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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
OCTOBER 11, 1996
(Date of report)
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-9463 75-2626358
(State or other jurisdiction of (Commission (I.R.S. employer
incorporation or organization) file number) identification no.)
1220 CHAMPION CIRCLE, SUITE 100,
CARROLLTON, TEXAS 75006
(Address of principal executive offices)
(214) 280-9675
(Registrant's telephone number, including area code)
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ULTRAK, INC. AND SUBSIDIARIES
ITEM 2: ACQUISITION OF ASSETS
Acquisition of Groupe Bisset:
On September 26, 1996, Ultrak, Inc. (the "Company") acquired 100% of the
outstanding share capital of Groupe Bisset, S.A. ("Bisset"), a Paris, France
based privately-held company, for US $5.0 million in cash and 289,855 shares of
restricted Common Stock, $.01 par value of the Company ("Common Stock"), US
$2.5 million in deferred consideration payable one half in cash and one half in
restricted Common Stock and up to an additional US $2.5 million payable one
half in cash and one half in restricted Common Stock if certain net income
levels are attained by Bisset over a one-year period beginning July 1, 1996.
In conjunction with the acquisition of Bisset, Roland Scetbon, President of
Bisset, was elected a director of the Company.
Bisset is a distributor of closed circuit television and professional audio
products. Bisset's unaudited net sales for the year ended December 31, 1995
were US $18.5 million. The transaction has been accounted for as a purchase
and the operations of Bisset will be included in the Company's consolidated
statement of income since the date of acquisition. Goodwill will be amortized
over 25 years using the straight line method.
ITEM 5: OTHER EVENTS
Investment in Lenel Systems International, Inc.:
On September 6, 1996, the Company purchased approximately 24% of the
outstanding common stock of Lenel Systems International, Inc. ("Lenel"), a New
York corporation, for $2.6 million in cash. Lenel is a privately-held software
company specializing in security access control products based in Fairport, New
York. Additionally, the Company received a warrant, expiring on March 1, 1999,
to purchase additional shares of Lenel stock to increase its ownership to 51%
and signed a world-wide reseller agreement with Lenel. The Company has the
right of first refusal with respect to the stock of Lenel's founders and has
the right to designate one director of Lenel. The transaction will be
accounted for using the equity method.
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ULTRAK, INC. AND SUBSIDIARIES
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
It is impracticable to provide the required financial statements relating to
Bisset at this time. The required financial statements will be filed as soon
as possible, but not later than 60 days from the date this report must be
filed.
(b) Pro Forma Financial Information
It is impracticable to provide the required pro forma financial information
relating to Bisset at this time. The required pro forma financial information
will be filed as soon as possible, but not later than 60 days from the date
this report must be filed.
(c) Exhibits
Exhibit 10.1 Stock Purchase Agreement dated September 26, 1996 among Maurice
Scetbon, Monda, S.A., a Belgium corporation, Frida, S.A., a Belgium
corporation, Ultrak, Inc. and Ultrak Holdings Limited, a United Kingdom company
and wholly-owned subsidiary of Ultrak, Inc.
Exhibit 10.2 Stock Purchase Agreement dated September 6, 1996 between Lenel
Systems International, Inc. and Ultrak, Inc.
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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: October 11, 1996 By: /s/ TIM D. TORNO
-----------------------
Tim D. Torno
Principal Financial and
Accounting Officer
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INDEX TO EXHIBITS
Exhibit Description
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10.1 Stock Purchase Agreement Dated September 26, 1996
Maurice Scetbon, Monda, S.A., a Belgium corporation,
Frida, S.A., a Belgium corporation Ultrak, Inc. and
Ultrak Holdings Limited, a United Kingdom company and
wholly owned subsidiary of Ultrak, Inc.
10.2 Stock Purchase Agreement dated September 6, 1996
between Lenel Systems International, and Ultrak,
Inc.
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated September 26, 1996 (the "Signing Date"), is
among Maurice Scetbon, Monda, S.A., a Belgian corporation ("Monda"), Frida,
S.A., a Belgian corporation ("Frida") (sometimes collectively referred to
herein as the "Shareholders" and individually referred to as a "Shareholder")
(Monda and Frida are sometimes collectively referred to herein as the
"Management Shareholders" and individually referred to as a "Management
Shareholders") (Maurice Scetbon is acting independently of the Management
Shareholders), Ultrak, Inc., a Delaware corporation ("Ultrak"), and Ultrak
Holdings Limited, a United Kingdom company and wholly-owned subsidiary of
Ultrak ("Holdings").
Recitals. The Shareholders desire to sell all of the outstanding
shares (the "Shares") of capital stock (the "Bisset Stock") of Bisset, s.a., a
French corporation ("Bisset"), to Holdings in accordance with the terms and
conditions of this Agreement and Ultrak desires that Holdings acquire all of
the Shares (the "Acquisition"). The parties, other than Holdings, Monda, and
Frida, previously executed a Promise to Buy and Promise to Sell, dated July 17,
1996, which will be fully superseded by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the terms of
this Agreement, the receipt and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby covenant and agree as
follows:
ARTICLE I: THE ACQUISITION
1.01. The Purchase. On the terms and subject to the conditions set
forth herein, at the Closing (as hereinafter defined) each Shareholder
covenants and agrees to sell and deliver to Holdings, and Holdings agrees to
purchase from each Shareholder, on the Closing Date (as hereinafter defined),
the number of the Shares set forth below opposite each Shareholder's name:
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
Frida 2,332
Monda 2,332
Maurice Scetbon 336
</TABLE>
1.02. Purchase Price. (a) Subject to Section 1.03, the purchase
price to be paid for the Shares shall be the aggregate of the following:
(i) Four Million Eight Hundred Eighty Thousand United
States Dollars (US$4,880,000.00) (the "Cash Price") payable by certified check
or wire transfer duly received at the Closing to each Shareholder in the amount
set forth below opposite each Shareholder's name:
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<TABLE>
<CAPTION>
Name Amount
---- ------
<S> <C>
Frida US$2,276,032
Monda US$2,276,032
Maurice Scetbon US$ 327,936
------------
Total US$4,880,000
</TABLE>
(ii) Two Hundred Eighty Two Thousand Eight Hundred
Ninety-Nine (282,899) unregistered shares of Common Stock, $0.01 par value, of
Ultrak ("Ultrak Stock") (the "Stock Price") (the Stock Price and the Cash Price
are sometimes collectively referred to herein as the "Initial Payment")
representing a total value of Four Million Eight Hundred Eighty Thousand United
States Dollars (US$4,880,000.00) at a value of US$17.25 per share of Ultrak
Stock issuable at the Closing as directed in writing by the Management
Shareholders, or if the Management Shareholders do not direct in writing, then
the shares of Ultrak Stock will be issued in the same manner and in the same
prorata percentages as the Cash Price as set forth in Section 1.02(a)(i).
(iii) Thirty percent (30%) of the Net Value (as hereinafter
defined) of Bisset less the amount payable to Nidco pursuant to Section
1.03(c) (the "Earnout Payment") as of the end of the Earnout Period (as
hereinafter defined). The Earnout Payment will be paid within thirty (30) days
of the end of the Earnout Period and will be paid by half in cash and by half
in unregistered shares of Ultrak Stock. For purposes of this Section
1.02(a)(iii), the value of Ultrak Stock for purposes of the Earnout Payment
will be the average closing price for the final twenty (20) trading days on the
NASDAQ National Market System ending on the last business day of the Earnout
Period. The term "Net Value" is defined as the earnings of Bisset after
interest, taxes, and any exceptional item for the period of twelve (12)
consecutive months ending on June 30, 1997 (the "Earnout Period") multiplied by
ten (10). The Net Value of Bisset will be calculated in accordance with
generally accepted French accounting principles ("GAAP") and based on and
adjusted for the same accounting practices and procedures as further defined in
Schedule A hereto and shall not include any costs or expenses of Bisset related
to the Acquisition. Notwithstanding anything to the contrary in this Agreement
or in any other agreement, the minimum amount of the Earnout Payment shall be
Two Million Five Hundred Thousand United States Dollars (US$2,500,000.00) and
the maximum amount of the Earnout Payment shall not exceed Five Million United
States Dollars (US$5,000,000.00). The Net Value of Bisset for the Earnout
Period shall be conclusively determined by Grant Thornton and Daniel Guerin
working together. The two said accountants shall issue a Joint Certificate of
Net Value as to the Net Value of Bisset as soon as possible following the
conclusion of the audit of Bisset for the Earnout Period. The Certificate of
Net Value shall be conclusive and binding on Ultrak, Bisset, and the
Shareholders. Ultrak covenants and agrees that it will not transfer or direct
sales made by Bisset to Ultrak or other Ultrak subsidiaries. Subject to
Section 1.03, the Earnout Payment shall be paid by Ultrak to the Shareholders
after payment by Ultrak to Nidco pursuant to Section 1.03(c) no later than ten
(10) days after the issuance of the Certificate of Net Value as directed in
writing by the Management Shareholders, or if the Management Shareholders do
not direct in writing, then the shares of Ultrak Stock will be issued in the
same manner and in the same prorata percentages as the Cash Price as set forth
in Section 1.02(a)(i). If a Force Majeure Event (as hereinafter defined)
occurs and is applicable for a period of time of more than seven (7)
consecutive days duration during the Earnout Period, then the Earnout Period
will be extended for the period of time that the Force Majeure Event is
applicable during the Earnout Period. The term
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"Force Majeure Event" means a national strike in France, a war involving
France, Act of God, or a national calamity that materially and adversely
impacts commerce in France.
1.03. Payments by Ultrak to Nidco. Ultrak recognizes and agrees
that Nidco ("Nidco") and Michael Wallace ("Wallace") have performed services
for and are entitled to receive the following amounts from Ultrak:
(a) US$120,000 to NIDCO;
(b) 6,956 shares of Ultrak Stock to Wallace; and
(c) six percent (6%) of the Earnout Payment to Nidco
Nidco shall furnish an invoice to Ultrak for the above-mentioned amount.
Except as set forth herein, neither Ultrak nor Holdings shall otherwise be
obligated to Nidco or Wallace in connection with the Acquisition.
1.04. Execution and Delivery of Closing Documents. Before the
Closing, each party shall cause to be prepared, and at the Closing the parties
shall execute and deliver, each agreement and instrument required by this
Agreement to be so executed and delivered and not theretofore accomplished. At
the Closing, the Shareholders shall deliver a share transfer order to Bisset in
form sufficient to cause title thereto to vest fully in Holdings, free and
clear of all liens, liabilities, claims and encumbrances, against delivery by
Ultrak of the Initial Payment. At the Closing, each party also shall execute
and deliver, or cause to be executed and delivered, such other appropriate and
customary documents as any other party reasonably may request for the purpose
of consummating the transactions contemplated by this Agreement. All actions
taken at the Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed.
1.05. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 o'clock a.m., local time,
at such offices as the parties shall agree on September 26, 1996, or on such
other date as may be agreed upon by the parties, but in any event not later
than September 30, 1996 (the "Termination Date") unless further extended by
written agreement of the parties to this Agreement. The day on which the
Closing occurs is herein referred to as the "Closing Date."
1.06. Further Assurances. After the Closing, the Shareholders shall
execute and deliver such additional documents and take such additional actions
as Ultrak may reasonably deem to be practical and necessary or advisable in
order to consummate the transactions contemplated by this Agreement and to vest
more fully in Holdings the ownership of the Shares.
1.07. Effective Date for Accounting Purposes. To the fullest extent
possible, the effective date of the Acquisition for accounting purposes will be
September 1, 1996 and the effective date of the transfer of control of Bisset
to Holdings will be September 1, 1996.
ARTICLE II: REGISTRATION RIGHTS
2.01. Registration.
(a) If, at any time after March 26, 1997 and before
September 26, 1998, Ultrak proposes to file a registration statement
relating to the Ultrak Stock (on any form other than
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Form S-4 or Form S-8) under the Securities Act of 1933, as amended
(the "Securities Act"), for sale for its own account, Ultrak will, not
less than ten (10) days prior to the initial filing of such
registration statement, deliver written notice of such intention to
the Shareholders, Wallace (for purposes of Article II only,
"Shareholders" or a "Shareholder" shall also include Wallace to the
extent each receives shares of Ultrak Stock pursuant to this
Agreement) setting forth the intended method of disposition, the
maximum proposed offering price, commissions and discounts in
connection therewith and other relevant information. Such notice must
indicate that the Shareholders have piggyback registration rights
pursuant to this Section 2.01(a) with respect to the shares of the
Ultrak Stock which are then held by the Shareholders and were acquired
pursuant to Sections 1.02 and 1.03 hereof (the "Registrable Shares").
If any Shareholder owning Registrable Shares so requests in writing
within ten (10) days after receipt of such notification, Ultrak hereby
agrees to include in such registration statement up to all (subject to
the terms of this Article II) of the Registrable Shares owned by such
Shareholder and to use all reasonable best efforts to register such
Registrable Shares so that such Registrable Shares may be sold at such
times and in such manner as the holder or holders thereof shall
determine. If the proposed registration by Ultrak is, in whole or in
part, an underwritten public offering of Ultrak Stock, then any
request pursuant to this Section 2.01(a) to register must specify and
irrevocably agree that the Registrable Shares of a Shareholder to be
included in the underwriting will be included on the same terms and
conditions as the shares of the Ultrak Stock otherwise being sold by
Ultrak through underwriters under such registration.
