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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
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-9463
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2626358
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1301 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS 75057
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 353-6500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.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 a definitive proxy to be filed or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of February 27, 1998, was $136,331,168. As of that date,
14,445,741 shares of the Registrant's Common Stock were 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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PART I
ITEM 1. BUSINESS
GENERAL
Ultrak, Inc. (the "Company" or "Ultrak") designs, manufactures,
markets, sells and services electronic products and systems for use in security
and surveillance, industrial and medical video and professional audio markets
worldwide. These products and systems include a broad line of cameras, lenses,
high-speed dome systems, monitors, switchers, quad processors, time lapse
recorders, multiplexers, video transmission systems, access control systems,
computerized observation and security systems, audio equipment and accessories.
The Company has generated rapid growth with sales increasing from $1.8 million
in 1987 to $189 million in 1997.
It is the Company's objective to provide single-source solutions to its
customers in the form of integrated systems whereby all closed circuit
television ("CCTV") components, alarms, access control, and badging as well as
facility and personnel management functions and reporting are controlled from
one single console. Integrated systems bring CCTV, access control and facility
management, communications and audio into one system with one control platform.
Integrated systems greatly reduce acquisition, support, maintenance and training
costs, raise system performance levels and provide a platform for innovation to
better serve the end user. Ultrak's management believes that integration
provides customers maximum functionality at the lowest possible cost.
The Company was incorporated in Colorado in 1980 and re-incorporated in
Delaware in December 1995. In 1997, the Company built a 170,000 square foot
warehouse and headquarters facility known as the Ultrak Worldwide Support Center
located in the northern Dallas suburb of Lewisville, Texas. Since January 1,
1998, the Company's new address is 1301 Waters Ridge Drive, Lewisville, Texas
75057 and its telephone number is (972) 353-6500.
Ultrak operates sales, distribution and manufacturing locations
worldwide. The Company has sales facilities in six US cities, England, France,
Germany, Italy, Singapore, Australia, Japan and South Africa, as well as active
representation through systems integrators in China and Brazil. Customers are
supported by ten distribution centers worldwide and manufacturing facilities
located in the United States, Germany, Australia and South Africa.
INDUSTRY BACKGROUND AND MARKETS SERVED
The markets served by Ultrak's products and systems include
Professional Security and Surveillance, Do-it-yourself Security and
Surveillance, Professional Audio, Industrial Video and Dental and Medical Video.
Professional Security and Surveillance
The professional security and surveillance market services
manufacturing facilities, airports, office complexes, government agencies,
hospitals, casinos, retail stores and other organizations that are increasingly
in need of integrated electronic security and surveillance systems that combine
CCTV, access control and facility management and communications. These products
and systems also play an important role in traffic management, public safety and
mobile video applications. The Company sells these products and systems to
distributors, dealers and systems integrators through its own field sales
personnel. It is the Company's strategy to develop and acquire a comprehensive
line of products and integrated systems, build worldwide sales, service and
support and provide single-source solutions to its customers.
The following Ultrak products and integrated systems are sold into the
professional security and surveillance markets: cameras, lenses, domes and
housings, monitors, time-lapse and digital recorders,
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ruggedized cameras, monitors and recorders for mobile video applications,
digital processors (quads and multiplexers), switchers and video management
systems, video transmission equipment, access control and facility management
equipment, and the DAVE (Duplex Analog Video Encoding) Technology(TM) system.
Ultrak's proprietary DAVE Technology System 2000 is based on technology that
provides complete and continuous video coverage using a large array of cameras
connected by a single loop of coaxial cable.
1997 revenues for the US electronic security market were estimated to
be in excess of $14 billion, according to the SDM Magazine 1998 Industry
Forecast Survey.
Do-It-Yourself Security and Surveillance
As CCTV become more affordable, small businesses and homeowners are
installing video observation systems to replace or supplement conventional alarm
systems. The consumer do-it-yourself security and surveillance market consists
of those applications in which end users purchase security and surveillance
systems and install the systems themselves in their small businesses or homes.
Video products sold into this market are characterized by affordability,
aesthetically appealing designs, ease of installation and maintenance and
mobility. The typical consumer market CCTV system consists of a camera, monitor,
switcher and, optionally, a video recorder, which system can be wired or
wireless. Consumer CCTV products are sold through mass merchandisers, wholesale
clubs, electronic retail stores, office and juvenile product superstores, as
well as through retail catalogs. According to the United States Census Bureau,
there were approximately 9.4 million businesses with less than 100 employees and
99 million households in the United States in 1996.
It is the Company's strategy to provide easy-to install and
easy-to-operate video products and systems that are "feature rich" and
affordably priced. The Company is seeking to expand these product lines
and introduce these, or similar products and systems, into the European
market. These products are marketed under the Exxis label at a certain
wholesale club and under the Smart Choice and other labels at various
retail outlets. The Company sells these products through a combination
of its own sales force and manufacturer's representatives.
Professional Audio
The professional audio market includes public address equipment for
office complexes, hotels, airports and retail stores. In addition, this market
includes sound reinforcement systems for concert halls, churches, arenas and
theaters.
Ultrak produces and markets products for professional audio and sound
reinforcement systems such as amplifiers, speakers, mixers, equalizers,
microphones, CD players, turntables and accessories. The Company sells these
systems through a direct sales force in France and through manufacturer's
representatives in the US and other countries.
Industrial Video
System integrators who assemble and sell equipment-incorporating video
to manufacturers that use the equipment in their production processes typically
purchase video products. Video cameras are used for machine vision, computer
imaging, robotics, microscopy, high-speed inspection and high temperature
furnace monitoring. Industrial video offers more precise assessment than human
visual inspection, and can measure image parameters which are imperceptible to
the human eye. These systems are also used to remotely monitor automated
assembly lines to ensure that each process on the assembly line is accurately
and completely performed. New industrial applications
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are emerging as new equipment is developed and as production automation levels
increase. According to Frost & Sullivan, the market for cameras for
manufacturing applications is expected to grow at a compound annual rate of 15%
through 1999. The world industrial video market was estimated to be $500 million
in 1997.
The Company's strategy with regard to the industrial video market is to
strengthen customer loyalty by backing-up advanced products with technical
expertise, a large variety of products and outstanding customer support. The
Company uses a combination of its own sales force and manufacturer's
representatives to sell these products to dealers and OEM accounts.
Dental & Medical Video
The dental and medical market consists of intraoral video cameras for
the dental market and medical video applications, such as otoscopes for eardrum
examinations and cameras for microscopy, endoscopy and various surgical
applications.
Video products assist dentists in diagnosing problems for patients and
help in explaining the proposed treatment to the patient, thereby increasing the
rate of patient acceptance of proposed treatments. By means of a video printer,
dentists can print pictures of the patient's teeth, providing documentation for
insurance purposes, patient monitoring and "superhuman" viewing during surgery.
The primary dental target market for CCTV systems consists of the approximately
118,500 general dentistry practitioners. Only about 46% of these dentists
currently own an intraoral camera system, according to a survey conducted for
Dental Products Report in 1996.
In addition, medical video is also emerging as a technology for
veterinary medicine. Frost & Sullivan, World Industrial/Broadcast Solid State
Camera and System Markets 1993, has estimated that the market for cameras in
medical applications will grow at a compound annual growth rate of 13% through
1999. The worldwide medical vision market is estimated to be $450 million and is
projected to grow at a 14% annual rate according to Frost & Sullivan.
The strategy that Ultrak has set is to capitalize on the new generation
of UltraCam intraoral camera systems and to build broader name recognition
within the medical community through the introduction of a new otoscope and
medical-grade VCR. Ultrak's sales force sells the intraoral camera systems to
dental dealers and the medical products to system integrators.
STRATEGY
Ultrak's strategy is to develop and acquire the most comprehensive
family of world-class electronic products and systems for all of the markets it
services. Additionally, Ultrak's strategy is to build worldwide marketing
capabilities to maximize market coverage and increase the speed with which it
gets its products to market. The Company seeks to implement this strategy
through superior customer service, highly focused sales and marketing,
customer-driven product development, cost effective design and production and
delivery of innovative and value oriented products and systems.
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ACQUISITIONS
Acquisitions have contributed significantly to the Company's recent
growth. The Company believes that acquisitions are an effective way to obtain
new CCTV and related products and integrated systems, add experienced personnel,
access additional channels of distribution, expand into new geographic
territories, diversify its customer base and improve operating efficiencies
through economies of scale. The Company believes that the security industry is
in the process of consolidating, which should present additional opportunities
for growth through acquisitions. During 1995, the Company completed three
acquisitions. During 1996, the Company completed three acquisitions and made a
minority investment in one company (subsequently sold in 1997) and in 1997, the
Company completed five acquisitions, made a minority investment in one company
and established an 80 percent-owned subsidiary in the Pacific Rim.
1995 Acquisitions:
Koyo, Diamond and GPS
In March 1995, Ultrak acquired certain assets of the CCTV division of
Koyo International, Inc. of America ("Koyo"), adding the patented ball camera,
which is ideal for museum, residential and high-end commercial installations and
offers a high level of performance and installation simplicity. In July 1995,
Ultrak acquired Diamond Electronics, Inc. ("Diamond"), a manufacturer of video
CCTV security and surveillance systems used by large retailers and
municipalities and of viewing systems used by industry in hazardous settings.
The acquisition of Diamond added industrial viewing equipment and high speed
dome-mounted camera systems. In November 1995, Ultrak acquired G.P.S. Standard
U.S.A. ("GPS"), adding a complete range of advanced CCTV accessories, including
camera housings, mounting brackets, camera pan-and-tilt mechanisms, perimeter
protection systems and software-driven camera control systems. Diamond was
acquired for $3.8 million in registered Common Stock and Koyo and GPS were
acquired for aggregate consideration of approximately $900,000 in cash and
Common Stock.
1996 Acquisitions:
MAXPRO
Effective July 1, 1996, Ultrak acquired approximately 75% of the
outstanding stock of MAXPRO Systems Pty Ltd. ("MAXPRO") in exchange for
approximately $8.2 million in cash and $900,000 in restricted Common Stock
payable over a two-year period ending August 1, 1998. On February 17, 1997, the
Company acquired the remainder of the outstanding stock of MAXPRO for 175,000
shares of restricted Common Stock valued at $3.1 million. MAXPRO, a manufacturer
and distributor of CCTV products and systems based in Perth, Western Australia,
added large-scale CCTV switching systems to the Company's product line and
enabled the Company to enter several new target geographic and customer markets.
MAXPRO's CCTV switching systems consist of sophisticated, matrix video switching
software that is coupled to a computer-controlled security input and output
network. The systems allow a virtually unlimited number of input and output
devices, including cameras, domes, VCRs and access control devices, to work
together seamlessly.
Bisset
Effective October 1, 1996, Ultrak acquired all of the outstanding share
capital of Groupe Bisset, S.A. ("Bisset"), based in Paris, and one of France's
largest distributors of CCTV products, for $5.0 million in cash and a total of
456,522 shares of restricted Common Stock valued at $8.6 million. Bisset
distributes products from manufacturers such as Diamond, Mitsubishi, Samsung,
Sanyo, Ikegami and Pentax as well as Ultrak. It sells to installing dealers and
system integrators and provides technical support and full warranty repair and
service. Bisset also designs, markets and sells audio equipment including
mixers, equalizers, speakers and public address equipment under its own brand,
BST, for the professional audio market. Bisset provided the Company with a
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prominent entry into the strategically important French market and provided the
Company with expanded sales opportunities in Western Europe.
Lenel
In September 1996, Ultrak acquired approximately 24% of the outstanding
stock of Lenel Systems International, Inc. ("Lenel"), a privately held software
company specializing in access control, based in Fairport, New York, for $2.6
million in cash. Additionally, Ultrak received a warrant that enabled it to
increase its equity ownership in Lenel over time and signed a reseller agreement
with Lenel whereby Ultrak is a worldwide reseller of Lenel's products (except
Norway and Sweden).
In September 1997, the Company sold its approximately 24% interest in
Lenel and warrants for consideration comprised of a promissory note and cash
totaling $3.1 million. The promissory note is due within one year and is secured
by the Lenel stock Ultrak owned.
VideV
Effective December 1, 1996, the Company acquired all of the outstanding
share capital of VideV GmbH ("VideV"), based in Dusseldorf and one of Germany's
largest distributors of CCTV products, for 5,000,000 Deutsche Marks ($3.25
million) in cash and 53,820 shares of restricted Common Stock valued at
$556,000. VideV designs and distributes its own line of CCTV products under the
brand name VideV Systems and distributes products from manufacturers such as
Costar, Grundig, HiSharp and Ikegami. VideV sells primarily to installing
dealers and system integrators. The acquisition of VideV provided the Company
with a significant entry into Germany's CCTV market and increases the Company's
overall presence in Western Europe.
1997 Acquisitions:
Monitor Dynamics
Effective February 1, 1997, the Company acquired Monitor Dynamics, Inc.
("MDI"), based in Rancho Cucamonga, California, which designs, manufactures,
markets and sells high-end security and access control systems for a total of
$26.1 million in cash. MDI's computer-based integrated security and access
control systems are sold under the SAFEnet brandname and are used in very
high-end government, defense, industrial, financial and commercial applications
throughout the United States and Europe. MDI's systems are sold primarily
through dealers and system integrators. The acquisition of MDI provides the
Company with high-end security and access control systems and products.
Intervision
Effective March 1, 1997, the Company acquired all of the outstanding
share capital of Intervision Express Limited ("Intervision"), based in Preston,
England (near Manchester), a distributor of CCTV products for 500,000 British
Pounds ($814,000) in promissory notes and 38,822 shares of restricted Common
Stock valued at $719,000. Intervision sells primarily to small- and medium-sized
installing dealers and system integrators. Intervision distributes products from
manufacturers such as Dedicated Micros, Toa, Hitachi and Mitsubishi. The
acquisition of Intervision gave the Company a presence in the United Kingdom
market and continued the expansion of its European operations.
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Videosys Group
Effective April 1, 1997, the Company acquired the Videosys Group
("Videosys"),based near Venice, Italy, for total consideration of $8.37 million
consisting of $5.55 million in cash and 160,000 shares of the Company's
restricted Common Stock valued at $2.82 million. The Videosys Group designs,
imports and distributes CCTV and related security products primarily in Italy,
under the Videosys brand name. The Videosys Group sells primarily to installing
dealers and system integrators. The acquisition of the Videosys Group provides
the Company with a significant presence into Italy's CCTV market.
Veravision
On April 1, 1997, the Company acquired all of the outstanding shares of
capital stock of Veravision, Inc. ("Veravision"), based in San Clemente,
California, which manufactures intra-oral camera products for use primarily in
the dental market, for $150,000 in promissory notes, assumed debt of
approximately $2.0 million and 10% of the outstanding shares of capital stock of
Dental Vision Direct, Inc., a subsidiary of the Company, which are convertible
into shares of restricted Common Stock using a formula set forth in the
definitive agreement.
Securion 24
In August 1997, the Company acquired 10% of the outstanding capital
stock of Securion 24 Co. Ltd. ("Securion"), a privately held manufacturer and
distributor of security products based near Tokyo, Japan, for total
consideration of approximately $2.2 million in cash. In connection with the
investment, Ultrak granted Securion exclusive distribution rights to certain of
its products and systems pursuant to a firm annual purchase commitment. The
minority interest in Securion gave the Company access to the Japanese market by
virtue of the Company's association with an established Japanese security
company.
Philtech
Effective October 1, 1997, the Company acquired 100% of the outstanding
capital stock of Philtech Electronic Services Limited ("Philtech"), a
privately-held, South African based company, for total consideration of $600,000
in cash, $300,000 of which is payable over the three years following closing.
Philtech is a designer, manufacturer and supplier of CCTV switching and control
equipment based in Bezvalley near Johannesburg, South Africa. The acquisition of
Philtech gave the Company a presence in the growing South African market.
Ultrak Asia Ltd.
In November 1997, the Company established an 80 percent-owned company
in Singapore, Ultrak Asia Ltd. ("Ultrak Asia"), to further penetrate the Asian
market with Ultrak products and systems.
MARKETING AND SALES
Ultrak operates through highly focused selling groups organized
according to Ultrak's target markets. Ultrak's customer-focused structure allows
for individual attention to each target market, quick response to customer needs
and early identification of market requirements and new product ideas.
Generally, the Company reaches each target market through regional sales
professionals supported by telemarketing, catalogs, direct mail, magazine
advertising and industry trade shows.
The Company uses various brand names for products sold through each of
its selling groups to maximize market penetration of each selling group, to
minimize market channel conflicts and to differentiate products by
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features, applications and price. The Company's proprietary brand names, many of
which are registered trademarks, include Ultrak, Diamond Electronics, MAXPRO,
VideV Systems, Videosys, SAFEnet, Exxis, Smart Choice, BST, Industrial Vision
Source, Mobile Video Products and UltraCam. Approximately 85% of the products
sold by the Company in 1997 carried Ultrak brand names. The Company also sells
brands such as Panasonic, Mitsubishi, and Sony.
Ultrak began actively pursuing the international market in 1995. In
1995 and early 1996, Ultrak sold its products and systems in a number of
countries including Mexico, Brazil, Argentina, England, France, Germany,
Denmark, India, China, South Korea, Japan, The Philippines and Australia. Since
the second quarter of 1996, the Company acquired MAXPRO (Australia), Bisset
(France), VideV (Germany), Intervision (the UK), the Videosys Group (Italy),
Philtech (South Africa), made an investment in a distribution company in Japan
and established a distribution company in Singapore, which has expanded the
Company's presence internationally. See Note J to the Company's Consolidated
Financial Statements with respect to Foreign Operations.
PRODUCT DESIGN AND DEVELOPMENT
In addition to traditional research and development activities,
Ultrak's engineering and product development staff works directly with its
customers to design new products and product enhancements, and coordinates with
its contract suppliers to manufacture certain Ultrak branded products. Ultrak
has developed a highly competent engineering staff to work with its selling and
marketing groups to develop new products and product line extensions that
promptly respond to customer needs on a worldwide basis. Consequently, Ultrak
believes that it can develop technologically superior products with
customer-desired performance capabilities that address new applications at lower
prices than competitive products.
As of December 31, 1997, the Company had a full-time engineering staff
of 75 employees compared to four as of December 31, 1994. Because of the complex
and highly specialized requirements of Ultrak products and systems, these
employees are experienced in a wide range of engineering disciplines including
charged-couple device ("CCD") technology, analog and digital signal processing,
CCTV management and switching technology, computer based access control
technology, facility management technology and high speed dome technology. In
addition, the Company's primary international contract manufacturers employ a
number of engineers who are primarily dedicated to research and development
efforts of products sold by Ultrak.
PRODUCTS AND SYSTEMS
The Company's motto, "Quality Products That Make a Difference,"
summarizes the Company's strategy of developing technologically advanced and
cost-effective products and systems that are unique and solve customers'
specific needs or problems. Through in-house product development, and with the
product lines the Company obtained through acquisitions, Ultrak offers a broad
line of Ultrak branded products and systems. The Company's brand names include
Ultrak, Diamond Electronics, MAXPRO, VideV Systems, Videosys, SAFEnet, Exxis,
Smart Choice, BST, Industrial Vision Source, Mobile Video Products and UltraCam.
Approximately 85% of the products sold by the Company in 1997 carried Ultrak
brand names. The Company also sells brands such as Panasonic, Mitsubishi,
Dedicated Micros and Sony.
The Company's products and systems include a broad line of cameras,
lenses, high-speed dome and housings, monitors, time-lapse and digital
recorders, digital processors, switchers and video management systems, the DAVE
Technology(TM) system, video transmission equipment access control and facility
management equipment, control matrix switching systems and accessories and
professional audio products. Other products and systems include dental intraoral
cameras, video printers, patient education systems, video otoscopes and furnace
viewing systems.
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OPERATIONS
A critical element of the Company's operations is its management
information systems. In early 1997, the Company selected SAP, a leading
enterprise software system, for its worldwide information needs. As of February
1998, the Company successfully completed the SAP conversion process at its
Lewisville, Texas Worldwide Support Center, as well as three other domestic
facilities. SAP has multi-lingual and multi-currency capabilities, and it will
unite Ultrak and all of its subsidiaries with a common inventory, sales and
database management system. Via laptop computers, the Ultrak sales team can
easily communicate with the host system from anywhere in the world.
Ultrak believes that one of the keys to its success is its commitment
to provide excellent response and service to its customers. Domestic orders can
be entered into the Company's Lewisville, Texas-based computer system either
directly by the customer through electronic data interchange, by traveling sales
representatives using laptop computers or by in-house sales personnel. After the
computer system performs an automated check of the customer's account and credit
limit, the order is released to be shipped from available inventory at one of
the five domestic stocking warehouse locations. Because the Company maintains a
relatively large inventory of products, it ships most items within 24 hours of
receipt of the order. The Company's domestic stocking warehouse locations are
Lewisville (Dallas), Texas; Broomfield (Denver), Colorado; Rancho Cucamonga
(Ontario), California, San Diego, California; Ft. Lauderdale, Florida and
Carroll (Columbus), Ohio. Approximately 85% of all domestic shipments are made
from the Lewisville, Texas warehouse. Bisset, Intervision, the Videosys Group
and Philtech also maintain a relatively large inventory of products and are able
to ship most items promptly after the receipt of an order. Because Diamond,
MAXPRO, VideV and MDI manufacture many of their products to order, the shipment
of their products generally occurs within a week or more after the receipt of an
order, depending on the size and complexity of the order.
With respect to Ultrak branded products manufactured by contract
manufacturers, most of these products are made exclusively for the Company or
there are limited or no sales of such products in the areas served by the
Company. The Company believes that its relationships with its suppliers are
good. 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 continue and grow. See Note G to the Company's Consolidated
Financial Statements with regard to Major Customers and Suppliers.
Delivery times for products manufactured abroad vary from one week to
two months, depending on the mode of transportation. Because of foreign
production lead times, the Company normally makes purchase commitments to these
foreign suppliers three to six months in advance of shipment. Therefore,
management believes it is necessary for the Company to commit to and carry
larger levels of inventory than would be necessary if it manufactured all of its
products domestically. Given order lead times, accurate inventory forecasting is
critical.
Substantially all of the Company's purchases from its non-affiliated
contract manufacturers are made in United States Dollars with the remaining
purchases made in Japanese Yen, Australian Dollars, French Francs, German
Deutschmarks, Italian Lira, the South African Rand and English Pounds. To date,
the Company's purchases have not been materially adversely affected by
fluctuations in the valuation of any international currency. It is expected that
the Company will continue to purchase the vast majority of its products in
United States Dollars.
To ensure complete customer service and satisfaction, Ultrak offers
third-party leasing services and after-sale service for all equipment sold by
the Company.
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Ultrak offers a limited warranty on all products shipped. The Company
generally warrants that its products will conform to Ultrak's published
specifications and be free from defects in materials and workmanship. For
products sold under the Ultrak name, the Company offers a two-year warranty on
cameras, most monitors, observation systems and quad processors. For all other
Ultrak equipment, a warranty of one year is offered. Ultrak specifically
disclaims any liability for personal injury or property loss by burglary,
robbery, fire or otherwise and disclaims any warranty that its products will
provide adequate warning or protection or that its products will not be
compromised or circumvented. The Company makes no warranty for products sold
under third-party brand names (although the warranty, if any, of the
manufacturer of the product may apply).
When goods are delivered to Ultrak, a random sampling quality assurance
procedure is performed. Selected units are verified for functionality, proper
packaging, labeling and documentation. The Company's primary contract
manufacturer as well as VideV in Germany are ISO9001 certified. The quality
assurance procedures in the Company's Ohio plant (Diamond) and California
facility (MDI) comply with ISO9001 specifications.
BACKLOG
As of December 31, 1997 and 1996, the Company had approximately $12.3
million and $9.4 million respectively, in order backlog which it considered to
be firm. Because purchase orders are subject to cancellation or delay by
customers with limited or no penalty, the Company's backlog is not necessarily
indicative of future revenues or earnings. Since the Company ships most products
within 24 hours of receipt of the order, the Company believes that backlog is
not a significant measurement of the Company's financial position.
INTELLECTUAL PROPERTY
As part of its ongoing engineering and development activities, Ultrak
seeks patent protection on inventions covering new products and improvements
when appropriate. Ultrak currently holds a number of United States patents and
has a number of pending patent applications. Although the Company's patents have
value, the Company believes that the success of its business depends more on
innovation, sales efforts, technical expertise and knowledge of its personnel
and other factors. The Company also relies upon trade secret protection for its
confidential and proprietary information. Many of the Company's brands are
registered trademarks owned by the Company.
COMPETITION
The Company faces substantial competition in each of its markets.
Significant competitive factors in the Company's markets include price, quality
and product performance, breadth of product line and customer service and
support. Some of the Company's existing and potential competitors have
substantially greater financial, manufacturing, marketing and other resources
than the Company. To compete successfully, the Company must continue to make
substantial investments in its engineering and development, marketing, sales,
customer service and support activities. There can be no assurance that
competitors will not develop products that offer price or performance features
superior to those of the Company's products.
The Company considers its major competitors to be the CCTV and access
control operations of Sensormatic Electronics Corporation, Burle (part of
Philips Communication & Security Systems, Inc.), Panasonic, Pelco, Vicon
Industries, Inc. and Cassi Rusco.
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EMPLOYEES
As of December 31, 1997, the Company had 672 full-time employees
employed worldwide at 16 primary locations and 12 field sales offices, of which
247 were sales and sales support personnel, 179 were warehouse/manufacturing
personnel, 71 were technical/service personnel, 75 were engineering and product
development personnel and 100 were administrative and managerial personnel.
The Company's future success will depend in large part upon its ability
to attract and retain highly skilled technical, managerial, financial and
marketing personnel, in a market where such people are in demand. No employee is
represented by a union or covered by a collective bargaining agreement and the
Company has not experienced a work stoppage or strike. The Company considers its
employee relations to be good.
The Company has a formal employee partnership philosophy that the
Company believes contributes significantly to its success. During periodic
"partners' meetings," all employee-partners are informed about the state of the
Company and key events that took place during the preceding month and given the
opportunity to ask questions, make suggestions and comment.
The Company's employee partnership philosophy statement is as follows:
Everyone working at Ultrak is considered to be a partner. Each
employee-partner pitches in to get the job done, is encouraged to grow both
professionally and personally, is recognized for individual achievement, and
works in a cheerful and friendly team environment. There is no room for prima
donnas or hierarchies. All employee-partners share in the Company's profits.
Ultrak extends its partnership philosophy to its suppliers and customers as
well.
ITEM 2. PROPERTIES
The Company moved to its new Worldwide Support Center in January 1998.
The facility is comprised of approximately 170,000 square feet of leased office
and warehouse space located on 14 acres of land in Lewisville, Texas, pursuant
to a lease with an initial term expiring in April 2003. There is adequate
available space on the premises for expansion of the Worldwide Support Center if
such expansion is deemed necessary. At the conclusion of the initial lease term,
the Company has an option to acquire the facility. The Company also leases
additional office/distribution warehouse space in Broomfield, Colorado; Fort
Lauderdale, Florida; San Diego, California; Paris, France; Dusseldorf, Germany;
Preston (Manchester), England; San Vendemiano (Venice), Italy; Kengray, South
Africa and Singapore.
The Company owns its 72,000 square foot manufacturing facility in
Carroll (Columbus), Ohio and leases its manufacturing facilities in San
Clemente, California; Rancho Cucamonga, California; and Perth, Western
Australia. The Company believes that its manufacturing facilities are adequate
to meet the Company's present and anticipated manufacturing needs for products
that it currently manufactures.
