-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H8AtV+TzmbmVoRsIEMHwR7bONk7FOoT7GleHeeZL9GUSdt/nqHB5pzxY5YbaHmoV fbMw55eZefMHTi2oFSWUEQ== 0000310056-97-000011.txt : 19970812 0000310056-97-000011.hdr.sgml : 19970812 ACCESSION NUMBER: 0000310056-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: VICON INDUSTRIES INC /NY/ CENTRAL INDEX KEY: 0000310056 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 112160665 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07939 FILM NUMBER: 97655358 BUSINESS ADDRESS: STREET 1: 89 ARKAY DR CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5169522288 MAIL ADDRESS: STREET 1: 89 ARKAY DR CITY: HAUPPAUGE STATE: NY ZIP: 11788 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1997 Commission File No. 1-7939 ------------------------- ------- VICON INDUSTRIES, INC. (Exact name of registrant as specified in its charter) NEW YORK STATE 11-2160665 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 89 Arkay Drive, Hauppauge, New York 11788 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 952-2288 (Former name, address, and fiscal year, if changed since last report) 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 At June 30, 1997, the registrant had outstanding 2,802,728 shares of Common Stock, $.01 par value. PART I - FINANCIAL INFORMATION VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended 6/30/97 6/30/96 Net sales........................... $13,725,759 $10,901,705 Costs and expenses: Cost of goods sold................ 9,815,328 8,166,548 Selling, general & admin. expenses........................ 3,048,456 2,474,716 Interest expense.................. 309,274 209,270 Unrealized foreign exchange gain................... (6,273) (14,365) ----------- ----------- Total costs and expenses....... 13,166,785 10,836,169 Income before income taxes.......... 558,974 65,536 Provision for income taxes.................... 16,000 25,000 ----------- ----------- Net income.......................... $ 542,974 $ 40,536 =========== =========== Net income per share $ .18 $ .01 === === Weighted average number of shares used in computing net income per share 3,049,335 2,857,545 See Notes to (Condensed) Consolidated Financial Statements. 2 PART I - FINANCIAL INFORMATION VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Nine Months Ended 6/30/97 6/30/96 Net sales........................... $37,351,404 $32,269,800 Costs and expenses: Cost of goods sold................ 26,867,870 24,080,725 Selling, general & admin. expenses........................ 8,468,881 7,250,572 Relocation expense................ 225,129 - Interest expense.................. 834,207 629,608 Unrealized foreign exchange gain................... (39,896) (33,749) ----------- ----------- Total costs and expenses....... 36,356,191 31,927,156 ----------- ----------- Income before income taxes.......... 995,213 342,644 Provision for income taxes.................... 71,000 75,000 ----------- ----------- Net income.......................... $ 924,213 $ 267,644 =========== =========== Net income per share: Primary $ .31 $ .10 === === Fully diluted $ .30 $ .09 === === Weighted average number of shares used in computing net income per share: Primary 2,950,071 2,788,299 Fully diluted 3,073,714 2,893,889 See Notes to (Condensed) Consolidated Financial Statements. 3 VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS 6/30/97 9/30/96 CURRENT ASSETS Cash............................................ $ 105,224 $ 205,876 Accounts receivable (less allowance of $476,000 at June 30, 1997 and $396,000 at September 30, 1996)............... 9,520,565 8,635,020 Other receivables............................... 137,180 71,819 Inventories: Parts, components, and materials.............. 4,066,423 2,175,408 Work-in-process............................... 2,697,957 1,391,552 Finished products............................. 11,566,399 11,135,798 ----------- ----------- 18,330,779 14,702,758 Prepaid expenses................................ 376,881 529,631 ----------- ----------- TOTAL CURRENT ASSETS............................ 28,470,629 24,145,104 - -------------------- Property, plant and equipment, net.............. 3,570,573 3,034,185 Other assets.................................... 954,116 905,327 ----------- ----------- TOTAL ASSETS.................................... $32,995,318 $28,084,616 - ------------ =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Borrowings under revolving credit agreement..... $ 785,060 $ 959,583 Current maturities of long-term debt............ 172,163 203,719 Accounts payable: Related party................................. 8,158,934 7,457,482 Other......................................... 2,251,814 1,811,730 Accrued wages and expenses...................... 1,949,809 1,229,087 Income taxes payable............................ 95,601 87,205 Deferred gain on sale and leaseback............. - 332,100 ------------ ----------- TOTAL CURRENT LIABILITIES 13,413,381 12,080,906 - ------------------------- Long-term debt: Related party................................. 1,800,000 2,262,005 Other......................................... 7,159,284 4,166,881 Deferred gain on sale and leaseback............. - 101,893 Other long-term liabilities..................... 458,094 504,776 SHAREHOLDERS' EQUITY Common stock, par value $.01.................... 28,027 28,027 Capital in excess of par value.................. 9,394,163 9,423,089 Retained earnings (deficit)..................... 640,602 (283,611) ------------ ----------- 10,062,792 9,167,505 Less Treasury stock 25,400 shares, at cost...... - (82,901) Foreign currency translation adjustment......... 101,767 (116,449) ------------ ----------- TOTAL SHAREHOLDERS' EQUITY 10,164,559 8,968,155 - -------------------------- ------------ ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 32,995,318 $28,084,616 - ------------------------------------------ ============ =========== See Notes to (Condensed) Consolidated Financial Statements. 4 VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended 6/30/97 6/30/96 Cash flows from operating activities: Net income................................... $ 924,213 $ 267,644 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization.............. 587,666 516,834 Amortization of sale and leaseback......... (433,993) (249,075) Unrealized foreign exchange gain........... (39,896) (33,749) Change in assets and liabilities: Accounts receivable.......................... (791,969) (747,546) Other receivables............................ (65,361) 36,930 Inventories.................................. (3,534,235) (3,128,810) Prepaid expenses............................ 162,986 (70,221) Other assets................................. (48,789) (59,235) Accounts payable............................ 1,122,442 2,232,871 Accrued wages and expenses................... 708,692 (520,030) Income taxes payable......................... 4,020 (2,484) Other liabilities........................... (46,682) (31,176) --------- --------- Net cash used in operating activities..... (1,450,906) (1,788,047) --------- --------- Cash flows from investing activities: Capital expenditures, net of minor disposals........................... (771,553) (352,918) --------- ---------- Net cash used in investing activities.... (771,553) (352,918) --------- ---------- Cash flows from financing activities: Net borrowings under new credit and security agreement......................... 