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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER:0-9463
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2626358
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1220 CHAMPION CIRCLE, SUITE 100
CARROLLTON, TEXAS 75006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 280-9675
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES x NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of February 29, 1996 was $42,938,000. As of that date,
there were 7,327,004 of the registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference from
the Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
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ULTRAK, INC.
FORM 10-K
TABLE OF CONTENTS
DECEMBER 31, 1995
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<TABLE>
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PART I Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . 5
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . 29
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . 29
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 29
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . 30
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Ultrak, Inc. (the "Company" or "Ultrak") designs, manufactures, markets and
services closed-circuit television ("CCTV") products for use in security,
general observation, traffic management, automated manufacturing, medical and
dental applications. These products include a broad line of cameras, lenses,
high-speed dome systems, monitors, switchers, quad processors, time-lapse
recorders, multiplexers, wireless video transmission systems, computerized
observation and security systems and accessories.
Until December 29, 1995, Ultrak was a Colorado corporation which was
incorporated in 1980. Effective December 29, 1995, Ultrak reincorporated in
the State of Delaware. The Company's headquarters are located at 1220 Champion
Circle, Suite 100, Carrollton, Texas, 75006. The Company conducts its
principal business operations at six locations: Carrollton (Dallas), Texas;
Broomfield (Denver), Colorado; Annapolis, Maryland; southern California;
Carroll (Lancaster), Ohio; and Chicago, Illinois; and has additional sales
offices in New York, southern Florida, Atlanta and Los Angeles.
RECENT DEVELOPMENTS
On March 15, 1995, Ultrak purchased certain assets of the CCTV division of Koyo
International, Inc. of America ("Koyo"). Ultrak acquired all of Koyo's
inventory, patent rights, customer lists and certain tooling for approximately
$416,000 in cash and a royalty up to 2% of the net selling price of products
produced by Ultrak under license from Koyo (minimum of $100,000 over the term
of the royalty). The royalty extends for two years beginning on the date of
commencement of sales of products produced under license, which is expected in
1996.
On May 25, 1995, the stockholders of the Company approved, effective as of
December 29, 1995, the change in the state of incorporation of the Company from
Colorado to Delaware (the "Reincorporation"). The Reincorporation was effected
through the merger of the Company with and into a newly formed Delaware
subsidiary wholly owned by the Company. Following the Reincorporation, the
officers and directors of the Company prior to the Reincorporation remained as
the officers and directors of the Company and the Company's Common Stock and
Series A Preferred Stock maintained the same relative rights, preferences,
privileges and restrictions.
On July 13, 1995, the stockholders of Diamond Electronics, Inc. ("Diamond"), an
Ohio corporation, approved the terms of an Agreement and Plan of Reorganization
("the Agreement") among Diamond, Ultrak, Diamond Purchasing Corp., a Texas
corporation and wholly owned subsidiary of Ultrak, and certain stockholders of
Diamond, pursuant to which (i) Diamond Purchasing Corp. merged with and into
Diamond, (ii) Diamond became a wholly owned subsidiary of Ultrak and (iii) the
outstanding shares of common stock of Diamond were converted into an aggregate
of 600,000 registered shares of Ultrak Common Stock. The Agreement specifies
certain conditions under which additional shares of Ultrak Common Stock can be
issued. Diamond is a manufacturer of commercial video CCTV security and
surveillance systems used by large retailers and of hazardous viewing systems
used by industry and municipalities. The transaction was accounted for as a
purchase effective as of July 1, 1995.
On August 1, 1995, the stockholders of BLC & Associates, Inc., a California
corporation doing business as G.P.S. Standard U.S.A. ("GPS"), executed an
Agreement and Plan of Reorganization among GPS,
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Ultrak and GPS Acquisition Corp., a Texas corporation and wholly owned
subsidiary of Ultrak, pursuant to which (i) GPS Acquisition Corp. merged with
and into GPS, (ii) GPS became a wholly-owned subsidiary of Ultrak and (iii) the
outstanding shares of Common Stock of GPS were converted into an aggregate of
176,420 registered shares of Ultrak Common Stock. GPS is a manufacturer of
surveillance camera housings, pan and tilt devices, matrix switchers and other
advanced software driven camera control systems. The transaction closed on
November 29, 1995, and was accounted for as a pooling of interests effective as
of December 1, 1995.
On February 9, 1995, the Company's line of credit with NationsBank of Texas,
N.A. was increased from $13.2 million to $15.0 million under the same terms and
conditions.
On July 18, 1995, the Company's line of credit with NationsBank of Texas, N.A.
was again amended as follows:
* The revolving line of credit facility was increased from $15.0
million to $17.5 million,
* A new term loan facility secured by real estate and equipment of
up to $2.5 million was established with a payout on a ten-year
amortization and a due date of July 31, 1997,
* The contract interest rate for both facilities was lowered from
prime plus .50% to floating prime plus .25% with an option at
LIBOR plus 2.50%,
* The due date of the revolving line of credit facility was
extended to July 31, 1997, from September 27, 1995, and
* Certain financial and operational covenants were modified.
On December 29, 1995, the Company entered into its fourth amendment with
NationsBank of Texas, N.A. to increase its revolving line of credit facility
from $17.5 million to $20.0 million under the same terms and conditions as in
the July 18, 1995 amendment.
CCTV PRODUCTS; INDUSTRY
Ultrak designs, manufactures, markets and services CCTV products for use in
security, general observation, traffic management, automated manufacturing,
medical and dental applications. These products include a broad line of
cameras, lenses, high-speed dome systems, monitors, switchers, quad processors,
time-lapse recorders, multiplexers, wireless video transmission systems,
computerized observation and security systems and accessories.
Ultrak's target markets are wholesale distributors, installing dealers, large
end-users, mass merchants (for resale), manufacturing companies, system
integrators and dentists. Each target market is reached through a dedicated
group of telemarketing and regional sales professionals as well as through
catalogs, magazine advertising and industry trade shows.
Approximately 70% of the Company's CCTV product sales carry its own brandnames
(Ultrak, Exxis, Smart Choice, Mobile Video Products, Diamond Electronics, GPS
and UltraCam), with the remainder having brands owned by others such as
Mitsubishi, Sony, Dedicated Micros and Panasonic. The Company's own branded
products are manufactured in Korea, Japan, England, Hong Kong, Taiwan, China
and the United States.
According to Security Dealer Magazine, the CCTV industry annual retail sales
were $1.42 billion in 1995, representing 11% of the $12.9 billion total U.S.
security industry market. The CCTV segment of the security industry has
experienced rapid growth since the early 1980s. CCTV sales represent a
significant portion of the total security industry growth, trailing only access
control and electronic article surveillance. Included in the CCTV category are
CCTV cameras, lenses, monitors, switchers, time-lapse recorders,
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multiplexers, video transmission systems and various types of peripheral
equipment used for CCTV installations. The Company's business is not generally
seasonal in nature, except that sales in December and January are typically
lower than other months.
The Company believes that it is an important factor within the CCTV industry
and that it is one of the three largest in terms of CCTV sales in the United
States. However, many of its competitors are divisions of much larger
companies.
The Company has trademark registration or applications pending on its Ultrak,
Exxis, [ ] Smart Choice, EasyWatch, Observision, UltraCam, Fastscan, Smartscan,
The Witness, Video Butler, BabyCam and BabyWatch trade names. In addition, the
Company has been issued patents on its UltraCam intraoral hand piece and The
Witness, a security observation system that begins recording activity upon
activation of an alarming input signal and several other devices. The Company
has several patents pending on its DAVE (Duplex Analog Video Encoder) System
designed to provide complete continuous video coverage of large areas by
employing a large array of cameras connected to a single loop of coaxial cable.
The Company has filed patent applications for four other patents, and acquired
during 1995 a patent covering a system for recording and modifying behavior of
passengers in a passenger vehicle.
SUPPLIERS AND DISTRIBUTION
During 1995, the Company purchased approximately 93% of its CCTV products from
non-affiliated manufacturer suppliers. Approximately 7% of its CCTV products
were manufactured in its Carroll (Lancaster), Ohio facility. Ultrak's product
development staff designs and then coordinates with its non-affiliated
suppliers the manufacture of certain of its private branded products and
coordinates and supervises the assembly and packaging of certain products by
its own employees. The Company has been and will continue to be substantially
dependent upon its non-affiliated manufacturing suppliers. The Company has
exclusive and non-exclusive sales and marketing rights for certain of the CCTV
products it sells, including certain CCTV cameras and systems manufactured in
Japan and Korea. The Company has in the past experienced, and may in the
future experience, short-term difficulties in obtaining some products from some
manufacturers.
In general, the Company's suppliers are constantly developing new products that
advance the state of technology in security products and offer improved value.
The Company has in the past issued letters of credit or placed funds on deposit
with its suppliers to attempt to ensure for itself a constant and consistent
supply of products. Approximately 95% of the Company's purchases from its
non-affiliated suppliers are made in United Sates dollars with the remaining 5%
purchased in Japanese yen. To date, the Company has not been materially
adversely affected by fluctuations in the valuation of the Japanese yen. It is
expected that the Company will continue to purchase the vast majority of its
products in United States dollars.
The Company believes that it has close relationships with its suppliers. In
some cases, the Company is the exclusive or semi-exclusive marketer of its
suppliers' products in the United States. The Company's trading agreements
with its suppliers are both written and oral. In most of these relationships,
the Company believes that the relationship is as important to the supplier as
it is to the Company. Thus, the Company believes that there is a strong,
mutually advantageous basis for the trading relationship to exist and grow.
Other than its own manufactured products, the Company imports its private
branded security products primarily from Korea, Japan, England, Hong Kong and
Taiwan. Because of foreign production lead times, the Company normally makes
purchase commitments to these foreign suppliers three to six months in advance
of shipment. Products ordered by the Company and manufactured by others in
Asia are shipped to the Company's warehouses located in the United States for
subsequent delivery to customers.
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Delivery times on these products to the United States vary from one week to two
months, depending on the mode of transportation used. Therefore, management
believes it is necessary for the Company to commit to and carry larger levels
of inventory than would be necessary if it used only domestic suppliers.
The Company ships most items within 24 hours of receipt of the order. As of
December 31, 1995 and 1994, the Company had approximately $6,701,000 and
$3,939,000, respectively, in order backlog which it considers to be firm.
The Company can ship its CCTV products from one of its six warehouse locations:
Carrollton (Dallas), Texas; Broomfield (Denver), Colorado; Annapolis, Maryland;
southern California; Carroll (Lancaster), Ohio; or Chicago, Illinois.
Currently, approximately 85% of all shipments are made from the Carrollton,
Texas centralized warehouse. Substantially all inventory, accounts receivable,
purchasing, payroll and other corporate business functions are controlled on
the Company's integrated computer system located in its Carrollton
headquarters. All sales locations are linked real time via a nationwide
network which allows for orders to be entered and shipped from multiple
locations.
Approximately 19% of the Company's 1995 sales were to Walmart Stores, Inc. and
Sam's Wholesale Club, a division of Walmart Stores, Inc. No other single
customer accounted for more than 10% of total sales in 1995.
EMPLOYEES
As of December 31, 1995, the Company had 292 full-time employees employed at
six primary locations and five field sales offices, of which 115 were sales and
sales support personnel, 72 were warehouse/manufacturing personnel, 35 were
technical/service personnel, 24 were engineering, research and product
development personnel and 46 were administrative and managerial personnel.
ITEM 2. PROPERTIES
The Company's headquarters are located in approximately 69,000 square feet of
leased office and warehouse space in Carrollton, Texas, pursuant to a lease
expiring in May 1999. The Company or its subsidiaries lease additional
office/warehouse space in Broomfield, Colorado; Annapolis, Maryland; southern
Florida; Atlanta, Georgia; Chicago, Illinois and southern California. The
Company owns its 72,000 square foot manufacturing facility in Carroll, Ohio.
The Company believes that its Carroll, Ohio manufacturing facility is adequate
to meet the Company's present and anticipated future manufacturing needs. The
Company would like to expand the office and warehouse space at its headquarters
and is currently negotiating for additional space which it will lease or build.
While the Company believes it can obtain additional lease space, there can be
no assurance that such space will be available at prices which the Company
currently pays.
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ITEM 3. LEGAL PROCEEDINGS
Other than the following matters, the Company is not aware of any material
pending or threatened legal proceedings to which the Company is or may be a
party. The Company knows of no other legal proceedings pending or threatened
or judgments entered against any director or officer of the Company in their
capacity as such.
P.A.T. CO. AND KUSTOM SIGNALS, INC., PLAINTIFFS V. ULTRAK, INC., DEFENDANT;
CASE NO. 95-2273 - EEO
On June 16, 1995, P.A.T. Co. and Kustom Signals, Inc., each a Kansas
corporation, filed suit against Ultrak in the United States District Court for
the District of Kansas claiming patent infringement, trademark infringement,
unfair competition, common law infringement and unfair competition. The
plaintiffs charged that Ultrak has infringed upon its Patent No.'s 4,789,904
("Vehicle Mounted Surveillance and Video Taping System") and 4,949,186
("Vehicle Mounted Surveillance System"). Ultrak has denied the allegations and
asserted affirmative defenses of non-infringement, invalidity and
unenforceability, and asserted counterclaims of monopolization and attempt to
monopolize, conspiracy to monopolize and unfair competition. Discovery in the
case is in the initial stages.
CONNER PERIPHERALS, INC., PLAINTIFF, VS. EXXIS TECHNOLOGIES, INC., DEFENDANT;
CAUSE NO. 95-10753-16
On December 29, 1995, Conner Peripherals, Inc. filed suit against Exxis
Technologies, Inc. ("Exxis"), then a wholly- owned subsidiary of Ultrak,
claiming that Exxis owed it $170,627.75 for goods sold and delivered from
January 2, 1993 through August 1993. On February 1, 1996, Exxis filed a
counterclaim against the plaintiff, alleging that the plaintiff breached an
agreement that was reached with Exxis in 1993 to give Exxis a credit in the
approximate amount of $150,000 on this account. While Exxis acknowledges
liability to the plaintiff in the amount of approximately $20,000, its denies
that the liability is as large as that sought by the plaintiff in this suit.
Exxis intends to contest this matter vigorously and to pursue its counterclaims
against the plaintiff in the event the plaintiff is unwilling to accept a fair
settlement in the very near future. Discovery in this suit has not been
completed.
In the opinion of management of the Company, the legal proceedings described
above will not have a material adverse effect upon the Company's business,
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company during
the fourth quarter of 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock became listed on the Nasdaq National Market System
on January 18, 1994 under the symbol "ULTK". Prior to that time, the Company's
Common Stock was traded in the over-the-counter market. The quotations shown
below, which are the high and low closing prices, were compiled by the Company
from Monthly Statistical Reports supplied by the Nasdaq National Market.
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High close Low close
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1994
First quarter $8.63 $5.75
Second quarter 7.13 4.50
Third quarter 7.63 6.13
Fourth quarter 8.00 6.75
1995
First quarter $7.25 $5.62
Second quarter 9.50 6.38
Third quarter 7.38 5.63
Fourth quarter 6.44 4.75
</TABLE>
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The total number of holders of the Common Stock as of February 29, 1996 was
approximately 3,500, comprised of approximately 1,600 stockholders of record
and approximately 1,900 not of record.
The Company has never paid any dividends to its common stockholders.
Currently, it is the intention of the Company not to pay any dividends to its
common stockholders in the foreseeable future. Management intends to reinvest
earnings available to common stockholders in the development and expansion of
the Company's business. The declaration in the future of any cash dividends on
Common Stock will be at the discretion of the board of directors and will
depend upon the earnings, capital requirements and financial position of the
Company, general economic conditions and other pertinent factors. The
Company's loan and security agreements with its financial institutions require
the lenders' prior written consent to the Company's payment of cash dividends
on its Common Stock. To the extent allowed by the Company's loan agreements,
the Company does intend to pay dividends on its Series A Preferred Stock, all
of which are owned by George K. Broady, the Chairman and Chief Executive
Officer of the Company. Annual preferred stock dividends in the amount of
$117,210 were paid to Mr. Broady during each of 1995, 1994 and 1993.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company which
have been derived from the Company's audited financial statements. The
selected financial data should be read in connection with the financial
statements and related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" which are included elsewhere
herein.
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Years ended December 31,
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1995(1) 1994(2) 1993 1992 1991
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Statement of Income Data
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Net sales $101,232,305 $79,062,711 $52,411,971 $28,864,478 $18,003,952
============ =========== =========== =========== ===========
Gross profit $ 24,913,027 $19,713,003 $12,858,457 $ 7,367,629 $ 4,613,904
============ =========== =========== =========== ===========
Operating profit $ 6,115,577 $ 5,378,687 $ 3,655,020 $ 1,278,618 $ 694,728
============ =========== =========== =========== ===========
Income from continuing operations
before income taxes $ 4,234,586 $ 4,302,532 $ 3,020,403 $ 569,843 $ 470,942
Income taxes 1,539,529 1,513,020 381,543 26,343 -
------------ ----------- ----------- ----------- -----------
Income from continuing
operations 2,695,057 2,789,512 2,638,860 543,500 470,942
Discontinued operations - (190,000) (1,834,370) 294,255 -
------------ ----------- ----------- ----------- -----------
Net income 2,695,057 2,599,512 804,490 837,755 470,942
Dividend requirements on
preferred stock 117,210 117,210 117,210 117,210 117,210
------------ ----------- ----------- ----------- -----------
Net income allocable to common
stockholders $ 2,577,847 $ 2,482,302 $ 687,280 $ 720,545 $ 353,732
============ =========== =========== =========== ===========
Income per common share from
continuing operations $.36 $.39 $.37 $.07 $.06
==== ==== ==== ==== ====
Net income per common share $.36 $.36 $.10 $.11 $.06
==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
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1995 1994 1993 1992 1991
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Balance Sheet Data
- ------------------
Total assets $52,954,795 $36,352,690 $25,384,794 $16,198,851 $8,054,270
Short-term debt 24,482,107 18,244,183 12,875,039 7,134,701 2,218,599
Long-term debt 1,534,548 - - 285,000 285,000
Stockholders' equity 16,496,539 10,070,388 7,541,339 6,817,683 4,177,044
Cash dividends declared
per common share - - - - -
</TABLE>
Note (1) Results include operations of certain companies acquired in 1994 and
1995. See Note B of Notes to Consolidated Financial Statements.
Note (2) Certain reclassifications have been made to 1994 amounts to conform
with the 1995 presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
RESULTS OF OPERATIONS. For the year ended December 31, 1995, net sales were
$101,232,305, an increase of $22,169,594 (28%) over 1994. This increase was
due to the effect of new acquisitions during 1995 (31%), increased volume of
sales of existing closed circuit television (CCTV) products to all of the
markets that the Company serves (32%) and to the sales of new products
introduced during 1995 (37%).
In comparison, cost of sales were $76,319,278 for 1995, an increase of
$16,969,570 (29%) over 1994. This increase was in direct relationship to the
overall increase in sales between the two periods. Gross margins on net sales
decreased slightly to 24.61% in 1995 from 24.93% in 1994. This overall
decrease was due to price competition in the CCTV market and a strategic
decision by the Company to be an industry value leader, offset partially by the
effect of higher margins on new products and products marketed by companies
acquired during 1995.
Marketing and sales expenses were $13,254,921 for 1995, an increase of
$2,053,461 (18%) over 1994. This increase was due to the effect in 1995 of new
acquisitions and the effect of hiring additional CCTV sales and support staff
as well as the increased travel and related costs incurred to support the
increased level of business. Marketing and sales expenses during 1995 were
13.1% of net sales down from 14.2% of net sales during 1994.
General and administrative expenses were $5,542,529 for 1995, an increase of
$2,409,072 (77%) over 1994. This increase is due to the effect in 1995 of new
acquisitions, the creation of a separate research and product development
function as well as the hiring of additional purchasing, operations and other
administrative staff and related costs necessary to support the increased level
of business. General and administrative expenses during 1995 were 5.5% of net
sales up from 4.0% of net sales during 1994.
Other expenses were $1,880,991 for 1995, an increase of $804,836 (75%) over
1994. This increase was due primarily to increased interest rates on higher
borrowings outstanding during the year.
LIQUIDITY AND CAPITAL RESOURCES. The Company had a net increase in cash for
the year ended December 31, 1995 of approximately $664,000. Cash used in
operating activities during 1995 was approximately $3,018,000. Operations did
not provide cash primarily because of increases in accounts and notes
receivable and inventory required by the significantly higher sales volume.
Cash used in investing activities was approximately $2,072,000 for capital
expenditures and business acquisitions. Cash provided by financing activities
was approximately $5,754,000, consisting of net borrowings from the Company's
bank and other lenders.
On February 9, 1995, the Company's line of credit with NationsBank of Texas,
N.A. was increased from $13.2 million to $15.0 million under the same terms and
conditions.
On July 18, 1995, the Company's line of credit with NationsBank of Texas, N.A.
was again amended as follows:
* The revolving line of credit facility was increased from $15.0
million to $17.5 million,
* A new term loan facility secured by real estate and equipment
of up to $2.5 million was established with a payout on a
ten-year amortization and a due date of July 31, 1997,
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* The contract interest rate for both facilities was lowered
from prime plus .50% to floating prime plus .25% with an
option at LIBOR plus 2.50%,
* The due date of the revolving line of credit facility was
extended to July 31, 1997 from September 27, 1995, and
* Certain financial and operational covenants were modified.
On December 29, 1995, the Company entered into its fourth amendment with
NationsBank of Texas, N.A. to increase its revolving line of credit facility
from $17.5 million to $20.0 million under the same terms and conditions as in
the July 18, 1995 amendment.
As of December 31, 1995, the Company had unused available revolving lines of
credit totaling approximately $2,700,000.
The Company will continue to be dependent upon its bank and other lender
financing to fund its operations. The Company anticipates that its current
operations and future growth will be financed primarily through increased lines
of credit and internally generated profits. The Company believes such sources
of funds will be adequate for its projected needs for the next twelve (12)
months. The Company may attempt to raise additional equity capital if sales
increase faster than planned or if it is otherwise deemed advantageous to do
so.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
RESULTS OF OPERATIONS - CONTINUING OPERATIONS. For the year ended December 31,
1994, sales from continuing operations were $79,062,711, an increase of
$26,650,740 (51%) over 1993. This growth was due primarily (70%) to increased
volume of sales of existing CCTV products to all of the markets that the
Company serves. New products introduced by the Company during 1994 contributed
approximately 30% of the increase in sales.
In comparison, cost of sales were $59,349,708 for 1994, an increase of
$19,796,194 (50%) over 1993. This increase was in direct relationship to the
overall CCTV increase in sales. Gross margins on sales increased to 24.93% in
1994 from 24.53% in 1993, primarily because of new product sales at higher
margins, offset by competition in the CCTV market and a strategic decision by
the Company to be an industry value leader.
Marketing and sales expenses were $11,201,460 for 1994, an increase of
$4,175,946 (59%) over 1993. This increase was due to additional CCTV sales and
sales support staff and related costs incurred to support the increased level
of CCTV sales, travel and related costs and increased marketing, advertising
and promotional costs.