ITEM 3. LEGAL PROCEEDINGS
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
legal proceedings pending or threatened or judgments entered against any
director or officer of the Company.
11
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the
Company during the fourth quarter of 1997.
FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED OR INCORPORATED IN THIS ANNUAL REPORT ON FORM
10-K, WHICH ARE NOT STATEMENTS OF HISTORICAL FACT CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 (THE "REFORM ACT"). FORWARD LOOKING STATEMENTS ARE MADE IN GOOD FAITH BY
ULTRAK, INC. PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE REFORM ACT. FORWARD
LOOKING STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
ULTRAK, INC. TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS, INCLUDING
THE TIMELY DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS, THE IMPACT OF COMPETITIVE
PRODUCTS AND PRICING, FLUCTUATIONS IN OPERATING RESULTS, ABILITY TO INTRODUCE
NEW PRODUCTS, TECHNOLOGICAL CHANGES, RELIANCE ON INTELLECTUAL PROPERTY AND OTHER
RISKS. MOREOVER, THE OBJECTIVES AND INTENTIONS SET FORTH IN THIS FORM 10-K ARE
SUBJECT TO CHANGE DUE TO DOMESTIC, GLOBAL MARKET AND ECONOMIC CONDITIONS BEYOND
THE CONTROL OF ULTRAK, INC.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE AND DIVIDENDS
The Company's $.01 par value common stock ("Common Stock") commenced
trading on the Nasdaq Stock Market's Nasdaq National Market ("Nasdaq National
Market") on January 18, 1994, under the symbol "ULTK." Before that time, the
Common Stock was traded in the over-the-counter market. Prices shown do not
include adjustments for retail markups, markdowns or commissions. The following
table sets forth the high and low closing prices on the Nasdaq National Market
for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
1996
<S> <C> <C>
First quarter...................................................................... $9.75 $6.38
Second quarter..................................................................... 19.38 9.25
Third quarter...................................................................... 29.00 15.63
Fourth quarter .................................................................... 33.25 24.13
1997
First quarter...................................................................... $31.50 $17.63
Second quarter..................................................................... 17.13 8.56
Third quarter...................................................................... 12.75 8.50
Fourth quarter .................................................................... 13.13 9.13
</TABLE>
As of February 28, 1998, there were approximately 1,300 holders of
record of the Common Stock.
The Company has never paid cash dividends on the Common Stock. The
Company presently intends to retain earnings to finance the development and
expansion of its business. The declaration in the future of any cash dividends
on the 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
intends to continue to pay dividends on outstanding shares of Series A Preferred
Stock, all of which are owned by George K. Broady, the Chairman and Chief
Executive Officer of the Company. Dividends in the amount of $117,210 have been
paid annually to Mr. Broady since the issuance of the Series A Preferred Stock.
RECENT SALES OF UNREGISTERED SECURITIES
On July 23, 1997, the Company issued 166,667 shares of Common Stock to
the former owners of Bisset (residents of France) as deferred consideration for
the acquisition of Bisset. The share price used for such issuance was $8.75 per
share. Exemption from registration was claimed under Section 4(2) of the Act.
On July 25, 1997, the Company issued 34,043 shares of Common Stock to
the former owners of MAXPRO (residents of Australia) as deferred consideration
for the acquisition of MAXPRO. The share price used for such issuance was $8.81
per share. Exemption from registration was claimed under Section 4(2) of the
Act.
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<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data for the Company as
of and for the five fiscal years ended December 31, 1997, have been derived from
the consolidated financial statements of the Company and its subsidiaries, which
have been audited by Grant Thornton LLP, independent certified public
accountants. The selected consolidated financial data includes the effects of
businesses acquired in 1994, 1995, 1996 and 1997. This data should be read in
conjunction with the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the Consolidated
Financial Statements and related notes which are included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
(IN THOUSANDS)
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net sales ......................................... $ 52,412 $ 79,063 $ 101,232 $ 136,636 $188,741
Cost of sales ..................................... 39,554 59,350 76,319 95,786 130,048
--------- --------- --------- --------- ---------
Gross profit ...................................... 12,858 19,713 24,913 40,850 58,693
Marketing and sales expenses ...................... 7,025 11,201 13,255 18,766 31,312
General and administrative expenses ............... 1,926 2,686 4,651 8,871 19,130
Depreciation and amortization ..................... 252 447 891 1,436 4,038
Special charges ................................... -- -- -- -- 3,122
--------- --------- --------- --------- ---------
Total operating expenses ................. 9,203 14,334 18,797 29,073 57,602
--------- --------- --------- --------- ---------
Operating profit .................................. 3,655 5,379 6,116 11,777 1,091
Other expense (income) ............................ 635 1,076 1,881 285 (3,079)
--------- --------- --------- --------- ---------
Income from continuing operations before income
taxes .......................................... 3,020 4,303 4,235 11,492 4,170
Incomes taxes ..................................... 382 1,514 1,540 3,893 1,769
--------- --------- --------- --------- ---------
Income from continuing operations ................. 2,638 2,789 2,695 7,599 2,401
Income (loss) from discontinued operations ........ (1,834) (190) -- -- --
--------- --------- --------- --------- ---------
Net income ............................... 804 2,599 2,695 7,599 2,401
Dividend requirements on preferred stock .......... 117 117 117 117 117
--------- -=------- --------- --------- ---------
Net income allocable to common stockholders ....... $ 687 $ 2,482 $ 2,578 $ 7,482 $ 2,284
========= ========= ========= ========= =========
Weighted average shares outstanding - basic ....... 6,511 6,542 6,870 9,486 13,970
Income per common share from continuing
operations - basic ............................. $ 0.39 $ 0.41 $ 0.38 $ 0.79 $ 0.16
Net income per common share - basic ............... $ 0.11 $ 0.38 $ 0.38 $ 0.79 $ 0.16
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
(IN THOUSANDS)
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Working capital...................................... $ 4,966 $ 5,676 $ 9,880 $119,163 $93,604
Total assets......................................... 25,385 36,353 52,955 172,578 185,420
Short-term debt...................................... 12,875 18,244 24,482 -- --
Long-term debt....................................... -- -- 1,535 -- --
Stockholder's equity and equity put options.......... 7,541 10,070 16,497 155,961 163,198
</TABLE>
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The consolidated financial statements include the accounts of Ultrak
and its eleven consolidated subsidiaries. The Company is further organized in
the US into separate selling divisions; all supported by common administrative
functions such as credit, accounting, payroll, purchasing, warehousing, training
and computer support services. All significant intercompany balances and
transactions among subsidiaries and divisions have been eliminated in
consolidation.
The Company has experienced substantial growth in recent years. During
the past ten years, net sales have grown from $1.8 million in 1987 to $188.7
million in 1997. Increases in net sales have come from increased volume of sales
of existing products and systems to all of the markets served by the Company,
introduction and sales of new products and systems, creation of new selling
groups to focus on new markets and acquisitions of businesses in the security
and surveillance and access control industries.
During 1995, the Company completed three acquisitions. The largest
company acquired was Diamond, a manufacturer of CCTV security and surveillance
systems used by large retailers, of traffic management systems used by
municipalities and of viewing systems used by industry in hazardous settings.
The transaction was accounted for as a purchase and the operations have been
included in the Company's financial statements since July 1, 1995.
In 1996, the Company completed three international acquisitions and
made a minority investment in a fourth company. Effective July 1, 1996, Ultrak
acquired approximately 75% of the outstanding stock of MAXPRO, a manufacturer of
large scale CCTV switching systems based in Perth, Western Australia. On
February 17, 1997, the Company acquired the remainder of the outstanding stock
of MAXPRO. On September 6, 1996, Ultrak acquired and subsequently sold in
September 1997 its interest in approximately 24% of the outstanding stock of
Lenel, a domestic security access control software company. Effective October 1,
1996, Ultrak acquired all of the outstanding share capital of Bisset, a
distributor of CCTV and professional audio products based in Paris, France.
Effective December 1, 1996, Ultrak acquired all of the outstanding stock of
VideV, a distributor and manufacturer of CCTV products based in Dusseldorf,
Germany. All of these transactions were accounted for as purchases and the
operations have been included in the Company's financial statements since the
dates of acquisition.
In 1997, the Company completed five acquisitions and made a minority
investment in a sixth company. Effective February 1, 1997, Ultrak acquired all
of the outstanding stock of MDI, a manufacturer of security and access control
systems based in Rancho Cucamonga, California. Effective March 1, 1997, the
Company acquired all of the outstanding stock of Intervision, a distributor of
CCTV products and systems based in England. Effective April 1, 1997, Ultrak
acquired all of the outstanding stock of the Videosys Group, a distributor of
CCTV and security products and systems based in Italy. Also effective April 1,
1997, the Company acquired all of the outstanding stock of Veravision, a
manufacturer of intraoral dental camera products based in San Clemente,
California. Effective October 1, 1997, the Company acquired all of the
outstanding stock of Philtech, a manufacturer and distributor of CCTV switching
and control equipment based in South Africa. All of these transactions were
accounted for as purchases and the operations have been included in the
Company's financial statements since the dates of acquisition.
Product sales are recorded when goods are shipped to the customer. Most
of the Company's sales are made to its domestic customers on Net 30 or Net 60
day credit terms after a credit review has been performed to establish
creditworthiness and to determine an appropriate credit line. The Company's
international sales are made under varying terms depending upon the
creditworthiness of the customer, and include the use of letters of credit,
payment
15
<PAGE> 16
in advance of shipment or open trade terms. Sales to one customer accounted for
approximately 12% of total sales during 1996 and 1997.
Cost of sales for most of the Company's products includes the cost of
the product shipped plus freight, customs and other costs associated with
delivery from foreign contract manufacturers or from domestic suppliers. Cost of
sales for products manufactured by Ultrak include material, direct labor and
overhead as well as an allocated portion of indirect overhead.
Marketing and sales expenses are costs related to the Company's sales
efforts, which include costs incurred by both direct employees of the Company
and independent sales representatives. Marketing and sales expenses consist
primarily of salaries, commissions and related benefits, depreciation,
telephone, advertising, warranty, printing, product literature, sales promotion
and travel-related costs.
General and administrative expenses include costs of all corporate and
general administrative functions that support the existing selling divisions as
well as provide the infrastructure for future growth. General and administrative
expenses consist primarily of salaries and related benefits of executive,
administrative, operations and engineering, research and development personnel,
legal, audit and other professional fees, supplies, other engineering costs and
travel-related costs. During 1995, 1996 and 1997 the Company added new corporate
management in several areas to help facilitate and manage its growth.
Engineering, research and product development costs are included in
general and administrative expenses and consist primarily of salaries, overhead
and material costs associated with the development of new products offered by
the Company. All such costs have been expensed when incurred. The Company's
investment in engineering, research and product development increased
significantly during 1995, and continued to increase on an absolute basis in
1996 and 1997.
The Company's consolidated financial statements are denominated in
dollars and, accordingly, changes in the exchange rate between the Company's
subsidiaries' local currencies and the dollar will affect the conversion of such
subsidiaries' financial results into dollars for purposes of reporting the
Company's consolidated financial results. Translation adjustments are reported
as a separate component of stockholders' equity.
A substantial portion of the Company's purchases and sales are derived
from operations outside the United States. Since the revenues and expenses of
the Company's foreign operations are generally denominated in local currency,
exchange rate fluctuations between local currencies and the dollar subject the
Company to currency exchange risks with respect to the results of its foreign
operations. Therefore, the Company is subject to these risks to the extent that
it is unable to denominate its purchases or sales in dollars or otherwise shift
to its customers or suppliers the effects of currency exchange rate
fluctuations. Such fluctuations in exchange rates could have a material adverse
effect on the Company's results of operations. The Company did not have foreign
exchange forward or currency option contracts outstanding at December 31, 1997.
16
<PAGE> 17
The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto included herein.
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales represented
by certain items in the Company's consolidated summary of income for the
indicated periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales ..................................................... 100.0% 100.0% 100.0%
Cost of sales ................................................. 75.4 70.1 68.9
----- ----- -----
Gross profit .................................................. 24.6 29.9 31.1
Marketing and sales expenses .................................. 13.1 13.7 16.6
General and administrative expenses 4.6 6.5 10.1
Depreciation and amortization ................................. .9 1.1 2.1
Special charges ............................................... -- -- 1.7
----- ----- -----
Total operating expenses ............................. 18.6 21.3 30.5
----- ----- -----
Operating profit .............................................. 6.0 8.6 .6
Other expense (income) ........................................ 1.8 .2 (1.6)
----- ----- -----
Income before income taxes .................................... 4.2 8.4 2.2
Income taxes .................................................. 1.5 2.8 .9
----- ----- -----
Net income .................................................... 2.7% 5.6% 1.3%
===== ===== =====
</TABLE>
17
<PAGE> 18
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
For the year ended December 31, 1997, net sales were $188.7 million, an
increase of $52.1 million (38%) over 1996. This increase was due to the effect
of new acquisitions during 1996 and 1997, sales of new products introduced
during late 1996 and 1997 and increased volume of sales of existing CCTV
products to most of the markets served by the Company.
Cost of sales were $130.0 million for 1997, an increase of $34.3
million (36%) over 1996, including approximately $1.0 million in provisions for
excess and obsolete inventory. Gross profit margins increased to 31.1% (to 31.6%
excluding the special provisions for excess and obsolete inventory) in 1996 from
29.9% in 1996. This increase was due to the continued increased sales levels of
Ultrak-branded products, cost reductions realized on certain Ultrak-branded
products, the effect of certain acquisitions (the manufactured products of which
carry higher gross profit margins than other products sold by the Company) and
somewhat higher margins earned on new products introduced during late 1996 and
1997.
Marketing and sales expenses were $31.3 million for 1997, an increase
of $12.5 million (67%) over 1996. Marketing and sales expenses for 1997 were
16.6% of net sales, up from 13.7% in 1996. This increase was due to the effect
of acquisitions during late 1996 and 1997 and the effect in 1997 of hiring
additional sales, sales support and marketing personnel in conjunction with new
product introductions and resulting sales activities, as well as the increased
travel, printing, product literature, advertising and promotion costs associated
with the introduction of new products.
General and administrative expenses were $19.1 million for 1997, an
increase of $8.9 million (116%) over 1996, including $1.0 million in increases
in reserves for accounts receivable and other assets. General and administrative
expenses for 1997 were 10.1% (9.6% excluding the special reserves for accounts
receivable and other assets) of net sales, up from 6.5% of net sales in 1996.
This increase was a result of (i) the acquisitions in late 1996 and 1997, which
maintain certain separate administrative functions and have greater research and
development costs, as a percentage of net sales, than Ultrak's other operations
and (ii) the hiring of additional research and development and administrative
staff to support the anticipated growth in sales.
Depreciation and amortization expenses were $4.0 million for 1997, an
increase of $2.6 million (181%) over 1996. Depreciation and amortization
expenses for 1997 were 2.1% of net sales, up from 1.1% of net sales in 1996.
This increase was a result of substantially increased goodwill amortization
related to the acquisitions in late 1996 and 1997 and increased property and
equipment.
Special charges were $3.1 million for 1997, representing 1.7% of net
sales for 1997. Special charges consisted of (i) the write-off of computer
hardware and software made obsolete by the implementation of new software, (ii)
the cost of moving to a new headquarters building including the write-off of
leasehold improvements and other abandonment costs and (iii) implementation
costs related to new software through December 1997.
Other income was approximately $3.1 million for 1997, an increase of
$3.4 million from 1996. This increase was due primarily to interest income and
gain on sale of investments, offset partially by $697,055 in nonrecurring costs
of a terminated merger.
18
<PAGE> 19
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
For the year ended December 31, 1996, net sales were $136.6 million, an
increase of $35.4 million (35%) over 1995. This increase was due to the effect
of new acquisitions during 1995 and 1996, sales of new products introduced
during 1996 and increased volume of sales of existing CCTV products to most of
the markets served by the Company.
Cost of sales were $95.8 million for 1996, an increase of $19.5 million
(26%) over 1995. Gross profit margins increased to 29.9% in 1996 from 24.6% in
1995. This increase was due to increased sales levels of Ultrak-branded
products, cost reductions realized on certain Ultrak-branded products, the
effect of the acquisitions of Diamond and MAXPRO (the manufactured products of
which carry higher gross profit margins than other products sold by the Company)
and Bisset and higher margins earned on new products introduced during 1996.
Marketing and sales expenses were $18.8 million for 1996, an increase
of $5.5 million (42%) over 1995. Marketing and sales expenses for 1996 were
13.7% of net sales, up from 13.1% in 1995. This increase was due to the effect
of acquisitions during 1995 and 1996 and the effect in 1996 of hiring additional
sales, sales support and marketing personnel in anticipation of new product
introductions and resulting sales activities, as well as the increased travel,
printing, product literature, advertising and promotion costs associated with
the introduction of new products.
General and administrative expenses were $8.9 million for 1996, an
increase of $4.2 million (91%) over 1995. General and administrative expenses
for 1996 were 6.5% of net sales, up from 4.6% of net sales in 1995. This
increase was a result of the acquisitions in 1995 and 1996, including Diamond,
MAXPRO and Bisset, which maintain certain separate administrative functions and
have greater research and development costs, as a percentage of net sales, than
Ultrak's other operations and the hiring of additional research and development
and administrative staff to support the anticipated growth in sales.
Other expenses were approximately $285,000 for 1996, a decrease of $1.6
million from 1995. This decrease was due primarily to lower interest expense
resulting from the repayment of bank and other lender borrowings in June 1996,
from the proceeds of the sale of Common Stock in June and November 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a net decrease in cash and cash equivalents for 1997 of
approximately $57.7 million. Net cash used in operating activities for the year
was approximately $18.2 million, primarily consisting of increases in accounts
and notes receivable, inventories and advances for inventory purchases required
by increased sales and decreases in trade accounts payable arising from the
Company's decision to actively pursue early payment to earn discounts. Net cash
used in investing activities was approximately $34.9 million consisting of cash
payments for acquisitions and purchases of property and equipment. Net cash used
in financing activities was approximately $3.8 million consisting primarily of
the purchase of approximately $4.3 million in treasury stock and the payment of
dividends on the Series A Preferred Stock.
On December 11, 1997, the Company entered into a new three-year credit
facility with NationsBank of Texas, N.A. The credit facility provides up to
$40.0 million in revolving credit with interest at prime minus .50% or LIBOR
plus .60%, payable quarterly. At the maturity of the revolving credit facility,
the principal balance converts to a fully amortizing four-year term loan. The
credit facility is unsecured. The credit agreement contains certain restrictive
covenants and conditions, including maximum senior funded debt to cash flow and
debt service coverage. The Company was in compliance with all of its covenants
as of December 31, 1997. No amounts were outstanding on the credit facility as
of December 31, 1997. The Company is required to pay a quarterly commitment fee
of .0625% on the unused balance of the credit facility beginning June 30, 1998.
19
<PAGE> 20
The Company believes that internally generated funds, available
borrowings under the new credit facility, current amounts of cash and the
remaining net proceeds from the sale of Common Stock in November 1996 will be
sufficient to meet its presently anticipated needs for working capital, capital
expenditures and acquisitions, if any, for at least the next 12 months.
EFFECT OF NEW PRONOUNCEMENTS
In 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
The provision of SFAS No. 130 established new rules for the reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. The new rules require that all items that
are recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. The Company will adopt SFAS No. 130 in 1998 and
does not expect that such adoption will have a material impact on results of
operations, financial position or cash flows.
In 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. The provisions of SFAS No. 131 require
public companies to use a management approach to determining their operating
segments. This management approach model defines operating segments as
revenue-producing components of the enterprise for which separate financial
information is produced internally and are subject to evaluation by the chief
operating decision maker in deciding how to allocate resources to segments. SFAS
No. 131 also expands the financial and descriptive information disclosures
relative to the identified operating segments. Ultrak will adopt SFAS No. 131 in
1998 and does not expect that such adoption will have a material impact on
results of operations, financial position or cash flows.
DERIVATIVE FINANCIAL INSTRUMENTS
During 1997, the Company sold equity put options covering 2.6 million
shares. As of December 31, 1997, all options remained outstanding and the
Company has recorded on the balance sheet its potential repurchase obligation
related to the put options totaling $28.4 million at exercise prices ranging
from $8.75 to $12.51 per share. The put options are exercisable only at their
expiration date and expire from March 1998 to January 1999.
YEAR 2000 COSTS
The Company is aware of certain issues associated with the programming
code in certain of its existing computer hardware and software systems as the
millennium (Year 2000) approaches. The Year 2000 issue is pervasive and complex,
as virtually every computer operation in certain of its international
subsidiaries could be affected in some way by the rollover of the two-digit year
value to "00". The issue is whether systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause
complete system failures. The Company is in the process of implementing SAP, a
world leading multi-lingual and multi-currency enterprise software, at all of
Ultrak's facilities worldwide. SAP's software and all associated third party
applications are Year 2000 compliant.
As of February 1998, the Company had successfully completed the
conversion process to SAP at its Worldwide Service and Support Center, as well
as three other domestic facilities. The Company's worldwide implementation of
SAP is scheduled to be completed by December 1999. For all systems that are
currently not Year 2000 compliant, the Company will address and convert those
computer systems first in its implementation plan. During the year ended
December 31, 1997, the Company has expensed approximately $1.6 million related
to its initial phase of its implementation of SAP. It is expected that the
remaining phases of the worldwide implementation will additionally cost
approximately $3.4 million, which will be incurred primarily in 1998 and 1999.
Such costs will be capitalized and amortized over the estimated useful life of
the software.
20
<PAGE> 21
Based upon the expected timely completion of its conversion to SAP and
its discussions with its primary suppliers and vendors, the Company believes
that the Year 2000 issues will not have a material impact on the financial
position, results of operations or cash flows of the Company.
INFLATION
During the years ended December 31, 1997, 1996 and 1995, the cost of
property and equipment, lease expense and salaries and wages have increased
modestly. The increases have not had a material impact on the Company's results
of operations during any of the periods.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its
subsidiaries that are required by this Item 8 are listed in Part IV under Item
14(a) of this report. Such consolidated financial statements are included herein
beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
21
<PAGE> 22
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 1998 Annual Meeting of Stockholders (the "1998
Proxy Statement"), which is expected to be filed with the Securities and
Exchange Commission on or about April 15, 1998. 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 1998 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 1998 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 1998 Proxy Statement.
22
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
The Financial Statements listed below are filed as part of this Annual
Report on Form 10-K.
Financial Statements:
Report of Independent Certified Public Accountants.
Consolidated Balance Sheets as of December 31, 1997
and 1996.
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Additional financial information pursuant to the requirements of Form
10-K:
Report of Independent Certified Public Accountants
on Schedule
Schedule II - Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are either
not applicable or the required information has been provided elsewhere in the
Consolidated Financial Statements or notes thereto.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed with the Securities and
Exchange Commission on March 6, 1997 reporting the acquisition
of MDI, Intervision and Veravision.
A Current Report on Form 8-K was filed with the Securities and
Exchange Commission on April 18, 1997 reporting the
acquisition of the Videosys Group.
(c) Exhibits
3.1 Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995)
23
<PAGE> 24
4.1 Form of certificate representing shares of the
Common Stock (filed as Exhibit 4.1 the Company's
Registration Statement on Form S-2, Registration
No. 333-02891)
10.1 Ultrak, Inc. 1988 Non-Qualified Stock Option Plan
(filed as Exhibit 10.6 to the Company's Registration
Statement on Form S-1, Registration No. 55-3-31110)
10.2 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)
10.3 Amendment No. 3 to Ultrak, Inc. 1988 Non-Qualified
Stock Option Plan (filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
10.4 Agreement and Plan of Reorganization, dated as of
April 28, 1995, among Diamond Electronics, Inc., the
shareholders of Diamond signing the Agreement, the
Company and Diamond Purchasing Corp. (filed as
Annex A to the Company's Form S-4 dated June 28,
1995)
10.5 Employment Agreement, dated May 25, 1995, between
the Company and James D. Pritchett (filed as Exhibit
10.21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995)
10.6 Employment Agreement, dated May 25, 1995, between
the Company and Tim D. Torno (filed as Exhibit 10.22
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.7 Ultrak, Inc. Incentive Stock Option Plan (filed as
Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997)
10.8 Stock Purchase Agreement dated August 7, 1996 among
Chris Davies, Kim Rhodes, Scott Rhodes, Rhodes
Davies & Associates Pty Ltd. and the Company (filed
as Exhibit 10.1 to the Company's Current Report on
Form 8-K dated August 23, 1996)
10.09 Stock Purchase Agreement dated September 26, 1996
among Maurice Scetbon, Monda, S.A., Frida, S.A., the
Company and Ultrak Holdings Limited (filed as
Exhibit 10.1 to the Company's Current Report on Form
8-K dated October 11, 1996)
10.10 Purchase Agreement of German GmbH Share Capital,
dated December 16, 1996, among all of the
shareholders of VideV GmbH, Ultrak and Ultrak
Holdings Limited (filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated December
31, 1996)
10.11 Agreement and Plan of Merger dated February 10, 1997
among Monitor Dynamics, Inc., all of the
shareholders of Monitor Dynamics, Inc., Ultrak, Inc.
and MDI Acquisition Corp. (filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated March 5,
1997)
*10.12 Amended and Restated Loan Agreement, dated effective
as of December 11, 1997, among Ultrak, Inc., Dental
Vision Direct, Inc., Diamond Electronics, Inc.,
Monitor Dynamics, Inc., Ultrak Operating, L.P. and
NationsBank of Texas, N.A. (filed as Exhibit 1 to
the Company's current Annual Report on Form 10-K for
the year ended December 31, 1997)
*21.1 Subsidiaries of the Company
*27.1 Financial Data Schedule
- --------
* Filed herewith 10.12, 21.1 and 27.1.
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 30th day of
March, 1998.
ULTRAK, INC.
