<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
JUNE 30, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-9463
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2626358
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1220 Champion Circle, Suite 100,
Carrollton, Texas 75006
(Address of principal executive offices) (Zip Code)
(214) 280-9675
(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 June 30, 1996: 10,326,276 shares of $.01 par value common
stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Part I: Financial Information Page No.
--------------------- --------
<S> <C>
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II: Other Information 11
-----------------
Signatures 12
</TABLE>
2
<PAGE> 3
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS JUNE 30, DECEMBER 31,
1996 1995
(Unaudited)
----------- ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $16,627,364 1,306,482
Trade Accounts Receivable, net 17,376,018 15,619,459
Notes Receivable 288,234 288,968
Inventories, net 23,211,343 21,293,216
Advances for Inventory Purchases 5,737,261 5,038,951
Prepaid Expenses and Other Current Assets 689,480 313,460
Deferred Income Taxes 875,292 943,046
----------- ----------
Total Current Assets 64,804,992 44,803,582
----------- ----------
Property, Plant and Equipment, net 4,122,825 4,117,899
Goodwill, net 2,854,462 2,470,839
Notes Receivable, Noncurrent 875,000 1,152,048
Other Assets 382,511 410,427
----------- ----------
Total Assets $73,039,790 52,954,795
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 5,829,329 6,988,550
Current Portion of Long-Term Debt 23,841 180,960
Notes Payable 806,303 24,301,147
Accrued Expenses 1,455,973 1,613,925
Federal and State Income Taxes Payable 419,499 954,716
Other Current Liabilities 857,750 884,410
----------- ----------
Total Current Liabilities 9,392,695 34,923,708
----------- ----------
Long-Term Debt 0 1,534,548
Stockholders' Equity:
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, $.01 par value; 20,000,000 shares authorized;
10,326,276 and 7,326,935 shares issued and outstanding at
June 30, 1996 and December 31, 1995, respectively 103,263 73,269
Additional Paid-in Capital 56,139,009 11,518,801
Less: Treasury Stock, at cost, 35,000 common stock shares (246,067) 0
Retained Earnings 6,674,135 3,927,714
----------- ----------
Total Stockholders' Equity 63,647,095 16,496,539
----------- ----------
Total Liabilities and Stockholders' Equity $73,039,790 52,954,795
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30,1996 JUNE 30,1995 JUNE 30,1996 JUNE 30,1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $31,766,442 22,305,871 61,440,469 44,135,033
Cost of sales 22,642,714 16,983,013 43,887,601 33,490,097
----------- ---------- ---------- ----------
Gross profit 9,123,728 5,322,858 17,552,868 10,644,936
Gross profit % 28.72% 23.86% 28.57% 24.12%
Other operating costs:
Marketing and sales 4,510,790 2,990,055 8,682,525 5,693,010
General and Administrative 1,900,886 1,167,093 3,611,459 2,177,550
----------- ---------- ---------- ----------
6,411,676 4,157,148 12,293,984 7,870,560
----------- ---------- ---------- ----------
Operating profit 2,712,052 1,165,710 5,258,884 2,774,376
Other expense (income):
Interest expense 321,777 414,654 886,803 811,483
Other, net 25,132 (11,988) 50,276 (31,543)
----------- ---------- ---------- ----------
346,909 402,666 937,079 779,940
----------- ---------- ---------- ----------
Income before income taxes 2,365,143 763,044 4,321,805 1,994,436
Income taxes 830,156 277,300 1,516,774 726,759
----------- ---------- ---------- ----------
NET INCOME 1,534,987 485,744 2,805,031 1,267,677
Dividend Requirements on
Preferred Stock (29,302) (29,302) (58,604) (58,604)
----------- ---------- ---------- ----------
Net Income Allocable to
Common Stockholders $ 1,505,685 456,442 2,746,427 1,209,073
=========== ========== ========== ==========
Net Income Per Common Share $.17 $.07 $.33 $.18
=========== ========== ========== ==========
Number of Common Shares
Used in Computations $ 8,809,734 6,905,475 8,247,774 6,863,251
=========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited) SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30,1996 JUNE 30,1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,805,031 1,267,677
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 557,177 285,458
Provision for losses on accounts receivable 168,554 46,788
Provision for inventory obsolescence 311,326 194,456
Changes in operating assets and liabilities:
Accounts and notes receivable (1,924,379) (662,298)
Inventory (2,229,453) (1,319,719)
Advances for inventory purchases (698,310) 1,719,471
Prepaid expenses and other current assets (308,266) (523,143)
Noncurrent notes and other assets (142,802) (361,616)
Accounts payable (1,159,221) (864,502)
Accrued and other current liabilities (719,829) (279,327)
----------- ---------
Net cash used in operating activities (3,340,172) (496,755)
----------- ---------
Cash flows from investing activities:
Purchases of property and equipment (497,965) (404,729)
Acquisitions, net of cash acquired 0 0
----------- ---------
Net cash used in investing activities (497,965) (404,729)
----------- ---------
Cash flows from financing activities:
Net borrowings (repayment) on notes payable (25,186,511) 304,361
Issuance of common stock, net of issuance costs 44,650,202 13,486
Purchase of treasury stock (246,068) 0
Payment of preferred stock dividends (58,604) (58,604)
----------- ---------
Net cash provided by financing activities 19,159,019 259,243
----------- ---------
Net increase (decrease) in cash and cash equivalents 15,320,882 (642,241)
----------- ---------
Cash and cash equivalents at beginning of the period 1,306,482 642,241
----------- ---------
Cash and cash equivalents at end of the period $16,627,364 0
=========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited interim consolidated financial statements include
the accounts of Ultrak, Inc. and its subsidiaries ("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 consolidated
financial statements and notes to the consolidated financial statements for the
year ended December 31, 1995 included in the Ultrak Annual Report on Form 10-K.
2. Business Combinations:
JAK Pacific Video Warranty and Repair Services, Inc.:
Effective April 1, 1994, the Company acquired 56% of the outstanding common
stock of JAK Pacific Video Warranty and Repair Services, Inc. ("JAK"), a
California corporation, for total cash consideration of $573,000. The
transaction was accounted for as a purchase. The operations of JAK have been
included in the Company's statements of income beginning April 1, 1994. JAK is
engaged in sales, service and warranty repairs of closed circuit television
products.
During 1995, the Company exercised its option to acquire the remaining 44% of
the common stock of JAK for cash consideration of $500,000. Goodwill is being
amortized over 20 years by the straight-line method.
Koyo's U.S. CCTV Division:
On March 15, 1995, the Company signed an agreement with Koyo International,
Inc. of America ("Koyo") to purchase certain assets of Koyo's U.S. CCTV
division. Under the agreement, the Company acquired all of Koyo's inventory,
patent rights, customer lists and certain tooling for cash of approximately
$416,000 plus a $100,000 minimum payment due under a royalty agreement. The
agreement provides for royalties of up to 2% of the net selling price of
products produced under license from Koyo. Goodwill is being amortized over 20
years by the straight-line method.
Diamond Electronics, Inc.:
On July 13, 1995, the Company acquired all of the outstanding shares of common
stock of Diamond Electronics, Inc. ("Diamond"), in exchange for 600,000
registered shares of the Company's common stock valued at $3,804,000. Costs
capitalized in conjunction with the acquisition were approximately $130,000.
The shareholders of Diamond are entitled to receive an additional 50,000 shares
of the Company's common stock if the market price is less than $8.00 per share
for the ten business days prior to July 13, 1996.
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
Diamond is a manufacturer of commercial video CCTV security and surveillance
systems used by large retailers, and of hazardous viewing systems used by
industry and municipalities. The transaction has been accounted for as a
purchase, and the operations of Diamond have been included in the Company's
statement of income since July 1, 1995. Goodwill is being amortized over 25
years by the straight-line method.
G.P.S. Standard U.S.A.:
Effective November 29, 1995, the Company acquired 100 percent of the
outstanding capital stock of BLC & Associates, Inc., doing business as G.P.S.
Standard U.S.A. ("GPS"), for 176,470 shares of registered common stock of the
Company. GPS is a manufacturer of surveillance camera housings, pan and tilt
devices, matrix switchers and other advanced software driven camera control
systems. The transaction was accounted for as a pooling of interests effective
December 1, 1995. Results of operations for periods prior to the date of
acquisition have not been restated to reflect the combined operations due to
immateriality.
3. Notes Payable and Long-Term Debt:
As of June 30, 1996, note payable consists of a $20.0 million revolving line of
credit from a bank due on July 31, 1997 with interest at prime plus .25% or
LIBOR plus 2.50% payable monthly. The note is collateralized by substantially
all assets.
As of June 30, 1996, the Company had unused available revolving lines of credit
totaling approximately $19.2 million.
On July 26, 1996, the Company entered into a new three year credit facility
with a bank. The new credit facility provides up to $20 million in revolving
credit with interest at prime minus .25% or LIBOR plus .75% payable quarterly.
The new note is collateralized by substantially all assets. The new credit
agreement contains certain restrictive covenants and conditions, including debt
to cash flow, tangible net worth and fixed charge coverage ratios.
As of August 12, 1996, the Company was in compliance with all of its covenants
with its lender.
4. Stockholder's Equity
On May 30, 1996, the Company sold 2,990,000 shares of it's common stock,
including 137,563 shares by certain stockholders, in a secondary offering. The
net proceeds of the offering were approximately $44.6 million of which
approximately $27.8 million was used to repay notes payable outstanding at the
time.
7
<PAGE> 8
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
5. Stock-Based Compensation
Statement of Financial Accounting Standard No. 123 (SFAS 123) "Accounting for
Stock-Based Compensation", is effective for 1996. As permitted by SFAS 123,
the Company has elected to continue to account for stock-based compensation
under preexisting accounting standards. The pro forma disclosures required
pursuant to this election for the three and six months ended June 30, 1996 and
1995 have not been presented because the effect on net income of the provisions
of SFAS 123 is not material. Since the number of stock options that may be
granted in the future is not predictable, the effect that SFAS 123 would have
on future periods is not known.
8
<PAGE> 9
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three and Six Months ended June 30, 1996 compared to the
Three and Six Months ended June 30, 1995
Results of Operations
For the three and six months ended June 30, 1996, net sales increased
$9,460,571 (42%) and $17,305,436 (39%), respectively, over the same periods in
1995. This increase for the six months ended June 30, 1996 was due to the
effect of the acquisition of Diamond (46%), increased volume of sales of
existing CCTV products to most of the markets served by the Company (35%) and
sales of new products introduced during 1996 (19%).
For the three and six months ended June 30, 1996, cost of sales increased
$5,659,701 (33%) and $10,397,504 (31%), respectively, over the same periods in
1995. Gross profit margins on net sales increased to 28.72% for the three
months ended June 30, 1996 from 23.86% for the same period in 1995. Gross
margins increased to 28.57% for the six months ended June 30, 1996 from 24.12%
for the same period in 1995. These increases were due to increased relative
sales levels of Ultrak branded products by most of the selling divisions, cost
reductions realized in 1996 on certain Ultrak branded products, the effect of
the acquisition of Diamond (the manufactured products of which carry higher
gross profit margins than other products sold by the Company) and higher
margins earned on new products introduced during 1996.
For the three and six months ended June 30, 1996, marketing and sales expenses
increased $1,520,735 (51%) and $2,989,515 (53%), respectively, over the same
periods in 1995. Marketing and sales expenses for the three months ended June
30, 1996 were 14.2% of net sales, up from 13.4% for the same period in 1995.
Marketing and sales expenses for the six months ended June 30, 1996 were 14.1%
of net sales, up from 12.9% for the same period in 1995. These increases were
due to the effect of acquisitions during 1995 and the effect in 1996 of hiring
additional sales, sales support and marketing personnel in anticipation of new
product introductions and resulting sales activities, as well as the increased
travel, printing, product literature, advertising and promotion costs
associated with the introduction of new products and increased sales activity
Company-wide.
For the three and six months ended June 30, 1996, general and administrative
increased $733,793 (63%) and $1,433,909 (66%), respectively, over the same
periods in 1995. General and administrative costs for the three months ended
June 30, 1996 were 5.9% of net sales, up from 5.2% of net sales for the same
period in 1995. General and administrative costs for the six months ended June
30, 1996 were 5.9% of net sales, up from 4.9% of net sales for the same period
in 1995. These increases were a result of the acquisitions in 1995, increased
engineering, research and development costs incurred and the hiring of
additional purchasing, operations and other administrative staff to support
the anticipated growth in sales.
For the three months ended June 30, 1996, other expenses decreased $55,757
(14%) from the same period in 1995. This decrease was due primarily to lower
interest expense resulting from the payoff of bank and other lender borrowings
in early June. For the six months ended June 30, 1996, other expenses increased
$157,139 (20%) over the same period in 1995. This increase was due primarily
to increased interest rates on higher levels of bank and other lender
borrowings for the first five months of 1996.
9
<PAGE> 10
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Liquidity and Capital Resources
The Company had a net increase in cash for the six months ended June 30, 1996
of approximately $15.3 million. Cash used in operating activities for the
period was approximately $3.3 million, primarily consisting of increases in
accounts and notes receivable, inventory and advances for inventory purchases
required by the higher sales activity, and decreases in trade accounts payable
arising from the Company's decision to actively pursue taking of trade
discounts. Cash used in investing activities was approximately $498,000
consisting of purchases of property and equipment. Cash provided by financing
activities was approximately $19.1 million consisting of net proceeds from the
sale of the Company's common stock in a secondary offering, offset by repayment
of borrowings on bank and other lender revolving lines of credit, purchase of
approximately $246,000 in treasury stock and payment of preferred stock
dividends.
As of June 30, 1996, the Company had unused available revolving lines of credit
totaling approximately $19.2 million. The Company was in compliance with all
of its covenants with its lender as of August 12, 1996.
The Company believes that internally generated funds, available borrowings
under the new credit facility, current amounts of cash and the net proceeds
from the stock offering will be sufficient to meet its presently
anticipated needs for working capital, capital expenditures and acquisitions,
if any, for at least the next 12 months.
10
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 1996
Part II: Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on May 20, 1996.
During the meeting, a majority of shareholders elected five directors to
serve until the next annual meeting of shareholders and approved the selection
of Grant Thornton LLP as the firm of independent certified public accountants
to audit the accounts of the Company for the fiscal year ending December 31,
1996.
Item 5. Other Information
On July 26, 1996, the Company entered into a new three year credit
facility with a bank. The new credit facility provides up to $20 million in
revolving credit with interest at prime minus .25% or LIBOR plus .75% payable
quarterly. The new note is collateralized by substantially all assets. The
new credit agreement contains certain restrictive covenants and conditions,
including debt to cash flow, tangible net worth and fixed charge coverage
ratios.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Exhibit 10.1: Loan and Security Agreement, dated July 26, 1996
between NationsBank of Texas, N.A. and Ultrak, Inc., Ultrak
Operating, L.P., Dental Vision Direct, Inc., Diamond
Electronics, Inc. and JAK Pacific Video Warranty and Repair
Services, Inc.
Exhibit 11.1: Computation of Per Share Income for the three and
six months ended June 30, 1996.
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K.
No Form 8-Ks were filed during the quarter ended June 30, 1996.
11
<PAGE> 12
ULTRAK, INC. AND SUBSIDIARIES
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.
ULTRAK, INC.
(Registrant)
Date: August 12, 1996 By: /s/ TIM D. TORNO
------------------------
Tim D. Torno
Principal Financial and
Accounting Officer
12
<PAGE> 13
EXHIBIT INDEX
Exhibit 10.1 Loan and Security Agreement Between NationsBank and ULTRAK
Exhibit 11.1 Computation of Per Share Income Ending June 30, 1996
Exhibit 27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
NationsBank
NationsBank of Texas, N.A.
LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC.
ULTRAK OPERATING, L.P.
DENTAL VISION DIRECT, INC
DIAMOND ELECTRONICS, INC.
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
Effective Date: July 26, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II-A. REVOLVING FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2A.1 Revolving Facility Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2A.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2A.3 Payments; Conversion to Term Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2A.4 Termination of Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2A.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2A.6 Borrowing and Disbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2A.7 Reimbursements to Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2A.8 Funding/Booking of Revolving Facility Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2A.9 Continuing Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II-B. TERM FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2B.1 Term Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2B.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2B.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2B.5 Termination of Term Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2B.6 Booking of Term Facility Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2B.7 Continuing Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II-C. GENERAL LOAN TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2C.1 Master Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2C.2 Interest Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2C.3 Interest Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2C.4 Interest Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2C.5 Mandatory Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2C.6 Application of Payments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2C.7 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2C.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2C.9 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2C.10 Special Provisions For LIBOR Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article III. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Perfection and Protection of Lender's Security interest . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Location of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.5 Examinations; Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Collateral Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Aging Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Receivables Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Real Property Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<TABLE>
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3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Landlords, Bailees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 Preservation of Lender's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Special Rights of Lender; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Mutual Benefit; Joint and Several Liability; Cross Collateralization; Cross Guaranties . . . . . . . 20
ARTICLE IV. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Items to be Delivered by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Loans Under Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Name; Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Existence; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Power and Authority; Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 No Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.16 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.17 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.18 Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.20 Representations and Warranties Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.7 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.8 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Aging Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.10 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.11 Notification of Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.12 Notification of Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.13 Notification Regarding Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.14 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<S> <C> <C>
6.16 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.17 Fees, Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.18 Waivers and Consents Respecting the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.19 Subordination Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.20 Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.22 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.23 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.24 Prohibition Against Liens on Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.25 Dissolution, Liquidation, Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.26 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.27 Limitation on Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.28 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.29 Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.30 Change in Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.31 Dividends, Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.32 Redemptions and Acquisition of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.33 Bonuses, Consulting Fees to Shareholders and Directors . . . . . . . . . . . . . . . . . . . . . . . 30
6.34 Loans to Officers, Directors, Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.35 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.36 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.37 Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.38 Covenants Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII. EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Refusal of Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Cash Collateral; Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 Enforcement Costs; Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.7 Performance by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 Non-waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.9 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Effective date; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Use of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.5 Lender's Records; Account Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.7 Non-applicability of Chapter 15 of Texas Credit Code . . . . . . . . . . . . . . . . . . . . . . . . 36
9.8 Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9 Judgment Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.10 Interest Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.11 Continuing Rights of Lender in respect of Obligations . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<TABLE>
<S> <C> <C>
9.12 Fees, Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.13 Acceptance and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.14 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.15 Express Waivers by Borrowers in respect of Cross-Collateralization
and Cross Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.16 Participation of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.17 Other Agreements; Cross Collateralization and Cross Default . . . . . . . . . . . . . . . . . . . . 39
9.18 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.19 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.20 Copies Valid as Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.21 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.22 Entirety and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.23 Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.24 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.25 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.26 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.27 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.28 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.29 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.30 Amendment and Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<PAGE> 6
NationsBank
NationsBank of Texas, N.A.
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement is effective as of July 26,
1996 and is executed and entered into by and between NATIONSBANK OF TEXAS,
N.A., a national bank ("Lender"), and ULTRAK, INC., a Delaware corporation,
ULTRAK OPERATING, L.P., a Texas limited partnership, DENTAL VISION DIRECT,
INC., a Texas corporation, DIAMOND ELECTRONICS, INC., an Ohio corporation and
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC., a California corporation
(each a "Borrower" and collectively called "Borrowers"), as follows: Lender and
Borrowers desire to enter into certain financing arrangements according to the
terms and provisions as set forth hereinbelow. Therefore, for value received,
the receipt and sufficiency of which are hereby acknowledged, and in
consideration of the mutual agreement provided herein, Lender and Borrowers
hereby agree as follows:
ARTICLE 1. DEFINITIONS
The following definitions shall apply throughout this Agreement:
"Accounts" means all rights to payment which are properly
classified as "accounts" as defined by the UCC, including all rights to payment
for goods sold or leased or for services rendered and which are not otherwise
evidenced by chattel paper or instruments, whether or not yet earned by
performance.