2,065,139 3,976,344 Repayments of U.S. revolving credit agreement.................................. - (2,800,000) Borrowings under U.K. term loan............... 830,000 - Repayment of mortgage loan to related party.. (353,112) (140,845) Repayment of promissory note to related party (200,000) - (Decrease) increase in borrowings under U.K. revolving credit agreement................. (226,766) 7,782 Repayments of other debt..................... (79,912) (60,913) ---------- ---------- Net cash provided by financing activities...................... 2,035,349 982,368 ---------- --------- Effect of exchange rate changes on cash.......... 86,458 46,533 ---------- ---------- Net decrease in cash............................. (100,652) (1,112,064) Cash at beginning of year........................ 205,876 1,151,850 ---------- ---------- Cash at end of period............................ $ 105,224 $ 39,786 ========== ========== Non-cash investing and financing activities: Capital lease obligations.................... $ 276,624 $ - See Notes to (Condensed) Consolidated Financial Statements. 5 VICON INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1997 Note 1: Basis of Presentation The accompanying unaudited (condensed) consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended September 30, 1996. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations Three Months Ended June 30, 1997 Compared with June 30, 1996 Net sales for the quarter ended June 30, 1997 were $13.7 million compared with $10.9 million in the corresponding quarter last year. The increase was principally due to increased sales of engineered systems and equipment. Order intake for the quarter was $13.3 million. Unfilled orders were $4.4 million at June 30, 1997. Gross profit margins for the current quarter were 28.5% compared with 25.1% in the corresponding quarter last year. The margin increase was due to lower costs for certain products and growing sales of new higher margin products. Operating expenses for the current quarter increased to $3.0 million compared with $2.5 million in the corresponding quarter last year. The increase was due principally to higher selling costs. Interest expense increased approximately $100,000 to $309,000 for the current year quarter as a result of increased bank borrowings to support higher working capital needs. The increase in current quarter pretax income of approximately $493,000 was principally due to higher sales and gross profit margins, offset in part by increased operating expenses. Results of Operations Nine Months Ended June 30, 1997 Compared with June 30, 1996 Net sales for the nine months ended June 30, 1997 were $37.4 million compared with $32.3 million in the corresponding period last year. The increase was principally due to increased sales of engineered systems and equipment. Order intake for the nine months was $38.7 million. Gross profit margins for the nine months were 28.1% compared with 25.4% in the corresponding period last year. The margin improvement was due to lower costs for certain products and growing sales of new higher margin products. Operating expenses increased to $8.7 million compared with $7.3 million in the corresponding period last year due to higher selling and product promotion costs. The Company also incurred $225,000 of moving expenses to relocate its U.S. headquarters to a new facility. Interest expense increased by $205,000 to $834,000 as a result of increased bank borrowings to support higher working capital needs. During the current period, the Company recorded an unrealized foreign exchange gain of $40,000 compared with a $34,000 gain in the corresponding period last year. Such gains result from the revaluation of a yen denominated mortgage note into U.S. dollars. The increase in current period pretax income of $653,000 was due to higher sales and gross margins, offset in part by increased operating expenses. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS LIQUIDITY AND FINANCIAL CONDITION June 30, 1997 Compared with September 30, 1996 Working capital increased approximately $3.0 million to $15.1 million at June 30, 1997 principally as a result of increased bank borrowings used to finance higher inventory levels. Accounts receivable increased approximately $.9 million to $9.5 million at June 30, 1997, as a result of higher sales levels. Inventories increased $3.6 million to $18.3 million at June 30, 1997 due principally to increased levels of parts and work-in-process for a new line of domed camera products. Total accounts payable increased $1.1 million to approximately $10.4 million at June 30, 1997 in order to finance the higher inventory levels. The Company maintains an overdraft facility of 600,000 pounds sterling (approx. $996,000) in the U.K. to support working capital requirements. At June 30, 1997, borrowings under this agreement were approximately $785,000. In February, 1997, the Company's bank loan agreement was amended to increase maximum borrowings from $5.5 million to $6.5 million, subject to an availability formula based on accounts receivable and inventories. Further, the term of the agreement was extended to January 31, 1999. Borrowings under such agreement amounted to approximately $6.2 million at June 30, 1997 compared with $4.1 million at September 30, 1996. The increase was used principally to finance higher inventory levels and capital additions. Concurrent with the foregoing amendment, a $2,000,000 secured promissory note with Chugai Boyeki Co., Ltd., a related party, was modified to require installments of $200,000 upon execution, $360,000 in July 1998 and the balance of $1,440,000 upon maturity in July 1999. In April 1997, the Company repaid its U.K. related party mortgage loan with the proceeds of a new ten year 500,000 pound sterling (approx. $830,000) bank term loan. The term loan is payable in equal monthly installments with interest at a fixed rate of 9%. The Company believes that its bank loan agreements and other sources of credit provide adequate funding to meet its near term cash requirements. 8 PART II ITEM 1 - LEGAL PROCEEDINGS The Company has no material outstanding litigation. ITEM 2 - CHANGES IN SECURITIES None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 - OTHER INFORMATION None ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K No Form 8-K was required to be filed during the current quarter. EXHIBIT NUMBERS DESCRIPTION 10 Material Contracts (.1) Advice of borrowing terms between the Registrant and National Westminster Bank PLC dated April 22, 1997. (.2) Commercial fixed rate loan agreement between the Registrant and National Westminster Bank PLC dated April 8, 1997. 