(b) If a registration pursuant to this Section 2.01
involves an underwritten offering and the managing underwriter of such
underwritten offering informs Ultrak and the Shareholders by letter of
such managing underwriter's reasonable belief that the effect of
including all of the Registrable Shares so requested to be included in
the registration statement will materially and adversely affect the
sale of the shares of the Ultrak Stock proposed to be sold by Ultrak,
then the number of shares of the Ultrak Stock that a holder of
Registrable Shares may include in such registration shall be reduced
(and the number of shares of the Ultrak Stock to be sold by other
selling shareholders shall also be reduced) to a number determined by
multiplying (x) the total number of shares held by all selling
shareholders having contractual registration rights (including the
holders of Registrable Shares) which the managing underwriter is
willing to have included in such registration, times (y) a fraction,
the numerator of which is the number of Registrable Shares which such
Shareholder requested to be included in such registration statement
and the denominator of which is the number of all shares (including
the Registrable Shares) which all the selling shareholders having
contractual registration rights have requested to be included in such
registration.
(c) Notwithstanding Section 2.01(b), the Shareholders
recognize and agree that their rights under this Section 2.01 shall be
expressly subject and inferior to the registration rights of:
(i) Petrus Fund, L.P. with respect to 100,000
shares of Ultrak Stock with such registration rights expiring on
November 30, 1996, and
(ii) Chris Davies, Kim Rhodes, Scott Rhodes and
Rhodes Davies & Associates with respect to a contingent number of
shares of Ultrak Stock with such registration rights expiring on July
1, 2000.
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(d) In connection with any registrations under this
Section 2.01, the Shareholders shall cooperate with Ultrak and
promptly furnish all information necessary to effect the proper
registration of Registrable Shares desired to be sold.
2.02. Costs and Expenses. All costs and expenses in connection with
the registration of any Registrable Shares under Section 2.01 of this Agreement
or the performance of Ultrak's obligations under Section 2.01 of this
Agreement, including, but not limited to, all registration, filing, stock
exchange and National Association of Securities Dealers, Inc. fees; all fees
and expenses of complying with securities or blue sky laws; fees and
disbursements of counsel for Ultrak, counsel responsible for qualifying the
Registrable Shares under blue sky laws, and of independent accountants and
other experts of Ultrak; and all other reasonable expenses of Ultrak in
connection with the transfer and delivery of the Registrable Shares, shall be
borne by Ultrak; provided, however, that Ultrak shall not be obligated to pay
any underwriting commissions or discounts relating to the Registrable Shares.
However, Ultrak shall be obligated to pay the fees and expenses of one legal
counsel for the Shareholders selected by Ultrak.
2.03. Indemnification.
(a) Ultrak hereby agrees to indemnify and hold harmless
each Shareholder owning Registrable Shares requesting or joining in a
registration hereunder and each other person, if any, who controls
such holder within the meaning of the Securities Act, against all
losses, liabilities, claims, damages, and expenses, joint or several,
to which such holder or controlling person may become subject under
the Securities Act and any applicable blue sky laws or otherwise,
insofar as such loss, liability, claim, damage or expense arises out
of or is based upon any untrue statement of any material fact
contained in any registration statement covering the Registrable
Shares, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or in an amendment or supplement thereto
executed by or on behalf of Ultrak or based upon written information
furnished by or on behalf of Ultrak filed in any jurisdiction in order
to qualify the Registrable Shares under the securities laws thereof or
filed with the United States Securities and Exchange Commission (the
"SEC"), or arises out of or is based upon the omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that Ultrak
shall not be obligated to indemnify a Shareholder in any such case to
the extent that any such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission
relating to such Shareholder or the Shareholder's method of
distributing the Registrable Shares, or otherwise, that was made in
reliance upon, and in conformity with, written information duly
executed and furnished by such Shareholder specifically for use in the
registration statement, or any amendment or supplement thereto, or any
application, as the case may be.
(b) By requesting Registrable Shares to be covered by any
registration statement in accordance with this Agreement, each
Shareholder agrees to indemnify and hold harmless Ultrak, each of its
directors and each of its officers who have signed said registration
statement, and each person, if any, who controls Ultrak within the
meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), to the same extent as the
indemnification by Ultrak provided for in Section 2.03(a), but only
with respect to untrue statements or omissions, if any, made by such
Shareholder or the Shareholder's method of distributing the
Registrable Shares, or otherwise, made in such registration statement,
prospectus
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contained therein, or amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with, written
information duly executed and furnished by such Shareholder against
whom indemnification is sought to Ultrak specifically for use in the
registration statement, in the prospectus contained therein, or any
amendment or supplement thereto, or any application, as the case may
be.
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2.04 Termination of Rights. The right of any Shareholder to
register Registrable Shares pursuant to Section 2.01 shall automatically
terminate as to any Registrable Shares that may be sold under Rule 144
promulgated by the SEC pursuant to the Securities Act ("Rule 144") without
registration (subject only to volume limitations as set forth in Rule 144).
2.05. Exchange Act Registration. Ultrak agrees to maintain
registration of the Ultrak Stock under the Exchange Act, to timely file and
maintain all required reports and other filings with the SEC, and to take such
action as may from time to time be necessary to enable holders of Registrable
Shares to be able to sell pursuant to Rule 144, unless otherwise restricted by
this Agreement or unless sales can be made without compliance with Rules 144
and 145 promulgated by the SEC under the Securities Act.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF
THE MANAGEMENT SHAREHOLDERS
Subject to the indemnification provisions of Article X, each
Management Shareholder jointly and severally represents and warrants to Ultrak
and Holdings that the following are true and correct as of the Signing Date and
will be true and correct as of the Closing Date as if made on that date:
3.01. Organization, Qualification, and Good Standing. Bisset is a
corporation duly organized and validly existing under the laws of France, has
the corporate power and authority to own or hold under lease its properties and
assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its property or the conduct of its business requires such
qualification.
3.02. Investments or Subsidiaries. Other than as set forth on
Schedule 3.02 of the Disclosure Schedule, Bisset does not own (nor has it ever
owned) the capital stock of any corporation, nor does it have (nor has it ever
had) an equity, profit sharing, participation, or other interest in any
corporation, partnership, joint venture, or other entity.
3.03. Corporate Records. Copies of the Articles of Incorporation
and all amendments thereto of Bisset have been delivered to Ultrak and such
copies are true, correct and complete. The minute books of Bisset contain
accurate and complete minutes of all meetings of and accurate and complete
consents to all actions taken without meetings by the Board of Directors (and
any committee thereof) and the shareholders of Bisset since the formation of
Bisset.
3.04. No Violation. Except as set forth on Schedule 3.04 of the
Disclosure Schedule, neither the execution and delivery of this Agreement by
the Shareholders nor the consummation of the transactions contemplated hereby
will violate or conflict with, or result in the breach or termination of, or
otherwise give any other contracting party the right to terminate, or
constitute a default (or an event which, with the lapse of time, or the giving
of notice, or both, will constitute a default) under, any contract, license,
other instrument or commitment to which Bisset is a party or by which Bisset is
bound, or result in the creation of any lien, charge or encumbrance upon the
properties or assets of Bisset pursuant to the terms of any such contract,
license, instrument or commitment. Other than as set forth on Schedule 3.04 of
the Disclosure Schedule, no authorization, consent, or approval of, or filing
with, any governmental body or authority is necessary for the consummation by
the Shareholders of the transactions contemplated herein.
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3.05. Authority of Bisset and Shareholders; No Violation by Bisset
or Shareholders. This Agreement has been duly and validly executed and
delivered by each Shareholder and, assuming this Agreement constitutes a valid
and binding agreement of Ultrak, this Agreement constitutes a valid and binding
agreement of each Shareholder, enforceable against each Shareholder in
accordance with its terms. Except as set forth on Schedule 3.05 of the
Disclosure Schedule, neither the execution and delivery of this Agreement by
any Shareholder nor the consummation of the transactions contemplated hereby by
the Shareholders will: (a) violate or conflict with, or result in the breach
or termination of, or otherwise give any other contracting party the right to
terminate, or constitute a default (or an event which, with the lapse of time,
or the giving of notice, or both, will constitute a default) under, any
contract, license, other instrument or commitment to which a Shareholder is a
party or by which a Shareholder is bound, or result in the creation of any
lien, charge or encumbrance upon the properties or assets of Bisset or the
Shareholders' Shares pursuant to the terms of any such contract, license,
instrument or commitment, or (b) violate or conflict with any applicable law,
regulation, permit, authorization, franchise, license, judgment, order, writ,
injunction or decree of any court or governmental body of any jurisdiction.
3.06. Capitalization. The capital stock of Bisset consists solely
of 5,000 shares of Bisset Stock, fully paid-in. There are no authorized, but
unissued shares of Bisset Stock or other authorized classes or series of
capital stock of Bisset. All outstanding shares of Bisset Stock are duly
authorized, validly issued, fully paid, and nonassessable and have been
offered, issued, sold and delivered by Bisset in compliance with applicable
securities laws. There are no preemptive rights with respect to the Bisset
Stock. There are no outstanding subscriptions, options, warrants, rights or
other arrangements or commitments, whether express or implied, obligating
Bisset to issue any shares of Bisset Stock or securities exchangeable for or
convertible into Bisset Stock. Schedule 3.06 of the Disclosure Schedule lists
all of the Bisset Stock owned, the address of each shareholder of Bisset as
shown in Bisset's share transfer register, and the number of shares of Bisset
Stock owned by each Shareholder. As of the Closing Date (prior to the
consummation of the transactions contemplated hereby), each Shareholder is the
lawful record and beneficial owner of the shares of Bisset Stock set forth by
his name on Schedule 3.06 of the Disclosure Schedule, free and clear of all
liens, liabilities, proxies, claims and encumbrances of any kind (other than as
noted on Schedule 3.06 of the Disclosure Schedule). As of the Closing Date,
the transfer of the certificates representing the Shares or the execution and
delivery of the share transfer order to Bisset if the Shares are
uncertificated, will transfer to Ultrak good and indefeasible title to such
shares of Bisset Stock, free and clear of all liens, liabilities, claims and
encumbrances of every kind.
3.07. Bisset Financial Statements. (a) The audited balance sheet
of Bisset as of December 31, 1995, (the "Audited Balance Sheet") and the
audited statement of operations, statement of cash flows, and statement of
changes in shareholders' equity of Bisset for the fiscal year then ended
(collectively, including the Audited Balance Sheet, the "Audited Financial
Statements"), each certified by Daniel Guerin, registered auditor, whose report
thereon is included therein, and the unaudited balance sheet of Bisset as of
June 30, 1996 (the "Unaudited Balance Sheet") (the Audited Balance Sheet and
the Unaudited Balance Sheet are collectively referred to as the "Balance
Sheets") and the unaudited statement of operations of Bisset for the 6-month
period ended June 30, 1996 (collectively, including the 1996 Balance Sheet, the
"Unaudited Financial Statements"), have been prepared in accordance with the
books and records of Bisset, which books and records are complete, maintained
on a consistent basis, and correctly reflect its income, expenses, assets and
liabilities, are true, complete and accurate and present fairly the financial
position, as adjusted for changes proposed by Exco-Paris, of Bisset as of the
dates of Balance Sheets and the results of operations of Bisset for the periods
covered by said
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statements of operations, in accordance with GAAP consistently applied, except
as otherwise disclosed therein and except, in the case of the Unaudited
Financial Statements, for (i) normally recurring year-end adjustments, which
adjustments will not be material either individually or in the aggregate, and
(ii) the absence of notes required by GAAP. The Audited Financial Statements
and the Unaudited Financial Statements are collectively referred to in this
Agreement as the "Financial Statements."
(b) The Management Shareholders represent and warrant that
(i) sales of Bisset for the six (6) months ended June 30, 1996 ("1996 Sales")
were not less than ninety percent (90%) of the sales of Bisset for the six (6)
months ended June 30, 1995 ("1995 Sales"), and (ii) gross margins for Bisset
for the six (6) months ended June 30, 1996 ("1996 Gross Margin") were not less
than ninety percent (90%) of the gross margins for the six (6) months ended
June 30, 1995 ("1995 Gross Margin").
3.08. Compliance with Laws. To the best knowledge of the Management
Shareholders, Bisset has complied with all laws, rules, and/or regulations
applicable to it or its business, and has received no notice of any alleged
violation of any such laws, rules, or regulations.
3.09. Taxes. Except as set forth on Schedule 3.09 of the Disclosure
Schedule, Bisset has duly filed when due all income, excise, corporate,
franchise, property, sales, payroll, withholding, and other tax returns and
reports required to be filed by it as of the date hereof by France, and has
paid or established adequate reserves for all taxes (including penalties and
interest) which have or may become due for the tax periods covered by such
returns, and any assessments which have been received by it; and all such tax
returns or reports which are income tax returns or reports fairly reflect the
taxable income generated by Bisset and the taxes of Bisset for the periods
covered thereby. Bisset is not delinquent in the payment of any tax,
assessment, or governmental charge. There is no tax deficiency or delinquency
asserted against Bisset and there is no unpaid assessment, proposal for
additional taxes, deficiency or delinquency in the payment of any of the taxes
of Bisset that is being asserted by any taxing authority, nor of any violation
of any tax law. There are no waivers or agreements by Bisset for the extension
of time for the assessment of any tax as shown on such returns or reports with
respect to Bisset. No audit of Bisset with respect to taxes is pending or, to
the best knowledge of the Management Shareholders, threatened. All monies
required to be withheld or collected by Bisset from employees or customers for
income taxes, social security and unemployment insurance taxes and sales,
excise, and use taxes, and the portion of any such taxes to be paid by Bisset
to governmental agencies, have been collected or withheld and either paid to
the respective governmental agencies or set aside for such purpose in the
manner required by applicable law and are properly reflected in the Financial
Statements or on the books and records of Bisset.