"Adjusted LIBOR Rate" means with respect to each Interest
Period, on any day thereof, an amount equal to the sum of (i) the quotient of
(a) the LIBOR Rate with respect to such Interest Period divided by (b) the
remainder of 1.0 less the LIBOR Reserve Requirement, if any, in effect on such
day plus (ii) the Applicable Margin.
"Adjusted Prime Rate" means a rate equal to the sum of (i) the
Prime Rate plus (ii) the Applicable Margin.
"Advance" means any Revolving Facility Advance.
"Affiliate" means any Person (i) that directly or indirectly
controls or is controlled by a Borrower (including without limitation all
Subsidiaries), or is under common control with a Borrower, or (ii) that
directly or indirectly owns or holds ten percent (10.0%) or more of any class
of Voting Stock of a Borrower or (iii) ten percent (10.0%) or more of the
Voting Stock of which is directly or indirectly owned or held by a Borrower or
(iii) that is an officer, director or shareholder of a Borrower.
"Affiliate Subordination Agreement" means a subordination
agreement respecting an Affiliate as prescribed by paragraph 6.17.
"Agreement" means this Loan and Security Agreement and all
exhibits and addenda, as it may be renewed; extended, modified, amended or
restated from time to time.
"Applicable Margin" means, as of the Effective Date (i) with
respect to the Prime Rate Balance, negative one quarter of one percent
(-0.25%) and (ii) with respect to the LIBOR Balance, three quarters of one
percent (0.75%), in each case subject to adjustment at any time after the
Effective Date as follows:
<PAGE> 7
<TABLE>
<CAPTION>
Through Revolving Facility After Revolving Facility
-------------------------- ------------------------
Maturity Date: Maturity Date:
Senior Funded Debt -------------- --------------
to Cash Flow Prime Balance LIBOR Balance Prime Balance LIBOR Balance
- ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Less than 2.0 to 1.0 -0.25% 0.75% 0.00% 1.00%
Less than 2.5 to 1.0
but greater than 2.0 to 1.0 -0.25% 1.00% 0.00% 1.25%
Less than 3.0 to 1.0
but greater than 2.5 to 1.0 0.00% 1.25% 0.00% 1.50%
</TABLE>
Senior Funded Debt to Cash Flow for purposes of determination of the Applicable
Margin shall be measured and determined according to the latest financial
statements delivered to Lender pursuant to paragraph 6.5 or paragraph 6.6. Each
change, if any, in the Applicable Margin resulting from a change in Senior
Funded Debt to Cash Flow shall be deemed effective as of the first day of the
month next following the calendar month in which such financial statements are
delivered to Lender.
"Books and Records" means all books, records, books or records
of account, files, journals, ledgers, correspondence, bank statements, customer
lists and related customer credit information, vendor and supplier lists,
distribution records and other records of purchases, sales and payments made and
received, and all other books and records created, generated, received, kept or
otherwise used in the operation of business, of whatever kind or nature and
however recorded or stored, whether in written, electronic or other form or
format.
"Borrower" means each of Parent, Ultrak, DVDI, Diamond and
JAK, respectively, and "Borrowers" means all of them together, jointly and
severally.
"Business Day" means any calendar day except Saturday, Sunday
and those legal public holidays specified in 5 U.S.C. Section 6103(a), as may be
amended from time to time.
"Capital Expenditures" for any period, means the aggregate
expenditures during such period which are classified as capital expenditures
according to GAAP.
"Collateral" means collectively all Receivables, Inventory,
Equipment, Intangibles, Deposit Accounts, the Real Property Collateral and all
proceeds of any of the foregoing at any time arising, including insurance
proceeds.
"Consequential Loss" means, with respect to payment of all or
any portion of any LIBOR Balance on a day other than the last day of the
Interest Period related thereto, any loss, cost or expense incurred by Lender
resulting from such payment, including without limitation the sum of (i) the
interest which, but for such payment, Lender would have earned in respect of
such principal amount so paid, for the remainder of the Interest Period
applicable to such sum, reduced, if Lender is able to redeposit or reinvest
such principal amount so paid for the balance of such Interest Period, by the
interest earned by Lender as a result of so redepositing or reinvesting such
principal amount plus (ii) any expense or penalty incurred by Lender on
redepositing or reinvesting such principal amount, provided, that the foregoing
measure of Consequential Loss is illustrative only and shall not be the sole or
exclusive measure for determining Consequential Loss. A written statement by
Lender of the amount of any Consequential Loss, setting forth the basis for the
determination thereof shall, in the absence of manifest error, be conclusive
and binding as to such determination and amount.
2
<PAGE> 8
"Contract Rate" at any time means Adjusted Prime Rate with
respect to the Prime Rate Balance or the Adjusted LIBOR Rate with respect to
any LIBOR Balance, as the case may be, in effect at any time pursuant to the
terms of this Agreement; provided, that at any time when an Event of Default is
in existence, the Contract Rate otherwise applicable shall increase by an
additional three percent (3.0%) per annum (subject to, however, and in no event
exceeding, the Maximum Rate) effective beginning upon written notice to
Borrowers by Lender and continuing until such time, if any, as such Event of
Default is cured to Lender's satisfaction or waived by Lender in writing, or
until such increase may be rescinded by Lender in its discretion. The Contract
Rate shall be computed on the basis of a year consisting of 360 days.
"Contract Term" means the period beginning on the Effective
Date and continuing through the Term Facility Maturity Date.
"Credit Limit" means Twenty Million and no/100 Dollars
($20,000,000.00).
"Deposit Accounts" means all deposit accounts now or hereafter
maintained by a Borrower with any commercial bank or other depository
institution, including any operating account.
"Diamond" means Diamond Electronics, Inc., an Ohio
corporation, with its principal place of business located at 1220 Champion
Circle, Suite 100, Carrollton, Texas 75006.
"DVDI" means Dental Vision Direct, Inc., a Texas corporation,
with its principal place of business located at 1220 Champion Circle, Suite
100, Carrollton, Texas 75006.
"Effective Date" means the effective date specified in the
preamble of this Agreement.
"Environmental Damages" means all costs, judgments, good faith
settlements, claims, damages, losses, penalties, fines, liabilities,
encumbrances, liens, costs, and expenses, of whatever kind or nature,
contingent or otherwise, matured or unmatured, foreseeable or unforeseeable,
and any attorneys' fees, costs and expenses in connection therewith, which are
incurred at any time as a result of the handling of Hazardous Materials, or the
existence of conditions at any time giving rise to a violation of Environmental
Requirements, including without limitation (i) all costs incurred in connection
with the investigation or remediation of Hazardous Materials or violations of
Environmental Requirements which are necessary to comply with any Environmental
Requirements, including, fees incurred for the services of attorneys,
consultants, contractors, experts and laboratories, and all other costs
incurred in the preparation of any feasibility studies or reports or the
performance of any cleanup, remediation, removal, response, abatement,
containment, closure, restoration or monitoring work, (ii) damages for personal
injury, injury to property or natural resources occurring on or off of affected
real property, consequential damages, the cost of demolition and rebuilding of
any improvements on real property, and interest and penalties, and (iii)
liability to any third party or governmental agency to reimburse, indemnify or
provide contribution to such person or agency.
"Environmental Requirements" means all legislative,
regulatory, administrative and common law requirements relating to the
protection of human health and safety or the environment, including, without
limitation, applicable present and future statutes, regulations, rules,
ordinances, codes, licenses, permits, judgments, orders, judicial opinions,
approvals, authorizations, concessions, franchises, and similar items issued or
promulgated by governmental agencies, departments, commissions, boards,
bureaus, or instrumentalities of the United States, any state or any political
subdivisions.
"Equipment" means all property properly classified under the
UCC as "equipment," including without limitation all equipment, fixtures,
machinery, machine tools, computers and related peripherals, furniture,
fixtures, furnishings and other goods used or useable in the operation or
conduct of business, now owned and
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hereafter acquired, wherever located, and all tools, parts, accessories,
processes, plans, manuals and specifications relating thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all regulations issued pursuant thereto.
"ERISA Affiliate" means any Person which, together with a
Borrower, would be treated as a single employer under Section 4001 of ERISA or
Section 414 of the IRC.
"Eurodollar Business Day" means a day on which dealings in
United States dollars are carried out in the interbank eurodollar market.
"Event of Default" shall have the meaning defined in paragraph
7.1.
"Facility" means the credit facilities established pursuant to
this Agreement, comprised collectively by the Revolving Facility and the Term
Facility.
"Facility Balance" at any time means the aggregate unpaid
balance of outstanding principal of all Advances.
"Fixed Charge Coverage Ratio" means the ratio of (i) Pre-Tax
Net Income plus interest expense plus rent and operating lease expense to (ii)
interest expense plus rent and operating expense, determined in arrears for the
preceding four fiscal quarters.
"GAAP" means generally accepted accounting principles as
promulgated by the American Institute of Certified Public Accountants,
consistently applied.
"Guarantor" means any Subsidiary other than a Borrower now or
hereafter in existence.
"Guaranty" shall mean a guaranty agreement executed and
delivered by a Guarantor for the benefit of Lender, referenced in paragraph
3.12.
"Hazardous Materials" means any chemical substances,
pollutants, contaminants, materials, or wastes, or combinations thereof,
whether solid, liquid or gaseous in nature the presence of which requires or
may require investigation or remediation under any federal, state or local
statute, regulations, ordinance, order, action, policy or common law or which
poses or threatens to pose a hazard to the health or safety of persons on or
about real property affected by a Borrower's activities, including without
limitation, material (i) which is or becomes defined as "hazardous waste,"
"hazardous substance," "pollutant or contaminant" under any Environmental
Requirements, including without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. section 9601 et seq.) or
the Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) or
(ii) which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), asbestos, urea formaldehyde from insulation,
or radon gas.
"Indemnified Claims" means any and all claims, demands,
actions, causes of action, judgments, obligations, liabilities, losses, damages
and consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, fees and expenses of attorneys
and other professional consultants and experts in connection with investigation
or defense) of every kind, known or unknown, existing or hereafter arising,
foreseeable or unforeseeable, which may be imposed upon, threatened or asserted
against, or incurred or paid by, any Indemnified Person at any time and from
time to time, because of, resulting from, in connection with, or arising out of
any transaction, act, omission, event or circumstance in any way connected with
the Collateral
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or the Loan Documents (including enforcement of Lender's rights thereunder or
defense of Lender's actions thereunder), including but not limited to economic
loss, property damage, personal injury or death in connection with, or
occurring on or in the vicinity of, any Collateral through any cause
whatsoever, any act performed or omitted to be performed under any Loan
Documents, any breach by a Borrower of any representation, warranty, covenant,
agreement or condition contained in any Loan Documents or any Event of Default
as defined in this Agreement. Indemnified Claims includes, without limitation,
Environmental Damages.
"Indemnified Persons" collectively means Lender and its
officers, directors, shareholders, employees, agents, attorneys and
representatives, and any Person owned or controlled by, or which owns or
controls or is under common control or is otherwise affiliated with, Lender,
and any other Person, if any, who acquires a portion of the Collateral in any
manner through Lender's exercise of rights and remedies under the Loan
Documents.
"Intangible Assets" means those assets which are treated as
intangible pursuant to GAAP, or as determined by Lender in its sole discretion,
and in any event including, without limitation: (i) obligations, if any, owing
by Affiliates; (ii) the amount, if any by which inventory exceeds the lower of
cost or market value thereof; (iii) the value of any inventory that is obsolete
or damaged or is otherwise deemed by Lender not to be of a marketable quality
commensurate with the inventory of Borrowers as a whole; (iv) accounts
receivable which are deemed by a Borrower or Lender to be uncollectible or
which should be subject to a reserve for bad debts in accordance with GAAP or
which are subject to potential claims or setoffs; (vi) any asset which is
intangible or lacks intrinsic and marketable value or collectibility, including
without limitation goodwill, noncompetition agreements, patents, copyrights,
trademarks, franchises and organization or research and development costs.
"Intangibles" means all Books and Records and all general
intangibles and contract rights, including without limitation trademarks and
service marks, trade names, copyrights, patents, rights under trademark,
copyright or patent license agreements, rights or claims under contracts,
license or consulting agreements, tax refunds or claims for tax refunds, rights
and claims under warranties or service contracts, all rights under licenses and
permits used in the operation of business, and all computer programs, systems,
software, firmware, routines, systems, algorithms, codes, printouts and
instructions of any kind for use on any variety of computing machinery, and all
documents, lists, data bases, and other information stored or recorded therein
or thereon in or on media of any kind, together with all instruction manuals or
documentation of any kind pertaining in any way to any of the foregoing, all
licenses, agreements or rights to use of any of the foregoing, and all rights to
receive payment of money from any Person which are not properly classified as
"Receivables," and all extensions, renewals, reissues and continuations of any
of the foregoing. Without limitation of the foregoing, "Intangibles" includes
all goodwill, going concern value and intangible properties relating to the
business, operations and properties of a Borrower, all Books and Records
required for or incident to the conduct and operation of such business, all
rights and interests under agreements with customers and suppliers, all "know
how" and trade secrets and all other rights to intellectual property, all rights
to payment or other claims owing to a Borrower by any Subsidiary or other
Affiliate.
"Interest Notice" means a notification delivered to Lender
pursuant to paragraph 2C.3, therein designating one or more Interest Options,
the amount of any Advance or portion of the Facility Balance to bear interest
for each such Interest Option and, in the case of an Interest Option
designating the Adjusted LIBOR Rate, the length of the corresponding Interest
Period.
"Interest Option" means an option elected by a Borrower to
designate any portion of the Facility Balance to accrue interest according to
the Adjusted Prime Rate or the Adjusted LIBOR Rate, exercised as provided by
paragraph 2C.3.
"Interest Period" means, with respect to any LIBOR Balance, a
period commencing on the date specified in the applicable Interest Notice as
the date on which the principal amount of such LIBOR Balance begins to
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accrue interest at the Adjusted LIBOR Rate (or, in the case of a successive
Interest Period, commencing on the Business Day following the last day of the
immediately preceding Interest Period), and ending one (1), three (3) or six
(6) months thereafter as a Borrower shall elect in accordance with paragraph
2C.2; provided, that (a) any Interest Period that would otherwise end on a day
which is not a LIBOR Business Day shall be extended to end on the succeeding
LIBOR Business Day and (b) any Interest Period that would otherwise end after
the Term Facility Maturity Date shall instead end on the Term Facility Maturity
Date.
"Inventory" means all present and hereafter acquired inventory
(including without limitation raw materials, work in process, finished goods
and all other goods held for sale or lease) held, possessed, owned, held on
consignment, or held for sale or return, in whole or in part, wherever located
(including in-transit), and all proceeds and products thereof, including
insurance payable by reason of loss or damage. "Inventory" includes returned
Inventory and Inventory in-transit for return.
"IRC" means the Internal Revenue Code of 1986, as amended,
and regulations promulgated thereunder.
"JAK" means JAK Pacific Video Warranty and Repair Services,
Inc., a California corporation, with its principal place of business located at
1220 Champion Circle, Suite 100, Carrollton, Texas 75006.
"Landlords Waiver" means an agreement in form and substance
satisfactory to Lender pursuant to which the landlord of any leased location
where any Collateral is located shall waive its rights, if any, to the
Collateral and allow Lender to enter upon the premises to inspect, remove or
dispose of the Collateral.
"Lender" means NATIONSBANK OF TEXAS, N.A., a national bank,
whose principal place of business is located at 901 Main Street, Dallas, Dallas
County, Texas 75202. When used throughout this Agreement, the term "Lender"
shall also include Lender's successors and assigns, including specifically any
party to whom Lender, or its successors or assigns, may assign its rights and
interests under this Agreement.
"Letter of Credit" means any letter of credit issued by Lender
for the account of any Borrower.
"Letter of Credit Documents" means each of the documents,
agreements and other writings required by Lender to be executed in connection
with the issuance of a Letter of Credit, including, without limitation, each
letter of credit application and reimbursement agreement, all in form
satisfactory to Lender, together with any and all renewals, extensions,
amendments, modifications, supplements and restatements thereof, respectively.
"Letter of Credit Reserve" means, at any time, the sum of (i)
the aggregate undrawn amount of all Letters of Credit outstanding at such time,
plus (ii) the aggregate amount of all drawings under Letters of Credit for
which Lender has not been reimbursed either in cash or as provided by paragraph
2C.7(b).
"Letter of Credit Sublimit" means the amount of Seven Million
($7,000,000.00).
"LIBOR Balance" means any portion of the Facility Balance that
bears interest at the Adjusted LIBOR Rate pursuant to the terms of this
Agreement.
"LIBOR Business Day" means a day on which dealings in United
States dollars are carried out in the interbank eurodollar market.
"LIBOR Costs" means such additional amount or amounts, if any,
as Lender shall reasonably determine will compensate it for actual costs
incurred in maintaining an Adjusted LIBOR Rate on any LIBOR Balance or any
portion thereof as a result of any change after the Effective Date in any
applicable law, rule or regulation or in the interpretation or administration
thereof, or Lender's compliance with any request or directive from any
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domestic or foreign governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) or by any
domestic or foreign court changing the basis of taxation of payments to Lender
in respect of LIBOR Balances or any other fees or amounts payable under this
Agreement (other than taxes imposed by applicable law on all or any portion of
the overall net income of Lender), or imposition, modification or application
of any reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, credit extended by, or any other
acquisition of funds for loans by Lender, or imposing on Lender or on the
interbank eurodollar market, any other condition affecting this Agreement or
the LIBOR Balances so as to increase the cost to Lender of making or
maintaining Adjusted LIBOR Rates with respect to LIBOR Balances or any portion
thereof or to reduce the amount of any sum received or receivable by Lender
under this Agreement, by an amount deemed by Lender to be material, but without
duplication for LIBOR Reserve Requirement.
"LIBOR Rate" means, with respect to each Interest Period, the
rate of interest per annum (determined by reference to such published index as
Lender may select or otherwise determined in Lender's discretion) to be the
rate as of the effective time of determination elected by Lender on the day
which is three (3) LIBOR Business Days prior to the first day of such Interest
Period and rounded upward, if necessary, to the nearest one-sixteenth of one
percent, at which deposits in United States dollars are offered by the major
clearing banks in the interbank eurodollar market for a period of time equal or
comparable to such Interest Period and in an amount equal or comparable to the
principal amount of the LIBOR Balance to which such Interest Period relates
(determination by Lender of the Adjusted LIBOR Rate being be conclusive and
binding in the absence of manifest error).
"LIBOR Reserve Requirement" means, on any day, the percentage
(expressed as a decimal fraction) which is in effect on such day as provided by
the Board of Governors of the Federal Reserve System (or any successor
governmental body) for determining the reserve requirements (including without
limitation, basic, supplemental, marginal and emergency reserves) under
Regulation D with respect to "Eurocurrency liabilities" as currently defined in
Regulation D, or under any similar or successor regulation. For purposes of
this definition, any LIBOR Balances hereunder shall be deemed "Eurocurrency
liabilities" under Regulation D without benefit of or credit for prorations,
exemptions or offsets under Regulation D. Lender's determination of the LIBOR
Reserve Requirement shall be conclusive.
"Loan Documents" means this Agreement, the Master Note, the
Letter of Credit Documents, the Real Property Collateral Documents, each
Guaranty and all other documents or agreements executed in connection
therewith, and also includes any and all renewals, extensions, modifications or
amendments of any of the foregoing.