9 Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 13, 1997 VICON INDUSTRIES, INC. Kenneth M. Darby Arthur D. Roche President Executive Vice President Chief Executive Officer Chief Financial Officer 10 Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 13, 1997 VICON INDUSTRIES, INC. VICON INDUSTRIES, INC. Kenneth M. Darby Arthur D. Roche Kenneth M. Darby Arthur D. Roche President Executive Vice President Chief Executive Officer Chief Financial Officer 10 EX-10 2 ADVISE OF BORROWING TERMS ADVICE OF BORROWING TERMS Ref. KM RM03 BRANCH/UNIT. National Westminster Bank PLC 4th Floor, Society Building, 176 London Road, Portsmouth, P02 9DR DATE- 22 April 1997, BORROWER'S NAME: VICON INDUSTRIES (UK) LIMITED Brunel Way, Fareham, Hants P015 5TX (This letter replaces the Advice of Borrowing Terms letter dated 18 March 1997) Subject to the Bank's rights below and subject to the Bank's rights under the 'General terms upon which the Bank makes facilities available', it is the Bank's current intention that the facilities specified in this 'Advice of Borrowing Terms' (except for those facilities which are subject to their own separate facility documentation covered below under 'Facilities subject to separate documentation') should remain available until 28 February 1998. FACILITY 1: Facility Type; Overdraft. Amount: 6oo,ooo.Pounds Sterling Purpose: Working capital requirements. Repayment: Fully fluctuating. lst Debit Interest Rate: 2 percent per annum. above NatWest's Base Rate from time to time. 2nd Debit interest Rate: (Applicable above 600,000 Pounds Sterling) 5 percent above Base Rate. Payable: Quarterly. 1 REPAYMENT: It is the Banks current intention that the facilities should be reviewed by the dates indicated herein, However, all, amounts outstanding under the facilities are repayable on demand, which may be made by the Bank at its sole discretion at any time. The facilities may also, by notice, be withdrawn, reduced or made subject to further conditions or otherwise varied. INTEREST: All rates specified above are variable. If the interest rate specified above is not linked to the Bank's Base Rate, interest will be charged initially at the rate per annum specified above, which may vary from time to time at the Bank's absolute discretion. Details of the current rates are available from the branch or office where the facility is provided. Interest on any indebtedness from time to time in excess of agreed facilities will be charged at the interest rate detailed above, An excess fee will be charged at the Bank's published rate from time to time (currently 3.50 pounds sterling per day) for each day that your agreed overdraft limit is exceeded . The Bank is not obliged to allow (or to continue to allow) any such excess borrowing, The Bank may alter the basis upon which interest is calculated (including the size of the margin charged over the Bank's Base Rate or other published rate) on facilities and/or the amount of any regular repayments of facilities which are repayable on dernand (or by notice), but it will give the customer one month's notice before doing so. OTHER FACILITIES: Facility Type: Forward Exchange Liability. Amount: 400,000 pounds sterling (represents 20 percent of contract). Facility Type: Terminable Indemnities (T/I). Amount: 200,000 pounds sterling (P/S). Purpose: HM Customs & Excise Duty Deferment Bond. Facility Type: Inward Collections - Documents Release in Trust 2 Amount: 20,000 pounds sterling (P/S). These facilities may by notice be withdrawn, reduced or made subject to further conditions or otherwise varied. SECURITY: The Bank continues to rely on its existing security (and requires additional security where specified.) detailed below for the discharge on demand of all present and future liabilities (both actual and contingent) of the Borrower(s) to the Bank. The liabilities secured will include without limitation, all liabilities, of the Borrower to the Bank under the facility or facilities specified in this Advice of Borrowing Terms including those which are listed below under the heading 'Facilities subject to separate documentation', From time to time the Bank may wish to revalue the security, and the cost of any valuations required by the Bank will be met by the Borrower. Further information is included in the 'General terms upon which the Bank makes facilities available'. Date Executed/New Title of Security Asset 6.7.1989 Guarantee 1,000,000P/S Given by Vicon Industries Inc. 17.10.1990 Mortgage Debenture Capturing all assets of the company. To Come First Legal Mortgage Site P3, Brunel Way, Segensworth Industrial Estate. FEES: Type: Overdraft renewal fee. Amount: 1,850 P/S (from account 01144642 560064). Date to be debited: Was paid 27 March 1997. OTHER CONDITIONS: Please continue to provide monthly management accounts in the existing format, together with aged debtor profile. Lending formula to continue whereby debtors less than 90 days plus stock (minus preferentials) to cover overdraft by 250%, with backup formula of debtors alone less than 90 days to provide 150 percent cover. 3 FACILITIES SUBJECT TO SEPARATE DOCUMENTATION Facility Type: Commercial Fixed Rate Loan . Amount: 500,000 POUNDS STERLING (P/S). Drawndown 14 April 1997 Per Form of Acceptance signed 8 April 1997 GENERAL TERMS: Please note that all facilities specified in this 'Advice of Borrowing Terms' are made available subject to the 'General terms upon which the Bank makes facilities available', except for those subject to separate facility letters/agreement forms which do not expressly incorporate the General Terms. Please note that all facilities are also subject to any terms which may be implied by English Law. J F Mclellan Corporate Manager The Borrower confirms acceptance of the above terms and conditions pursuant to a Resolution of the Board of Directors on 30-04-97. BORROWERS SIGNATURE For and on behalf of Vicon Industries (UK) Limited 30-04-97 Date 4 EX-10 3 COMMERCIAL FIXED RATE LOAN AGREEMENT EAST SOLENT CORPORATE BUSINESS CENTRE 3rd & 4th Floors Telephone:01705 665060 Portsmouth Corporate Office Society Building Facsimile:01705 666858 176 London Road North End PORTSMOUTH Your ref: Hants Our ref. CCM MR Tue P029DR STRICTLY PRIVATE & CONFIDENTIAL C Wall Esq Managing Director Vicon Industries (UK) Limited Brunel Way Fareham NATWEST Hants P015 5TX 8 April 1997 Dear Mr Wall CUSTOMER FIXED RATE LOAN AGREEMENT DATED 24 MARCH 1997 We refer to the Commercial Fixed Rate Loan Agreement dated 24 March 1997 which we have entered into with you (the "Agreement"). Words which are defined in the Agreement have the same meaning when used in this Letter. Subject to the terms of the Agreement, you are entitled to ask us to provide a Quotation to you in connection with the Agreement. In consideration of you paying to us a fee of 275 pounds sterling (P/S) on or before 14 April 1997, we hereby agree that: the fixed rate of interest specified in the Quotation for the whole period of the Loan shall not be greater than 9 per cent per year (the "Maximum Agreed Rate") You may only accept our offer if you are able to satisfy all the terms and conditions contained within this letter and you can, of course, only draw the Loan if you satisfy all the terms and conditions in the Agreement. The Maximum Agreed Rate is only available for the lesser of: the period of 7 days from the date of this letter; and the period within which you must draw the Loan under the Agreement. Our offer contained in this letter relates solely to the rate of interest specified in our Quotation which may be made by us pursuant to the Agreement and not to any other offer of facilities by us to you. The fee of 275 pounds sterling (P/S) payable to us by you pursuant to paragraph 4 of this letter is in addition to any fees which are payable to you under the Agreement and is not refundable by us to you in the event that you do not draw the Loan. Acceptance of our offer