General and administrative expenses were $3,132,857 for 1994, an increase of
$954,934 (44%) from 1993 due to additional administrative staff and related
costs necessary to support the increase in sales.
Other expenses were $1,076,155 for 1994, an increase of $441,538 (70%) over
1993. This increase was due primarily to increased interest costs on
borrowings offset partially by interest income on notes receivable.
RESULTS OF OPERATIONS - DISCONTINUED OPERATIONS. On July 22, 1993, the Company
announced that it would discontinue its personal computers products (PC)
business segment and concentrate its resources on the CCTV business segment.
As a result of this decision, the operations and net assets of the PC business
segment have been classified as discontinued operations for all periods
presented.
9
<PAGE> 12
During the year ended December 31, 1994, the Company recorded an additional
provision of $190,000, net of income tax benefit, to reflect costs of
dissolution of the business as well as provision for expected settlement costs
of the remaining lawsuit relating to the discontinued operations.
Sales included in discontinued operations for the years ended December 31,
1994, 1993 and 1992 were $110,720, $19,232,836 and $9,677,585, respectively
(not included in net sales reported from continuing operations above).
10
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants - as of and
for the years ended December 31, 1995, 1994 and 1993 12
Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994 13
Consolidated Statements of Income, Years Ended
December 31, 1995, 1994 and 1993 15
Consolidated Statements of Stockholders' Equity, Years
Ended December 31, 1995, 1994 and 1993 16
Consolidated Statements of Cash Flows, Years Ended
December 31, 1995, 1994 and 1993 17
Notes to Consolidated Financial Statements 19
Financial Statement Schedule:
Report of Independent Certified Public Accountants - as of
and for the years ended December 31, 1995, 1994 and 1993 34
II - Valuation and Qualifying Accounts 35
</TABLE>
All other schedules have been omitted as the required information is not
applicable, not required, or the information is included in the Consolidated
Financial Statements or Notes thereto.
11
<PAGE> 14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated balance sheets of Ultrak, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ultrak, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Dallas, Texas
February 19, 1996
12
<PAGE> 15
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,306,482 $ 642,241
Trade accounts receivable, less allowance for doubtful accounts
of $481,104 and $323,772 at December 31, 1995 and 1994,
respectively 15,619,459 10,743,091
Notes receivable 288,968 253,771
Inventories 21,293,216 14,396,438
Advances for inventory purchases 5,038,951 5,381,437
Prepaid expenses and other current assets 313,460 178,698
Deferred income taxes (Note G) 943,046 362,988
------------ -------------
Total current assets 44,803,582 31,958,664
PROPERTY, PLANT AND EQUIPMENT, at cost 5,694,265 2,966,619
Less accumulated depreciation and amortization (1,576,366) (995,226)
------------ -------------
4,117,899 1,971,393
GOODWILL, net of accumulated amortization of $212,894 and $135,467
at December 31, 1995 and 1994, respectively 2,470,839 1,259,969
NOTES RECEIVABLE 1,152,048 984,208
OTHER ASSETS 410,427 178,456
------------ -------------
$ 52,954,795 $ 36,352,690
============ =============
</TABLE>
13
<PAGE> 16
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
December 31,
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 6,988,550 $ 6,531,779
Notes payable (Note C) 24,301,147 18,244,183
Current maturities of long-term debt (Note C) 180,960 -
Accrued expenses 1,613,925 664,740
Federal and state income taxes payable 954,716 343,973
Other current liabilities 884,410 497,627
------------ ------------
Total current liabilities 34,923,708 26,282,302
LONG-TERM DEBT (Note C) 1,534,548 -
COMMITMENTS AND CONTINGENCIES (Note F) - -
STOCKHOLDERS' EQUITY (Note D)
Preferred stock, $5 par value, issuable in series; 2,000,000 shares
authorized; Series A, 12% cumulative convertible, 195,351 shares
authorized, issued and outstanding 976,755 976,755
Common stock, $.01 par value (no par in 1994); 20,000,000 shares
authorized; 7,326,935 and 6,555,619 shares issued and outstanding
at December 31, 1995 and 1994, respectively 73,269 73,254
Additional paid-in capital 11,518,801 7,213,747
Retained earnings 3,927,714 1,806,632
------------ ------------
Total stockholders' equity 16,496,539 10,070,388
------------ ------------
$ 52,954,795 $ 36,352,690
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE> 17
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $101,232,305 $ 79,062,711 $ 52,411,971
Cost of sales 76,319,278 59,349,708 39,553,514
------------ ------------ ------------
Gross profit 24,913,027 19,713,003 12,858,457
Other operating costs:
Marketing and sales 13,254,921 11,201,460 7,025,514
General and administrative 5,542,529 3,132,857 2,177,923
------------ ------------ ------------
18,797,450 14,334,316 9,203,437
------------ ------------ ------------
Operating profit 6,115,577 5,378,687 3,655,020
Other expense (income):
Interest expense 1,840,489 1,091,400 693,655
Other, net 40,502 (15,245) (59,038)
------------ ------------ ------------
1,880,991 1,076,155 634,617
------------ ------------ ------------
Income from continuing operations
before income taxes 4,234,586 4,302,532 3,020,403
Income taxes (Note G) 1,539,529 1,513,020 381,543
------------ ------------ ------------
Income from continuing operations 2,695,057 2,789,512 2,638,860
Discontinued operations, net of tax effects (Note I):
Loss from operations - - (289,489)
Provision for loss on disposal - (190,000) (1,544,881)
------------ ------------ ------------
- (190,000) (1,834,370)
------------ ------------ ------------
NET INCOME 2,695,057 2,599,512 804,490
Dividend requirements on preferred stock (Note D) (117,210) (117,210) (117,210)
------------ ------------ ------------
Net income allocable to common stockholders $ 2,577,847 $ 2,482,302 $ 687,280
============ ============ ============
Income per common share:
Continuing operations $.36 $.39 $.37
==== ==== ====
Net income $.36 $.36 $.10
==== ==== ====
Number of weighted average common and
common equivalent shares outstanding 7,147,904 6,818,999 6,789,872
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE> 18
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -------------
<S> <C> <C> <C>
COMMON STOCK
Beginning of year $ 73,254 $ 72,489 $ 70,968
Change in par value (39,714) - -
Acquisitions of businesses 39,457 - -
Exercise of stock options and warrants 272 765 1,521
-------------- ------------ -------------
End of year $ 73,269 $ 73,254 $ 72,489
============== ============ =============
ADDITIONAL PAID-IN CAPITAL
Beginning of year $ 7,213,747 $ 7,167,765 $ 7,132,910
Change in par value 39,714 - -
Acquisitions of businesses 4,238,462 - -
Exercise of stock options and warrants 26,878 45,982 34,855
-------------- ------------ -------------
End of year $ 11,518,801 $ 7,213,747 $ 7,167,765
============== ============ =============
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Beginning of year $ 1,806,632 $ (675,670) $ (1,362,950)
Preferred stock dividends (117,210) (117,210) (117,210)
Accumulated deficit of pooled company (Note B) (456,765) - -
Net income 2,695,057 2,599,512 804,490
-------------- ------------ -------------
End of year $ 3,927,714 $ 1,806,632 $ (675,670)
============== ============ =============
COMMON SHARES
Beginning of year 6,555,619 6,538,352 6,495,848
Acquisitions of businesses 762,816 - -
Exercise of stock options and warrants 8,500 17,267 42,504
-------------- ------------ -------------
7,326,935 6,555,619 6,538,352
============== ============ =============
PREFERRED SHARES
Beginning and end of year 195,351 195,351 195,351
============== ============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE> 19
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,695,057 $ 2,599,512 $ 804,490
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 890,987 447,280 252,275
Provision for losses on accounts receivable 49,114 532,344 228,814
Provision for inventory obsolescence 411,915 52,408 102,295
Deferred income taxes (152,782) 227,012 (590,000)
Changes in operating assets and liabilities:
Accounts and notes receivable (3,140,518) (3,705,743) (3,753,654)
Inventories (4,145,192) (3,360,827) (5,216,355)
Advances for inventory purchases 342,486 (2,871,341) (182,169)
Prepaid expenses and other current assets (82,284) (77,803) 21,132
Noncurrent notes and other assets (84,681) (346,847) (477,489)
Accounts payable (677,814) 2,124,485 3,019,574
Other notes payable - (285,000) (5,543)
Accrued liabilities and other current liabilities 875,300 945,218 (12,625)
Net assets of discontinued operations - 197,125 642,103
----------- ------------ ------------
Net cash used in operating activities (3,018,412) (3,522,177) (5,167,152)
Cash flows from investing activities:
Purchases of property and equipment (1,055,055) (1,346,369) (699,311)
Acquisitions, net of cash acquired (1,016,633) (573,000) -
Decrease in net assets of discontinued operations - - 163,563
----------- ------------ ------------
Net cash used in investing activities (2,071,688) (1,919,369) (535,748)
Cash flows from financing activities:
Net borrowings on notes payable 5,844,401 5,654,144 5,460,881
Proceeds from exercise of stock options 27,150 46,747 36,376
Payment of preferred stock dividends (117,210) (117,210) (117,210)
----------- ------------ ------------
Net cash provided by financing activities 5,754,341 5,583,681 5,380,047
----------- ------------ ------------
Net increase (decrease) in cash 664,241 142,135 (322,853)
Cash at beginning of year 642,241 500,106 822,959
----------- ------------ ------------
Cash at end of year $ 1,306,482 $ 642,241 $ 500,106
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE> 20
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 1,812,415 $ 1,109,361 $ 684,933
=========== =========== ============
Income taxes $ 1,431,581 $ 804,158 $ 91,269
=========== =========== ============
Supplemental schedule of noncash investing and financing activities:
Acquisition of businesses
Assets acquired $ 8,490,799 $ 573,000
Liabilities assumed (3,640,455) -
Common stock issued (3,804,000) -
----------- -----------
1,046,344 573,000
Less cash acquired 29,711 -
----------- -----------
Net cash paid for acquisitions $ 1,016,633 $ 573,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 21
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Consolidation
The accompanying consolidated financial statements include the accounts of
Ultrak, Inc. and its subsidiaries (the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
Effective December 29, 1995, the Company was reincorporated in the state of
Delaware.
Nature of Operations
The Company designs, manufactures, markets and services closed circuit
television ("CCTV") products for use in security, general observation,
traffic management, automated manufacturing, medical and dental
applications. These products include a broad line of cameras, lenses,
high-speed dome systems, monitors, switchers, quad processors, time-lapse
recorders, multiplexers, wireless video transmission systems, computerized
observation and security systems and accessories which are sold principally
to customers in the United States. Foreign customers account for less than
10% of revenue.
Inventories
Inventories are comprised principally of goods held for resale, which are
valued at the lower of cost (first-in, first-out) or market.
Advances for Inventory
Advances for inventory represents payments in advance for goods purchased
primarily from the Far East. Upon receipt of the goods, advances are
classified as inventories.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are carried at cost. The provision for
depreciation is computed using the straight- line method over the estimated
useful lives of the assets.
Goodwill and Amortization
Goodwill resulting from acquisitions is being amortized using the
straight-line method over periods ranging from twenty to forty years. On an
ongoing basis, management reviews the valuation and amortization of goodwill
to determine possible impairment by comparing the carrying value to the
undiscounted future cash flows of the related business unit.
Income Taxes
Deferred income taxes are determined using the liability method, under which
deferred tax assets and liabilities are determined based on differences
between financial accounting and tax bases of assets and liabilities.
19
<PAGE> 22
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. As of December 31, 1995 and 1994, there were
no cash equivalents.
Income Per Common Share
Income per common share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares result from the assumed issuance of shares
under the Company's incentive stock option plan and for stock purchase
warrants when dilutive. Fully-diluted income per share, which gives effect
to assumed conversion of the Series A preferred stock, is the same as
primary income per share.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, trade receivables and
payables, notes receivable and debt, which has variable rates. The fair
value of all instruments approximates the carrying value.
Reclassifications
Certain reclassifications have been made to prior years to conform with the
1995 presentation.
NOTE B - BUSINESS COMBINATIONS
JAK Pacific Video Warranty and Repair Services, Inc.:
Effective April 1, 1994, the Company acquired 56% of the outstanding common
stock of JAK Pacific Video Warranty and Repair Services, Inc. ("JAK"), a
California corporation, for total cash consideration of $573,000. The
transaction was accounted for as a purchase. The operations of JAK have
been included in the Company's statements of income beginning April 1, 1994.
JAK is engaged in sales, service and warranty repairs of closed circuit
television products.
20
<PAGE> 23
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE B - BUSINESS COMBINATIONS - Continued
During 1995, the Company exercised its option to acquire the remaining 44%
of the common stock of JAK for cash consideration of $500,000. Goodwill is
being amortized over 20 years by the straight-line method.
Koyo's U.S. CCTV Division:
On March 15, 1995, the Company signed an agreement with Koyo International,
Inc. of America ("Koyo") to purchase certain assets of Koyo's U.S. CCTV
division. Under the agreement, the Company acquired all of Koyo's
inventory, patent rights, customer lists and certain tooling for cash of
approximately $416,000 plus a $100,000 minimum payment due under a royalty
agreement. The agreement provides for royalties of up to 2% of the net
selling price of products produced under license from Koyo. Goodwill is
being amortized over 20 years by the straight-line method.
Diamond Electronics, Inc.:
On July 13, 1995, the Company acquired all of the outstanding shares of
common stock of Diamond Electronics, Inc. ("Diamond"), in exchange for
600,000 registered shares of the Company's common stock valued at
$3,804,000. Costs capitalized in conjunction with the acquisition were
approximately $130,000. The shareholders of Diamond are entitled to receive
an additional 50,000 shares of the Company's common stock if the market
price is less than $8.00 per share for the ten business days prior to July
13, 1996.
Diamond is a manufacturer of commercial video CCTV security and surveillance
systems used by large retailers, and of hazardous viewing systems used by
industry and municipalities. The transaction has been accounted for as a
purchase, and the operations of Diamond have been included in the Company's
statement of income since July 1, 1995. Goodwill is being amortized over 25
years by the straight-line method.
The following unaudited pro forma information for 1995 and 1994 presents a
summary of consolidated results of operations of the Company and Diamond as
if the acquisition had occurred at the beginning of the respective periods,
giving effect to the amortization of goodwill and certain other adjustments:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Net sales $ 107,374,308 $ 90,568,402
============== =============
Income from continuing operations $ 3,064,428 $ 3,090,966
============== =============
Net income $ 3,064,428 $ 2,900,966
============== =============
Income per common share from continuing operations $.41 $.42
==== ====
Net income per common share $.41 $.39
==== ====
</TABLE>
The pro forma effect of the acquisitions of JAK and Koyo is not significant.
21
<PAGE> 24
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE B - BUSINESS COMBINATIONS - Continued
G.P.S. Standard U.S.A.:
Effective November 29, 1995, the Company acquired 100 percent of the
outstanding capital stock of BLC & Associates, Inc., doing business as
G.P.S. Standard U.S.A. ("GPS"), for 176,470 shares of registered common
stock of the Company. GPS is a manufacturer of surveillance camera
housings, pan and tilt devices, matrix switchers and other advanced software
driven camera control systems. The transaction was accounted for as a
pooling of interests effective December 1, 1995. Results of operations for
periods prior to the date of acquisition have not been restated to reflect
the combined operations due to immateriality.
NOTE C - NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
---------- -----------
<S> <C> <C>
$20.0 million revolving line of credit from a bank, due upon demand
or July 31, 1997; interest at prime (8.75% at December 31, 1995)
plus .25% or LIBOR (5.82% at December 31, 1995) plus 2.50%
payable monthly; collateralized by substantially all assets $17,478,730 $11,735,392
$7.0 million revolving line of credit from an investment company,
due upon demand or April 4, 1996; interest at the greater of
8.5% or prime plus 2.0% payable monthly; collateralized
by inventory 6,822,417 6,508,791
----------- -----------
$24,301,147 $18,244,183
=========== ===========
</TABLE>
At December 31, 1995, the Company had unused available revolving lines of
credit totaling approximately $2.7 million.
22
<PAGE> 25
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE C - NOTES PAYABLE AND LONG-TERM DEBT - Continued
Long-term debt as of December 31, 1995 consists of a bank loan due on July
31, 1997 which bears interest at prime plus .25% or LIBOR plus 2.50% and is
collateralized by real estate and equipment. Principal payments of $14,583
are due monthly with $1,414,590 due upon maturity.
The following are scheduled maturities of long-term debt at December 31,
1995:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1996 $ 180,960
1997 1,534,548
----------
$1,715,508
==========
</TABLE>
Debt is guaranteed in part ($8,000,000) by the principal stockholder of the
Company. The credit agreements contain certain restrictive covenants and
conditions, including debt to tangible net worth ratios, current ratios and
working capital ratios. At December 31, 1995, the Company did not meet
certain of these covenants on its bank debt and has obtained waivers of the
violations.
The weighted average interest rate for notes payable for the years ended
December 31, 1995 and 1994 was 9.5% and 8.16%, respectively.
NOTE D - STOCKHOLDERS' EQUITY
Preferred Stock
The Series A preferred stock earns dividends at the rate of 12% per annum,
beginning January 1, 1991, payable quarterly. All dividends accrue whether
or not such dividends have been declared and whether or not there are
profits, surplus, or other funds of the Company legally available for
payment.
The Company may at any time redeem all or any portion of the Series A
Preferred Stock then outstanding at the liquidation value of $5.00 per share
plus unpaid dividends. A holder of Series A Preferred Stock may convert all
or any of the shares into shares of the Company's common stock at any time
at a conversion rate equal to the original purchase price of $5.00 plus any
unpaid dividends the sum of which is divided by $2.40.
Holders of Series A preferred stock are entitled to vote on all matters
submitted to a vote of stockholders. Each Series A preferred share is
entitled to voting rights equal to 16.667 shares of common stock.
23
<PAGE> 26
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE D - STOCKHOLDERS' EQUITY - Continued
Nonqualified Stock Option Plan
The 1988 Nonqualified Stock Option Plan provides for options to be granted
covering 833,334 shares of common stock. Shares under grant generally
become exercisable in five equal annual installments beginning one year
after the date of grant, and expire after ten years.
Option exercise prices are set by the Compensation Committee of the Board of
Directors on the date of grant at the approximate market price of the
Company's common stock.
Details of stock options are as follows:
<TABLE>
<CAPTION>
Number of
shares Option price
--------- ------------
<S> <C> <C>
Options outstanding - January 1, 1994 500,226 $1.20-$7.50
Granted 47,500 4.50-6.88
Forfeited (14,167) 3.75-6.00
Exercised (600) 2.40
------- -----------
Options outstanding - December 31, 1994 532,959 1.20-7.50
Granted 146,750 5.63-7.00
Forfeited (4,334) 2.40-7.50
Exercised (8,500) 2.40-6.50
------- -----------
Options outstanding - December 31, 1995 666,875 $1.20-$7.50
======= ===========
Options exercisable - December 31, 1995 406,468 $1.20-$7.50
======= ===========
</TABLE>
Stock Warrants
In connection with the $7.0 million line of credit (Note C), the Company
granted to the lender warrants to purchase a total of 200,000 shares of
restricted common stock at a price of $8.00 per share, subject to certain
adjustments. The warrant agreement expires in April 1996 and no warrants
have been exercised to date.
24
<PAGE> 27
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE E - MAJOR CUSTOMERS AND SUPPLIERS
One customer accounted for more than 10% of revenue in each of the three
years ended December 31, 1995. Sales to that customer were:
<TABLE>
<S> <C>
1995 $19,140,000
1994 16,279,000
1993 9,596,000
</TABLE>
Loss of this customer would have a material adverse effect on the operations
of the Company.
The Company purchased approximately 45% of its products from one supplier in
1995 and 1994. Although there are a limited number of manufacturers of the
Company's products, management believes there are suppliers who could
provide similar products on comparable terms. A change in suppliers could
cause a delay and a possible loss of sales, which would affect operating
results adversely.
NOTE F - COMMITMENTS AND CONTINGENCIES
The Company has entered into operating leases for office and warehouse space
and data processing equipment.
Minimum future rental payments for all long-term, noncancelable operating
leases are presented below:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1996 $ 489,000
1997 409,000
1998 328,000
1999 168,000
2000 38,000
----------
$1,432,000
==========
</TABLE>
Total rent expense charged to operations is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C>
$468,770 $473,502 $266,717
======== ======== ========
</TABLE>
As of December 31, 1995, the Company is a defendant in lawsuits arising in
the ordinary course of business. In the opinion of management, the lawsuits
will not have a material adverse effect upon the Company's business,
financial position or results of operations.
25
<PAGE> 28
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE G - INCOME TAXES
The provision for taxes on income from continuing operations consists of the
following:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Federal
Current $1,629,374 $1,081,435 $ 613,105
Deferred (152,782) 227,012 (266,892)
State 62,937 204,573 35,330
---------- ---------- ---------
$1,539,529 $1,513,020 $ 381,543
========== ========== =========
</TABLE>
The Company's effective income tax rate differed from the Federal statutory
rate as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate 34.0% 34.0% 34.0%
State taxes, net of Federal benefit 1.0 3.1 1.0
Reduction in deferred tax asset
valuation allowance - - (4.5)
Net operating loss carryforward recognized (1.5) (3.7) (18.4)
Other, net 2.9 1.8 .6
---- ---- ----
36.4% 35.2% 12.7%
==== ==== ====
</TABLE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------ ----------
<S> <C> <C>
Deferred tax assets:
Inventory $ 560,717 $ 156,854
Accounts receivable 155,439 156,416
Accrued expenses 259,114 98,489
Net operating loss carryforward 174,935 177,026
------------ ----------
1,150,205 588,785
Valuation allowance (68,970) (133,804)
------------ ----------
1,081,235 454,981
Deferred tax liabilities:
Depreciation (83,702) (78,331)
Other (54,487) (13,662)
------------ ----------
(138,189) (91,993)
------------ ----------
$ 943,046 $ 362,988
============ ==========
</TABLE>
26
<PAGE> 29
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE G - INCOME TAXES - Continued
As of December 31, 1995, the Company has available net operating loss
carryforwards of approximately $500,000 which are available to reduce future
taxable income by approximately $60,000 per year through 2002. A valuation
allowance of $68,970 has been provided to offset a portion of the deferred
tax assets related to these carryforwards.
NOTE H - DISCONTINUED OPERATIONS
On July 22, 1993, the Company announced that it would discontinue its
personal computer products (PC) business segment and concentrate its
resources on the CCTV business segment. As a result of this decision, the
operations and net assets of the PC business segment are classified as
discontinued operations.
Sales included in discontinued operations for the year ended December 31,
1993 were $19,232,836. The loss from discontinued operations is net of tax
benefits of $145,106 in 1993, and the provision for loss on disposal in 1994
and 1993 is net of tax benefits of $98,000 and $774,368, respectively.