"Master Note" means a promissory note executed by Borrowers
payable to the order of Lender in the face amount of the Credit Limit,
evidencing loans under the Facility, as provided in Section 2A.1 and in form
satisfactory to Lender, and includes any and all renewals, extensions,
amendments, modifications or restatements thereof
"Material Adverse Effect" means (i) a materially adverse
effect on the business, assets, operations, prospects or condition, financial or
otherwise, of a Borrower, or Borrowers and any Guarantor taken as a whole, or
(ii) material impairment of the ability of a Borrower or any Guarantor to
perform any obligations under the Loan Documents.
"Maximum Rate" means the greater of (i) the "monthly ceiling"
as referred to and in effect from time to time under the provisions of Tex.
Rev. Civ. Stat. Ann. art. 5069-1.04(c), as amended, or (ii) the maximum rate of
interest permitted from day to day by any other applicable state or federal
law.
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"Net Income" means, for any period, net income for such period
after giving effect to deduction of or provision for all operating expenses,
all taxes and reserves (including reserves for deferred taxes and all other
proper deductions), all determined in accordance with GAAP, provided that there
shall be excluded from Net Income: (a) the net income (or net loss) of any
Person accrued prior to the date it becomes a Subsidiary of, or is merged into
or consolidated with, the Person whose Net Income is being determined or a
Subsidiary of such Person, (b) the net income (or net loss) of any Person in
which the Person whose Net Income is being determined or any Subsidiary of such
Person has an ownership interest, except, in the case of net income, to the
extent that any such income has actually been received by such Person or such
Subsidiary in the form of cash dividends or similar distributions, (c) any
restoration of any contingency reserve, except to the extent that provision for
such reserve was made out of income during such period, (d) any net gains or
losses on the sale or other disposition, not in the ordinary course of
business, of Investments, Business Units and other capital assets, provided
that there shall also be excluded any related charges for taxes thereon, (e)
any net gain arising from the collection of the proceeds of any insurance
policy, (f) any write-up of any asset, and (g) any other extraordinary item.
"Obligations" means (i) all obligations and indebtedness now
or hereafter owing by Borrowers, or any Borrower, under this Agreement, or
otherwise arising in connection with the Loan Documents, including without
limitation, all loan repayment obligations, accrued interest and fees, costs
and expenses as provided by the Loan Documents, and any other amounts from time
to time owing by Borrowers, or any Borrower, to Lender in connection therewith;
(ii) any and all other indebtedness and obligations of every kind and character
now or hereafter owing by Borrowers, or any Borrower, to Lender, whether direct
or indirect, primary or secondary, joint, several, or joint and several, fixed
or contingent, including indebtedness and obligations, if any, which may be
assigned to or acquired by Lender; and (iii) any and all renewals and
extensions of the foregoing, or any part thereof
"Parent" means Ultrak, Inc., a Delaware corporation, with its
principal place of business located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006
"Payment Date" means the last day of each March, June,
September and December from and after the Effective Date, and in addition with
respect to any LIBOR Balance, also includes the last day of the corresponding
Interest Period with respect to such LIBOR Balance.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means any individual, corporation, joint venture,
general or limited partnership, trust, unincorporated organization or
governmental entity or agency.
"Plan" means any (i) any "employee benefit plan," as defined
in Section 3(3) of ERISA, established or maintained by a Borrower or any ERISA
Affiliate now or during any of the preceding six years, and (ii) any other plan
established or maintained now or during any of the preceding six years by a
Borrower or any ERISA Affiliate for its employees which is covered by Title IV
of ERISA or is subject to the minimum funding standards under Section 412 of
the IRC.
"Pre-Tax Net Income" means for any period, net income for such
period prior to accruing for appropriate taxes but otherwise determined
according to the definition of "Net Income" provided in this Agreement.
"Prime Rate" means the rate of interest which is announced
from time to time by Lender as its prime rate of interest. It is acknowledged
that the Prime Rate may not be the lowest or most favorable interest rate at
any time charged by Lender.
"Prime Rate Balance" means any portion of the Facility Balance
bearing interest at the Adjusted Prime Rate pursuant to the terms of this
Agreement.
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"Prohibited Transaction" means any transaction described in
Section 406 of ERISA which is not exempt under Section 408 of ERISA and any
transaction described in Section 4975(c) of the IRC which is not exempt under
Section 4974(c)(2) or Section 4975(d) of the IRC, or by the transitional rules
of Section 414(c) and Section 2003(c) of ERISA.
"Real Property Collateral" means the certain real property,
with all improvements now or hereafter located thereon, described in the Real
Property Collateral Documents.
"Real Property Collateral Documents" means the certain Renewal
and Extension of Open-End Mortgage, Assignment, Security Agreement and
Financing Statement, together with all affidavits, certificates and other
documents executed in connection therewith.
"Receivables" mean all Accounts, chattel paper, documents and
instruments. "Receivables" includes, without limitation, all accounts
receivable (and in any case where an Account arises from the sale of Inventory,
the interest of the seller therein), lease receivables; notes receivable;
documents of title; warehouse receipts; all rights to payment under equipment
leases, and all proceeds thereof.
"Reportable Event" means (i) any transaction described in
Section 406 of ERISA or the regulations thereunder for which the 30-day notice
is not waived by said regulations, (ii) a withdrawal from a plan described in
Section 4063 or 4064 of ERISA, or (iii) a cessation of operations described in
Section 4062(f) of ERISA.
"Revolving Facility" means the credit facility established for
revolving loans pursuant to Article II-A of this Agreement
"Revolving Facility Advance" means a loan made by Lender under
the Revolving Facility.
"Revolving Facility Balance" means, at any time, the unpaid
principal balance outstanding and owing under the Revolving Facility.
"Revolving Facility Maturity Balance" means the aggregate
unpaid principal balance outstanding under the Revolving Facility at the close
of Lender's business on the Revolving Facility Maturity Date.
"Revolving Facility Maturity Date" means June 30, 1999.
"Senior Funded Debt to Cash Flow" means the ratio of (i) the
sum of all indebtedness for borrowed money and all capital lease obligations to
(ii) earnings before interest, taxes, depreciation and amortization, determined
in arrears for the preceding four fiscal quarters.
"Shareholders Equity" means shareholders equity determined
according to GAAP.
"Subordinated Debt" means all indebtedness which by its terms
is subordinate in right of payment and claim in favor of Lender pursuant to an
Affiliate Subordination Agreement or other written subordination agreement
reasonably satisfactory to Lender.
"Subsidiaries" at any time means all subsidiary corporations
that would be appropriate for inclusion in either consolidating or consolidated
financial statements of Parent determined according to GAAP, and "Subsidiary"
means any of such corporations.
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"Tangible Net Worth" means the amount by which (a) the sum of
Shareholders Equity plus Subordinated Debt exceeds (b) Intangible Assets.
"Tangible Net Worth Adjustment" means, as of any time of
determination, the sum of the amount of all TNW Increases occurring after the
Effective Date through such time of determination.
"Term Facility" means the credit facility established for
conversion of the Revolving Facility Maturity Balance to a term loan, pursuant
to Article II-B of this Agreement
"Term Facility Amortization Payment" means an amount, rounded
upward to the nearest whole dollar, equal to one-sixteenth (1/16th) of the
Revolving Facility Maturity Balance, provided, that the final Term Facility
Amortization Payment shall be an amount equal to the amount of the remaining
unpaid principal balance outstanding under the Term Facility as of the time
such payment is made.
"Term Facility Balance" means, at any time, the Facility
Balance existing under the Term Facility.
"Term Facility Maturity Date" means June 30, 2003.
"TNW Increase" means an amount (not less than $0.00),
determined as of the end of any completed fiscal year of Borrowers, equal to
fifty percent (50.0%) of Net Income for such fiscal year.
"UCC" means me Toms Uniform Commercial Code, as in effect from
time to time.
"Ultrak" means Ultrak Operating, L.P., a Texas limited
partnership, with its principal place of business located at 1220 Champion
Circle, Suite 100, Carrollton, Texas 75006
"Voting Stock" means sufficient shares of a Borrower (however
designated) having ordinary voting power for the election of a majority of the
members of its board of directors (not including shares having such power only
in the event of a contingency).
GENERAL TERMS. Unless expressly provided otherwise, any term
which is defined by the UCC shall have the same meaning, wherever used in this
Agreement, as is prescribed by the UCC.
ARTICLE II-A. REVOLVING FACILITY
2A.1 REVOLVING FACILITY ADVANCES. Subject to the terms and
provisions of this Agreement, Lender hereby establishes a revolving credit
facility for loans from time to time during the period beginning on the
Effective Date and ending on the Revolving Facility Maturity Date, provided,
that the Facility Balance shall not at any time exceed an amount equal to the
Credit Limit less the Letter of Credit Reserve. Principal may be borrowed and
repaid, from time to time during such period, subject to all terms and
provisions of this Agreement. No Revolving Facility Advance shall be made after
the Revolving Facility Maturity Date.
2A.2 INTEREST ACCRUAL. Interest on the Revolving Facility
Balance shall accrue as provided in Article II-C.
2A.3 PAYMENTS; CONVERSION TO TERM FACILITY. Subject to
the terms of this Agreement, accrued interest on the Revolving Facility Balance
shall be payable quarterly in arrears on each Payment Date beginning on
September 30, 1996 and continuing thereafter through June 30, 1999 and on the
Revolving Facility Maturity Date. If any such accrued interest is not paid on
its due date, Lender may at its option (but with no obligation
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to do so), add the amount of such accrued interest to the unpaid principal due
under the Revolving Facility, in which event such accrued interest will be
deemed paid and the aggregate amount thereof shall be deemed included in the
Revolving Facility Balance. Subject to the terms of this Agreement, on the
Revolving Facility Maturity Date the Revolving Facility Maturity Balance shall
automatically be renewed and converted to comprise the Term Facility Balance as
provided by paragraph 2B.1.
2A.4 TERMINATION OF REVOLVING FACILITY. Subject to the
terms of this Agreement, the Revolving Facility shall terminate on the
Revolving Facility Maturity Date. Borrowers acknowledge and agree that Lender
shall have no obligation to renew the Revolving Facility.
2A.5 USE OF PROCEEDS. Subject to the terms of this
Agreement, all proceeds of Revolving Facility Advances shall be used for working
capital purposes in the ordinary course of business or for capital expenditures
or acquisitions to the extent not prohibited by this Agreement.
2A.6 BORROWING AND DISBURSEMENT. Revolving Facility
Advances shall be funded at the request of Borrowers, subject to satisfaction
of all requirements for funding under the Revolving Facility as provided in
paragraph 4.2 and otherwise as provided by this Agreement. Lender shall be
given a timely Interest Notice with respect to each request for a Revolving
Facility Advance, provided, that if Lender does not receive a timely Interest
Notice with respect to any such request, Borrowers shall automatically be
deemed to have irrevocably designated such Revolving Facility Advance as being
a Prime Rate Balance, subject to the right of later conversion as provided by
paragraph 2C.3(b). Subject to the terms and conditions of this Agreement,
Lender shall fund the requested Revolving Facility Advance by disbursing same
to a joint operating account of Borrowers, according to Borrowers' joint
written disbursement instructions.
2A.7 REIMBURSEMENTS TO LENDER. In the event Lender shall
sustain or incur any loss or reasonable expenses as a result of failure by
Borrowers to borrow any Revolving Facility Advance after having given notice of
a request for such Revolving Facility Advance under paragraph 2.A.8 (whether by
reason of election not to proceed with such Advance or failure of satisfaction
of any conditions required by Article IV), Borrowers jointly and severally
agree to pay to Lender, upon demand, an amount sufficient to compensate Lender
for any such losses and expenses, including without limitation, Consequential
Loss, if any. At the request of Borrowers, Lender shall provide a certificate
itemizing such loss and expenses.
2A.8 FUNDING/BOOKING OF REVOLVING FACILITY ADVANCES.
Lender may fund or book amounts in respect of Revolving Facility Advances at
any office or branch office of Lender as Lender shall determine in its
discretion.
2A-9 CONTINUING REPRESENTATIONS. Except as may have been
otherwise disclosed to Lender in writing each request for a Revolving Facility
Advance and acceptance of the proceeds thereof shall constitute a continuing
representation and express warranty by Borrowers that as of the date of such
request and at and as of the time of the funding thereof all conditions and
requirements of subparagraphs (b) through (g) of paragraph 4.2 are
satisfied and fulfilled in all respects.
ARTICLE II-B. TERM FACILITY
2B.1 TERM FACILITY. Lender hereby establishes a term
facility for repayment of the Revolving Facility Maturity Balance. Subject to
the terms and provisions of this Agreement, effective at the close of Lender's
business on the Revolving Facility Maturity Date, the Revolving Facility
Maturity Balance shall automatically convert and be renewed into, and
thereafter shall constitute, the Term Facility Balance, which shall be payable
and governed as provided and governed as provided in Article II-B and as
otherwise as provided by this Agreement.
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2B.2 INTEREST ACCRUAL. Interest on the Term Facility
Balance shall accrue as provided in Article II-C.
2B.4 PAYMENTS. Subject to the terms of this Agreement, (i)
accrued interest on the Term Facility Balance shall be payable quarterly in
arrears on each Payment Date beginning on September 30, 1999 and continuing
thereafter through June 30, 2003 and on the Term Facility Maturity Date, and
(ii) principal payments in an amount equal to the Term Facility Amortization
Payment shall be due and payable in equal quarterly installments on each
Payment Date beginning on September 30, 1999 and continuing thereafter through
June 30, 2003 and on the Term Facility Maturity ]Date.
2B.5 TERMINATION OF TERM FACILITY. Subject to the terms of
this Agreement, the Term Facility shall terminate and the Term Facility Balance
and all unpaid accrued interest and other obligations in respect thereof shall
be due and payable in full on the Term Facility Maturity Date.
2B.6 BOOKING OF TERM FACILITY BALANCE. Lender may book the
Term Facility Balance at any office or branch office of Lender as Lender shall
determine in its discretion.
2B.7 CONTINUING REPRESENTATIONS. Except as may have been
otherwise disclosed to Lender in writing, Borrowers' acceptance of the
forbearance resulting from conversion of the Revolving Facility Maturity
Balance to the Term Facility Balance as provided by paragraph 2B. I shall
constitute a continuing representation by Borrowers that no event or condition
exists which would be the subject of a required notice under paragraph 6.12 or
paragraph 6.13.
ARTICLE II-C. GENERAL LOAN TERMS
2C.1 MASTER NOTE. The Facility Balance shall be further
evidenced by a promissory note dated as of the Effective Date, which shall be
executed and delivered by Borrowers payable to the order of Lender in the face
amount of the Credit Limit, in form satisfactory to Lender.
2C.2 INTEREST ACCRUAL. Interest shall accrue on the
Facility Balance from day to day outstanding at a rate equal to the lesser of
the applicable Contract Rate or the Maximum Rate, provided however, that
subject to the provisions of paragraph 9.10, in the event that the Contract
Rate shall exceed the Maximum Rate at any time and thereafter shall be less
than the Maximum Rate then at Lender's option, notwithstanding the foregoing,
the rate of interest applicable hereunder shall remain at the Maximum Rate
until the aggregate accrued interest to date under the Facility equals de
amount that would have accrued had the Contract Rate at all times remained in
effect. Each change in the applicable interest rate shall become effective
without prior notice automatically as of the opening of business on the
Business Day of any effective change in the Prime Rate or the Maximum Rate, as
the case may be. Unpaid principal, if any, of any Facility Balance remaining
unpaid on the Term Facility Maturity Date shall automatically accrue interest
&an and after such date at an annual rate equal to the Maximum Rate. Interest
on the Facility Balance shall be calculated on the basis of the actual days
elapsed in a year consisting of 360 days.
2C.3 INTEREST OPTIONS. Subject to the provisions of this
Agreement, Borrowers shall have the option to designate all or any portion of
any Revolving Facility Advance or any portion of the Facility Balance as a
Prime Rate Balance or a LIBOR Balance, provided however, that any such LIBOR
Balance for any particular Interest Period shall not be for less than
$500,000.00 of unpaid principal or an integral multiple thereof, and no more
than four (4) Interest Periods shall be allowed to exist at any one time. Any
such option shall be exercised by timely delivery to Lender of an Interest
Notice in the manner provided below:
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(a) Revolving Facility Advances. Borrowers shall
give to Lender an Interest Notice in connection with each request for
a Revolving Facility Advance, therein designating the Interest
Option(s) selected with respect to such Revolving Facility Advance.
(b) Conversion of Prime Rate Balance to LIBOR
Balance. During any period in which any Prime Rate Balance is in
existence Borrowers shall have the right to convert all or any portion
thereof to a LIBOR Balance by giving Lender an Interest Notice of such
conversion, therein designating the Interest Option(s) selected with
respect thereto.
(c) At Expiration of Interest Periods. At least
three (3) Business Days prior to the end of any Interest Period,
Borrowers shall give Lender an Interest Notice indicating the Interest
Option to be applicable to the corresponding LIBOR Balance upon the
expiration of such Interest Period. If no such Interest Notice is
timely given to Lender, Borrowers shall be deemed to have designated
that such LIBOR Balance shall be converted to a Prime Rate Balance
upon the expiration of such Interest Period and to have given Lender
notice of such designation.
Notwithstanding the foregoing, Borrowers shall have no right to designate the
Adjusted LIBOR Rate in any Interest Notice delivered at any time when any Event
of Default is in existence.
2C.4 INTEREST NOTICES. Unless otherwise agreed by Lender,
each Interest Notice, in order to be timely and effective under this Agreement,
shall be delivered to Lender (i) if such Interest Notice includes designation
of a LIBOR Balance at least two (2) Business Days prior to the Business Day on
which funding of the requested Advance, or conversion of a Prime Rate Balance
to a LIBOR Balance, is to be effective, and (ii) otherwise by 12:00 noon on the
Business Day on which any funding of the requested Advance, or conversion of a
Prime Rate Balance to a LIBOR Balance, is to be effective. Each Interest Notice
shall be irrevocable and binding upon Borrowers. Any Interest Notice may be
written or oral (provided, that Borrowers agree that any oral Interest Notice
shall promptly be confirmed in writing, but provided further, that any delay or
failure in providing such confirmation shall not affect Lender's ability to
properly rely upon the validity of any such oral Interest Notice). Lender
hereby is authorized and directed to honor all telephonic Interest Notices from
any Person whom Lender reasonable believes to be authorized to request an
Advance. Borrowers jointly and severally agree to indemnify and hold Lender
harmless from any loss or liability incurred in connection with honoring any
such telephonic or other oral Interest Notices. Written Interest Notices are
effective only upon receipt by Lender.
2C.5 MANDATORY PAYMENTS. If at any time for any reason the
Facility Balance exceeds an amount equal to the Credit Limit less the Letter of
Credit Reserve, Borrowers jointly and severally agree to make an immediate
payment of principal under the Facility in an amount not less than the amount
of such excess, which shall be applied in the manner prescribed by paragraph
2C.6. Amounts, if any, payable under this paragraph 2C.5 shall be deemed to be
payable without necessity of notice or demand and may be offset by Lender
against any amount owing by Lender to any Borrower without prior notice.
2C.6 APPLICATION OF PAYMENTS AND PREPAYMENTS. All payments
from time to time received by Lender shall be applied in the following order of
priority: (i) payment of any fees, costs or expenses for which any Borrower is
obligated under the Loan Documents, (ii) payment of accrued interest due and
payable in respect of the Facility, (iii) payment of principal due and payable
in respect of the Facility, first to any Prime Rate Balance and then to any
LIBOR Balance according to the latest expiring corresponding Interest Periods)
and (iv) prepayments of principal under the Facility, first to any Prime Rate
Balance and then to any LIBOR Balance according to the latest expiring
corresponding Interest Periods (and in respect of the Term Facility Balance, in
any case in inverse order of scheduled installments thereunder). Subject to the
foregoing, Borrowers shall have the right to prepay all or any portion of the
outstanding principal under the Facility at any time, subject however to prior
payment of Consequential Loss, if any, resulting from such prepayment.