3.10. Liabilities and Obligations. The Financial Statements reflect
all material liabilities or obligations of Bisset, accrued, contingent, or
otherwise, other than liabilities and obligations incurred in the ordinary
course of business of Bisset since June 30, 1996. All reserves shown in the
Financial Statements are appropriate, reasonable and sufficient to provide for
the losses thereby contemplated. Except as set forth in the Financial
Statements, Bisset is not liable upon or with respect to, or obligated in any
other way to provide funds in respect of or to guarantee or assume in any
manner, any debt, obligation or liability of any person, corporation,
association, partnership, joint venture, trust or other entity, and Bisset
knows of no basis for the assertion of any other claims, liabilities or
obligations of any nature or in any amount that would be material to the
condition (financial or otherwise), business or operations of Bisset.
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3.11. Employee Benefit Plans and Arrangements. Other than as
required by applicable French law, Bisset does not sponsor or maintain and is
not otherwise a party to, nor is it obligated under, any French employee
benefit law, rule or regulation, or any employee benefit, pension, profit
sharing, or other plan (the "Plans"). Bisset is not obligated to create any
Plan.
3.12. Absence of Certain Changes. Except as set forth on Schedule
3.12 of the Disclosure Schedule or except in the ordinary course of business,
from and including June 30, 1996, Bisset has not: (a) suffered any material
adverse change in its condition (financial or otherwise), business or
operations (a material adverse change shall not include any change in general
economic conditions, actions of competitors, or the presence of new
competitors); (b) contracted for or paid any single capital expenditure in
excess of US$10,000 or total capital expenditures in excess of US$50,000; (c)
mortgaged, pledged, or subjected to any lien, lease, security interest or other
charge or encumbrance any of its properties or assets; (d) formed or acquired
or disposed of any interest in any corporation, partnership, joint venture or
other entity; (e) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) or lost or terminated employees or
suppliers that could or does adversely affect its condition (financial or
otherwise), business or operations; (f) except for the disposal of inventory,
machinery, vehicles and equipment consistent with past practices, acquired or
disposed of any assets or incurred, assumed or guaranteed any indebtedness for
borrowed money or other liabilities or obligations to pay money other than
trade payables in the ordinary course of business; (g) forgiven, compromised,
cancelled, released, permitted to lapse or waived any rights or claims that are
material to the condition (financial or otherwise), business or operations of
Bisset; (h) entered into, terminated or agreed to any modifications or
amendments to any material agreements, leases or commitments; (i) paid any
bonus, granted any benefit, made any payments, or loaned any money to the
Shareholders or its employees or other affiliates; (j) entered into any
employment, compensation, consulting or collective bargaining agreement with
any person or group, or modified or amended the terms of any such existing
agreement or entered into, adopted or amended any Plan; or (k) entered into or
terminated any other commitment or transaction or experienced any other event
that is material to the condition (financial or otherwise), business or
operations of Bisset.
3.13. Title and Related Matters. Bisset has good and marketable
title to all assets reflected in the Financial Statements as owned by Bisset
and to those other assets reflected in Bisset's books and records as being
owned (except as they have since been affected by transactions in the ordinary
course of business and consistent with past practices), and Bisset owns such
assets free and clear of all mortgages, liens, pledges, charges or encumbrances
of any kind or character, except (a) statutory liens for property taxes that
are not yet delinquent and (b) as expressly stated in the Financial Statements
or on Bisset's books and records (except as they have since been affected by
transactions in the ordinary course of business and consistent with past
practices).
3.14. Insurance. Bisset is a beneficiary of policies of insurance,
issued by insurers of recognized responsibility, providing coverage to insure
the properties and businesses thereof against such risks and in such amounts as
are prudent and customary in Bisset's industry. All of such policies are, and
will be maintained through the Closing Date, in full force and effect. All
premiums due thereon have been paid and no notice of cancellation has been
received with respect thereto.
3.15. Patents, Trademarks, Copyrights, Etc. Except as set forth on
Schedule 3.15 of the Disclosure Schedule, (a) Bisset owns all patents,
technology, know-how, processes, trademarks and copyrights, if any, necessary
to conduct its business, or possesses adequate licenses or other rights, if
any, therefor, without conflict with the rights of others (the "Proprietary
Rights"),(b) Bisset has the sole
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<PAGE> 11
and exclusive right to use the Proprietary Rights without infringing or
violating the rights of any third parties, (c) no consent of third parties is
required for the use thereof by Bisset, and no claim has been asserted by any
person to the ownership of or right to use any Proprietary Right or challenging
or questioning the validity or effectiveness of any such license or agreement,
and Bisset does not know of any basis for any such claim, (d) each of the
Proprietary Rights is valid and subsisting, has not been cancelled, abandoned,
or otherwise terminated and, if applicable, has been duly issued or filed, and
(e) there is no claim that, or inquiry as to whether, any product, activity or
operation of Bisset infringes upon or involves, or has resulted in the
infringement of, any Proprietary Right of any other person, corporation or
other entity; and no proceedings have been instituted, are pending or are
threatened which challenge the rights of Bisset with respect thereto.
3.16. Consents. Bisset possesses all necessary licenses,
franchises, permits and governmental authorizations material to the conduct of
its business, and no authorization, consent, approval, permit, or license of,
or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required
in connection with, the execution, delivery and performance of this Agreement
or the agreements contemplated hereby on the part of Bisset, and the execution,
delivery and performance of this Agreement will not with the giving of notice,
the lapse of time, or both, terminate such licenses, franchises, permits and
governmental authorizations.
3.17. Labor Relations. Other than as required by applicable French
law, Bisset is not a party to any collective bargaining agreements with any
union and no collective bargaining agreement is currently being negotiated by
Bisset. There is no pending representation question involving an attempt to
organize a bargaining unit including any employees of Bisset and no labor
grievance has been filed.
3.18. Litigation and Claims. Except as set forth on Schedule 3.18
of the Disclosure Schedule, Bisset is not a party to, and the business and
assets of Bisset are not the subject of or affected by, any pending or, to the
best knowledge of the Management Shareholders, threatened suit, claim, action
or litigation by or with any party or any administrative, arbitration, or other
governmental proceeding, investigation or inquiry. Bisset is not (a) subject
to any continuing court or administrative order, writ, injunction or decree
applicable specifically to Bisset or to its business, assets, operations or
employees, or (b) in default with respect to any such order, writ, injunction
or decree. Bisset does not know of any basis for any such action, proceeding
or investigation.
3.19. Employees and Consultants. Except as set forth on Schedule
3.19 of the Disclosure Schedule, Bisset has no direct or indirect, express or
implied, obligation to pay severance or termination pay to any officer or
employee of Bisset, or to pay any termination or severance payments to any
consultant, agent or other person or entity.
3.20. Books of Account. The books of account of Bisset have been
kept accurately in the ordinary course of business, the transactions entered
therein represent bona fide transactions and the revenues, expenses, assets and
liabilities of Bisset have been properly recorded in such books.
3.21. Distributions. Since June 30, 1996, no distribution, payment
or dividend of any kind has been declared, paid or distributed by Bisset on or
with respect to any of its capital stock at any time.
3.22. Accounts Receivable. The accounts receivable of Bisset on
June 30, 1996, and those existing on the Closing Date:
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<PAGE> 12
(a) will have arisen out of sales in the ordinary course
of business and represent, to the best knowledge of each Management
Shareholder, bona fide indebtedness of the applicable account debtor;
(b) to the best knowledge of each Management Shareholder,
are and will be collectible in full, net of the reserves therefore set
forth on the books of Bisset, which reserves were calculated
consistent with past practices and with GAAP applied consistently with
the Audited Financial Statements; and
(c) are subject to no existing claims of offset,
counterclaim, recoupment or setoff and, to the best knowledge of each
of the Management Shareholders, there are no facts or circumstances
(whether asserted or unasserted) that could give rise to such a claim.
Schedule 3.22 of the Disclosure Schedule is a complete and accurate accounts
receivable aging report for Bisset as of a date within thirty (30) days of the
date of this Agreement.
3.23. Contracts.
(a) Except as set forth on Schedule 3.23 of the
Disclosure Schedule, Bisset is not a party to, or bound by, with
respect to items requiring annual payments in excess of US$100,000,
any undischarged written or oral:
(i) contract of employment for any period of time
whatsoever, or restricting the employment, of any employee,
except as contemplated by this Agreement;
(ii) consulting agreement;
(iii) [intentionally omitted];
(iv) contract or agreement restricting in any
manner Bisset's right to compete with any other person or
restricting Bisset's right to sell to or purchase from any
other person;
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<PAGE> 13
(v) agreement with any affiliate of Bisset or
person controlled directly or indirectly by an affiliate of
Bisset for or with respect to the borrowing or lending of
monies, the purchase or sale of goods or the performance of
services;
(vi) contract for the payment or receipt of
license fees or royalties to or from any person, firm or
corporation;
(vii) contract of agency, representation,
distribution or franchise which cannot be canceled without
payment or penalty upon reasonable notice;
(viii) service contract;
(ix) guaranty, performance, bid or completion
bond, or surety or indemnification agreement;
(x) contract relating to the purchase, sale,
ownership, use or license of technology except licenses for
third party software generally available to the public;
(xi) lease or sublease, either as lessee or
sublessee, lessor or sublessor, of real or personal property
or intangibles;
(xii) contracts relating to the purchase, sale or
margining of securities;
(xiii) warranty or product service contracts; or
(xiv) joint venture, partnership or other contracts
involving a sharing of profits, losses, costs or liabilities.
All material contracts, leases, subleases and other instruments of the
type referred to in this Section 3.23 and described on Schedule 3.23 of the
Disclosure Schedule (collectively, "Contracts") are in full force and effect
and are binding upon Bisset and, to the best knowledge of each of the
Management Shareholders, are binding on the other parties thereto. Except as
set forth on Schedule 3.23 of the Disclosure Schedule, no material default by
Bisset, no material default by the other contracting parties has occurred
thereunder, and no event has occurred which with the giving of notice or the
lapse of time, or both, would constitute a material default by Bisset. Bisset
has delivered to Ultrak true and complete copies of each contract, lease,
sublease or other instrument described on Schedule 3.23 of the Disclosure
Schedule.
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<PAGE> 14
(b) Except as disclosed on Schedule 3.23 of the
Disclosure Schedule, Bisset is not a party to, or bound by, any
Contract under the terms of which performance by Bisset according to
the terms of this Agreement will be a material default or an event of
acceleration, or would otherwise require consent.
(c) Schedule 3.23 of the Disclosure Schedule contains a
list of every material license, permit or governmental approval,
order, directive and agreement applied for, pending, issued, rejected
or given to Bisset with respect to the conduct of its business or
operations. Bisset possesses all licenses, permits and governmental
approvals and authorization which are required in order to operate its
business as presently conducted and Bisset is in compliance with all
such licenses, permits, approvals and authorizations.
(d) Schedule 3.23 of the Disclosure Schedule contains a
list of all pending or threatened claims against Bisset under each
Contract (including without limitation, claims for back charges,
rebates, price reductions, breaches of product or service warranties
or for product or service liability for products manufactured or
sold), excluding requests for service in the ordinary course of
business which Bisset is required to perform pursuant to the terms of
standard warranties and which are covered by warranty reserves, to the
extent such claims, individually or in the aggregate, could have a
material adverse effect on the condition (financial or otherwise),
business or operations of Bisset.
3.24. Corporate Name. There are no actions, suits or proceedings
pending or threatened against or affecting Bisset which may result in any
impairment of the right of Bisset to use its corporate name. Schedule 3.24 of
the Disclosure Schedule lists any former corporate names of Bisset and any
names other than its full corporate name under which Bisset has conducted
business.
3.25. Compliance with Environmental Laws. To the best knowledge of
the Management Shareholders, (a) Bisset has not obtained and has not been
required to obtain any permits, licenses or similar authorizations by reason of
any applicable environmental laws, rules or regulations, (b) in connection with
any real property owned, used, or leased by Bisset ("Real Property"), Bisset
has (i) not placed any asbestos-containing thermal insulation or building
products or PCB-containing products on the Real Property, (ii) no knowledge
that any owner, prior lessee or user has placed any asbestos-containing thermal
insulation or building products or PCB-containing products on the Real
Property, (iii) not installed or maintained any active or inactive hazardous
waste receptacles on the Real Property, (iv) no knowledge that any active or
inactive hazardous waste receptacles have ever been on the Real Property, or
(v) no unperformed environmental obligations, (c) there is no hazardous
waste, solid waste or hazardous substances on the Real Property, and (d) there
have been no spills, discharges or other releases of hazardous or toxic
substances onto or from the Real Property.
3.26. Condition of Fixed Assets. All of the fixed assets owned or
leased by Bisset are in good condition and repair for the intended use in the
ordinary course of business and conform in all material respects with all
applicable ordinances, regulations and other laws and there are no known latent
defects therein.
3.27. Agreements with the Shareholders. Set forth on Schedule 3.27
of the Disclosure Schedule is a complete list of all agreements (written or
oral) between the Shareholders, any entities owned or controlled by the
Shareholders (the "Shareholder Affiliates'), and/or their family members, on
the one hand, and Bisset, on the other hand. Schedule 3.27 also sets forth all
amounts due and
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<PAGE> 15
owing by the Shareholders, the Shareholder Affiliates, or the Shareholders'
family members to Bisset or by Bisset to the Shareholders, the Shareholder
Affiliates, or the Shareholders' family members.