NOTE I - UNAUDITED QUARTERLY OPERATING RESULTS
Unaudited quarterly operating results for the years ended December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995:
-----
Sales $21,829,162 $22,305,871 $28,429,494 $28,667,778
Gross profit 5,322,078 5,322,858 6,809,054 7,459,037
Net income 781,933 485,744 683,162 744,218
=========== =========== =========== ===========
Net income per share $.11 $.07 $.09 $.10
==== ==== ==== ====
1994:
-----
Sales $17,808,683 $19,032,217 $21,524,735 $20,697,076
Gross profit 4,164,245 4,928,373 5,278,902 5,341,483
Income (loss) from
Continuing operations 628,057 825,511 999,428 336,516
Discontinued operations - - (190,000) -
----------- ----------- ----------- -----------
Net income 628,057 825,511 809,428 336,516
=========== =========== =========== ===========
Net income per share $.09 $.12 $.11 $.04
==== ==== ==== ====
</TABLE>
27
<PAGE> 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in accountants or disagreements with accountants
during the years ended December 31, 1995 or 1994.
28
<PAGE> 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information regarding the
Company's directors to appear under the caption "Election of Directors" in the
Company's proxy statement for its 1996 Annual Meeting of Stockholders (the
"1996 Proxy Statement"), which is expected to be filed with the Securities and
Exchange Commission on or about April 14, 1996. See also the list of the
Company's executive officers and related information under "Directors and
Executive Officers" in Part I thereof.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information to appear under the
captions "Election of Directors" and "Executive Compensation and Other
Information" in the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
There is hereby incorporated by reference the information with respect to
security ownership to appear under the caption "Security Ownership of Principal
Stockholders and Management" in the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information to appear under the
caption "Executive Compensation and Other Information - Certain Transactions"
in the 1996 Proxy Statement.
29
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements and Schedules
1. Financial Statements
<TABLE>
Page
----
<S> <C>
Independent Auditors' Report - as of and for the years
ended December 31, 1995, 1994 and 1993 12
Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994 13
Consolidated Statements of Income, Years Ended December 31,
1995, 1994 and 1993 15
Consolidated Statements of Stockholders' Equity, Years Ended
December 31, 1995, 1994 and 1993 16
Consolidated Statements of Cash Flows, Years Ended December 31,
1995, 1994 and 1993 17
Notes to Consolidated Financial Statements 19
2. Financial Statement Schedules
Independent Auditors' Report - as of and for the years ended
December 31, 1995, 1994 and 1993 34
II - Valuation and Qualifying Accounts 35
(b) Reports on Form 8-K
None filed in the fourth quarter of 1995.
(c) Exhibits 31
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
10.1 Loan Agreement, dated as of July 20, 1992, between the Company, CCTV Source International, Inc. and Loss
Prevention Electronics Corporation and Petrus Fund, L.P. (filed as Exhibit 3 to the Company's Current
Report on Form 8-K dated June 15, 1992)
10.2 Financing and Security Agreement, dated as of September 24, 1993, by and among NationsBank of Texas, N.A.,
the Company, Loss Prevention Electronics Corporation, CCTV Source International, Inc., and Dental Vision
Direct, Inc. (with Guaranty by Individual executed by George K. Broady, for the benefit of NationsBank of
Texas, N.A.) filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 4, 1993)
10.3 First Amendment to Loan Agreement, dated as of October 4, 1993, between the Company, CCTV Source
International, Inc. and Loss Prevention Electronics Corporation, and Petrus Fund, L.P. (with related
Restated Revolving Credit Note) (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated
October 4, 1993)
10.4 Warrant Purchase Agreement, dated as of July 20, 1992, between the Registrant, George K. Broady and Petrus
Fund, L.P. (filed as Exhibit 4 to the Registrant's Current Report on Form 8-K dated June 15, 1992)
10.5 Security Agreement, dated as of October 4, 1993, between Exxis Technologies, Inc. and Petrus Fund L.P.
(filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated October 4, 1993)
10.6 Security Agreement, dated as of October 4, 1993, between Dental Vision Direct, Inc. and Petrus Fund L.P.
(filed as Exhibit 10.5 to the Company' Current Report on Form 8-K dated October 4, 1993)
10.7 Ultrak, Inc. 1988 Non-Qualified Stock Option Agreement (filed as Exhibit 10.16 to the Company's
Registration Statement on Form S-1, Registration No. 55-3-31110)
10.8 Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option Plan (filed as Exhibit 10 to the Company's
Current Report on Form 8-K dated December 28, 1993)
10.9 Second Amendment to Warrant Purchase Agreement, dated as of October 4, 1993, between the Company, George
K. Broady and Petrus Fund, L.P. (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated
October 4, 1993)
10.10 First Amendment to Financing and Security Agreement, dated effective October 31, 1994, by and among
NationsBank of Texas, N.A., Ultrak, Inc., Loss Prevention Electronics Corporation, CCTV Source
International, Inc. and Dental Vision Direct, Inc. (filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K dated November 14, 1994)
</TABLE>
31
<PAGE> 34
<TABLE>
<S> <C>
10.11 Second Amendment to Loan Agreement, executed November 11, 1994 to be effective as of October 4, 1994, by
and between Ultrak, Inc. and Petrus Fund L.P. (filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K dated November 14, 1994)
10.12 Third Amendment to Warrant Purchase Agreement, executed November 11, 1994 to be effective as of October 4,
1994, by and among Ultrak, Inc., George K. Broady and Petrus Fund, L.P. (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K dated November 14, 1994)
10.13 Letter Agreement among Ultrak, Risheg and JAK Pacific Warranty and Repair Services, Inc. ("JAK") regarding
Ultrak's purchase and option to purchase JAK's common stock, dated as of April 5, 1994
10.14 Second Amendment to Financing and Security Agreement, dated as of February 9, 1995, by and among
NationsBank of Texas, N.A., Ultrak, Inc., Loss Prevention Electronics Corporation, CCTV Source
International, Inc. and Dental Vision Direct, Inc.
10.15 Agreement and Plan of Reorganization, dated as of April 28, 1995, by and among Diamond Electronics, Inc.,
the shareholders of Diamond signing the Agreement, Ultrak, Inc. and Diamond Purchasing Corp. (filed as
Annex A to the Company's Form S-4 dated June 28, 1995)
10.16 Third Amendment to Financing and Security Agreement, dated effective as of July 18, 1995, by and among
NationsBank of Texas, N.A., Ultrak, Inc., Dental Vision Direct, Inc., Exxis Technologies, Inc., JAK
Pacific Video Warranty and Repair Services, Inc. and Diamond Electronics, Inc.
10.17 Agreement and Plan of Reorganization, dated as of August 1, 1995, by and among BLC & Associates, Inc.,
(doing business as G.P.S. Standard U.S.A.), Mathiew Bais, Commodore Investments, Ltd., Ultrak, Inc. and
GPS Acquisition Corp. (filed as Exhibit 1.01 to the Company's Form S-4 dated October 20, 1995)
10.18 Fourth Amendment to Financing and Security Agreement, dated effective as of December 29, 1995, by and
among NationsBank of Texas, N.A., Ultrak, Inc., Dental Vision Direct, Inc., Diamond Electronics, Inc., JAK
Pacific Video Warranty and Repair Services, Inc. and Ultrak Operating, L.P.
10.19 Agreement and Plan of Merger, dated effective as of December 29, 1995, by and among Exxis Technologies,
Inc. and Ultrak, Inc.
10.20 Agreement and Plan of Merger, dated effective as of December 29, 1995, between Ultrak, Inc. (Colorado) and
Ultrak, Inc. (Delaware)
10.21 Employment agreement between Ultrak, Inc. and James D. Pritchett dated May 25, 1995
10.22 Employment agreement between Ultrak, Inc. and Tim D. Torno dated May 25, 1995
11.1 Computation of Per Share Data
21.1 List of subsidiaries
</TABLE>
32
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ULTRAK, INC.
March 13, 1996 By: /s/ George K. Broady
------------------------------------
George K. Broady
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
March 13, 1996 By: /s/ George K. Broady
------------------------------------
George K. Broady
Director
March 13, 1996 By: /s/ William C. Lee
------------------------------------
William C. Lee
Director
March 13, 1996 By: /s/ Charles C. Neal
------------------------------------
Charles C. Neal
Director
March 13, 1996 By: /s/ James D. Pritchett
------------------------------------
James D. Pritchett
Executive Vice President and
Director
March 13, 1996 By: /s/ Robert F. Sexton
------------------------------------
Robert F. Sexton
Director
March 13, 1996 By: /s/ Tim D. Torno
------------------------------------
Tim D. Torno
Secretary-Treasurer and Chief
Financial Officer
33
<PAGE> 36
Report of Independent Certified Public Accountants
on Schedules
Board of Directors
Ultrak, Inc.
In connection with our audits of the consolidated financial statements of
Ultrak, Inc. and Subsidiaries referred to in our report dated February 19,
1996, we have also audited Schedule II for each of the three years in the
period ended December 31, 1995. In our opinion, this schedule presents fairly,
in all material aspects, the information required to be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
February 19, 1996
34
<PAGE> 37
Schedule II
ULTRAK, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Balance at Charge to Balance at
Beginning Charge to Other End
Description of Period Operations Accounts Deductions of Period
----------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
- -----------------------------
Allowance for doubtful accounts $323,772 $ 49,114 $282,701(1) $(216,483)(2) $439,104
======== ========= ======== ========= ========
Inventory valuation allowance $206,593 $ 411,915 $ - $ - $618,508
======== ========= ======== ========= ========
Year ended December 31, 1994:
- -----------------------------
Allowance for doubtful accounts $213,607 $ 532,344 $ - $(422,179)(2) $323,772
======== ========= ======== ========= ========
Inventory valuation allowance $154,185 $ 52,408 $ - $ - $206,593
======== ========= ======== ========= ========
Year ended December 31, 1993:
- -----------------------------
Allowance for doubtful accounts $135,105 $ 228,814 $ - $(150,312)(2) $213,607
======== ========= ======== ========= ========
Inventory valuation allowance $ 51,890 $ 102,295 $ - $ - $154,185
======== ========= ======== ========= ========
</TABLE>
Notes
(1) Balances recorded from business combinations during 1995.
(2) Balances written off.
35
<PAGE> 38
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibits Description
- -------- -----------
<S> <C>
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
10.1 Loan Agreement, dated as of July 20, 1992, between the Company, CCTV Source International, Inc. and Loss
Prevention Electronics Corporation and Petrus Fund, L.P. (filed as Exhibit 3 to the Company's Current
Report on Form 8-K dated June 15, 1992)
10.2 Financing and Security Agreement, dated as of September 24, 1993, by and among NationsBank of Texas, N.A.,
the Company, Loss Prevention Electronics Corporation, CCTV Source International, Inc., and Dental Vision
Direct, Inc. (with Guaranty by Individual executed by George K. Broady, for the benefit of NationsBank of
Texas, N.A.) filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 4, 1993)
10.3 First Amendment to Loan Agreement, dated as of October 4, 1993, between the Company, CCTV Source
International, Inc. and Loss Prevention Electronics Corporation, and Petrus Fund, L.P. (with related
Restated Revolving Credit Note) (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated
October 4, 1993)
10.4 Warrant Purchase Agreement, dated as of July 20, 1992, between the Registrant, George K. Broady and Petrus
Fund, L.P. (filed as Exhibit 4 to the Registrant's Current Report on Form 8-K dated June 15, 1992)
10.5 Security Agreement, dated as of October 4, 1993, between Exxis Technologies, Inc. and Petrus Fund L.P.
(filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated October 4, 1993)
10.6 Security Agreement, dated as of October 4, 1993, between Dental Vision Direct, Inc. and Petrus Fund L.P.
(filed as Exhibit 10.5 to the Company' Current Report on Form 8-K dated October 4, 1993)
10.7 Ultrak, Inc. 1988 Non-Qualified Stock Option Agreement (filed as Exhibit 10.16 to the Company's
Registration Statement on Form S-1, Registration No. 55-3-31110)
10.8 Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option Plan (filed as Exhibit 10 to the Company's
Current Report on Form 8-K dated December 28, 1993)
10.9 Second Amendment to Warrant Purchase Agreement, dated as of October 4, 1993, between the Company, George
K. Broady and Petrus Fund, L.P. (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated
October 4, 1993)
10.10 First Amendment to Financing and Security Agreement, dated effective October 31, 1994, by and among
NationsBank of Texas, N.A., Ultrak, Inc., Loss Prevention Electronics Corporation, CCTV Source
International, Inc. and Dental Vision Direct, Inc. (filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K dated November 14, 1994)
10.11 Second Amendment to Loan Agreement, executed November 11, 1994 to be effective as of October 4, 1994, by
and between Ultrak, Inc. and Petrus Fund L.P. (filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K dated November 14, 1994)
10.12 Third Amendment to Warrant Purchase Agreement, executed November 11, 1994 to be effective as of October 4,
1994, by and among Ultrak, Inc., George K. Broady and Petrus Fund, L.P. (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K dated November 14, 1994)
10.13 Letter Agreement among Ultrak, Risheg and JAK Pacific Warranty and Repair Services, Inc. ("JAK") regarding
Ultrak's purchase and option to purchase JAK's common stock, dated as of April 5, 1994
10.14 Second Amendment to Financing and Security Agreement, dated as of February 9, 1995, by and among
NationsBank of Texas, N.A., Ultrak, Inc., Loss Prevention Electronics Corporation, CCTV Source
International, Inc. and Dental Vision Direct, Inc.
10.15 Agreement and Plan of Reorganization, dated as of April 28, 1995, by and among Diamond Electronics, Inc.,
the shareholders of Diamond signing the Agreement, Ultrak, Inc. and Diamond Purchasing Corp. (filed as
Annex A to the Company's Form S-4 dated June 28, 1995)
10.16 Third Amendment to Financing and Security Agreement, dated effective as of July 18, 1995, by and among
NationsBank of Texas, N.A., Ultrak, Inc., Dental Vision Direct, Inc., Exxis Technologies, Inc., JAK
Pacific Video Warranty and Repair Services, Inc. and Diamond Electronics, Inc.
10.17 Agreement and Plan of Reorganization, dated as of August 1, 1995, by and among BLC & Associates, Inc.,
(doing business as G.P.S. Standard U.S.A.), Mathiew Bais, Commodore Investments, Ltd., Ultrak, Inc. and
GPS Acquisition Corp. (filed as Exhibit 1.01 to the Company's Form S-4 dated October 20, 1995)
10.18 Fourth Amendment to Financing and Security Agreement, dated effective as of December 29, 1995, by and
among NationsBank of Texas, N.A., Ultrak, Inc., Dental Vision Direct, Inc., Diamond Electronics, Inc., JAK
Pacific Video Warranty and Repair Services, Inc. and Ultrak Operating, L.P.
10.19 Agreement and Plan of Merger, dated effective as of December 29, 1995, by and among Exxis Technologies,
Inc. and Ultrak, Inc.
10.20 Agreement and Plan of Merger, dated effective as of December 29, 1995, between Ultrak, Inc. (Colorado) and
Ultrak, Inc. (Delaware)
10.21 Employment agreement between Ultrak, Inc. and James D. Pritchett dated May 25, 1995
10.22 Employment agreement between Ultrak, Inc. and Tim D. Torno dated May 25, 1995
11.1 Computation of Per Share Data
21.1 List of subsidiaries
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.14
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
SECOND AMENDMENT
TO
FINANCING AND SECURITY AGREEMENT
This Second Amendment to Financing and Security Agreement is executed
and entered into by NATIONSBANK OF TEXAS, N.A. ("Lender"), Ultrak, Inc., Loss
Prevention Electronics Corporation, CCTV Source International, Inc., and Dental
Vision Direct, Inc., effective as of the 9th day of February, 1995, as follows:
RECITALS
Borrowers and Lender are parties to the certain Financing and Security
Agreement dated effective September 24, 1993, as amended by the
certain First Amendment to Financing and Security dated effective
October 31, 1994 (the "Financing and Security Agreement"). Terms
defined in the Financing and Security Agreement, wherever used in this
agreement, are incorporated herein by reference and shall have the
same meanings as are prescribed by the Financing and Security
Agreement.
Borrowers and Lender have agreed to amend the Financing and Security
Agreement as provided herein.
NOW THEREFORE, for valuable consideration, the receipt of which hereby
is acknowledged, and in consideration of the mutual agreements and benefits in
the premises, the undersigned parties each hereby agrees as follows:
1. Paragraph 1.4 (definition of "Aggregate Borrowing Base") of
the Financing and Security Agreement hereby is amended to read in its entirety
as follows:
" 1.4 "AGGREGATE BORROWING BASE" at any time means an amount equal
to (i) up to a maximum of eighty-five percent (85%) of the aggregate
Eligible Accounts of Borrowers plus (ii) up to a maximum of forty-five
percent (45%) of the aggregate Eligible Inventory of Borrowers (but
limited however, to an amount not exceeding the lesser of (i)
$7,500,000.00 or (ii) fifty percent (50%) of the aggregate unpaid
balance of the Revolving Facility, less (iii) the Reserve."
2. Paragraph 1.19 (definition of "Credit Limit") of the
Financing and Security Agreement hereby is amended to read in its entirety as
follows:
"l.19 "CREDIT LIMIT" means the amount of Fifteen Million and no/100
Dollars ($15,000,000.00)."
3. Paragraph 1.41 (definition of "Loan Documents") of the
Financing and Security Agreement hereby is amended to read in its entirety as
follows:
"1.41 "LOAN DOCUMENTS" means this Agreement, each Revolving Note,
the Guaranty, each application and reimbursement agreement in respect
of letters of credit, if any, issued by Lender for the account of any
Borrower under paragraph 2.9, each other security agreement, pledge
agreement, collateral assignment or other agreement from time to time
securing the Obligations or any part thereof, and any other documents
or agreements executed in connection with any of the foregoing, and
also includes any and all renewals, extensions, modifications or
amendments of any of the foregoing."
4. Paragraph 1.53 (definition of "Reserve") of the Financing and
Security Agreement hereby is amended to read in its entirety as follows:
"l.53 "RESERVE" at any time means an amount from time to time
established by Lender in its discretion as a reserve in reduction of
the Aggregate Borrowing Base or a Company Borrowing Base in respect of
(i) costs, expenses, contingencies or other potential factors which,
in the event they should occur, could adversely affect or otherwise
reduce the anticipated amount of timely collections in payment of
Eligible Accounts or the anticipated amount of proceeds which could be
realized upon liquidation of Eligible Inventory or (ii) the aggregate
unfunded amount of all outstanding letters of credit, if any, issued
by Lender for the account of a Borrower as provided by paragraph 2.9.
The "Reserve," if any from time to time, does not represent cash
funds."
<PAGE> 2
5. Paragraph 1.61 (definition of "Unused Aggregate
Availability") of the Financing and Security Agreement hereby is amended to
read in its entirety as follows:
"l.61 "UNUSED AGGREGATE AVAILABILITY" at any time means the amount,
if any, by which the Aggregate Availability exceeds the aggregate
unpaid balance of the Revolving Facility."
6. A new paragraph 2.9 hereby is added to the Financing and
Security Agreement, immediately following paragraph 2.8 thereof, which shall
read in its entirety as follows:
"2.9 LETTERS OF CREDIT. The Revolving Facility may be utilized by
any Borrower for the issuance of commercial letters of credit or
standby letters of credit, for the account of such Borrower, subject
to the Borrower Availability applicable to such Borrower, provided
that the maximum aggregate unfunded face amount of such letters of
credit at any time outstanding (with respect to all Borrowers) shall
not at any time exceed the amount of $1,000,000.00. Each such letter
of credit shall be supported by a duly executed application and
reimbursement agreement in form satisfactory to Lender and shall be
subject to payment to Lender of an annual fee as provided therein, in
an amount equal to 3/4 percent (.75%) per annum (pro-rated for periods
of less than one year) of the unfunded face amount thereof. The
aggregate unfunded amount of letters of credit, if any, outstanding
for the account of a Borrower shall be included in the Reserve. The
amount, if any, from time to time funded by Lender for the account of
any Borrower under any such letter of credit shall be reimbursed and
paid by such Borrower to Lender on demand, or at Lender's option,
charged as a loan to such Borrower under the Revolving Facility. All
obligations and indebtedness from time to time owing to Lender by any
Borrower under the Loan Documents in connection with any letter of
credit issued by Lender hereunder, shall be included within the
Obligations."
7. Paragraph 2.8 ("Continuing Representations") of the Financing
and Security Agreement hereby is amended to read in its entirety as follows:
"2.8 CONTINUING REPRESENTATIONS. Except as may have been otherwise
disclosed to Lender in writing, each request by a Borrower for a loan
under the Revolving Facility, or for issuance of a letter of credit
under paragraph 2.9, shall constitute a continuing representation by
such Borrower that no event or condition that would be the subject of
a required notice under paragraph 6.12 or paragraph 6.13 is in
existence as of such time."
8. Subparagraph (a)(2) ("Leverage Ratio") of paragraph 6.22
("Financial Covenants") of the Financing and Security Agreement hereby is
amended to read in its entirety as follows:
"2. Leverage Ratio. Leverage Ratio shall not exceed the
specified amounts as of the end of each applicable
period as follows:
<TABLE>
<CAPTION>
Effective Period Requirement
---------------- -----------
<S> <C>
December 31, 1993 2.60 to 1.0
December 31, 1994 2.75 to 1.0"
</TABLE>
9. The Financing and Security Agreement, as amended by this
agreement, hereby is ratified and confirmed as being and continuing in full
force and effect. All references to the Financing and Security Agreement in any
of the Loan Documents shall be deemed to mean the Financing and Security
Agreement as amended by this agreement.
10. This agreement (i) shall be deemed effective prospectively as
of the effective date specified in the preamble, (ii) contains the entire
agreement among the parties and may not be amended or modified except in
writing signed by all parties, (iii) shall be governed and construed according
to the laws of the State of Texas and (iv) may be executed in any number of
counterparts, each of which shall be valid as an original and all of which
shall be one and the same agreement. A telecopy of any executed counterpart
shall be deemed valid as an original.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
2
<PAGE> 3
EXECUTED as of the effective date specified in the preamble.
NATIONSBANK OF TEXAS, N.A.
By: /s/ F. W. MCCOLLUM
------------------------------------
F. W. McCollum
Vice President
ULTRAK, INC.
By: /s/ GEORGE K.BROADY
------------------------------------
George K. Broady
President
LOSS PREVENTION ELECTRONICS CORPORATION
By: /s/ GEORGE K. BROADY
------------------------------------
George K. Broady
President
CCTV SOURCE INTERNATIONAL, INC.
By: /s/ GEORGE K. BROADY
------------------------------------
George K. Broady
President
DENTAL VISION DIRECT, INC.
By: /s/ GEORGE K. BROADY
------------------------------------
George K. Broady
President
3
<PAGE> 4
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
F.W. McCollum, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act of
the said NATIONSBANK OF TEXAS, N.A., and was executed for the purposes and
consideration therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 9th day of February, 1995.
/s/ TRACINA G. JONES
--------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Tracina G. Jones
- ------------------------------- --------------------------------------
[SEAL] (Printed Name of Notary)
TRACINA G. JONES
NOTARY PUBLIC
STATE OF TEXAS
My Comm. Exp. 5-19-96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said ULTRAK, INC., and was executed for the purposes and
consideration therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 9th day of February, 1995.