By /s/ George K. Broady
-----------------------------------
George K. Broady
Chairman and Chief Executive Officer
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
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
March 30, 1998
/s/George K. Broady Chairman of the Board and Chief
------------------------------ Executive Officer
George K. Broady (Principal Executive Officer)
/s/ James D. Pritchett President and Director March 30, 1998
--------------------------
James D. Pritchett
March 30, 1998
/s/ Tim D. Torno Vice President-Finance, Secretary,
-------------------------- Treasurer and Chief Financial Officer
Tim D. Torno (Principal Financial and Accounting
Officer)
/s/ William C. Lee Director March 30, 1998
----------------------------
William C. Lee
/s/ Charles C. Neal Director March 30, 1998
---------------------------
Charles C. Neal
/s/ Roland Scetbon Director
-------------------------
Roland Scetbon March 30, 1998
/s/ Robert F. Sexton Director
----------------------------
Robert F. Sexton March 30, 1998
</TABLE>
25
<PAGE> 26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated balance sheets of Ultrak, Inc. and
Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. 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, 1997 and 1996, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Dallas, Texas
February 14, 1998
F-1
<PAGE> 27
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------- -------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 14,101,684 $ 71,810,707
Restricted cash 3,949,690 -
Trade accounts receivable, less allowance for doubtful accounts of
$1,791,056 and $764,118 at December 31, 1997 and 1996,
respectively 32,390,447 23,800,284
Notes receivable 1,920,281 1,109,534
Inventories 45,390,195 29,698,137
Advances for inventory purchases 11,420,009 4,921,481
Prepaid expenses and other current assets 3,298,493 3,156,489
Deferred income taxes 3,354,246 1,283,788
------------- -------------
Total current assets 115,825,045 135,780,420
PROPERTY, PLANT AND EQUIPMENT, at cost 9,390,213 7,718,605
Less accumulated depreciation and amortization (3,443,044) (2,606,498)
------------ ------------
5,947,169 5,112,107
GOODWILL, net of accumulated amortization of $2,687,351
and $611,383 at December 31, 1997 and 1996, respectively 57,909,633 28,027,964
OTHER ASSETS 5,737,872 3,657,624
------------- -------------
Total assets $185,419,719 $172,578,115
=========== ===========
</TABLE>
F-2
<PAGE> 28
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
December 31,
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------- -------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable - trade $ 13,263,083 $ 11,228,246
Accrued expenses 3,808,330 1,738,652
Accrued compensation 2,315,710 1,097,081
Income taxes payable 43,698 720,304
Other current liabilities 2,790,494 1,832,723
------------- -------------
Total current liabilities 22,221,315 16,617,006
COMMITMENTS AND CONTINGENCIES - -
EQUITY PUT OPTIONS ON COMMON STOCK 28,364,000 -
STOCKHOLDERS' EQUITY
Preferred stock, $5 par value, issuable in series; 2,000,000 shares
authorized; Series A, 12% cumulative convertible;
authorized, issued and outstanding, 195,351 shares 976,755 976,755
Common stock, $.01 par value; 20,000,000 shares authorized;
issued, 14,445,741 and 13,863,101 shares at December 31,
1997 and 1996, respectively 144,457 138,631
Deferred issuance of common stock related to companies acquired
(50,819 and 91,802 common shares at December 31, 1997 and 1996,
respectively) 508 918
Additional paid-in capital 126,414,327 143,716,645
Retained earnings 13,692,732 11,409,228
Cumulative translation adjustment (1,868,304) (35,000)
Treasury stock, at cost (432,850 and 35,000 common shares
at December 31, 1997 and 1996, respectively) (4,526,071) (246,068)
------------ -----------
Total stockholders' equity 134,834,404 155,961,109
----------- -----------
Total liabilities and stockholders' equity $185,419,719 $172,578,115
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 29
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Net sales $188,740,735 $136,636,124 $101,232,305
Cost of sales 130,047,733 95,785,995 76,319,278
----------- ------------ ------------
Gross profit 58,693,002 40,850,129 24,913,027
Other operating costs:
Marketing and sales 31,312,342 18,765,892 13,254,921
General and administrative 19,130,365 8,871,257 4,651,542
Depreciation and amortization 4,037,394 1,436,374 890,987
Special charges 3,122,000 - -
------------ ------------ ------------
57,602,101 29,073,523 18,797,450
------------ ------------ ------------
Operating profit 1,090,901 11,776,606 6,115,577
Other expense (income):
Interest expense 154,965 1,066,651 1,963,535
Interest income (1,853,639) (628,178) (123,046)
Gain on sale of investments (1,694,664) - -
Cost of terminated merger 697,055 - -
Other, net (382,999) (153,583) 40,502
-------------- ------------- ----------
(3,079,282) 284,890 1,880,991
-------------- ------------- ----------
Income before income taxes 4,170,183 11,491,716 4,234,586
Income tax expense 1,769,469 3,892,992 1,539,529
-------------- ------------- ----------
NET INCOME 2,400,714 7,598,724 2,695,057
Dividend requirements on preferred stock (117,210) (117,210) (117,210)
-------------- ------------- ------------
Net income allocable to common stockholders $ 2,283,504 $ 7,481,514 $ 2,577,847
============== ============= ============
Income per common share:
Basic $.16 $.79 $.38
=== === ===
Diluted $.15 $.73 $.36
=== === ===
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 30
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------- --------------- ---------------
COMMON STOCK
<S> <C> <C> <C>
Beginning of year $ 138,631 $ 73,269 $ 73,254
Public offerings of common stock - 59,800 -
Change in par value - - (39,714)
Acquisitions of businesses 5,745 2,913 39,457
Exercise of stock options and warrants 81 2,649 272
------------ ------------ ------------
End of year $ 144,457 $ 138,631 $ 73,269
============ ============ ============
DEFERRED ISSUANCE RELATED TO COMPANIES
ACQUIRED
Beginning of year $ 918 $ - $ -
Acquisitions of businesses - 918 -
Issuance of common stock (410) - -
------------ ------------ ------------
End of year $ 508 $ 918 $ -
============ ============ ============
ADDITIONAL PAID-IN CAPITAL
Beginning of year $143,716,645 $ 11,518,801 $ 7,213,747
Public offerings of common stock, net of
expenses - 120,201,438 -
Change in par value - - 39,714
Proceeds from sale of equity put options
on common stock 4,484,310 - -
Redemption price of equity put options (28,364,000) - -
Acquisitions of businesses 6,534,784 10,068,887 4,238,462
Exercise of stock options and warrants 42,588 1,927,519 26,878
------------ ------------ ------------
End of year $126,414,327 $143,716,645 $ 11,518,801
============ ============ ============
CUMULATIVE TRANSLATION ADJUSTMENT
Beginning of year $ (35,000) $ - $ -
Translation adjustments (1,833,304) (35,000) -
------------ ------------ ------------
End of year $ (1,868,304) $ (35,000) $ -
============ ============ ============
TREASURY STOCK
Beginning of year $ (246,068) $ - $ -
Purchases (4,280,003) (246,068) -
------------ ------------ ------------
End of year $ (4,526,071) $ (246,068) $ -
============ ============ ============
</TABLE>
F-5
<PAGE> 31
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
-------------- --------------- ---------------
RETAINED EARNINGS
<S> <C> <C> <C>
Beginning of year $ 11,409,228 $ 3,927,714 $ 1,806,632
Preferred stock dividends (117,210) (117,210) (117,210)
Accumulated deficit of pooled company - - (456,765)
Net income 2,400,714 7,598,724 2,695,057
-------------- --------------- ---------------
End of year $ 13,692,732 $ 11,409,228 $ 3,927,714
============== =============== ===============
COMMON STOCK
Beginning of year 13,863,101 7,326,935 6,555,619
Public offerings of common stock - 5,979,977 -
Acquisitions of businesses 574,532 291,316 762,816
Exercise of stock options and warrants 8,108 264,873 8,500
-------------- --------------- ---------------
14,445,741 13,863,101 7,326,935
============== =============== ===============
COMMON STOCK TO BE ISSUED
Beginning of year 91,802 - -
Acquisitions of businesses - 91,802 -
Issuance of common stock (40,983) - -
-------------- --------------- ---------------
End of year 50,819 91,802 -
============== =============== ===============
TREASURY STOCK - COMMON
Beginning of year 35,000 - -
Treasury stock purchases 397,850 35,000 -
-------------- --------------- ---------------
End of year 432,850 35,000 -
============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 32
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 2,400,714 $ 7,598,724 $ 2,695,057
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 4,037,394 1,436,374 890,987
Provision for losses on accounts receivable 475,766 168,293 49,114
Provision for inventory obsolescence 732,105 128,423 411,915
Noncash special charges 3,122,000 - -
Deferred income taxes (1,765,821) (218,742) (152,782)
Changes in operating assets and liabilities - net of effects of
acquisitions of businesses:
Accounts and notes receivable (2,014,432) (4,551,066) (3,140,518)
Inventories (11,804,405) (2,665,733) (4,145,192)
Advances for inventory purchases (6,482,564) 117,470 342,486
Prepaid expenses and other current assets 743,217 (3,735,440) (82,284)
Noncurrent notes and other assets 1,284,498 (420,897) (84,681)
Accounts payable - trade (5,737,996) 720,027 (677,814)
Accrued expenses and other current liabilities (3,144,446) 41,552 875,300
------------- ------------- -------------
Net cash used in operating activities (18,153,970) (1,381,015) (3,018,412)
Cash flows from investing activities:
Purchases of property and equipment (2,059,456) (1,541,311) (1,055,055)
Acquisitions of businesses, net of cash acquired (32,859,912) (20,503,325) (1,016,633)
------------- ------------- -------------
Net cash used in investing activities (34,919,368) (22,044,636) (2,071,688)
Cash flows from financing activities:
Net borrowings (repayments) on notes payable - (27,941,212) 5,844,401
Issuance of common stock 42,669 122,191,406 27,150
Increase in restricted cash (3,949,690) - -
Proceeds from sale of equity put options 4,484,310 - -
Purchase of treasury stock (4,280,003) (246,068) -
Payment of preferred stock dividends (117,210) (117,210) (117,210)
------------- ------------- -------------
Net cash provided by (used in) financing
activities (3,819,924) 93,886,916 5,754,341
Effect of exchange rate changes on cash (815,761) 42,960 -
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents (57,709,023) 70,504,225 664,241
Cash and cash equivalents at beginning of the year 71,810,707 1,306,482 642,241
------------- ------------- -------------
Cash and cash equivalents at end of the year $ 14,101,684 $ 71,810,707 $ 1,306,482
============= ============= =============
</TABLE>
F-7
<PAGE> 33
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
Supplemental cash flow information:
Cash paid during the period for:
<S> <C> <C>
Interest $ 144,965 $ 1,238,894 $ 1,812,415
============ ============ ============
Income taxes $ 4,783,883 $ 4,379,656 $ 1,431,581
============ ============ ============
Supplemental schedule of noncash investing and financing:
Acquisition of businesses
Assets acquired $ 56,335,806 $ 39,692,802 $ 8,490,799
Liabilities assumed (12,549,752) (7,303,383) (3,640,455)
Common stock issued or issuable (6,540,529) (10,072,718) (3,804,000)
------------ ------------ ------------
37,245,525 22,316,701 1,046,344
Less cash acquired 4,385,613 1,813,376 29,711
------------ ------------ ------------
Net cash paid for acquisitions $ 32,859,912 $ 20,503,325 $ 1,016,633
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE> 34
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Ultrak, Inc. (the "Company") is a U.S.-based multinational corporation that
designs, manufactures, markets, sells and services electronic products and
systems for use in security and surveillance, industrial and medical video
and professional audio markets worldwide. These products and systems include
a broad line of cameras, lenses, high-speed dome systems, monitors,
switchers,quad processors, time lapse recorders, multiplexers, video
transmission systems, access control systems, computerized observation and
security systems, audio equipment and accessories.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Restricted Cash
At December 31, 1997, restricted cash represents collateral for outstanding
equity put options.
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.
F-9
<PAGE> 35
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Earnings Per Share
In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standard No. 128, "Earnings Per Share"
(SFAS 128). In accordance with SFAS 128, the Company computes basic earnings
per share based on the weighted average number of common shares outstanding.
Diluted earnings per share is computed based on the weighted average number
of shares outstanding, plus the number of additional common shares that
would have been outstanding if dilutive potential common shares had been
issued (see Note K). All prior year earnings per share have been restated to
comply with the provisions of SFAS 128.
Goodwill and Amortization
Goodwill resulting from acquisitions is being amortized using the
straight-line method over periods ranging from twenty to forty years.
Accounting for Impairment of Long-Lived Assets
The Company evaluates long-lived assets and intangibles held and used for
impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. Impairment is recognized when the
undiscounted cash flows estimated to be generated by those assets are less
than the carrying amounts of such assets.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
notes receivable and equity put options for which the fair value
approximates the carrying value.
Stock-Based Compensation
The Company accounts for stock-based compensation to employees using the
intrinsic value method. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to
acquire that stock.
Currency Translation
Translation adjustments to the financial statements of foreign subsidiaries
are reflected in the consolidated financial statements as a separate
component of stockholders' equity.
F-10
<PAGE> 36
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS AND 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.
Reclassifications
Certain reclassifications have been made to prior years financial statements
to conform with the 1997 presentation.
Derivative Financial Instruments
Equity put options on common stock represent the number of options sold at
their respective strike price. Proceeds from the sale of equity put options
on common stock are accounted for as additional paid-in capital.
Effect of Accounting Pronouncement
In 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standard No. 130, "Reporting Comprehensive Income" (SFAS 130).
SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Beginning in 1998, the Company will provide the
information relating to comprehensive income to conform to the requirements.
NOTE B - BUSINESS COMBINATIONS
1997 Business Combinations:
Monitor Dynamics, Inc.
Effective February 1, 1997, the Company acquired all of the outstanding
shares of capital stock of Monitor Dynamics, Inc. ("MDI") for $26.1 million
in cash. MDI designs, manufactures, markets and sells high-end security and
access control systems under the SAFEnet brand name. MDI's systems are used
in government, defense, industrial, financial and commercial applications
throughout the United States and Europe.
F-11
<PAGE> 37
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - BUSINESS COMBINATIONS - Continued
Intervision Express, Ltd.
Effective March 1, 1997, the Company acquired all of the outstanding share
capital of Intervision Express, Ltd. ("Intervision"), a United Kingdom
limited liability company. The total consideration was approximately $1.533
million dollars, including 38,822 shares of common stock valued at $719,000.
Intervision distributes CCTV products, primarily in the UK, manufactured by
Ultrak, Dedicated Micros, Toa, Hitachi, Mitsubishi and others.
Videosys Group
Effective April 1, 1997, the Company acquired the Videosys Group (the
"Videosys Group") for total consideration of $8.37 million consisting of
$5.55 million in cash and $2.82 million (160,000 shares) in common stock.
The Videosys Group designs, imports, and distributes CCTV and related
security products primarily in Italy, under the Videosys brand name.
Veravision, Inc.
Effective April 1, 1997, the Company acquired all of the issued and
outstanding capital stock of Veravision, Inc. ("Veravision"). The
consideration consisted of $150,000 in promissory notes, approximately $2.0
million in notes and accounts receivable due from Veravision and 10% of the
common stock of Dental Vision Direct, Inc., a wholly-owned subsidiary of the
Company. Veravision manufactures intra-oral camera products for use
primarily in the dental market.
Other Acquisitions
Additionally, in 1997, the Company acquired a 10% interest in a company in
Japan for $2.2 million in cash and 100% of a company based in South Africa
for $300,000 in cash and $300,000 of amounts payable over a three-year
period and an 80% interest in a company based in Singapore for $95,000 in
cash.
1996 Business Combinations:
Maxpro Systems Pty, Ltd.:
Effective July 1, 1996, the Company acquired 75% of the outstanding capital
stock of Maxpro Systems Pty, Ltd. (Maxpro), a Perth, Australia company, for
approximately $8.2 million in cash and $900,000 in common stock payable over
a two-year period. Effective February 17, 1997, the Company acquired the
remaining 25% of the outstanding capital stock of Maxpro for 175,000 shares
of Ultrak common stock valued at $3.1 million.
Maxpro is a manufacturer of a computer controlled video management systems
that are coupled to a computer controlled alarm input and output network
used primarily in casinos, airports, mines, nuclear power plants, prisons
and other large closed circuit television applications.
F-12
<PAGE> 38
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - BUSINESS COMBINATIONS - Continued
Lenel Systems International, Inc.:
On September 6, 1996, the Company purchased approximately 24% of the
outstanding common stock of Lenel Systems International, Inc. ("Lenel") for
$2.6 million in cash. Lenel is a software company specializing in access
control products based in Fairport, New York. In conjunction with the
acquisition, the Company received a warrant to acquire up to 51% of Lenel
for a price based upon earnings.
In September 1997, the Company sold its interest in Lenel for a promissory
note and cash totaling $3.1 million. The promissory note is due within one
year and is secured by the Lenel common stock sold.
A gain on the sale of approximately $285,000 has been included in other
income in 1997.
Groupe Bisset, S.A.:
Effective October 1, 1996, the Company acquired 100% of the outstanding
share capital of Groupe Bisset, S.A. ("Bisset"), a Paris, France company,
for $5.0 million in cash and a total of 456,522 shares of common stock
valued at $8,552,900. Bisset is one of France's largest distributors of CCTV
and professional audio products.
VideV GmbH:
Effective December 1, 1996, the Company acquired 100% of the outstanding
share capital of VideV GmbH ("VideV"), a Dusseldorf, Germany company. VideV
is a manufacturer and distributor of CCTV products. VideV was purchased for
a total of $3.25 million in cash and 53,820 shares of common stock valued at
$556,000.
1995 Business Combinations:
Diamond Electronics, Inc.:
Effective July 1, 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. Diamond is a manufacturer of video CCTV security and
surveillance systems used by large retailers, and hazardous viewing systems
used by industry and municipalities.
Other Acquisitions
During 1995, the Company acquired two other companies for total
consideration of approximately $900,000.
F-13
<PAGE> 39
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - BUSINESS COMBINATIONS - Continued
All acquisitions have been accounted for as purchases and the operations of
purchased companies have been included in the Company's statement of income
since their date of acquisition. Goodwill is being amortized on the
straight-line method over periods ranging from 20 to 30 years.
Unaudited Pro Forma Information
The following unaudited pro forma information for 1997 and 1996 presents a
summary of consolidated results of operations of the Company as if the
acquisitions had occurred at the beginning of the respective periods
presented, giving effect to the amortization of goodwill and other
acquisition adjustments (in thousands):
<TABLE>
<CAPTION>
Year ended
December 31,
------------------------
1997 1996
-------- -----------
<S> <C> <C>
Net sales $195,649 $ 191,038
======== ===========
Net income $ 2,853 $ 7,587
======== ===========
Income per share
Basic $ .20 $ .78
======== ===========
Diluted $ .19 $ .71
======== ===========
</TABLE>
The pro forma financial information should be read in conjunction with the
related historical information and is not necessarily indicative of the
results that would have been attained had the transaction actually occurred.
NOTE C - SPECIAL CHARGES AND CHANGES IN ESTIMATES
During the fourth quarter of 1997, the Company recorded nonrecurring charges
of approximately $3.1 million which consist of (1) the write-off of computer
hardware and software made obsolete by the implementation of new software,
(2) the cost of moving to a new headquarters building including charges for
the write-off of leasehold improvements and other abandonment costs and (3)
implementation costs related to new software through December 1997.
During the fourth quarter of 1997, the Company also made certain changes in
estimates totaling $2.0 million consisting of provisions for excess and
obsolete inventory of $1.0 million and increases in reserves for accounts
receivable and other assets of $1.0 million.
F-14
<PAGE> 40
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - LINE OF CREDIT
On December 11, 1997, the Company entered into a new three-year unsecured
credit facility with a bank. The credit facility provides up to $40.0
million in revolving credit with interest at prime minus .50% or LIBOR plus
.60%, payable quarterly. At the maturity of the revolving credit facility in
2000, the principal balance converts to a fully amortizing four-year term
loan. The credit agreement contains certain restrictive covenants and
conditions, including maximum senior funded debt to cash flow and debt
service coverage. No amounts were outstanding on the credit facility as of
December 31, 1997. The Company is required to pay a quarterly commitment of
.062% beginning June 30, 1998.
NOTE E - STOCKHOLDERS' EQUITY
The Series A preferred stock earns dividends at the rate of 12% per annum,
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. The holder of the 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. Upon
conversion, 406,981 shares of commons stock could be obtained.
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.
During 1997, the Company repurchased 397,850 shares of its common stock for
approximately $4.3 million. As part of its share repurchase program, during
1997 the Company sold equity put options covering 2,620,000 shares for
$4,484,310. As of December 31, 1997, all options remained outstanding and
the Company's potential repurchase obligation under equity put options with
net cash or physical settlement terms totaled $28,364,000 at exercise prices
ranging from $8.75 to $12.51 per share. The options are exercisable only at
expiration and expire from March 1998 to January 1999.
F-15
<PAGE> 41
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - STOCK-BASED COMPENSATION
The Company's 1988 Nonqualified Stock Option Plan (the "1988 Plan") provided
for grants of options for up to 1,000,000 restricted shares. At December 31,
1997, 174,558 shares were available for grant under the 1988 Plan.
On May 23, 1997, the shareholders of the Company approved an increase in the
number of shares available under the 1988 Plan from 833,334 to 1,000,000 and
established the 1997 Incentive Stock Option Plan ("the 1997 Plan"). The 1997
Plan provides for grants of options for up to 400,000 shares based upon the
Company achieving one or more definitive performance measurements for the
fiscal year, including minimum levels of economic value added, minimum
levels of market value added or attainment of the financial budget. The 1997
Plan is a formula-based plan administered by the Compensation Committee. The
Compensation Committee must determine by March 31st of each year the
percentage that each of the definitive considerations represents in the
determination of grants under the Plan for that fiscal year. Option grants
under the 1997 Plan are limited to 1% of the outstanding common stock of the
Company. At December 31, 1997, 261,359 shares were available for grant under
the 1997 Plan.
Option exercise prices are set by the Compensation Committee of the Board of
Directors on the date of grant at the market price of the Company's common
stock and all have fixed exercise prices. Shares under grant generally
become exercisable in five equal annual installments beginning one year
after the date of grant, and expire after ten years.
Compensation cost for stock options granted to employees is measured as the
excess, if any, of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock. If
the Company recognized compensation expense based upon the fair value at the
grant date for options under the 1988 and 1997 Plans, the Company's 1997 and
1996 net income and income per share would be reduced to the pro forma
amounts indicated as follows:
<TABLE>
<CAPTION>
1997 1996
-------------- ----------
<S> <C> <C>
Net income:
As reported $2,400,714 $7,598,724
Pro forma $1,968,418 $7,391,347
Basic income per share:
As reported $.16 $.79
Pro forma $.12 $.77
Diluted income per share:
As reported $.15 $.73
Pro forma $.12 $.71
</TABLE>
F-16
<PAGE> 42
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - STOCK-BASED COMPENSATION - Continued
The fair value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: expected volatility of 70 percent; risk-free interest rates of
5.5 percent; no dividend yield; and expected lives of seven years.
The pro forma amounts presented are not representative of the amounts that
will be disclosed in the future because they do not take into effect pro
forma expenses related to grants before 1995.
Additional information with respect to options outstanding at December 31,
1997, and changes for the three years then ended is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ --------------------- -----------------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 658,775 $ 4.42 666,875 $ 3.84 532,959 $3.29
Granted 369,641 17.96 47,000 16.27 146,750 5.87
Exercised (8,108) 5.26 (21,850) 4.66 (8,500) 3.68
Forfeited (19,652) 12.16 (33,250) 5.84 (4,334) 5.31
------- ------- --------
Outstanding at end of year 1,000,656 $ 9.26 658,775 $ 4.42 666,875 $3.84
========= ====== ======= ====== ======= ====
Options exercisable at
end of year 511,768 $ 3.44 458,177 $ 2.94 406,468 $2.78
========= ====== ======= ====== ======= ====
Weighted average fair value
per share of options granted $ 9.68 $11.92 $4.19
====== ===== ====
</TABLE>
Information about stock options outstanding at December 31, 1997 is
summarized as follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------- -------------------------
Weighted
average Weighted Weighted
remaining average average
Number contractual exercise Number exercise
Range of exercise prices outstanding life price exercisable price
------------------------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.2 to 5.62 378,267 2.2 years $ 2.29 373,415 $ 2.29
$5.63 to 16.99 335,733 7.5 years $ 7.12 128,153 6.06
$17.00 to $30.63 286,656 9.0 years $21.41 10,200 23.55
--------- --------
1,000,656 511,768 $ 3.64
========= =======
</TABLE>
F-17
<PAGE> 43
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - MAJOR CUSTOMERS AND SUPPLIERS
One customer accounted for more than 10% of revenue in each of the three
years ended December 31, 1997. Sales to that customer were:
<TABLE>
<S> <C>
1997 $22,046,000
1996 16,014,000
1995 19,140,000
</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 contract
manufacturer in each of the three years in the period ended December 31,
1997. 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 in
and a possible loss of sales.
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse space and data processing equipment
under long-term, noncancelable leases.
Minimum future rental payments for all long-term, noncancelable operating
leases are presented below:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998 $ 2,168,000
1999 2,064,000
2000 1,821,000
2001 1,555,000
2002 1,450,000
Thereafter 1,307,000
------------
$ 10,365,000
============
</TABLE>
Total rent expense was as follows:
<TABLE>
<S> <C>
1997 $1,587,800
1996 1,087,300
1995 468,800
</TABLE>
F-18
<PAGE> 44
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE I - INCOME TAXES
The provision for taxes consists of the following:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Federal
Current $ 3,318,395 $ 3,518,707 $ 1,629,374
Deferred (1,787,035) (218,742) (152,782)
State 267,428 206,529 62,937
Foreign (29,319) 386,498 --
----------- ----------- -----------
$ 1,769,469 $ 3,892,992 $ 1,539,529
=========== =========== ===========
</TABLE>
The Company's effective income tax rate differed from the U.S. Federal
statutory rate as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate 34.0% 34.0% 34.0%
State taxes, net of Federal benefit 4.2 1.1 1.0
Net operating loss carryforward recognized -- (1.3) (1.5)
Goodwill amortization 9.3 1.1 1.0
Tax exempt interest and dividends (3.2) -- --
Other, net (1.9) (1.0) 1.9
---- ---- ----
42.4% 33.9% 36.4%
==== ==== ====
</TABLE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
----------- -----------
Deferred tax assets:
<S> <C> <C>
Inventories $ 1,755,574 $ 676,401
Accounts receivable 540,204 202,420
Accrued expenses 1,493,011 170,408
Net operating loss carryforward 249,264 381,498
----------- -----------
4,038,053 1,430,727
Deferred tax liabilities:
Property, plant and equipment (86,966) (104,418)
Other (596,841) (42,521)
----------- -----------
(683,807) (146,939)
----------- -----------
$ 3,354,246 $ 1,283,788
=========== ===========
</TABLE>
F-19
<PAGE> 45
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE I - INCOME TAXES - Continued
At December 31, 1997, the Company had Federal and state net operating loss
carryforwards of approximately $580,000 and $1,200,000, respectively. The
Federal net operating loss carryforwards are limited in use each year to
approximately $100,000 through expiration in 2010. The state net operating
loss carryforwards expire in 2005.
NOTE J - FOREIGN OPERATIONS
The following table summarizes the domestic and foreign operations for the
years ended December 31, 1997 and 1996 and identifiable assets as of
December 31, 1997. The Company had no significant foreign operations prior
to 1996.
<TABLE>
<CAPTION>
Year ended December 31, 1997
-----------------------------------------------------------------------------------
Domestic Europe Other Eliminations Consolidated
------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 140,346,567 $46,696,252 $ 6,777,321 $ (5,079,405) $ 188,740,735
============= =========== =========== ============= =============
Income from operations $ 5,748,921 $(1,261,888) $ (316,850) $ -- $ 4,170,183
============= =========== =========== ============= =============
Identifiable assets $ 156,548,829 $24,488,336 $ 4,382,554 $ -- $ 185,419,719
============= =========== =========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1996
------------------------------------------------------------------
Domestic Foreign Eliminations Consolidated
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Net sales $128,344,438 $ 9,687,911 $ (1,396,225) $136,636,124
============ ============= ============== ============
Income from operations $ 11,060,350 $ 761,875 $ (330,509) $ 11,491,716
============ ============= ============== ============
Identifiable assets $157,418,659 $ 15,159,456 $ -- $172,578,115
============ ============= ============== ============
</TABLE>
Gains from foreign currency transactions were approximately $97,000 in 1997.
There were no foreign currency gains or losses in 1996.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Standard No. 131, "Disclosures About Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 establishes standards for the way
public business enterprises report selected information about operating
segments in annual reports and interim financial reports issued to
stockholders. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. For the year ended 1998, the Company will provide
financial and descriptive information about its reportable segments to
conform to the requirements.