3.28. Brokers and Finders. Except as disclosed on Schedule 3.28 of
the Disclosure Schedule, none of Bisset, the Shareholders, or any of Bisset's
officers, directors, shareholders, and employees has employed any broker,
finder, or investment bank or incurred any liability for any investment banking
fees, financial advisory fees, brokerage fees, or finders' fees in connection
with the transactions contemplated hereby.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF ULTRAK
Ultrak represents and warrants to the Shareholders that the following
are true and correct as of the Signing Date and will be true and correct as of
the Closing Date as if made on that date:
4.01. Organization, Qualification and Good Standing. Ultrak is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and Ultrak has the corporate power and
authority to own or hold under lease its properties and assets and to carry on
its business as it is now being conducted.
4.02. Capitalization of Ultrak. The authorized capital stock of
Ultrak consists of 20,000,000 shares of Ultrak Stock and 2,000,000 shares of
Preferred Stock, $5.00 par value per share, of which 195,351 shares have been
designated as Series A 12% Cumulative Convertible Preferred Stock ("Series A
Preferred Stock"). As of June 30, 1996, there were issued and outstanding
approximately 10,300,000 shares of Ultrak Stock and 195,351 shares of Series A
Preferred Stock. Ultrak has never paid cash dividends on the Ultrak Stock.
Ultrak presently intends to retain earnings to finance the development and
expansion of its business. The declaration in the future of any cash dividends
on the Ultrak Stock will be at the discretion of Ultrak's Board of Directors
and will depend upon the earnings, capital requirements and financial position
of Ultrak, general economic conditions and other pertinent factors. Ultrak's
agreements with NationsBank prohibit the payment of cash dividends on the
Ultrak Stock. Ultrak intends to continue to pay dividends on outstanding
shares of Series A Preferred Stock, all of which are owned by George K. Broady,
the Chairman, Chief Executive Officer and President of Ultrak. Dividends in
the amount of $117,210 have been paid annually to Mr. Broady since the issuance
of the Series A Preferred Stock.
4.03. Corporate Authority Relative to This Agreement; No Violation.
Ultrak has the corporate power to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and thereby will have
been duly and validly authorized by Ultrak's Boards of Directors by the Closing
Date and, at that time, no other corporate proceedings on the part of Ultrak
will be necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Ultrak and, assuming this Agreement constitutes a valid and binding agreement
of the other parties hereto, this Agreement constitutes a valid and binding
agreement of Ultrak, enforceable against Ultrak in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will: (x) violate or conflict with any
provision of the Certificate of Incorporation or Bylaws of Ultrak, (y) violate
or conflict with, or result in the breach or termination of, or otherwise give
any other contracting party the right to terminate, or constitute a default (or
an event which, with the lapse of time, or the giving of notice,
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<PAGE> 16
or both, will constitute a default) under, any contract, license, other
instrument or commitment to which Ultrak is a party or by which Ultrak is
bound, or result in the creation of any lien, charge or encumbrance upon the
properties or assets of Ultrak pursuant to the terms of any such contract,
license, instrument or commitment, or (z) violate or conflict with any law,
regulation, permit, authorization, franchise, license, judgment, order, writ,
injunction or decree of any court or governmental body of any jurisdiction, in
each case as such is related to Ultrak or its assets.
4.04. Ultrak SEC Reports and Financial Statements. Ultrak has
previously furnished to Bisset, the Shareholders and Nidco a copy of (i)
Ultrak's annual report on Form 10-K filed with the SEC for the year ended
December 31, 1995, (ii) Ultrak's quarterly report on Form 10-Q filed with the
SEC for the quarters ended March 31 and June 30, 1996 and (iii) Ultrak's
definitive prospectus, dated May 30, 1996, in connection with the public sale
of shares of Ultrak Stock (the "SEC Filings"). The audited consolidated
financial statements and unaudited consolidated interim financial statements
(collectively referred to herein as the "Ultrak Financials") included in the
SEC Filings (including any related notes and schedules) fairly presented the
financial position of Ultrak as of the dates thereof and the results of
operations and changes in financial position or other information included
therein for the periods or as of the dates then ended, all in accordance with
generally accepted accounting principles consistently applied during the
periods involved (except as otherwise stated therein).
4.05. Consents. Except for the consent of NationsBank of Texas,
N.A. ("NationsBank"), no authorization, consent, approval, permit or license
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required
in connection with, the execution, delivery and performance of this Agreement
or the agreements contemplated hereby on the part of Ultrak.
4.06. Brokers and Finders. Neither Ultrak nor any officer or
director of Ultrak has employed any broker, finder or investment bank or
incurred any liability for any investment banking fees, financial advisory
fees, brokerage fees or finders' fees in connection with the transactions
contemplated hereby.
ARTICLE V: JOINT COVENANTS OF ULTRAK AND
THE MANAGEMENT SHAREHOLDERS
5.01. Access. Each of Ultrak and the Management Shareholders will
afford to one another and to one another's officers, employees, accountants,
counsel and other authorized representatives, full and complete access during
normal business hours, throughout the period prior to the Closing Date, to its
properties, personnel, contracts, commitments, books, records (including but
not limited to tax returns) and reports, schedules or other documents and will
use all its reasonable efforts to cause its respective representatives to
furnish promptly to the other such additional financial and operating data and
other information as to its respective businesses and properties as the other
or its duly authorized representatives may from time to time reasonably
request.
5.02. Notice of any Material Change. Each of Ultrak and the
Management Shareholders, promptly after the first notice or occurrence thereof,
but not later than the Closing Date, shall disclose to the other in writing the
occurrence of any event or the existence of any state of facts that: (a) had
such event occurred or such facts existed or been known at the date hereof,
would have been required to have been set forth in this Agreement; (b) would
make any of its representations and warranties in this Agreement untrue in any
material respect; or (c) would otherwise constitute a material adverse
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<PAGE> 17
change in the business, results of operations, working capital, assets,
liabilities or condition (financial or otherwise) of Ultrak or Bisset, as the
case may be (a material adverse change shall not include any change in general
economic conditions, actions of competitors, or the presence of new
competitors). No notice hereunder will have any effect for the purpose of
determining the satisfaction of or compliance with the conditions to the
obligations of the parties set forth elsewhere in this Agreement.
5.03. Cooperation. Ultrak, Bisset and the Management Shareholders
will: (a) cooperate with one another in determining whether any filings are
required to be made with or consents, authorizations, clearances and approvals
required to be obtained from, any governmental or regulatory authorities in any
jurisdiction or any third party prior to the Closing Date in connection with
the consummation of the transactions contemplated in this Agreement and
cooperate in making any such filings promptly and in seeking timely to obtain
any such consents; (b) keep each other informed in connection with the
transactions contemplated by this Agreement; (c) cooperate with one another and
expend reasonable amounts in order to lift any injunctions or remove any other
impediment to the consummation of the transactions contemplated herein; and (d)
take such actions as the other party may reasonably request to consummate the
transactions contemplated by this Agreement and use all its reasonable efforts
to satisfy all conditions precedent to the obligations to close such
transactions.
5.04. Confidentiality. Each party to this Agreement will take all
reasonable precautions to maintain the confidentiality of any information
concerning any other party or any affiliate of any other party provided to or
discovered by it or its representatives and will not disclose such information
to anyone other than those people directly involved in the investigation and
negotiations pertaining to the transactions contemplated hereby. Each party
further agrees that in the event the transactions contemplated by this
Agreement are not consummated, it will return or destroy all documents and
records obtained from any other party during the course of its investigation or
negotiations pertaining to the transactions contemplated hereby and will use
all its reasonable efforts to cause all information with respect to such other
party and its businesses which it obtained pursuant to this Agreement to be
kept confidential.
5.05. No Solicitation. Until the Closing Date, Bisset and each of
the Management Shareholders covenant that neither they nor Bisset's officers,
directors, agents or affiliates, will: (a) directly or indirectly, encourage,
solicit or initiate discussion or negotiations with any corporation,
partnership, person or other entity or group concerning any merger, sale of all
or substantially all of the assets, business combination, sale of shares of
capital stock or similar transactions involving Bisset, whether by providing
nonpublic information or otherwise; or (b) disclose, directly or indirectly,
any information not customarily disclosed to any person concerning its business
and properties, afford to any other person access to its properties, books or
records or otherwise assist or encourage any person in connection with any of
the foregoing. In the event Bisset receives any offer or inquiry for a
transaction of the type referred to in (a) above, the Management Shareholders
will promptly inform Ultrak as to any such offer.
5.06. Public Announcements. Ultrak, Bisset and the Management
Shareholders will consult with each other before issuing any press release,
public announcement, or make any public filing regarding this Agreement, and
will not, unless otherwise required by law, issue any such press release prior
to such consultation.
ARTICLE VI: COVENANTS OF THE MANAGEMENT
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<PAGE> 18
SHAREHOLDERS
6.01. Conduct of Bisset's Business. Prior to the Closing Date, and
except as may be permitted, required or contemplated pursuant to this Agreement
or as specifically consented to in writing by Ultrak, the Management
Shareholders will cause Bisset to:
(a) conduct its operations in the ordinary and usual
course of business consistent with past and current practices, and
will use all its reasonable efforts to maintain and preserve intact
its business organization and goodwill, to retain the service of its
key officers and employees, and to maintain satisfactory relationships
with customers and those having business relationships with it;
(b) not declare or pay any dividends on its outstanding
shares of capital stock;
(c) not propose or adopt any amendments to its Articles
of Incorporation;
(d) not issue any shares of its capital stock or effect
any stock split or otherwise change its current capitalization;
(e) not grant, confer or award any options, warrants,
conversion rights or other rights, not existing on the date hereof, to
acquire any shares of its capital stock;
(f) not purchase or redeem any shares of its capital
stock;
(g) not make any loan or advance to any shareholder,
officer, director or employee;
(h) not increase the compensation of or pay or accrue any
bonus to any employee other than in accordance with past established
practices; and/or
(i) unless otherwise required by law, not agree to take
any action that would make any representation or warranty in Article
III hereof untrue or incorrect.
ARTICLE VII: JOINT CONDITIONS PRECEDENT
Except as may be waived by all parties, the obligations of Ultrak and
the Shareholders to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions:
7.01. Absence of Litigation. No governmental agency or authority
shall have instituted, or threatened in writing to institute, any action or
proceeding seeking to delay, restrain, enjoin or prohibit the consummation of
the transactions contemplated by this Agreement, and no order, judgment or
decree by any court or governmental agency or authority shall be in effect that
enjoins, restrains or prohibits the same or otherwise would materially
interfere with the operation of the assets and business of Ultrak or Bisset
after the Acquisition.
ARTICLE VIII: CONDITIONS PRECEDENT TO ULTRAK'S OBLIGATIONS
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<PAGE> 19
The obligations of Ultrak to consummate the transactions contemplated
by this Agreement will be subject to the satisfaction on or before the Closing
Date of each of the following conditions:
8.01. Representations and Warranties; Compliance. The
representations and warranties of Bisset and the Shareholders in this Agreement
shall have been true and correct in all material respects on and as of the
Signing Date and shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date, and the covenants
and agreements of Bisset and the Shareholders in this Agreement shall have been
complied with in all material respects. On the Closing Date, Bisset and the
Shareholders shall have provided Ultrak with a Certificate of Compliance in the
form of Exhibit 8.01.
8.02. No Material Adverse Change. There shall have been no material
adverse change in Bisset's business, properties, assets, liabilities, results
of operations or condition, financial or otherwise, from the financial
information set forth in the Financial Statements (a material adverse change
shall not include any change in general economic conditions, actions of
competitors, or the presence of new competitors).
8.03. [intentionally omitted]
8.04. Guarantee of Net Asset Value. The net asset value of Bisset
as of June 30, 1996 shall not be less than Fifteen Million Six Hundred Thousand
French francs (FF15,600,000). The net asset value for Bisset shall be
conclusively determined by Exco-Paris and shall equal all of Bisset's assets
less all of Bisset's liabilities (the "Net Asset Value"). If the Net Asset
Value of Bisset on June 30, 1996 is less than FF15,600,000 and Ultrak waives
this closing condition and consummates the Acquisition, then the Cash Price
shall not be adjusted.
8.05. Governmental Filing. The Acquisition documents shall have
been filed with the necessary French governmental agencies or French investment
review boards.
8.06. Due Diligence. Ultrak shall have reviewed all of the assets,
liabilities, contracts, books and records, and other properties of Bisset that
Ultrak determines are necessary or appropriate and Ultrak shall have
determined, in its discretion, that its review of the foregoing is acceptable.
8.07. Warranty of Sales and Gross Margin for 1996. The 1996 Sales
shall not be less than ninety percent (90%) of the 1995 Sales and the 1996
Gross Margin shall not be less than ninety percent (90%) of the 1995 Gross
Margin.
8.08. NationsBank Approval. NationsBank shall have approved, in
writing, the Acquisition.
8.09. Investment Letter. Each Shareholder, Nidco, and any other
person or entity receiving shares of Ultrak Stock shall have executed an
Investment Letter in the form of Exhibit 8.09.
8.10. Reviews. Exco-Paris or such other accounting firm acceptable
to Ultrak shall have completed a review of the Unaudited Financial Statements
for the period ended June 30, 1996 and the report of Exco-Paris thereon shall
have been furnished to Ultrak and be acceptable to Ultrak, in its discretion.