/s/ DEBORAH DUNCAN
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Deborah Duncan
- ------------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
DEBORAH DUNCAN
MY COMMISSION EXPIRES
January 9, 1999
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said LOSS PREVENTION ELECTRONICS CORPORATION, and was
executed for the purposes and consideration therein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 9th day of February, 1995.
/s/ DEBORAH DUNCAN
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Deborah Duncan
- ------------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
DEBORAH DUNCAN
MY COMMISSION EXPIRES
January 9, 1999
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said CCTV SOURCE INTERNATIONAL, INC., and was executed for
the purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 9th day of February, 1995.
/s/ DEBORAH DUNCAN
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Deborah Duncan
- ------------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
DEBORAH DUNCAN
MY COMMISSION EXPIRES
January 9, 1999
4
<PAGE> 5
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said DENTAL VISION DIRECT, INC., and was executed for the
purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 9th day of February, 1995.
/s/ DEBORAH DUNCAN
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Deborah Duncan
- ------------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
DEBORAH DUNCAN
MY COMMISSION EXPIRES
January 9, 1999
5
<PAGE> 1
EXHIBIT 10.16
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
THIRD AMENDMENT
TO
FINANCING AND SECURITY AGREEMENT
This agreement ("Third Amendment") is executed and entered
into by and among NATIONSBANK OF TEXAS, N.A. ("Lender"), ULTRAK, INC., a
Colorado corporation, DENTAL VISION DIRECT, INC., a Texas corporation, EXXIS
TECHNOLOGIES, INC., a Texas corporation, JAK PACIFIC VIDEO WARRANTY AND REPAIR
SERVICES, INC., a California corporation, and DIAMOND ELECTRONICS, INC., an
Ohio corporation, as follows:
Definitions
The following definitions shall apply throughout this Third Amendment:
"CCTV/LPEC Merger Date" means December 31, 1993.
"Diamond" means Diamond Electronics, Inc., an Ohio corporation.
"JAK" means JAK Pacific Video Warranty and Repair Services, Inc., a
California corporation.
"Effective Date" means July 18, 1995.
"Exxis" means Exxis Technologies, Inc., a Texas corporation.
"Financing and Security Agreement" means the certain Financing and
Security Agreement dated effective as of September 24, 1993 among
Lender, Ultrak, LPEC, CCTV and DVDI, as may be modified, amended,
renewed, extended or restated from time to time.
"Ultrak Parties" collectively means Ultrak, DVDI, Diamond, JAK and
Exxis.
Except as provided otherwise herein, terms defined in the Financing and
Security Agreement are incorporated herein by reference and shall have the same
meanings wherever used herein as are prescribed by the Financing and Security
Agreement, as amended by this Third Amendment.
Recitals
Lender, Ultrak and DVDI are parties to the Financing and Security
Agreement.
Subsequent to execution of the Financing and Security Agreement, CCTV
and LPEC were merged into Ultrak.
It is proposed that each of Diamond, Exxis and JAK become a party to
the Financing and Security Agreement as a Borrower, with all rights,
benefits and obligations of a Borrower thereunder.
NOW THEREFORE, for valuable consideration, the receipt of which hereby is
acknowledged, and in consideration of the mutual agreements and benefits in the
premises, the undersigned parties each hereby agrees as follows:
ARTICLE 1. SUPPLEMENTAL AGREEMENTS IN RESPECT OF CCTV/LPEC MERGER
1.1. The Ultrak Parties represent and warrant to Lender that on the
CCTV/LPEC Merger Date, CCTV and LPEC each was merged into Ultrak in a merger
transaction in which Ultrak assumed ownership of all properties (including all
Collateral), and all liabilities (including all Obligations) of CCTV and LPEC,
respectively. Lender consents to such merger (such consent to be deemed
effective as of the CCTV/LPEC Merger Date) subject to the terms of this Third
Amendment.
1.2. Contemporaneously upon execution hereof, Ultrak shall deliver
to Lender a copy of the Certificate of Merger, or comparable document,
certified by the Secretary of State of Colorado and confirming the merger
transaction referenced in paragraph 1.1.
1.3. Ultrak acknowledges that it is directly liable for all
Obligations owing by each of CCTV and LPEC, respectively, as of the CCTV/LPEC
Merger Date. Ultrak represents that all Collateral previously owned by CCTV and
LPEC, respectively, prior to the CCTV/LPEC Merger Date is now owned by Ultrak,
subject to Lender's interests under the Financing and Security Agreement. On
and after the CCTV/LPEC Merger Date, any and all Loan Documents which at any
time have been or are executed in the name of CCTV or LPEC, respectively, shall
be deemed to be the act of Ultrak.
<PAGE> 2
1.4. Ultrak agrees to execute such additional documentation in
connection with the foregoing as Lender may reasonably request in order to
protect and continue Lender's rights under the Loan Documents.
ARTICLE II. SUPPLEMENTAL AGREEMENTS IN RESPECT OF DIAMOND, EXXIS AND JAK
2.1. The Financing and Security Agreement hereby is amended, as of
the Effective Date, to add a new paragraph 1.21a immediately following
paragraph 1.21, a new paragraph 1.27a immediately following paragraph 1.27, and
a new paragraph 1.37a immediately following paragraph 1.37, respectively, each
of which shall read in its entirety as follows:
"1.21a "Diamond" means Diamond Electronics, Inc., an Ohio
corporation, whose chief executive office is located at 1220
Champion Circle, Suite 100, Carrollton, Texas 75006."
"1.27a "Exxis" means Exxis Technologies, Inc., a Texas
corporation, whose chief executive office is located at 1220
Champion Circle, Suite 100, Carrollton, Texas 75006."
"1.37a "JAK" means JAK Pacific Video Warranty and Repair
Services, Inc., a California corporation, whose chief
executive office is located at 1220 Champion Circle, Suite
100, Carrollton, Texas 75006."
2.2. Paragraph 1.7 (definition of "Borrower") hereby is amended to
read in its entirety as follows:
"1.7 "Borrower"separately and severally means each of
Ultrak, DVDI, JAK, Diamond and Exxis, respectively."
2.3. Paragraph 1.9 (definition of "Borrowers") hereby is amended to
read in its entirety as follows:
"1.9 "Borrowers"collectively means all of Ultrak, DVDI,
JAK, Diamond and Exxis, collectively together. "
2.4. Contemporaneously upon execution hereof, Diamond, Exxis and
JAK each shall deliver to Lender each of the items (pertaining to themselves,
respectively) as are itemized by subparagraphs (a) through (n) of paragraph 4.1
of the Financing and Security Agreement.
2.5. Exhibit 3.4 ("Location of Collateral") to the Financing and
Security Agreement hereby is amended and restated, as of the Effective Date, to
read in its entirety as shown in Exhibit "A" attached hereto which is
incorporated herein by reference. The second sentence of Paragraph 3.4
("Location of Collateral") of the Financing and Security Agreement hereby is
amended and restated as follows:
"Exhibit 3.4 attached hereto correctly identifies the locations where
all Inventory and Equipment will be maintained, and if any such
location is a leased location, the name and address of the owner
thereof."
2.6. Pursuant to paragraph 3.17 of the Financing and Security
Agreement: Each Borrower other than Diamond, Exxis and JAK (i) hereby agrees
that the continuing security interest and lien previously granted to Lender by
such Borrower under such paragraph 3.17 shall secure all Obligations from time
to time owing by each of the other Borrowers, respectively (including without
limitation Diamond, Exxis and JAK), and as additional security, hereby grants
to Lender a continuing security interest and lien in and to all of its right,
title and interest in the Collateral to secure all Obligations from time to
time owing by each of the other Borrowers, respectively (including without
limitation Diamond, Exxis and JAK) (such grant to be governed by, and entitled
to all of the benefits of, the Financing and Security Agreement as provided in
such paragraph 3.17), (ii) each Borrower other than Diamond, Exxis and JAK
shall execute and deliver for the benefit of Lender guaranty agreements
pursuant to which such party shall guarantee to Lender the prompt payment and
performance of all Obligations from time to time owing by Diamond, Exxis and
JAK, respectively (such guaranty agreements to be in form and substance
satisfactory to Lender and delivered to Lender contemporaneously upon execution
of this Third Amendment) and (iii) each of Diamond, Exxis and JAK,
respectively, hereby grants to Lender a continuing security interest and lien
in and to all of its right, title and interest in the Collateral to secure all
Obligations of each other Borrower from time to time arising on or after the
Effective Date, respectively (such grants to be governed by, and entitled to
all of the benefits of the Financing and Security Agreement), and each of
Diamond, Exxis and JAK, respectively, shall execute and deliver for the benefit
of Lender a guaranty agreement pursuant to which such party shall guarantee to
Lender the prompt payment and performance of all Obligations of each other
Borrower from time to time arising on or after the Effective Date (such
guaranty agreements to be in form and substance satisfactory to Lender),
provided that it is agreed that (i) such security interest and guaranty
agreements shall not secure any Obligations existing and owing as of the close
of Lender's business on the Business Day preceding the Effective Date (for this
purpose it is agreed that payments applied on or after the Effective Date to
Obligations of any Borrower shall be deemed applied first in reduction of
Obligations of
2
<PAGE> 3
such Borrower existing as of the close of Lender's business on the Business Day
preceding the Effective Date). Each Borrower hereby acknowledges that its
agreement to the provisions of this paragraph is in consideration of the
availability of loans to each of the other Borrowers under the Financing and
Security Agreement and is not required by Lender as a condition to the
availability of loans or extensions of credit to such Borrower.
2.7. As of the Effective Date, Exhibit 5.6 ("Share Ownership") of
the Financing and Security Agreement hereby is deemed to be amended to read in
its entirety as provided in Exhibit "B" attached hereto.
2.8. Each of Diamond, Exxis and JAK has delivered to Lender its
balance sheet, income statement and statement of cash flow as of its fiscal
year ending December 31, 1994, and its balance sheet and income statement as of
the monthly period ending May 31, 1995. Such financial statements were prepared
in accordance with GAAP, and are correct and complete, and fairly present the
financial condition of such Borrowers as of such dates and the results of their
respective operations for the periods covered thereby. There has been no
material adverse change in the business, properties or financial condition of
Diamond or Exxis since the dates of the foregoing financial statements,
respectively.
2.9. Diamond, Exxis and JAK each hereby represents and warrants to
Lender each of the representations and warranties provided by the following
paragraphs of the Financing and Security Agreement, as though separately set
forth herein: Paragraphs 3.3, 3.4 (as amended by paragraph 2.5 of this Third
Amendment), 3.6 and 3.9, and each of paragraphs 5.1 through 5.5, paragraph 5.6
(as amended by paragraph 2.7 of this Third Amendment), paragraph 5.7 and each
of paragraphs 5.9 through 5.20.
2.10. On and after the Effective Date, each of Diamond, Exxis and
JAK shall be deemed to be a party to the Financing and Security Agreement (as
supplemented by this Third Amendment) as a Borrower for all purposes, and
Diamond, Exxis and JAK each hereby covenants and agrees to perform all
obligations of a Borrower thereunder, subject to the terms of this Third
Amendment.
ARTICLE III. ADDITIONAL AMENDMENTS
3.1 The Financing and Security Agreement hereby is amended to
restate or add, as the case may be, the following definitions in Article 1, as
follows:
"1.00 "ADJUSTED LIBOR RATE" means an interest rate per annum equal
to the quotient of (i) the London Interbank Offered Rate, divided by
(ii) a percentage equal to 100.0% less the Eurodollar Reserve
Percentage.
"1.14 "COLLATERAL" means collectively all of the foregoing, now
owned and hereafter acquired: Receivables, Inventory, Equipment, and
all computer programs, applications, discs, software, files and other
records pertaining to any Collatera1. Collateral also includes all
proceeds of any of the foregoing at any time arising, including
insurance proceeds."
"1.18 "CONTRACT TERM" means the period specified in the preamble of
this Agreement and continuing through July 31, 1997
"1.19 "CREDIT LIMIT" means the amount of Seventeen Million Five
Hundred Thousand and no/100 Dollars ($17,500,000.00)."
"1.24a "EQUIPMENT" means all equipment now owned and hereafter
acquired, including without limitation all machinery, furniture and
other goods used or bought for use in business and all other property
which is properly classified as equipment pursuant to the Code, both
now owned and hereafter acquired.
"1.26a "EURODOLLAR BUSINESS DAY" means any Business Day on which
transactions in United States Dollars are conducted in the London
interbank market.
"1.26b "EURODOLLAR RESERVE PERCENTAGE" shall mean the maximum reserve
requirement (including without limitation, any basic, supplemental,
marginal and emergency reserves) (expressed as a percentage)
applicable to member banks of the Federal Reserve System in respect of
"Eurocurrency Liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System, or such additional,
substituted or amended reserve requirement as may be hereafter
applicable to member banks of the Federal Reserve System."
"1.35a "INTEREST PERIOD" means the period commencing on the first
effective Eurodollar Business Day of a LIBOR Contract Rate election
under paragraph 2.2a and ending one, two, three or six months
thereafter, as designated by a Borrower at the time of such election,
provided that (i) if any Interest Period would otherwise end on a day
which is not a Eurodollar Business Day, then such Interest Period
shall be extended to the next succeeding Eurodollar Business Day
unless to do so would extend such Interest Period into a subsequent
calendar month, in which event such Interest Period shall end on the
next
3
<PAGE> 4
preceding Eurodollar Business Day, and (ii) any Interest Period that
begins on the last day of a calendar month, or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period, shall end on the last Eurodollar Business
Day of the last calendar month of such Interest Period, and provided
further, that no Interest Period may end on a day which is after the
last day of the Contract Term."
"1.40a "LIBOR CONTRACT RATE" means the Adjusted LIBOR Rate plus two
and one-half percent (2.50%) per annum."
"1.40b "LIBOR RATE OPTION" means any election by a Borrower, in
accordance with paragraph 2.2a to have any Tranche bear interest
according to the LIBOR Contract Rate."
"1.40c "LONDON INTERBANK OFFERED RATE" means, with respect to any
LIBOR Rate Option for the applicable Interest Period, the rate of
interest per annum (rounded upward, if necessary, to the next higher
1/1 6th of one percent) determined by Lender, in accordance with its
customary general practice from time to time, to be the rate at which
deposits in immediately available funds in Dollars are or would be
offered or quoted by Lender to major banks in the London interbank
market, as of approximately 11:00 a.m. London time, or as soon
thereafter as practicable, on the second Business Day immediately
preceding the first day of such Interest Period, for a term comparable
to such Interest Period and in an amount equal to the amount of the
Tranche to be the subject of such LIBOR Rate Option. If no such offers
or quotes are generally available for such amount, then Lender shall
be entitled to determine the London Interbank Offered Rate for any
such LIBOR Rate Option by estimating in its reasonable judgment the
per annum rate (described above) that would be applicable if such
quotes or offers were generally available."
"1.41 "LOAN DOCUMENTS" means this Agreement, each Revolving Note,
each Term Note, each Guaranty, the Real Property Collateral Documents
and any other documents or agreements executed in connection
therewith, and also includes any and all renewals, extensions,
modifications or amendments of any of the foregoing."
"1.49a "PRETAX NOT INCOME" for any period means net income for such
period prior to accruing for appropriate taxes but otherwise
determined as provided by the definition of "Net Income" in paragraph
6.22(b)."
"1.51a "REAL PROPERTY COLLATERAL" means the certain real property
described within Exhibit 1.51 a."
"1.51b "REAL PROPERTY COLLATERAL DOCUMENTS" means the certain
[DESCRIBE DEED OF TRUST OR MORTGAGE] Deed of Trust of even date
herewith executed by Borrower creating a deed of trust lien in the
Real Property Collateral for the benefit of Lender, together with all
affidavits, certificates and other documents executed by Borrower in
connection therewith.
"1.59a "TERM FACILITY" means the loan facility established by this
Agreement pursuant to Article IIA."
"1.59b "TERM FACILITY CREDIT LIMIT" means the maximum amount in
respect of the Term Facility applicable to each respective Borrower,
as follows: (i) $500,000.00 for Ultrak, (ii) $100,000.00 for DVDI,
(iii) $100,000.00 for Exxis, (iv) $1,800,000.00 for Diamond and (v)
$0.00 (zero dollars) for JAK.
"1.59c "TERM FACILITY BORROWING BASE" means (i) with respect to any
Borrower other than Diamond, an amount equal to seventy five percent
(75.0%) of the forced sale liquidation value of Equipment owned by
such Borrower and (ii) with respect to Diamond, an amount equal to the
sum of seventy five percent (75.0%) of the forced sale liquidation
value of Equipment owned by Diamond plus seventy five percent of the
fair market value of the Real Property Collatera1. The forced sale
liquidation value of Equipment and the fair market value of the Real
Property Collateral, for purposes of determining the Term Facility
Borrowing Base, shall be as determined by Lender from time to time in
its discretion.
"1.59d "TERM NOTE" shall mean a promissory note executed by a
Borrower payable to the order of Lender evidencing loans to such
Borrower under the Term Facility, as provided in paragraph 2A.1 and in
form satisfactory to Lender, and includes any and all renewals,
extensions, amendments or modifications thereof."
"1.59e "TRANCHE" means any portion of the Revolving Facility the
principal amount of which is subject to election of the LIBOR Contract
Rate in accordance with paragraph 2.2a."
3.2 The first sentence of paragraph 1.17 (definition of
"Contract Rate") of the Financing and Security Agreement hereby is amended to
read as follows:
"CONTRACT RATE" means, on any day, a floating annual rate of interest
calculated on the basis of actual days elapsed but computed as if each
year consists of 360 days, equal to
4
<PAGE> 5
the sum of the Prime Rate effective as of the first day of the
calendar month in which such day falls plus (i) in the case of the
Revolving Facility, one-quarter of one percent (0.25%) and (ii) in the
case of the Term Facility, one-quarter of one percent (0.25%)."
3.3 Paragraph 1.21 (definition of "Eligible Accounts") of the
Financing and Security Agreement hereby is amended to add the following,
immediately after the existing last sentence thereof:
"At Lender's discretion, Lender may consider for eligibility accounts
owing by account debtors located outside the United States, provided,
that the aggregate unpaid amount (in United States dollars) (i) of all
such accounts at no time exceeds $200,000.00 and (ii) for all such
accounts owing by any single account debtor at no time exceeds
$100,000.00, and provided further, that the determination of whether
to include any such accounts as Eligible Accounts shall at all times
be and remain in Lender's sole discretion."
3.4 The Financing and Security Agreement hereby is amended to add
Exhibit 1.52a entitled "Real Property Collateral" in the form attached as
Exhibit "C" attached hereto.
3.5 In paragraph 1.4 (definition of "Aggregate Borrowing Base")
and paragraph 1.16 (definition of "Company Borrowing Base"), the dollar amount
"$5,000,000.00" hereby is amended, in each case, to read "$8,750,000.00".
3.6 The Financing and Security Agreement is amended to add a new
paragraph 2.2a (entitled "LIBOR Option") and a new paragraph 2.2b (entitled
"Interest Rate Reduction"), respectively, immediately following paragraph 2.1,
each of which shall read in its entirety as follows:
"2.2a LIBOR OPTION. Subject to the terms and provisions of
this Agreement, and in lieu of the interest rate otherwise applicable
under paragraph 2.1, each Borrower shall have the option to elect a
rate per annum equal to the lesser of (i) the LIBOR Contract Rate or
(ii) the Maximum Rate as being applicable to any Tranche during any
Interest Period, provided, that any such Tranche shall be in the
minimum amount of $1,750,000.00, and no more than four (4) separate
Tranches may exist in the aggregate at any one time. Any Borrower may
make such election at any time by written notice, in form satisfactory
to Lender, delivered to Lender no later than two (2) Eurodollar
Business Days prior to the beginning of the Interest Period to which
such election shall be applicable, therein stating (i) the Interest
Period selected, and the date such Interest Period is to begin, and
(ii) the principal amount of the Tranche to be subject to such
election. Any such written notice of election shall be irrevocable.
Accrued interest on the principal amount of each Tranche shall be
payable monthly in arrears on the last day of each calendar month and
on the last day of the Interest Period applicable to such Tranche. If,
with respect to any election under this paragraph, Lender determines
that deposits in United States Dollars, in applicable amounts, are not
being offered to Lender, or other major United States banks of
comparable size to Lender, in the London interbank Eurodollar market
for the applicable Interest Period, or Lender determines that the
LIBOR Contract Rate will not adequately and fairly reflect the cost to
Lender of maintaining or funding the applicable portion of the Loans
relative to such election for such Interest Period, then at Lender's
option, Lender may give notice to Borrowers and thereby suspend the
option to elect the LIBOR Contract Rate, pending any subsequent
reinstatement in Lender's discretion, and with respect to any such
election then applicable to any portion of the Loans, require that
such portion either be repaid in full (in which event any amounts
otherwise payable in the event of prepayment of a Tranche as provided
below shall not be applicable) or converted to bear interest according
to the interest rate provided in paragraph 2.1. All unpaid principal,
if any, of loans with respect to which no such election is made, as
provided herein, shall automatically be deemed to be subject to, and
shall accrue interest at, the interest rate as provided by paragraph
2.1. Except as results from application of proceeds of Receivables as
provided by paragraph 3.8, prepayment of a Tranche shall not be
permitted without the prior written consent of Lender. Should any
prepayment of a Tranche, or any portion thereof, occur (whether as a
result of such applications or by consent of Lender, or otherwise),
then within fifteen (15) days of Lender's request therefor, Borrowers
shall pay to Lender any loss or expense which Lender may incur or
sustain as a result of any such prepayment. Lender's statement of the
amount of such loss or expense, prepared in reasonable detail by
Lender, shall be conclusive and binding for all purposes, absent
manifest error or gross negligence. Calculation of such amounts shall
be made as though Lender shall have actually funded or committed to
fund the relevant Tranche through the purchase of an underlying
deposit in an amount equal to the amount of such Tranche and having a
maturity comparable to the related Interest Period (provided, however,
that it is understood that Lender may fund, or make provision for
funding, any Tranche in any manner as Lender may determine in its
discretion)."
"2.2b INTEREST RATE REDUCTION. The interest rate(s)
otherwise applicable to the Revolving Facility under paragraph 2.2a or
paragraph 2.2b, as the case may be, shall be subject to reduction on
the conditions, and in specified amounts, as follows:
5
<PAGE> 6
<TABLE>
<CAPTION>
==================================================================================
CONDITIONS AMOUNT OF RATE
REDUCTION
No Event of Default exists, and: =================================
Contract Rate LIBOR
Contract Rate
==================================================================================
<S> <C> <C>
Tangible Net Worth at December 31, 1995
equals or exceeds $16,000,000.00 and
- ---------------------------------------------- One-quarter One-half
Pretax Net Income at for fiscal year ending of of
December 31, 1995 equals or exceeds one percent one percent
$6,000,000.00 and (0.25%) (0.5%)
- ----------------------------------------------
Leverage Ratio at December 31, 1995 does
not exceed 2.50 to 1.00.