to You may only be effected by the receipt by us of the fee specified in paragraph 4 of this letter together with the following items which must, in form and substance, be satisfactory us. a signed copy of this letter signed for and on your behalf a certified copy of a resolution of your board of directors authorising acceptance of our offer a certified copy of your memorandum and articles of association This letter is governed by the laws of England. Yours sincerely TIM BLEATHMAN Corporate Manager For and on behalf of National Westminster Bank PLC Form of Charge Filed at HM Land Registry Under Reference MD436N ID: C041410 NWB1115 (Revised May 1995) Legal Mortgage of land by individual(s) or company (with provision for commercial use) This Legal Mortgage is dated 9th April 1997 and is made between Vicon Industries (UK) Limited (Reg No 1551194) whose Registered Office is situate at Site P3 Brunel Way Segensworth Industrial Estate Segensworth East Fareham Hampshire (the Mortgagor) of the one part and National Westminster Bank Pic (the Bank) of the other part whose address for service of any documents relating to this Legal Mortgage is its Branch at Solent Securities Centre 3rd Floor Arndale House 243 High Street North Poole Dorset BH15 1BD or such other address as the Bank may notify the Mortgagor of in writing from time to time. Description of the leasehold property to be mortgaged Address: Site P3 Brunel Way Segensworth Industrial Estate Segensworth East Fareham Hampshire Registered land Title number(s) County/London Borough HP401658 Hampshire / Fareham Unregistered land The property is comprised in the following documents: Date Description (Conveyance Parties Lease Assignment Assent etc) ID : C041410 1 If the expression "the Mortgagor" includes more than one person it shall be construed as referring to all and/or any one or more of those persons and their obligations shall be joint and several. 2 (a) The Mortgagor with full title guarantee charges by way of legal mortgage all and every interest in or over the property described above which the Mortgagor now or hereafter has power so to charge and charges in equity all other interests therein (the Mortgaged Property) and the proceeds of We thereof and charges to the Bank all moneys to be received under any policy of insurance effected in respect of the Mortgaged Property as a continuing security to the Bank for the discharge on demand of:- (i) all present and/or future indebtedness of the Mortgagor to the Bank on any current and/or other account vath interest and bank charges and (ii) all other liabilities whatsoever of the Mortgagor to the Bank present future actual and/or contingent and (iii) all costs charges and expenses howsoever incurred by the Bank in relation to .this Mortgage and such indebtedness and/or liabilities on a full indemnity basis and for the payment of interest on the foregoing day by day from demand until full discharge (as well after as before judgment) at the rate payable or deemed to be payable by the Mortgagor. Such interest will be calculated and compounded as agreed or in such manner as the Bank may reasonably determine from time to time. The costs and expenses referred to herein shall include (for avoidance of doubt) all amounts the Bank may from time to time require to compensate it for its internal management and administrative costs and expenses incurred in connection with the enforcement of this Mortgage and recovery of the liabilities secured by it. In the absence of manifest error a certificate signed by an officer of the Bank as to the amount of such costs and expenses incurred by the Bank from time to time shall for all purposes be conclusive evidence (and admissible as such) against and binding upon the Mortgagor. (b) If the Mortgagor is a company the Mortgagor with full title guarantee also charges by way of floating security all movable plant machinery implements utensils furniture and equipment building and other materials goods and other effects now and from time to time placed on or used in or about the Mortgaged Property (the Charged Effects) with the discharge on demand of all moneys costs and interest as aforesaid and the expression "the Mortgaged Property" shall be construed accordingly. (c) The Mortgagor with full title guarantee hereby assigns unto the Bank all that the goodwill and connection of any business or businesses from time to time carried on in or upon the Mortgaged Property or any part or parts thereof and the full benefit of all licences (which expression shall also include any registrations) held in connection with such business(es) subject to redemption on payment of all liabilities hereby secured and the expression "the Mortgaged Property" shall be construed accordingly. The Mortgagor will take out and maintain all necessary licences for the due carrying on of such business(es) and will not do or suffer to be done any act matter or thing whereby any such licences may be lost or not renewed and will (to the fullest extent possible) at all times at the Mortgagor's cost execute all such instruments and do all such things as shall be requisite for transferring and vesting all or any such licences to and in the nominee(s) of the Bank or any other person(s) as the Bank may direct and the of the Mortgagor hereby irrevocably and by way of security appoints the Bank to be the attorney of the Mortgagor in the name of the Mortgagor to apply for and obtain the renewal of any such licences and to sign all proper notices and other documents and to do all necessary acts for assigning or transferring all or any such licences to such person(s) as the Bank may think fit. Without prejudice to the above the Mortgagor consents to the making of any protection order in respect of the Mortgaged Property or any part or parts thereof to such person or persons as the Bank or any Receiver appointed hereunder may specify and/or the transfer of any such licence as aforesaid and agrees that this Mortgage may be produced (and shall be admissible) as evidence of such consent. 3 The Mortgagor will keep the Mortgaged Property in a good state of repair and condition and will keep it insured against such risks and with such office and for such amounts as the Bank may from time to time approve. If the Mortgagor fails to maintain or insure the Mortgaged Property the Bank may do so at the expense of the Mortgagor without thereby becoming a mortgagee in possession. 4 Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage and the statutory power of sale and other powers shall be exercisable at any time after demand. 5 If the Mortgagor is not a company (or to the extent that the charge expressed to be created by Clause 2(b) is ineffective) and in the event of the Bank taking possession of the Mortgaged Property then without prejudice to Clause 7 below the Bank is hereby authorised as agent for the Mortgagor to remove store sell or otherwise deal with any furniture or goods whatsoever which the Mortgagor shall fail or refuse to remove from the Mortgaged Property within seven days of being requested so to do by notice from the Bank and the Bank shall not be liable for any loss or damage occasioned to the Mortgagor. The Mortgagor shall indemnify the Bank against all expenses incurred by the Bank in relation to such furniture or goods and the Bank shall account to the Mortgagor for the proceeds of any such sale after deducting any such expenses. 