Exco-Paris shall have reviewed the December 31, 1995 audio business pre-tax
profits report and the report of Exco-Paris thereon shall have been furnished
to Ultrak and be acceptable to Ultrak in its discretion.
- 19 -
<PAGE> 20
8.11. Financial Statement Adjustments. Each adjustment to Bisset's
financial statements proposed by Exco-Paris shall be booked, recorded, and
made as June 30, 1996 and not thereafter changed, reversed, or modified in any
manner. Ultrak shall be furnished by Bisset with a June 30, 1996 balance sheet
of Bisset evidencing all such adjustments.
8.12. Employment Agreements. Each Management Shareholder shall have
executed an Employment Agreement with Bisset in the form of Exhibit 8.12.
8.13. Special Compensation Agreements. Each Management Shareholder
shall have executed a Special Compensation Agreement in the form of Exhibit
8.13.
8.14. Pension Annuities. The pension annuities on the lives of the
Management Shareholders shall (i) be assigned to Bisset or (ii) the Management
Shareholders shall assume all future payments with respect thereto and Bisset
shall be released in writing from any liability thereon.
ARTICLE IX: CONDITIONS PRECEDENT TO THE SHAREHOLDERS'
OBLIGATIONS
The obligations of Bisset and the Shareholders to consummate the
transactions contemplated by this Agreement will be subject to the satisfaction
on or before the Closing Date of each of the following conditions:
9.01. Representations and Warranties; Compliance. The
representations and warranties of Ultrak in this Agreement shall have been true
and correct in all material respects on and as of the Signing Date and shall be
true and correct in all material respects as of the Closing Date as though made
on and as of the Closing Date, and the covenants and agreements of Ultrak in
this Agreement shall have been complied with in all material respects. On the
Closing Date, Ultrak shall have provided Bisset and the Shareholders with a
Certificate of Compliance in the form of Exhibit 9.01.
9.02. No Material Adverse Change. There shall have been no material
adverse change in Ultrak's assets, liabilities, results of operations or
condition, financial or otherwise.
9.03. Ultrak Board of Directors. Roland Scetbon shall have been
duly elected to the Board of Directors of Ultrak.
9.04. Special Compensation Agreement. Each Management Shareholder
shall have executed a Special Compensation Agreement in the form of Exhibit
8.13.
ARTICLE X: INDEMNIFICATION
10.01. Indemnification. Each Management Shareholder severally
covenants and agrees to indemnify Ultrak, Holdings, and Bisset against one-half
of the amount any loss, expense, liability, taxes, VAT, customs, or other
damage, including the reasonable costs of investigation, interest, penalties
and attorneys' and accountants' fees ("Damages"), actually incurred by Ultrak
or Bisset in connection with or arising from or attributable to any breach or
inaccuracy of any representation or warranty made by any Management Shareholder
herein or any breach or failure to perform any agreement or covenant of
- 20 -
<PAGE> 21
any Management Shareholder herein. Indemnification payments by a Management
Shareholder to Ultrak or Holdings rather than Bisset will not adversely impact
the amount of the Earnout Payment and shall not reduce the Earnout Payment.
Only one of Ultrak, Holdings, or Bisset may seek indemnification in any
instance for the same Damages.
10.02. Threshold. The Management Shareholders shall not be required
to make any indemnification payment pursuant to Section 10.1 for any Damages
until such time as the total amount of all Damages that have been incurred by
Ultrak or Bisset exceeds US$200,000 in the aggregate. At such time as the
total amount of such Damages exceeds US$200,000 in the aggregate, Ultrak shall
be entitled to be indemnified against the full amount of such Damages (and not
solely the amount that exceeds US$200,000). The US$200,000 limitation shall
not apply with respect to claims regarding title to the Shares. As to
financial statement liabilities, accruals, and reserves, the breach or
inaccuracy of representations and warranties with respect thereto shall be
determined with reference to the June 30, 1996 financial statements as adjusted
pursuant to the recommendations of Exco-Paris (including the FF2,200,000
reserve for certain taxes added pursuant to Schedule 10.02).
10.03. Expiration of Indemnity. Ultrak may make no claim for
indemnification for Damages (i) that relate to a tax matter, whether income,
sales, use, VAT, customs duties and customs fees and assessments or other taxes
("Tax Matters") after September 30, 2001 (the "Tax Claim Deadline") and (ii)
that relate to matters other than a Tax Matter after September 30, 1997 (the
"Non-Tax Claim Deadline"). The expiration of the period within which claims
may be made shall not affect any rights of Ultrak with respect to claims made
prior to the Non-Tax Claim Deadline or the Tax Claim Deadline, as applicable.
10.04. Fraud. Notwithstanding any provision in this Agreement to the
contrary, the liability of a Management Shareholder for fraudulent conduct
shall be subject only to applicable statutes of limitations, and any claim
against a Management Shareholder alleging fraudulent conduct need not be
presented by the Tax Claim Deadline or the Non-Tax Claim Deadline.
10.05. Survival of Representations and Warranties. Other than
disclosures set forth in the Disclosure Schedule hereto or in the Certificate
of Compliance to be delivered at Closing pursuant to Section 8.01 hereof, no
disclosure by Bisset or any Management Shareholder nor any investigation by or
on behalf of Ultrak with respect to Bisset shall be deemed to affect Ultrak's
reliance on the representations, warranties, covenants or agreements contained
herein or to waive Ultrak's rights to indemnity as provided herein for the
breach or inaccuracy or failure to perform or comply with any representation,
warranty, covenant or agreement the Management Shareholders. The indemnity
obligations of the Management Shareholders under this Article X (and the
representations, warranties, covenants and agreements of Bisset and the
Shareholders) shall survive the Closing until the applicable Tax Claim Deadline
or Non-Tax Claim Deadline.
10.06. Maximum Liability. In no event will any Management
Shareholder be liable to indemnify Ultrak or Bisset pursuant to this Article X
in an amount exceeding the aggregate purchase price referred to in Section 1.02
hereof received by such Management Shareholder.
10.07. After-tax Benefit. The amount of any indemnification
obligation for each Management Shareholder under this Article X shall be net an
amount equal to one-half of any tax benefits actually realized by Bisset
resulting from the event or occurrence giving rise to such indemnification
obligation.
- 21 -
<PAGE> 22
ARTICLE XI: WAIVER AND AMENDMENT
11.01. Modification, Amendment and Waiver. This Agreement may not be
modified unless such modification is in writing and signed by all parties
hereto. No waiver of any term of this Agreement shall be enforceable unless in
writing and signed by the party against which it is sought to be changed. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by such other
party.
- 22 -
<PAGE> 23
ARTICLE XII: REMEDIES
12.01. Equitable Remedies. The parties hereto acknowledge that a
refusal by a party to consummate the transactions contemplated hereby will
cause irreparable harm to the other parties, for which there may be no adequate
remedy at law. A party not in default at the time of such refusal shall be
entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that refused to consummate the
transactions contemplated hereby.
12.02. Remedies of Bisset. After the Closing, Bisset shall have the
same rights and benefits under this Agreement as does Ultrak with respect to
the representations, warranties and covenants of the Shareholders contained
herein, as fully as if such representations, warranties and covenants had been
made to or with Bisset in lieu or in place of Ultrak as the purchaser of the
Shares. In any proceeding by Bisset to assert or prosecute any claims under,
or to otherwise enforce, this Agreement, the Shareholders agree that they shall
not assert as a defense or bar to recovery by Bisset or Ultrak, and hereby
waive any right to so assert such defense or bar such recovery, that (a) prior
to the Closing, Bisset shall have had knowledge of the circumstances giving
rise to the claim being pursued by it or Ultrak; (b) prior to the Closing,
Bisset engaged in conduct or took action that caused or brought about the
circumstances giving rise to its or Ultrak's claim, or otherwise contributed
thereto; (c) Bisset is estopped from asserting or recovering upon its claim by
reason of having joined in the representations, warranties and covenants made
by the Shareholders in this Agreement; or (d) the Shareholders have a right of
contribution from Bisset to the extent that there is any recovery against them.
ARTICLE XIII: MISCELLANEOUS
13.01. Expenses. Each party hereto shall bear its own expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby. However, the fees and expenses incurred by
Bisset shall be paid by the Management Shareholders only to the extent that
such fees and expenses exceed US$100,000 (excluding fees and expenses of
Nidco).
13.02. Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered the same agreement and faxed
copies of manually executed signature pages to this Agreement will be fully
binding and enforceable without the need for delivery of the manually executed
signature page.
13.03. GOVERNING LAW; ARBITRATION.
(a) THE INTERNAL LAWS (AND NOT THE CONFLICTS OF LAWS
RULES) OF NEW YORK GOVERN THIS AGREEMENT.
(b) ANY DISPUTE OR CLAIM ARISING UNDER OR PURSUANT TO
THIS AGREEMENT SHALL BE FINALLY SETTLED BY, AND SUBJECT TO,
ARBITRATION IN ACCORDANCE WITH THE RULES OF THE INTERNATIONAL CHAMBER
OF COMMERCE, WHICH RULES ARE DEEMED TO BE INCORPORATED HEREIN BY THIS
REFERENCE. ANY SUCH ARBITRATION SHALL BE CONDUCTED IN LONDON, ENGLAND
AND THE LANGUAGE TO BE USED IN THE ARBITRATION PROCEEDING SHALL BE
ENGLISH. JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.
- 23 -
<PAGE> 24
13.04. Notices. All notices hereunder will be in writing and will be
deemed given if delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the addresses set forth opposite
each party's name on the signature page of this Agreement (or at such other
addresses for a party as will be specified by like notice) and will be deemed
given on the date on which so hand-delivered or on the third business day
following the date on which so mailed to the address set forth opposite the
name and signature block for each party to this Agreement.
13.05. Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
13.06. Assignments; Entire Agreement; Headings. This Agreement shall
not be assignable by operation of law or otherwise. Any attempted assignment
of this Agreement shall be void. This Agreement, the Schedules attached
hereto, and the Exhibits attached hereto constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
All Schedules, Exhibits and documents and agreements referred to herein or
attached hereto are fully and completely incorporated herein effective as of
the first reference herein. The headings contained in this Agreement are for
reference purposes and will not affect in any way the meaning or interpretation
of this Agreement. Use of "herein," "hereof" or similar terms refer to this
Agreement as a whole. The reference to any gender shall be construed to
include the masculine, feminine, and neuter.
[SIGNATURES ON THE FOLLOWING PAGE]
- 24 -
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
<TABLE>
<S> <C>
ULTRAK, INC.
Address for Ultrak:
1220 Champion Circle
Suite 100
Carrollton, Texas 75006 By: /s/ GEORGE K. BROADY
Attn: George K. Broady --------------------------------------
George K. Broady, President and CEO
ULTRAK HOLDINGS LIMITED
1220 Champion Circle
Suite 100
Carrollton, Texas 75006 By: /s/ GEORGE K. BROADY
Attn: George K. Broady --------------------------------------
Its: President
-------------------------------------
Address for each SHAREHOLDERS:
Shareholder:
/s/ ROBERT SCETBON - By Power of Attorney
112 quai de Bezons -----------------------------------------
95100 Argenteuil, France MAURICE SCETBON
Avenue J.J. Gossiaux 13 MONDA, S.A.
1160 Auderghem
Bruxelles Belgium By: /s/ ROLAND SCETBON
--------------------------------------
Its: By Power of Attorney
-------------------------------------
Avenue J.J. Gossiaux 13 FRIDA, S.A.
1160 Auderghem
Bruxelles Belgium By: /s/ ROLAND SCETBON
--------------------------------------
Its: By Power of Attorney
-------------------------------------
FOR PURPOSES OF ARTICLE II ONLY:
Address for Nidco: NIDCO:
253 rue Saint-Honore
75001 Paris, France By: /s/ MICHAEL WALLACE
-------------------------------------
Michael Wallace
/s/ MICHAEL WALLACE
----------------------------------------
Michael Wallace, Individually
</TABLE>
- 25 -
<PAGE> 26
SCHEDULE A
CALCULATION OF THE NET VALUE OF BISSET
For purposes of Section 1.02(a)(iii) of the Stock Purchase Agreement, the "Net
Value of Bisset" shall be calculated as follows:
The term "Net Value" is defined as the earnings of Bisset after interest, taxes
and any exceptional item, as it appears on line HN of the tax form 2053 of
French operations.
The "Net Value" will be computed for a period of twelve (12) consecutive
months, ending on June 30, 1997. The balance sheet for the period ending June
30, 1997 will be established by comparison with the balance sheet of Bisset as
of June 30, 1996, as restated after the booking of all of the proposed
adjustments of EXCO AUDIT, as set forth on Schedule B.
An accrual for "retirement bonus" (indemnites de depart a la retraite) will be
booked in the balance sheet as of June 30, 1997. However, for the calculation
of the Net Value only the difference between (i) the sum of 1,269,000 FF, which
is the accrual of such retirement bonus as of June 30, 1996 as per EXCO AUDIT's
work papers, and (ii) the accrual as of June 30, 1997 will be taken into
account.
Hence, the Net Value of Bisset will be equal to the amount indicated on line HN
of form 2053, minus an amount equal to the difference between the accrued
"indemnites de depart a la retraite" appearing in the balance sheet of June 30,
1996 and the one mentioned in the balance sheet as of June 30, 1997.
For the establishment of the balance sheet as of June 30, 1997, the accounting
firms appointed, as per Section 1.02(a)(iii), to issue the Certificate of Net
Value will use the same accounting principles as the ones used by EXCO for the
proposed adjustments as of June 1996 appended to this Schedule.