==================================================================================
</TABLE>
Once achieved, any such reduction shall be permanent, subject to the
other terms and conditions of this Agreement. Compliance with the
above conditions shall be measured and determined according to the
annual audited financial statements delivered to Lender under
paragraph 6.5. Any such reduction shall be deemed effective as of the
first day of the calendar month next following the calendar month in
which such financial statements are delivered to Lender."
3.7 Paragraph 2.5 ("Early Termination of Revolving Facility by
Borrower") hereby is amended and restated to read in its entirety as follows:
"EARLY TERMINATION OF REVOLVING FACILITY. Borrowers
acknowledge that termination of the Revolving Facility at any time
prior to expiration of the Contract Term would result in the loss by
Lender of benefits under this Agreement, and that the damages incurred
by Lender as a result of such termination would be difficult and
impractical to ascertain. Therefore, in the event of termination of
the Revolving Facility at any effective time prior to expiration of
the Contract Term, then, for the privilege of any such termination and
as a condition to the effectiveness thereof, Borrowers jointly and
severally agree to pay to Lender a sum certain, as liquidated damages,
equal to the following Applicable Percentage (herein defined) of the
Revolving Credit Limit, which amount Borrowers and Lender acknowledge
to be the best estimate of the amount necessary to fairly and
reasonably compensate Lender for its damages resulting from such
termination. As used herein, "Applicable Percentage" means one percent
(1.0%), provided, that the Applicable Percentage shall automatically
reduce by fifty-five one-thousandths percent (0.055%) beginning on
January 18, 1996 and by like amounts on the numerically corresponding
day of each subsequent calendar month thereafter. No such payment will
be applicable with respect to (i) any reduction under the Revolving
Facility which is a result of proceeds received by a Borrower through
capital contributions or which does not result in early termination
and total repayment of the Revolving Facility, (ii) renewal or
refinancing of the Obligations by Lender, (iii) early termination of
the Revolving Facility and total payment of the Obligations following
any reduction in the advance rate generally applicable for determining
the Company Borrowing Base or the Aggregate Borrowing Base (a) in
respect of Eligible Accounts to an amount less than eighty percent
(80%) or (b) in respect of Eligible Inventory to an amount less than
forty-five percent (45%), provided that Borrowers notify Lender in
writing of such intended termination within thirty (30) days following
the effective date of any such reduction, and such termination and
total payment are consummated within ninety (90) days after such
effective date of reduction or (iv) early termination of the Revolving
Facility and total payment of the Obligations following any
notification by Lender of suspension of the LIBOR Option as provided
by paragraph 2.2a, provided, that Borrowers notify Lender in writing
of such intended termination within thirty (30) days following the
effective date of any such suspension, and such termination and total
payment are consummated within ninety (90) days after such effective
date of suspension."
3.8 A new Article IIA (entitled "Term Loan Facility") hereby is
added to the Financing and Security Agreement, immediately following the
conclusion of Article II ("Revolving Credit Facility"), which shall read in its
entirety as follows:
"ARTICLE IIA. TERM FACILITY
2A.1 LOANS. Subject to and on the terms and conditions
provided in this Agreement, Lender hereby approves a loan in favor of
each Borrower, secured by the Collateral, in an aggregate amount up to
the lesser of (i) the Term Facility Borrowing Base applicable to each
such Borrower or (ii) the Term Facility Credit Limit applicable to
each such Borrower, respectively, provided, that the aggregate
principal amount loaned to all Borrowers under the Term Facility shall
not at any time exceed Two Million Five Hundred Thousand and no/l00
dollars ($2,500,000.00). Each loan to a Borrower under the Term
Facility, and all accrued interest thereon, shall be payable as
provided in this Agreement
6
<PAGE> 7
and additionally evidenced by a Term Note executed by such Borrower.
Each loan to a Borrower under the Term Facility shall be funded upon
request of such Borrower and upon satisfaction of all requirements
prescribed by paragraph 4.3 or at such other time as may be determined
by mutual agreement.
2A.2 INTEREST. The unpaid principal from day to day
outstanding under the Term Facility shall bear interest at the lesser
of (i) the Contract Rate or (ii) the Maximum Rate, provided, however
that, subject to the provisions of paragraph 9.10, in the event that
the Contract Rate shall exceed the Maximum Rate at any time and
thereafter the Contract Rate shall be less than the Maximum Rate, the
rate of interest applicable hereunder shall remain at the Maximum Rate
until the aggregate accrued interest to date under the Term Facility
equals the amount that would have accrued had the Contract Rate at all
times remained in effect. Interest shall be calculated on a 360
day/year basis, subject to the Maximum Rate. All past due principal
and all past due accrued interest under the Term Facility shall accrue
interest at the Maximum Rate.
2A.3 REPAYMENT TERMS AND MATURITY. Accrued interest under the
Term Facility shall be paid monthly on the last day of each calendar
month during the time any loan thereunder is outstanding. Principal of
each loan under the Term Facility shall be payable as follows: (i)
equal monthly installments in an amount equal to the amount required
to fully amortize the face principal amount of the Term Note
evidencing same over the remaining term of a hypothetical amortization
period of 120 months commencing on September 1, 1995, such monthly
payments to begin on the later of September 1, 1995 or the first day
of the calendar month next following the calendar month in which such
Term Note is made effective, and continuing on the first day of each
calendar month thereafter through and including July 1, 1997, (ii)
followed by a final installment of all remaining unpaid principal on
the last day of the Contract Term. Subject to Lender's rights under
Article VIII, the Term Facility shall terminate and all outstanding
principal, unpaid accrued interest and other obligations thereunder
shall be due and payable in full on July 31, 1997. To the extent that
any accrued interest or principal payment owing by any Borrower under
the Term Facility is not paid on its due date as specified above,
Lender may at its option (but with no obligation to do so), add the
amount thereof to the unpaid principal due by such Borrower under the
Revolving Facility, in which event such amount due under the Term
Facility will be deemed paid and the aggregate amount thereof shall be
treated as a loan to such Borrower under the Revolving Facility.
2A.4 MANDATORY INTERIM PRINCIPAL PAYMENTS. If at any time,
from time to time, the unpaid principal amount outstanding and owing
by a Borrower under the Term Facility exceeds the Term Facility
Borrowing Base applicable to such Borrower then, within thirty (30)
days following written request or demand by Lender, such Borrower
shall make an immediate payment of principal in reduction of its loan
under the Term Facility in an amount not less than the amount
necessary to eliminate such excess as of the time of such payment. All
such amounts, if any, payable by such Borrower shall be deemed to be
payable on demand (subject to such thirty (30) day period), and Lender
shall have the right at any time (after the expiration of such thirty
(30) day period) (but no obligation) to charge such amount as a loan
to such Borrower under the Revolving Facility, or offset same against
any amount owing by Lender to such Borrower, without prior notice. If
at any time, from time to time, the aggregate unpaid principal amount
outstanding and owing by all Borrowers under the Term Facility exceeds
the aggregate amount of $2,500,000.00, Borrowers jointly and severally
agree to make an immediate payment of principal under the Term
Facility in an amount not less than the amount of such excess, which
may be applied by Lender in reduction of the Term Facility in Lender's
discretion. All such amounts, if any, shall be deemed to be payable on
demand, and Lender shall have the right (but no obligation) to charge
such amount as a loan to any Borrower under the Revolving Facility, or
offset same against any amount owing by Lender to any Borrower,
without prior notice.
2A.5 AUTOMATIC MATURITY AND REQUIRED PAYMENT. Notwithstanding
the foregoing, each loan under the Term Facility shall automatically
mature and be due and payable in full, without notice, upon the
earlier of (i) expiration of the Contract Term or (ii) any earlier
termination of the Revolving Facility, in which event each Borrower
agrees to pay all of its Obligations under Term Facility in ful1.
2A.6 PREPAYMENT. Any Borrower shall have the right at any time
and from time to time to make prepayments on the principal amount
borrowed under the Term Facility, in whole or in part, provided, that
(i) all partial prepayments shall be applied in such manner as Lender
may determine.
2A.7 PURPOSE AND USE OF FUNDS. The Term Facility shall be used
for the following purpose: Refinancing of existing indebtedness.
3.9 The first sentence of paragraph 3.6 ("Collateral Reports") is
amended to read as follows:
"At such times and according to such frequency as may be determined by
mutual agreement, and at such other times as Lender may request, each
Borrower shall execute
7
<PAGE> 8
and deliver to Lender, in form satisfactory to Lender, a collateral
report setting forth a certification of Eligible Accounts and Eligible
Inventory, and calculation of its Company Borrowing Base, in form
prescribed by Lender."
3.10 The Financing and Security Agreement hereby is amended to add
a new paragraph 3.9a (entitled "Real Property Collateral"), immediately
following paragraph 3.9, which shall read in its entirety as follows:
"3.9a REAL PROPERTY COLLATERAL. Diamond shall grant a deed of
trust lien or mortgage for the benefit of Lender covering the
Real Property Collateral, which at all times shall be
maintained as a first priority deed of trust lien or mortgage
in favor of Lender, securing all of the Obligations, as
provided in the Real Property Collateral Documents. Prior to
funding under the Term Facility with respect to any Real
Property Collateral, Diamond shall provide Lender, at
Borrower's expense, with (i) an environmental site assessment,
prepared by a credentialed environmental site consultant
acceptable to Lender and in form satisfactory to Lender,
confirming to Lender the status of compliance with
Environmental Requirements with respect to such Real Property
Collateral, (ii) a mortgagee's policy of title insurance
written by a title insurance company acceptable to Lender and
in form satisfactory to Lender, containing no exceptions other
than as are acceptable to Lender and (iii) a boundary survey,
performed and certified to Lender by a credentialed registered
surveyor acceptable to Lender, and in form satisfactory to
Lender. As promptly as possible, Lender shall obtain an
updated appraisal of the Real Property Collateral, on a
valuation basis acceptable to Lender, prepared by a
credentialed appraiser acceptable to Lender, and complying
with applicable law and in form satisfactory to Lender.
Lender may obtain an updated appraisal with respect to the
Real Property Collateral at such times as Lender may request
in order to comply with applicable law or internal policy
requirements. Diamond shall pay all reasonable costs and
expenses incurred by Lender in obtaining any and all such
updated appraisals."
3.11 Paragraph 3.10 ("Guaranty") hereby is amended and restated to
read in its entirety as follows:
"3.10 GUARANTY. Guarantor shall execute and deliver to Lender
a guaranty agreement, in form and substance satisfactory to Lender,
pursuant to which Guarantor shall guarantee prompt payment and
performance when due of all Obligations; provided, that in the event
Borrowers meet the conditions for interest rate reduction prescribed
by paragraph 2.2b, such guaranty shall be deemed released and
discharged, in which event, upon Guarantor's written request and
certification to Lender that Borrowers have met such conditions,
Lender will execute and deliver to Guarantor a written release of such
guaranty."
3.12 The Financing and Security Agreement hereby is amended to add
a new paragraph 4.3 (entitled "Loans Under Term Facility"), immediately
following paragraph 4.1, which shall read in its entirety as follows:
"4.3 LOANS UNDER TERM FACILITY. As a condition to each loan to
a Borrower under the Term Facility, each of the following requirements
must be satisfied in Lender's discretion: (a) such Borrower shall be
current with respect to the delivery of all items as required under
paragraph 4.1, (b) the amount outstanding to such Borrower under the
Term Facility, immediately following funding of the amount of loan
requested, will not exceed the Term Facility Credit Limit or the Term
Facility Borrowing Base applicable to such Borrower, and the aggregate
amount outstanding to all Borrowers under the Term Facility shall not
exceed $2,500,000.00, (c) Lender shall have received the Real Property
Collateral Documents, and the items with respect thereto required by
paragraph 3.9a, in form satisfactory to Lender, (d) all
representations and warranties contained in Article III and Article V
hereof shall be true, correct and complete in all material respects
(as determined by Lender in its sole discretion), and (a) no Event of
Default shall have occurred and be continuing, or shall result from
such loan and no other event or condition which would be the subject
of a required notice under paragraph 6.13 shall be in existence. Any
request for funding under the Term Facility at a time when any of the
foregoing requirements is not satisfied may be declined by Lender
without prior notice."
3.13 Subparagraph (a) of paragraph 6.22 ("Financial Covenants")
hereby is amended to add, or modify, the following, as noted:
(a) Subparagraph (all ("Tangible Net Worth") is amended
to add the following, immediately after the last line
thereof:
<TABLE>
<S> <C>
"December 31, 1995 $12,000,000.00
December 31, 1996 $16,000,000.00"
</TABLE>
(b) Subparagraph (a)2 ("Leverage Ratio") is amended to
add the following, immediately after the last line
thereof:
8
<PAGE> 9
<TABLE>
<S> <C>
"December 31, 1995 2.75 to 1.0
December 31, 1996 2.50 to 1.0
All subsequent periods 2.25 to 1.0"
</TABLE>
(c) Subparagraph (a)3 ("Capital Expenditures") is amended
to add the following, immediately after the last line
thereof:
<TABLE>
<S> <C>
"Fiscal year ending December 31, 1995 $1,500,000.00
Fiscal year ending December 31, 1996 $2,000,000.00
Fiscal quarter ending July 31, 1997 $2,000,000.00"
</TABLE>
(d) Subparagraph (a)4 ("Interest Coverage Ratio") is
amended to add the following, immediately after the
last line thereof:
<TABLE>
<S> <C>
"December 31, 1995 4.25 to 1.0
December 31, 1996 4.50 to 1.0"
</TABLE>
(e) Subparagraph (a)5 ("Net Income") is amended to add
the following, immediately after the last line
thereof:
<TABLE>
<S> <C>
"Fiscal year ending December 31, 1995 $3,000,000.00
Fiscal year ending December 31, 1996 $4,000,000.00"
</TABLE>
3.14 Subparagraph (h) and subparagraph (i) of paragraph 7.1 ("Event
of Default") of the Financing and Security Agreement hereby are amended and
restated to read in their entirety, respectively, as follows:
"(h) The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against
or with respect to any of the Collateral or the Real Property
Collateral involving an amount in controversy in excess of
$50,000.00;"
"(i) The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against
or with respect to any Borrower's property not included within
the Collateral or the Real Property Collateral if the amount in
controversy is excess of $100,000.00 or if the outcome,
pendency or effect thereof is reasonably expected to
result in or cause a Material Adverse Effect;"
3.15 Paragraph 9.1 ("Effective Date; Termination") of the Financing
and Security Agreement hereby is amended and restated to read in its entirety as
follows:
"9.1 EFFECTIVE DATE; TERMINATION. This Agreement shall
become effective upon acceptance by Lender, as of the effective date
specified in the preamble of this Agreement and, subject to all other
provisions of the Loan Documents, shall continue in full force and
effect through expiration of the Contract Term at which time the
Revolving Facility and the Term Facility each shall terminate without
further notice. Notwithstanding any termination or notice of
termination, the Obligations and all rights and remedies of Lender
hereunder with respect thereto, including without limitation all
rights and remedies with respect to the Collateral shall remain in
full force and effect until the Obligations have been paid in ful1."
3.16 The amendments specified in this Article III are in addition
to, and shall be deemed to become effective simultaneously with, those
specified in Article II.
ARTICLE IV. GENERAL
4.1 In consideration of this Third Amendment and increase of the
Credit Limit as provided herein, Borrowers jointly and severally agree to pay
to Lender a Credit Limit increase fee in the amount of $12,500.00 [which is
calculated by multiplying the sum of (i) the aggregate amount of increase of
the Credit Limit hereunder by one-half of one percent (.005%)], which shall be
payable upon execution hereof.
4.2. Contemporaneously upon execution of this Third Amendment, each
of the Ultrak Parties shall deliver to Lender: (i) a copy of corporate
resolutions (in form satisfactory to Lender) approving this Third Amendment,
authorizing the transactions contemplated hereby, and authorizing and directing
a named officer or officers to execute and deliver this Third Amendment and any
related documents contemplated hereby to be executed by such party, duly
adopted by the board of directors, accompanied by the certificate of the
corporate secretary, dated as of the Effective Date, that such copy is a true
and complete copy of resolutions duly adopted by the board of directors, and
that such resolutions have not been amended, modified, or revoked in any
respect and are in full force and effect as of the date hereof, (ii) an opinion
of counsel in form satisfactory to Lender and (iii) such related documents as
Lender may reasonably request in connection with this Third Amendment.
9
<PAGE> 10
4.3 Each of the Ultrak Parties represents that, as of the
Effective Date, ownership of the Ultrak Parties is as reflected in Exhibit "B"
attached hereto, each of the Ultrak Parties is in compliance with all
requirements under the Financing and Security Agreement and that no Event of
Default exists thereunder.
4.4 The Ultrak Parties and Lender each represents to the other
that all necessary corporate action has been taken to authorize its execution
and performance of this Third Amendment.
4.5 The Loan Documents, supplemented as provided herein, hereby
are ratified and confirmed as being and remaining valid and in full force and
effect in accordance with their respective terms, as so supplemented. As of the
Effective Date, all references in the Loan Documents to the Financing and
Security shall mean the Financing and Security Agreement as amended by this
Third Amendment.
4.6 This Third Amendment (i) shall be deemed effective
prospectively as of the Effective Date, (ii) contains the entire agreement
among the parties and may not be amended or modified except in writing signed
by all parties, (iii) shall be governed and construed according to the laws of
the State of Texas and (iv) may be executed in any number of counterparts, each
of which shall be valid as an original and all of which shall be one and the
same agreement. A telecopy of any executed counterpart shall be deemed valid as
an original.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED and made effective as of the Effective Date.
ULTRAK, INC.
By: /s/ TIM D. TORNO
------------------------------------
Tim D. Torno
Vice President
DENTAL VISION DIRECT, INC.
By: /s/ TIM D. TORNO
------------------------------------
Tim D. Torno
Vice President
JAK PACIFIC VIDEO WARRANTY AND REPAIR
SERVICES, INC.
By: /s/ TIM D. TORNO
------------------------------------
Tim D. Torno
Vice President
DIAMOND ELECTRONICS, INC.
By: /s/ TIM D. TORNO
------------------------------------
Tim D. Torno
Vice President
EXXIS TECHNOLOGIES, INC.
By: /s/ TIM D. TORNO
------------------------------------
Tim D. Torno
Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ FORREST W. MCCOLLUM
------------------------------------
Forrest W. McCollum
Vice President
10
<PAGE> 11
CONSENT BY GUARANTOR
The undersigned hereby consents to the foregoing Third Amendment to Financing
and Security Agreement and confirms that the certain Guaranty by Individual
dated September 23, 1993 previously executed by the undersigned for the benefit
of Lender hereby is amended and restated as evidenced by the certain Amended
and Restated Guaranty by Individual of even date herewith executed by the
undersigned for the benefit of Lender.
/s/ GEORGE K. BROADY
----------------------------------------
George K. Broady, individually
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Forrest W. McCollum, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of said NATIONSBANK OF TEXAS, N.A., and that he executed the same
for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ----------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said ULTRAK, INC. and that he executed the same for the purposes and
considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ----------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said DENTAL VISION DIRECT, INC., and that he executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ----------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
11
<PAGE> 12
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC., and that he
executed the same for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ----------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said DIAMOND ELECTRONICS, INC. and that he executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ----------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said EXXIS TECHNOLOGIES, INC., and that he executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ SHERRI D. BENDER
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ----------------------------- ----------------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
GEORGE K. BROADY, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 18th day of July, 1995.
/s/ JEANETTE COURTRIGHT
----------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
10/1/97 Jeanette Courtright
- ----------------------------- ----------------------------------------
(Printed Name of Notary)
12
<PAGE> 13
EXHIBIT "A"
TO
THIRD AMENDMENT TO FINANCING AND SECURITY AGREEMENT
---------------------------------------------------
EXHIBIT 3.4
FINANCING AND SECURITY AGREEMENT
AMONG
NATIONSBANK OF TEXAS, N.A.
ULTRAK, INC.,
DENTAL VISION DIRECT INC.,
DIAMOND ELECTRONICS, INC.,
EXXIS TECHNOLOGIES, INC., and
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
Locations of Collateral
All Inventory and Equipment owned by each Borrower is located at the following
locations:
<TABLE>
<CAPTION>
=============================================================================================================================
ADDRESS OF LOCATION COUNTY OWNED OR LEASED
[IF LEASED, NAME OF LANDLORD]
=============================================================================================================================
<S> <C> <C>
ULTRAK, INC.
=============================================================================================================================
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
- -----------------------------------------------------------------------------------------------------------------------------
2400 Industrial Lane Boulder Leased
Broomfield, Colorado 80020 Superior Investments I, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
913 Commerce Drive Anne Arundel Leased
Annapolis, Maryland 21401 Annapolis Commerce Park
Limited Partnership
- -----------------------------------------------------------------------------------------------------------------------------
1323 Butterfield Road, Suite 110 DuPage Leased
Downers Grove, Illinois 60515 Gottlieb Properties, Inc.
=============================================================================================================================
DENTAL VISION DIRECT, INC.
=============================================================================================================================
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
=============================================================================================================================
DIAMOND ELECTRONICS, INC.
=============================================================================================================================
4465 Coonpath Road Fairfield Owned
Carroll, Ohio 43112
=============================================================================================================================
EXXIS TECHNOLOGIES, INC.
=============================================================================================================================
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
=============================================================================================================================
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
=============================================================================================================================
2300 Stowe Drive, Suite C San Diego Leased
Poway, CA 92064 Poway Industrial Park
=============================================================================================================================
</TABLE>
13
<PAGE> 14
EXHIBIT "B"
TO
THIRD AMENDMENT TO FINANCING AND SECURITY AGREEMENT
---------------------------------------------------
EXHIBIT 5.6
FINANCING AND SECURITY AGREEMENT
AMONG
NATIONSBANK OF TEXAS, N.A.
ULTRAK, INC.,
DENTAL VISION DIRECT INC.,
DIAMOND ELECTRONICS, INC.,
EXXIS TECHNOLOGIES, INC., and
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
Share Ownership
Ownership:
Ultrak, Inc. is publicly owned. Thirty two and 38/100 percent 132.38%) of the
Voting Stock of Ultrak, Inc. and one hundred percent (100%) of the convertible
preferred stock are owned of record and beneficially by George K. Broady.
One hundred percent (100%) of the Voting Stock of Diamond Electronics, Inc. is
owned of record and beneficially by Ultrak, Inc.
One hundred percent (100%) of the Voting Stock of Dental Vision Direct, Inc. is
owned of record and beneficially by Ultrak, Inc.
Eighty percent (80%) of the Voting Stock of JAK Pacific Video Warranty and
Repair Services, Inc. is owned of record and beneficially by Ultrak, Inc. The
balance of such Voting Stock is owned by Abeer Risheq, an individua1.
Stock options, warrants, etc.:
Ultrak, Inc:
1. Non-qualified Employee Stock Option Plan - up to 833,334 shares
of no par common stock at varying exercise prices.
2. Convertible Preferred Stock - convertible into 406,981 shares
of no par common stock.