6 The statutory powers of leasing or of accepting surrenders of leases conferred on mortgagors shall not be exercised by the Mortgagor nor shall the Mortgagor pan with possession of the Mortgaged Property or any part thereof nor confer upon any person firm company or body whatsoever any licence right or interest to occupy the Mortgaged Property or any part thereof without the consent in writing of the Bank but the Bank may grant or accept surrenders of leases without restriction. 7(a) At any time after the power of sale has become exercisable the Bank may by writing under the hand of any Manager of the Bank appoint any person or persons to be receiver(s) of the Mortgaged Property or any part or parts thereof (a Receiver). The Bank and/or any Receiver appointed hereunder may (without prejudice to any other powers howsoever conferred) enter the Mortgaged Property., or any part(s) thereof (whether or not any income is arising therefrom) and shall (severally) have full power (i) to do any act or deed whatsoever (in the case of the Bank and any Receiver for and in the name of or on behalf of the Mortgagor or in the case of the Bank as Mortgagee) in relation to or in connection therewith which the Mortgagor was (or might have been) capable of doing and irrespective of the Mortgagor's death insolvency or incapacity and treating the Mortgagor conclusively as sole legal and beneficial owner (including (without limitation) power to manage build complete layout repair cleanse develop use deal with apply for registration permissions and licences equip furnish get-in receive and collect moneys arising sell give effective receipts exchange lease licence sub-lease surrender and accept surrender of leases convey assign transfer covenant exercise statutory rights insure litigate contract compromise employ agents and servants and provide services) and (ii) to conduct any business carried on or in the opinion of the Bank or any Receiver capable of being carried on in or from the Mortgaged Property and shall in connection therewith have all of the powers referred to above. Any expenditure incurred in so doing shall be immediately repayable by the Mortgagor with interest at the rate aforesaid and shall be a liability charged on the Mortgaged Property in priority to all other sums secured thereon. The Bank and any Receiver may utilise any moneys from time to time received for the purpose of financing any expenditure or costs at any time incurred in connection with the exercise of any powers hereby or otherwise conferred in advance of any other payments or application (whether under Section 109(8) of the Law of Property Act 1925 of otherwise), Any Receiver may D ID : C041410 1 If the expression "the Mortgagor" includes more than one person it shall be construed as referring to all and/or any one or more of those persons and their obligations shall be joint and several. 2 (a) The Mortgagor with full title guarantee charges by way of legal mortgage all and every interest in or over the property described above which the Mortgagor now or hereafter has power so to charge and charges in equity all other interests therein (the Mortgaged Property) and the proceeds of We thereof and charges to the Bank all moneys to be received under any policy of insurance effected in respect of the Mortgaged Property as a continuing security to the Bank for the discharge on demand of:- (i) all present and/or future indebtedness of the Mortgagor to the Bank on any current and/or other account vath interest and bank charges and (ii) all other liabilities whatsoever of the Mortgagor to the Bank present future actual and/or contingent and (iii) all costs charges and expenses howsoever incurred by the Bank in relation to .this Mortgage and such indebtedness and/or liabilities on a full indemnity basis and for the payment of interest on the foregoing day by day from demand until full discharge (as well after as before judgment) at the rate payable or deemed to be payable by the Mortgagor. Such interest will be calculated and compounded as agreed or in such manner as the Bank may reasonably determine from time to time. The costs and expenses referred to herein shall include (for avoidance of doubt) all amounts the Bank may from time to time require to compensate it for its internal management and administrative costs and expenses incurred in connection with the enforcement of this Mortgage and recovery of the liabilities secured by it. In the absence of manifest error a certificate signed by an officer of the Bank as to the amount of such costs and expenses incurred by the Bank from time to time shall for all purposes be conclusive evidence (and admissible as such) against and binding upon the Mortgagor. (b) If the Mortgagor is a company the Mortgagor with full title guarantee also charges by way of floating security all movable plant machinery implements utensils furniture and equipment building and other materials goods and other effects now and from time to time placed on or used in or about the Mortgaged Property (the Charged Effects) with the discharge on demand of all moneys costs and interest as aforesaid and the expression "the Mortgaged Property" shall be construed accordingly. (c) The Mortgagor with full title guarantee hereby assigns unto the Bank all that the goodwill and connection of any business or businesses from time to time carried on in or upon the Mortgaged Property or any part or parts thereof and the full benefit of all licences (which expression shall also include any registrations) held in connection with such business(es) subject to redemption on payment of all liabilities hereby secured and the expression "the Mortgaged Property" shall be construed accordingly. The Mortgagor will take out and maintain all necessary licences for the due carrying on of such business(es) and will not do or suffer to be done any act matter or thing whereby any such licences may be lost or not renewed and will (to the fullest extent possible) at all times at the Mortgagor's cost execute all such instruments and do all such things as shall be requisite for transferring and vesting all or any such licences to and in the nominee(s) of the Bank or any other person(s) as the Bank may direct and the of the Mortgagor hereby irrevocably and by way of security appoints the Bank to be the attorney of the Mortgagor in the name of the Mortgagor to apply for and obtain the renewal of any such licences and to sign all proper notices and other documents and to do all necessary acts for assigning or transferring all or any such licences to such person(s) as the Bank may think fit. Without prejudice to the above the Mortgagor consents to the making of any protection order in respect of the Mortgaged Property or any part or parts thereof to such person or persons as the Bank or any Receiver appointed hereunder may specify and/or the transfer of any such licence as aforesaid and agrees that this Mortgage may be produced (and shall be admissible) as evidence of such consent. 3 The Mortgagor will keep the Mortgaged Property in a good state of repair and condition and will keep it insured against such risks and with such office and for such amounts as the Bank may from time to time approve. If the Mortgagor fails to maintain or insure the Mortgaged Property the Bank may do so at the expense of the Mortgagor without thereby becoming a mortgagee in possession. 