F-20
<PAGE> 46
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - EARNINGS PER SHARE
Following is a reconciliation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------- ----------------------------- -------------------------------
Per Per Per
Net share Net share Net share
Income Shares amount Income Shares amount Income Shares amount
---------- ---------- ----- ---------- ---------- ------ ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic earnings per common
share $2,283,504 13,969,698 $ 0.16 $7,481,514 9,485,858 $0.79 $2,577,847 6,870,050 $ 0.38
====== ===== =======
Effect of dilutive securities
Contingently issuable
shares -- 301,981 -- 37,021 -- --
Put options -- 78,126 -- -- -- --
Stock options -- 467,499 -- 515,613 -- 277,854
Convertible preferred stock -- -- 117,210 406,981 117,210 406,981
---------- ---------- ----- ---------- ---------- ---- ---------- --------- -------
Diluted earnings per common
share $2,283,504 14,817,304 $0.15 $7,598,724 10,445,473 $.73 $2,695,057 7,554,885 $ 0.36
========== ========== ===== ========== ========== ==== ========== ========= =======
</TABLE>
NOTE L - UNAUDITED QUARTERLY OPERATING RESULTS
Unaudited quarterly operating results for the years ended December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
1997:
<S> <C> <C> <C> <C>
Sales $ 40,572,193 $ 43,984,080 $ 50,701,185 $ 53,483,277
Gross profit 13,061,049 13,878,575 16,010,446 15,742,932
Net income 2,034,433 876,443 2,016,607 (2,526,769)
Income (loss) per share
Basic $ .14 $ .06 $ .14 $ (.18)
Diluted .14 .06 .13 (.18)
1996:
Sales $ 29,674,027 $ 31,766,442 $ 35,151,344 $ 40,044,311
Gross profit 8,429,140 9,123,728 11,076,035 12,221,226
Net income 1,270,044 1,534,987 2,329,884 2,463,809
Income per share
Basic $ .17 $ .19 $ .23 $ .20
Diluted .16 .17 .21 .19
</TABLE>
See Note C for special charges and changes in estimates in the fourth quarter of
1997.
F-21
<PAGE> 47
Report of Independent Certified Public Accountants on Schedule
Board of Directors
Ultrak, Inc.
In connection with our audit of the consolidated financial statements of Ultrak,
Inc., and Subsidiaries referred to in our report dated February 14, 1998, which
is included in Part II of this Form 10-K, we have also audited Schedule II for
each of the three years in the period ended December 31, 1997. In our opinion,
this schedule presents fairly, in all material respects, the information
required to be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
February 14, 1998
<PAGE> 48
SCHEDULE II
ULTRAK, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- --------------------------------------- ------------ -------------- ----------------- ---------------- --------------
Balance at Charge to Balance at
Beginning Charge to Other End of
Description of Period Operations Accounts Deductions Period
- --------------------------------------- ------------ -------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
ALLOWANCE FOR DOUBTFUL
TRADE ACCOUNTS $764,118 $475,766 $955,084 (1) $(403,912) (2) $1,791,056
======== ======== ======== ========= ==========
YEAR ENDED DECEMBER 31, 1996:
ALLOWANCE FOR DOUBTFUL
TRADE ACCOUNTS $439,104 $168,293 $395,116 (1) $(238,395) (2) $ 764,118
======== ======== ======== ========= ==========
YEAR ENDED DECEMBER 31, 1995:
ALLOWANCE FOR DOUBTFUL
TRADE ACCOUNTS $323,772 $ 49,114 $282,701 (1) $(216,483) (2) $ 439,104
======== ======== ======== ========== ==========
- --------------------------------------- ------------ -------------- ----------------- ---------------- --------------
</TABLE>
Notes:
(1) Balances recorded from business combinations.
(2) Balances written off.
<PAGE> 49
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
3.1 Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995)
4.1 Form of certificate representing shares of the Common
Stock (filed as Exhibit 4.1 the Company's Registration
Statement on Form S-2, Registration No. 333-02891)
10.1 Ultrak, Inc. 1988 Non-Qualified Stock Option Plan
(filed as Exhibit 10.6 to the Company's Registration
Statement on Form S-1, Registration No. 55-3-31110)
10.2 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)
10.3 Amendment No. 3 to Ultrak, Inc. 1988 Non-Qualified
Stock Option Plan (filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
10.4 Agreement and Plan of Reorganization, dated as of
April 28, 1995, among Diamond Electronics, Inc., the
shareholders of Diamond signing the Agreement, the
Company and Diamond Purchasing Corp. (filed as Annex A
to the Company's Form S-4 dated June 28, 1995)
10.5 Employment Agreement, dated May 25, 1995, between the
Company and James D. Pritchett (filed as Exhibit 10.21
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.6 Employment Agreement, dated May 25, 1995, between the
Company and Tim D. Torno (filed as Exhibit 10.22 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995)
10.7 Ultrak, Inc. Incentive Stock Option Plan (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997)
10.8 Stock Purchase Agreement dated August 7, 1996 among
Chris Davies, Kim Rhodes, Scott Rhodes, Rhodes Davies
& Associates Pty Ltd. and the Company (filed as
Exhibit 10.1 to the Company's Current Report on Form
8-K dated August 23, 1996)
10.09 Stock Purchase Agreement dated September 26, 1996
among Maurice Scetbon, Monda, S.A., Frida, S.A., the
Company and Ultrak Holdings Limited (filed as Exhibit
10.1 to the Company's Current Report on Form 8-K dated
October 11, 1996)
10.10 Purchase Agreement of German GmbH Share Capital, dated
December 16, 1996, among all of the shareholders of
VideV GmbH, Ultrak and Ultrak Holdings Limited (filed
as Exhibit 1 to the Company's Current Report on Form
8-K dated December 31, 1996)
10.11 Agreement and Plan of Merger dated February 10, 1997
among Monitor Dynamics, Inc., all of the shareholders
of Monitor Dynamics, Inc., Ultrak, Inc. and MDI
Acquisition Corp. (filed as Exhibit 1 to the Company's
Current Report on Form 8-K dated March 5, 1997)
*10.12 Amended and Restated Loan Agreement, dated effective
as of December 11, 1997, among Ultrak, Inc., Dental
Vision Direct, Inc., Diamond Electronics, Inc.,
Monitor Dynamics, Inc., Ultrak Operating, L.P. and
NationsBank of Texas, N.A. (filed as Exhibit 1 to the
Company's current Annual Report on Form 10-K for the
year ended December 31, 1997)
*21.1 Subsidiaries of the Company
*27.1 Financial Data Schedule
- ------------------------
* Filed herewith 10.12, 21.1 and 27.1.
<PAGE> 1
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED LOAN AGREEMENT
AMONG
NATIONSBANK OF TEXAS, N.A.
(as "Lender"),
ULTRAK, INC.,
DENTAL VISION DIRECT, INC.,
DIAMOND ELECTRONICS, INC.,
MONITOR DYNAMICS, INC.,
AND
ULTRAK OPERATING, L.P.
(as "Borrowers"),
and
BISSET S.A.,
CASAROTTO SECURITY SPA,
INTERVISION EXPRESS, LTD.,
MAXPRO SYSTEMS PTY. LTD.,
PHILTECH ELECTRONIC SERVICES (PROPRIETARY) LIMITED,
ULTRAK GP, INC.,
ULTRAK LP, INC.,
AND
VIDEV GMBH
(as "Guarantors")
Effective Date: December 11, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II-A. REVOLVING FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2A.1 Revolving Facility Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2A.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2A.3 Payments; Conversion to Term Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2A.4 Termination of Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2A.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2A.6 Borrowing and Disbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2A.7 Reimbursements to Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2A.8 Funding/Booking of Revolving Facility Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2A.9 Continuing Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE II-B. TERM FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2B.1 Term Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2B.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2B.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2B.4 Termination of Term Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2B.5 Booking of Term Facility Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2B.6 Continuing Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II-C. GENERAL LOAN TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2C.1 Master Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2C.2 Interest Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2C.3 Interest Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2C.4 Interest Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2C.5 Mandatory Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2C.6 Application of Payments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2C.7 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2C.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2C.9 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III. CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1 Increased Cost and Reduced Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Limitation On Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.4 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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ARTICLE IV. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Items to be Delivered by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Loans Under Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Name; Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Existence; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Power and Authority; Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.5 No Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.6 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.11 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.13 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.14 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.16 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.18 Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.20 Representations and Warranties Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.4 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.5 Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.6 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.7 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.8 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.9 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 Notification of Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.11 Notification of Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Notification Regarding Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.13 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.14 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.15 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.16 Fees, Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.17 Subordination Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.18 Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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6.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.20 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.21 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.22 Prohibition Against Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.23 Dissolution, Liquidation, Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.24 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.25 Limitation on Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.26 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.27 Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.28 Redemptions and Acquisition of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.29 Consulting Fees, etc., to Shareholders and Directors . . . . . . . . . . . . . . . . . . . . . . . . 34
6.30 Loans to Officers, Directors, Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.31 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.32 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.33 Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.34 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.35 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.36 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.37 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.38 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.39 Covenants Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII. EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1 Refusal of Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3 Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.5 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.6 Performance by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.7 Non-waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Effective date; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.4 Use of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5 Lender's Records; Account Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 Expenses and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.7 Non-applicability of Chapter 15 of Texas Finance Code . . . . . . . . . . . . . . . . . . . . . . . 44
9.8 Judgment Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.9 Interest Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.10 Continuing Rights of Lender in Respect of Obligations . . . . . . . . . . . . . . . . . . . . . . . 44
9.11 Acceptance and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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9.12 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.13 Express Waivers by Borrowers in Respect of Cross Guaranties . . . . . . . . . . . . . . . . . . . . 45
9.14 Participation of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.15 Other Agreements; Cross Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.16 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.17 Waiver of Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.18 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.19 Entirety and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.20 Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.21 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.22 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.23 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.24 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.25 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.26 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.27 Mutual Benefit; Joint and Several Liability; Cross Guaranties . . . . . . . . . . . . . . . . . . . 49
9.28 Amendment and Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.29 Release of Collateral; Release of Liability of JAK . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<PAGE> 6
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement ("Agreement") is effective as
of December 11, 1997 and is executed and entered into among ULTRAK, INC., a
Delaware corporation ("Parent"), DENTAL VISION DIRECT, INC., a Texas
corporation ("DVDI"), DIAMOND ELECTRONICS, INC., an Ohio corporation
("Diamond"), MONITOR DYNAMICS, INC., a California corporation ("Monitor"),
ULTRAK OPERATING, L.P., a Texas limited partnership ("Ultrak"), each of the
Guarantors (as defined herein) and NATIONSBANK OF TEXAS, N.A., a national
banking association ("Lender").
RECITALS:
A. Lender, Parent and certain of Parent's subsidiaries entered
into that certain Loan and Security Agreement, dated effective as of July 26,
1996 (the "Original Agreement"), whereby Lender agreed to provide certain loan
facilities to Parent and such subsidiaries on the terms and conditions set
forth therein.
B. Borrowers (as defined below) have requested that Lender amend
and restate the Original Agreement in certain respects and that Lender make
certain loan facilities available to Borrowers.
C. Lender has agreed to provide such loan facilities upon and
subject to the terms and conditions set forth in this Agreement and the other
Loan Documents (as defined below).
NOW THEREFORE, for value received, the receipt and sufficiency of
which are hereby acknowledged, and in consideration of the mutual agreement
provided herein, Lender and Borrowers hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 DEFINITIONS. The following definitions shall apply throughout
this Agreement:
"Adjusted LIBOR Rate" means, (a) for any LIBOR Balance for any
Interest Period therefor, an amount equal to the sum of (i) the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
Lender to be equal to the quotient obtained by dividing (A) the LIBOR Rate for
such LIBOR Balance for such Interest Period by (B) 1.0 minus the LIBOR Reserve
Requirement for such LIBOR Balance for such Interest Period, plus (ii) the
Applicable Margin, and (b) for any Floating LIBOR Rate Balance for any day, an
amount equal to the sum of (i) the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by Lender to be equal to the
quotient obtained by dividing (A) the Floating LIBOR Rate for such day by (B)
1.0 minus the
<PAGE> 7
LIBOR Reserve Requirement (if any) for such Floating LIBOR Rate Balance for
such day, plus (ii) the Applicable Margin.
"Adjusted Prime Rate" means a rate equal to the sum of (i) the Prime
Rate plus (ii) the Applicable Margin.
"Advance" means any Revolving Facility Advance.
"Affiliate" means any Person (i) that directly or indirectly controls
or is controlled by a Borrower (including, without limitation, all of any
Borrower's Subsidiaries), or is under common control with Borrower, or (ii)
that directly or indirectly owns or holds ten percent (10.0%) or more of any
class of Voting Stock of Borrower or (iii) ten percent (10.0%) or more of the
Voting Stock of which is directly or indirectly owned or held by Borrower or
(iii) that is an officer, director or shareholder of Borrower.
"Affiliate Subordination Agreement" means a subordination agreement
respecting an Affiliate as prescribed by paragraph 6.17.
"Agreement" means this Amended and Restated Loan Agreement and all
exhibits and addenda, as it may be renewed, extended, modified, amended or
restated from time to time.
"Applicable Lending Office" means, for each Type of loan, the "Lending
Office" of Lender (or of an affiliate of Lender) designated for such Type of
loan on the signature pages hereof or such other office of Lender (or an
affiliate of Lender) as Lender may from time to time specify to Borrowers by
written notice in accordance with the terms hereof as the office by which its
loans of such Type are to be made and maintained.
"Applicable Margin" means, as of the Effective Date (i) with respect
to the Prime Rate Balance, negative one- half of one percent (-0.50%) and (ii)
with respect to the Floating LIBOR Rate Balance and the LIBOR Balance, six
tenths of one percent (0.60%), in each case subject to adjustment to the
percentages specified below, as applicable, at any time thereafter based upon
Parent's ratio of Senior Funded Debt to Cash Flow as follows:
<TABLE>
<CAPTION>
====================================================================================
Senior Funded Debt to Cash Flow Prime Rate LIBOR Balance and
Balance Floating LIBOR Rate
Balance
====================================================================================
<S> <C> <C>
Less than or equal to 2.00 (0.50)% 0.60%
- ------------------------------------------------------------------------------------
Less than or equal to 2.50 but (0.25)% 0.75%
greater than 2.00
- ------------------------------------------------------------------------------------
Greater than 2.50 0.00% 1.00%
====================================================================================
</TABLE>
2
<PAGE> 8
Senior Funded Debt to Cash Flow for purposes of determination of the Applicable
Margin shall be measured and determined according to the latest financial
statements delivered to Lender pursuant to paragraph 6.5 or paragraph 6.6.
Each change, if any, in the Applicable Margin resulting from a change in Senior
Funded Debt to Cash Flow shall be deemed effective as of the first day of the
month next following the calendar month in which such financial statements are
delivered to Lender.
"Bisset" means, Bisset, S.A., a corporation organized under the laws
of France, with its principal place of business located at 98, Ter Bd Heloise
(BP112), 95013 Argenteuil Cdx, France, and its successors and assigns.
"Books and Records" means all books, records, books or records of
account, files, journals, ledgers, correspondence, bank statements, customer
lists and related customer credit information, vendor and supplier lists,
distribution records and other records of purchases, sales and payments made
and received, and all other books and records created, generated, received,
kept or otherwise used in the operation of business, of whatever kind or nature
and however recorded or stored, whether in written, electronic or other form or
format.
"Borrower" means each of Parent, DVDI, Diamond, Monitor and Ultrak,
respectively, and "Borrowers" means all of such Persons, jointly and severally.
"Business Day" means any calendar day except Saturday, Sunday and
those legal public holidays specified in 5 U.S.C. Section 6103(a), as such
statute may be amended from time to time.
"Business Unit" means any Subsidiary, division or other operating unit
of any Person, and "Business Units" means all of such Subsidiaries, divisions
and other operating units, collectively.
"Capital Expenditures" for any period, means the aggregate
expenditures during such period which are classified as capital expenditures
according to GAAP.
"Capital Stock" means corporate stock and any and all shares,
partnership interests, membership interests, equity interests, rights,
securities or other equivalent evidences of ownership (however designated)
issued by any entity (whether a corporation, partnership, limited liability
company, limited partnership or other type of entity).
"Casarotto" means, Casarotto Security SpA, a corporation organized
under the laws of Italy, with its principal place of business located at 214
Via Treviso, San Vendemiano (TV), Italy, and its successors and assigns.
"Consequential Loss" means, with respect to payment of all or any
portion of any LIBOR Balance on a day other than the last day of the Interest
Period related thereto, any loss, cost or expense incurred by Lender resulting
from such payment, including, without limitation, the sum of (i) the interest
which, but for such payment, Lender would have earned in respect of such
principal amount so paid, for the remainder of the Interest Period applicable
to such sum, reduced, if Lender is able to redeposit or reinvest such principal
amount so paid for the balance of such Interest Period, by the interest earned
by Lender as a result of so redepositing or reinvesting such principal amount
plus (ii) any expense or penalty incurred by Lender on redepositing or
reinvesting such principal
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<PAGE> 9
amount, provided, that the foregoing measure of Consequential Loss is
illustrative only and shall not be the sole or exclusive measure for
determining Consequential Loss. A written statement by Lender of the amount of
any Consequential Loss, setting forth the basis for the determination thereof
shall, in the absence of manifest error, be conclusive and binding as to such
determination and amount.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to paragraph 2C.3(c) hereof of a LIBOR Balance as a LIBOR
Balance from one Interest Period to the next Interest Period.
"Contract Rate" at any time means, the Adjusted Prime Rate with
respect to the Prime Rate Balance or the Adjusted LIBOR Rate with respect to
any Floating LIBOR Rate Balance or LIBOR Balance, as the case may be, in effect
at any time pursuant to the terms of this Agreement; provided, that at any time
when an Event of Default is in existence, the Contract Rate otherwise
applicable shall increase by an additional two percent (2.0%) per annum
(subject to, however, and in no event exceeding, the Maximum Rate) effective
beginning upon written notice to Parent by Lender and continuing until such
time, if any, as such Event of Default is cured to Lender's satisfaction or
waived by Lender in writing, or until such increase may be rescinded by Lender
in its discretion. The Contract Rate shall be computed on the basis of a year
consisting of 360 days.
"Contract Term" means the period beginning on the Effective Date and
continuing through the Term Facility Maturity Date.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to paragraph 2C.3(b) or Article III of one Type of loan into another
Type of loan.
"Credit Limit" means Forty Million and no/100 Dollars ($40,000,000.00).
"DVDI" means Dental Vision Direct, Inc., a Texas corporation, with its
principal place of business located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006, whose tax identification number is 75-2476418, and its
successors and assigns.
"Diamond" means Diamond Electronics, Inc., an Ohio corporation, with
its principal place of business located at 4465 Coonpath Road, Carroll, Ohio
43112, whose tax identification number is 35-1620542, and its successors and
assigns.
"Dollar" and "$" each means freely transferable U.S. dollars.
"Effective Date" means the effective date specified in the
introductory paragraph of this Agreement.
"Environmental Damages" means all costs, judgments, good faith
settlements, claims, damages, losses, penalties, fines, liabilities,
encumbrances, liens, costs and expenses, of whatever kind or nature, contingent
or otherwise, matured or unmatured, foreseeable or unforeseeable, and any
attorneys' fees, costs and expenses in connection therewith, which are incurred
at any time as a result of the handling of Hazardous Materials, or the
existence of conditions at any time giving rise to a violation of Environmental
Requirements, including, without, limitation, (i) all costs incurred in
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<PAGE> 10
connection with the investigation or remediation of Hazardous Materials or
violations of Environmental Requirements which are necessary to comply with any
Environmental Requirements, including, fees incurred for the services of
attorneys, consultants, contractors, experts and laboratories, and all other
costs incurred in the preparation of any feasibility studies or reports or the
performance of any cleanup, remediation, removal, response, abatement,
containment, closure, restoration or monitoring work, (ii) damages for personal
injury, injury to property or natural resources occurring on or off of affected
real property, consequential damages, the cost of demolition and rebuilding of
any improvements on real property, and interest and penalties, and (iii)
liability to any third party or governmental agency to reimburse, indemnify or
provide contribution to such person or agency.
"Environmental Requirements" means all legislative, regulatory,
administrative and common law requirements relating to the protection of human
health and safety or the environment, including, without limitation, applicable
present and future statutes, regulations, rules, ordinances, codes, licenses,
permits, judgments, orders, judicial opinions, approvals, authorizations,
concessions, franchises and similar items issued or promulgated by governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the
United States, any state or any political subdivision of the United States or
any state.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all regulations issued pursuant thereto.
"ERISA Affiliate" means any Person which, together with Borrower,
would be treated as a single employer under Section 4001 of ERISA or Section
414 of the IRC.
"Eurodollar Business Day" means a day on which dealings in United
States dollars are carried out in the interbank eurodollar market.
"Event of Default" shall have the meaning defined in paragraph 7.1.
"Facility" means the credit facilities established pursuant to this
Agreement, comprised collectively by the Revolving Facility and the Term
Facility.
"Facility Balance" at any time means the aggregate unpaid balance of
outstanding principal of all Advances.
"Fixed Charge Coverage Ratio" means the ratio of (i) Pre-Tax Net
Income, plus interest expense, plus rent and operating lease expense to (ii)
interest expense, plus rent and operating lease expense, each determined in
arrears for the preceding four fiscal quarters.
"Floating LIBOR Rate" means, for any Floating LIBOR Rate Balance, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for overnight deposits (or the shortest term quoted therefore) in
Dollars at approximately 11:00 a.m. (London time) on the day on which any
Floating LIBOR Rate Balance is outstanding. If for any reason such rate is not
available, the term "Floating LIBOR Rate" shall mean, the rate per annum
(rounded upwards, if necessary, to the nearest
5
<PAGE> 11
1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank
offered rate for overnight deposits (or the shortest term quoted therefore) in
Dollars at approximately 11:00 a.m. (London time) on the day on which any
Floating LIBOR Rate Balance is outstanding; provided, however, if more than one
applicable rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100 of 1%).
"Floating LIBOR Rate Balance" means any portion of the Facility
Balance that bears interest at rates based upon the Floating LIBOR Rate
(subject to adjustment as provided herein) pursuant to the terms of this
Agreement.
"Floating Rate" means, as applicable, either the Floating LIBOR Rate
or the Prime Rate.
"Floating Rate Balance" means any portion of the Facility Balance
which is either a Floating LIBOR Rate Balance or a Prime Rate Balance.
"GAAP" means generally accepted accounting principles as promulgated
by the American Institute of Certified Public Accountants, consistently
applied.
"Guarantor" means any Subsidiary other than a Borrower now or
hereafter in existence, including, without limitation, Bisset, Casarotto,
Intervision, Maxpro, Philtech, Ultrak GP, Ultrak LP and VideV.
"Guaranty" shall mean a guaranty agreement executed and delivered by a
Guarantor or a Borrower for the benefit of Lender, as referenced in paragraph
6.34.
"Hazardous Materials" means any chemical substances, pollutants,
contaminants, materials, or wastes, or combinations thereof, whether solid,
liquid or gaseous in nature the presence of which requires or may require
investigation or remediation under any federal, state or local statute,
regulations, ordinance, order, action, policy or common law or which poses or
threatens to pose a hazard to the health or safety of persons on or about real
property affected by a Borrower's activities, including, without limitation,
material (i) which is or becomes defined as "hazardous waste," "hazardous
substance," "pollutant or contaminant" under any Environmental Requirements,
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. section 9601 et seq.) or the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) or (ii) which
contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated
biphenyls (PCBs), asbestos, urea formaldehyde foam insulation or radon gas.
"Indebtedness" of any Person means, without duplication, all
liabilities of such Person, and to the extent not otherwise included in
liabilities, the following: (a) all obligations for money borrowed or for the
deferred purchase price of property or services; (b) all obligations
(including, during the noncancellable term of any lease in the nature of a
title retention agreement, all future payment obligations under such lease
discounted to their present value in accordance with GAAP) secured by any lien
to which any property or asset owned or held by such Person is subject, whether
or not the obligation secured thereby shall have been assumed by such Person;
(c) all obligations of other Persons which such Person has guaranteed,
including, but not limited to, all obligations of such
6
<PAGE> 12
Person consisting of recourse liability with respect to accounts receivable
sold or otherwise disposed of by such Person; (d) all obligations of such
Person in respect of interest rate protection agreements; and (e) in the case
of Borrower (without duplication) all obligations under the Revolving Facility
or the Term Facility.
"Indemnified Person" has the meaning set forth in paragraph 9.6(b) of
this Agreement.
"Intangible Assets" means those assets which are treated as intangible
pursuant to GAAP, or as determined by Lender in its sole discretion, and in any
event including, without limitation: (i) obligations, if any, owing by
Affiliates; (ii) the amount, if any by which inventory exceeds the lower of
cost or market value thereof; (iii) the value of any inventory that is obsolete
or damaged or is otherwise deemed by Lender not to be of a marketable quality
commensurate with the inventory of Borrowers as a whole; (iv) accounts
receivable which are deemed by a Borrower or Lender to be uncollectible or
which should be subject to a reserve for bad debts in accordance with GAAP or
which are subject to potential claims or setoffs; (vi) any asset which is
intangible or lacks intrinsic and marketable value or collectibility,
including, without limitation, goodwill, noncompetition agreements, patents,
copyrights, trademarks, franchises and organization or research and development
costs.
"Interest Notice" means a notification delivered to Lender pursuant to
paragraph 2C.3 and paragraph 2C.4, therein designating one or more Interest
Options, the amount of any Advance or portion of the Facility Balance to bear
interest for each such Interest Option and, in the case of an Interest Option
designating such Advance as a LIBOR Balance, the length of the corresponding
Interest Period.
"Interest Option" means an option elected by a Borrower to designate
any portion of the Facility Balance to accrue interest according to the
Adjusted Prime Rate or, with respect to Floating LIBOR Rate Balances and LIBOR
Balances, the Adjusted LIBOR Rate, exercised as provided by paragraph 2C.3.
"Interest Period" means, with respect to any LIBOR Balance, a period
commencing on the date specified in the applicable Interest Notice as the date
on which the principal amount of such LIBOR Balance begins to accrue interest
at the Adjusted LIBOR Rate (or, in the case of a successive Interest Period,
commencing on the Business Day following the last day of the immediately
preceding Interest Period), and ending one (1), three (3) or six (6) months
thereafter as Borrower shall elect in accordance with paragraph 2C.3 and
paragraph 2C.4; provided, that (a) any Interest Period that would otherwise end
on a day which is not a LIBOR Business Day shall be extended to end on the next
succeeding LIBOR Business Day and (b) any Interest Period that would otherwise
end after the Term Facility Maturity Date shall instead end on the Term
Facility Maturity Date.
"Intervision" means, Intervision Express, Ltd., a corporation
organized under the laws of England, with its principal place of business
located at 445 Oakshott Place, Walton Summit, Bamver Br, Preston PR5 8AT,
Lancashire, England, and its successors and assigns.
"Investments" means, with respect to any Person: (a) the acquisition
or ownership by such Person of any share of Capital Stock, evidence of
Indebtedness or other security issued by any other Person; (b) any loan,
advance or extension of credit to, or contribution to the capital of, any other
7
<PAGE> 13
Person, excluding advances to employees in the ordinary course of business for
business expenses; (c) any guaranty of the obligations of any other Person; (d)
any other investment (other than the acquisition of a Business Unit) in any
other Person; and (e) any commitment or option (where the consideration for
such option exceeds $100) to make any of the investments listed in clauses (a)
through (d) above.
"IRC" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"JAK" means JAK Pacific Video Warranty and Repair Services, Inc., a
California corporation, with its principal place of business located at 1220
Champion Circle, Suite 100, Carrollton, Texas 75006, and its successors and
assigns.
"L/C Issuer" means Lender and any affiliate of Lender that issues any
Letter of Credit pursuant to this Agreement.
"LIBOR Balance" means any portion of the Facility Balance that bears
interest at rates based upon the LIBOR Rate (subject to adjustment as provided
herein) pursuant to the terms of this Agreement.
"LIBOR Business Day" means a day on which dealings in United States
dollars are carried out in the interbank eurodollar market.