3. Petrus Warrants - pursuant to the 1992 loan agreement, as
amended, 200,000 warrants issued to the Petrus Fund, Ltd.,
convertible into 200,000 shares of no par common stock
14
<PAGE> 15
EXHIBIT "C"
TO
THIRD AMENDMENT TO FINANCING AND SECURITY AGREEMENT
---------------------------------------------------
EXHIBIT 1.51a
FINANCING AND SECURITY AGREEMENT
AMONG
NATIONSBANK OF TEXAS, N.A.
ULTRAK, INC.,
DENTAL VISION DIRECT INC.,
DIAMOND ELECTRONICS, INC.,
EXXIS TECHNOLOGIES, INC., and
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
Real Property Collatera1.
15
<PAGE> 16
EXHIBIT "A"
The Land
Parcel I: Situated in the State of Ohio, County of Fairfield, in the Township
of Greenfield:
Being Lot Number Two (2), in AMENDED PLAT OF GREENFIELD CROSSROADS, as
the same is numbered and delineated upon the recorded Plat thereof, of
record in Plat Book 11, Page 4, Recorder's Office, Fairfield County,
Ohio.
Parcel II: Situated in the State of Ohio, County of Fairfield, in the Township
of Greenfield:
Being Lot Number Five (5), in AMENDED PLAT OF GREENFIELD CROSSROADS,
as the same is numbered and delineated upon the recorded Plat thereof,
of record in Plat Book 11, Page 4, Recorder's Office, Fairfield
County, Ohio.
Parcel III:
Easement from the County Commissioners of Fairfield County, Ohio, to
Arvin Industries, Inc., dated June 24, 1974, received for record June
26, 1974, at 1:50 a.m., and recorded in Volume 439, Page 240, records
of Deeds, Fairfield County, Ohio.
<PAGE> 1
EXHIBIT 10.18
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
FOURTH AMENDMENT
TO
FINANCING AND SECURITY AGREEMENT
This agreement ("Fourth Amendment") is executed and entered into by
and among NationsBank of Texas, N.A. ("Lender"), Ultrak, Inc., a Delaware
corporation ("Ultrak Parent"), Dental Vision Direct, Inc., a Texas corporation
("DVDI"), Diamond Electronics, Inc., an Ohio corporation ("Diamond"), JAK
PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC., a California corporation
("JAK"), and Ultrak Operating, L.P., a Texas limited partnership ("Ultrak
Limited"), as of the Effective Date defined below, as follows:
Definitions
The following definitions, together with those specified in the
preamble, shall apply throughout this Fourth Amendment:
"Transfers" means collectively the asset sale and purchase
transactions evidenced by the Transfer Agreements.
"Effective Date" means the effective date of this Agreement, being
December 29, 1995.
"Financing and Security Agreement" means the certain Financing and
Security Agreement dated effective as of September 24, 1993 among
Lender, Ultrak Colorado, Loss Prevention Electronics Corporation, CCTV
Source International, Inc., and DVDI, as amended by the First
Amendment to Financing and Security Agreement dated effective October
31, 1994, the Second Amendment to Financing and Security Agreement
dated effective February 9, 1995, and the Third Amendment to Financing
and Security Agreement dated effective July 18, 1995, as modified,
amended, renewed, extended or restated from time to time.
"Mergers" means collectively Merger 1 and Merger 2.
"Merger 1" means the merger transaction pursuant to the certain
Agreement and Plan of Merger dated December 20, 1995 among Exxis and
Ultrak Colorado, by which Exxis was merged into Ultrak Colorado, with
Ultrak Colorado as the survivor.
"Merger 2" means the merger transaction pursuant to the certain
Agreement and Plan of Merger dated December 20, 1995 between Ultrak
Colorado and Ultrak Parent, by which Ultrak Colorado was merged on the
Merger Date into Ultrak Parent, with Ultrak Parent as the survivor.
"Merger Date" means December 29, 1995.
"Transfer Agreements" means collectively Transfer Agreement A1,
Transfer Agreement A2, Transfer Agreement B1 and Transfer Agreement
B2, respectively.
"Transfer Agreement A1" means the certain Assignment Agreement dated
effective as of the Transfer Date between Ultrak Parent and Ultrak GP
pursuant to which Ultrak Parent sold and transferred to Ultrak GP and
Ultrak GP purchased from Ultrak Parent, certain assets of Ultrak
Parent, as provided therein.
"Transfer Agreement A2" means the certain General Bill of Sale,
Assignment and Assumption Agreement dated effective as of the Transfer
Date between Ultrak Parent and Ultrak LP pursuant to which Ultrak
Parent sold and transferred to Ultrak LP and Ultrak LP purchased from
Ultrak Parent, certain assets of Ultrak Parent, as provided therein.
"Transfer Agreement B1" means the certain Assignment Agreement dated
effective as of the Transfer Date between Ultrak GP and Ultrak Limited
pursuant to which Ultrak GP sold and transferred to Ultrak Limited and
Ultrak Limited purchased from Ultrak GP, all of the assets acquired by
Ultrak GP pursuant to Transfer Agreement A1.
"Transfer Agreement B2" means the certain General Agreement,
Assignment and Assumption Agreement dated effective as of the Transfer
Date between Ultrak LP and Ultrak Limited pursuant to which Ultrak LP
sold and transferred to Ultrak Limited and Ultrak Limited purchased
from Ultrak LP, all of the assets acquired by Ultrak LP pursuant to
Transfer Agreement A2.
"Transfer Date" means December 29, 1995.
<PAGE> 2
"Ultrak Colorado" means Ultrak, Inc., a Colorado corporation and
predecessor by merger of Ultrak Parent.
"Ultrak GP" means Ultrak GP, Inc., a Delaware corporation and wholly
owned subsidiary of Ultrak Parent.
"Ultrak LP" means Ultrak LP, Inc., a Delaware corporation and wholly
owned subsidiary of Ultrak Parent.
"Ultrak Parties" collectively means Ultrak Parent, Diamond and Ultrak
Limited.
Except as provided otherwise herein, terms defined in the Financing and
Security Agreement are incorporated herein by reference and shall have the same
meanings wherever used herein as are prescribed by the Financing and Security
Agreement, as amended by this Fourth Amendment.
Recitals
The Mergers occurred on the Merger Date.
The Transfers occurred on the Transfer Date.
Lender, Ultrak Parent and Diamond are parties to the Financing and
Security Agreement. Pursuant to the Financing and Security Agreement,
the Ultrak Parties have requested Lender's consent to the Mergers and
the Transfers.
It is proposed that Ultrak Limited become a party to the Financing and
Security Agreement as a Borrower, with all rights, benefits and
obligations of a Borrower thereunder.
Lender and the Ultrak Parties have agreed to certain other amendments
in respect of the Financing and Security Agreement, as provided
hereinbelow.
NOW THEREFORE, for valuable consideration, the receipt of which hereby
is acknowledged, and in consideration of the mutual agreements and benefits in
the premises, the undersigned parties each hereby agrees as follows:
ARTICLE I.
MERGERS AND TRANSFERS
1.1 In consideration of Lender's consent to the Mergers, the
Ultrak Parties expressly represent and warrant to Lender, and agree with
Lender, as follows:
a. The Ultrak Parties represent and warrant to Lender
that (i) on December 29, 1995, Exxis was merged into Ultrak Colorado
pursuant to Merger 1, by which Ultrak Colorado assumed ownership of
all assets and properties (including all Collateral owned by Exxis),
and all liabilities (including all Obligations owing by Exxis) of
Exxis, and (ii) on the Merger Date, Ultrak Colorado was merged into
Ultrak Parent pursuant to Merger 2, by which Ultrak Parent assumed
ownership of all assets and properties (including all Collateral owned
by Ultrak Colorado), and all liabilities (including all Obligations
owing by Ultrak Colorado) of Ultrak Colorado. Lender consents to the
Mergers subject to the terms of this Fourth Amendment.
b. The Ultrak Parties represent to Lender that the
Mergers were consummated in compliance with applicable law and are
effective. Contemporaneously upon execution hereof, Ultrak Parent
shall deliver to Lender a copy of each certificate of merger, or
comparable document, certified by the Secretary of State of Delaware
and confirming the Mergers.
c. Ultrak Parent represents that as a result of the
Mergers and as of the Merger Date and continuing on and after the
Effective Date, Ultrak Parent (i) has assumed liability for all
Obligations previously owing by each of Ultrak Colorado and Exxis,
respectively and (ii) acquired ownership of all Collateral previously
owned by Ultrak Colorado and Exxis, respectively, subject to Lender's
interests under the Financing and Security Agreement. On and after the
Merger Date, any and all Loan Documents which at any time have been or
are executed in the name of Ultrak Colorado or Exxis, respectively,
shall be deemed to be the act of Ultrak Parent.
1.2 In consideration of Lender's consent to the Transfers, the
Ultrak Parties expressly represent and warrant to Lender, and agree with
Lender, as follows:
a. The Transfers have been closed and consummated
effective as of the Transfer Date;
b. As a result of the Transfers and effective as of the
Transfer Date: (i) all assets owned by Ultrak Parent on the Transfer
Date (including without limitation all property acquired as a result
of the Mergers), were sold and transferred, absolute, to Ultrak
Limited, expressly subject to Lender's security interests and liens
under the Financing and Security Agreement but otherwise
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<PAGE> 3
free and clear of liens, claims or encumbrances, and (ii) Ultrak
Limited assumed all liability and obligation for full payment and
performance of all Obligations owing to Lender by Ultrak Parent. As a
result of the Transfers and as of the Transfer Date and continuing on
and after the Effective Date, Ultrak Limited acknowledges that it is
directly liable for all Obligations previously owing by Ultrak Parent
prior to the Transfer Date, and that all Collateral previously owned
by Ultrak Parent prior to the Transfer Date, and acquired by Ultrak
Limited as a result of the Transfers, is now owned by Ultrak Limited,
subject to Lender's security interests, liens and interests under the
Financing and Security Agreement.
c. Execution and performance of the Transfers by Ultrak
Parent and Ultrak Limited, respectively, did not and does not breach
or violate, or create a default under, any agreement or instrument to
which either Ultrak Parent or Ultrak Limited are parties or under
which the property of either is bound; and
d. The Transfers were governed by the laws of the State
of Texas and were executed and consummated in compliance with
applicable law.
1.3 In consideration of Lender's agreements herein, Ultrak Limited
(i) hereby expressly and irrevocably assumes all obligation and liability for
full payment of all Obligations owing to Lender by Ultrak Parent as of the
Transfer Date and (ii) hereby expressly acknowledges and agrees that all
Collateral previously owned by Ultrak Parent and acquired by Ultrak Limited as
a result of the Transfers continues as Collateral under the Financing and
Security Agreement, subject to Lender's continuing security interests, liens
and interests thereunder. Ultrak Limited hereby grants to Lender a continuing
security interest and lien in and to all Collateral previously owned by Ultrak
Parent and purchased by Ultrak Limited from Ultrak Parent pursuant to the
Transfer.
1.4 Each of the Ultrak Parties agrees to execute such additional
documentation in connection with the Mergers or the Transfers as Lender may
reasonably request in order to protect and continue Lender's rights under the
Loan Documents (including without limitation UCC-1 financing statements naming
each of Ultrak Parent and Ultrak Limited, respectively, as debtor and covering
all Collateral now or hereafter owned by either of them.
ARTICLE II.
SUPPLEMENTAL AGREEMENTS IN RESPECT
OF ULTRAK PARENT AND ULTRAK LIMITED
2.1. The Financing and Security Agreement hereby is amended, as of
the Effective Date, to amend or add (as the case may be) the following
definitions, which shall read in their entirety as follows:
"1.7 "BORROWER" separately and severally means each of Ultrak,
DVDI, Diamond, JAK and Ultrak Limited, respectively."
"1.9 "BORROWERS" collectively means all of Ultrak, DVDI,
Diamond, JAK and Ultrak Limited, collectively together."
"1.58 "SUBSIDIARIES" means all subsidiary corporations of
Ultrak or other Persons that would be appropriate for
inclusion in either consolidating or consolidated financial
statements of Ultrak determined according to GAAP, and
"Subsidiary" means any of such corporations or other Persons."
"1.60 "ULTRAK" means Ultrak, Inc., a Delaware corporation,
successor by merger of Ultrak, Inc, a Colorado corporation."
"1.60a "ULTRAK LIMITED" means Ultrak Operating, L.P. a Texas
limited partnership whose chief executive office is located at
1220 Champion Circle, Suite 100, Carrollton, Texas 75006."
2.4. Contemporaneously upon execution hereof, Ultrak Limited shall
deliver to Lender each of the items (pertaining to itself) as are itemized by
subparagraphs (f) through (n) of paragraph 4.1 of the Financing and Security
Agreement.
2.5. Exhibit 3.4 ("Location of Collateral") to the Financing and
Security Agreement hereby is amended to the extent necessary to add, as of the
Effective Date, the additional locations shown in Exhibit "A" attached hereto
which is incorporated herein by reference.
2.6. Pursuant to paragraph 3.17 of the Financing and Security
Agreement: Each Borrower other than Ultrak Limited (i) hereby agrees that the
continuing security interest and lien previously granted to Lender by such
Borrower (or in the case of Ultrak, its predecessor in interest, Ultrak, Inc.,
a Colorado corporation) under such paragraph 3.17 shall secure all Obligations
from time to time owing by each of the other Borrowers, respectively (including
without limitation Ultrak Limited), and as additional security, hereby grants
to Lender a continuing security interest and lien in and to all of its right,
title and interest in the Collateral to secure all Obligations from time to
time owing by each of the other Borrowers, respectively (including without
limitation Ultrak Limited) (such grant to be governed by, and entitled to all
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<PAGE> 4
of the benefits of, the Financing and Security Agreement as provided in such
paragraph 3.17), (ii) each Borrower other than Ultrak Limited shall execute and
deliver for the benefit of Lender guaranty agreements pursuant to which such
party shall guarantee to Lender the prompt payment and performance of all
Obligations from time to time owing by Ultrak Limited (such guaranty agreements
to be in form and substance satisfactory to Lender and delivered to Lender
contemporaneously upon execution of this Fourth Amendment) and (iii) Ultrak
Limited hereby grants to Lender A continuing security interest and lien in and
to all of its right, title and interest in the Collateral to secure all
Obligations of each other Borrower from time to time arising on or after the
Effective Date, respectively (such grants to be governed by, and entitled to
all of the benefits of the Financing and Security Agreement), and Ultrak
Limited shall execute and deliver for the benefit of Lender a guaranty
agreement pursuant to which it shall guarantee to Lender the prompt payment and
performance of all Obligations of each other Borrower from time to time arising
on or after the Effective Date (such guaranty agreements to be in form and
substance satisfactory to Lender), provided that it is agreed that (i) such
security interest and guaranty agreements shall not secure any Obligations of
any such other Borrower existing and owing as of the close of Lender's business
on the Business Day preceding the Effective Date (for this purpose it is agreed
that payments applied on or after the Effective Date to Obligations of any
Borrower shall be deemed applied first in reduction of Obligations of such
Borrower existing as of the close of Lender's business on the Business Day
preceding the Effective Date). Each Borrower hereby acknowledges that its
agreement to the provisions of this paragraph is in consideration of the
availability of loans to each of the other Borrowers under the Financing and
Security Agreement and is not required by Lender as a condition to the
availability of loans or extensions of credit to such Borrower.
2.7. As of the Effective Date, Exhibit 5.6 ("Share Ownership") of
the Financing and Security Agreement hereby is amended and restated to read in
its entirety as follows:
"5.6 SHARE OWNERSHIP. Each of Borrower's outstanding shares or
interests (as the case may be) has been duly and validly issued and is
fully paid and is nonassessable. The outstanding equity ownership of
Borrower is as specified in Exhibit 5.6. Except as provided in Exhibit
5.6, there are no subscriptions, options to purchase, conversion or
exchange rights, warrants or other agreements, claims or commitments
of any nature obligating Borrower to issue, transfer, deliver or sell
additional shares or interests of its equity ownership,"
Exhibit 5.6 to the Financing and Security Agreement hereby is amended and
restated to read in its entirety as specified in Exhibit "B" attached hereto.
2.8. Ultrak Limited has delivered to Lender its balance sheet as of
the Effective Date (after effectiveness of the Mergers and the Transfers),
prepared in accordance with GAAP, and such balance sheet fairly presents the
financial condition of such Ultrak Limited as of such date, subject to year-end
adjustments,
2.9. Ultrak Limited hereby represents and warrants to Lender each
of the representations and warranties provided by the following paragraphs of
the Financing and Security Agreement, as of the Effective Date, as though
separately set forth herein: Paragraphs 3.3, 3.4 (as amended by paragraph 2.5
of this Fourth Amendment), 3.6, 3.9, 5.1 through 5.6 (as amended by paragraph
2.7 of this Fourth Amendment), and each of paragraphs 5.9 through 5.20,
provided, that in connection with the foregoing, as to Ultrak Limited only:
a. In paragraph 5.1, (i) the heading, "Corporate Name;
Trade Names" shall be deemed instead to read "Name; Trade Names" and
(ii) the word "corporate" shall be deemed instead to read "limited
partnership";
b. In paragraph 5.3, (i) the heading, "Corporate
Existence" shall be deemed instead to read "Existence" and (ii) the
clause "Borrower is a corporation, duly incorporated,..." shall be
deemed instead to read, "Borrower is a limited partnership, duly
formed,...";
c. In paragraph 5.4, (i) the heading, "Corporate Power
and Authority; Validity" shall be deemed instead to read "Power and
Authority; Validity" and (ii) the word "corporate" in the last line
thereof shall be deemed instead to read "partnership"; and
d. In paragraph 5.5, the clause "articles of
incorporation or bylaws" shall be deemed instead to read "its
agreement of limited partnership".
2.10. On and after the Effective Date, Ultrak Limited shall be
deemed to be a party to the Financing and Security Agreement (as supplemented
by this Fourth Amendment) as a Borrower for all purposes, and Ultrak Limited
hereby covenants and agrees to perform all obligations of a Borrower
thereunder, subject to the terms of this Fourth Amendment.
ARTICLE III. ADDITIONAL AMENDMENTS
3.1 The Financing and Security Agreement hereby is amended to
restate the following definitions in Article I, as follows:
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"1.19 "CREDIT LIMIT" means the amount of Twenty Million and no/100
Dollars ($20,000,000.00)."
"1.59b "TERM FACILITY CREDIT LIMIT" means the maximum amount in
respect of the Term Facility applicable to each respective Borrower,
as follows: (i) $0.00 for Ultrak, (ii) $1,800,000.00 for Diamond and
(iii) $700,000.00 for Ultrak Limited."
3.2 Paragraph 1.21 (definition of "Eligible Accounts") of the
Financing and Security Agreement hereby is amended to add the following,
immediately after the existing last sentence thereof:
"At Lender's discretion, Lender may consider for eligibility accounts
owing by account debtors located outside the United States, provided,
that the aggregate unpaid amount (in United States dollars) (i) of all
such accounts at no time exceeds $500,000.00 and (ii) for all such
accounts owing by any single account debtor at no time exceeds
$100,000.00, and provided further, that the determination of whether
to include any such accounts as Eligible Accounts shall at all times
be and remain in Lender's sole discretion."
3.3 In paragraph 1.4 (definition of "Aggregate Borrowing Base")
and paragraph 1.16 (definition of "Company Borrowing Base"), the dollar amount
"$8,750,000.00" hereby is amended, in each case, to read "$10,000,000.00".
3.4 Paragraph 2.2a ("LIBOR Option") is amended to correct the
paragraph reference in line 2 thereof to read "paragraph 2.2", and paragraph
2.2b ("Interest Rate Reduction") of the Financing and Security Agreement hereby
is amended and restated to read in its entirety as follows:
"2.2b INTEREST RATE REDUCTION. The interest rate(s) otherwise
applicable to the Revolving Facility under paragraph 2.2 or paragraph
2.2a, as the case may be, shall be subject to reduction on the
conditions, and in specified amounts, as follows:
<TABLE>
<CAPTION>
============================================================================
CONDITIONS AMOUNT OF RATE
REDUCTION
No Event of Default exists, and:
=================================
Contract Rate LIBOR
Contract Rate
============================================================================
<S> <C> <C>
Tangible Net Worth at December 31, 1996
equals or exceeds $17,500,000.00 and
- -------------------------------------------
One-quarter One-half
Pretax Net Income for fiscal year ending of of
December 31, 1996 equals or exceeds one percent one percent
6,000,000.00 and (0.25%) (0.5%)
- -------------------------------------------
Leverage Ratio at December 31, 1996 does
not exceed 2.25 to 1.00.
============================================================================
</TABLE>
Once achieved, any such reduction shall be permanent, subject to the
other terms and conditions of this Agreement. Compliance with the
above conditions shall be measured and determined according to the
annual audited financial statements delivered to Lender under
paragraph 6.5. Any such reduction shall be deemed effective as of the
first day of the calendar month next following the calendar month in
which such financial statements are delivered to Lender."
3.5 The amendments specified in this Article III are in addition
to, and shall be deemed to become effective simultaneously with, those specified
in Article II.
ARTICLE IV. GENERAL
4.1 In consideration of this Fourth Amendment and increase of the
Credit Limit as provided herein, Borrowers jointly and severally agree to pay
to Lender a Credit Limit increase fee in the amount of $12,500.00 [which is
calculated by multiplying the sum of (i) the aggregate amount of increase of
the Credit Limit hereunder by one-half of one percent (0.5%)], which shall be
payable upon execution hereof.
4.2. Contemporaneously upon execution of this Fourth Amendment:
a. Each of Ultrak and Diamond shall deliver to Lender a
copy of authorizing resolutions (in form reasonably satisfactory to
Lender) approving this Fourth Amendment, authorizing the transactions
contemplated hereby, and authorizing and directing a named officer or
officers to execute and deliver this Fourth Amendment and any related
documents contemplated hereby to be executed by such party, duly
adopted by its board of directors, accompanied by the certificate of
its corporate secretary, dated as of the Effective Date, that such
copy is a true and complete copy of resolutions duly adopted by the
board of directors, and that such resolutions
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<PAGE> 6
have not been amended, modified, or revoked in any respect and are in
full force and effect as of the date hereof.
b. Ultrak Limited shall deliver to Lender a Certificate
of General Partner, duly executed by its sole general partner, Ultrak
GP, Inc., and certifying and attaching (i) a true and correct copy of
Ultrak Limited's certificate of limited partnership, (ii) a
certificate of existence, issued and certified by the appropriate
governmental official, for each of Ultrak Limited and its sole general
partner, Ultrak GP, Inc., (iii) a copy of authorizing resolutions of
Ultrak Limited (in form satisfactory to Lender) approving this Fourth
Amendment, authorizing the transactions contemplated hereby, and
authorizing its sole general partner, Ultrak GP, Inc., to execute and
deliver this Fourth Amendment and any related documents contemplated
hereby to be executed by Ultrak Limited and (iv) certification of the
name and signatures of incumbent officers of its sole limited partner,
Ultrak GP, Inc., who are authorized to execute the Fourth Amendment
and other Loan Documents on behalf of Ultrak Limited
c. A copy of all executed documentation evidencing the
Transfers.
d. Endorsement to mortgagee's policy of title insurance
on all Real Property Collateral to confirm that existing coverage is
not affected by the transactions evidenced and contemplated by this
Fourth Amendment.
e. Opinion of counsel for the Ultrak Parties and
Guarantor, confirming (i) consummation of the Mergers in accordance
with applicable law, (ii) consummation and enforceability of the
Transfers, (iii) formation and existence of Ultrak Limited, (iv) due
authorization of the Ultrak Parties to execute and perform this Fourth
Amendment, (v) enforceability of this Fourth Amendment and (vi) such
other matters as Lender may request.
f. Such other documents, agreements and certifications
as Lender may reasonably request in connection with this Fourth
Amendment.