4 Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage and the statutory power of sale and other powers shall be exercisable at any time after demand. 5 If the Mortgagor is not a company (or to the extent that the charge expressed to be created by Clause 2(b) is ineffective) and in the event of the Bank taking possession of the Mortgaged Property then without prejudice to Clause 7 below the Bank is hereby authorised as agent for the Mortgagor to remove store sell or otherwise deal with any furniture or goods whatsoever which the Mortgagor shall fail or refuse to remove from the Mortgaged Property within seven days of being requested so to do by notice from the Bank and the Bank shall not be liable for any loss or damage occasioned to the Mortgagor. The Mortgagor shall indemnify the Bank against all expenses incurred by the Bank in relation to such furniture or goods and the Bank shall account to the Mortgagor for the proceeds of any such sale after deducting any such expenses. 6 The statutory powers of leasing or of accepting surrenders of leases conferred on mortgagors shall not be exercised by the Mortgagor nor shall the Mortgagor pan with possession of the Mortgaged Property or any part thereof nor confer upon any person firm company or body whatsoever any licence right or interest to occupy the Mortgaged Property or any part thereof without the consent in writing of the Bank but the Bank may grant or accept surrenders of leases without restriction. 7(a) At any time after the power of sale has become exercisable the Bank may by writing under the hand of any Manager of the Bank appoint any person or persons to be receiver(s) of the Mortgaged Property or any part or parts thereof (a Receiver). The Bank and/or any Receiver appointed hereunder may (without prejudice to any other powers howsoever conferred) enter the Mortgaged Property., or any part(s) thereof (whether or not any income is arising therefrom) and shall (severally) have full power (i) to do any act or deed whatsoever (in the case of the Bank and any Receiver for and in the name of or on behalf of the Mortgagor or in the case of the Bank as Mortgagee) in relation to or in connection therewith which the Mortgagor was (or might have been) capable of doing and irrespective of the Mortgagor's death insolvency or incapacity and treating the Mortgagor conclusively as sole legal and beneficial owner (including (without limitation) power to manage build complete layout repair cleanse develop use deal with apply for registration permissions and licences equip furnish get-in receive and collect moneys arising sell give effective receipts exchange lease licence sub-lease surrender and accept surrender of leases convey assign transfer covenant exercise statutory rights insure litigate contract compromise employ agents and servants and provide services) and (ii) to conduct any business carried on or in the opinion of the Bank or any Receiver capable of being carried on in or from the Mortgaged Property and shall in connection therewith have all of the powers referred to above. Any expenditure incurred in so doing shall be immediately repayable by the Mortgagor with interest at the rate aforesaid and shall be a liability charged on the Mortgaged Property in priority to all other sums secured thereon. The Bank and any Receiver may utilise any moneys from time to time received for the purpose of financing any expenditure or costs at any time incurred in connection with the exercise of any powers hereby or otherwise conferred in advance of any other payments or application (whether under Section 109(8) of the Law of Property Act 1925 of otherwise), Any Receiver may borrow and/or secure the payment of money which may be required for the exercise of any of the powers hereby or otherwise conferred in such manner (including the creating of new legal charges of the Mortgaged Property whether or not having priority to this Mortgage) as may be considered expedient. Neither the Bank nor any Receiver shall be liable to the Mortgagor as mortgagee in possession or otherwise for any loss howsoever occurring in the exercise of any such powers and any Receiver shall be the agent of the Mortgagor (who shall be solely responsible for his acts defaults and remuneration). Section 109(6) of the said Act shall apply as though the words "not exceeding five per centum of the gross amount of all money received" were omitted. The Mortgagor hereby irrevocably appoints the Bank and any Receiver as agents and attorneys to exercise (severally) any of the said powers. The powers of attorney hereby given are given by way of security. The powers hereby conferred may also be exercised by any substitute or delegate appointed in writing by the Bank or any Receiver or by any attorney of any of them or by any substitute or delegate appointed in writing by any such attorney for and in the name and on behalf of the Mortgagor the Receiver or the Bank as the case may be and any such exercise by any such substitute delegate or attorney shall be treated by the Mortgagor and the Bank and shall be effective in all respects as an exercise by the Bank or by the Receiver as the case may be. The Bank and any Receiver (including any substitute delegate or attorney as aforesaid) in connection with any powers howsoever conferred may do all acts and things and execute all such deeds and sign all such agreements or enter into or make all such arrangements as may be required of as they may consider necessary or desirable in relation to the exercise of any such powers. (b) If the Mortgagor is not a company then the Mortgagor hereby (i) grants an irrevocable licence to the-Bank and to any Receiver until the sale of the Mortgaged Property to use all the assets of the Mortgagor situated at the Mortgaged Property which are used in connection vath any business of the Mortgagor carried on at the Mortgaged Property and (ii) further irrevocably authorises the Bank and/or any Receiver to remove sell store or otherwise deal with the same and to pay any net proceeds of sale after deduction of any costs and expenses relating thereto to the Bank which shall account to the Mortgagor for the proceeds of any such sale aftw deducting any such expenses. 8 If the Bank receives or is deemed to be affected by notice whether actual or constructive of any subsequent charge or other interest affecting any part of the Mortgaged Property and/or the proceeds of sale thereof and/or any other property hereby charged the Bank may open a new account or accounts with any person for whose liabilities this Mortgage is available as security. N the Bank does not open a new account it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice and as from that time all payments made to the Bank shall be credited or be treated as having been credited to the new account and shall not operate to reduce the amount for which this Mortgage is security. 