"LIBOR Costs" means such additional amount or amounts, if any, as
Lender shall reasonably determine will compensate it for actual costs incurred
in maintaining an Adjusted LIBOR Rate on any Floating LIBOR Rate Balance or
LIBOR Balance or any portion thereof as a result of any change after the
Effective Date in any applicable law, rule or regulation or in the
interpretation or administration thereof, or Lender's compliance with any
request or directive from any domestic or foreign governmental authority
charged with the interpretation or administration thereof (whether or not
having the force of law) or by any domestic or foreign court changing the basis
of taxation of payments to Lender in respect of Floating LIBOR Rate Balances or
LIBOR Balances or any other fees or amounts payable under this Agreement (other
than taxes imposed by applicable law on all or any portion of the overall net
income of Lender), or imposition, modification or application of any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, credit extended by, or any other acquisition of funds for loans
by Lender, or imposing on Lender or on the interbank eurodollar market, any
other condition affecting this Agreement or the Floating LIBOR Rate Balances or
LIBOR Balances so as to increase the cost to Lender of making or maintaining
Adjusted LIBOR Rates with respect to Floating LIBOR Rate Balances or LIBOR
Balances or any portion thereof or to reduce the amount of any sum received or
receivable by Lender under this Agreement, by an amount deemed by Lender to be
material, but without duplication for the LIBOR Reserve Requirement.
"LIBOR Rate" means, for any LIBOR Balance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term
8
<PAGE> 14
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR Rate" shall mean, for any LIBOR Balance for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%).
"LIBOR Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental or emergency reserves) are required to be maintained by Lender
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) by member banks of the Federal
Reserve System against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the LIBOR Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (i) any category of liabilities which includes
deposits by reference to which the Adjusted LIBOR Rate is to be determined, or
(ii) any category of extensions of credit or other assets which include
Floating LIBOR Rate Balances or LIBOR Balances. The Adjusted LIBOR Rate shall
be adjusted automatically on and as of the effective date of any change in the
LIBOR Reserve Requirement.
"Lender" means NationsBank of Texas, N.A., a national banking
association, whose principal place of business is located at 901 Main Street,
Dallas, Dallas County, Texas 75202. When used throughout this Agreement, the
term "Lender" shall also include Lender's successors and assigns, including
specifically any party to whom Lender, or its successors or assigns, may assign
its rights and interests under this Agreement.
"Letter of Credit" means any letter of credit issued by L/C Issuer for
the account of Borrower.
"Letter of Credit Documents" means each of the documents, agreements
and other writings required by L/C Issuer to be executed in connection with the
issuance of a Letter of Credit, including, without limitation, each letter of
credit application and reimbursement agreement, all in form satisfactory to L/C
Issuer, together with any and all renewals, extensions, amendments,
modifications, supplements and restatements thereof, respectively.
"Letter of Credit Reserve" means, at any time, the sum of (i) the
aggregate undrawn amount of all Letters of Credit outstanding at such time,
plus (ii) the aggregate amount of all drawings under Letters of Credit for
which Lender has not been reimbursed either in cash or as provided by paragraph
2C.7(b).
"Letter of Credit Sublimit" means the amount of Seven Million
($7,000,000.00).
"Loan Documents" means this Agreement, the Master Note, the Letter of
Credit Documents, each Guaranty and all other documents or agreements executed
in connection therewith, and also includes any and all renewals, extensions,
modifications or amendments of any of the foregoing.
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<PAGE> 15
"Master Note" means a promissory note executed by Borrowers payable to
the order of Lender in the face amount of the Credit Limit, evidencing loans
under the Facility, as provided in Section 2A.1 and in form satisfactory to
Lender, and includes any and all renewals, extensions, amendments,
modifications or restatements thereof.
"Material Adverse Effect" means (i) a materially adverse effect on the
business, assets, operations, prospects or condition, financial or otherwise,
of Borrowers and Guarantors taken as a whole, or (ii) material impairment of
the ability of Borrowers and the Guarantors to perform any obligations under
the Loan Documents.
"Maximum Rate" means the greater of (i) the "weekly ceiling" as
referred to and in effect from time to time under the provisions of Tex. Rev.
Civ. Stat. Ann. art. 5069, as amended, or (ii) the maximum rate of interest
permitted from day to day by any other applicable state or federal law.
"Maxpro" means, Maxpro Systems Pty. Ltd., a corporation organized
under the laws of Australia, with its principal place of business located at
Unit 1, 25 Irvine Drive, Malaga, Western Australia 6062, and its successors and
assigns.
"Monitor" means, Monitor Dynamics, Inc., a California corporation,
with its principal place of business located at 9518 Ninth Street, Rancho
Cucomonga, California 91730, whose tax identification number is 95-3381316, and
its successors and assigns.
"Net Income" means, for any period, net income for such period after
giving effect to deduction of or provision for all operating expenses, all
taxes and reserves (including reserves for deferred taxes and all other proper
deductions), all determined in accordance with GAAP, provided that there shall
be excluded from Net Income: (a) the net income (or net loss) of any Person
accrued prior to the date it becomes a Subsidiary of, or is merged into or
consolidated with, the Person whose Net Income is being determined or a
Subsidiary of such Person; (b) the net income (or net loss) of any Person in
which the Person whose Net Income is being determined or any Subsidiary of such
Person has an ownership interest, except, in the case of net income, to the
extent that any such income has actually been received by such Person or such
Subsidiary in the form of cash dividends or similar distributions; (c) any
restoration of any contingency reserve, except to the extent that provision for
such reserve was made out of income during such period; (d) any net gains or
losses on the sale or other disposition, not in the ordinary course of
business, of Investments, Business Units and other capital assets, provided
that there shall also be excluded any related charges for taxes thereon; (e)
any net gain arising from the collection of the proceeds of any insurance
policy; (f) any write-up of any asset; and (g) any other extraordinary item.
"Obligations" means: (i) all obligations and indebtedness now or
hereafter owing by Borrowers or any Borrower under this Agreement, or otherwise
arising in connection with the Loan Documents, including, without limitation,
all loan repayment obligations, accrued interest and fees, costs and expenses
as provided by the Loan Documents, and any other amounts from time to time
owing by Borrowers, or any Borrower, to Lender in connection therewith; (ii)
any and all other indebtedness and obligations of every kind and character now
or hereafter owing by any Borrower or Guarantor to Lender, whether direct or
indirect, primary or secondary, joint, several, or joint and several, fixed or
contingent, including indebtedness and obligations, if any, which may be
assigned
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<PAGE> 16
to or acquired by Lender; and (iii) any and all renewals and extensions of the
foregoing, or any part thereof, provided, that with respect to Monitor, the
foregoing shall exclude, and Monitor shall have no liability or obligation for,
any such Obligations owing by any other Borrower and outstanding as of the
effective date of this Agreement.
"Original Agreement" has the meaning set forth in Recital A of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Parent" means Ultrak, Inc., a Delaware corporation, with its
principal place of business located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006, whose tax identification number is 75-2626358, and its
successors and assigns.
"Payment Date" means the last day of each March, June, September and
December from and after the Effective Date, and in addition with respect to any
LIBOR Balance, also includes the last day of the corresponding Interest Period
with respect to such LIBOR Balance.
"Person" means any individual, corporation, joint venture, general or
limited partnership, trust, unincorporated organization or governmental entity
or agency.
"Permitted Liens" means (i) liens, security interests, pledges and
encumbrances (if any) created in favor of Lender, (ii) each of the liens,
security interests and encumbrances listed on Exhibit 1.1 attached hereto,
(iii) liens and encumbrances for taxes, assessments or other governmental
charges that are not delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property subject to such liens and encumbrances, and
for which adequate reserves have been created in accordance with GAAP, provided
that, the existence of such lien or encumbrance does not constitute a Material
Adverse Effect, (iv) liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory liens, securing obligations that are not
yet due and are incurred in the ordinary course of any Borrower's or
Guarantor's business, (v) purchase money liens, capital lease obligations or
security interests on any of any Borrower's or Guarantor's fixed assets
acquired after the Effective Date as permitted by this Agreement (provided
that, (A) any assets subject to the foregoing are acquired in the ordinary
course of such Borrower's or Guarantor's business and such lien or security
interest attaches concurrently or within ninety (90) days after the acquisition
thereof, (B) the indebtedness secured by such lien or security interest does
not exceed the lesser of the cost or fair market value of the assets acquired,
(C) such lien or security interest shall attach only to the assets so acquired,
and (D) the indebtedness, liabilities and obligations incurred shall not exceed
$1,500,000 at any time, (vi) customary exceptions to title and encumbrances on
any Borrower's or Guarantor's real estate which do not constitute a lien for
money borrowed, (vii) liens, security interests, pledges and encumbrances
resulting from good faith deposits to secure payment of workmen's compensation
or other social security programs or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, contracts (other than for
payment of indebtedness, accounts payable or other borrowed money) or leases,
all in the ordinary course of business, and (viii) any extension, renewal or
replacement of any of the foregoing; provided that, any liens, security
interests, pledges
11
<PAGE> 17
and encumbrances permitted hereunder shall not be extended or spread to cover
any additional indebtedness or property.
"Philtech" means, Philtech Electronic Services (Proprietary) Limited,
a corporation organized under the laws of South Africa, with its principal
place of business located at 8 Osprey Street, Kensington 2091, South Africa,
and its successors and assigns.
"Plan" means any (i) any "employee benefit plan," as defined in
Section 3(3) of ERISA, established or maintained by Borrower or any ERISA
Affiliate now or during any of the preceding six years, and (ii) any other plan
established or maintained now or during any of the preceding six years by
Borrower or any ERISA Affiliate for its employees which is covered by Title IV
of ERISA or is subject to the minimum funding standards under Section 412 of
the IRC.
"Pre-Tax Net Income" means for any period, Net Income for such period
prior to accruing for appropriate taxes but otherwise determined according to
the definition of "Net Income" provided in this Agreement.
"Prime Rate" means the per annum rate of interest established from
time to time by Lender as its prime rate, which rate may not be the lowest rate
of interest charged by Lender to its customers.
"Prime Rate Balance" means any portion of the Facility Balance bearing
interest at the Adjusted Prime Rate pursuant to the terms of this Agreement.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt under Section 408 of ERISA and any transaction
described in Section 4975(c) of the IRC which is not exempt under Section
4974(c)(2) or Section 4975(d) of the IRC, or by the transitional rules of
Section 414(c) and Section 2003(c) of ERISA.
"Reportable Event" means (i) any transaction described in Section 406
of ERISA or the regulations thereunder for which the 30-day notice is not
waived by said regulations, (ii) a withdrawal from a plan described in Section
4063 or 4064 of ERISA, or (iii) a cessation of operations described in Section
4062(f) of ERISA.
"Revolving Facility" means the credit facility established for
revolving loans pursuant to Article II-A of this Agreement.
"Revolving Facility Advance" means a loan made by Lender under the
Revolving Facility.
"Revolving Facility Balance" means, at any time, the unpaid principal
balance outstanding and owing under the Revolving Facility.
"Revolving Facility Maturity Balance" means the aggregate unpaid
principal balance outstanding under the Revolving Facility at the close of
Lender's business on the Revolving Facility Maturity Date.
"Revolving Facility Maturity Date" means November 30, 2000.
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<PAGE> 18
"Senior Funded Debt to Cash Flow" means the ratio of (i) without
duplication, the sum of all indebtedness for borrowed money, all capital lease
obligations and all indebtedness, liabilities and obligations of Ultrak (or any
other Borrower or Guarantor) under that certain Lease Agreement (Tax Retention
Operating Lease), dated as of March 31, 1997, between First Security Bank,
National Association, not individually but solely as the Owner Trustee under
the Ultrak Trust 1996-1, as Lessor, and Ultrak Operating, L.P., as Lessee, to
(ii) earnings before interest, taxes, depreciation and amortization, determined
in arrears for the preceding four fiscal quarters.
"Shareholder's Equity" means shareholder's equity determined according
to GAAP.
"Subordinated Debt" means all indebtedness which by its terms is
subordinate in right of payment and claim in favor of Lender pursuant to an
Affiliate Subordination Agreement or other written subordination agreement
reasonably satisfactory to Lender.
"Subsidiaries" at any time means all subsidiary corporations,
partnerships or other business entities that would be appropriate for inclusion
in either consolidating or consolidated financial statements of Parent,
determined according to GAAP, and "Subsidiary" means any of such Persons
collectively.
"Term Facility" means the credit facility established for conversion
of the Revolving Facility Maturity Balance to a term loan, pursuant to Article
II-B of this Agreement
"Term Facility Amortization Payment" means an amount, rounded upward
to the nearest whole dollar, equal to one- sixteenth (1/16th) of the Revolving
Facility Maturity Balance, provided, that the final Term Facility Amortization
Payment shall be an amount equal to the amount of the remaining unpaid
principal balance outstanding under the Term Facility as of the time such
payment is made.
"Term Facility Balance" means, at any time, the Facility Balance
existing under the Term Facility.
"Term Facility Maturity Date" means November 30, 2004.
"Type" means any type of loan under the Facility (i.e. a Prime Rate
Balance or LIBOR Balance).
"UCC" means the Texas Uniform Commercial Code, as in effect from time
to time.
"Ultrak" means Ultrak Operating, L.P., a Texas limited partnership,
with its principal place of business located at 1220 Champion Circle, Suite
100, Carrollton, Texas 75006, whose tax identification number is 75-2625985,
and its successors and assigns.
"Ultrak GP" means Ultrak GP, Inc., a Delaware corporation, with its
principal place of business located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006, whose tax identification number is 52-1971937, and its
successors and assigns.
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"Ultrak LP" means Ultrak LP, Inc., a Delaware corporation, with its
principal place of business located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006, whose tax identification number is 51-0372494, and its
successors and assigns.
"VideV" means, VideV GmbH, a corporation organized under the laws of
Germany, with its principal place of business located at GroBenbaumer Weg 10,
40472 Dusseldorf, Germany, and its successors and assigns.
"Voting Stock" means sufficient shares of a Borrower or a Guarantor
(however designated) having ordinary voting power for the election of a
majority of the members of such Borrower's or Guarantor's board of directors
(not including shares having such power only in the event of a contingency).
1.2 GENERAL TERMS. Unless expressly provided otherwise, any term
which is defined by the UCC shall have the same meaning, wherever used in this
Agreement, as is prescribed by the UCC.
ARTICLE II-A. REVOLVING FACILITY
2A.1 REVOLVING FACILITY ADVANCES. Subject to the terms and
provisions of this Agreement, Lender hereby establishes a revolving credit
facility for loans to Borrowers from time to time during the period beginning
on the Effective Date and ending on the Revolving Facility Maturity Date,
provided, that the Facility Balance shall not at any time exceed an amount
equal to the Credit Limit, less the Letter of Credit Reserve. Principal may be
borrowed and repaid, from time to time during such period, subject to all terms
and provisions of this Agreement. No Revolving Facility Advance shall be made
after the Revolving Facility Maturity Date. Each Borrower jointly and
severally agrees to pay the Revolving Facility Balance as provided by this
Agreement.
2A.2 INTEREST ACCRUAL. Interest on the Revolving Facility Balance
shall accrue as provided in Article II-C.
2A.3 PAYMENTS; CONVERSION TO TERM FACILITY. Subject to the terms
of this Agreement, accrued interest on the Revolving Facility Balance shall be
payable quarterly in arrears on each Payment Date, beginning on December 31,
1997, and continuing thereafter through September 30, 2000, and on the
Revolving Facility Maturity Date. If any such accrued interest is not paid on
its due date, Lender may at its option (but with no obligation to do so), add
the amount of such accrued interest to the unpaid principal due under the
Revolving Facility, in which event such accrued interest will be deemed paid
and the aggregate amount thereof shall be deemed included in the Revolving
Facility Balance. Subject to the terms of this Agreement, on the Revolving
Facility Maturity Date the Revolving Facility Maturity Balance shall
automatically be renewed and converted to comprise the Term Facility Balance as
provided by paragraph 2B.1.
2A.4 TERMINATION OF REVOLVING FACILITY. Subject to the terms of
this Agreement, the Revolving Facility shall terminate on the Revolving
Facility Maturity Date. Borrowers acknowledge and agree that Lender shall have
no obligation to renew the Revolving Facility.
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2A.5 USE OF PROCEEDS. Subject to the terms of this Agreement, all
proceeds of Revolving Facility Advances shall be used for working capital
purposes in the ordinary course of business or for capital expenditures or
acquisitions to the extent not prohibited by this Agreement.
2A.6 BORROWING AND DISBURSEMENT. Revolving Facility Advances shall
be funded at the request of a Borrower, subject to satisfaction of all
requirements for funding under the Revolving Facility as provided in paragraph
4.2 and otherwise as provided by this Agreement. Lender shall be given a
timely Interest Notice with respect to each request for a Revolving Facility
Advance, provided, that if Lender does not receive a timely Interest Notice
with respect to any such request, such Borrower shall automatically be deemed
to have irrevocably designated such Revolving Facility Advance as being a Prime
Rate Balance, subject to the right of later conversion as provided by paragraph
2C.3(b). Subject to the terms and conditions of this Agreement, Lender shall
fund the requested Revolving Facility Advance by disbursing same to an
operating account of any Borrower (or Borrowers jointly), according to any
Borrower's written disbursement instructions.
2A.7 REIMBURSEMENTS TO LENDER. In the event Lender shall sustain
or incur any loss or reasonable expenses as a result of failure by a Borrower
to borrow any Revolving Facility Advance after having given notice of a request
for such Revolving Facility Advance under paragraph 2C.4 (whether by reason of
election not to proceed with such Advance or failure of satisfaction of any
conditions required by Article IV), Borrowers jointly and severally agree to
pay to Lender, upon demand, an amount sufficient to compensate Lender for any
such losses and expenses, including, without limitation, Consequential Loss, if
any. At the request of Borrowers, Lender shall provide a certificate itemizing
such loss and expenses.
2A.8 FUNDING/BOOKING OF REVOLVING FACILITY ADVANCES. Lender may
fund or book amounts in respect of Revolving Facility Advances at any office or
branch office of Lender as Lender shall determine in its discretion.
2A.9 CONTINUING REPRESENTATIONS. Except as may have been otherwise
disclosed to Lender in writing, each request for a Revolving Facility Advance
and acceptance of the proceeds thereof shall constitute a continuing
representation and express warranty by Borrower that as of the date of such
request and at and as of the time of the funding thereof all conditions and
requirements of subparagraphs (b) through (e) of paragraph 4.2 are satisfied
and fulfilled in all respects.
ARTICLE II-B. TERM FACILITY
2B.1 TERM FACILITY. Lender hereby establishes a term facility for
repayment of the Revolving Facility Maturity Balance. Subject to the terms and
provisions of this Agreement, effective at the close of Lender's business on
the Revolving Facility Maturity Date, the Revolving Facility Maturity Balance
shall automatically convert and be renewed into, and thereafter shall
constitute, the Term Facility Balance, which shall be payable and governed as
provided in paragraph 2B.4 and otherwise as provided by this Agreement.
2B.2 INTEREST ACCRUAL. Interest on the Term Facility Balance shall
accrue as provided in Article II-C.
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2B.3 PAYMENTS. Subject to the terms of this Agreement, (i) accrued
interest on the Term Facility Balance shall be payable quarterly in arrears on
each Payment Date beginning on December 31, 2000, and continuing thereafter
through September 30, 2004 and on the Term Facility Maturity Date, and (ii)
principal payments in an amount equal to the Term Facility Amortization Payment
shall be due and payable in equal quarterly installments on each Payment Date
beginning on December 31, 2000 and continuing thereafter through September 30,
2004 and on the Term Facility Maturity Date.
2B.4 TERMINATION OF TERM FACILITY. Subject to the terms of this
Agreement, the Term Facility shall terminate and the Term Facility Balance and
all unpaid accrued interest and other obligations in respect thereof shall be
due and payable in full on the Term Facility Maturity Date.
2B.5 BOOKING OF TERM FACILITY BALANCE. Lender may book the Term
Facility Balance at any office or branch office of Lender as Lender shall
determine in its discretion.
2B.6 CONTINUING REPRESENTATIONS. Except as may have been otherwise
disclosed to Lender in writing, Borrowers' acceptance of the forbearance
resulting from conversion of the Revolving Facility Maturity Balance to the
Term Facility Balance as provided by paragraph 2B.1 shall constitute a
continuing representation by Borrowers that no event or condition exists which
would be the subject of a required notice under paragraph 6.11 or paragraph
6.12.
ARTICLE II-C. GENERAL LOAN TERMS
2C.1 MASTER NOTE. The Facility Balance shall be further evidenced
by a promissory note, dated as of the Effective Date, which shall be executed
and delivered by Borrowers jointly and severally payable to the order of Lender
in the face amount of the Credit Limit, in form satisfactory to Lender.
2C.2 INTEREST ACCRUAL. Interest shall accrue on the Facility
Balance from day to day outstanding at a rate equal to the lesser of the
applicable Contract Rate or the Maximum Rate, provided however, that subject to
the provisions of paragraph 9.9, in the event that the Contract Rate shall
exceed the Maximum Rate and at any time and thereafter shall be less than the
Maximum Rate, then at Lender's option, notwithstanding the foregoing, the rate
of interest applicable hereunder shall remain at the Maximum Rate until the
aggregate accrued interest to date under the Facility equals the amount that
would have accrued had the Contract Rate at all times remained in effect. Each
change in the applicable interest rate shall become effective without prior
notice automatically as of the opening of business on the Business Day of any
effective change in the applicable Floating Rate or the Maximum Rate, as the
case may be. Unpaid principal, if any, of any Facility Balance remaining
unpaid on the Term Facility Maturity Date shall automatically accrue interest
from and after such date at an annual rate equal to the Maximum Rate. Interest
on the Facility Balance shall be calculated on the basis of the actual days
elapsed in a year consisting of 360 days.
2C.3 INTEREST OPTIONS. Subject to the provisions of this
Agreement, a Borrower shall have the option to designate all or any portion of
any Revolving Facility Advance or any portion of the Facility Balance as a
Prime Rate Balance, a Floating LIBOR Rate Balance or a LIBOR Balance, provided
however, that any such LIBOR Balance for any particular Interest Period shall
not be for
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less than $500,000.00 of unpaid principal or an integral multiple thereof, and
no more than four (4) Interest Periods shall be allowed to exist at any one
time. Any such option shall be exercised by timely delivery to Lender of an
Interest Notice in the manner provided below:
a. Revolving Facility Advances. A Borrower shall give
to Lender an Interest Notice in connection with each request for a
Revolving Facility Advance, therein designating the Interest Option(s)
selected with respect to such Revolving Facility Advance.
b. Conversion of Floating Rate Balance to LIBOR Balance.
During any period in which any Floating Rate Balance is in existence
Borrowers shall have the right to convert all or any portion thereof
to a LIBOR Balance or to another Type of Floating Rate Balance by
giving Lender an Interest Notice of such conversion, therein
designating the Interest Option(s) selected with respect thereto.
c. At Expiration of Interest Periods. At least two (2)
Business Days prior to the end of any Interest Period, Borrowers shall
give Lender an Interest Notice indicating the Interest Option to be
applicable to the corresponding LIBOR Balance upon the expiration of
such Interest Period. If no such Interest Notice is timely given to
Lender, Borrowers shall be deemed to have designated that such LIBOR
Balance shall be converted to a Prime Rate Balance upon the expiration
of such Interest Period and to have given Lender notice of such
designation.
Notwithstanding the foregoing, Borrowers shall have no right to designate the
Adjusted LIBOR Rate or the Floating LIBOR Rate in any Interest Notice delivered
at any time when any Event of Default is in existence.
2C.4 INTEREST NOTICES. Unless otherwise agreed by Lender, each
Interest Notice, in order to be timely and effective under this Agreement,
shall be delivered to Lender (i) if such Interest Notice includes designation
of a LIBOR Balance at least two (2) Business Days prior to the Business Day on
which funding of the requested Advance, or conversion of a Floating Rate
Balance to a LIBOR Balance, is to be effective, and (ii) otherwise by 12:00
noon on the Business Day on which any funding of the requested Advance, or
conversion of a LIBOR Balance to a Floating Rate Balance or conversion of one
Type of Floating Rate Balance to another Type of Floating Rate Balance, is to
be effective. Each Interest Notice shall be irrevocable and binding upon
Borrowers. Any Interest Notice may be written or oral (provided, that
Borrowers agree that any oral Interest Notice shall promptly be confirmed in
writing, but provided further, that any delay or failure in providing such
confirmation shall not affect Lender's ability to properly rely upon the
validity of any such oral Interest Notice). Lender hereby is authorized and
directed to honor all telephonic Interest Notices from any Person whom Lender
reasonably believes to be authorized to request an Advance. In accordance with
paragraph 9.6(c), Borrowers jointly and severally agree to indemnify and hold
Lender harmless from any loss or liability incurred in connection with honoring
any such telephonic or other oral Interest Notices. Written Interest Notices
are effective only upon receipt by Lender.
2C.5 MANDATORY PAYMENTS. If at any time for any reason the
Facility Balance exceeds an amount equal to the Credit Limit less the Letter of
Credit Reserve, Borrowers jointly and severally agree to make an immediate
payment of principal under the Facility in an amount not less than the
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amount of such excess, which shall be applied in the manner prescribed by
paragraph 2C.6. Amounts, if any, payable under this paragraph 2C.5 shall be
deemed to be payable without necessity of notice or demand and may be offset by
Lender against any amount owing by Lender to any Borrower without prior notice.
2C.6 APPLICATION OF PAYMENTS AND PREPAYMENTS. All payments from
time to time received by Lender shall be applied in the following order of
priority: (i) payment of any fees, costs or expenses for which any Borrower is
obligated under the Loan Documents; (ii) payment of accrued interest due and
payable in respect of the Facility; (iii) payment of principal due and payable
in respect of the Facility, first to any Floating LIBOR Rate Balance, next to
any Prime Rate Balance and then to any LIBOR Balance according to the latest
expiring corresponding Interest Periods); and (iv) prepayments of principal
under the Facility, first to any Floating LIBOR Rate Balance, next to any Prime
Rate Balance and then to any LIBOR Balance according to the latest expiring
corresponding Interest Periods (and in respect of the Term Facility Balance, in
any case in inverse order of scheduled installments thereunder). Subject to
the foregoing, Borrowers shall have the right to prepay all or any portion of
the outstanding principal under the Facility at any time, subject however to
prior payment of Consequential Loss, if any, resulting from such prepayment.
Notwithstanding the foregoing, during the existence and continuance of any
Event of Default, Lender may apply any payments or prepayments, or other
amounts received, in such manner as Lender may determine in its sole
discretion.
2C.7 LETTERS OF CREDIT.
a. Upon the request of any Borrower from time to time,
Lender shall in accordance with the provisions of this paragraph 2C.7
cause L/C Issuer to issue one or more Letters of Credit up to an
aggregate amount available to be drawn (plus the aggregate amount of
unreimbursed drawings under all Letters of Credit) at any time not to
exceed the Letter of Credit Sublimit; provided, that (1) all Letter of
Credit Documents in connection with each Letter of Credit shall be
satisfactory to Lender in its sole discretion, (2) no Letter of Credit
shall be issued if, after issuance thereof, the sum of the aggregate
principal amount of the Facility Balance outstanding, plus the Letter
of Credit Reserve, would exceed the Credit Limit, (3) each Letter of
Credit shall be a documentary letter of credit issued to or for the
benefit of a supplier of such Borrower in connection with the purchase
of inventory or a standby letter of credit otherwise issued to a
beneficiary, and for a purpose, acceptable to Lender in its sole
discretion, and (4) no Letter of Credit shall have an expiration date
later than 180 days after the Revolving Facility Maturity Date.
b. With respect to any drawing under a Letter of Credit
which occurs on or prior to the Revolving Facility Maturity Date,
unless Borrowers otherwise promptly pay L/C Issuer its reimbursement
obligation therefor, Borrowers shall be deemed to have irrevocably
requested Lender to make a Revolving Facility Advance (designated as a
Prime Rate Balance) in the amount of such reimbursement obligation,
and Lender shall have the option, but not the obligation, to fund such
request. Upon Lender's funding of any such Revolving Facility Advance
for the benefit of L/C Issuer, such reimbursement obligation shall be
deemed paid and the amount thereof shall be included as a part of the
Revolving Facility Balance.