For purposes of calculating the Net Value, an assumed income tax rate of 34%
will be used.
For purposes of calculating the Net Value, the Net Value shall not include any
costs or expenses of Bisset related to the Acquisition (as defined in the Stock
Purchase Agreement).
For purposes of illustration, the Maximum Earnout Payment (assuming an exchange
ratio of 5.0 FF per one US Dollar) would require earnings of Bisset after
interest, taxes and any exceptional item for the 12 month period ending on June
30, 1997 as follows:
<TABLE>
<S> <C>
5,000,000 (USD)
/ .30
------------
16,666,666 (USD)
/ 10
------------
1,666,666.6 (USD)
x 5 (conversion from USD to FF)
------------
8,333,333 (FF)
============
</TABLE>
<PAGE> 27
Management Shareholders
CERTIFICATE OF COMPLIANCE
Each of the undersigned, FRIDA, S.A. and MONDA, S.A., (collectively,
the "Management Shareholders" and individually a "Management Shareholder"),
hereby certify to Ultrak, Inc. ("Ultrak") that:
1. The representations and warranties of such Management
Shareholder in the Stock Purchase Agreement (the "Purchase Agreement"), dated
September 26, 1996 (the "Signing Date"), by and among the Shareholders, Maurice
Scetbon, Ultrak, and Ultrak Holdings Limited were true and correct as to such
Management Shareholder in all material respects on and as of the Signing Date
and are true and correct in all material respects as of the date hereof.
2. Each of the Management Shareholders has complied, in all
material respects, with all of such Management Shareholder's covenants and
agreements required by the Purchase Agreement to be performed and complied with
by such Management Shareholder.
DATED: September 26, 1996
FRIDA, S.A.,
a Belgian corporation
By:
-------------------------
Its:
------------------------
MONDA, S.A.,
a Belgian corporation
By:
-------------------------
Its:
------------------------
<PAGE> 28
EXHIBIT 8.09
INVESTMENT LETTER
September 26, 1996
Ultrak, Inc.
1220 Champion Circle
Suite 100
Carrollton, Texas 75006
Gentlemen:
This Investment Letter (this "Letter") is issued to Ultrak, Inc., a
Delaware corporation ("Ultrak"), in connection with the undersigned's
acquisition from Ultrak of certain shares (the "Shares") of Ultrak's Common
Stock, $0.01 par value (the "Stock") pursuant to that certain Stock Purchase
Agreement, dated September 26, 1996, by and among Ultrak, Bisset s.a., the
undersigned and others (the "Agreement"). This letter is based on the legal
information supplied by Ultrak and Ultrak's counsel.
1. In connection with the issuance to the undersigned of the
Shares, the undersigned hereby acknowledges and understands that the Shares
have not been registered under the United States Securities Act of 1933, as
amended (the "Federal Act"), the Texas Securities Act, as amended (the "Texas
Act"), or any securities acts of any other state or country (the "Other Acts"),
that the Shares are being issued to the undersigned in reliance upon one or
more exemptions from registration contained in the Federal Act, the Texas Act,
and the Other Acts, and that Ultrak's reliance on such exemptions is based in
part upon the representations made by the undersigned in this Letter.
2. The undersigned hereby represents to Ultrak that the
undersigned is acquiring the Shares solely for the undersigned's own account
for investment and not with a view to, or for offer or sale in connection with,
the unregistered "distribution" of all or any part of the Shares within the
meaning of the Federal Act. The undersigned represents that he has no current
intention to sell, convey, dispose, of or otherwise distribute any interest in
or risk related to the Shares. The undersigned acknowledges and agrees that
this transaction has not been reviewed or approved by the United States
Securities and Exchange Commission or any other governmental agency or
department.
3. The undersigned hereby acknowledges that the provisions of
Rule 144 promulgated under the Federal Act ("Rule 144") are not now available
for the public resale of the Shares and that, except as set forth in Article II
of the Agreement, the undersigned has no right to have the Shares registered
under the Federal Act to permit them to be resold. The undersigned also
hereby acknowledges that, as a result of the foregoing, the undersigned must
hold the Shares for at least two (2) years from issuance (unless subsequently
registered prior to that time under Article II of the Agreement) assuming the
entire risk of investment therein for that period of time, until and unless (i)
the Shares are subsequently registered under the
<PAGE> 29
Federal Act, (ii) the Shares may be sold under Rule 144, or (iii) an exemption
from registration is available at the time of resale of the Shares (and in
compliance with Sections 6 and 8 of this Letter). The undersigned is aware of
the provisions of Rule 144 which permits limited resale of shares purchased in
a private placement subject to the satisfaction of certain conditions,
including, among other things, the existence of a public market for such
shares, the availability of certain current public information about the issuer
of such shares, the resale occurring not less than two years after acquisition,
the sale being through a "broker's transaction" or in transactions directly
with a "market maker" (as provided by Rule 144(f)) and the number of shares
being sold during any three-month period not exceeding specified limitations
(unless the sale is within the requirements of Rule 144(k)).
4. The undersigned hereby represents to Ultrak that the
undersigned has such knowledge and experience in financial and business matters
that the undersigned is capable of evaluating the merits and risks of investing
in the Shares and that the undersigned is able to bear the economic risk,
including a total loss, of such an investment. The undersigned understands and
has fully considered for purposes of this investment the risks of this
investment and that, because of the restrictions on transfer, it may not be
possible for the undersigned to liquidate his investment in the case of
emergency.
5. The undersigned acknowledges and agrees that he is acquiring
the Shares without being offered or furnished any offering literature or
prospectus other than the SEC Filings (as defined in Article IV of the
Agreement). The undersigned hereby acknowledges that the undersigned has had
access to all information which the undersigned considers necessary or
advisable to enable the undersigned to make an informed decision concerning the
acquisition of the Shares. The undersigned is acquiring the Shares based
solely on the undersigned's review of the SEC Filings and his investigation of,
and satisfaction with, Ultrak's current and anticipated financial condition and
assets and not based on any oral representations of any individual. The
undersigned confirms that he and his representatives and advisors have been
given the opportunity to ask questions of, and to receive answers from, persons
acting on behalf of Ultrak concerning the business and prospects of Ultrak and
to obtain any additional information, to the extent such persons possess such
information or can acquire it without unreasonable effort or expense and
without breach of confidentiality obligations, necessary to verify the accuracy
of the information set forth in the SEC Filings.
6. The undersigned understands that the undersigned must not, and
the undersigned agrees that the undersigned will not, sell, transfer, assign,
encumber, or otherwise dispose of the Shares or any interest therein, unless
prior thereto the undersigned has delivered to Ultrak, and Ultrak has accepted
as satisfactory, an opinion of experienced and competent counsel to the effect
that such proposed sale, transfer, assignment, encumbrance, or disposition will
not constitute or result in any violation of the Federal Act, the Texas Act,
the Other Acts, or any other applicable statute relating to the disposition of
securities.
7. Nothing in this Letter shall permit the undersigned to sell
any of the Shares in violation of any other agreement between Ultrak and the
undersigned or among Ultrak, the undersigned, and others, including but not
limited to the Agreement.
<PAGE> 30
8. The undersigned understands and agrees that there may be typed
or otherwise printed on the certificates representing the Shares, and any other
securities issued in respect of the Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation, or similar event, a legend
referring to the foregoing restriction upon disposition, such legend to be
substantially in the following form (in addition to any other legends required
by applicable law):
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") OR UNDER ANY APPLICABLE STATE LAW, AND SUCH SHARES
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF
UNLESS A REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO SUCH
DISPOSITION SHALL THEN BE IN EFFECT OR UNLESS THE PERSON REQUESTING
THE TRANSFER OF SUCH SHARES SHALL FURNISH, WITH RESPECT TO SUCH
TRANSFER, AN OPINION OF COUNSEL (BOTH COUNSEL AND OPINION TO BE
SATISFACTORY TO THE CORPORATION) TO THE EFFECT THAT SUCH SALE,
TRANSFER, ASSIGNMENT, OR DISPOSITION WILL NOT INVOLVE ANY VIOLATION OF
THE ACT OR ANY APPLICABLE STATE LAW.
9. The undersigned also understands that Ultrak's Transfer Agent,
the keeper of Ultrak's stock transfer books and records, has been instructed
not to transfer the Shares except upon Ultrak's instructions for the two (2)
years from issuance and that Ultrak will take such other steps as Ultrak deems
necessary to prevent the transfer of the Shares in the absence of compliance
with the foregoing restrictions.
10. The undersigned represents to Ultrak that, at the current
time, he has an individual net worth, or a joint net worth with his spouse,
that exceeds US$1,000,000, that he is an "accredited investor" under Rule 501
of Regulation D of the Federal Act, and that the sale of the Shares to the
undersigned is predicated, in part, on Regulation D, which addresses the
limited sale of unregistered securities.
11. The undersigned represents to Ultrak that the offer and sale
of the Shares has occurred outside of the United States, that the undersigned
originated the buy order to purchase the Shares from outside the United States,
and that the sale of the Shares to the undersigned is predicated, in part, on
Regulation S of the Federal Act, which addresses the sale of securities that
occur outside of the United States.
<PAGE> 31
12. The undersigned agrees that Ultrak may present this Investment
Letter to such parties as it deems appropriate to establish the availability of
an exemption from registration of the Shares under applicable federal and state
securities laws and for other similar purposes.
Very truly yours,
Date: September 26, 1996
------------------------------
------------------------------
If the person signing this Letter is married, then such person's
spouse must sign below:
I hereby acknowledge that I have read this Letter and fully understand
its contents. I further agree that any community property interest or other
interest that I have or may in the future have in the Shares shall be subject
to this Letter.
Date: September 26, 1996
------------------------------
Signature
Printed Name:
<PAGE> 32
Ultrak, Inc.
CERTIFICATE OF COMPLIANCE
The undersigned, Ultrak, Inc., a Delaware corporation ("Ultrak"),
hereby certifies to Bisset S.A. ("Bisset") and the Shareholders (as hereinafter
defined) that:
1. The representations and warranties of Ultrak in the Stock
Purchase Agreement (the "Purchase Agreement"), dated September 26, 1996 (the
"Signing Date"), by and among Ultrak, Ultrak Holdings Limited and all of the
shareholders of Bisset (the "Shareholders") were true and correct in all
material respects on and as of the Signing Date and are true and correct in all
material respects as of the date hereof.
2. Ultrak has complied, in all material respects, with all of the
covenants and agreements required by the Purchase Agreement to be performed and
complied with by Ultrak.
3. Ultrak has completed its due diligence pursuant to Section
8.06 of the Purchase Agreement and Exco-Paris has completed its reviews
pursuant to Section 8.10 of the Purchase Agreement.
DATED: September 26, 1996
ULTRAK, INC.
By:
-------------------------------
George K. Broady, President
<PAGE> 1
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
This Agreement is made as of this 6th day of September, 1996 by and
between LENEL SYSTEMS INTERNATIONAL, INC., a Delaware corporation, with its
principal executive offices located at 290 Woodcliff Office Park, Fairport, New
York 14450 (the "Company") and ULTRAK, INC., a Delaware corporation with its
principal executive offices located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006 ("Ultrak").
Subject to the terms and conditions hereof, the parties agree as
follows:
SECTION 1
SALE OF STOCK
1.1 Sale of Stock. Subject to the terms and conditions hereof, the
Company will issue and sell to Ultrak, and Ultrak will purchase from the
Company, an aggregate of 1,500,000 shares of Common Stock, par value $.10 (the
"Common Stock") of the Company (the "Shares") for a purchase price of One
Dollar and 75/100 ($1.75) per share.
SECTION 2
CLOSING DATES; DELIVERY
2.1 Closing Dates. The closing of the purchase and sale of the
Shares and the other transactions contemplated hereunder shall be held at the
offices of the Company at 8:30 a.m., local time, on September 6, 1996 (the
"Closing") or at such other time and place upon which Ultrak and the Company
shall agree (the date of the Closing is hereinafter referred to as the "Closing
Date").
2.2 Delivery. At the Closing, the Company will deliver to Ultrak a
certificate registered in Ultrak's name representing the number of Shares to be
purchased by Ultrak at the Closing, and Ultrak shall pay the purchase price, in
the amount of $2,625,000, by either (i) delivery of a certified check drawn on
a US bank and made payable to the Company, or (ii) direct wire transfer into
the Company's account.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Ultrak as follows:
3.1 Organization and Standing; Articles and By-Laws. The Company is
a corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is presently qualified to do business as a
<PAGE> 2
foreign corporation in the State of New York and in all other jurisdictions
where the failure to be so qualified would have a material adverse affect on
the Company's business as now conducted or as now proposed to be conducted.
The Company has furnished Ultrak with copies of its Articles of Incorporation
and By-Laws, as amended. Said copies are true, correct and complete and
contain all amendments through the Closing Date.
3.2 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement, to issue the Shares and to carry out and perform its obligations
under the terms of this Agreement and the documents contemplated hereby or
executed in connection herewith.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock, of which 4,817,516 shares are
issued and outstanding, including 878,183 shares, which have been issued upon
the exercise of warrants accomplished by the cancellation of term debt, or by
the conversion to shares of convertible debentures and upon the conversion of
accrued interest on the term debt and debentures in the aggregate amount of
$1,317,300, and 883,000 shares are reserved for issuance upon exercise of
outstanding warrants and options as of the Closing Date and owned by the people
set forth on Schedule 3.4. The outstanding shares of Common Stock have been
duly authorized and validly issued, and are fully paid and nonassessable.