4.3 Each of the Ultrak Parties represents that, as of the
Effective Date, (i) ownership of Ultrak Limited, and the ownership of its sole
general partner and its sole limited partner, respectively, is as reflected in
Exhibit "B" attached hereto, (ii) each of the Ultrak Parties is in compliance
with all requirements under the Financing and Security Agreement and no Event
of Default exists thereunder.
4.4 The Ultrak Parties and Lender each represents to the other
that all necessary authorization action has been taken to authorize its
execution and performance of this Fourth Amendment.
4.5 The Loan Documents, supplemented as provided herein, hereby
are ratified and confirmed as being and remaining valid and in full force and
effect in accordance with their respective terms, as so supplemented. As of the
Effective Date, all references in the Loan Documents to the Financing and
Security shall mean the Financing and Security Agreement as amended by this
Fourth Amendment.
4.6 This Fourth Amendment (i) shall be deemed effective
prospectively as of the Effective Date, (ii) contains the entire agreement
among the parties and may not be amended or modified except in writing signed
by all parties, (iii) shall be governed and construed according to the laws of
the State of Texas and (iv) may be executed in any number of counterparts, each
of which shall be valid as an original and all of which shall be one and the
same agreement. A telecopy of any executed counterpart shall be deemed valid as
an original.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED and made effective as of the Effective Date.
ULTRAK, INC.
By: /s/ TIM D. TORNO
---------------------------------------
Tim D. Torno
Vice President
DENTAL VISION DIRECT, INC.
By: /s/ TIM D. TORNO
---------------------------------------
Tim D. Torno
Vice President
DIAMOND ELECTRONICS, INC.
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<PAGE> 7
By: /s/ TIM D. TORNO
---------------------------------------
Tim D. Torno
Vice President
JAK PACIFIC VIDEO WARRANTY AND REPAIR
SERVICES, INC.
By: /s/ TIM D. TORNO
---------------------------------------
Tim D. Torno
Vice President
ULTRAK OPERATING, L.P.
A Texas limited partnership
By: Ultrak G.P., Inc., its sole general partner
By: /s/ TIM D. TORNO
---------------------------------------
Tim D. Torno
Vice President
NATIONSBANK OF TEXAS, N.A.
BY: /s/ FORREST W. MCCOLLUM
---------------------------------------
Forrest W. McCollum
Vice President
CONSENT BY GUARANTOR
The undersigned hereby consents to the foregoing Fourth Amendment to
Financing and Security Agreement and confirms that the certain Amended and
Restated Guaranty by Individual dated July 18, 1995 executed by the undersigned
for the benefit of Lender is amended and restated and continued in full force
and effect as evidenced by the certain Amended and Restated Guaranty by
Individual of even date herewith executed by the undersigned for the benefit of
Lender.
/s/ GEORGE K. BROADY
---------------------------------------
George K. Broady, individually
7
<PAGE> 8
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said ULTRAK, INC., a Delaware corporation, and that he executed the same for
the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 29th day of
December, 1995.
/s/ SHERRI D. BENDER
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said DENTAL VISION DIRECT, INC., A Texas corporation, and that he executed
the same for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 29th day of
December, 1995.
/s/ SHERRI D. BENDER
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said DIAMOND ELECTRONICS, INC., an Ohio corporation, and that he executed
the same for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 29th day of
December, 1995.
/s/ SHERRI D. BENDER
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act
of said JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC., a California
corporation, and that he executed the same for the purposes and considerations
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 29th day of
December, 1995.
/s/ SHERRI D. BENDER
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
8
<PAGE> 9
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Tim D. Torno, known to me to be the person and officer whose name is subscribed
to the foregoing instrument, and acknowledged to me that the same was the act of
Ultrak G.P., Inc., a Delaware corporation and sole general partner, on behalf
and as the act of ULTRAK OPERATING, L.P., a Texas limited partnership, and that
he executed the same for the purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 29th day of
December, 1995.
/s/ SHERRI D. BENDER
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
GEORGE K. BROADY, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and considerations therein expressed,
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 28th day of
December, 1995.
/s/ DEBORAH DUNCAN
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Deborah Duncan
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Deborah Duncan
MY COMMISSION EXPIRES
JANUARY 9, 1999
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Forrest W. McCollum, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of said NATIONSBANK OF TEXAS, N.A., a national banking association,
and that he executed the same for the purposes and considerations therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 29th day of
December, 1995.
/s/ SHERRI D. BENDER
------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
Sherri D. Bender
- ------------------------------ ------------------------------
[SEAL] (Printed Name of Notary)
Sherri D. Bender
Notary Public, State of Texas
My Comm. Expires 03/14/96
9
<PAGE> 10
EXHIBIT "A"
TO
FOURTH AMENDMENT TO FINANCING AND SECURITY AGREEMENT
--------------------------------------------------
SUPPLEMENT TO EXHIBIT 3.4
FINANCING AND SECURITY AGREEMENT
AMONG
NATIONSBANK OF TEXAS, N.A.
ULTRAK, INC.,
DENTAL VISION DIRECT, INC.,
DIAMOND ELECTRONICS, INC.,
JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
ULTRAK OPERATING, L.P.
LOCATIONS OF COLLATERAL
SUPPLEMENT TO EXHIBIT 3.4
-------------------------
All Inventory and Equipment owned by Ultrak Operating, L.P. is located at the
following locations:
================================================================================
ADDRESS OF LOCATION COUNTY Owned or Leased
(if leased, name of landlord)
================================================================================
ULTAK OPERATING, L.P.
================================================================================
1220 Champion Circle, Dallas Leased
Suite 100 Champion Circle/TCEP II
Carrollton, Texas 75006 Joint Venture
- --------------------------------------------------------------------------------
10
<PAGE> 11
EXHIBIT "B"
TO
FOURTH AMENDMENT TO FINANCING AND SECURITY AGREEMENT
--------------------------------------------------
EXHIBIT 5.6
FINANCING AND SECURITY AGREEMENT
AMONG
NATIONSBANK OF TEXAS, N.A.
ULTRAK, INC.,
DENTAL VISION DIRECT, INC.,
DIAMOND ELECTRONICS, INC.,
JAK PACIFIC VIDEO WARRANTY REPAIR SERVICES, INC.,
ULTRAK OPERATING, L.P.
SHARE OWNERSHIP
Ownership:
Ultrak, Inc. is publicly owned. Approximately thirty-two and 38/100 percent
(32.38%) of the Voting Stock of Ultrak, Inc. and one hundred percent (100%) of
the convertible preferred stock are owned of record and beneficially by George
K. Broady.
One hundred percent (100%) of the Voting Stock of Diamond Electronics, Inc. is
owned of record and beneficially by Ultrak, Inc.
Ultrak Operating, L.P. is owned as follows: (i) a one percent (1.0%) general
partnership interest is owned by Ultrak GP, Inc., A Delaware corporation, as
sole general partner, and (ii) a ninety-nine percent limited partnership
interest is owned by Ultrak LP, Inc., a Delaware corporation, as sole limited
partner.
One hundred percent (100%) of the Voting Stock of Ultrak GP, Inc., a
Delaware corporation, is owned of record and beneficially by Ultrak,
Inc.
One hundred percent (100%) of the Voting Stock of Ultrak LP, Inc., a
Delaware corporation, is owned of record and beneficially by Ultrak,
Inc.
Stock options, warrants, etc.:
Ultrak, Inc:
1. Non-qualified Employee Stock Option Plan - up to 833,334
shares of no par common stock at varying exercise prices.
2. Convertible Preferred Stock - convertible into 406,981
shares of no par common stock.
3. Petrus Warrants - pursuant to the 1992 loan agreement, as
amended, 200,000 warrants issued to the Petrus Fund, L.P.,
exercisable for 200,000 shares of no par common stock
11
<PAGE> 1
EXHIBIT 10.19
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of December 20, 1995, is
by and between Ultrak, Inc., a Colorado corporation ("Parent"), and Exxis
Technologies, Inc., a Texas corporation ("Exxis").
WITNESSETH:
WHEREAS, the authorized capital stock of Exxis consists of 1,000,000
shares of Common Stock, $0.01 par value ("Exxis Common Stock"), of which
100,000 shares of Exxis Common Stock are issued and outstanding and owned by
Parent; and
WHEREAS, the respective boards of directors of Parent and Exxis deem
it to be desirable and in the best interest of the respective corporations that
the corporations merge into a single corporation (the "Merger"), and, pursuant
to resolutions duly adopted, such boards of directors have approved and adopted
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements and covenants contained herein, the parties hereto agree as follows:
ARTICLE I
Section 1.1. In accordance with the provisions of the Colorado
Business Corporation Act and the Texas Business Corporation Act at the
Effective Time (as defined below) of the Merger, Exxis shall be merged into
Parent, which shall be the surviving corporation (in its capacity as such
surviving corporation Parent is hereinafter sometimes referred to as the
"Surviving Corporation", and Parent and Exxis are hereinafter sometimes
referred to collectively as the "Constituent Corporations"), and as such the
Surviving Corporation shall continue to be governed by the laws of the State of
Colorado.
Section 1.2. The Merger shall become effective on the date that
Articles of Merger, executed, adopted and approved in accordance with the
Colorado Business Corporation Act, shall have been filed with the Secretary of
State of Colorado. The time when the Merger shall become effective is herein
called the "Effective Time." The actions described above shall be conclusive
evidence, for all purposes of this Agreement, of compliance with all conditions
precedent.
Section 1.3. Except as may otherwise be set forth herein, at the
Effective Time, the corporate existence and identity of Parent, with all its
purposes, powers, franchises, privileges, rights and immunities shall continue
under the laws of the State of Colorado, unaffected and unimpaired by the
Merger, and the corporate existence and identity of Exxis with all its
purposes, powers, franchises, privileges, rights and immunities, shall be
merged with and into Parent and the Surviving Corporation shall be vested fully
therewith, and the separate corporate existence and identity of Exxis shall
thereafter cease, except to the extent continued by applicable law. At the
Effective Time, the Surviving Corporation shall have the following rights and
obligations:
(a) The Surviving Corporation shall have all the rights,
privileges, immunities and powers, and shall be subject to all of the
duties and liabilities, of a corporation organized under the laws of
the State of Colorado.
<PAGE> 2
(b) The Surviving Corporation shall succeed to, without
other transfer, and shall possess and enjoy, all of the rights,
privileges, immunities, powers, purposes and franchises, of both a
public and private nature, of the Constituent Corporations and all
property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account and all other choses in
action, and every other interest of or belonging to either of the
Constituent Corporations shall be deemed to be transferred to and
vested in the Surviving Corporation without further act or deed, and
shall thereafter be the property of the Surviving Corporation as they
were of the respective Constituent Corporations, and the title to any
real estate vested by deed or otherwise in either of said Constituent
Corporations shall not revert or be in any way impaired by reason of
the Merger.
(c) The Surviving Corporation shall thenceforth be
responsible and liable for all debts, liabilities, obligations and
duties of either of the Constituent Corporations, and any claim
existing or action or proceeding pending by or against either
Constituent Corporation may be prosecuted as if the Merger had not
occurred, or the Surviving Corporation may be substituted in its
place. Neither the rights of creditors nor any liens upon the property
of either Constituent Corporation shall be impaired by the Merger.
Section 1.4. If at any time the Surviving Corporation shall deem or be
advised that any further transfers, assignments, conveyances, assurances in law
or other acts or things are necessary or desirable to vest or confirm in the
Surviving Corporation the title to any property or assets of either of the
Constituent Corporations, each Constituent Corporation and its proper officers
and directors shall execute and deliver any and all such proper transfers,
assignments, conveyances and assurances in law, and shall do all other acts and
things as are necessary or proper to vest or confirm title to such property and
assets in the Surviving Corporation and to otherwise carry out the purposes and
intent of this Agreement.
ARTICLE II
Section 2.1. The Articles of Incorporation of Parent in effect at the
Effective Time shall constitute the Articles of Incorporation of the Surviving
Corporation until amended, altered or repealed in the manner provided by law.
Section 2.2. The By-Laws of Parent in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation, until amended, altered or
repealed.
Section 2.3. The directors of Parent at the Effective Time shall be
the directors of the Surviving Corporation and shall hold office in accordance
with the By-Laws of the Surviving Corporation until the next annual meeting of
shareholders of the Surviving Corporation or until their respective successors
are elected and qualified.
Section 2.4. The officers of Parent at the Effective Time shall be the
officers of the Surviving Corporation and shall hold office subject to the
By-Laws of the Surviving Corporation.
ARTICLE III
Section 3.1. At the Effective Time, each share of Exxis Common Stock
outstanding immediately prior to the Effective Time shall by virtue of the
Merger and without any action on the part of the holder thereof be canceled.
2
<PAGE> 3
ARTICLE IV
Section 4.1. This Agreement may be executed by the parties hereto in
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one instrument.
Section 4.2. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Parent and Exxis at any
time prior to the Effective Time.
Section 4.3. This Agreement may be terminated at any time prior to the
Effective Time by mutual agreement of the parties hereto.
IN WITNESS WHEREOF, each of the Constituent Corporations has caused
this Agreement to be executed on its behalf by its respective officers hereunto
duly authorized as of the date first above written.
ULTRAK, INC.,
a Colorado corporation
By: /s/ GEORGE K. BROADY
------------------------------------
George K. Broady, President
EXXIS TECHNOLOGIES, INC.
a Texas corporation
By: /s/ GEORGE K. BROADY
------------------------------------
George K. Broady, President
3
<PAGE> 1
EXHIBIT 10.20
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is executed as of December
20, 1995, by and between Ultrak, Inc., a Colorado corporation ("Parent"), and
Ultrak, Inc., a Delaware corporation ("Subsidiary").
WITNESSETH:
WHEREAS, the authorized capital stock of Subsidiary consists
of 20,000,000 shares of Common Stock, $0.01 par value ("Subsidiary Common
Stock"), and 2,000,000 shares of Preferred Stock, $5.00 par value ("Subsidiary
Preferred Stock"), 195,351 shares of which have been designated Series A 12%
Cumulative Convertible Preferred Stock ("Subsidiary Series A Preferred Stock"),
of which 1,000 shares of Subsidiary Common Stock are issued and outstanding and
owned by Parent; and
WHEREAS, the authorized capital stock of Parent consists of
20,000,000 shares of Common Stock, no par value ("Parent Common Stock") and
2,000,000 shares of Preferred Stock, $5.00 par value ("Parent Preferred
Stock"), 195,351 shares of which have been designated Series A 12% Cumulative
Convertible Preferred Stock ("Parent Series A Preferred Stock"), of which
approximately 6,560,000 shares of Parent Common Stock and 195,351 shares of
Parent Series A Preferred Stock are issued and outstanding; and
WHEREAS, the respective boards of directors and shareholders
of Parent and Subsidiary deem it to be desirable and in the best interest of
the respective corporations that the two corporations merge into a single
corporation (the "Merger"), and, pursuant to resolutions duly adopted, such
boards of directors and shareholders have approved and adopted this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual agreements and covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
Section 1.1. In accordance with the provisions of the Colorado
Business Corporation Act and the Delaware General Corporation Law at the
Effective Time (defined below) of the Merger, Parent shall be merged into
Subsidiary, which shall be the surviving corporation (in its capacity as such
surviving corporation Subsidiary is hereinafter sometimes referred to as the
"Surviving Corporation", and Parent and Subsidiary are hereinafter sometimes
referred to collectively as the "Constituent Corporations"), and as such
Subsidiary shall continue to be governed by the laws of the State of Delaware.
Section 1.2. The Merger shall become effective on December 29,
1995 or such later date as the Articles of Merger, executed, adopted and
approved in accordance with the Delaware General Corporation Law, shall have
been filed with the Secretary of State of Delaware. The time when the Merger
shall become effective is herein called the "Effective Time." The actions
described above shall be conclusive evidence, for all purposes of this
Agreement, of compliance with all conditions precedent.
Section 1.3. Except as may otherwise be set forth herein, at
the Effective Time, the corporate existence and identity of Subsidiary, with
all its purposes, powers, franchises, privileges, rights and
<PAGE> 2
immunities shall continue under the laws of the State of Delaware, unaffected
and unimpaired by the Merger, and the corporate existence and identity of
Parent, with all its purposes, powers, franchises, privileges, rights and
immunities, shall be merged with and into Subsidiary and the Surviving
Corporation shall be vested fully therewith, and the separate corporate
existence and identity of Parent shall thereafter cease, except to the extent
continued by applicable law. At the Effective Time, the Surviving Corporation
shall have the following rights and obligations:
(a) The Surviving Corporation shall have
all the rights, privileges, immunities and powers, and shall
be subject to all of the duties and liabilities, of a
corporation organized under the laws of the State of Delaware.
(b) The Surviving Corporation shall
succeed to, without other transfer, and shall possess and
enjoy, all of the rights, privileges, immunities, powers,
purposes and franchises, of both a public and private nature,
of the Constituent Corporations and all property, real,
personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account and all other
choses in action, and every other interest of or belonging to
either of the Constituent Corporations shall be deemed to be
transferred to and vested in the Surviving Corporation without
further act or deed, and shall thereafter be the property of
the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate
vested by deed or otherwise in either of said Constituent
Corporations shall not revert or be in any way impaired by
reason of the Merger.
(c) The Surviving Corporation shall
thenceforth be responsible and liable for all debts,
liabilities, obligations and duties of either of the
Constituent Corporations, and any claim existing or action or
proceeding pending by or against either Constituent
Corporation may be prosecuted as if the Merger had not
occurred, or the Surviving Corporation may be substituted in
its place. Neither the rights of creditors nor any liens upon
the property of either Constituent Corporation shall be
impaired by the Merger.
Section 1.4. If at any time the Surviving Corporation shall
deem or be advised that any further transfers, assignments, conveyances,
assurances in law or other acts or things are necessary or desirable to vest or
confirm in the Surviving Corporation the title to any property or assets of
either of the Constituent Corporations, each Constituent Corporation and its
proper officers and directors shall execute and deliver any and all such proper
transfers, assignments, conveyances and assurances in law, and shall do all
other acts and things as are necessary or proper to vest or confirm title to
such property and assets in the Surviving Corporation and to otherwise carry
out the purposes and intent of this Agreement.
ARTICLE II
Section 2.1. The Certificate of Incorporation of Subsidiary in
effect at the Effective Time shall constitute the Articles of Incorporation of
the Surviving Corporation until amended, altered or repealed in the manner
provided by law.
Section 2.2. The By-Laws of Subsidiary in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation, until
amended, altered or repealed.
2
<PAGE> 3
Section 2.3. The directors of Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and shall hold office in
accordance with the By-Laws of the Surviving Corporation until the next annual
meeting of shareholders of the Surviving Corporation or until their respective
successors are elected and qualified.
Section 2.4. The officers of Subsidiary at the Effective Time
shall be the officers of the Surviving Corporation and shall hold office
subject to the Bylaws of the Surviving Corporation.
ARTICLE III
Section 3.1. At the Effective Time, the manner of exchanging
the outstanding Common Stock of the Constituent Corporations shall be as
follows:
(a) Each share of Parent Common Stock
outstanding immediately prior to the Effective Time, except
all shares of Parent Common Stock held by Parent in its
treasury, which shall be cancelled and no shares issued in
respect thereof, shall, at the Effective Time, by virtue of
the Merger and without action on the part of the holder
thereof, be converted into one share of the Subsidiary Common
Stock.
(b) Each share of Parent Series A
Preferred Stock outstanding immediately prior to the Effective
Time shall, at the Effective Time, by virtue of the Merger and
without action on the part of the holder thereof, be converted
into one share of the Subsidiary Series A Preferred Stock,
which is identical in all respects, including rights,
preferences and designations, to the Parent Series A Preferred
Stock.
(c) Each share of Subsidiary Common
Stock outstanding immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, be
cancelled and returned to the status of authorized but
unissued stock of the Surviving Corporation.
(d) No fractional shares of Subsidiary
Common Stock or Subsidiary Series A Preferred Stock and no
certificates or scrip certificates therefor shall be issued.
(e) All of the shares of Subsidiary
Common Stock and Subsidiary Series A Preferred Stock, when
delivered pursuant to the provisions of this Agreement, shall
be validly issued, fully paid and nonassessable.
(f) If any stock certificate evidencing
shares of Subsidiary Common Stock and/or Subsidiary Series A
Preferred Stock is requested to be issued in a name other than
that in which the surrendered Parent stock certificate is
registered, it shall be a condition of such issuance that the
surrendered stock certificate shall be properly endorsed in
blank or otherwise in proper form for transfer and that the
person requesting such exchange pay to the Surviving
Corporation any applicable transfer or other taxes or
establish to the satisfaction of the Surviving Corporation
that any such tax has been paid or is not payable.
3
<PAGE> 4
ARTICLE IV
Section 4.1. This Agreement may be executed by the parties
hereto in counterparts, each of which when so executed and delivered shall be
an original, but all of which shall constitute one instrument.
Section 4.2. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of Parent and
Subsidiary at any time prior to the Effective Time.
Section 4.3. This Agreement may be terminated at any time
prior to the Effective Time by mutual agreement of the parties hereto.
IN WITNESS WHEREOF, each of the Constituent Corporations has
caused this Agreement to be executed on its behalf by its respective officers
hereunto duly authorized as of the date first above written.
ULTRAK, INC.
a Colorado corporation
By: /s/ GEORGE K. BROADY
---------------------------
George K. Broady, President
ULTRAK, INC.,
a Delaware corporation
By: /s/ GEORGE K. BROADY
---------------------------
George K. Broady, President
4
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
THIS AGREEMENT is between Ultrak, Inc., a Colorado corporation (the
"Company"), and James D. Pritchett ("Employee").
In consideration of the terms of this Agreement, and other good and
valuable consideration, the sufficiency of which is hereby acknowledged by each
party, the Company and Employee, intending to be legally bound, hereby covenant
and agree as follows:
1. Employment. The Company hereby agrees to continue to employ
Employee, and Employee hereby accepts continued employment with the Company,
upon the terms and conditions hereinafter set forth.
2. Term. Subject to the other terms of this Agreement, this
Agreement shall be effective for the period from January 1, 1995 through
December 31, 1996. The period from January 1 of a calendar year through
December 31 of such calendar year is hereafter referred to as a "Year." The
period from January 1, 1995 through December 31, 1995 is hereafter referred to
as the "First Year" and the period from January 1, 1996 through December 31,
1996 is hereafter referred to as the "Second Year." The parties hereby
acknowledge and agree it is their intent that this Agreement shall
automatically renew for an additional Year as of each January 1 after the
Second Year. The period during which this Agreement is effective is hereafter
referred to as the "Term."