9 In case the Mortgagor shall have more than one account with the Bank it shall be lawful for the Bank at any time and without any prior notice forthwith to transfer all or any part of any balance standing to the credit of any such account (whether current or otherwise or subject to notice or not) to any other such account which may be in debit but the Bank shall notify the Mortgagor of the transfer having been made. If any credit balance is in a different currency from any debit balance the Bank shall be entitled to utilise currency of the credit balance for the purchase at its spot rate of exchange of an amount in the currency of the debt balance not exceeding the amount of such debit balance and also to pay out of the credit balance any additional sum which the Bank may be required to pay for such currency. 10 None of the persons included in the expression 'the Mortgagor" shall as against the Bank be entitled to any of the rights or remedies legal or equitable of a surety as regards the indebtedness or liabilities of any of the other persons included in the expression "the Mortgagor". 11 A demand or notice hereunder shall be in writing signed by an officer or agent of the Bank and may be served on the Mortgagor by hand or by post or by facsimile machine (fax). In the case of a company service by hand may be made either by delivering the same to any officer of the company at any place or leaving the same addressed to the company at its registered office or place of business last known to the Bank. A demand or notice by post or by fax may be addressed to the Mortgagor at the registered office address or place of business last known to the Bank and shall be deemed to have been received if posted two days after the day on which it was posted and if sent by fax at the time of transmission. It shall be effective notwithstanding it be returned undelivered and notwithstanding the death of the Mortgagor. The Bank may use the last fax number of the Mortgagor known to it and transmission may be proved by production of an activity or transmission report which purports to indicate the transmission of a message to such a number. 12 If the Mortgagor is a company the Mortgagor certifies that this Mortgage does not contravene any of the provisions of the company's Memorandum and Articles of Association and has been executed in accordance therewith. 13 This Mortgage shall be governed by and construed in accordance with the Laws of England. In Witness whereof this Deed has been executed by the Mortgagor the day and year first before written. ID C041410 Signed as a Deed by the Mortgagor acting by Director Name in full (in block letters) Director/Secretary* Name in full (in block letters) *delete as applicable or alternatively: The Common Seal of Vicon Industries (UK) Limited was hereunto affixed in the presence of Director Secretary I/We acknowledge receipt of a completed copy of this document. If executed by a company the acknowledgment must be signed by a Director or by the Company Secretary Secretary Signature(s) ID C041410 Solent Securities Centre East Solent Corporate Business Centre Vicon Industries (UK) Limited Dated 9th April 1997 Vicon Industries (UK) Limited to National Westminster Bank Plc Legal Mortgage of Leasehold property situate at Site P3 Brunel Way Segensworth Industrial Estate Segansworth East. Fareham Hampshire Chsl018o NWB1115(RevMayl995) This Release made the day of One thousand nine hundred and Between the within-named National Westminster Bank Plc (the Bank) of the one part and the within-named of the other part Witnesses that the Bank as Mortgagee hereby releases all and singular the property now comprised in or charged by the within-written Dead from all moneys secured by and from all claims and demands under the Within-written Deed. In Witness whereof this Deed has been duty executed on behalf of the Bank by its duly authorised Attorney the day and year first before written. Signed and Delivered as a Deed by as the Attorney and on behalf of the Bank In the presence of Bank Official Signature of Witness COMMERCIAL FIXED RATE LOAN Agreement (Company) We, National Westminster Bank Plc and any person to whom we transfer our rights or duties under this agreement agree to offer you a loan under the terms and conditions set out below and on the attached appendix. The first part of the appendix explains some of the words and phrases used in this agreement. 1. Date of offer: 24 March 1997 2 Your name- VICON INDUSTRIES (UK) LTD (1551194) Brunel Way, Segensworth East, Fareham, Hampshire P015 5TX 3 Lending Branch: 130 Commercial Road, Portsmouth, Hampshire PO1 1ES 4 Amount: 500,000 (Five hundred thousand pounds) 5 Purpose of the Loan: To uplift Japanese Yen loan from Chugai Boyeici Co Ltd and to provide working capital 6 Period of the Loan: 10 years 7 Interest rate A fixed rate of interest for the whole period of the Loan.(Please see: - paragraph 4 of the appendix for how we work out the interest; and - paragraph 5 of the appendix for how we fix the rate of interest.) (Please see paragraph 4 of the appendix for how we work out interest) 8 Fee: 5,ooo pounds due on the date on which you accept our offer as set out in paragraph 3 of the appendix. 9 Drawing the Loan; You must draw the loan in full in one amount. 10 Repayment: You must have repaid the Loan in full on the last day of the period shown in term 6 of this agreement. Subject always to our rights under paragraph 13 of the appendix, You will repay the Loan by 120 equal instalments of principal payable every one month starting one month after the date on which you draw the Loan. 11 Security: - First Legal Mortgage over Site P3, Brunel Way, Scgensworth Industrial Estate, Fareham, Hampshire. 12 Value of Security: The Security shown in term 11 of this agreement together with any security provided pursuant to paragraph 6 of the appendix must be worth (calculated according to our own basis of valuation from time to time) at least 100 percent of the amount which you owe at any time on the Loan. 13 Financial agreements: You agree to the following:- Please see paragraph 2 of the appendix for an explanation of the words and phrases used below. a. You will not allow Tangible Net Worth to be less than 450,000 pounds b. You will not allow Cash Generated to be Less than 100 percent of Debt Service Costs. c. You will not allow Profit to be less than 200 percent of Borrowing Costs. COMMERCIAL FIXED RATE LOAN d. You will not, without our prior written consent either create, extend or increase any security interest on the whole or any part of your or the Group's undertaking, property or assets (including uncalled capital) whether present or future. Security interest includes (without limitation) liens, pledges, charges, mortgages or other encumbrances. e. You will provide us with such financial and other information relating to you or to the Group as we may reasonably require including (without limitation) copies of the audited accounts not later than 5 months after the end of the accounting period to which they relate. In order to verify whether you are complying with these covenants, we will refer to your annual audited accounts'. 14 Overdue payments: If you do not make any payment under this agreement on the date it is due, then, without prejudice to our other rights, we will charge interest on the overdue amount from the date it was due to the date upon which we receive payment (as well after as before judgement). This will be calculated (and compounded in accordance with our normal practice) on the basis of a year of 365 days and the actual number of days elapsed. You will pay interest to us at a rate which is equal to the sum of:- 5 percent per year; and our base rate from time to time Any late payments may be debited to a Separate account. 