Except as set forth above and in Schedule 3.4, there are no options, warrants
or other rights to purchase any of the Company's authorized and unissued
capital stock. Except as set forth on Schedule 3.4, there are no outstanding
agreements regarding the voting of shares of common stock.
3.5 Authorization. All corporate action on the part of the Company,
its directors and shareholders, necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance
of all the Company's obligations hereunder has been taken or will be taken
prior to the Closing. This Agreement and the documents contemplated hereby or
executed in connection with, when executed and delivered by the Company, shall
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. The
Shares, when issued in compliance with the provisions of or this Agreement,
will be validly issued, will be fully paid and nonassessable. The Shares are
not subject to any preemptive rights or rights of first refusal.
3.6 Balance Sheet. The Company has delivered to Ultrak its audited
financial statements for the year ending December 31, 1994 and its preliminary
and tentative financial statements for the year ending December 31, 1995, and
its Balance Sheet for the period ending June 30, 1996 (the "Balance Sheet").
The Balance Sheet is complete and correct in all material
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<PAGE> 3
respects and has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. The
Balance Sheet accurately sets out and describes the financial condition of the
Company as of the dates indicated therein. Since June 30, 1996, there has not
been any change in the assets, liabilities, financial condition or operations
of the Company, from that reflected in the Balance Sheet, except changes in the
ordinary course of business which have not been, either in any case or in the
aggregate, materially adverse.
3.7 Material Liabilities. The Company has no material liabilities
or obligations, absolute or contingent (individually or in the aggregate),
except (i) the liabilities and obligations set forth in the Balance Sheet, (ii)
the liabilities evidenced by the Company's subordinated notes, convertible
debentures, and warrants set forth on Schedule 3.7 (the "Subordinated Debt"),
and (iii) liabilities and obligations which have been incurred subsequent to
June 30, 1996 in the ordinary course of business which have not been, either in
any case or in the aggregate, materially adverse.
3.8 Title to Properties and Assets. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any
case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business. To the best of its
knowledge, the Company owns or possesses, has access to, or can become licensed
on reasonable terms under, all patents, inventions, copyrights, licenses,
information, proprietary rights and processes necessary for the lawful conduct
of its business as now conducted and as proposed to be conducted, without any
infringement of or conflict with the rights of others. Schedule 3.8 sets forth
a true and complete list of all patents and parent applications owned by the
Company.
3.9 Compliance With Instruments. The Company is not in violation of
any term of its Articles of Incorporation or By-Laws, Shareholder Agreements,
or in any material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and to the best of its knowledge is not in violation of any order, statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the
Shares, have not resulted and will not result in any material violation of, or
conflict with, or constitute a material default under, the Company's Articles
of Incorporation or By-Laws or any of its agreements nor result in the creation
of, any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company; and there is no violation of default which
materially and adversely affects the business of the Company or any of its
properties or assets.
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<PAGE> 4
3.10 Litigation. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any reasonable basis therefor or threat thereof).
3.11 Employees. To the best of the Company's knowledge and to the
best of the knowledge of Elena Prokupets, President and Chief Executive Officer
and of Rudy Prokupets, Vice President for Technology, in their capacities as
officers of the Company, no employee of the Company is in violation of any term
of any employment contract, patent disclosure agreement or any other contract
or agreement relating to the relationship of such employee with the Company or
any other party because of the nature of the business conducted or to be
conducted by the Company. The Company does not have any employment contracts
with any of its employees not terminable at will and does not have any
collective bargaining agreements covering any of its employees.
3.12 Governmental Consents. All consents, approvals, orders or
authorizations or, or registrations, qualifications, designations,
declarations, or filings with any federal or state governmental authority on
the part o the Company required in connection with the consummation of the
transactions contemplated by this Agreement shall have been obtained prior to,
and be effective as of, the Closing.
3.13 Information. To the best of the knowledge of the Company and of
Elena Prokupets, President and Chief Executive Officer and of Rudy Prokupets,
Vice President for Technology, in their capacities as officers of the Company,
no representation or warranty by the Company in this Agreement or in any
written statement or certificate furnished or to be furnished to Ultrak
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, when taken together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements made not misleading. All materials about the
Company's business presented by the Company to Ultrak, have been prepared in a
good faith effort by the Company to describe the Company's present and proposed
products, operations, and projected growth and the Company is not aware of any
materially misleading statements or omissions therein.
SECTION 4
REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
OF ULTRAK
Ultrak represents and warrants to the Company as follows:
4.1 Qualifications of Ultrak.
(a) Ultrak hereby represents and warrants to the Company that
it is an accredited Investor, inasmuch as it is a corporation, not formed for
the specific purpose of acquiring the Shares, with total assets in excess of
$5,000,000.
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(b) Ultrak hereby represents and warrants to the Company that
Ultrak has such knowledge and experience in financial and business matters that
Ultrak is capable of evaluating the merits and risks of this transaction and of
an investment in the Company.
(c) The overall commitment of Ultrak to securities which are
not readily marketable is not disproportionate to the its total assets, and
investment in the Shares will not cause Ultrak's overall commitment to become
excessive. Ultrak has adequate means of providing for current needs and
contingencies, has no need for liquidity in the investment in the Shares, and
can sustain a complete loss of the investment in the Shares.
(d) Ultrak further represents and warrants that: (i) Ultrak
has not been formed, reformed or recapitalized for the specific purpose of
purchasing the Shares; (ii) Ultrak has been duly formed and is validly existing
in good standing under the laws of the jurisdiction of its formation, with full
power and authority to enter into the transactions contemplated by this
Agreement; and (iii) this Agreement has been duly and validly authorized,
executed, and delivered by Ultrak and when executed and delivered by the
Company, will constitute the valid, binding and enforceable agreement of
Ultrak.
4.2 Access to Information; Independent Investigation.
(a) Ultrak has received and carefully reviewed a copy of the
Company's Business Plan.
(b) Ultrak, in making the decision to purchase the Shares
subscribed for, has relied upon the representations and warranties in this
Agreement and independent investigations made by it and Ultrak, has, prior to
any sale, been given access and the opportunity to examine all material books
and records of the Company, all material contracts and documents relating to
this offering and an opportunity to ask questions of, and to receive answers
from, the Company or any person acting on its behalf concerning the terms and
conditions of this offering, and to obtain any additional information to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information so furnished. Ultrak has been furnished with all materials
relating to: (i) the business, finances and operation of the Company and
materials relating to the offer and sale of the Shares, and (ii) any other
information, that has been requested. Ultrak has received complete and
satisfactory answers to any such inquiries.
(c) Ultrak acknowledges that it is subscribing for the Shares
after what it deems to be adequate investigation of the business, finances and
prospects of the Company by Ultrak.
(d) Ultrak understands that no federal or state agency has
passed on or made a recommendation or endorsement of the Shares. Ultrak
understands that this offering has not been reviewed by the Attorney General of
the State of New York and that any offering literature
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<PAGE> 6
used in connection with this offering has not been pre-filed with the Attorney
General and has not been reviewed by the Attorney General
4.3 Investment Representations.
(a) Ultrak has been advised by the Company, and understands,
that it must bear the economic risk of an investment in the Shares for an
indefinite period of time because the Shares have not been registered under the
Securities Act of 1933, as amended ("Securities Act"), and the Company is under
no obligation to register the Shares, other than as set forth in Section 8
below. Therefore, the Shares must be held by Ultrak unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available for the transfer of the Shares.
(b) Ultrak represents that the Shares are being acquired
solely for its own account for investment and not with a view toward, or for
resale in connection with, any "distribution" (as that term is used in the
Securities Act and the rules and regulations thereunder) of all or any portion
thereof.
(c) Ultrak agrees not to subdivide the Shares or to offer,
sell, pledge, hypothecate or otherwise transfer or dispose of any of the Shares
in the absence of an effective registration statement under the Securities Act
covering such disposition, or an opinion of counsel, satisfactory to the
Company and its counsel, to the effect that registration under the Securities
Act is not required in respect of such transfer or disposition.
(d) Ultrak further understands that a stop transfer order will
be placed on the stock-transfer books of the Company respecting the
certificates evidencing the Shares, and such certificates shall bear until such
time as the Shares shall have been registered under the Securities Act or shall
have been transferred in accordance with such an opinion of counsel, the
following legend or one substantially similar thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN
OPINION OF COUNSEL TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
(e) Ultrak understands that the offer and sale of the Shares
are not being registered under the Securities Act in reliance on exemptions
provided under the Securities Act and/or Regulation D promulgated pursuant to
the Securities Act, and that the Company is basing its reliance on that
exemption in part on the representations, warranties, statements and agreements
contained herein.
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<PAGE> 7
4.4 Ultrak affirmatively covenants that Ultrak will not hire or
solicit for hiring as an employee, consultant, distributor, agent or otherwise
any person, who is employed by Company, or whose employment relationship with
Company was terminated after the date which is one year prior to the date such
person commences any employment, consulting or other relationship with Ultrak.
SECTION 5
CONDITIONS TO CLOSING
5.1 Conditions to Ultrak's Obligations at the Closing. Ultrak's
obligations to purchase the Shares at the Closing are subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by Ultrak:
(a) The representations and warranties made by the Company
herein shall be true and correct when made, and shall be true and correct on
the Closing Date with the same force and effect as if they had been made on
and as of the same date; and the Company shall have performed all obligations
and conditions herein required to be performed or observed by it on or prior to
the Closing Date and all documents incident thereto shall be satisfactory in
form and content to Ultrak and its counsel.
(b) The Company shall have obtained all consents, permits and
waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement which need to be obtained prior to the Closing.
(c) At the Closing, the purchase of the Shares by Ultrak shall
be legally permitted by all laws and regulations to which the Company is
subject.
(d) Each executive officer of the Company listed on Schedule
5.1(d) attached hereto shall have entered into a Non-Competition and Employment
Agreement with the Company in substantially the form of Exhibit 5.1(d)
attached hereto.
(e) The Company and Ultrak shall have entered into a
non-exclusive Distribution/Reseller Agreement in substantially the form of
Exhibit 5.1(e) attached hereto.
(f) The Subordinate Debt shall have been converted into shares
of Common Stock in accordance with the terms of the instruments evidencing such
debt.
(g) Effective as of the Closing Date, the Company shall have
increased its allowance for uncollectible receivables, warranty reserves, and
reserves for unrecorded liabilities to an aggregate minimum amount of $75,000,
subject to verification or modification by mutual agreement of the Company's
auditor and Ultrak's CFO prior to October 15, 1996.
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<PAGE> 8
(h) The Company shall have executed the Warrant and the
Company, Ultrak, and the Shareholders identified therein shall have executed
the Shareholders' Voting Agreement in the forms, respectively, contained in
Exhibit 5.1(h) attached hereto.
(i) Elena and Rudy Prokupets shall have executed the Right of
First Refusal and Co-Sell Agreement in the form of Exhibit 5.1(i) attached
hereto.
(j) The Company shall use its best efforts to obtain from
Mosler, Inc., a reseller of Company's products, an acknowledgment in writing
that Ultrak's Reseller Agreement with Company is in compliance with Company's
reseller agreement with Mosler, Inc. If and upon obtaining such
acknowledgement, it shall be attached as Exhibit 5.1(j) of this Agreement.
5.2 Conditions to the Company's Obligations at the Closing. The
Company's obligations to sell the Shares at the Closing are subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Company:
(a) The representations and warranties made by Ultrak herein
shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of the same date; and Ultrak shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing Date and all documents incident thereto shall be satisfactory in form
and content to the Company and its counsel.
(b) Ultrak shall have obtained all consents, permits and
waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement which need to be obtained prior to the Closing.
SECTION 6
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
6.1 Financial Information.
(a) The Company will mail the following reports to Ultrak for
so long as Seven Hundred Fifty Thousand (750,000) of the Shares are owned by
Ultrak:
(i) As soon as practicable after the end of each fiscal
year, and in any event within 45 days thereafter, a consolidated balance sheet
of the Company as of the end of such fiscal year, and a consolidated statement
of income and consolidated statement of cash flow for such year, prepared in
accordance with generally accepted accounting principles, all in reasonable
detail and audited by independent public accountants selected by the Company.
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(ii) Within 30 days following the beginning of each
fiscal year, an Annual Financial Projection. The Annual Financial Projection
shall set forth full and complete forecasted balance sheets, income statements,
and statements of cash flow for the next fiscal year and for each month within
that year. The Annual Financial Projection shall also describe in its
assumptions section, the marketing, production, research and development,
organization and staffing, and financial strategies which support the Annual
Financial Projection's projected figures.
(b) For so long as Ultrak is eligible to receive reports under
this Section 6.1, but in no event more often than once each first, second, and
third fiscal quarter, Ultrak shall also have the right, at its expense, and
upon reasonable notice to the Company (which in no event shall be less than
seven (7) days notice), to audit the books and records of the Company.
6.2 Additional Information. The Company will deliver or provide to
Ultrak (i) as soon as practicable after the end of each fiscal month, and in
any event within 20 days thereafter, an unaudited consolidated balance sheet
and statement of income of the Company and, (ii) with reasonable promptness,
such other information and data, including access to books, records, officers,
general managers exclusive of technical employees, sales managers and
accountants, with respect to the Company as Ultrak may from time to time
reasonably request; provided, however, that the Company shall not be obligated
to provide any information that it considers in good faith to be a trade secret
or to contain confidential or classified information.