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Borrowers shall promptly pay L/C Issuer all reimbursement obligations
with respect to any drawing under a Letter of Credit which occurs
after the Revolving Facility Maturity Date.
c. The issuance and negotiation of Letters of Credit
shall be governed by the Uniform Customs and Practices for Documentary
Credits (1993 Revision), as published in the International Chamber of
Commerce Uniform Customs and Practices, Publication No. 500 or, at L/C
Issuer's and Lender's option, such other policies and practices as may
be followed by L/C Issuer and Lender with respect to similar letters
of credit at the time.
2C.8 FEES. Subject in all respects to the provisions of paragraph
9.9 Borrowers jointly and severally agree as follows:
a. Commitment Fee. In connection with and as
consideration for Lender's commitments under this Agreement, and
calculated from the date which is six months after the Effective Date,
Borrowers shall pay a fee to Lender, beginning on June 30, 1998, and
continuing on the last day of each March, June, September and December
thereafter, through and including the Revolving Facility Maturity
Date, in an amount equal to one- sixteenth of one percent (0.0625%)
per annum of the average daily unused portion of the Credit Limit
during the previous quarter (or shorter period with respect to any
period beginning or ending on a date which is not the quarter end),
payable quarterly in arrears on each Payment Date and on the date of
any early termination of the Facility.
b. Letter of Credit Fees. As consideration for Lender's
commitment to cause L/C Issuer to issue any Letter of Credit,
Borrowers shall pay to Lender all applicable Letter of Credit fees as
follows: one-half of one percent (0.50%) per annum of the face amount
of each Letter of Credit (subject to payment of Lender's or L/C
Issuer's applicable minimum fee for issuance of letters of credit of
such type), plus Lender's or L/C Issuer's customary documentation
fees, if any, for issuance. Such fees shall be payable to Lender in
advance on the date of issuance of each Letter of Credit and shall be
calculated according to the face amount of such Letter of Credit based
on its stated term.
c. General. Fees shall be allocated by Borrowers among
themselves as Borrowers shall determine. All fees shall be fully
earned by Lender when due and payable and, except as otherwise set
forth herein, shall not be subject to refund or rebate. All fees are
for compensation for services and are not, and shall not be deemed to
be, interest or a charge for the use of money.
2C.9 PAYMENTS. Each Borrower hereby jointly and severally agrees
to make all payments in respect of the Obligations as provided by this
Agreement and the other Loan Documents.
ARTICLE III. CHANGE IN CIRCUMSTANCES
3.1 INCREASED COST AND REDUCED RETURN.
a. If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change in any applicable
law, rule or regulation, or any change in the interpretation or
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administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (or its Applicable Lending Office)
with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank or comparable agency:
i. shall subject Lender (or its Applicable
Lending Office) to any tax, duty or other charge with respect
to any Floating LIBOR Rate Balance or any LIBOR Balance, the
Master Note or its obligation to make loans to Borrowers based
on the Adjusted LIBOR Rate, or change the basis of taxation of
any amounts payable to Lender (or its Applicable Lending
Office) under this Agreement or the Master Note in respect of
any Floating LIBOR Rate Balance or any LIBOR Balance (other
than taxes imposed on the overall net income of Lender by the
jurisdiction in which Lender has its principal office or its
Applicable Lending Office);
ii. shall impose, modify or deem applicable any
reserve, special deposit, assessment or similar requirement
(other than the LIBOR Reserve Requirement utilized in the
determination of the Adjusted LIBOR Rate) relating to any
extensions of credit or other assets of, or any deposits with
or other liabilities or commitments of, Lender (or its
Applicable Lending Office), including the commitment of Lender
hereunder; or
iii. shall impose on Lender (or its Applicable
Lending Office) or the London interbank market any other
condition affecting this Agreement or the Master Note or any
of such extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing or maintaining any Floating LIBOR Rate Balance or any LIBOR
Balance or to reduce any sum received or receivable by Lender (or its
Applicable Lending Office) under this Agreement or the Master Note
with respect to any Floating LIBOR Rate Balance or any LIBOR Balance,
then Borrowers shall pay to Lender on demand such amount or amounts as
will compensate Lender for such increased cost or reduction. If
Lender requests compensation by Borrowers under this paragraph 3.1(a),
Borrowers may, by notice to Lender, suspend the obligation of Lender
to make or Continue loans of the Type with respect to which such
compensation is requested, or to Convert loans of any other Type into
loans of such Type, until the event or condition giving rise to such
request ceases to be in effect (in which case the provisions of
paragraph 3.4 shall be applicable); provided that such suspension
shall not affect the right of Lender to receive the compensation so
requested.
b. If, after the date hereof, Lender shall have
determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy or any change therein or in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on the
capital of Lender or any corporation controlling Lender as
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a consequence of Lender's obligations hereunder to a level below that
which Lender or such corporation could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy), then from time to time
upon demand Borrowers shall pay to Lender such additional amount or
amounts as will compensate Lender for such reduction.
c. Lender shall promptly notify Borrowers of any event
of which it has knowledge, occurring after the date hereof, which will
entitle Lender to compensation pursuant to this paragraph and will
designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. If Lender claims compensation under this
paragraph, Lender shall furnish to Borrower a statement setting forth
the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining
such amount, Lender may use any reasonable averaging and attribution
methods.
3.2 LIMITATION ON TYPES OF LOANS. If on or prior to the first day
of any Interest Period for any LIBOR Balance or any Floating LIBOR Rate
Balance:
(a) Lender determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining
the LIBOR Rate applicable to such Balance; or
(b) Lender determines (which determination shall be
conclusive) that the Adjusted LIBOR Rate will not adequately and
fairly reflect the cost to Lender of funding such LIBOR Balances or
Floating LIBOR Rate Balances;
then Lender shall give Borrowers prompt notice thereof specifying the relevant
Type of loans and the relevant amounts or periods, and so long as such
condition remains in effect, Lender shall be under no obligation to make
additional loans of such Type, Continue loans of such Type, or to Convert loans
of any other Type into loans of such Type and Borrowers shall, on the last
day(s) of the then current Interest Period(s) for the outstanding loans of the
affected Type, either prepay such loans or Convert such loans into another Type
of loan in accordance with the terms of this Agreement.
3.3 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for Lender or its Applicable
Lending Office to make, maintain or fund LIBOR Balances or Floating LIBOR Rate
Balances hereunder, then Lender shall promptly notify Borrowers thereof and
Lender's obligation to make or Continue LIBOR Balances or Floating LIBOR Rate
Balances and to Convert other Types of loans into LIBOR Balances or Floating
LIBOR Rate Balances shall be suspended until such time as Lender may again
make, maintain, and fund LIBOR Balances or Floating LIBOR Rate Balances (in
which case the provisions of paragraph 3.4 shall be applicable).
3.4 TREATMENT OF AFFECTED LOANS. If the obligation of Lender to
make LIBOR Balances or Floating LIBOR Rate Balances available to Borrowers or
to Continue, or to Convert loans of any other Type into, loans of a particular
Type shall be suspended pursuant to paragraph 3.1 or paragraph
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3.3 hereof (loans of such Type being herein called "Affected Loans" and such
Type being herein called the "Affected Type"), Lender's Affected Loans shall be
automatically Converted into Prime Rate Balances on the last day(s) of the then
current Interest Period(s) for Affected Loans (or, in the case of a Conversion
required by paragraph 3.3, on such earlier date as Lender may specify to
Borrowers) and, unless and until Lender gives notice as provided below that the
circumstances specified in paragraph 3.1 or paragraph 3.3 hereof that gave rise
to such Conversion no longer exist:
a. to the extent that Lender's Affected Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to Lender's Affected Loans shall be applied
instead to its Prime Rate Balances; and
b. all loans that would otherwise be made or Continued
by Lender as loans of the Affected Type shall be made or Continued
instead as Prime Rate Balances, and all loans of Lender that would
otherwise be Converted into loans of the Affected Type shall be
Converted instead into (or shall remain as) Prime Rate Balances.
3.5 COMPENSATION. Upon the request of Lender, Borrowers shall pay
to Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of Lender) to compensate it for any loss, cost or expense (including
loss of anticipated profits) incurred by it as a result of:
a. any payment, prepayment or Conversion of a LIBOR
Balance for any reason (including, without limitation, the
acceleration of the Facility pursuant to paragraph 8.2) on a date
other than the last day of the Interest Period for such LIBOR Balance;
or
b. any failure by Borrower for any reason (including,
without limitation, the failure of any condition precedent specified
in Article IV to be satisfied) to borrow, Convert, Continue or prepay
a LIBOR Rate Balance on the date for such borrowing, Conversion,
Continuation or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation or Conversion under this
Agreement.
3.6 TAXES.
a. Any and all payments by Borrower to or for the
account of Lender hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present
or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding
taxes imposed on Lender's income, and franchise taxes imposed on
Lender (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable under this
Agreement or any other Loan Document to Lender, (i) the sum payable
shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this paragraph 3.6) Lender receives an amount equal to the sum
it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv)
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Borrower shall furnish to Lender, at its address referred to in
paragraph 9.3, the original or a certified copy of a receipt
evidencing payment thereof.
b. In addition, Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Agreement or any other Loan Document or from
the execution or delivery of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as
"Other Taxes").
c. Borrower agrees to indemnify Lender for the full
amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this paragraph 3.6) paid by Lender and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto.
d. If a Borrower is required to pay additional amounts
to or for the account of Lender pursuant to this paragraph 3.6, then
Lender will agree to use reasonable efforts to change the jurisdiction
of its Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the
judgment of Lender, is not otherwise disadvantageous to Lender.
e. Within thirty (30) days after the date of any payment
of Taxes, Borrowers shall furnish to Lender the original or a
certified copy of a receipt evidencing such payment.
f. Without prejudice to the survival of any other
agreement of Borrowers hereunder, the agreements and obligations of
Borrowers contained in this paragraph 3.6 shall survive the
termination of the Facility and the payment in full of the Master
Note.
ARTICLE IV. CONDITIONS
4.1 ITEMS TO BE DELIVERED BY BORROWER. Prior to or simultaneously
with execution and delivery hereof, Borrowers shall deliver, or cause to be
delivered, to Lender the following:
a. Officer's Certificate (Corporate Borrowers and
Guarantors). Due certification by the corporate secretary or
assistant secretary of each corporation which is a Borrower or
Guarantor hereunder, attesting to the accuracy, completeness and
authenticity of the following:
i. Articles of Incorporation and Certificate of
Existence. A copy of its articles of incorporation (or other
similar corporate charter documentation, as applicable), and
all amendments thereto, accompanied by the certificate of the
appropriate governmental official of its jurisdiction of
incorporation bearing a date no more than thirty (30) days
prior to the date hereof, to the effect that such copy is
correct and complete and that such Person is a corporation
duly incorporated and validly existing in such jurisdiction,
and certified by the corporate secretary of such Person dated
the date hereof, as being correct and complete as of the date
hereof.
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ii. Good Standing. Certification by the
appropriate government official of the jurisdiction of
incorporation of each Borrower bearing a date no more than
thirty (30) days prior to the date hereof, to the effect that
such Person is in good standing with respect to payment of
franchise and similar taxes. Each Borrower and Guarantor
represents that to the extent required by applicable law, it
is qualified or licensed to transact business in all
jurisdictions in which failure to so qualify could have a
Material Adverse Effect.
iii. Bylaws. A copy of the bylaws or other
similar corporate governance documentation, as applicable, and
all amendments thereto, of such Person accompanied by
certificates from its corporate secretary, dated the date
hereof, to the effect that such copy is correct and complete
as of the date hereof.
iv. Resolutions. A copy of corporate
resolutions (or similar authorizing documentation, as
applicable) of such Person approving this Agreement,
authorizing the transactions contemplated hereby, and
authorizing and directing a named officer or officers of such
Person to sign and deliver all Loan Documents to be executed
by such Person, duly adopted by the board of directors of such
Person, accompanied by the certificate of the corporate
secretary, dated the date hereof, that such copy is a true and
complete copy of resolutions duly adopted by the board of
directors of such Person, and that such resolutions have not
been amended, modified, or revoked in any respect and are in
full force and effect as of the date hereof. Such resolutions
shall be in form and substance satisfactory to Lender.
v. Incumbency. Certification of incumbency of
all officers of such Person executed by its president or vice
president and corporate secretary, as of the effective date
hereof, certifying the name and signature of each such
officer.
b. General Partner's Certificate (Ultrak). In addition
to the items required under paragraph 4.1(a), due certification by
Ultrak GP, Inc., the general partner of Ultrak, attaching and
attesting to the accuracy, completeness and authenticity of the
following:
i. Certificate of Limited Partnership. A true
and correct copy of Ultrak's certificate of limited
partnership;
ii. Certificates of Existence (Ultrak and Ultrak
GP, Inc.). A certificate of existence, issued and certified
by the appropriate governmental official, for each of Ultrak
and its sole general partner, Ultrak GP, Inc.;
iii. Authorizing Resolutions. A copy of
authorizing resolutions approving this Agreement and the other
Loan Documents, authorizing the transactions contemplated
hereby, and authorizing its sole general partner, Ultrak GP,
Inc., to execute and deliver this Agreement and the other Loan
Documents and any related documents contemplated hereby to be
executed by Ultrak, in form satisfactory to Lender;
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iv. Incumbency. Certification of the name and
signatures of incumbent officers of Ultrak GP, Inc. who are
authorized to execute this Agreement and other Loan Documents
on behalf of Ultrak; and
v. Partnership Agreement. A true and correct
copy of the agreement of limited partnership, and all
amendments thereto, of Ultrak.
c. Amended and Restated Loan Agreement. This Agreement,
duly executed.
d. Master Note. The Master Note, duly executed.
e. Affiliate Subordination Agreements. All Affiliate
Subordination Agreements, if any, required by Lender under paragraph
6.17.
f. Guaranty. A Guaranty pursuant to paragraph 6.34,
duly executed by each Borrower or Guarantor as the case may be and
delivered and in form satisfactory to Lender.
g. Opinion of Counsel. An opinion of counsel for
Borrowers in form and substance satisfactory to Lender.
h. Other Documents. Such other items as Lender may
request in order to protect its interests and rights under the Loan
Documents.
4.2 LOANS UNDER REVOLVING FACILITY. As a condition to any
Revolving Facility Advance, each of the following requirements must be
satisfied in Lender's discretion:
a. Lender shall have implemented all administrative
procedures required by Lender for administration of the Facility, in
form satisfactory to Lender;
b. All items as required under paragraph 4.1 shall have
been delivered to Lender, and the same shall be satisfactory to Lender
in its discretion;
c. All representations and warranties contained in the
Loan Documents shall be true, correct and complete in all material
respects (as determined by Lender in its sole discretion) except as
disclosed otherwise to Lender in writing and as acceptable to Lender;
d. No Event of Default shall have occurred and be
continuing, or shall result from such Advance, and no other event or
condition which with notice or the passage of time, or both would
constitute an Event of Default, or which otherwise is the subject of a
required notice under paragraph 6.11 or paragraph 6.12, shall be in
existence; and
e. No material adverse change shall have occurred with
respect to any Borrower's financial condition or operations since the
effective date of the most recent financial statements delivered to
Lender.
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Any request for a Revolving Facility Advance at a time when any of the
foregoing requirements are not satisfied may be declined by Lender without
prior notice.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
Each Borrower (as to itself unless otherwise noted) hereby represents
and warrants to Lender the following:
5.1 NAME; TRADE NAMES. Each Borrower and Guarantor is conducting,
transacting, and carrying on its business under its corporate name shown in
Article I and such other names as may be specified in Exhibit 5.1, and is not
engaged in business under any other name.
5.2 CHIEF EXECUTIVE OFFICE. Each Borrower's and Guarantor's chief
executive office is located at the address specified for such Person in Article
I.
5.3 EXISTENCE; GOOD STANDING. Each Borrower (excluding Ultrak)
and Guarantor, respectively, is a corporation, duly incorporated, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified or licensed to transact business in all
jurisdictions the laws of which require it to be so qualified or licensed.
Ultrak is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Texas, and is duly qualified or
licensed to transact business in all jurisdictions the laws of which require it
to be so qualified or licensed. Ultrak GP, Inc., a Delaware corporation, is
sole general partner of Ultrak.
5.4 POWER AND AUTHORITY; VALIDITY. Each Borrower and Guarantor
possesses all requisite power and authority to own, lease and operate its
properties and to carry on its business and to execute, deliver and comply with
the Loan Documents. Each of the Loan Documents has been duly authorized by all
necessary corporate action and has been duly executed and delivered by each
Borrower and Guarantor, and evidences valid and binding obligations enforceable
in accordance with its respective terms.
5.5 NO CONFLICTING AGREEMENTS. Each Borrower represents that the
execution, delivery and performance of the Loan Documents will not violate the
articles of incorporation or bylaws of any Person party thereto (or in the case
of Ultrak, its agreement of limited partnership), nor constitute a default
under, or result in a breach of, any contract, agreement or other instrument to
which it is a party or which is applicable to its property.
5.6 SHARE OWNERSHIP. Each Borrower's or Guarantor's outstanding
shares or interests (as the case may be) have been duly and validly issued and
are fully paid and nonassessable. The outstanding equity ownership of each
such Person 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
any such Person to issue, transfer, deliver or sell additional shares or
interests of its equity ownership.
5.7 SUBSIDIARIES. There are no Subsidiaries that are not
Borrowers or Guarantors, except as listed in Exhibit 5.7. Each such Subsidiary
listed therein, if any, is organized, validly
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existing and in good standing under the laws of the jurisdiction of its
organization, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now conducted and
proposed to be conducted. All outstanding shares of stock, or other interests
of equity ownership, of each such Subsidiary, if any, have been validly issued
and are fully paid and non-assessable, and all shares, or other interests of
equity ownership, owned by any Borrower or Guarantor are free and clear of any
lien, pledge, security interest or other encumbrance.
5.8 FINANCIAL STATEMENTS. Parent has delivered to Lender its
consolidated audited balance sheet, income statement and statement of cash flow
as of its fiscal year ending December 31, 1996 and its consolidated balance
sheet, income statement and statement of cash flow as of the quarterly period
ending September 30, 1997. All of such financial statements were prepared in
accordance with GAAP, and are correct and complete, and fairly present the
consolidated financial condition of Parent and the Subsidiaries on the
respective dates thereof and the results of its operations for the respective
periods then ended. There has been no material adverse change in the business,
properties or financial condition of any Borrower or Guarantor since the dates
of such financial statements, respectively.
5.9 LITIGATION. Other than as disclosed to Lender in Exhibit 5.9,
Borrower represents that no Borrower or Guarantor is a party to any pending
lawsuits or proceedings before or by any state or federal court or governmental
agency or instrumentality, and is not aware of any threatened or potential
lawsuits, proceedings, claims or investigations. The items, if any, disclosed
in Exhibit 5.9, in the event of any unfavorable or adverse determination, will
not result in or cause a Material Adverse Effect.
5.10 COMPLIANCE WITH LAWS. Borrower represents that neither any
Borrower nor any Guarantor is in violation of any laws, regulations and orders
in any respect which will result in or cause, or reasonably would be expected
to result in or cause, a Material Adverse Effect.
5.11 JUDGMENTS. There are no outstanding or unpaid judgments
against any Borrower or Guarantor which, in the aggregate, exceed the total
amount of $1,500,000.
5.12 TAXES. All tax returns or filings required to be filed by any
Borrower or Guarantor have been filed and taxes imposed upon any such Person
which are due and payable have been paid.
5.13 TITLE TO PROPERTY. Each Borrower and Guarantor has good and
marketable title to all property reflected as being owned by such Person in the
financial statements previously delivered to Lender or purported to have been
acquired since such date, except property sold or otherwise disposed of
subsequent to such date in the ordinary course of business. Each such Person
possesses all patents, patent rights, licenses, trademarks, trademark rights,
trade names, trade name rights and copyrights which are required to conduct its
business as now conducted without any known infringement or conflict by or
against the rights of any other Person.
5.14 CONSENTS. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution,
delivery and performance of the Loan Documents. Each Borrower and Guarantor
has all required governmental permits and licenses, if any, on account of its
operations
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and activities and is in full compliance with the terms and conditions thereof,
and all such permits and licenses are in full force and effect.
5.15 FULL DISCLOSURE. Borrower has disclosed to Lender all
material facts known to Borrower concerning the financial condition and
business operations of Borrowers and the Guarantors. All information furnished
by Borrower to Lender was true and complete at the time of delivery thereof to
Lender, and there has been no material change in any such information except as
may have been disclosed by Borrower to Lender in writing. There is no fact
known to Borrower which would be reasonably expected to result in a Material
Adverse Effect during the term of this Agreement.
5.16 SOLVENCY. As of, and immediately following the effective date
of this Agreement: (i) the fair saleable value of all assets of each Borrower
or Guarantor exceeds the amount of all of such Person's existing debts and
liabilities (including contingent liabilities), (ii) the assets of such Person
do not constitute an unreasonably small capital for the operation of such
Person's business as now conducted and as intended to be conducted, taking into
account all known or projected capital requirements for such operations, (iii)
such Person does not intend to incur debts beyond its ability to pay as they
mature, and (iv) such Person's cash flow is sufficient to pay all existing
debts and liabilities as they become due.
5.17 EMPLOYEE RELATIONS. Neither any Borrower nor any Guarantor is
aware of any contemplated, threatened or pending strike, work stoppage or other
labor dispute involving its employees or the employees of any Affiliate.
5.18 EMPLOYEE BENEFIT PLAN. Neither any Borrower, any Guarantor
nor any of their ERISA Affiliates, nor any Plan, is in material violation in
form or in operation of any provision of ERISA or any other applicable state or
federal law, including the requirements of the IRC. No Prohibited Transaction
or Reportable Event has occurred with respect to any Plan which reasonably
would be expected to result in a Material Adverse Effect. No notice of intent
to terminate a Plan has been filed within the 24-month period preceding the
date hereof, nor has any Plan been terminated under Section 4041(c) of ERISA
since September 2, 1974. The PBGC has not instituted proceedings to terminate
or appoint a trustee to administer a Plan, and no event has occurred and no
condition exists which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan.
Neither any Borrower, any Guarantor nor any ERISA Affiliate has incurred or
expects to incur any withdrawal liability to any multiemployer plan within the
meaning of Section 3(37) or Section 3001(a)(3) of ERISA or Section 414 of the
IRC. Neither any Borrower, any Guarantor nor any ERISA Affiliate has any
obligation to provide medical benefits or coverage to any former employee other
than as required under Section 4980B of the IRC or Part 6 of Title I of ERISA.
Each Employee Benefit Plan subject to Section 4980B of the IRC has satisfied
the applicable requirements of Section 4980B of the IRC. Each Plan meets the
minimum funding requirements of IRC Section 412 and no waiver from the minimum
funding requirements has been applied for or approved pursuant to Section
412(d) of the IRC. The reporting and disclosure requirements of each Plan have
been timely and completely satisfied. Neither any Borrower, any Guarantor, any
ERISA Affiliate nor any fiduciary of any Plan has engaged in conduct that would
be a breach of any duty under Part 4, Subtitle B, Title I of ERISA. There are
no actions, suits or claims pending (other than routine claims for benefits)
or, to the knowledge of any Borrower, any Guarantor
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or any ERISA Affiliate, threatened against, or with respect to, any Plan or its
assets, if any. Each Plan which is a "welfare benefit plan," as described in
Section 3(1) of ERISA, may be unilaterally amended or terminated in its
entirety without liability except as to benefits accrued prior to such
amendment. Termination of employment of any employee of any Borrower, any
Guarantor or any ERISA Affiliate would not result in payments which, in the
aggregate, would result in imposition of the sanctions imposed under Section
280B or Section 4999 of the IRC.
5.19 ENVIRONMENTAL MATTERS. Borrower represents and warrants to
Lender that to the best of Borrower's knowledge: (a) all of Borrowers' and the
Guarantors' activities and conduct of business related to the use and handling
of Hazardous Materials, comply and have at all times complied with all
Environmental Requirements; (b) neither Borrower, any Guarantor nor any prior
owner of any of their respective property has received notice or other
communication concerning any alleged violation of Environmental Requirements,
whether or not corrected to the satisfaction of the appropriate authority, or
notice or other communication concerning alleged liability for Environmental
Damages, and there exists no writ, injunction, decree, order, judgment or lien,
nor any lawsuit, claim, proceeding citation, directive, summons or
investigation, pending or threatened, relating to the ownership, use,
maintenance or operation of any Borrowers' or Guarantors' business or any
associated real property, by any Person, or from alleged violation of
Environmental Requirements; (c) each Borrower and Guarantor has all permits and
licenses required to be issued to it by any governmental authority on account
of any or all of its activities, and is in full compliance with the terms and
conditions of all such permits and licenses. No change in the facts or
circumstances reported or assumed in the application for or granting of any
such permits or licenses exists, and such permits and licenses are in full
force and effect.
5.20 REPRESENTATIONS AND WARRANTIES CUMULATIVE. The
representations and warranties contained in this Article V are in addition to
all other representations and warranties provided in the Loan Documents.
ARTICLE VI. COVENANTS
Throughout the Contract Term and until payment and performance in full of the
Obligations, each Borrower agrees (as to itself unless otherwise noted) as
follows, unless otherwise allowed by prior written consent of Lender:
6.1 COMPLIANCE CERTIFICATE. Within forty-five (45) days following
the end of each fiscal quarter, Borrowers shall deliver to Lender a
certificate, in form satisfactory to Lender, signed by the president or chief
financial officer of each Borrower certifying to Lender (i) that no event or
condition that would be the subject of a required notice under paragraph 6.11
or paragraph 6.12 is in existence as of the date of such certificate or, if
such is not the case, provides the notice required pursuant to paragraph 6.11
or paragraph 6.12, when the event giving rise to such notice occurred, whether
the event giving rise to such notice is continuing and the steps taken or being
taken by Borrowers with respect to such event, (ii) setting forth the
calculations required to establish whether or not Parent was in compliance with
the requirements of paragraphs 6.20, 6.21, 6.24 and 6.25, as at the end of such
calendar quarter, and (iii) which states that the information on the Exhibits
to this Agreement is complete and accurate as of the date of such certificate,
or if such is not the case, attaches to such certificate updated Exhibits
(subject to Lender's approval of such updated Exhibits). Such certificate
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shall be deemed to be a continuing representation and warranty pending any
subsequent certification or notification by Borrowers respecting their
compliance or non-compliance with this Agreement, and Borrowers acknowledge
that Lender shall rely upon the same in making loans under the Revolving
Facility.
6.2 AUTHORITY. As soon as possible following any effective change
thereof and in any event within ten (10) Business Days thereafter (but in any
event at or prior to the time of any loan request thereafter, and at such other
times, from time to time, at the request of Lender) Borrowers shall certify to
Lender the names and signatures of all Persons authorized to execute and
deliver any documentation contemplated by or relating to any of the Loan
Documents.