Notwithstanding the foregoing, during the existence and continuance of any Event
of Default, Lender may apply any payments or prepayments, or other amounts
received, in such manner as Lender may determine in its sole discretion.
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2C.7 LETTERS OF CREDIT.
(a) Upon the request of any Borrower from time to
time, Lender shall in accordance with the provisions of this paragraph
2C.7 issue one or more Letters of Credit up to an aggregate amount
available to be drawn (plus the aggregate amount of unreimbursed
drawings under all Letters of Credit) at any time not to exceed the
Letter of Credit Sublimit; provided, that (1) all Letter of Credit
Documents in connection with each Letter of Credit shall be
satisfactory to Lender in its sole discretion, (2) no Letter of Credit
shall be issued if, after issuance thereof, the sum of the aggregate
principal amount of the Facility Balance outstanding, plus the Letter
of Credit Reserve, would exceed the Credit Limit, (3) each Letter of
Credit shall be a documentary letter of credit issued to or for the
benefit of a supplier of such Borrower in connection with the purchase
of Inventory or a standby letter of credit otherwise issued to a
beneficiary, and for a purpose, acceptable to Lender in its sole
discretion, and (4) no Letter of Credit shall have an expiration date
later than 180 days after the Revolving Facility Maturity Date.
(b) With respect to any drawing under a Letter of
Credit which occurs on or prior to the Revolving Facility Maturity
Date, unless Borrowers otherwise promptly pay Lender its reimbursement
obligation therefor, Borrowers shall be deemed to have irrevocably
requested Lender to make a Revolving Facility Advance (designated as a
Prime Rate Balance) in the amount of such reimbursement obligation,
and Lender shall have the option, but not the obligation, to fund such
request. Upon Lender's funding of any such Revolving Facility Advance,
such reimbursement obligation shall be deemed paid and the amount
thereof shall be included as a part of the Revolving Facility Balance.
Borrowers shall promptly pay Lender all reimbursement obligation with
respect to any drawing under a Letter of Credit which occurs after the
Revolving Facility Maturity Date.
(c) The issuance and negotiation of Letters of
Credit shall be governed by the Uniform Customs and Practices for
Documentary Credits (1993 Revision), as published in the International
Chamber of Commerce Uniform Customs and Practices, Publication No. 500
or, at Lender's option, such other policies and practices as may be
followed by Lender with respect to similar letters of credit at the
time.
2C.8 FEES. Subject in all respects to the provisions of
paragraph 9.12 Borrowers jointly and severally agrees as follows:
(a) Origination Fee. In consideration for
establishing the Facility, Borrowers shall pay an origination fee to
Lender in the aggregate amount equal to Twenty Thousand and no/100
Dollars ($20,000.00), which shall be payable upon execution of this
Agreement.
(b) Commitment Fee. In connection with and as
consideration for Lender's commitments under this Agreements,
Borrowers shall pay a fee to Lender, beginning on the date which is
the second anniversary of the Effective Date and continuing until the
Revolving Facility Maturity Date, in an amount equal to one-eighth of
one percent (0.125%) per annum of the average daily unused portion of
the Credit Limit, payable quarterly in arrears on each Interest
Payment Date and on the date of any early termination of the Facility.
(c) Letter of Credit Fees. As consideration for
the issuance by Lender of any Letter of Credit, such Borrowers shall
pay to Lender all applicable Letter of Credit fees as follows:
three-quarters of one percent (0.75%) per annum of the face amount of
each standby Letter of Credit or one-half of one percent (0.5%) per
annum of the face amount of each documentary Letter of Credit, as the
case may be (in either case subject to payment of Lender's applicable
minimum fee for issuance of letters of credit
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<PAGE> 20
of such type), plus Lender's customary documentation fees, if any, for
issuance. Such fees shall be payable to Lender in advance on the date
of issuance of each Letter of Credit and shall be calculated according
to the face amount of such Letter of Credit based on its stated term.
(d) General. Fees shall be allocated by Borrowers
among themselves as Borrowers shall determine. All fees shall be fully
earned by Lender when due and payable and, except as otherwise set
forth herein, shall not be subject to refund or rebate. All fees are
for compensation for services and are not and shall not be deemed to
be, interest or a charge for the use of money.
2C.9 PAYMENTS. Each Borrower hereby jointly and severally
agrees to make all payments in respect of the Obligations as provided by this
Agreement and the other Loan Documents.
2C.10 SPECIAL PROVISIONS FOR LIBOR PRICING.
(a) Inadequacy of LIBOR Balance Pricing. If
Lender determines that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in United States
dollars (in the applicable amounts) are not being offered to United
States financial institutions in the interbank eurodollar market for
such Interest Period, or that the rate at which such Dollar deposits
are being offered will not adequately and fairly reflect the cost to
Lender of making or maintaining a LIBOR Balance for the applicable
Interest Period, Lender shall give at least five (5) Business Days
notice thereof to Borrowers, whereupon until Lender notifies Borrowers
that the circumstances giving rise to such suspension no longer exist
(i) the right to select an Interest Option based upon the LIBOR Rate
shall be suspended, and (ii) Borrowers shall be deemed to have
converted each LIBOR Balance to the Prime Rate Balance in accordance
with the provisions hereof on the last day of the then-current
Interest Period applicable to such LIBOR Balance.
(b) Illegality. If the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender with
any request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency shall make it
unlawful or impossible for Lender to make or maintain a LIBOR Balance,
Lender shall so notify Borrowers. After the expiration of five (5)
Business Days after receipt of such notice (unless immediate effect is
required in order for Lender to maintain compliance with applicable
law, in which case such notice shall be effective immediately),
Borrowers shall be deemed to have converted any LIBOR Balance to de
Prime Rate Balance, on either (i) the last day of the then-current
Interest Period applicable to such LIBOR Balance if Lender may
lawfully continue to maintain and fund such LIBOR Balance to such day,
or (ii) immediately, if Lender may not lawfully continue to maintain
such LIBOR Balance to such day.
(c) Additional Costs. Borrowers agree to pay to
Lender all LIBOR Costs within ten (10) days of receipt by Borrowers
from Lender of a statement setting forth the amount or amounts due and
the basis for the determination from time to time of such amount or
amounts, which statement shall be conclusive and binding upon
Borrowers absent manifest error. Failure by Lender to demand
compensation for any LIBOR Costs in any Interest Period shall not
constitute a waiver. of Lender's right to demand compensation for any
LIBOR Costs incurred during any such Interest Period or in any other
subsequent or prior Interest Period.
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ARTICLE III. COLLATERAL
3.1 SECURITY INTEREST. Each Borrower hereby grants to
Lender a continuing security interest and lien in and to all of its right,
title and interest in the Collateral to secure full payment and performance of
the Obligations.
3.2 PERFECTION AND PROTECTION OF LENDER'S SECURITY
INTEREST. Without limitation of the provisions of this Agreement but in
supplement hereof, to further evidence Lender's continuing security interests
and liens in the Collateral, Borrowers shall execute and deliver to Lender
separate security agreements, on Lender's standard form security agreement and
otherwise in form reasonably satisfactory to Lender, provided, that in the
event of any conflict between the provisions of this Agreement and the
provisions of any such separate security agreements, the provisions of this
Agreement shall control. Each Borrower shall perform, at its expense, all
action requested by Lender at any time to perfect, maintain, protect, and
enforce Lender's security interests in the Collateral, including without
limitation executing and filing financing statements and amendments thereof, in
form and substance satisfactory to Lender; delivering to Lender the originals
of all Collateral the possession of which is required for perfection of
Lender's security interests, duly endorsed or assigned to Lender without
restriction; placing notations on books of account to disclose Lender's
security interests; and such other steps as are deemed necessary by Lender to
maintain its security interests. In the event any Borrower's Receivables
(singularly in excess of $250,000.00 or in the aggregate in excess of
$500,000.00) at any time are evidenced by a promissory note or other
instrument, such Borrower will immediately notify Lender and, at Lender's
request, deliver such instrument to Lender, duly endorsed payable to the order
of Lender. Borrowers shall deliver to Lender the certificate of title on all
Collateral with respect to which recordation or notation is required for
perfection of a security interest, and shall execute applications for corrected
certificates of title and other such documentation as may be necessary to duly
perfect Lender's security interest therein. So long as this Agreement is in
effect and until all Obligations have been fully satisfied, Lender's security
interest and lien hereunder shall continue in full force and effect in all
Collateral.
3.3 PRIORITY. Lender's security interests in the
Collateral granted herein at all times shall be and remain first, prior and
senior to any other interests in the Collateral, except to the extent, if any,
as specified otherwise in Exhibit 3.3 or as may be expressly agreed otherwise
by Lender in writing. Borrowers represents to Lender that no other security
interests, liens or other encumbrances exist with respect to any of the
Collateral, except to the extent, if any, as disclosed in Exhibit 3.3.
3.4 LOCATION OF COLLATERAL. Each Borrower represents and
warrants to Lender that all of its books and records relating to the Collateral
owned by such Borrower are located at its chief executive office, and at such
other locations, if any, as are specified in Exhibit 3.4. Exhibit 3.4 attached
hereto correctly identifies the locations where all Inventory will be
maintained, and if any such location is a leased location, the name and address
of the owner thereof. Each Borrower agrees that it will not maintain any
Collateral at any location other than its chief executive office designated and
those listed in Exhibit 3.4 unless it gives Lender at least 30 days prior
written notice and executes such financing statements and other documents as
Lender may request in connection therewith.
3.5 EXAMINATIONS; INSPECTIONS. Lender shall have the
right without hindrance or delay to conduct field examinations to inspect the
Collateral and to inspect, audit and copy any Borrower's books, records,
journals, correspondence and other records and data relating to the Collateral
or its business (without limitation of the foregoing, Lender and Borrower
confirm their expectation that, absent the existence of an Event of Default,
such field examinations are not expected to be required more often than once
annually). Lender is authorized to discuss Borrowers' affairs with any Person,
including without limitation employees of any Borrower, as Lender may deem
necessary in relation to the Collateral, any Borrower's financial condition or
Lender's rights under the Loan Documents. With respect to any such field
examination performed while any Event of Default is in
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existence, Borrowers jointly and severally agree to pay Lender's out of pocket
expenses relating to such field examinations. Lender shall have full access to
all records available to any Borrower from any credit reporting service, bureau
or similar service and shall have the right to examine and make copies of any
such records. Lender may exhibit a copy of this Agreement to such service and
such service shall be entitled to rely on the provisions hereof in providing
access to Lender as provided herein.
3.6 COLLATERAL RECORDS. Borrowers shall maintain accurate
and complete books and records in respect of the Collateral. Within three (3)
Business Days following request by Lender, Borrowers will deliver or otherwise
furnish to Lender such information regarding the Collateral as Lender may
request. If any of such records or reports are prepared by an accounting
service or other agent, each Borrower hereby authorizes such service or agent
to deliver such records, reports and related documents to Lender. Lender may
exhibit a copy of this Agreement to any such service or agent and such service
or agent shall be entitled to rely on the provisions hereof in providing such
documentation to Lender.
3.7 AGING REPORTS. Within forty-five (45) days after the
end of each calendar quarter, each Borrower shall furnish to Lender an analysis
of amounts owing on all accounts included within the Receivables owing to such
Borrower, showing an aging as follows: (i) those aged 30 days or less from date
of invoice, (ii) those aged over 30 days, but less than 61 days, from date of
invoice, (ii) those aged over 60 days, but less than 91 days, from date of
invoice, (iii) those aged over 90 days from date of invoice. Such analysis
shall include a listing of the name and complete address of each account debtor
and such other information as Lender may request
3.8 RECEIVABLES COLLECTIONS. For so long, from time to
time, as no Event of Default is in existence, all collections and proceeds of
Receivables may be collected and retained by Borrowers for use in the ordinary
course of business. At any time when an Event of Default is in existence, at
Lender's option upon written notice to Borrowers, all collections and proceeds
of Receivables shall be delivered to Lender in the form received, with any
necessary endorsement, for deposit to a blocked collection account and
application to the Obligations in accordance with paragraph 2C.6.
3.9 INVENTORY. Within forty-five (45) days after the end
of each calendar quarter, each Borrower shall furnish to Lender an inventory
report, therein listing and reporting such information in respect of such
Borrower's Inventory as Lender may require, in form satisfactory to Lender.
Each Borrower represents and warrants to Lender that all Inventory of such
Borrower shall be held for sale in the ordinary course of such Borrower's
business, and is and will be fit for such purpose. Each Borrower will keep its
Inventory in good and marketable condition, at its own expense. All sales of
Inventory shall be in accordance with applicable law. Each Borrower will
maintain a perpetual inventory system at all times and will conduct a physical
count of its Inventory at least once per calendar year and at Lender's request
shall promptly supply Lender with a copy of such count. No negotiable documents
have been issued in respect of any Borrower's Inventory, and none shall be
issued without prior written notice to Lender and, at Lender's request,
completion of arrangements satisfactory to Lender for possession of such
negotiable documents to be delivered to Lender. No material amount of
Inventory is held by any Borrower on consignment or approval, or on a sale or
return, bill-and-hold, guaranteed sale, repurchase or similar basis and no
Inventory has been sold or delivered to any Person on consignment or approval,
or on a sale or return, bill-and-hold, guaranteed sale, repurchase or similar
basis. Borrowers will not acquire or accept any material amount of Inventory on
consignment or approval, or on a sale or return, bill-and-hold, guaranteed sale,
repurchase or similar basis without the prior written consent of Lender and
Borrowers will not sell any material amount of Inventory on consignment or
approval, or on a sale or return, bill-and-hold, guaranteed sale, repurchase or
similar basis without the prior written consent of Lender. All cash receipts,
if any, from time to time received by any Borrower in respect of the sale of
Inventory, including without limitation cash, checks or similar items, shall be
subject to an express trust for the benefit of Lender and promptly delivered to
Lender in the form received for application in reduction of the Obligations.
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3.10 REAL PROPERTY COLLATERAL. Lender at all times shall
have and maintain a deed of trust or mortgage lien for the benefit of Lender
covering the Real Property Collateral, which at all times shall be maintained
as a first priority deed of trust or mortgage lien in favor of Lender, securing
all of the Obligations, as provided in the Real Property Collateral Documents.
At Lender's request, Diamond shall provide Lender, at Borrowers' expense, with
(i) an environmental site assessment, prepared by a credentialed environmental
site consultant acceptable to Lender and in form satisfactory to Lender,
confirming to Lender the status of compliance with Environmental Requirements
with respect to such Real Property Collateral, (ii) a mortgagee's policy of
title insurance written by a title insurance company reasonably acceptable to
Lender and in form reasonably satisfactory to Lender, containing no exceptions
other than as are reasonably acceptable to Lender and (iii) a boundary survey,
performed and certified to Lender by a credentialed registered surveyor
reasonably acceptable to Lender, and in form reasonably satisfactory to Lender.
Lender may obtain an updated appraisal with respect to the Real Property
Collateral at such times as Lender may request in order to comply with
applicable law or internal policy requirements. Notwithstanding the foregoing,
it is agreed that absent existence of an Event of Default, any such
environmental site assessment, mortgagee's policy of title insurance or
boundary survey shall not be required more often than once during any two (2)
year period (it being understood, however, that such limitation shall not apply
at any time when any Event of Default is in existence or if any such item is
required in order to comply with applicable law). Subject to paragraph 3.14,
Diamond shall pay all reasonable costs and expenses incurred by Lender in
obtaining any and all such updated appraisals.
3.11 EQUIPMENT. All Equipment is and will be used or held
for use in the ordinary course of business. The Equipment shall be maintained
in good operating condition and repair (ordinary wear and tear excepted).
Current and accurate maintenance records will be maintained on all Equipment
and made available to Lender upon request. No attachments or accessions to the
Equipment will be allowed unless such items are subject to Lender's first and
exclusive security interests as provided herein. Each Borrower agrees that it
will not sell or otherwise dispose of any Equipment (other than in the ordinary
course of business) without the prior written consent of Lender. Unless
expressly agreed otherwise by Lender in writing, Lender's security interest in
all Equipment shall remain in full force and effect and shall continue
notwithstanding any sale or other disposition thereof. Any and all proceeds of
any Equipment shall at all times be subject to Lender's continuing security
interests under this Agreement. Unless otherwise agreed by Lender in writing,
all cash receipts, if any, from time to time ranked by any Borrower in respect
of the sale of Equipment, including without limitation cash, checks or similar
items, shall be subject to an express trust for the benefit of Lender and
promptly delivered to Lender in the form received for application in reduction
of the Obligations. No Equipment shall be allowed to become a fixture to real
property or an accession to other personal property unless Lender has a valid,
perfected first priority security interest therein.
3.12 GUARANTY. Each Guarantor shall execute and deliver to
Lender a guaranty agreement, in form and substance satisfactory to Lender,
pursuant to which such Guarantor shall guarantee prompt payment and performance
when due of the Obligations.
3.13 INSURANCE. Each Borrower shall keep and maintain
adequate insurance with respect to its business and all of its property at any
time included within the Collateral, written by insurers acceptable to Lender.
Such insurance shall be with respect to loss, damages, and liability of amounts
not less than reasonably requested by Lender, and shall include, at minimum,
extended coverage insurance, insurance against business interruption, insurance
for workers compensation, and insurance for general premises liability, fire,
theft, burglary, pilferage, loss in transit, casualty and all risk. Borrowers
will make timely payment of all premiums required to maintain such insurance in
force. Borrowers shall cause Lender to be an additional insured and loss payee
under all policies of insurance covering any of the Collateral, to the extent
of Lender's interest, in form satisfactory to Lender. Borrowers will cause
each policy of insurance to contain a clause or endorsement requiring the
insurer to give not less than thirty (30) days prior written notice to Lender
in the event of cancellation of the policy for any reason whatsoever. Borrowers
shall deliver copies of each insurance policy to
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<PAGE> 24
Lender at lease once during any twelve (12) month period, and in any event, at
such other times as Lender may request If any Borrower fails to procure such
insurance or to pay the premiums therefor when due, Lender shall have the right
(but with no obligation) to make such payment, which amount such Borrower shall
pay to Lender on demand or, at Lender's option (but with no obligation to do
so) Lender may add such amount to the unpaid principal due by such Borrower
under the Revolving Facility, in which event such amount will be deemed paid
and the aggregate amount thereof shall be treated as a loan under the Revolving
Facility. Each Borrower shall promptly notify Lender of any material loss,
damage, or destruction to any of its property at any time included within the
Collateral. Lender is hereby authorized to collect all insurance proceeds
directly. After deducting from such proceeds the expenses, if any, incurred by
Lender in the collection or handling thereof, Lender may apply such proceeds to
the reduction of the Obligations, in such order as Lender determines, or at
Lender's option may permit or require that such proceeds, or any part thereof,
be used to replace, repair or restore the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.
3.14 APPRAISALS. Borrowers shall allow Lender, at
Borrowers' expense, to make arrangements for appraisals or updated appraisals
with respect to any Collateral at such times as Lender may request (provided,
that Borrower's obligations for such expenses shall not exceed $5,000.00 per
calendar year).