6.3 Directors. Effective as of the Closing Date, the Company's
Board of Directors shall consist of at least one (1) director appointed by
Ultrak and, Ultrak, thereafter, shall have the right to appoint one (1)
additional director for every five (5) additional directors serving on the
Company's Board of Directors.
6.4 Termination of Covenants. The covenants set forth in Sections
6.1, 6.2, and 6.3 shall terminate and be of no further force or effect at such
time as the Company is required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended.
6.5 Issuance of Equity Securities. Subsequent to the Closing Date,
the Company shall obtain Ultrak's prior written approval, which shall not be
unreasonably withheld, prior to issuance of any equity securities, defined as
Common Shares, warrants or options, for consideration valued at less than One
Dollar Seventy-Five Cents ($1.75) per Common Share or equivalent equity
security.
6.6 Key Employee Life Insurance. Company shall use its best efforts
to obtain within 60 days following Closing Date a "key employee" life insurance
policy on the life of Company's Vice President for Technology, Rudy Prokupets,
with a face insurance value of at least one million dollars ($1,000,000.00) and
with Company as named beneficiary.
6.7 Chief Financial Officer Selection Approval. In the event
Company, in its discretion, shall appoint and hire a Chief Financial Officer
and/or a General manager, Ultrak
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shall have the right to approve the selection of the final candidate prior to
an offer being tendered to such candidate by the Company. Ultrak's approval of
such final candidate(s) shall not unreasonably be withheld. Ultrak shall not
have the right to set or to approve the terms of employment or compensation
arrangements, which shall be in the sole discretion of the Company.
SECTION 7
MUTUAL INDEMNIFICATION
7.1 Mutual Indemnification. Ultrak will indemnify the Company and
hold it harmless from and in respect of any and all loss, liability, cost or
expense (including reasonable fees and expenses of counsel) accruing from or
resulting by reason of any breach of any representation, warranty, covenant, or
agreement made or to be performed by Ultrak pursuant to this Agreement. The
Company will indemnify Ultrak and hold it harmless from and in respect of any
and all loss, liability, cost or expense (including reasonable fees and
expenses of counsel) accruing from or resulting by reason of any breach of any
representation, warranty, covenant, or agreement made or to be performed by the
Company pursuant to this Agreement.
SECTION 8
REGISTRATION RIGHTS
8.1 Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Demand Registration" see Section 8.2 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"IPO" shall mean the sale of the Company's Common Stock in an
underwritten public offering registered under the Securities Act, where the
aggregate offering price equals or exceeds $5,000,000
"Registration Expenses" shall mean all expenses relating to the
registration, other than underwriting discounts, selling commissions and stock
transfer taxes applicable to the Common Shares to be registered.
"Registrable Securities" shall mean: (i) the shares (ii) any
securities issued or issuable with respect to the Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, or other reorganization and (iii) any
Common Stock issued or issuable in connection with the Warrant ("Warrant
Shares").
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"Piggyback Registration" see Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Shares" shall mean the shares of Common Stock being issued and
sold pursuant to this Agreement.
"Underwritten registration or underwritten offering" shall mean a
registration in which securities of the Company are sold pursuant to a firm
commitment underwriting.
"Register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
8.2 Demand Registration.
(a) At any time following an IPO and subject to the provision
of Section 8.2(b) hereof, Ultrak may request a registration by the Company
under the Securities Act of all or part of the Registrable Securities ("Demand
Registration"). All requests made pursuant to this Section 8.2(a) will specify
the number of Registrable Securities to be registered. The Company shall cause
such Demand Registration to be effected as promptly as possible.
(b) Subject to the provisions of Section 8.4(b) hereof, Ultrak
will be entitled to request an aggregate of two (2) Demand Registrations in
which Ultrak and the Company will equally share all Registration Expenses;
provided, however, that the Company will not be obligated to register any
Registrable Securities pursuant to a Demand Registration unless there is
requested to be included in such registration not less than 250,000 Shares. A
registration initiated as a Demand Registration will not count as a Demand
Registration until such registration has become effective.
8.3 Piggyback Registration. (a) Following an IPO, if at any time or
from time to time the Company shall determine to register any of its securities
under the Securities Act (other than pursuant to a Demand Registration) (a
"Piggyback Registration"), either for its own account or the account of a
shareholder of the Company, other than (i) a registration relating solely to an
employee benefit plan or (ii) a registration relating solely to a Rule 145
transaction, the Company will:
(i) promptly give Ultrak written notice thereof; and
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(ii) include in such registration, and in any
underwriting involved therewith, all of the Registrable Securities specified by
Ultrak to be included made within 20 days after receipt of the written notice
specified in Section 8.3(a)(i).
8.4 Underwriting.
(a) If any registration is an underwritten offering, the
Company will have the right to select the investment banker or investment
bankers and manager or managers to administer the offering; provided that such
investment bankers and managers must be reasonably satisfactory to Ultrak.
(b) If the registration involves an underwriting, Ultrak's
participation therein shall be conditioned upon Ultrak signing a standard
underwriting agreement. If the number of Registrable Securities that Ultrak
requests to be included in the offering exceeds the amount of securities that
the underwriters reasonably believe compatible with the success of the
offering, the Company shall only be required to include in the offering so many
of the Registrable Securities as the underwriters believe will not jeopardize
the success of the offering. If all the Registrable Securities that Ultrak
requests to be included in the offering can not be accommodated, the number of
Registrable Securities to be included shall be apportioned pro rata among all
selling shareholders according to the total amount of securities owned by
selling shareholders, or in such other proportions as shall mutually be agreed
to by such selling holders.
8.5 Holdback Agreement.
(a) Ultrak agrees not to effect any public sale or
distribution of equity securities of the Company, including a sale pursuant to
Rule 144 under the Securities Act, during the seven (7) days prior to, and
during the 90- day period beginning on, the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration).
(b) The Company agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such equity securities, including a sale
pursuant to Rule 144 under the Securities Act, during the seven (7) days prior
to, and during the 90-day period beginning on, the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8).
8.6 Termination. The obligations of the Company set forth in Section
8.2 to 8.5 shall terminate at such time as all of the Registrable Securities
can be sold to the public under Rule 144 in the opinion of counsel to the
Company.
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SECTION 9
ULTRAK'S RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. The Company hereby grants to Ultrak the
right of first refusal to purchase its pro rata share of New Securities (as
defined in this Section 9.1) which the Company may, from time to time, propose
to sell and issue. A pro rata share, for purposes of this right of first
refusal, is the ratio that the sum of the number of shares of Common Stock then
held by Ultrak bears to the sum of the total number of shares of Common Stock
then outstanding.
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred,
whether now authorized or not, and rights, options or warrants to purchase said
shares of Common Stock or Preferred, and securities of any type whatsoever that
are, or may become, convertible into said shares of Common Stock or Preferred.
Notwithstanding the foregoing, "New Securities" does not include (i) securities
offered to the public generally pursuant to a registration statement or
pursuant to Regulation A under the Securities Act, (ii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization whereby the
Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation, (iii) shares of the
Company's Common Stock or related options convertible into such Common Stock at
or above a per share purchase price and/or option exercise price of One Dollar
Seventy-Five Cents ($1.75) per Common Share issued to employees, officers and
directors of, and consultants, customers, and vendors to, the Company, pursuant
to any arrangement approved by the Board of Directors of the Company, (iv)
shares of the Company's Common Stock or related securities convertible into
such Common Stock set forth on Schedule 3.4, (v) stock issued pursuant to any
rights or agreements including without limitation convertible securities,
options and warrants, provided that the rights of first refusal established by
this Section 9.1 apply with respect to the initial sale or grant by the Company
of such rights or agreements and (vi) stock issued in connection with any stock
split, stock dividend or recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give Ultrak written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. Ultrak shall have thirty (30) days from
the date of receipt of any such notice to propose to purchase its pro rata
share of such New Securities for the price and upon the terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities desired to be purchased. A request shall be an irrevocable
offer to purchase the quantity of New Securities specified.
(c) In the event Ultrak fails to exercise the right of first
refusal within said thirty (30) day period, the Company shall have one hundred
eighty (180) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by Ultrak at the price and upon the
terms no more favorable to the purchasers of such securities than specified in
the Company's notice. In the event the Company has not sold the New Securities
or entered into an agreement to sell the New
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Securities within said one hundred eighty (180) day period (or sold and issued
New Securities in accordance with the foregoing within sixty (60) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities in accordance with the
procedure provided above, which procedure in such event shall be termed the
"Second Round Right of First Refusal". In the event any such offering of New
Securities continues beyond said one hundred eighty (180) day period and thus
becomes and "Extended Offering" Ultrak, with the prior written approval of
Company, which shall not unreasonably be withheld, may assign its Second Round
Right of First Refusal, which shall be limited to such Extended Offering, to an
identified third party.
(d) The right of first refusal granted under this Agreement
shall expire upon the first to occur of the following: (i) the closing of the
first public offering of the Common Stock of the Company to the general public
which is effected pursuant to a registration statement filed with, and declared
effective by, the Commission under the securities Act; or (ii) Ultrak holds
less than one million two hundred fifty thousand (1,250,000) shares of Common
Stock (appropriately adjusted for stock splits, stock dividends or similar
capital reorganizations).
(e) Except in accordance with the provisions of paragraph
9.1(c) above, the right of first refusal hereunder is not assignable.
SECTION 10
COMPANY RIGHT OF FIRST REFUSAL
10.1 Company Right of First Refusal. In the event Ultrak proposes to
sell the Shares, it shall give the Company written notice of its intention,
describing the number of Shares it proposes to sell and the price and terms
upon which Ultrak proposes to sell the same. The Company shall have thirty
(30) days from the date of receipt of any such notice to agree to purchase all
or any portion of the Shares being sold for the price and upon the terms
specified in the notice by giving written notice to Ultrak.
10.2 Failure to Exercise. In the event the Company fails to exercise
the right of first refusal within the thirty (30) day period, Ultrak shall have
one hundred eighty (180) days thereafter to sell or enter into an agreement
(pursuant to which the sale of such Shares covered thereby shall be closed, if
at all, within sixty (60) days from the date of said agreement) to sell the
Shares not elected to be purchased by the Company or the remaining shareholders
at the price and upon the terms no more favorable to the purchasers of such
securities then specified in Ultrak's notice. In the event Ultrak has not sold
the Shares or entered into an agreement to sell the Shares within said one
hundred eighty (180) day period (or sold the Shares in accordance with the
foregoing within sixty (60) days from the date of said agreement), Ultrak shall
not thereafter sell any Shares, without first offering such securities in the
manner provided above.
10.3 Right of First Refusal Expiration. The right of first refusal
granted under this Section 10 shall expire upon the first to occur of the
following: (i) the closing of the first public
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offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared
effective by, the Commission under the securities Act; or (ii) Ultrak holds
less than 1,300,000 shares of Common Stock or Preferred Stock (appropriately
adjusted for stock splits, stock dividends or similar capital reorganizations),
where Ultrak has obtained the prior written approval of the Company for the
buyer of up to 200,000 of Ultrak's initial 1,500,000 shares; or (iii) Ultrak
holds less than 1,500,000 shares of Common Stock or Preferred Stock
(appropriately adjusted for stock splits, stock dividends or similar capital
reorganizations), where Ultrak has not obtained the prior written approval of
the Company for such buyer.
10.4 Additional Legend. In addition to whatever legends are required
to be placed on the certificate evidencing the Shares by applicable securities
laws, the following legend shall be endorsed thereon:
"The shares represented by this certificate are subject to
a right of first refusal option in favor of the corporation and certain
shareholders set forth in an agreement between the corporation and the
registered holder, a copy of which is on file at the principal office of this
corporation."
SECTION 11
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be governed in all respects
by the internal laws of the State of New York.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Ultrak and the
closing of the transactions contemplated hereby.
11.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
11.4 Entire Agreement; Amendment. This Agreement and other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
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11.5 Notice, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepared, or otherwise delivered by hand or by messenger,
addressed
(a) if to Ultrak: Tim Torno
Chief Financial Officer
Ultrak, Inc.
Suite 100
1220 Champion Circle
Carrollton, Texas 75006
with copies to: Richard Waggoner, Esq.
Gardere & Wynne
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
(b) if to the Company: Lenel Systems International, Inc.
290 Woodcliff Office Park
Fairport, New York 14450
Attn: Elena and Rudy Prokupets
with copies to: David A. Lovenheim, Esq.
Harris, Beach & Wilcox, LLP
130 East Main Street
Rochester, NY 14604
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective (i) when delivered, if delivered either
personally or by overnight courier or (ii) at the earlier of its receipt or
five (5) days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
11.6 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to Ultrak,
upon any breach or default of the Company under this Agreement, shall impair
any such right, power or remedy of such holder nor shall it be construed to be
a waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any provisions
or conditions of this agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either
under this
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Agreement or by law or otherwise afforded to any holder, shall be cumulative
and not alternative.
11.7 Expenses. The Company and Ultrak shall bear its own expenses
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
11.8 Counterparts. This Agreement may be signed in one or more
counterparts, and it shall not be necessary that the signatures of both parties
appear on each such counterpart; all counterparts shall collectively constitute
a single agreement.
11.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
11.10 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
ULTRAK, INC. LENEL SYSTEMS INTERNATIONAL, INC.
a Delaware corporation a Delaware corporation
By: /s/ GEORGE K. BROADY By: /s/ ELENA PROKUPETS
--------------------------- -----------------------------------
Title: President Title: President & CEO
------------------------
By: /s/ RUDY PROKUPETS
-----------------------------------
Title: Vice President, Technology
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