6.3 BOOKS AND RECORDS. Each Borrower and Guarantor shall keep and
maintain proper, complete and consistent books of record and account respecting
such Person's affairs and financial condition in accordance with GAAP, and
shall permit Lender from time to time, by and through its authorized agents, to
(i) visit and inspect any of such Person's properties located in the United
States, (ii) inspect and copy the books and records located in the United
States of any Borrower or Guarantor at any location inspected under clause (i),
and (iii) discuss any Borrower's or Guarantor's affairs, finances, accounts and
operations with its officers. Notwithstanding the foregoing, Lender shall have
the continuing right, by and through its authorized agents, and at its sole
cost and expense to (x) visit and inspect any Borrower's or Guarantor's
properties located outside the United States, (y) inspect and copy the books
and records located outside the United States of any Borrower or Guarantor at
any location inspected under clause (x), and (z) discuss any Borrower's or
Guarantor's affairs, finances, accounts and operations with its officers.
6.4 EXISTENCE. Each Borrower and Guarantor shall preserve and
maintain its existence, good standing and authority to transact business in all
jurisdictions where necessary for the proper conduct of its business, and shall
maintain all of its properties, rights, privileges and franchises necessary or
desirable in the normal conduct of its business.
6.5 ANNUAL FINANCIAL STATEMENTS. Parent shall deliver to Lender,
as soon as practicable after the end of each fiscal year, and in any event
within one hundred twenty (120) days thereafter, its unqualified audited
consolidated balance sheet as of the end of such fiscal year, and its audited
consolidated statement of income and changes to stockholders equity and
consolidated statements of cash flow, in reasonable detail, prepared in
accordance with GAAP and certified by an independent certified public
accounting firm acceptable to Lender as fairly presenting the consolidated
financial condition and results of operations of Parent and the Subsidiaries
(including, without limitation, each Borrower and Guarantor). Such financial
statements shall be accompanied by a copy of the report to management delivered
to Parent by such accountants and also by a statement signed by Parent's
president or chief financial officer representing to Lender that such financial
statements are true and complete and fairly present the consolidated financial
condition and results of operation of Parent and the Subsidiaries (including,
without limitation, each Borrower and Guarantor), and that no event or
condition that would be the subject of a required notice under paragraph 6.11
or paragraph 6.12 is in existence as of the date of delivery of such
statements.
6.6 INTERIM FINANCIAL STATEMENTS. Parent shall deliver to Lender,
as soon as practicable after the end of each calendar quarter, and in any event
within forty-five (45) days thereafter, a
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consolidated and consolidating balance sheet as of the end of such quarter, and
consolidated income statement for such quarter and a consolidated and
consolidating income statement for the period from the beginning of the current
fiscal year to the end of such quarter, in reasonable detail and prepared in
accordance with GAAP. Such financial statements shall be accompanied by a
statement signed by each Borrower's president or chief financial officer
representing to Lender that such financial statements are true and complete and
fairly present the financial condition and results of operations of Parent and
the Subsidiaries (including, without limitation, each Borrower and Guarantor),
and that no event or condition that would be the subject of a required notice
under paragraph 6.12 is in existence as of the date of delivery of such
statements.
6.7 PROJECTIONS. Borrowers shall deliver to Lender, on or before
March 31 of each year during the Contract Term, a projection for the period of
not less than twelve calendar months following the preceding December 31,
including projected balance sheets, statements of income and statements of cash
flow, all in form satisfactory to Lender and including such additional
information as is required by Lender.
6.8 SEC FILINGS. Parent shall deliver to Lender a correct and
complete copy of (i) each Form 10-K Report filed with the Securities and
Exchange Commission, which shall be delivered to Lender as soon as practicable
upon filing thereof and in any event within ten (10) Business Days after the
applicable filing deadline date, (ii) each Form 10-Q Report filed with the
Securities and Exchange Commission, which shall be delivered to Lender as soon
as possible upon filing thereof and in any event within ten (10) Business Days
after the applicable filing deadline date, and (iii) each other filing from
time to time made with the Securities and Exchange Commission, which shall be
delivered to Lender as soon as possible upon filing thereof and in any event
within ten (10) Business Days after the filing thereof.
6.9 INFORMATION. In addition to information and items
specifically required by the Loan Documents, Borrowers shall promptly furnish
to Lender such other information, documentation or projections respecting its
business affairs, assets and liabilities as Lender may reasonably request.
6.10 NOTIFICATION OF CONTINGENT LIABILITIES. Promptly upon
receiving notice or otherwise becoming aware thereof, Borrowers shall notify
Lender of any pending or threatened lawsuit, claim, action, liability,
investigation or proceeding that would be treated as a contingent liability of
any Borrower or Guarantor under GAAP and is in an amount in excess of
$2,000,000, or which is reasonably expected to result in a Material Adverse
Effect.
6.11 NOTIFICATION OF MATERIAL CHANGES. Borrowers will notify
Lender in writing at least thirty (30) days prior to the occurrence of any of
the following: (i) change of any Borrower's or Guarantor's name, (ii) change
of any Borrower's or Guarantor's address or principal place of business, or
(iii) change of the location of any Borrower's or Guarantor's books and
records. Borrowers shall promptly notify Lender of any change in any other
material fact or circumstance represented or warranted in any of the Loan
Documents.
6.12 NOTIFICATION REGARDING DEFAULT. Borrowers shall immediately
notify Lender in writing upon becoming aware of the existence of any condition
or event which constitutes an Event of Default or any condition or event which,
after notice or lapse of time, or both, would constitute
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an Event of Default, therein specifying the nature and period of existence
thereof and what action Borrowers are taking or propose to take with respect to
such condition or event. Borrowers shall immediately notify Lender in writing
if any Borrower knows, or reasonably expects, that an Event of Default will
occur, therein specifying the nature of the anticipated Event of Default.
Without limiting the foregoing, Borrowers will also immediately notify Lender
if any Borrower's or Guarantor's board of directors authorizes the filing by
such Person of a petition in bankruptcy.
6.13 PAYMENT OF TAXES. Each Borrower shall, and shall cause each
Guarantor to, promptly pay, or cause to be paid, when due, any and all taxes
except such taxes as may be contested in good faith by appropriate proceedings,
provided, that adequate reserves shall be maintained as are appropriate
according to GAAP.
6.14 COMPLIANCE WITH LAWS. Each Borrower shall, and shall cause
each Guarantor to, comply with all applicable laws, regulations and orders
applicable to it or its property, a violation of which would reasonably be
expected to result in a Material Adverse Effect, and upon request by Lender,
provide Lender with evidence of such compliance.
6.15 COMPLIANCE WITH AGREEMENTS. Each Borrower shall, and shall
cause each Guarantor to, comply in all material respects with all agreements,
indentures, mortgages or documents binding upon such Person or affecting its
property or business.
6.16 FEES, COSTS AND EXPENSES. Each Borrower agrees to promptly
pay upon demand all costs, fees and expenses as provided in paragraph 9.6.
6.17 SUBORDINATION AGREEMENTS. At Lender's request, all present
and future obligations due by any Borrower to any Affiliate (excluding ordinary
course items such as salary, travel and expense reimbursements and other
similar ordinary course items as may be determined by agreement) shall be
subordinate in right of payment and claim to the Obligations, pursuant to a
definitive subordination agreement executed by Borrower and such Affiliate in
form satisfactory to Lender. Each Borrower agrees to cause, at Lender's
request, all present and future obligations due by any Guarantor to any
Affiliate (excluding ordinary course items such as salary, travel and expense
reimbursements and other similar ordinary course items as may be determined by
agreement) to be subordinate in right of payment and claim to the obligations
of such Guarantor under the Loan Documents to be executed by such Guarantor,
pursuant to a definitive subordination agreement executed by such Guarantor and
such Affiliate in form satisfactory to Lender.
6.18 CHANGE OF FISCAL YEAR. Each Borrower shall notify Lender at
least ninety (90) days prior to the effective date of any change in its fiscal
year or any change in the fiscal year of any Guarantor.
6.19 EMPLOYEE BENEFIT PLANS. Each Borrower shall, and shall cause
each Guarantor to, timely deliver the following to Lender: (a) a copy of any
notice of noncompliance received from the PBGC under Section 4041(b)(2)(c),
within three (3) days after receipt of such notice; (b) a copy of any notice
received by such Person or any ERISA Affiliate, or the administrator of any
Plan, that the PBGC has instituted proceedings to terminate such Plan or to
appoint a trustee to administer such Plan, promptly upon receipt and in no
event more than three (3) days after the receipt of such notice;
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(c) a copy of any notice received by any Borrower or Guarantor, or any of their
ERISA Affiliates, concerning the imposition of any withdrawal liability under
Section 4202 of ERISA, within ten (10) days after receipt thereof by such
Person; (d) a copy of any notification of intention to impose or assert
withdrawal liability under ERISA against any Borrower or Guarantor, or any of
their ERISA Affiliates, promptly upon receipt thereof and in any event within
three (days) of receipt thereof; and (e) a copy of any notice from the Internal
Revenue Service regarding revocation or investigation of possible revocation of
the qualified status of any Plan under the IRC, promptly upon receipt thereof
and in any event within three (3) days after receipt thereof. If requested by
Lender, each Borrower shall, and shall cause each Guarantor to, timely deliver
the following to Lender: (f) a copy of all materials required to be filed with
the PGBC by any Borrower or Guarantor, or any of their ERISA Affiliates, with
respect to any Reportable Event, within ten (10) days after the earlier of the
filing or the occurrence thereof; (g) a copy of any notice sent by any Borrower
or Guarantor, or any of their ERISA Affiliates, to participants of a Plan of
such Person's intent to terminate such Plan, no later than the date such notice
is required to be provided to participants under Section 4041(a)(2) of ERISA;
(h) a copy of each annual and other report with respect to each Plan or any
trustee created thereunder, promptly after the filing thereof with the United
States Secretary of Labor or the PBGC; and (i) such additional information
concerning any Borrower's or Guarantor's, or any of their ERISA Affiliates',
Employee Benefit Plans as may be requested by Lender. Each Borrower and
Guarantor shall make prompt payment of all contributions required under all
Plans to the extent required to meet the minimum funding standard set forth in
ERISA with respect to such Plans, but shall reduce contributions or benefits if
and to the extent necessary to avoid an Event of Default hereunder to the
extent such reduction is not prohibited by applicable provisions of ERISA.
6.20 FINANCIAL COVENANTS. Each Borrower agrees that the following
financial covenants must be maintained as set forth herein as of the times
specified, as applicable:
a. Maximum Senior Funded Debt to Cash Flow. Parent's
consolidated Senior Funded Debt to Cash Flow shall not exceed
2.75 to 1.00 at any time, tested as of the end of any fiscal
quarter.
b. Fixed Charge Coverage Ratio. Parent's consolidated Fixed
Charge Coverage Ratio shall not be less than 2.00 to 1.00 at
any time, tested as of the end of any fiscal quarter.
6.21 SALE OF ASSETS. Neither any Borrower nor any Guarantor will
sell or dispose of any assets other than in the ordinary course of business,
provided, that no Borrower or Guarantor shall be precluded from making sales
not in the ordinary course of business, the sales price of which, when added to
the sales price of all other such sales, if any, by all Borrowers and
Guarantors during the preceding twelve calendar months does not exceed an
aggregate of $5,000,000.
6.22 PROHIBITION AGAINST LIENS. Neither any Borrower nor any
Guarantor will grant, create or allow to exist any security interest, lien or
other encumbrance on any of such Borrower's or Guarantor's property, excluding
Permitted Liens. Neither any Borrower nor any Guarantor will enter into or
otherwise become a party to any agreement (other than this Agreement) that
prohibits or otherwise restricts the right of such Borrower or Guarantor to
create, incur, assume or otherwise
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suffer to exist any security interest, lien, pledge or other encumbrance in
favor of Lender on any of such Person's property.
6.23 DISSOLUTION, LIQUIDATION, MERGER. Neither any Borrower nor
any Guarantor shall dissolve or liquidate, or become a party to any merger or
consolidation with any Person (other than merger or consolidation with another
Borrower, in which event such Borrower shall provide Lender with at least
fifteen (15) days prior written notice of such intended merger or consolidation
and provide Lender with such documentation in connection therewith as Lender
may request).
6.24 LIMITATION ON INDEBTEDNESS. Neither any Borrower nor any
Guarantor will become or remain obligated, directly or indirectly, for borrowed
money or otherwise under any promissory note, bond, indenture or similar
instrument, for an amount in excess of $2,000,000 in the aggregate for all
Borrowers and Guarantors, other than indebtedness in favor of Lender or trade
indebtedness incurred in the normal and ordinary course of such Borrower's or
Guarantor's business and not more than sixty (60) days past due.
6.25 LIMITATION ON CONTINGENT LIABILITIES. Neither any Borrower
nor any Guarantor will be directly or indirectly liable in connection with the
obligations of any other Person, whether by guarantee, surety, endorsement
(other than endorsement of negotiable instruments for collection in the
ordinary course of business), agreement to purchase or repurchase, agreement to
make investments, agreement to provide funds or maintain working capital, or
any agreement to assure a creditor against loss, in an amount in excess of
$2,000,000 in the aggregate for all Borrowers and Guarantors, other than in
favor of Lender.
6.26 CHANGE IN BUSINESS. Neither any Borrower nor any Guarantor
shall discontinue, or make any material change in, its business as currently
established, or enter any new or different line of business not directly
related to such Person's existing line of business.
6.27 CHANGE IN MANAGEMENT. There will be no change of the
personnel performing the functions of any Borrower's or any Guarantor's chief
executive officer, chief financial officer and chief operating officer
(collectively, the "Management Positions") as such positions are presently
constituted. Notwithstanding the foregoing, such a change in personnel may
occur if not more than three individuals cease to hold any Management Position
during the twelve (12) month period ending on the date of such change or if the
individual currently performing the function becomes unable to perform such
function, provided that the individual appointed to any such Management
Position is an individual acceptable to Lender.
6.28 REDEMPTIONS AND ACQUISITION OF SHARES. Parent will not make
any payment on account of the purchase, redemption or other acquisition or
retirement of any shares of its Capital Stock, provided, that for so long as no
Event of Default, or event or condition which with notice or passage of time,
or both, would constitute an Event of Default, is in existence, Parent shall
not be precluded from making any such payments in an aggregate amount not
exceeding $20,000,000 during the Contract Term.
6.29 CONSULTING FEES, ETC., TO SHAREHOLDERS AND DIRECTORS. Neither
any Borrower nor any Guarantor will declare or pay any consulting fees,
management fees or other third party fees to
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any Affiliate; provided that such fees may be declared and paid to Affiliates,
arising out of transactions entered into by such Borrower or Guarantor and such
Affiliate on terms comparable to terms available in similar transactions with a
third party which is not an Affiliate of any Borrower or Guarantor, in an
amount for all Borrowers and Guarantors not to exceed $300,000 in the aggregate
during any twelve (12) month period.
6.30 LOANS TO OFFICERS, DIRECTORS, SHAREHOLDERS. Except as set
forth in Exhibit 6.30, neither any Borrower nor any Guarantor will make any
loans or advances to or for the benefit of (i) any Affiliate who is a Borrower
or Guarantor, the unpaid balance of which at any time, when added to the unpaid
balance, if any, owing to any and all Borrowers and Guarantors by any such
Affiliates, exceeds the amount of $10,000,000 in the aggregate or (ii) any
Affiliate other than a Borrower or Guarantor, the unpaid balance of which at
any time, when added to the unpaid balance, if any, owing to any and all
Borrowers and Guarantors by all such Affiliates, exceeds the amount of
$1,500,000 in the aggregate.
6.31 TRANSACTIONS WITH AFFILIATES. Except as set forth in Exhibit
6.31, neither any Borrower nor any Guarantor will make any payment on any
obligation owing to any Affiliate (excluding reasonable expense reimbursements
in the ordinary course of business) unless specifically allowed under any
Affiliate Subordination Agreement or otherwise allowed by Lender. Neither any
Borrower nor any Guarantor will enter into any transaction with an Affiliate
except in the ordinary course of business on terms no less favorable to such
Borrower or Guarantor, nor more favorable to such Affiliate, than would be
obtainable in a comparable arm's length transaction with a Person who is not an
Affiliate. Neither any Borrower nor any Guarantor will enter into any
transaction with an Affiliate involving an amount in excess of $1,500,000
unless such transaction is specifically approved by such Borrower's or
Guarantor's board of directors as being an arm's length transaction on terms no
less favorable to such Borrower or Guarantor, nor more favorable to such
Affiliate, than would be obtainable in a comparable arm's length transaction
with a Person who is not an Affiliate.
6.32 ACQUISITIONS. Neither any Borrower nor any Guarantor shall
purchase or otherwise acquire any other Person or all of, or substantially all
of, the assets of any other Person, provided, that for so long as no Event of
Default, or event or condition which with notice or passage of time, or both,
would constitute an Event of Default, is in existence, neither any Borrower nor
any Guarantor shall be precluded from acquiring any other Person or all of, or
substantially all of, the assets of such Person the aggregate sales price of
which, when added to the aggregate sales price (including cash, deferred
payment obligations, stock, assumption of liabilities and all other forms of
consideration) of all other such acquisitions, if any, by all Borrowers and
Guarantors during the preceding twelve (12) months does not exceed $20,000,000.
6.33 LIMITATION ON INVESTMENTS. Neither any Borrower nor any
Guarantor shall invest in or otherwise purchase or acquire the securities of
any Person, except for (i) ordinary course investments in securities of the
United States and certificates of deposit issued by commercial banks organized
in the United States which have assets in excess of $250,000,000.00 and (ii)
investments in equity securities traded on the New York Stock Exchange,
American Stock Exchange or the Nasdaq Stock Market, investment grade bonds and
other similar debt instruments traded in a nationally recognized domestic
United States market and other similar marketable securities up to an amount
not to exceed $15,000,000 plus, or minus, the sum of all realized gains, or
losses, of such
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investments and realized gains, or losses, associated with Parent's "Put Option
Program," each net of all applicable taxes; provided that (A) such investments
shall specifically exclude any investment in or other trading of foreign
currency (except as required to support Parent's and its Subsidiaries'
operations), commodities, commodity contracts (as defined in the UCC), futures
contracts, options, swaps or any other financial or other type of "derivative"
transaction or investment and (B) no more than twenty percent (20%) of all
investments permitted pursuant to this clause (ii) shall be in any single
investment.
6.34 GUARANTY. Each Borrower, and each Subsidiary of each
Borrower (whether presently existing or formed or acquired after the date
hereof), shall execute and deliver to Lender a guaranty agreement, in form and
substance satisfactory to Lender, pursuant to which such Person shall guarantee
prompt payment and performance when due of the Obligations, provided, in the
case of Monitor, the such guaranty agreement shall exclude, and Monitor shall
have no liability or obligation for, any such Obligations owing by any other
Borrower and outstanding as of the effective date of this Agreement.
6.35 INVENTORY. Each Borrower and each Guarantor represents and
warrants to Lender that all inventory of such Person shall be held for sale in
the ordinary course of such Person's business, and is and will be fit for such
purpose. Each Borrower and each Guarantor will keep its inventory in good and
marketable condition, at its own expense. All sales of inventory shall be in
accordance with applicable law. Each Borrower and each Guarantor will maintain
a perpetual inventory system at all times and will conduct a count of its
inventory in accordance with GAAP and at Lender's request shall promptly supply
Lender with a copy of such count.
6.36 ENVIRONMENTAL COMPLIANCE. At Lender's written request and
Borrowers' sole cost and expense (not to exceed $30,000 in any twelve (12)
month period), Borrowers shall provide Lender, 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 any real property
owned or leased by any Borrower or Guarantor. Notwithstanding the foregoing,
it is agreed that absent existence of an Event of Default, any such
environmental site assessment, shall not be required more often than once
during any three (3) year period (it being understood, however, that such
limitation shall not apply at any time when any Event of Default is in
existence or if any such item is required in order to comply with applicable
law).
6.37 EQUIPMENT. Each Borrower's and Guarantor's equipment is and
will be used or held for use in the ordinary course of such Person's business.
Such equipment shall be maintained in good operating condition and repair
(ordinary wear and tear excepted).
6.38 INSURANCE. Upon Lender's written request, each Borrower and
Guarantor shall keep and maintain adequate insurance with respect to its
business and all of its property. Such insurance shall be with respect to
loss, damages and liability of amounts not less than what is reasonable for
similarly situated businesses, and shall include, at minimum, extended coverage
insurance, insurance against business interruption, insurance for worker's
compensation and insurance for general premises liability, fire, theft,
burglary, pilferage, loss in transit, casualty and all risk. Each Borrower and
Guarantor will make timely payment of all premiums required to maintain such
insurance in force.
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Each Borrower and each Guarantor shall deliver copies of each insurance policy
to Lender at least once during any twelve (12) month period, and in any event,
at such other times as Lender may request.
6.39 COVENANTS CUMULATIVE. The covenants contained in this Article
VI are in addition to all other covenants provided in the Loan Documents.
ARTICLE VII. EVENT OF DEFAULT
7.1 EVENT OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
a. The failure of timely payment of the Obligations, or
any part thereof, as they become due in accordance with the terms of
the Loan Documents;
b. Any violation, breach or default of any covenant,
agreement or other obligation under this Agreement or any of the Loan
Documents, not otherwise covered by paragraph 7.1(a);
c. Any representation or warranty made by Borrower or
any Guarantor in the Loan Documents was false in any material respect
at the time when made;
d. The occurrence of any event or circumstance which
Lender believes has resulted, or may result, in a Material Adverse
Effect;
e. The filing of any petition or proceeding by or
against Borrower or any Guarantor under the United States Bankruptcy
Code, as amended from time to time, or any other applicable state or
federal law relating to bankruptcy reorganization or other relief for
debtors, or the appointment of a conservator, receiver, trustee or
liquidator of all or a substantial part of the assets of Borrower or
any Guarantor;
f. The use of any funds borrowed from Lender under this
Agreement for any purpose other than as provided in this Agreement;
g. The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against or with
respect to any Borrower's or Guarantor's property if the amount in
controversy is in excess of $1,500,000 in the aggregate, or if the
outcome, pendency or effect thereof is reasonably expected to result
in or cause a Material Adverse Effect;
h. Any breach or default in the payment or performance
of any material obligation, or any defined event of default, under the
terms, provisions or conditions of any contract or instrument pursuant
to which any Borrower or Guarantor is obligated on any indebtedness or
obligation or other liability to any Person other than Lender in an
amount exceeding $1,500,000, and the expiration of thirty (30) days
from the date of such breach, default or event of default;
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i. The entry of any judgment or judgments against any
Borrower or Guarantor in an amount equal to or exceeding $1,500,000 in
the aggregate;
j. The dissolution or liquidation of any Borrower or
Guarantor, or the taking of any action by the board of directors or
shareholders of any Borrower or Guarantor (or its general partner in
the case of Ultrak), to dissolve or liquidate;
k. Revocation or repudiation by any Borrower or
Guarantor of any obligations under a Guaranty;
l. Any of the following with respect to any Plan: (i) a
Reportable Event or Prohibited Transaction with respect to a Plan
which could, in the opinion of Lender, result in a Material Adverse
Effect; (ii) the filing of a notice of intent to terminate a Plan
under a distress termination as described in section 4041(c) of ERISA
which could, in the opinion of Lender, result in a Material Adverse
Effect; (iii) the receipt of a notice by the plan administrator of
Borrower or any Guarantor that the PBGC has instituted proceedings to
terminate a Plan or appoint a trustee to administer a Plan; (iv) the
withdrawal by Borrower, any Guarantor or any ERISA Affiliate from a
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3)
of ERISA or Section 414 of the IRC if such action could, in the
opinion of Lender, result in a Material Adverse Effect; or (v) the
revocation by the Internal Revenue Service of the qualified status of
any Employee Benefit Plan if such action could, in the opinion of
Lender, result in a Material Adverse Effect; or
m. Any qualification by a certified public accountant
relative to any financial statement delivered to Lender under this
Agreement that is not acceptable to Lender in its discretion.
ARTICLE VIII. REMEDIES
8.1 REFUSAL OF FUNDING. Lender shall have no obligation to make
any loan and any loan requested at any such time may be declined by Lender, in
whole or in part, in Lender's sole discretion without prior notice (i) at any
time when any applicable condition for funding prescribed under this Agreement
has not been fulfilled to Lender's satisfaction, (ii) at any time when any
Event of Default is in existence, or when any condition exists which after
notice or lapse of time, or both, would constitute an Event of Default, (iii)
if Lender has received any notice under paragraph 6.12 or has knowledge of any
event or condition which would be the subject of any notice required
thereunder, or (iv) if any Borrower or Guarantor has repudiated or made any
anticipatory breach of any of its obligations under this Agreement or any other
Loan Document.
8.2 REMEDIES. Should an Event of Default occur at any time,
Lender may at its option declare the entire outstanding principal amount and
unpaid accrued interest of any part of the Obligations to be immediately due
and payable and, in addition, take any or all of the following action
(provided, that with respect to any Event of Default arising under paragraph
7.1(a), ten (10) Business Days shall first have passed after written notice by
Lender to Borrowers of the occurrence of any such Event of Default, and with
respect to any other Event of Default, thirty (30) Business Days shall first
have passed after written notice by Lender to Borrowers of the occurrence of
any such Event
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of Default): (i) commence such actions as may be necessary to enforce the
Obligations, or any part thereof; or (ii) exercise and avail itself of any and
all other remedies as may be available under the Loan Documents or as otherwise
may be available according to law.
8.3 ENFORCEMENT COSTS. Borrowers jointly and severally agree to
pay to Lender on demand any and all reasonable expenses, including legal
expenses, reasonable attorneys' fees, court costs, collection costs and
traveling expenses, incurred or paid by Lender in protecting or enforcing any
of its rights hereunder or under any other Loan Document. Until reimbursed or
otherwise paid, Lender is hereby authorized to add all such expenses to the
principal amount of the Obligations. After deducting all of such expenses, any
remaining proceeds of collection shall be applied in payment of the Obligations
in such manner as Lender may determine, and the excess, if any, shall be
disbursed by Lender in accordance with applicable law. Each Borrower expressly
agrees that it shall remain liable for any deficiency.
8.4 WAIVER OF NOTICES. Except as otherwise expressly provided in
this Agreement, each Borrower expressly waives presentment, demand, notice of
intention to accelerate, notice of acceleration, protest and any other notices
of any kind with respect to the Obligations.
8.5 SETOFF. Each Borrower irrevocably authorizes Lender to charge
any account of such Borrower maintained with Lender with such amount as may be
necessary from time to time to pay any Obligations. Each Borrower agrees that
Lender shall have a contractual right to setoff any and all deposits or other
sums at any time credited by or due from Lender to such Borrower against any
part of the Obligations. Such right of setoff may be exercised at any time by
Lender at any time when any Event of Default is in existence (subject to the
prior notice requirements to the extent provided with respect to remedies
pursuant to paragraph 8.2, but otherwise without prior notice), irrespective of
whether an Event of Default exists or whether Lender has accelerated the
Obligations. Upon the occurrence of an Event of Default and for so long as the
same shall remain in existence and not cured or waived, Lender shall be
entitled in its discretion to hold any such deposits or other sums pending
acceleration of the Obligations.
8.6 PERFORMANCE BY LENDER. Should any Borrower or Guarantor fail
to perform any covenant, duty or agreement required by the Loan Documents,
Lender may, at its sole option and election, perform or attempt to perform same
on behalf of such Borrower or Guarantor at such Person's cost and expense,
provided that Lender shall have no obligation or duty to take any such action.
Each Borrower and Guarantor agrees to reimburse Lender for such reasonable
costs and expenses on demand.