3.15 LANDLORDS, BAILEES. Except as disclosed in Exhibit
3.4, Borrowers will not deliver possession or control of any Collateral to any
Person without Lender's prior written consent. Borrowers shall notify each
bailee, if any, from time to time in possession of any Collateral of Lender's
security interests under this Agreement. At Lender's request, any Borrower
shall obtain such bailee's acknowledgment of such notice and its agreement to
hold all Collateral from time to time in its possession subject to disposition
at Lender's direction. At Lender's request, any Borrower will cause the
landlord to execute and deliver to Lender a Landlord's Waiver with respect to
any leased locations where any of its property at any time included within the
Collateral will be located. Borrowers shall immediately notify Lender upon
receipt of any notice from any Person claiming past due rent, fees or other
charges in excess of sixty days (60) past due in respect of any Collateral.
3.16 RIGHT TO CURE. Lender in its sole discretion may pay
any amount or take any action in order to preserve, protect and maintain the
Collateral and Lender's security interest therein, including without
limitation, payment of any insurance premium, any repair, maintenance or
storage charge, any landlord's claim, and any other encumbrance or claim
asserted against property of any Borrower at any time included within the
Collateral. All such payments and all out-of-pocket costs and expenses made or
incurred by Lender shall be payable by such Borrower to Lender on demand or at
Lender's discretion, deemed as a loan to such Borrower under the Revolving
Facility as of the date or dates of Lender's disbursement thereof. Any payment
made or other action taken by Lender under this paragraph shall be without
prejudice to any right to assert an Event of Default or exercise any other
remedy hereunder.
3.17 PRESERVATION OF LENDER'S RIGHTS. To the extent
allowed by law, neither Lender nor any of its officers, directors, employees,
and agents shall be liable or responsible in any way for the safekeeping of any
Collateral or for any act or failure to act with respect to the Collateral, or
for any loss or damage thereto or any diminution in the value thereof, or for
any act by any other Person. In the case of any instruments and chattel paper
included within the Collateral, Lender shall have no duty or obligation to
preserve rights against prior parties. The Obligations shall not be affected by
any failure of Lender to take any steps to perfect is security interests or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release any Borrower from any of the Obligations. Lender may extend
the time for payment of the Obligations or modify or amend the terms of any of
the Loan Documents, or compromise or grant other indulgences, renewals,
extensions or releases, and take or omit to take any other action with respect
to the Obligations or the Collateral, or any Person directly or indirectly
obligated in connection therewith without impairing Lender's security interests
in the Collateral or any of Lender's rights under the Loan Documents.
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3.18 SPECIAL RIGHTS OF LENDER; POWER OF ATTORNEY. Each
Borrower hereby irrevocably appoints Lender as its agent and attorney-in-fact
to take any action necessary to preserve and protect the Collateral and
Lender's interests under the Loan Documents. Each Borrower hereby authorizes
and appoints Lender as attorney in fact to sign and file any financing
statement or other document necessary to perfect Lender's security interest in
the Collateral. Lender shall have the right at any time to take any of the
following action, in its own name or in the name of any Borrower, whether or
not an Event of Default is in existence: (i) make written or verbal requests
for verification of amounts owing on Receivables from any or all Persons which
Lender believes may be account debtors or obligors on Receivables; (ii) notify
any or all Persons which Lender believes may be account debtors or obligors on
Receivables to make payments directly to Lender; (iii) take possession and
control of proceeds of Receivables, (iv) redirect the deposit and disposition
of collections and proceeds of Receivables; (v) endorse the name of any
Borrower on checks, instruments or other evidences of payment on Receivables;
(vi) settle, adjust, compromise or discharge Receivables or extend time of
payment upon such terms as Lender may determine; (vii) take action in Lender's
name or any Borrower's name to enforce collection of Receivables; (viii)
prepare, sign and file, on behalf of any Borrower in such Borrower's name or in
Lender's name as assignee, any proof of claim or other document in any
bankruptcy proceedings of any account debtor or obligor on Receivables; (ix)
prepare, sign and file, in the name of any Borrower, any notice of lien or
similar document necessary to create or perfect any materialman's lien,
laborer's lien or similar lien in enforcement of any Receivables; (x) access,
copy any information recorded or contained or utilize any computer or data
processing equipment or system in respect of the Receivables maintained by any
Borrower or any Affiliate, or to which any Borrower has access; (xi) enter onto
any Borrower's premises and discuss Borrower's affairs with such Borrower's
personnel as may be reasonably necessary in connection with maintaining or
enforcing Lender's rights under the Loan Documents, (xii) direct the U.S.
Postal service to change the address to which any Borrower's mail is delivered,
(xiii) open mail addressed to any Borrower and dispose of checks or other
proceeds of Receivables in accordance with this Agreement, and (xiv) take all
other action allowed by law as may be necessary to carry out the Loan Documents
and give effect to Lender's rights thereunder. Should Lender at any time elect
to exercise its right of verification or notification with respect to the
Receivables as provided in clause (i) or clause (ii) above, respectively,
Lender shall have the right in its sole discretion to direct such request for
verification, or notification, as the case may be, to all Persons which Lender
believes may have transacted business with any Borrower at any time, whether or
not such Persons are then indebted to such Borrower, and Lender is hereby
released and discharged from any liability by reason of any such request for
verification or notification. Costs and expenses incurred by Lender in
connection with any of such actions by Lender, including attorneys' fees and
out-of-pocket expenses, shall be reimbursed to Lender on demand.
3.19 MUTUAL BENEFIT; JOINT AND SEVERAL LIABILITY; CROSS
COLLATERALIZATION; CROSS GUARANTIES. The Facility is for the joint and several
benefit of each and all Borrowers, and each and any Borrower shall be entitled
to request and obtain Revolving Facility Advances, subject to the terms of this
Agreement. Because of the inter-relationships among Borrowers and their
respective businesses and operations, each Borrower has determined
independently from considerations relative to credit otherwise available to
such Borrower under this Agreement, that entering into this Agreement is within
its corporate purpose, will be of direct and indirect benefit to such Borrower
and is in its best interest. Each Borrower (i) acknowledges and agrees that it
is jointly and severally liable for the Obligations, (ii) agrees that the
security interest and continuing lien in and to all of its right, title and
interest in the Collateral and the Real Property Collateral, as the case may
be, granted to or for the benefit of Lender pursuant to this Agreement and the
other Loan Documents shall secure all Obligations from time to time owing by
each of the other Borrowers, respectively, and (iii) each Borrower shall
execute and deliver for the benefit of Lender a guaranty agreement pursuant to
which such Borrower shall guarantee to Lender the prompt payment and
performance of all Obligations from time to time owing by each other Borrower,
respectively (such guaranty agreements to be in form and substance
satisfactory to Lender). Each Borrower hereby acknowledges that its agreement
to the provisions of this paragraph is in consideration of the availability of
loans to each of the other Borrowers under this Agreement and is not required
by Lender as a condition to the availability of loans to such Borrower under
this Agreement.
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ARTICLE IV. CONDITIONS
4.1 ITEMS TO BE DELIVERED BY BORROWER. Prior to or
simultaneously with execution and delivery hereof, Borrowers shall deliver, or
cause to be delivered, to Lender the following:
a. Officer's Certificate (Parent, DVDI, Diamond,
JAK). Due certification by the corporate secretary or
assistant secretary of Parent, DVDI, Diamond and JAK,
respectively, attesting to the accuracy, completeness and
authenticity of the following:
i. Articles of Incorporation and
Certificate of Existence. A copy of its articles of
incorporation, and all amendments thereto,
accompanied by the certificate of the appropriate
governmental official of its state of incorporation
bearing a date no more than thirty (30) days prior to
the date hereof, to the effect that such copy is
correct and complete and that such Borrower is a
corporation duly incorporated and validly existing in
such state, and certified by the corporate secretary
of such Borrower dated the date hereof, as being
correct and complete as of the date hereof.
ii. Good Standing. Certification by the
appropriate government official of the state of
incorporation of such Borrower bearing a date no more
than thirty (30) days prior to the date hereof, to
the effect that such Borrower is in good standing
with respect to payment of franchise and similar
taxes. Each Borrower represents that to the extent
required by applicable law, it is qualified or
licensed to transact business in all jurisdictions in
which any of its property included within the
Collateral is located.
iii. By-Laws. A copy of the bylaws, and
all amendments thereto, of such Borrower accompanied
by certificates from its corporate secretary, dated
the date hereof, to the effect that such copy is
correct and complete as of the date hereof.
iv. Resolutions. A copy of corporate
resolutions of such Borrower approving this
Agreement, authorizing the transactions contemplated
hereby, and authorizing and directing a named officer
or officers of such Borrower to sign and deliver all
Loan Documents to be executed by such Borrower, duly
adopted by the board of directors of such Borrower,
accompanied by the certificate of the corporate
secretary, dated the date hereof, that such copy is a
true and complete copy of resolutions duly adopted by
the board of directors of such Borrower, and that
such resolutions have not been amended, modified, or
revoked in any respect and are in full force and
effect as of the date hereof. Such resolutions shall
be in form and substance satisfactory to Lender.
v. Incumbency. Certification of
incumbency of all officers of such Borrower executed
by its president or vice president and corporate
secretary, as of the effective date hereof,
certifying the name and signature of each such
officer.
b. General Partner's Certificate (Ultrak). Due
certification by Ultrak, G.P., Inc., the general partner of
Ultrak, attaching and attesting to the accuracy, completeness
and authenticity of the following:
i. Certificate of Limited Partnership.
A true and correct copy of Ultrak's certificate of
limited partnership,
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ii. Certificates of Existence (Ultrak
and Ultrak GP, Inc.). A certificate of existence,
issued and certified by the appropriate governmental
official, for each of Ultrak and its sole general
partner, Ultrak GP, Inc.,
iii. Authorizing Resolutions. A copy of
authorizing resolutions approving this Agreement and
the other Loan Documents, authorizing the
transactions contemplated hereby, and authorizing its
sole general partner, Ultrak GP, Inc., to execute and
deliver this Agreement and the other Loan Documents
and any related documents contemplated hereby to be
executed by Ultrak, in form satisfactory to Lender,
and
iv. Incumbency. Certification of the
name and signatures of incumbent officers of its sole
general partner, Ultrak GP, Inc., who are authorized
to execute this Agreement and other Loan Documents on
behalf of Ultrak.
c. Loan and Security Agreement. This Agreement,
duly executed.
d. Master Note. The Master Note, duly executed.
e. Security Agreements. The separate security
agreements, for each Borrower, required by paragraph 3.2.
f. Financing Statements. All financing
statements required by Lender in connection with perfection of
Lender's security interests in the Collateral.
g. Insurance. Evidence of insurance in
compliance with the requirements of paragraph 3.13.
h. Landlords Waivers; Bailees' Acknowledgments.
All Landlords Waivers, notifications and acknowledgments as
may be required by Lender under paragraph 3.15.
i. Affiliate Subordination Agreements. All
Affiliate Subordination Agreements, if any, required by Lender
under paragraph 6.19.
j. Guaranty. A Guaranty pursuant to paragraph
3.12, duly executed and delivered and in form satisfactory to
Lender.
k. Real Property Collateral Documents. A
mortgagee's policy of title insurance, or endorsements
thereof, with respect to all Real Property Collateral, as
required by, and in form satisfactory to, Lender.
l. 0pinion of Borrower's Counsel. An opinion of
counsel for Borrowers, in form and substance satisfactory to
Lender.
m. Other Documents. Such other items as Lender
may request in order to perfect or protect its interests and
rights under the Loan Documents.
4.2 LOANS UNDER REVOLVING FACILITY. As a condition to
any Revolving Facility Advance, each of the following requirements must be
satisfied in Lender's discretion:
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a. Lender shall have implemented all
administrative procedures required by Lender for
administration of the Facility, in form satisfactory to
Lender;
b. All items as required under paragraph 4.1
shall have been delivered to Lender, and the same shall be
satisfactory to Lender in its discretion;
c. All representations and warranties contained
in the Loan Documents shall be true, correct and complete in
all material respects (as determined by Lender in its sole
discretion) except as disclosed otherwise to Lender in writing
and is acceptable to Lender;
d. No Event of Default shall have occurred and
be continuing, or shall result from such Advance, and no other
event or condition which with notice or the passage of time,
or both would constitute an Event of Default, or which
otherwise is the subject of a required notice under paragraph
6.11, shall be in existence;
e. No material adverse change shall have
occurred with respect to any Borrower's financial condition or
operations since the effective date of the most recent
financial statements delivered to Lender.
g. All Obligations under the Loan Documents are
secured by first and prior, continuing, security interests and
liens in and to all Collateral.
Any request for a Revolving Facility Advance at a time when any of the
foregoing requirements are not satisfied may be declined by Lender without
prior notice.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
Each Borrower (as to itself unless otherwise noted) hereby
represents and warrants to Lender the following:
5.1 NAME; TRADE NAMES. Borrower is conducting,
transacting, and carrying on its business under its corporate name shown in
Article I and such other names as may be specified in Exhibit 5.1, and is not
engaged in business under any other name. Except as provided in Exhibit 5.1,
during the past five (5) years Borrower has not (i) done business under any
other name, or changed the location of its chief executive office, (ii) been
party to a merger or consolidation or (iii) acquired any of the property
included within the Collateral from any other Person, except for Inventory
purchased in the ordinary course of business.
5.2 CHIEF EXECUTIVE OFFICE. Borrower's chief executive
office is located at the address specified for Borrower in Article 1.
5.3 EXISTENCE; GOOD STANDING. Parent, DVDI, Diamond and
JAK, respectively, each is a corporation, duly incorporated, validly existing,
and in good standing under the laws of its state of incorporation, and is duly
qualified or licensed to transact business in all jurisdictions the laws of
which require it to be so qualified or licensed. Ultrak is a limited
partnership duly formed, validly existing and in good standing under the laws
of the State of Texas, and is duly qualified or licensed to transact business
in all jurisdictions the laws of which require it to be so qualified or
licensed. Ultrak, G.P., Inc., a Delaware corporation, is sole general partner
of Ultrak.
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5.4 POWER AND AUTHORITY; VALIDITY. Borrower possesses all
requisite power and authority own, lease and operate its properties and to
carry on its business and to execute, deliver, and comply with the Loan
Documents. Each of the Loan Documents has been duly authorized by all
necessary corporate action and has been duly executed and delivered by
Borrower, and evidences valid and binding obligations enforceable in accordance
with its respective terms.
5.5 NO CONFLICTING AGREEMENTS. Borrower represents that
the execution, delivery and performance of the Loan Documents will not violate
its articles of incorporation or bylaws (or in the case of Ultrak, its
agreement of limited partnership), nor constitute a default under, or result in
a breach of, any contract, agreement, or other instrument to which it is a
party or which is applicable to its property.
5.6 SHARE OWNERSHIP. Each of Borrower's outstanding
shares or interests (as the case may be) has been duly and validly issued and
is fully paid and is nonassessable. The outstanding equity ownership of
Borrower is as specified in Exhibit 5.6. Except as provided in Exhibit 5.6,
there are no subscriptions, options to purchase, conversion or exchange rights,
warrants or other agreements, claims or commitments of any nature obligating
Borrower to issue, transfer, deliver or sell additional shares or interests of
its equity ownership.
5.7 SUBSIDIARIES. There are no Subsidiaries that are not
Borrowers, except as listed in Exhibit 5.7. Each such Subsidiary listed therein
if any, is a corporation organized, validly existing and in good standing under
the laws of the state of its incorporation, and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now conducted and proposed to be conducted. All outstanding
shares of stock of each such Subsidiary, if any, have been validly issued and
are fully paid and non-assessable, and all shares owned by Borrower are free
and clear of any lien, pledge, security interest or other encumbrance.
5.8 FINANCIAL STATEMENTS. Parent has delivered to Lender
its consolidated audited balance sheet, income statement and statement of cash
flow as of its fiscal year ending December 31, 1995 and its consolidated
balance sheet, income statement and statement of cash flow as of the quarterly
period ending March 31, 1996. All of such financial statements were prepared in
accordance with GAAP, and are correct and complete, and fairly present the
consolidated financial condition of Parent and the Subsidiaries on the
respective dates thereof and the results of its operations for the respective
periods then ended. There has been no material adverse change in the business,
properties or financial condition of Borrower since the dates of such financial
statements, respectively.
5.9 LITIGATION. Other than as disclosed to Lender in
Exhibit 5.9, Borrower represents that it is not a party to any pending lawsuits
or proceedings before or by any state or federal court or governmental agency
or instrumentality, and is not aware of any threatened or potential lawsuits,
proceedings, claims, or investigations. The items, if any, disclosed in Exhibit
5.9, in the event of any unfavorable or adverse determination, will not result
in or cause a Material Adverse Effect.
5.10 COMPLIANCE WITH LAWS. Borrower represents that it is
not in violation of any laws, regulations and orders in any respect which will
result in or cause, or reasonably would be expected to result in or cause, a
Material Adverse Effect.
5.11 JUDGMENTS. There are no outstanding or unpaid
judgments against Borrower which, in the aggregate, exceed the total amount of
$250,000.00.
5.12 TAXES. All tax returns or filings required to be
filed by Borrower have been filed and taxes imposed upon Borrower which are due
and payable have been paid.
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5.13 TITLE TO PROPERTY. Borrower has good and marketable
title to all property reflected as being owned by Borrower in the financial
statements previously delivered to Lender or purported to have been acquired
since such date, except property sold or otherwise disposed of subsequent to
such date in the ordinary course of business. Borrower possesses all patents,
patent rights, licenses, trademarks, trademark rights, trade names, trade name
rights, and copyrights which are required to conduct its business as now
conducted without any known infringement or conflict by or against the rights
of any Person.
5.14 CONSENTS. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution, delivery and performance of the Loan Documents. Borrower has all
required governmental permits and licenses, if any, on account of its
operations and activities and is in full compliance with the terms and
conditions thereof, and all such permits and licenses are in full force and
effect.
5.15 FULL DISCLOSURE. Borrower has disclosed to Lender all
material facts known to Borrower concerning its financial condition and
business operations. All information furnished by Borrower to Lender was true
and complete at the time of delivery thereof to Lender, and there has been no
material change in any such information except as may have been disclosed by
Borrower to Lender in writing. There is no fact known to Borrower which would
be reasonably expected to result in a Material Adverse Effect during the term
of this Agreement.
5.16 SOLVENCY. As of, and immediately following the
effective date of this Agreement: (i) the fair saleable value of all assets of
Borrower exceeds the amount of all of Borrower's existing debts and liabilities
("including contingent liabilities), (ii) the assets of Borrower do not
constitute an unreasonably small capital for the operation of Borrower's
business as now conducted and as intended to be conducted, taking into account
all known or projected capital requirements for such operations, (iii) Borrower
does not intend to incur debts beyond its ability to pay as they mature, and
(iv) Borrower's cash flow is sufficient to pay all existing debts and
liabilities as they become due.
5.17 EMPLOYEE RELATIONS. Borrower is not aware of any
contemplated, threatened or pending strike, work stoppage or other labor
dispute involving its employees or the employees of any Affiliate.
5.18 EMPLOYEE BENEFIT PLAN. Neither Borrower nor any of
its ERISA Affiliates, nor any Plan, is in material violation in form or in
operation of any provision of ERISA or any other applicable state or federal
law, including the requirements of the IRC. No Prohibited Transaction or
Reportable Event has occurred with respect to any Plan which reasonably would
be expected to result in a Material Adverse Effect. No notice of intent to
terminate a Plan has been filed within the 24-month period preceding the date
hereof, nor has any Plan been terminated under Section 4041(c) of ERISA since
September 2, 1974. The PBGC has not instituted proceedings to terminate or
appoint a trustee to administer a Plan, and no event has occurred and no
condition exists which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan.