3. Duties. Employee shall be the Executive Vice President and
Chief Operating Officer of the Company. During the Term, Employee shall be
based in the Dallas, Texas area only and shall perform the duties and exercise
the powers which from time to time may be lawfully assigned to or vested in him
by the Company's Board of Directors (the "Board"). It is agreed that during the
Term, Employee will not accept an officership or directorship or participate in
the operation or management of any other entity, unless it is an entity either
owned or controlled by the Company, without the prior written consent of the
President.
4. Extent of Services. Unless prevented by ill health, Employee
shall devote his entire working time, attention and energies to the business of
the Company, and shall not during the Term engage in any other business
activity whether or not such business activity is pursued for gain, profit or
other pecuniary advantage; provided, however, Employee shall not be prevented
from investing in such form or manner as will not require any services on the
part of Employee in the operation of the affairs of the companies in which such
investments are made, except that in no event may Employee make investments in
any firms in competition with, or in the business of supplying goods or
services to the Company, unless such investments are (a) disclosed in writing
to
1
<PAGE> 2
and approved by the Board and (b) do not exceed $25,000 with respect to each
investment in any privately-held company or 2% of the voting securities of any
publicly-owned company.
5. Base Salary. The Company shall pay Employee a salary (the
"Base Salary"), payable in bi-weekly installments. The Base Salary for the
First Year shall be $198,000 and may be increased by the Board without an
amendment to this Agreement. If Employee is absent from his employment because
of illness which prevents Employee from performing his duties described herein,
the Company shall be obligated to pay Employee his Base Salary and other
compensation for all such periods of absence for the balance of the Term less
any applicable disability insurance actually received by Employee. The Base
Salary and any other compensation payable pursuant to this Agreement shall be
subject to appropriate tax withholding.
6. Other Compensation.
(a) The Company currently has in effect certain bonus and
stock option plans. During the Term, Employee will be
eligible to participate in those plans currently in
effect and as they may be amended from time to time,
so long as such plans remain in existence.
Furthermore, during the Term, Employee shall be
entitled to participate in all current or
subsequently enacted benefit programs applicable to
all executive officers of the Company. For purposes
of this Agreement, all references to stock option
plans, bonus plans or benefit programs shall be
deemed to mean that Employee shall be eligible to
participate in such plans or programs of the Company
in which Employee presently participates or is
eligible to participate, or such plans or programs
that may subsequently be adopted in substitution for
such plans or programs.
(b) The Company will provide Employee a $300 per month
car allowance.
(c) Employee shall receive four (4) weeks of paid
vacation each Year.
(d) Employee shall be covered by all existing insurance
programs afforded by the Company to its executive
officers. Employee understands and agrees that he
shall initially pay forty percent (40%) of the
premiums for health insurance coverage.
7. Expense Reimbursement. Employee is authorized to incur
reasonable expenses with regard to the business of the Company, including
expenses for entertainment, travel and other items of a
2
<PAGE> 3
similar character in accordance with the Company's travel and entertainment
policies as such policies shall exist from time to time (the "Policy"). The
Company will reimburse Employee for all such expenses incurred and reported by
him in accordance with the Policy.
8. Termination by the Company. This Agreement may be terminated
by the giving of sixty (60) days prior written notice pursuant to Section 13 by
the Company upon the occurrence of the following:
(a) If Employee breaches this Agreement, and such breach,
if capable of being cured, is not cured within thirty
(30) calendar days of receipt by Employee from the
Company of written notice requiring him to cure such
breach(es);
(b) If Employee shall be convicted of a criminal offense
which in the reasonable opinion of the Board may
injure or tend to injure the reputation or business
of the Company;
(c) If Employee files for bankruptcy or a bankruptcy
petition is filed against Employee and, in either
case, such bankruptcy proceeding is not dismissed
within ninety (90) days of being filed;
(d) If Employee shall grossly neglect the performance of
his duties as set forth or described herein; or
(e) If Employee becomes so addicted to alcohol, drugs or
any controlled substance that it substantially
impairs his abilities to perform his assigned duties.
9. Termination by the Company or Employee. Notwithstanding any
other provision of this Agreement, either party may terminate this Agreement by
giving notice pursuant to the terms and conditions of this Agreement.
10. Payments upon Termination or Death. It is agreed that if this
Agreement is terminated, payments and/or provisions for payments will be made
as follows:
(a) If the Company terminates this Agreement on some
basis other than the reason or reasons as stated in
Section 8, or if Employee dies, the Company will take
the actions set forth in Paragraphs (1), (2) and (3)
of this Subsection 10(a). If Employee terminates
this Agreement for cause, which shall be limited to a
material breach (specified in writing by Employee) by
the Company of the terms of this
3
<PAGE> 4
Agreement, then the Company will take the actions set
forth in paragraphs (1) (2) and (3) of this
Subsection 10(a).
(1) All stock options presently granted to
Employee will become immediately vested and
shall be exercised, if ever, in accordance
with and subject to the terms and provisions
of the Company's Stock Option Plan and
Employee's Stock Option Agreement; and
(2) If Employee dies, Employee's estate will
receive within fifteen (15) days, an amount
equal to all Base Salary and all other
benefits that would have accrued and/or been
payable to Employee for a period of eighteen
(18) months from the date of death at
Employee's then current level of
compensation, and if the Company terminates
this Agreement on some basis other than the
reason or reasons stated in Section 8 or
Employee terminates this Agreement for cause,
Employee will continue to receive all Base
Salary and all other benefits for a period of
eighteen (18) months from the date of
termination; and
(3) Any other relocation or other expense amount
specifically agreed to herein.
(b) If the Company terminates this Agreement for a reason
or reasons set forth in Section 8 or Employee
terminates this Agreement without cause, then the
Company will only be obligated to pay to Employee the
actual amount of compensation accrued to the date of
termination, Employee will be bound to the terms of
any Stock Option Agreement as it relates to the
exercise of any vested stock options, and all other
payments or benefits recited herein shall be
cancelled and terminated, without recourse.
11. Non-Competition. If the Company terminates this Agreement on
some basis other than the reason or reasons stated in Section 8 or if Employee
terminates this Agreement, then for the Noncompete Period (as defined below),
Employee shall not, directly or indirectly, either as an individual, a partner
or a joint venturer, or in any other capacity, (a) invest (other than
investments in publicly-owned companies which constitute less than 2% of the
voting securities of any such company) or engage in any business that is
competitive with that of the Company, (b) accept employment with or render
services to a competitor of the Company or any of its affiliates as a director,
officer, agent, employee or
4
<PAGE> 5
consultant or (c) contact, solicit or attempt to solicit or accept business
from any customers of the Company or its affiliates or any person or entity
whose business the Company or its affiliates is soliciting. If the Company
terminates this Agreement on some basis other than the reason or reasons stated
in Section 8 or Employee terminates this Agreement for cause, the Noncompete
Period shall be the period after termination for which Employee receives Base
Salary pursuant to Section 10. If Employee terminates this Agreement other than
for cause the Noncompete Period shall be twelve (12) months from the date of
such termination.
12. Arbitration. Any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, shall be finally resolved by
binding arbitration in Dallas, Texas in accordance with the then effective
rules of the American Arbitration Association.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent by registered or
certified mail to Employee and/or the Company at their addresses as set forth
on the signature page(s).
14. Waiver, Modification or Cancellation. Any waiver, amendment,
modification, or cancellation of any provision of this Agreement shall not be
valid unless in writing and signed by both Employee and the Company; provided,
however, that increases in the Base Salary approved by the Board or the
granting of additional compensation and/or benefits to Employee approved by the
Board need not be in a writing signed by Employee.
15. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon (a) the Company and the Company's successors and assigns,
including but not limited to any entity which may acquire all or substantially
all of the Company's assets and business or with or into which the Company may
be consolidated or merged, and (b) Employee and Employee's heirs, executors,
administrators and legal representatives, provided that the duties of Employee
as described herein may not be delegated.
16. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision never comprised a part
hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as part
of this Agreement, a provision as similar in its terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
5
<PAGE> 6
17. Entire Agreement. This Agreement represents the entire
Agreement between the parties with respect to the subject matter hereof. Each
party represents to the other that there are no other oral, written, express or
implied contracts, agreements or understanding between them. This Agreement
supersedes any existing employment agreement between the parties.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF TEXAS (AND NOT THE CONFLICTS OF LAWS RULES OF TEXAS).
19. Specific Representations. Each party represents to the other
that:
(a) The consideration recited herein shall conclusively
be deemed fair, adequate, reasonable and sufficient.
(b) Such party has voluntarily and without fraud, duress,
coercion, undue influence or improper persuasion
executed this Agreement.
(c) The signature appearing below is such party's manual,
original, genuine, authentic and undeniable
signature.
(d) Such party is competent, authorized and capable of
executing this Agreement as a valid, binding and
enforceable agreement.
(e) Such party is not aware of any agreement, document or
commitment that would limit such party's ability to
fully comply with the terms of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May
25, 1995, but effective as of January 1, 1995.
Address:
- ------------------------------- /s/ James D. Pritchett
- ------------------------------- -----------------------------
- ------------------------------- JAMES D. PRITCHETT
Address: ULTRAK, INC.
1220 Champion Circle By: /s/ George K. Broady
Suite 100 --------------------------
Carrollton, Texas 75006 Its: President
6
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS AGREEMENT is between Ultrak, Inc., a Colorado corporation (the
"Company"), and Tim D. Torno ("Employee").
In consideration of the terms of this Agreement, and other good and
valuable consideration, the sufficiency of which is hereby acknowledged by each
party, the Company and Employee, intending to be legally bound, hereby covenant
and agree as follows:
1. Employment. The Company hereby agrees to continue to employ
Employee, and Employee hereby accepts continued employment with the Company,
upon the terms and conditions hereinafter set forth.
2. Term. Subject to the other terms of this Agreement, this
Agreement shall be effective for the period (the "First Year") from January 1,
1995 through December 31, 1995. The period from January 1 of a calendar year
through December 31 of such calendar year is hereafter referred to as a "Year."
The parties hereby acknowledge and agree it is their intent that this Agreement
shall automatically renew for an additional Year as of each January 1. The
period during which this Agreement is effective is hereafter referred to as the
"Term."
3. Duties. Employee shall be the Vice President-Finance, Chief
Financial Officer, Secretary and Treasurer of the Company. During the Term,
Employee shall be based in the Dallas, Texas area only and shall perform the
duties and exercise the powers which from time to time may be lawfully assigned
to or vested in him by the Company's Board of Directors (the "Board"). It is
agreed that during the Term, Employee will not accept an officership or
directorship or participate in the operation or management of any other entity,
unless it is an entity either owned or controlled by the Company, without the
prior written consent of the President.
4. Extent of Services. Unless prevented by ill health, Employee
shall devote his entire working time, attention and energies to the business of
the Company, and shall not during the Term engage in any other business
activity whether or not such business activity is pursued for gain, profit or
other pecuniary advantage; provided, however, Employee shall not be prevented
from investing in such form or manner as will not require any services on the
part of Employee in the operation of the affairs of the companies in which such
investments are made, except that in no event may Employee make investments in
any firms in competition with, or in the business of supplying goods or
services to the Company, unless such investments are (a) disclosed in writing
to and approved by the Board and (b) do not exceed $25,000 with respect to each
investment in any privately-held company or 2% of the voting securities of any
publicly-owned company.
1
<PAGE> 2
5. Base Salary. The Company shall pay Employee a salary (the
"Base Salary"), payable in bi-weekly installments. The Base Salary for the
First Year shall be $138,000 and may be increased by the Board without an
amendment to this Agreement. If Employee is absent from his employment because
of illness which prevents Employee from performing his duties described herein,
the Company shall be obligated to pay Employee his Base Salary and other
compensation for all such periods of absence for the balance of the Term less
any applicable disability insurance actually received by Employee. The Base
Salary and any other compensation payable pursuant to this Agreement shall be
subject to appropriate tax withholding.
6. Other Compensation.
(a) The Company currently has in effect certain bonus and
stock option plans. During the Term, Employee will be
eligible to participate in those plans currently in
effect and as they may be amended from time to time,
so long as such plans remain in existence.
Furthermore, during the Term, Employee shall be
entitled to participate in all current or
subsequently enacted benefit programs applicable to
all executive officers of the Company. For purposes
of this Agreement, all references to stock option
plans, bonus plans or benefit programs shall be
deemed to mean that Employee shall be eligible to
participate in such plans or programs of the Company
in which Employee presently participates or is
eligible to participate, or such plans or programs
that may subsequently be adopted in substitution for
such plans or programs.
(b) The Company will provide Employee a $300 per month
car allowance.
(c) Employee shall receive four (4) weeks of paid
vacation each Year.
(d) Employee shall be covered by all existing insurance
programs afforded by the Company to its executive
officers. Employee understands and agrees that he
shall, as of the date hereof, be responsible for
paying for forty percent (40%) of the premiums for
health insurance coverage. Employee understands such
percentage may change.
(e) The Company shall pay the cost of all CPE courses for
Employee for up to the minimum hours required per
calendar year in order for Employee to maintain his
CPA status.
2
<PAGE> 3
7. Expense Reimbursement. Employee is authorized to incur
reasonable expenses with regard to the business of the Company, including
expenses for entertainment, travel and other items of a similar character in
accordance with the Company's travel and entertainment policies as such
policies shall exist from time to time (the "Policy"). The Company will
reimburse Employee for all such expenses incurred and reported by him in
accordance with the Policy.
8. Termination by the Company. This Agreement may be terminated
by the giving of sixty (60) days prior written notice pursuant to Section 13 by
the Company upon the occurrence of the following:
(a) If Employee breaches this Agreement, and such breach,
if capable of being cured, is not cured within thirty
(30) calendar days of receipt by Employee from the
Company of written notice requiring him to cure such
breach(es);
(b) If Employee shall be convicted of a criminal offense
which in the reasonable opinion of the Board may
injure or tend to injure the reputation or business
of the Company;
(c) If Employee files for bankruptcy or a bankruptcy
petition is filed against Employee and, in either
case, such bankruptcy proceeding is not dismissed
within ninety (90) days of being filed;
(d) If Employee shall grossly neglect the performance of
his duties as set forth or described herein; or
(e) If Employee becomes so addicted to alcohol, drugs or
any controlled substance that it substantially
impairs his abilities to perform his assigned duties.
9. Termination by the Company or Employee. Notwithstanding any
other provision of this Agreement, either party may terminate this Agreement by
giving notice pursuant to the terms and conditions of this Agreement.
10. Payments upon Termination or Death. It is agreed that if this
Agreement is terminated, payments and/or provisions for payments will be made
as follows:
(a) If the Company terminates this Agreement on some
basis other than the reason or reasons as stated in
Section 8, or if Employee dies, the Company will take
the actions set forth in Paragraphs (1), (2) and (3)
of this Subsection 10(a). If Employee terminates
this Agreement for cause, which shall be
3
<PAGE> 4
limited to a material breach (specified in writing by
Employee) by the Company of the terms of this
Agreement, then the Company will take the actions set
forth in paragraphs (1), (2) and (3) of this
Subsection 10(a).
(1) All stock options presently granted to
Employee will become immediately vested and
shall be exercised, if ever, in accordance
with and subject to the terms and provisions
of the Company's Stock Option Plan and
Employee's Stock Option Agreement; and
(2) If Employee dies, Employee's estate will
receive within fifteen (15) days, an amount
equal to all Base Salary and all other
benefits that would have accrued and/or been
payable to Employee for a period of twelve
(12) months from the date of death at
Employee's then current level of
compensation, and if the Company terminates
this Agreement on some basis other than the
reason or reasons stated in Section 8 or
Employee terminates this Agreement for cause,
Employee will continue to receive all Base
Salary and all other benefits for a period of
one year from the date of termination; and
(3) Any other relocation or other expense amount
specifically agreed to herein.
(b) If the Company terminates this Agreement for a reason
or reasons set forth in Section 8 or Employee
terminates this Agreement without cause, then the
Company will only be obligated to pay to Employee the
actual amount of compensation accrued to the date of
termination, Employee will be bound to the terms of
any Stock Option Agreement as it relates to the
exercise of any vested stock options, and all other
payments or benefits recited herein shall be cancelled
and terminated, without recourse.
11. Non-Competition. If the Company terminates this Agreement on
some basis other than the reason or reasons stated in Section 8 or if Employee
terminates this Agreement, then for the Noncompete Period (as defined below),
Employee shall not, directly or indirectly, either as an individual, a partner
or a joint venturer, or in any other capacity, (a) invest (other than
investments in publicly-owned companies which constitute less than 2% of the
voting securities of any such company) or engage in any business that is
competitive with that of the Company, (b) accept employment with or render
services to a competitor of the Company
4
<PAGE> 5
or any of its affiliates as a director, officer, agent, employee or consultant
or (c) contact, solicit or attempt to solicit or accept business from any
customers of the Company or its affiliates or any person or entity whose
business the Company or its affiliates is soliciting. If the Company terminates
this Agreement on some basis other than the reason or reasons stated in Section
8 or Employee terminates this Agreement for cause, the Noncompete Period shall
be the period after termination for which Employee receives Base Salary
pursuant to Section 10. If Employee terminates this Agreement other than for
cause, the Noncompete Period shall be twelve (12) months from the date of such
termination.
12. Arbitration. Any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, shall be finally resolved by
binding arbitration in Dallas, Texas in accordance with the then effective
rules of the American Arbitration Association.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent by registered or
certified mail to Employee and/or the Company at their addresses as set forth
on the signature page(s).
14. Waiver, Modification or Cancellation. Any waiver, amendment,
modification, or cancellation of any provision of this Agreement shall not be
valid unless in writing and signed by both Employee and the Company; provided,
however, that increases in the Base Salary approved by the Board or the
granting of additional compensation and/or benefits to Employee approved by
the Board need not be in a writing signed by Employee.
15. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon (a) the Company and the Company's successors and assigns,
including but not limited to any entity which may acquire all or substantially
all of the Company's assets and business or with or into which the Company may
be consolidated or merged, and (b) Employee and Employee's heirs, executors,
administrators and legal representatives, provided that the duties of Employee
as described herein may not be delegated.
16. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision never comprised a part
hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom. Furthermore, in lieu of such
illegal, invalid or unenforceable provision, there shall be added automatically
as part of this Agreement, a provision as similar in its terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
5
<PAGE> 6
17. Entire Agreement. This Agreement represents the entire
Agreement between the parties with respect to the subject matter hereof. Each
party represents to the other that there are no other oral, written, express or
implied contracts, agreements or understanding between them. This Agreement
supersedes any existing employment agreement between the parties.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF TEXAS (AND NOT THE CONFLICTS OF LAWS RULES OF TEXAS).
19. Specific Representations. Each party represents to the other
that:
(a) The consideration recited herein shall conclusively
be deemed fair, adequate, reasonable and sufficient.
(b) Such party has voluntarily and without fraud, duress,
coercion, undue influence or improper persuasion
executed this Agreement.
(c) The signature appearing below is such party's manual,
original, genuine, authentic and undeniable
signature.
(d) Such party is competent, authorized and capable of
executing this Agreement as a valid, binding and
enforceable agreement.
(e) Such party is not aware of any agreement, document or
commitment that would limit such party' s ability to
fully comply with the terms of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May
25, 1995, but effective as of January 1, 1995.
Address:
237 Bay Circle /s/ Tim D. Torno
Coppell, Texas 75019 ---------------------------
TIM D. TORNO
Address: ULTRAK, INC.
1220 Champion Circle
Suite 100 By: /s/ George K. Broady
Carrollton, Texas 75006 -----------------------
Its: President
6
<PAGE> 1
Exhibit 11.1
ULTRAK, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE DATA
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Computation of earnings per share - primary:
- --------------------------------------------
Income from continuing operations $2,695,051 $2,789,512 $2,638,860
Less dividend requirements on preferred stock (117,210) (117,210) (117,210)
---------- ---------- ----------
Income from continuing operations allocable to
common stockholders $2,577,847 $2,672,302 $2,521,650
========== ========== ==========
Net income allocable to common stockholders $2,577,847 $2,482,302 $ 687,280
========== ========== ==========
Weighted average number of common shares
outstanding during the period 6,870,050 6,541,786 6,511,269
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the average market price 277,854 277,213 278,603
---------- ---------- ----------
Shares used for computation 7,147,904 6,818,999 6,789,872
========== ========== ==========
Income per share - primary
Continuing operations $ .36 $.39 $.37
===== ==== ====
Net income $ .36 $.36 $.10
===== ==== ====
Computation of earnings per share - assuming full dilution:
- -----------------------------------------------------------
Income from continuing operations $2,695,057 $2,789,512 $2,638,860
========== ========== ==========
Net income $2,695,057 $2,599,512 $ 804,490
========== ========== ==========
Weighted average number of common shares
outstanding during the period 6,870,050 6,541,786 6,511,269
Net effect of dilutive stock options and
warrants based on the treasury stock method
using the greater of the average or ending
market price 299,298 288,218 286,474
Effect of preferred stock conversion 406,981 406,981 406,981
---------- ---------- ----------
Shares used for computation 7,576,329 7,236,985 7,204,724
========== ========== ==========
Income per share - assuming full dilution
Continuing operations $ .36 $.39 $.37
===== ==== ====
Net income $ .36 $.36 $.11
===== ==== ====
</TABLE>
Note - The computation of fully-diluted income per share for 1993 is presented
even though it is at variance with Accounting Principles Board Opinion No. 15,
because the result is antidilutive.
<PAGE> 1
Exhibit 21.1
ULTRAK, INC. AND SUBSIDIARIES
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary Name % Owned State of Incorporation
--------------- ------- ----------------------
<S> <C> <C>
Dental Vision Direct, Inc. 100% Texas
JAK Pacific Video Warranty and
Repair Services, Inc. 100% California
Diamond Electronics, Inc. 100% Ohio
BLC & Associates, Inc. 100% California
Ultrak GP, Inc. 100% Delaware
Ultrak LP, Inc. 100% Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,306,482
<SECURITIES> 0
<RECEIVABLES> 16,100,563
<ALLOWANCES> 481,104
<INVENTORY> 21,293,216
<CURRENT-ASSETS> 44,803,582
<PP&E> 5,694,265
<DEPRECIATION> 1,576,366
<TOTAL-ASSETS> 52,954,795
<CURRENT-LIABILITIES> 34,923,708
<BONDS> 0
<COMMON> 73,269
0
976,755
<OTHER-SE> 15,446,515
<TOTAL-LIABILITY-AND-EQUITY> 52,954,795
<SALES> 101,232,305
<TOTAL-REVENUES> 101,232,305
<CGS> 76,319,278
<TOTAL-COSTS> 76,319,278
<OTHER-EXPENSES> 18,797,450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,840,489
<INCOME-PRETAX> 4,234,586
<INCOME-TAX> 1,539,529
<INCOME-CONTINUING> 2,695,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,695,057
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