8.7 NON-WAIVER. Forbearance or indulgence by Lender of any Event
of Default or any other event or condition which is or would be the subject of
a required notice under paragraph 6.12, at any time from time to time, shall
not be deemed a waiver of any rights of Lender under the Loan Documents. The
acceptance by Lender at any time and from time to time of any partial payment
of the Obligations shall not be deemed to be a waiver of any Event of Default
then existing. No delay or omission by Lender in exercising any right or
remedy shall impair such right or remedy, or be construed as a waiver thereof,
nor shall any single or partial exercise of any such rights or remedies
preclude other or further exercise thereof. Lender shall not be required or
obligated to file suit or otherwise pursue any other Person for enforcement or
collection of any of the Obligations.
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ARTICLE IX. MISCELLANEOUS
9.1 EFFECTIVE DATE; TERMINATION. This Agreement shall become
effective upon acceptance by Lender, as of the effective date specified in the
introductory paragraph of this Agreement. Subject to all other provisions of
the Loan Documents, the Facility shall terminate automatically on the Term
Facility Maturity Date, without further notice. Notwithstanding any such
termination, the Obligations and all rights and remedies of Lender under the
Loan Documents with respect thereto shall remain in full force and effect until
all Obligations have been paid in full.
9.2 PAYMENTS. All payments or collections received by Lender
after its internally established time for closing business on any Business Day
shall be deemed received as of the next succeeding Business Day. All payments
shall be made in immediately available funds, at Lender's address specified in
Article I. Any payment which is due on a day which is not a Business Day shall
instead be deemed to be due on the next succeeding Business Day, and interest
thereon shall accrue and be payable at the then applicable rate during the time
of such extension.
9.3 NOTICES. Any consent, approval, notice, request or demand
from one party to another must be made in writing to be effective, and shall be
deemed to have been given on the third Business Day after its deposit in the
United States mail, postage prepaid and properly addressed, by certified or
registered mail, return receipt requested, or on the Business Day on which it
is actually delivered by messenger delivery, telecopy or other electronic
transmission, whichever is earlier. The address of each party for the purposes
hereof is as follows:
Borrowers and Guarantors:
ULTRAK, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
BISSET S.A.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
CASAROTTO SECURITY SPA
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
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DENTAL VISION DIRECT, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
DIAMOND ELECTRONICS, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
INTERVISION EXPRESS, LTD.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
MAXPRO SYSTEMS PTY, LTD.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
MONITOR DYNAMICS, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
PHILTECH ELECTRONIC SERVICES
(PROPRIETARY) LIMITED
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
ULTRAK GP, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
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ULTRAK LP, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
ULTRAK OPERATING, L.P.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
VIDEV GMBH
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
Lender:
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 7th floor
Dallas, Texas 75202
Attention: COMMERCIAL BANKING/Division Manager: URGENT
Telecopy: 214/508-3139
or such other address as may hereafter be designated and delivered in writing.
9.4 USE OF LOAN PROCEEDS. No portion of the proceeds of any loans
under the Revolving Facility shall be used to purchase or carry any "margin
stock" (including, without limitation, repurchases of Parent's Capital Stock)
as defined under Regulation "U" of the Board of Governors of the Federal
Reserve System, or to repay or refinance any debt previously incurred by any
Borrower for such purpose.
9.5 LENDER'S RECORDS; ACCOUNT STATEMENTS. Lender's records in
respect of loans advanced, accrued interest, payments received and applied and
other matters in respect of calculation of the amount of the Obligations shall
be deemed conclusive absent demonstration of error. All statements of account
rendered by Lender to any Borrower relating to principal, accrued interest or
costs owing by Borrowers under this Agreement shall be presumed to be correct
and accurate unless, within thirty (30) days after receipt thereof, Borrowers
shall notify Lender in writing of any claimed error therein.
9.6 EXPENSES AND INDEMNIFICATION.
a. Borrowers agree to pay on demand all costs and
expenses of Lender in connection with the preparation, execution,
delivery, administration, modification and
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amendment of this Agreement, the other Loan Documents and the other
documents to be delivered hereunder, including, without limitation,
the reasonable fees and expenses of counsel for Lender (including the
cost of internal counsel) with respect thereto (which costs shall not
exceed $7,500) and with respect to advising Lender as to its rights
and responsibilities under the Loan Documents. Borrowers further
agree to pay on demand all costs and expenses of Lender, if any
(including, without limitation, reasonable attorneys' fees and
expenses and the cost of internal counsel), in connection with the
enforcement (whether through negotiations, legal proceedings or
otherwise) of the Loan Documents and the other documents to be
delivered hereunder.
b. BORROWERS AGREE TO INDEMNIFY AND HOLD HARMLESS LENDER
AND EACH OF ITS AFFILIATES AND ITS RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND ADVISORS (EACH, AN "INDEMNIFIED PERSON") FROM
AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS
AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS'
FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY
INDEMNIFIED PERSON, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH
OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY
INVESTIGATION, LITIGATION OR PROCEEDING OR PREPARATION OF DEFENSE IN
CONNECTION THEREWITH) THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF
THE FACILITY (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF THE INDEMNIFIED PERSON), EXCEPT TO THE EXTENT SUCH
CLAIM, DAMAGE, LOSS, LIABILITY, COST OR EXPENSE IS FOUND IN A FINAL,
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
RESULTED FROM SUCH INDEMNIFIED PERSON'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER
PROCEEDING TO WHICH THE INDEMNITY IN THIS PARAGRAPH APPLIES, SUCH
INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION,
LITIGATION OR PROCEEDING IS BROUGHT BY ANY BORROWER, ITS DIRECTORS,
SHAREHOLDERS OR CREDITORS OR AN INDEMNIFIED PERSON OR ANY OTHER PERSON
OR ANY INDEMNIFIED PERSON IS OTHERWISE A PARTY THERETO AND WHETHER OR
NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED. BORROWERS
AGREE NOT TO ASSERT ANY CLAIM AGAINST LENDER, ANY OF ITS AFFILIATES,
OR ANY OF ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS,
AGENTS AND ADVISERS, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR
OTHERWISE RELATING TO THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF
THE FACILITY.
c. Without prejudice to the survival of any other
agreement of Borrowers hereunder, the agreements and obligations of
Borrowers contained in this paragraph shall survive the payment in
full of the Obligations and all other amounts payable under this
Agreement.
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9.7 NON-APPLICABILITY OF CHAPTER 15 OF TEXAS FINANCE CODE.
Chapter 15 of the Texas Finance Code shall not be applicable to this Agreement
or the Revolving Facility.
9.8 JUDGMENT INTEREST. It is agreed that any judgement entered by
a court in favor of Lender against any Borrower for payment of the Obligations,
or any part thereof, shall provide for post-judgement interest on the amount
thereof at a rate equal to the Maximum Rate.
9.9 INTEREST LIMITATION. In no contingency or event whatsoever
shall the amount of interest under the Loan Documents paid by any Borrower,
received by Lender, agreed to be paid by any Borrower, or requested or demanded
to be paid by Lender, exceed the Maximum Rate. In the event any such sums paid
to Lender by any Borrower would exceed the Maximum Rate, Lender shall
automatically apply such excess to any unpaid principal or, if the amount of
such excess exceeds said unpaid principal, such excess shall be paid to such
Borrower. All sums paid, or agreed to be paid, by any Borrower which are or
hereafter may be construed to be compensation for the use, forbearance or
detention of money shall be amortized, prorated, spread and allocated in
respect of the Obligations throughout the full Contract Term until the
Obligations are paid in full. Notwithstanding any provisions contained in the
Loan Documents, or in any notes or other related documents executed pursuant
hereto, Lender shall never be entitled to receive, collect or apply as interest
any amount in excess of the Maximum Rate and, in the event Lender ever
receives, collects or applies any amount in respect of any Borrower that
otherwise would be in excess of the Maximum Rate, such amount shall
automatically be deemed to be applied in reduction of the unpaid principal
balance of the Obligations and, if such principal balance is paid in full, any
remaining excess shall forthwith be paid to such Borrower. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the Maximum Rate, Borrowers and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as a
standby fee, commitment fee, prepayment charge, delinquency charge or
reimbursement for a third-party expense rather than as interest, (ii) exclude
voluntary prepayments and the effect thereof, and (iii) amortize, prorate,
allocate and spread in equal parts throughout the entire period during which
the indebtedness was outstanding the total amount of interest at any time
contracted for, charged or received. Nothing herein contained shall be
construed or so operate as to require any Borrower to pay any interest, fees,
costs or charges greater than is permitted by applicable law. Subject to the
foregoing, each Borrower hereby agrees that the actual effective rate of
interest from time to time existing with respect to loans made by Lender to
such Borrower, including all amounts agreed to by such Borrower or charged or
received by Lender, which may be deemed to be interest under applicable law,
shall be deemed to be a rate which is agreed to and stipulated by such Borrower
and Lender in accordance with applicable law.
9.10 CONTINUING RIGHTS OF LENDER IN RESPECT OF OBLIGATIONS. In the
event any amount from time to time applied in reduction of the Obligations is
subsequently set aside, avoided, declared invalid or recovered by any Borrower,
any Guarantor or any trustee or in bankruptcy, or in the event Lender is
otherwise required to refund or repay any such amount pursuant to any
applicable law, then the Obligations shall automatically be deemed to be
revived and increased to the extent of such amount and the same shall continue
to be secured by the Collateral as if such amount had not been so applied.
9.11 ACCEPTANCE AND PERFORMANCE. This Agreement shall become
effective only upon acceptance by Lender. The Obligations are payable at
Lender's offices in Dallas, Dallas County, Texas. Each Borrower, each
Guarantor and Lender agrees that Dallas County, Texas shall be the
44
<PAGE> 50
exclusive venue for litigation of any dispute or claim arising under or
relating to the Loan Documents, and that such county is a convenient forum in
which to decide any such dispute. Each Borrower, each Guarantor and Lender
consents to the personal jurisdiction of the state and federal courts located
in Dallas County, Texas for the litigation of any such dispute or claim.
9.12 OBLIGATIONS. Lender's rights in respect of the Obligations
shall not be impaired by reason that the amount thereof at any time exceeds any
stated maximum or other limitation provided herein.
9.13 EXPRESS WAIVERS BY BORROWERS IN RESPECT OF CROSS GUARANTIES.
In connection with the matters provided in paragraph 9.27, each Borrower agrees
as follows:
a. Borrower hereby waives: (1) notice of acceptance of
this Agreement; (2) notice of any loans or other financial
accommodations made or extended under the Loan Documents or the
creation or existence of any Obligations; (3) notice of the amount of
the Obligations, subject, however, to Borrower's right to make inquiry
of Lender to ascertain the amount of the Obligations at any reasonable
time; (4) notice of any adverse change in the financial condition of
any other Borrower or of any other fact that might increase Borrower's
risk with respect to such other Borrower under this Agreement; (5)
notice of presentment for payment, demand, protest and notice thereof
as to any promissory notes or other instruments among the Loan
Documents; and (7) all other notices (except if such notice is
specifically required to be given to Borrower hereunder or under any
of the Loan Documents to which Borrower is a party) and demands to
which Borrower might otherwise be entitled.
b. Borrower hereby waives the right by statute or
otherwise to require Lender to institute suit against any other
Borrower or to exhaust any rights and remedies which Lender has or may
have against any other Borrower. Borrower further waives any defense
arising by reason of any disability or other defense of any other
Borrower (other than the defense that the Obligations shall have been
fully and finally performed and indefeasibly paid) or by reason of the
cessation from any cause whatsoever of the liability of any such
Borrower in respect thereof.
c. Borrower hereby waives and agrees not to assert
against Lender: (1) any defense (legal or equitable), set-off,
counterclaim or claim which Borrower may now or at any time hereafter
have against any other Borrower or any other party liable to Lender;
(2) any defense, set-off, counterclaim, or claim of any kind or nature
available to any other Borrower against Lender, arising directly or
indirectly from the present or future lack of perfection, sufficiency,
validity or enforceability of the Obligations or any security
therefor; (3) any right or defense arising by reason of any claim or
defense based upon an election of remedies by Lender under any
applicable law; (4) the benefit of any statute of limitations
affecting any other Borrower's liability hereunder.
d. In addition to the foregoing waivers, Borrower hereby
waives outright and absolutely, any right of subrogation Borrower has
or may have against any other Borrower with respect to the
Obligations. In addition, Borrower hereby waives any right to proceed
against any other Borrower, now or hereafter, for contribution,
indemnity, reimbursement and
45
<PAGE> 51
any other suretyship rights and claims, whether direct or indirect,
liquidated or contingent, whether arising under express or implied
contract or by operation of law, which Borrower may now have or
hereafter have as against any such other Borrower with respect to the
Obligations. Borrower also hereby waives any rights to recourse to or
with respect to any asset of any other Borrower. Borrower agrees that
in light of the immediately foregoing waivers, the execution of this
Agreement shall not be deemed to make Borrower a "creditor" of any
other Borrower, and that for purposes of Sections 547 and 550 of the
Bankruptcy Code Borrower shall not be deemed a "creditor" of any other
Borrower.
e. Borrower consents and agrees that, without notice to
or by Borrower and without affecting or impairing the obligations of
Borrower hereunder, Lender may, by action or inaction: (a) compromise,
settle, extend the duration or the time for the payment of, or
discharge the performance of, or may refuse to or otherwise not
enforce the Loan Documents; (b) release all or any one or more parties
to any one or more of the Loan Documents or grant other indulgences to
any other Borrower in respect thereof; (c) amend or modify in any
manner and at any time (or from time to time) any of the Loan
Documents; or (d) release or substitute any guarantor or other Person
liable for payment of the Obligations, if any, or enforce, exchange,
release or waive any security for the Obligations or any guaranty of
the Obligations, or any thereof.
f. Lender shall have the right to seek recourse against
Borrower to the fullest extent provided for herein, and no election by
Lender to proceed in one form of action or proceeding, or against any
party, or on any obligation, shall constitute a waiver of Lender's
right to proceed in any other form of action or proceeding or against
other parties unless Lender has expressly waived such right in
writing. Specifically, but without limiting the generality of the
foregoing, no action or proceeding by Lender under any document or
instrument evidencing the Obligations shall serve to diminish the
liability of Borrower under this Agreement except to the extent that
Lender finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
g. Borrower represents and warrants to Lender that
Borrower is currently informed of the financial condition of all other
Borrowers and Guarantors of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Borrower further represents and warrants to Lender that
Borrower has read and understands the terms and conditions of the Loan
Documents. Borrower hereby covenants that Borrower will continue to
keep informed of the financial condition of all other Borrowers and
Guarantors, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Obligations.
9.14 PARTICIPATION OF OBLIGATIONS. Each Borrower agrees that
Lender may, at its option, sell interests in the Obligations and its rights
under this Agreement to a financial institution or institutions and that Lender
may disclose any financial and other information concerning Borrowers and
Guarantors to any prospective purchaser of any such interest.
9.15 OTHER AGREEMENTS; CROSS DEFAULT. Each Borrower expressly
acknowledges that the "Obligations" as defined in this Agreement includes other
obligations and indebtedness, if any, as may from time to time be owing to
Lender by any Borrower under any other instrument or agreement executed by any
Borrower for the benefit of Lender, whether or not such instrument or agreement
46
<PAGE> 52
is included within the Loan Documents. In consideration of this Agreement,
each Borrower acknowledges and agrees that (i) any security or other collateral
from time to time securing such other obligations and indebtedness shall secure
all Obligations as collateral under this Agreement, (ii) any breach or default
under any such other instrument or agreement shall constitute an Event of
Default under this Agreement, and (iii) any Event of Default under this
Agreement shall constitute a default under any such other instrument or
agreement.
9.16 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR
THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
THE COUNTY OF LENDER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS
AGREEMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR;
IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE.
ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE
DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A
WAIVER BY LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91
OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF
LENDER HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL (IF ANY), OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. LENDER MAY
47
<PAGE> 53
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER
THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE
MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
9.17 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO AGREE THAT NO
PARTY SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM
CONCERNING THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION
THEREWITH, IN EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING
EXPRESSLY WAIVED BY EACH PARTY HERETO. EACH PARTY HERETO ACKNOWLEDGES THAT
SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE
RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF
ITS CHOOSING.
9.18 GOVERNING LAW. THIS AGREEMENT, AND ALL DOCUMENTS AND
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED, THAT TO THE EXTENT
FEDERAL LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE
LAWS OF THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW
WHICH PURPORT TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR,
CHARGED OR RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW
SHALL APPLY.
9.19 ENTIRETY AND AMENDMENTS. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof, and may be
modified or amended only by an instrument in writing executed by an authorized
officer of each party hereto.
9.20 PARTIES BOUND. This Agreement shall be binding upon and
inure to the benefit of each Borrower, each Guarantor and Lender, and their
respective successors in interest and assigns. Neither Borrowers not
Guarantors may assign any right, power, duty or obligation under this
Agreement, or any document or instrument executed in connection herewith,
without the prior written consent of Lender. This Agreement is intended for
the benefit of the parties hereto and their respective successors in interest
and assigns only and may not be relied upon by any other Person.
9.21 ACCOUNTING TERMS. Except as otherwise specifically provided
herein, all accounting and financial terms used herein, and the compliance with
each financial covenant contained herein, shall be determined on a consolidated
basis for Parent and its Subsidiaries in accordance with GAAP.
9.22 EXHIBITS. All exhibits referenced herein, and attached
hereto, are incorporated in this Agreement and made a part hereof for all
purposes. All terms defined in this Agreement, wherever used in any such
exhibits, shall have the same meanings as are prescribed by this Agreement.
48
<PAGE> 54
9.23 CUMULATIVE RIGHTS. All rights and remedies of Lender under
the Loan Documents are cumulative, and are in addition to rights and remedies
available to Lender by law. Such rights and remedies may be exercised
concurrently or successively, at such times as Lender may determine in its
discretion.
9.24 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future laws effective
during the Contract Term, such provisions shall be fully severable, and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement. In such
case, the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected thereby.
9.25 MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in one or more multiple originals, each of which shall be deemed
an original, but all of which together shall constitute one and the same
Agreement.
9.26 SURVIVAL. All covenants, agreements, representations and
warranties made by each Borrower herein shall survive the execution, delivery
and closing of this Agreement, and all documents executed in connection
herewith, and shall not be affected by any investigation made by any party.
9.27 MUTUAL BENEFIT; JOINT AND SEVERAL LIABILITY; CROSS GUARANTIES.
The Facility is for the joint and several benefit of each and all Borrowers,
and each and any Borrower shall be entitled to request and obtain Revolving
Facility Advances, subject to the terms of this Agreement. Because of the
inter-relationships among Borrowers and their respective businesses and
operations, each Borrower has determined, independently from considerations
relative to credit otherwise available to any other Borrower under this
Agreement, that entering into this Agreement is within its corporate purpose,
will be of direct and indirect benefit to such Borrower and is in its best
interest. Each Borrower (i) acknowledges and agrees that it is jointly and
severally liable for the Obligations, and (ii) each Borrower shall execute and
deliver for the benefit of Lender a guaranty agreement pursuant to which such
Borrower shall guarantee to Lender the prompt payment and performance of all
Obligations from time to time owing by each other Borrower, respectively (such
guaranty agreements to be in form and substance satisfactory to Lender). Each
Borrower hereby acknowledges that its agreement to the provisions of this
paragraph is in consideration of the availability of loans to each of the other
Borrowers under this Agreement and is not required by Lender as a condition to
the availability of loans to such Borrower under this Agreement.
9.28 AMENDMENT AND RESTATEMENT. This Agreement is in amendment and
restatement of the Original Agreement and all "Obligations," if any, as defined
therein which remain outstanding on the Effective Date shall be deemed to be
renewed and hereafter included within the Obligations under this Agreement,
provided, that Monitor does not assume, and shall have no liability or
obligation for, any such Obligations owing by any other Borrower and
outstanding as of the effective date of this Agreement.
9.29 RELEASE OF COLLATERAL; RELEASE OF LIABILITY OF JAK. As of the
Effective Date, Lender releases any liens, encumbrances or security interests
granted to Lender pursuant to the terms of the Original Agreement, and agrees
to execute and deliver to any Borrower, at such Borrower's sole cost and
expense, any UCC-3 termination or other form of release or termination required
to
49
<PAGE> 55
evidence the release provided herein. Lender releases JAK from its obligations
under the Original Agreement and agrees that JAK shall have no liability or
obligations hereunder.
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.
[remainder of this page intentionally left blank]
50
<PAGE> 56
EXECUTED as of the effective date specified in the introductory
paragraph of this Agreement.
BORROWERS:
ULTRAK, INC.
By: /s/ TIM D. TORNO
----------------------------------
Tim D. Torno
Vice President
DENTAL VISION DIRECT, INC.
By: /s/ TIM D. TORNO
----------------------------------
Tim D. Torno
Vice President
DIAMOND ELECTRONICS, INC.
By: /s/ TIM D. TORNO
----------------------------------
Tim D. Torno
Vice President
MONITOR DYNAMICS, INC.
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
ULTRAK OPERATING, L.P.
A Texas limited partnership
By: Ultrak GP, Inc., its sole general
partner
By: /s/ TIM D. TORNO
------------------------------
Tim D. Torno
Vice President
51
<PAGE> 57
GUARANTORS:
BISSET S.A.
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
CASAROTTO SECURITY SPA
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
INTERVISION EXPRESS, LTD.
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
MAXPRO SYSTEMS PTY. LTD.
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
PHILTECH ELECTRONIC SERVICES
(PROPRIETARY) LIMITED
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
ULTRAK GP, INC.
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
52
<PAGE> 58
ULTRAK LP, INC.
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
VIDEV GMBH
By: /s/ TIM D. TORNO
----------------------------------
Name: Tim D. Torno
--------------------------------
Title: Vice President
-------------------------------
53
<PAGE> 59
LENDER:
NATIONSBANK OF TEXAS, N.A.
By: /s/ RUSSELL P. HARTSFIELD
--------------------------------------
Russell P. Hartsfield
Senior Vice President
Applicable Lending Office for LIBOR
-----------------------------------
Balance Loans and Floating Rate Balance
---------------------------------------
Loans:
-----
901 Main Street, 7th Floor
Dallas, Texas 75202
Attention: Russell P. Hartsfield
Telecopier No. (214) 508-3139
54
<PAGE> 60
EXHIBIT 1.1
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Liens, security interests and encumbrances
Liens in favor of Hewlett-Packard Company filed November 6, 1991 and May 12,
1993 covering certain computer hardware.
55
<PAGE> 61
EXHIBIT 5.1
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Trade Names
Ultrak
Exxis
Smart Choice
Mobile Video Products
Diamond Electronics
Industrial Vision Source
MAXPRO
BST
VideV
Euroline
Point Guard
BabyCam
EasyWatch
SAFEnet
UltraCam
Philtech
56
<PAGE> 62
EXHIBIT 5.6
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Share Ownership
<TABLE>
<CAPTION>
Person: Owned by: Owned by:
- ------ -------- --------
<S> <C> <C>
BORROWERS:
Ultrak, Inc. Publicly owned
Ultrak Operating, L.P. 99% Ultrak LP, Inc. 100% Ultrak
1% Ultrak GP, Inc. 100% Ultrak
Dental Vision Direct, Inc. 100% Ultrak
Diamond Electronics, Inc. 100% Ultrak
Monitor Dynamics, Inc. 100% Ultrak
GUARANTORS:
Bisset S.A. 100% Ultrak Holdings, Ltd. 100% Ultrak
Casarotto Security SPA 100% Ultrak Holdings, Ltd. 100% Ultrak
Intervision Express, Ltd. 100% Ultrak Holdings, Ltd. 100% Ultrak
VideV GMBH 100% Ultrak Holdings, Ltd. 100% Ultrak
Maxpro Systems Pty, Ltd. 100% Ultrak
Philtech Electronic Services, Ltd. 100% Ultrak
</TABLE>
Stock options, warrants, etc.:
Ultrak, Inc:
1. Non-qualified Employee Stock Option Plan - up to 1,000,000
shares of $.01 par value common stock at varying prices.
2. Convertible Preferred Stock - convertible into 406,981 shares
of $.01 par value common stock.
57
<PAGE> 63
EXHIBIT 5.7
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Subsidiaries
<TABLE>
<CAPTION>
Entity Location Ownership
------ -------- ---------
<S> <C> <C>
Ultrak Asia, Ltd. Singapore 80% owned by Ultrak
Securion 24 Co. Ltd. Japan 10% owned by Ultrak
</TABLE>
58
<PAGE> 64
EXHIBIT 5.9
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Litigation
None outstanding or known.
59
<PAGE> 65
EXHIBIT 6.30
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Intercompany Advances to/from Affiliates
as of 10/31/97
<TABLE>
<CAPTION>
Entity Amount Due From (Due to)
------ ------------------------
<S> <C>
Diamond Electronics, Inc. $ 6,700,000
Monitor Dynamics, Inc. $(3,200,000)
Maxpro Systems Pty, Ltd. $ 1,600,000
Bisset, SA $ 182,000
VideV GMBH $ 2,900,000
Intervision Express Ltd. $ 1,700,000
Casarotto Security SPA $ 2,900,000
Philtech Proprietary $ 100,000
-----------
Net Amount of Intercompany Advances $12,882,000
</TABLE>
60
<PAGE> 66
EXHIBIT 6.31
TO LOAN AND SECURITY AGREEMENT
BETWEEN
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC., ET AL
Affiliate Transactions
1. Each Distribution Agreement between any Loan Party and any of its
Affiliates in form and substance comparable to Annex 1 of this
Exhibit.
2. Each Central Cost Allocation Agreement between a Ultrak, Inc. and any
of its Subsidiaries in form and substance comparable to Annex 2 of
this Exhibit.
61
<PAGE> 1
EXHIBIT 21.1
Ultrak, Inc.
SUBSIDIARIES OF ULTRAK, INC.
1. Ultrak Operating, L.P., a Texas limited partnership
2. Ultrak GP, Inc., a Delaware corporation
3. Ultrak LP, Inc., a Delaware corporation
4. Dental Vision Direct, Inc., a Texas corporation
5. Diamond Electronics, Inc., an Ohio corporation
6. Ultrak Holdings Limited, a United Kingdom private limited liability company
7. Groupe Bisset, S.A., a French corporation
8. MAXPRO Systems Pty Ltd., an Australian corporation
9. VideV GmbH, a German corporation
10. Monitor Dynamics, Inc. a California corporation
11. Intervision Express Limited, a United Kingdom private limited liability
company
12. Veravision, Inc., a California corporation
13. Security Procurement, B.V., a Dutch corporation
14. Philtech Electronic Services, a South African corporation
15. Casarotto Security, SrL, an Italian company
16. Videosys Ltd., a United Kingdom private limited liability company
17. Ultrak Asia Ltd., a Singapore company
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 18,051,347
<SECURITIES> 0
<RECEIVABLES> 34,181,503
<ALLOWANCES> 1,791,056
<INVENTORY> 45,390,195
<CURRENT-ASSETS> 115,825,045
<PP&E> 9,390,213
<DEPRECIATION> 3,443,044
<TOTAL-ASSETS> 185,419,719
<CURRENT-LIABILITIES> 22,221,315
<BONDS> 0
0
976,755
<COMMON> 144,457
<OTHER-SE> 163,053,947
<TOTAL-LIABILITY-AND-EQUITY> 185,419,719
<SALES> 188,740,735
<TOTAL-REVENUES> 188,740,735
<CGS> 130,047,733
<TOTAL-COSTS> 130,047,733
<OTHER-EXPENSES> 57,602,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,965
<INCOME-PRETAX> 4,170,183
<INCOME-TAX> 1,769,469
<INCOME-CONTINUING> 2,400,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,400,714
<EPS-PRIMARY> .16
<EPS-DILUTED> .15
</TABLE>