Neither Borrower nor any ERISA Affiliate has incurred or expects to incur any
withdrawal liability to any multiemployer plan within the meaning of Section
3(37) or Section 3001(a)(3) of ERISA or Section 414 of the IRC. Neither
Borrower nor any ERISA Affiliate has any obligation to provide medical benefits
or coverage to any former employee other than as required under Section 4980B
of the IRC or Part 6 of Title I of ERISA. Each Employee Benefit Plan subject to
Section 4980B of the IRC has satisfied the applicable requirements of Section
4980B of the IRC. Each Plan meets the minimum funding requirements of IRC
Section 412 and no waiver from the minimum funding requirements has been
applied for or approved pursuant to Section 412(d) of the IRC. The reporting
and disclosure requirements of each Plan have been timely and completely
satisfied. Neither Borrower, any ERISA Affiliate nor any fiduciary of any Plan
has engaged in conduct that would be a breach of any duty under Part 4,
Subtitle B, Title I of ERISA. There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge of Borrower or
any ERISA
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Affiliate, threatened against, or with respect to, any Plan or its assets, if
any. Each Plan which is a "welfare benefit plan," as described in Section 3(l)
of ERISA, may be unilaterally amended or terminated in its entirety without
liability except as to benefits accrued prior to such amendment. Termination of
employment of any employee of the Borrower or any ERISA Affiliate would not
result in payments which, in the aggregate, would result in imposition of the
sanctions imposed under Section 280B or Section 4999 of the IRC.
5.19 ENVIRONMENTAL MATTERS. Borrower represents and
warrants to Lender that to the best of Borrower's knowledge: (a) all of
Borrower's activities and conduct of business related to the use and handling
of Hazardous Materials, comply and have at all times complied with all
Environmental Requirements; (b) neither Borrower nor any prior owner of the
Collateral has received notice or other communication concerning any alleged
violation of Environmental Requirements, whether or not corrected to the
satisfaction of the appropriate authority, or notice or other communication
concerning alleged liability for Environmental Damages, and there exists no
writ, injunction, decree, order, judgment or lien, nor any lawsuit, claim,
proceeding citation, directive, summons or investigation, pending or
threatened, relating to the ownership, use, maintenance or operation of
Borrower's business or any associated real property, by any Person, or from
alleged violation of Environmental Requirements; (c) Borrower has all permits
and licenses required to be issued to it by any governmental authority on
account of any or all of its activities, and is in full compliance with the
terms and conditions of all such permits and licenses. No change in the facts
or circumstances reported or assumed in the application for or granting of any
such permits or licenses exists, and such permits and licenses are in full
force and effect.
5.20 REPRESENTATIONS AND WARRANTIES CUMULATIVE. The
representations and warranties contained in this Article V are in addition to
all other representations and warranties provided in the Loan Documents.
ARTICLE VI. COVENANTS
Throughout the Contract Term and until payment and performance in full of the
Obligations, each Borrower agrees (as to itself unless otherwise noted) as
follows, unless otherwise allowed by prior written consent of Lender:
6.1 COMPLIANCE CERTIFICATE. Within forty-five (45) days
following the end of each fiscal quarter, Borrower shall deliver to Lender a
certificate, in form satisfactory to Lender, signed by the president or chief
financial officer of Borrower certifying to Lender that no event or condition
that would be the subject of a required notice under paragraph 6.12 or
paragraph 6.13 is in existence as of the date of such certificate. Such
certificate shall be deemed to be a continuing representation and warranty
pending any subsequent certification or notification by Borrower respecting its
compliance or non-compliance with this Agreement, and Borrower acknowledges
that Lender shall rely upon the same in making loans under the Revolving
Facility.
6.2 AUTHORITY. As soon as possible following any
effective change thereof and in any event within ten (10) Business Days
thereafter (but in any event at or prior to the time of any loan request
thereafter, and at such other times, from time to time, at the request of
Lender) Borrower shall certify to Lender the names and signatures of all
Persons authorized to execute and deliver any documentation contemplated by or
relating to any of the Loan Documents.
6.3 BOOKS AND RECORDS. Borrower shall keep and maintain
proper, complete and consistent books of record and Account respecting the
Collateral and Borrower's affairs and financial condition in accordance with
GAAP, and shall permit Lender from time to time, by and through its authorized
agents, to visit and inspect any of its properties, inspect and copy its books
and records, and discuss its affairs, finances, Accounts, and operations with
its officers.
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6.4 EXISTENCE. Borrower shall preserve and maintain its
existence, good standing and authority to transact business in all
jurisdictions where necessary for the proper conduct of its business, and shall
maintain all of its properties, rights, privileges and franchises necessary or
desirable in the normal conduct of its business.
6.5 ANNUAL FINANCIAL STATEMENTS. Parent shall deliver to
Lender, as soon as practicable after the end of each fiscal year, and in any
event within one hundred twenty (120) days thereafter, its unqualified audited
consolidated balance sheet as of the end of such fiscal year, and its audited
consolidated statement of income and changes to stockholders equity and
consolidated statements of cash flow, in reasonable detail, prepared in
accordance with GAAP and certified by an independent certified public
accounting firm acceptable to Lender as fairly presenting the consolidated
financial condition and results of operations of Parent and the Subsidiaries
(including without limitation, each Borrower). Such financial statements shall
be accompanied by a copy of the report to management delivered to Parent by
such accountants and also by a statement signed by each Borrower's president or
chief financial officer representing to Lender that such financial statements
are true and complete and fairly present the consolidated financial condition
and results of operation of Parent and the Subsidiaries (including without
limitation, each Borrower), and that no event or condition that would be the
subject of a required notice under paragraph 6.12 or paragraph 6.13 is in
existence as of the date of delivery of such statements.
6.6 INTERIM FINANCIAL STATEMENTS. Parent shall deliver to
Lender, as soon as practicable after the end of each calendar quarter, and in
any event within forty-five (45) days thereafter, a consolidated and
consolidating balance sheet as of the end of such quarter, and consolidated
income statement for such quarter and a consolidated and consolidating income
statement for the period from the beginning of the current fiscal year to the
end of such quarter, in reasonable detail and prepared in accordance with GAAP.
Such financial statements shall be accompanied by a statement signed by each
Borrower's president or chief financial officer representing to Lender that
such financial statements are true and complete and fairly present the
financial condition and results of operations of Parent and the Subsidiaries
(including without limitation, each Borrower), and that no event or condition
that would be the subject of a required notice under paragraph 6.13 is in
existence as of the date of delivery of such statements.
6.7 PROJECTIONS. Borrower shall deliver to Lender, on or
before January 31 of each fiscal year during the Contract Term, a projection
for the succeeding period of not less than twelve calendar months, including
projected balance sheets, statements of income and statements of cash flow, all
in form satisfactory to Lender and including such information as is required by
Lender.
6.8 SEC FILINGS. Borrower shall deliver to Lender a
correct and complete copy of (i) each Form 10-K Report filed with the
Securities and Exchange Commission, which shall be delivered to Lender as soon
as possible upon filing thereof and in any event within ten (10) Business Days
after the applicable filing deadline date, (ii) each Form 10-Q Report filed
with the Securities and Exchange Commission, which shall be delivered to Lender
as soon as possible upon filing thereof and in any event within ten (10)
Business Days after the applicable filing deadline date, and (iii) each other
filing from time to time made with the Securities and Exchange Commission,
which shall be delivered to Lender as soon as possible upon filing thereof
6.9 AGING REPORTS. Borrower shall timely deliver to
Lender all aging analysis and account debtor listings required by paragraph
3.7.
6.10 INFORMATION. In addition to information and items
specifically required by the Loan Documents, Borrower shall promptly furnish to
Lender such other information, documentation or projections respecting its
business affairs, assets, and liabilities as Lender may request.
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6.11 NOTIFICATION OF CONTINGENT LIABILITIES. Promptly upon
receiving notice or otherwise becoming aware thereof, Borrower shall notify
Lender of any pending or threatened lawsuit, claim, action, liability,
investigation or proceeding that would be treated as a contingent liability of
Borrower or any Guarantor under GAAP and is in an amount in excess of
$250,000.00, or which is reasonably expected to result in a Material Adverse
Effect.
6.12 NOTIFICATION OF MATERIAL CHANGES. Borrower will
notify Lender in writing at least thirty (30) days prior to the occurrence of
any of the following: (i) change of Borrower's name, (ii) change of Borrower's
address or principal place of business, (iii) change of the location of
Borrower's books and records, (iv) change of the location of any Collateral,
(v) the opening of any new material place of business or the closing of any
existing place of business or (vi) material use of any trade name, fictitious
name or other assumed name. Borrower shall promptly notify Lender of any change
in any other material fact or circumstance represented or warranted in any of
the Loan Documents.
6.13 NOTIFICATION REGARDING DEFAULT. Borrower shall
immediately notify Lender in writing upon becoming aware of the existence of
any condition or event which constitutes an Event of Default or any condition
or event which, after notice or lapse of time, or both, would constitute an
Event of Default, therein specifying the nature and period of existence thereof
and what action Borrower is taking or proposes to take with respect to such
condition or event. Borrower shall immediately notify Lender in writing if it
knows, or reasonably expects, that an Event of Default will occur, therein
specifying the nature of the anticipated Event of Default. Without limiting the
foregoing, Borrower will also immediately notify Lender if Borrower's board of
directors authorizes the filing by Borrower of a petition in bankruptcy.
6.14 PAYMENT OF TAXES. Borrower shall promptly pay, or
cause to be paid, when due, any and all taxes except such taxes as may be
contested in good faith by appropriate proceedings, provided, that adequate
reserves shall be maintained as are appropriate according to GAAP. At Lender's
request pending resolution of any such contest and prior to the delinquency of
such tax, Borrower shall furnish to Lender a cash reserve in the amount of the
tax, together with a reasonable additional sum to pay all projected costs,
interest and penalties in connection therewith, conditioned that such tax,
together with applicable interest, cost, and penalties, if any, be timely paid
to the extent required upon resolution of such contest. Borrower agrees that it
shall immediately notify Lender of the initiation of any such contest and
advise Lender from time to time of the status thereof. Borrower shall promptly
pay any amounts adjudged to be due pursuant to any such contest, with all
costs, penalties, and interest thereon, before such judgment becomes final or
any writ or order is issued under which the Collateral, or any portion thereof,
may become subject to any lien or encumbrance.
6.15 COMPLIANCE WITH LAWS. Borrower shall comply with all
applicable laws, regulations and orders applicable to it or its property, a
violation of which would reasonably be expected to result in a Material Adverse
Effect, and upon request by Lender, provide Lender with evidence of such
compliance.
6.16 COMPLIANCE WITH AGREEMENTS. Borrower shall comply in
all material respects with all agreements, indentures, mortgages, or documents
binding upon Borrower or affecting its property or business.
6.17 FEES, COSTS AND EXPENSES. Borrower agrees to promptly
pay upon demand all costs, fees and expenses as provided in paragraph 9.12.
6.18 WAIVERS AND CONSENTS RESPECTING THE COLLATERAL.
Borrower shall furnish to Lender such waivers and consents as may reasonably be
requested by Lender with respect to Lender's security interests and liens in
the Collateral.
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6.19 SUBORDINATION AGREEMENTS. At Lender's request, all
present and future obligations due by Borrower to any Affiliate (excluding
ordinary course items such as salary, travel and expense reimbursements and
other similar ordinary course items as may be determined by agreement) shall be
subordinate in right of payment and claim to the Obligations, pursuant to a
definitive subordination agreement executed by Borrower and such Affiliate in
form satisfactory to Lender.
6.20 CHANGE OF FISCAL YEAR. Borrower shall notify Lender
at least ninety (90) days prior to the effective date of any change in its
fiscal year.
6.21 EMPLOYEE BENEFIT PLANS. Borrower shall timely deliver
the following to Lender: (a) a copy of any notice of noncompliance received from
the PBGC under Section 4041(b)(2)(c), within three (3) days after receipt of
such notice; (b) a copy of any notice received by Borrower or any ERISA
Affiliate, or the administrator of any Plan, that the PBGC has instituted
proceedings to terminate such Plan or to appoint a trustee to administer such
Plan, promptly upon receipt and in no event more than three (3) days after the
receipt of such notice; (c) a copy of any notice received by Borrower or any
ERISA Affiliate concerning the imposition of any withdrawal liability under
Section 4202 of ERISA, within ten (10) days after receipt thereof by Borrower or
such ERISA Affiliate; (d) a copy of any notification of intention to impose or
assert withdrawal liability under ERISA against Borrower or any ERISA Affiliate,
promptly upon receipt thereof and in any event within three (days) of receipt
thereof; and (e) a copy of any notice from the Internal Revenue Service
regarding revocation or investigation of possible revocation of the qualified
status of any Plan under the IRC, promptly upon receipt thereof and in any event
within three (3) days after receipt thereof. If requested by Lender, Borrower
shall timely deliver the following to Lender: (f) a copy of all materials
required to be filed with the PGBC with respect to any Reportable Event, within
ten (10) days after the earlier of the filing or the occurrence thereof; (g) a
copy of any notice sent by Borrower to participants of a Plan of Borrower's
intent to terminate such Plan, no later than the date such notice is required to
be provided to participants under Section 4041(a)(2) of ERISA; (h) a copy of
each annual and other report with respect to each Plan or any trustee created
thereunder, promptly after the filing thereof with the United States Secretary
of Labor or the PBGC; and (i) such additional information concerning any of
Borrower's Employee Benefit Plans as may be requested by Lender. Borrower shall
make prompt payment of all contributions required under all Plans to the extent
required to meet the minimum funding standard set forth in ERISA with respect to
such Plans, but shall reduce contributions or benefits if and to the extent
necessary to avoid an Event of Default hereunder to the extent such reduction is
not prohibited by applicable provisions of ERISA.
6.22 FINANCIAL COVENANTS. Borrower agrees that the
following financial covenants must be maintained as set forth herein as of the
times specified, as applicable:
a. Maximum Senior Funded Debt to Cash Flow. Senior
Funded Debt to Cash Flow shall not exceed 3.00 to
1.00 at any time, tested as of the end of any fiscal
quarter.
b. Tangible Net Worth. Tangible Net Worth at any time
from the Effective Date shall not be less than an
amount equal to $50,000,000.00 plus the Tangible Net
Worth Adjustment, tested as of the end of any fiscal
quarter (provided, that in the event Borrower's
anticipated acquisition of seventy-five percent
(75.0%) of the shares of Maxpro Systems Pty, Ltd is
not consummated on or before December 31, 1996 then,
unless otherwise agreed by Lender in writing, the
foregoing base minimum requirement shall be
automatically increased from $50,000,000.00 to
$55,000,000.00, effective as of such date).
c. Fixed Charge Coverage Ratio. Borrower's Fixed Charge
Coverage Ratio shall not be less than 2.00 to 1.00 at
any time, tested as of the end of any fiscal quarter.
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6.23 SALE OF ASSETS. Borrower will not sell or dispose of
any assets other than the sale of Inventory in the ordinary course of business,
provided, that Borrower shall not be precluded from making ordinary course sales
of any equipment the sales price of which, when added to the sales price of all
other such ordinary course sales of equipment, if any, by all Borrowers during
the preceding twelve calendar months does not exceed $1,000,000.00, provided
further, that all proceeds at any time received by Borrower in respect of such
sale shall be promptly delivered to Lender for application in reduction of the
Obligations owing by Borrower, or in such other manner as Lender may determine
in its discretion.
6.24 PROHIBITION AGAINST LIENS ON COLLATERAL. Borrower
will not grant, create or allow to exist any security interest, lien or other
encumbrance on any of the Collateral.
6.25 DISSOLUTION, LIQUIDATION, MERGER. Borrower shall not
dissolve or liquidate, or become a party to any merger or consolidation with
any Person (other than merger or consolidation with another Borrower, in which
event Borrower shall provide Lender with at least fifteen (15) days prior
written notice of such intended merger or consolidation and provide Lender with
such documentation in connection therewith as Lender may request).
6.26 LIMITATION ON INDEBTEDNESS. Borrower will not be
obligated, directly or indirectly, for borrowed money or otherwise under any
promissory note, bond, indenture or similar instrument, other than in favor of
Lender or trade indebtedness incurred in the normal and ordinary course of
Borrower's business and not more than sixty (60) days past due.
6.27 LIMITATION ON CONTINGENT LIABILITIES. Borrower will
not be directly or indirectly liable in connection with the obligations of any
Person, whether by guarantee, surety, endorsement (other than endorsement of
negotiable instruments for collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to make investments, agreement
to provide funds or maintain working capital, or any agreement to assure a
creditor against loss, other than in favor of Lender.
6.28 CHANGE IN BUSINESS. Borrower shall not discontinue,
or make any material change in, its business as currently established, or enter
any new or different line of business not directly related to Borrower's
existing line of business.
6.29 CHANGE IN MANAGEMENT. There will be no change of the
personnel performing the functions of Borrower's chief executive officer, chief
financial officer and chief operating officer as such positions are presently
constituted. Notwithstanding the foregoing, such a change in personnel may
occur if the person currently performing the function becomes unable to perform
such function, provided the Borrowers shall promptly replace such person with a
permanent or interim person acceptable to Lender.
6.30 REDEMPTIONS AND ACQUISITION OF SHARES. Borrower will
not make any payment on account of the purchase, redemption or other
acquisition or retirement of any shares of its capital stock, provided, that
for so long as no Event of Default, or event or condition which with notice or
passage of time, or both, would constitute an Event of Default, is in
existence, Borrower shall not be precluded from making any such payments in an
aggregate amount not exceeding $2,500,000.00 during the Contract Tenn.
6.31 CONSULTING FEES, ETC., TO SHAREHOLDERS AND DIRECTORS.
Borrower will not declare or pay any consulting fees, management fees or other
third party fees to any Affiliate.
6.32 LOANS TO OFFICERS, DIRECTORS, SHAREHOLDERS. Borrower
will not make any loans or advances to or for the benefit of any Affiliate, the
unpaid balance of which at any time, when added to the unpaid balance owing to
Borrower by all other Affiliates, if any, exceeds the amount of $100,000.00.
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6.33 TRANSACTIONS WITH AFFILIATES. Borrower will not make
any payment on any obligation owing to any Affiliate (excluding reasonable
expense reimbursements in the ordinary course of business) unless specifically
allowed under any Affiliate Subordination Agreement or otherwise allowed by
Lender. Borrower will not enter into any transaction with an Affiliate except
in the ordinary course of business on terms no less favorable to Borrower, nor
more favorable to such Affiliate, than would be obtainable in a comparable
arm's length transaction with a Person who is not an Affiliate. Borrower will
not enter into any transaction with an Affiliate involving an amount in excess
of $100,000.00 unless such transaction is specifically approved by Borrower's
board of directors as being an arm's length transaction on terms no less
favorable to Borrower, nor more favorable to such Affiliate, than would be
obtainable at comparable arm's length transaction with a Person who is not an
Affiliate.
6.34 ACQUISITIONS. Borrower shall not purchase or
otherwise acquire assets from any Person outside the ordinary course of
business of Borrower, provided, that for so long as no Event of Default, or
event or condition which with notice or passage of time, or both, would
constitute an Event of Default, is in existence, Borrower shall not be
precluded from acquiring assets the aggregate sales price of which, when added
to the aggregate sales price (including cash, deferred payment obligations,
stock, assumption of liabilities and all other forms of consideration) of all
other such acquisitions, if any, by all Borrowers during the Contract Term does
not exceed $8,000,000.00 during any period of twelve (12) months.
6.35 LIMITATION ON INVESTMENTS. Borrower shall not invest
in or otherwise purchase or acquire the securities of any Person, except for
ordinary course investments in securities of the United States and certificates
of deposit issued by commercial banks organized in the United States which have
assets in excess of $250,000,000.00.
6.36 COVENANTS CUMULATIVE. The covenants contained in this
Article VI are in addition to all other covenants provided in the Loan
Documents.
ARTICLE VII. EVENT OF DEFAULT
7.1 EVENT OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
a. The failure of timely payment of the
Obligations, or any part thereof, as they become due in
accordance with the terms of the Loan Documents;
b. Any violation, breach or default of any
covenant, agreement or other obligation under this Agreement
or any of the Loan Documents, not otherwise covered by
paragraph 7.1(a);
c. Any representation or warranty made by
Borrower in the Loan Documents was false in any material
respect at the time when made;
d. The occurrence of any event or circumstance
which Lender believes has or may result in a Material Adverse
Effect;
e. The filing of any petition or proceeding by
or against Borrower or any Guarantor under the United States
Bankruptcy Code, as amended from time to time, or any other
applicable state or federal law relating to bankruptcy
reorganization or other relief for debtors, or the appointment
of a conservator, receiver, trustee, or liquidator of all or a
substantial part of the assets of Borrower or any Guarantor;
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f. The use of any funds borrowed from Lender
under this Agreement for any purpose other than as provided in
this Agreement;
g. The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against
or with respect to any of the Collateral or the Real Property
Collateral involving an amount in controversy in excess of
$100,000.00;
h. The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against
or with respect to any Borrower's property not included within
the Collateral or the Real Property Collateral if the amount
in controversy is excess of $250,000.00 or if the outcome,
pendency or effect thereof is reasonably expected to result in
or cause a Material Adverse Effect;
i. Any breach or default in the payment or
performance of any material obligation, or any defined event
of default, under the terms, provisions or conditions of any
contract or instrument pursuant to which any Borrower is
obligated on any indebtedness or obligation or other liability
to any Person other than Lender in an amount exceeding
$250,000.00, and the expiration of thirty (30) days from the
date of such breach, default or event of default;
j. The entry of any judgment against any
Borrower in an amount equal to or exceeding $250,000.00;
k. The dissolution or liquidation of any
Borrower, or the taking of any action by the board of
directors or shareholders of any Borrower (or it general
partner in the case of Ultrak), to dissolve or liquidate;
l. Revocation or repudiation by any Guarantor of
any obligations under a Guaranty;
m. Any of the following with respect to any
Plan: A Reportable Event or Prohibited Transaction with
respect to a Plan which could, in the opinion of Lender,
result in a Material Adverse Effect; or the filing of a notice
of intent to terminate a Plan under a distress termination as
described in section 4041(c) of ERISA which could, in the
opinion of Lender, result in a Material Adverse Effect; or the
receipt of a notice by the plan administrator of Borrower that
the PBGC has instituted proceedings to terminate a Plan or
appoint a trustee to administer a Plan; or the withdrawal by
Borrower or any ERISA Affiliate from a multiemployer plan as
defined in Section 3(37) or Section 4001(a)(3) of ERISA or
Section 414 of the IRC if such action could, in the opinion of
Lender, result in a Material Adverse Effect; the revocation by
the Internal Revenue Service of the qualified status of any
Employee Benefit Plan if such action could, in the opinion of
Lender, result in a Material Adverse Effect.
n. Any qualification by a certified public
accountant relative to any financial statement delivered to
Lender under this Agreement that is not acceptable to Lender
in its discretion.
ARTICLE VIII. REMEDIES
8.1 REFUSAL OF FUNDING. Lender shall have no obligation
to make any loan (i) at any time when any applicable condition for funding
prescribed under this Agreement has not been fulfilled to Lender's
satisfaction, (ii) at any time when any Event of Default is in existence, or
when any condition exists which after notice or lapse of time, or both, would
constitute an Event of Default, (iii) if Lender has received any notice under
paragraph 6.13 or has knowledge of any event or condition which would be the
subject of any notice required thereunder, or (iv) if any Borrower has
repudiated or made any anticipatory breach of any of its obligations under this
Agreement; and any loan requested at any such time may be declined by Lender,
in whole or in part, in Lender's sole discretion without prior notice.
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8.2 REMEDIES. Should an Event of Default occur at any
time, Lender may at its option declare the entire outstanding principal amount
and unpaid accrued interest of any part of the Obligations to be immediately
due and payable and, in addition, take any or all of the following action
(provided, that with respect to any Event of Default arising under paragraphs
7.1(a), ten (1O) Business Days shall first have passed after written notice by
Lender to Borrowers of the occurrence of any such Event of Default, and with
respect to any other Event of Default, thirty (30) Business Days shall first
have passed after written notice by Lender to Borrowers of the occurrence of
any such Event of Default): (i) commence such actions as may be necessary to
enforce the Obligations, or any part thereof; (ii) take such steps as Lender
may deem appropriate to foreclose and enforce any and all liens and security
interests now or hereafter granted to Lender to secure payment and performance
of the Obligations, or any part thereof; or (iii) exercise and avail itself of
any and all other remedies as may be available under the Loan Documents or as
otherwise may be available according to law. Lender at all times shall have the
rights and remedies of a secured party under the Code, including but not
limited to the right to take possession or enforce direct payment of the
Receivables. Lender may demand, collect, receipt for, settle, compromise
adjust, sue for, foreclose or otherwise realize upon Collateral as Lender may
determine. In taking possession of any Collateral, Lender is authorized to
enter upon any premises owned or leased by any Borrower where any Collateral is
located. At its option, Lender may require any Borrower to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender which is reasonably convenient to both Lender and such Borrower.
Borrowers agree that Lender shall be entitled to dispose of any Collateral on
any Borrower's premises. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender will give reasonable notice of the time and place of any public
sale thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. For this purpose, it is agreed that at least
five (5) days notice of the time of sale or other intended disposition of the
Collateral delivered in accordance with paragraph 9.3 shall be deemed to be
reasonable notice in conformity with the Code. Lender may adjourn or otherwise
reschedule any public sale by announcement at the time and place specified in
the notice of such public sale, and such sale may be made at the time and
place as so announced without necessity of further notice. Lender shall not be
obligated to sell or dispose of any Collateral, notwithstanding any prior
notice of intended disposition. With respect to any instruments or chattel
paper at any time included within the Collateral, Lender shall not have any
duty or obligation to take steps to preserve rights against prior parties.
8.3 CASH COLLATERAL; INJUNCTIVE RELIEF. All cash proceeds
of Collateral from time to time existing, including without limitation
collections and payments of Receivables and cash receipts, if any, for other
Collateral, whether consisting of cash, checks or other similar items, at all
times shall be subject to an express trust for the benefit of Lender. All such
proceeds shall be subject to Lender's continuing security interests under this
Agreement. Except as may be specifically allowed otherwise by this Agreement,
each Borrower is expressly prohibited from using, spending, retaining or
otherwise exercising any dominion over such proceeds. Each Borrower
acknowledges and agrees that an action for damages against such Borrower for
any breach of such prohibitions shall not be an adequate remedy at law. In the
event of any such breach, each Borrower agrees to the fullest extent allowed by
law that Lender shall be entitled to injunctive relief to restrain such breach
and require compliance with the requirements of this Agreement.
8.4 ENFORCEMENT COSTS; APPLICATION OF PROCEEDS. Borrowers
jointly and severally agree to pay to Lender on demand any and all reasonable
expenses, including legal expenses, reasonable attorneys' fees, court costs,
collection costs, and traveling expenses, incurred or paid by Lender in
protecting or enforcing any of its rights hereunder, including its right to
take possession, hold, store, prepare for sale, sell, or otherwise dispose of
the Collateral and collect the proceeds of any Collateral. Until reimbursed or
otherwise paid, Lender is hereby authorized to add all such expenses to the
principal amount of the Obligations. After deducting all of such expenses, any
remaining proceeds of collection or sale of the Collateral shall be applied in
payment of the Obligations in such manner as Lender may determine, and the
excess, if any, shall be disbursed by Lender in accordance with applicable law.
Each Borrower expressly agrees that it shall remain liable for any deficiency.
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8.5 WAIVER OF NOTICES. Except as otherwise expressly
provided in this Agreement, each Borrower expressly waives presentment, demand,
notice of intention to accelerate, notice of acceleration, protest and any
other notices of any kind with respect to the Obligations.
8.6 SETOFF. Each Borrower irrevocably authorizes Lender
to charge any account of such Borrower maintained with Lender with such amount
as may be necessary from time to time to pay any Obligations. Each Borrower
agrees that Lender shall have a contractual right to setoff any and all
deposits or other sums at any time credited by or due from Lender to such
Borrower against any part of the Obligations. Such right of setoff may be
exercised at any time by Lender at any time when any Event of Default is in
existence (subject to the prior notice requirements to the extent provided with
respect to remedies pursuant to paragraph 8.2, but otherwise without prior
notice), irrespective of whether an Event of Default exists or whether Lender
has accelerated the Obligations. Upon the occurrence of an Event of Default and
for so long as the same shall remain in existence and not cured or waived,
Lender shall be entitled in its discretion to hold any such deposits or other
sums pending acceleration of the Obligations.
8.7 PERFORMANCE BY LENDER. Should any Borrower fail to
perform any covenant, duty, or agreement required by the Loan Documents, Lender
may, at its sole option and election, perform or attempt to perform same on
behalf of such Borrower at such Borrower's cost and expense, provided that
Lender shall have no obligation or duty to take any such action. Each Borrower
agrees to reimburse Lender for such reasonable costs and expenses on demand.
8.8 NON-WAIVER. Forbearance or indulgence by Lender of
any Event of Default or any other event or condition which is or would be the
subject of a required notice under paragraph 6.13, at any time from time to
time, shall not be deemed a waiver of any rights of Lender under the Loan
Documents. The acceptance by Lender at any time and from time to time of any
partial payment of the Obligations shall not be deemed to be a waiver of any
Event of Default then existing. No delay or omission by Lender in exercising
any right or remedy shall impair such right or remedy, or be construed as a
waiver thereof, nor shall any single or partial exercise of any such rights or
remedies preclude other or further exercise thereof. Lender shall not be
required or obligated to file suit or otherwise pursue any other Person for
enforcement or collection of any of the Obligations or to take any action to
realize upon any of the Collateral.
8.9 APPLICATION OF PAYMENTS. During the existence of any
Event of Default, all payments and proceeds of Collateral received by Lender
shall be applied to the Obligations in Lender's discretion, and Lender shall
have the right to adjust or reapply in another manner any such payments and
proceeds as Lender may determine in its discretion.
ARTICLE IX. MISCELLANEOUS
9.1 EFFECTIVE DATE; TERMINATION. This Agreement shall
become effective upon acceptance by Lender, as of the effective date specified
in the preamble of this Agreement. Subject to all other provisions of the Loan
Documents, the Facility shall terminate automatically on the Term Facility
Maturity Date, without further notice. Notwithstanding any such termination,
the Obligations and all rights and remedies of Lender under the Loan Documents
with respect thereto, including without limitation all rights and remedies with
respect to the Collateral shall remain in full force and effect until all
Obligations have been paid in full.
9.2 PAYMENTS. All payments or collections received by
Lender after its internally established time for closing business on any
Business Day shall be deemed received as of the next succeeding Business Day.
All payments shall be made in immediately available funds, at Lender's address
specified in Article I. Any payment which is due on a day which is not a
Business Day shall instead be deemed to be due on the next succeeding Business
Day, and interest thereon shall accrue and be payable at the then applicable
rate during the time of such extension.
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9.3 NOTICES. Any consent, approval, notice, request, or
demand from one party to another must be made in writing to be effective, and
shall be deemed to have been given on the third Business Day after its deposit
in the United States mail, postage prepaid and properly addressed, by certified
or registered mail, return receipt requested, or on the Business Day on which
it is actually delivered by messenger delivery, telecopy or other electronic
transmission, whichever is earlier. The address of each party for the purposes
hereof is as follows:
Borrowers:
ULTRAK, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
DENTAL VISION DIRECT, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
DIAMOND ELECTRONICS, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
JAK PACIFIC VIDEO WARRANTY AND
REPAIR SERVICES, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
ULTRAK OPERATING, L.P.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
Lender:
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 7th floor
Dallas, Texas 75202
Attention: COMMERCIAL BANKING/Division Manager: URGENT
Telecopy: 214/508-3139
or such other address as may hereafter be designated and delivered in writing.
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9.4 USE OF LOAN PROCEEDS. No portion of the proceeds of
any loans under the Revolving Facility shall be used to purchase or carry any
"margin stock" as defined under Regulation "U" of the Board of Governors of the
Federal Reserve System, or to repay or refinance any debt previously incurred
by any Borrower for such purpose.
9.5 LENDER'S RECORDS; ACCOUNT STATEMENTS. Lender's
records in respect of loans advanced, accrued interest, payments received and
applied and other matters in respect of calculation of the amount of the
Obligations shall be deemed conclusive absent demonstration of error. All
statements of account rendered by Lender to any Borrower relating to principal,
accrued interest or costs owing by Borrower under this Agreement shall be
presumed to be correct and accurate unless, within thirty (30) days after
receipt thereof, such Borrower shall notify Lender in writing of any claimed
error therein.
9.6 INDEMNITY. Borrowers hereby jointly and severally
agree to indemnify and hold harmless and defend all Indemnified Persons from
and against any and all Indemnified Claims. Upon notification and demand,
Borrowers agree to provide defense of any Indemnified Claim and pay all costs
and expenses of counsel selected by any Indemnified Person's respect thereof.
Any Idemnified Person against whom any Indemnified Claim may be asserted
reserves the right to settle or compromise any such Indemnified Claim as such
Indemnified Person may determine in its/his/her sole discretion, and the
obligations of such Indemnified Person, if any, pursuant to any such settlement
or compromise shall be deemed included within the Indemnified Claims. The
indemnification provided for in this paragraph shall survive any termination of
this Agreement and shall continue for the benefit of all Indemnified Persons.
Except as specifically provided in this paragraph, each Borrower waives all
notices from any Indemnified Person.
9.7 NON-APPLICABILITY OF CHAPTER 15 OF TEXAS CREDIT CODE.
Chapter 15 of the Texas Credit Code shall not be applicable to this Agreement
or the Revolving Facility.
9.8 YIELD PROTECTION. If at any time after the date
hereof, and from time to time, Lender determines that the adoption or
modification of any applicable law, rule or regulation regarding taxation,
Lender's required levels of reserves, deposits, insurance or capital (including
any allocation of capital requirements or conditions), or similar requirements,
or any interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of Lender with any of such requirements, has or
would have the effect of increasing Lender's costs relating to the Obligations
or reducing the yield or rate of return of Lender on the Obligations to a level
at least one-half of one percent (.50%) below that which Lender could have
achieved but for the adoption or modification of any such requirements, then
within 15 days of any request by Lender, Borrowers shall pay to Lender such
additional amounts as will compensate Lender for such increase in costs or
reduction in yield or rate of return of Lender, provided, that such amount
shall only be payable in the event Lender elects to require a similar payment
or adjustment in respect of substantially all other similarly situated
borrowers. No failure by Lender to immediately demand payment of any additional
amounts payable hereunder shall constitute a waiver of Lender's right to demand
payment of such amounts at any subsequent time. Nothing herein contained shall
be construed or so operate as require Borrower to pay any interest, fees,
costs, or charges greater than is permitted by applicable law.
9.9 JUDGMENT INTEREST. It is agreed that any judgement
entered by a court in favor of Lender against any Borrower for payment of the
Obligations, or any part thereof, shall provide for post-judgement interest on
the amount thereof at a rate equal to the Maximum Rate.
9.10 INTEREST LIMITATION. In no contingency or event
whatsoever shall the amount of interest under the Loan Documents paid by any
Borrower, received by Lender, agreed to be paid by any Borrower, or requested
or demanded to be paid by Lender, exceed the Maximum Rate. In the event any
such sums paid to Lender by any Borrower would exceed the Maximum Rate, Lender
shall automatically apply such excess to any unpaid principal or, if the amount
of such excess exceeds said unpaid principal, such excess shall be paid to such
Borrower. All
36
<PAGE> 42
sums paid, or agreed to be paid, by any Borrower which are or hereafter may
be construed to be compensation for the use, forbearance, or detention of money
shall be amortized, prorated, spread and allocated in respect of the
Obligations throughout the full Contract Term until the Obligations are paid in
full. Notwithstanding any provisions contained in the Loan Documents, or in any
notes or other related documents executed pursuant hereto, Lender shall never
be entitled to receive, collect or apply as interest any amount in excess of
the Maximum Rate and, in the event Lender ever receives, collects, or applies
any amount in respect of any Borrower that otherwise would be in excess of the
Maximum Rate, such amount shall automatically be deemed to be applied in
reduction of the unpaid principal balance of the Obligations and, if such
principal balance is paid in full, any remaining excess shall forthwith be paid
to such Borrower. In determining whether or not the interest paid or payable
under any speci 'fic contingency exceeds the Maximum Rate, Borrowers and
Lender shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment as a standby fee, commitment fee,
prepayment charge, delinquency charge or reimbursement for a third-party
expense rather than as interest, (ii) exclude voluntary prepayments and the
effect thereof, and (iii) amortize, prorate, allocate and spread in equal parts
throughout the entire period during which the indebtedness was outstanding the
total amount of interest at any time contracted for, charged or received.
Nothing herein contained shall be construed or so operate as to require any
Borrower to pay any interest, fees, costs, or charges greater than is permitted
by applicable law. Subject to the foregoing, each Borrower hereby agrees that
the actual effective rate of interest from time to time existing with respect
to loans made by Lender to such Borrower, including all amounts agreed to by
such Borrower or charged or received by Lender, which may be deemed to be
interest under applicable law, shall be deemed to be a rate which is agreed to
and stipulated by such Borrower and Lender in accordance with applicable law.
9.11 CONTINUING RIGHTS OF LENDER IN RESPECT OF
OBLIGATIONS. In the event any amount from time to time applied in reduction of
the Obligations is subsequently set aside, avoided, declared invalid or
recovered by any Borrower or any trustee or in bankruptcy, or in the event
Lender is otherwise required to refund or repay any such amount pursuant to any
applicable law, then the Obligations shall automatically be deemed to be
revived and increased to the extent of such amount and the same shall continue
to be secured by the Collateral as if such amount had not been so applied.
9.12 FEES, COSTS AND EXPENSES. Borrowers jointly and
severally agree to pay all reasonable costs and expenses incurred by Lender in
connection with the Loan Documents, including without limitation: (i) up to
$20,000.00 for negotiation, preparation and closing of the Loan Documents,
including appraisal fees, reasonable attorneys fees and disbursements, search
fees, filing and recording fees, (ii) ongoing administration of the Loan
Documents, including without limitation, reasonable fees and costs incurred in
consultation with attorneys, accountants or appraisers or in connection with
any factual investigation, (iii) negotiation, preparation and closing of any
amendment, waiver or consent relating to the Loan Documents, including
appraisal fees, reasonable attorneys fees and disbursements, search fees,
filing and recording fees, and (IV) enforcing any provision of the Loan
Documents, collecting the Obligations, exercising any rights or remedies or
pursuing or defending any claim arising out of, or in any way relating to the
Loan Documents, including without limitation reasonable fees and costs of
attorneys, experts or other consultants retained by Lender in connection
therewith and any other fees pursuant to paragraph 8.4. Borrowers will pay any
applicable stamp, registration, recordation and similar taxes, fees and charges
in respect of the Collateral or perfection or maintenance of Lender's rights
under the Loan Documents, and agree to indemnify Lender against any liabilities
resulting from any delay, deferral or omission in payment of any such taxes,
fees or charges. All fees, costs and expenses for which Borrowers are obligated
under the Loan Documents shall be payable to Lender on demand. At Lender's
option, the amount of such fees, costs and expenses. owing by any Borrower may
be deducted from the proceeds of any loan to such Borrower hereunder or added
to the unpaid principal due by such Borrower under the Revolving Faci lity, in
which event such fees, costs and expenses will be deemed paid and the amount
thereof shall be treated as a loan to such Borrower under the Revolving
Facility.
37
<PAGE> 43
9.13 ACCEPTANCE AND PERFORMANCE. This Agreement shall
become effective only upon acceptance by Lender. The Obligations are payable at
Lender's offices in Dallas, Dallas County, Texas. Each Borrower and Lender
agrees that Dallas County, Texas shall be the exclusive venue for litigation of
any dispute or claim arising under or relating to the Loan Documents, and that
such county is a convenient forum in which to decide any such dispute. Each
Borrower and Lender consents to the personal jurisdiction of the state and
federal courts located in Dallas County, Texas for the litigation of any such
dispute or claim.
9.14 OBLIGATIONS. Lender's rights in respect of the
Obligations shall not be impaired by reason that the amount thereof at any time
exceeds any stated maximum or other limitation provided herein.
9.15 EXPRESS WAIVERS BY BORROWERS IN RESPECT OF
CROSS-COLLATERALIZATION AND CROSS GUARANTIES. In connection with the matters
provided in paragraph 3.19, each Borrower agrees as follows:
(a) Borrower hereby waives: (1) notice of
acceptance of this Agreement; (2) notice of any loans or other
financial accommodations made or extended under the Loan
Documents or the creation or existence of any Obligations; (3)
notice of the amount of the Obligations, subject, however, to
Borrower's right to make inquiry of Lender to ascertain the
amount of the Obligations at any reasonable time; (4) notice
of any adverse change in the financial condition of any other
Borrower or of any other fact that might increase Borrower's
risk with respect to such other Borrower under this Agreement;
(5) notice of presentment for payment, demand, protest, and
notice thereof as to any promissory notes or other instruments
among the Loan Documents; and (7) all other notices (except if
such notice is specifically required to be given to Borrower
hereunder or under any of the Loan Documents to which Borrower
is a party) and demands to which Borrower might otherwise be
entitled.
(b) Borrower hereby waives the right by statute
or otherwise to require Lender to institute suit against any
Borrower or to exhaust any rights and remedies which Lender
has or may have against any Borrower. Borrower further waives
any defense arising by reason of any disability or other
defense of any other Borrower (other than the defense that the
Obligations shall have been fully and finally performed and
indefeasibly paid) or by reason of the cessation from any
cause whatsoever of the liability of any such Borrower in
respect thereof
(c) Borrower hereby waives and agrees not to
assert against Lender: (1) any defense (legal or equitable),
set-off, counterclaim, or claim which Borrower may now or at
any time hereafter have against any other Borrower or any
other party liable to Lender; (2) any defense, set-off,
counterclaim, or claim of any kind or nature available to any
other Borrower against Lender, arising directly or indirectly
from the present or future lack of perfection, sufficiency,
validity, or enforceability of the Obligations or any security
therefor; (3) any night or defense arising by reason of any
claim or defense based upon an election of remedies by Lender
under any applicable law; (4) the benefit of any statute of
limitations affecting any other Borrower's liability
hereunder.
(d) In addition to the foregoing waivers,
Borrower hereby waives outright and absolutely, any right of
subrogation Borrower has or may have against any other
Borrower with respect to the Obligations. In addition,
Borrower hereby waives any night to proceed against any other
Borrower, now or hereafter, for contribution, indemnity,
reimbursement, and any other suretyship rights and claims,
whether direct or indirect, liquidated or contingent, whether
arising under express or implied contract or by operation of
law, which Borrower may now have or hereafter have as against.
any such other Borrower with respect to the Obligations.
Borrower also hereby waives any rights to recourse to or with
respect to any asset of any other Borrower. Borrower agrees
that in light of the immediately foregoing waivers, the
execution of this Agreement shall not be deemed to make
Borrower a "creditor" of any other
38
<PAGE> 44
Borrower, and that for purposes of Sections 547 and 550 of the
Bankruptcy Code Borrower shall not be deemed a "creditor" of
any other Borrower.
(e) Borrower consents and agrees that, without
notice to or by Borrower and without affecting or impairing
the obligations of Borrower hereunder, Lender may, by action
or inaction: (a) compromise, settle, extend the duration or
the time for the payment of, or discharge the performance of,
or may refuse to or otherwise not enforce the Loan Documents;
(b) release all or any one or more parties to any one or more
of the Loan Documents or grant other indulgences to any other
Borrower in respect thereof, (c) amend or modify in any manner
and at any time (or from time to time) any of the Loan
Documents; or (d) release or substitute any other guarantor,
if any, of the Obligations, or enforce, exchange, release, or
waive any security for the Obligations or any other guaranty
of the Obligations, or any portion thereof
(f) Lender shall have the right to seek
recourse against Borrower to the fullest extent provided for
herein and no election by Lender to proceed in one form or
action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Lender's right to
proceed in any other form of action or proceeding or against
other parties unless Lender has expressly waived such right in
writing. Specifically, but without limiting the generality of
the foregoing, no action or proceeding by Lender under any
document or instrument evidencing the Obligations shall serve
to diminish the liability of Borrower under this Agreement
except to the extent that Lender finally and unconditionally
shall have realized indefeasible payment by such action or
proceeding.
(g) Borrower represents and warrants to Lender
that Borrower is currently informed of the financial condition
of all other Borrowers and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of
nonpayment of the Obligations. Borrower further represents and
warrants to Lender that Borrower has read and understands the
terms and conditions of the Loan Documents. Borrower hereby
covenants that Borrower will continue to keep informed of the
financial condition of all other Borrowers, the financial
condition of Guarantor, and of all other circumstances which
bear upon the risk of nonpayment or nonperformance of the
Obligations.
9.16 PARTICIPATION OF OBLIGATIONS. Borrower agrees that
Lender may, at its option, sell interests in the Obligations and its rights
under this Agreement to a financial institution or institutions and that Lender
may disclose any financial and other information concerning Borrower to any
prospective purchaser of any such interest.
9.17 OTHER AGREEMENTS; CROSS COLLATERALIZATION AND CROSS
DEFAULT. Borrower expressly acknowledges that the "Obligations" as defined in
this Agreement includes other obligations and indebtedness, if any, as may from
time to time be owing to Lender by Borrower under any other instrument or
agreement executed by Borrower for the benefit of Lender, whether or not such
instrument or agreement is included within the Loan Documents. In consideration
of this Agreement Borrower acknowledges and agrees that (i) all such other
obligations and indebtedness, from time to time, are and shall continue to be
secured by the Collateral, (ii) any security or other collateral from time to
time securing such other obligations and indebtedness (whether or not included
within the "Collateral" as defined by this Agreement) shall secure all
Obligations as additional collateral under this Agreement, (iii) any breach or
default under any such other instrument or agreement shall constitute an Event
of Default under this Agreement and (iv) and Event of Default under this
Agreement shall constitute a default under any such other instrument or
agreement.
9.18 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR
AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS,
39
<PAGE> 45
AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY
BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
THE COUNTY OF ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF
THIS INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S.
WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND
THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A
WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S. C. SEC. 91
OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF
BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF,
WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER BANK MAY EXERCISE
SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY
OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT,
AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR
THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE
RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO
SUCH REMEDIES.
9.19 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO AGREE THAT NEITHER
PARTY SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM
CONCERNING THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION
THEREWITH, IN EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING
EXPRESSLY WAIVED BY LENDER AND EACH BORROWER. LENDER
40
<PAGE> 46
AND EACH BORROWER ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND
UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH
THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING.
9.20 COPIES VALID AS FINANCING STATEMENTS. A carbon,
photographic or other reproduction, including photocopy, telecopy or electronic
transmission, of this Agreement or any financing statement shall be sufficient
as a financing statement.
9.21 GOVERNING LAW. This Agreement, and all documents and
instruments executed in connection herewith, shall be governed by and construed
according to the laws of the State of Texas, provided, that to the extent
federal law would allow a higher rate of interest than would be allowed by the
laws of the State of Texas, then with respect to the provisions of any law with
purport to limit the amount of interest that may be contracted for, charged or
received in connection with any of the Obligations, such federal law shall
apply.
9.22 ENTIRETY AND AMENDMENTS. This Agreement embodies the
entire agreement between the parties relating to the subject matter hereof, and
may be modified or amended only by an instrument in writing executed by an
authorized officer of each party hereto.
9.23 PARTIES BOUND. This Agreement shall be binding upon
and inure to the benefit of each Borrower and Lender, and their respective
successors in interest and assigns. Borrowers may not assign any right, power,
duty, or obligation under this Agreement, or any document or instrument
executed in connection herewith, without the prior written consent of Lender.
This Agreement is intended for the benefit of Borrowers and Lender, and their
respective successors in interest and assigns only, and may not be relied upon
by any other Person.
9.24 ACCOUNTING TERMS. Except as otherwise specifically
provided herein, all accounting and financial terms used herein, and the
compliance with each financial covenant contained herein, shall be determined
on a consolidated basis for Parent and its Subsidiaries in accordance with
GAAP.
9.25 EXHIBITS. All exhibits referenced herein, and
attached hereto, are incorporated in this Agreement and made a part hereof for
all purposes. All terms defined in this Agreement, wherever used in any such
exhibits, shall have the same meanings as are prescribed by this Agreement.
9.26 CUMULATIVE RIGHTS. All rights and remedies of Lender
under the Loan Documents are cumulative, and are in addition to rights and
remedies available to Lender by law. Such rights and remedies may be exercised
concurrently or successively, at such times as Lender may determine in its
discretion. Each Borrower waives any right to require marshaling.
9.27 SEVERABILITY. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under any present or future laws
effective during the Contract Term, such provisions shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part of this Agreement. In
such case, the remaining provisions of the Agreement shall remain in full force
and effect and shall not be effected thereby.
9.28 MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in one or more multiple originals, each of which shall be deemed
an original, but all of which together shall constitute one and the same
Agreement.
9.29 SURVIVAL. All covenants, agreements, representations,
and warranties made by each Borrower herein shall survive the execution,
delivery, and closing of this Agreement, and all documents executed in
connection herewith, and shall not be affected by any investigation made by any
party.
41
<PAGE> 47
9.30 Amendment and Restatement. This Agreement is in
amendment and restatement of the certain Financing and Security Agreement dated
effective September 24, 1993, as amended, to which Lender and Borrowers are
parties and all "Obligations," if any, as defined therein which remain
outstanding on the Effective Date shall be deemed Lo be renewed and hereafter
included within the Obligations under this Agreement.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
EXECUTED as of the effective date specified in the preamble.
ULTRAK, INC.
By: /s/ TIM D. TORNO
-------------------------------------
Tim D. Torno
Vice President
DENTAL VISION DIRECT, INC.
By: /s/ TIM D. TORNO
-------------------------------------
Tim D. Torno
Vice President
DIAMOND ELECTRONICS, INC.
By: /s/ TIM D. TORNO
-------------------------------------
Tim D. Torno
Vice President
JAK PACIFIC VIDEO WARRANTY AND REPAIR
SERVICES, INC.
By: /s/ TIM D. TORNO
-------------------------------------
Tim D. Torno
Vice President
ULTRAK OPERATING, L.P.
A Texas limited partnership
By: Ultrak G.P., Inc., its sole
general partner
By: /s/ TIM D. TORNO
--------------------------------
Tim D. Torno
Vice President
NATIONSBANK OF TEXAS
By: /s/ RUSSELL P. HARTSFIELD
-------------------------------------
Russell P. Hartsfield
Senior Vice President
42
<PAGE> 48
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said ULTRAK, INC., a Delaware corporation, and that he executed the same for
the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of July,
1996.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires: ----------------------------------------
[NOTARY STAMP] (Printed Name of Notary)
- ----------------------
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said DENTAL VISION DIRECT, INC., a Texas corporation, and that he executed
the same for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of July,
1996.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires: ----------------------------------------
[NOTARY STAMP] (Printed Name of Notary)
- ----------------------
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said DIAMOND ELECTRONICS, INC., an Ohio corporation, and that he executed
the same for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of July,
1996.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires: ----------------------------------------
[NOTARY STAMP] (Printed Name of Notary)
- ----------------------
43
<PAGE> 49
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally
appeared Tim D. Torno, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of said JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC., a
California corporation, and that he executed the same for the purposes and
considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of July,
1996.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires: ----------------------------------------
[NOTARY STAMP] (Printed Name of Notary)
- ----------------------
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally
appeared Tim D. Torno, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of Ultrak G.P., Inc., a Delaware corporation and sole general
partner, on behalf and as the act of ULTRAK OPERATING, L.P., a Texas limited
partnership, and that he executed the same for the purposes and considerations
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of July,
1996.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires: ----------------------------------------
[NOTARY STAMP] (Printed Name of Notary)
- ----------------------
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally
appeared Russell P. Hartsfield, known to me to be the person and officer whose
name is subscribed to the foregoing instrument, and acknowledged to me that the
same was the act of said NATIONSBANK OF TEXAS, N.A., a national banking
association, and that he executed the same for the purposes and considerations
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of July,
1996.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires: ----------------------------------------
[NOTARY STAMP] (Printed Name of Notary)
- ----------------------
44
<PAGE> 50
EXHIBIT 3.3
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Other Security Interests, Liens or Encumbrances
None.
45
<PAGE> 51
EXHIBIT 3.4
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Locations of Collateral
All Inventory and Equipment owned by each Borrower is located at the following
locations:
<TABLE>
<CAPTION>
=====================================================================================================
ADDRESS OF LOCATION COUNTY OWNED OR LEASED
[IF LEASED, NAME OF LANDLORD]
=====================================================================================================
<S> <C> <C>
ULTRAK OPERATING, L.P.
=====================================================================================================
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
- -----------------------------------------------------------------------------------------------------
2400 Industrial Lane Boulder Leased
Broomfield, Colorado 80020 Superior Investments I, Inc.
- -----------------------------------------------------------------------------------------------------
913 Commerce Drive Anne Arundel Leased
Annapolis, Maryland 21401 Annapolis Commerce Park
Limited Partnership
- -----------------------------------------------------------------------------------------------------
1323 Butterfield Road, Suite 110 DuPage Leased
Downers Grove, Illinois 60515 Gottlieb Properties, Inc.
=====================================================================================================
DENTAL VISION DIRECT, INC.
=====================================================================================================
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
=====================================================================================================
DIAMOND ELECTRONICS, INC.
=====================================================================================================
4465 Coonpath Road Fairfield Owned
Carroll, Ohio 43112
=====================================================================================================
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
=====================================================================================================
2300 Stowe Drive, Suite C San Diego Leased
Poway, CA 92064 Poway Industrial Park
=====================================================================================================
</TABLE>
46
<PAGE> 52
EXHIBIT 5.1
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Trade Names
None.
47
<PAGE> 53
EXHIBIT 5.6
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Share Ownership
Ownership:
Ultrak, Inc. is publicly owned. Approximately twenty and 9/100 percent (20.9%)
of the Voting Stock of Ultrak, Inc. and one hundred percent (100%) of the
convertible preferred stock are owned of record and beneficially by
George K. Broady.
One hundred percent (100%) of the Voting Stock of Diamond Electronics, Inc. and
JAK Pacific Video Warranty and Repair Services, Inc. are owned of record and
beneficially by Ultrak, Inc.
Ultrak Operating, L.P. is owned as follows: (i) a one percent (1.0%) general
partnership interest is owned by Ultrak GP, Inc., a Delaware corporation as
sole general partner, and (ii) a ninety-nine percent limited partnership
interest is owned by Ultrak LP, Inc., a Delaware corporation, as sole limited
partner.
One hundred percent (100%) of the Voting Stock of Ultrak GP, Inc., a Delaware
corporation, is owned of record and beneficially by Ultrak, Inc.
One hundred percent (100%) of the Voting Stock of Ultrak LP, Inc., a Delaware
corporation, is owned of record and beneficially by Ultrak, Inc.
Stock options, warrants. etc.:
Ultrak, Inc:
1. Non-qualified Employee Stock Option Plan - up to 833,334
shares of no par common stock at varying exercise prices.
2. Convertible Preferred Stock - convertible into 406,981 shares
of no par common stock.
3. Petrus Warrants - pursuant to the 1992 loan agreement, as
amended, 92,460 warrants issued to the Petrus Fund, Ltd.,
convertible into 92,460 shares of no par common stock
48
<PAGE> 54
EXHIBIT 5.6
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Subsidiaries
See Share Ownership.
49
<PAGE> 55
EXHIBIT 5.9
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Litigation
1. P.A.T. Co. and Kustom Signals, Inc., Plaintiffs v. Ultrak, Inc.,
Defendant; Case No. 95-2273-EEO
2. Conner Peripherrals, Inc., Plaintiff. vs. Exxis Technologies. Inc.,
Defendant; Cause No. 95-10753-16.
3. Clayton Sperry vs. Exxis Corporation, et al; Ca. No. 4: 95-1613-22
50
<PAGE> 1
Exhibit 11.1
ULTRAK, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Computation of Income per Share-Primary: Three Months Six Months
- --------------------------------------- ------------ ----------
<S> <C> <C>
Net income $1,534,987 2,805,031
Less: Dividend requirements on preferred stock
(29,302) (58,604)
---------- ----------
Net income allocable to common stockholders $1,505,685 2,746,427
========== ==========
Weighted average number of common shares
outstanding during the period 8,275,333 7,781,724
Net effect of dilutive stock options and
warrants based on the treasury method using
average market price 534,401 466,050
---------- ----------
Shares used for computation 8,809,734 8,247,774
========== ==========
Income per share-primary $.17 $.33
========== ==========
Computation of Income per Share-Assuming Full Dilution:
- ------------------------------------------------------
Net income $1,534,987 2,805,031
Less: Dividend requirements on preferred stock -- --
---------- ----------
Net income allocable to common stockholders $1,534,987 2,805,031
========== ==========
Weighted average number of common shares
outstanding during the period 8,275,333 7,781,724
Net effect of dilutive stock options and
warrants based on the treasury method using
the greater of average or ending price 564,611 564,399
Net effect of preferred stock conversion 406,981 406,981
---------- ---------
Shares used for computation 9,246,925 8,753,104
========== ==========
Income per share-assuming full dilution $.17 $.32
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 559,777
<SECURITIES> 16,067,587
<RECEIVABLES> 17,997,923
<ALLOWANCES> 621,905
<INVENTORY> 23,211,343
<CURRENT-ASSETS> 64,804,992
<PP&E> 6,301,628
<DEPRECIATION> 2,178,803
<TOTAL-ASSETS> 73,039,790
<CURRENT-LIABILITIES> 9,392,695
<BONDS> 0
<COMMON> 103,263
0
976,755
<OTHER-SE> 62,567,077
<TOTAL-LIABILITY-AND-EQUITY> 73,039,790
<SALES> 61,440,469
<TOTAL-REVENUES> 61,440,469
<CGS> 43,887,601
<TOTAL-COSTS> 43,887,601
<OTHER-EXPENSES> 12,293,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 886,803
<INCOME-PRETAX> 4,321,805
<INCOME-TAX> 1,516,774
<INCOME-CONTINUING> 2,805,031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,805,031
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