15 Early Repayment: Paragraph 8 of the appendix gives details of how you may ask to repay the Loan before the specified repayment dates. In connection with paragraph 8 of the appendix, the prepayment fee is 0.5 percent. of the amount which you prepay. COMMERCIAL FIXED RATE LOAN Appendix 1 Agreement This appendix forms part of the agreement between us. If we refer to a paragraph, this will mean a paragraph of this appendix. if we refer to a term this will mean a term of the agreement. 2 Meanings of words and phrases used in this agreement: the 'Agreement Date' means the date on which our offer Is accepted in the way set out in paragraph 3 of the appendix. 'Business Day' shall mean a day on which banks in general are open in the City of London for the transaction of business of the nature set out in this agreement. 'Event of Default' shall mean any event specified in paragraph 13 of the appendix. 'the Group' means you and your (of where your Parent is specified in term 2(b), your Parent and its) subsidiary undertakings (as defined by Section 258 of the Companies Act 1985) taken as a whole (and, save where the context does not admit, any of them individually); if there are no subsidiary undertakings for the time being, references to the Group shall be taken to be references to you and the word 'consolidated" in relation to any accounts or other financial matters shall be ignored. the 'Loan' means the loan facility which we have agreed to provide under the terms and subject to the conditions of this agreement and, where necessary, it will mean all amounts owed under this agreement. 'The Offer Date' is the date shown in term 1 of the agreement. This is the date on which we make the written offer of the Loan. "your Parent" is the company shown in term 2(b) of the agreement 'Option' means either of the interest rate options shown in term 7 of the agreement 'Quotation' means a statement from us in response to a request under paragraph 5 of the appendix giving details of a period and an interest rate and any other terms under which we are willing to provide the Loan. 'The Quotation Date' is the date on which we make a Quotation. 'Security' means the security shown in term 11 of the agreement and any other security which you provide under paragraph 6 of the appendix. "Subsidiary Undertaking' shall mean a subsidiary undertaking (as defined by S.258 of the Companies Act 1985). The following definitions apply to the financial agreements in term 13 of the agreement. 'Borrowing Costs' means, in respect of any financial period, all continuing, regular or periodic costs, charges and expenses (including but not limited to, interest and any capitalised interest) incurred by the Group in effecting, servicing or maintaining Total Borrowing. 'Capital Expenditure' means, in respect of any financial period, the aggregate expenditure of the Group on the purchase of fixed assets (as determined in accordance with generally accepted United Kingdom accounting principles (consistently applied)). 'Cash Generated' means, in respect of any financial period, the sum of:- - Profit;plus - an amount equal to the depreciation charged on fixed assets of the Group during such period and any other non-cash movements; plus - an amount equal to any decrease in net working capital (being, in respect of any period, the net surplus (or deficit) of the aggregate stock in trade of the Group and the COMMERCIAL FIXED RATE LOAN amount owed to members of the Group by debtors less the amount owed by them to creditors at the end of such period); plus - the proceeds of new ordinary or other non-redeemable shares issued by you during such period. LESS the sum of:- - - an amount equal to tbe tax paid by tbe Group during such period, plus - - an amount equal to any increase in net working capital (as defined-above) during such period; plus - - an amount equal to the Capital Expenditure (including investments) by the Group during such period less an amount equal to the net proceeds of disposal of fixed assets during such period; plus - - an amount equal to the aggregate amount of dividends on ordinary shares paid by you during such period; plus - - any receipts of the Group by way of extraordinary items during such period. 'Current Assets' means all assets of the Group which would be classified, in accordance with generally accepted United Kingdom accounting principles (Consistently applied) as current assets. 'Current Liabilities' means all liabilities of the Group which would be classified, in accordance with generally accepted United Kingdom accounting principles (consistently applied) as current liabilities. 'Debt Service Costs' means, in respect of any financial period:- (i) all interest, commission, periodic fees and other financial charges payable by any member of the Group during such period (including the interest element payable under financial leases); plus (ii) the aggregate amount of all dividend payments on redeemable Preference shares (and other redeemable shares) made by you during such period, plus (iii) the aggregate amount of all debt repayments made by any member of the Group or due from any member of the Group (including redemption of any redeemable preference shares) during such period. 'Net Cash Flow before Financing' means in respect of any financial period, the sum of:- i. Profit, plus ii. an amount equal to the depreciation charged on fixed assets of the Group during such period and any other non-cash movements during such period; plus iii.an amount equal to any decrease in net working capital (being, in respect of any period the net surplus (or deficit) of the aggregate stock in trade of the Group and the amount owed to members of the Group by debtors less the amount owed by them to creditors at the end of such period); LESS the sum of:- i. an amount equal to the tax paid by the Group during such period, plus ii. an amount equal to any increase in net working capital (as defined above) during such period, plus iii. an amount equal to the Capital Expenditure (including investments) by the Group during such period less an amount equal to the net proceeds of disposal of fixed assets during such period, plus iv. an amount equal to the interest paid (less interest received) for such period, plus v. an amount equal to the aggregate amount of dividends on ordinary shares paid by you during such period; plus vi. any receipts of the Group by way of extraordinary items during such period. COMMERCIAL FIXED RATE LOAN 'Net Working Assets' in respect of any period, the.aggregate stock in trade of the Group and the amounts owed to members of the Group by trade debtors less the amounts owed by them to trade creditors at the end of such period. `Profit' means, in respect of any financial period, the amount of profit of the Group (excluding profit attributable to minority interests) before taxation, interest payable, and any unusual, extraordinary or exceptional items. `Tangible Net Worth' means the amount the time being paid up or credited as paid up on your (or, where your Parent is specified in term 2(b), your Parent's) issued share capital plus all reserves of the Group which would, in accordance with generally accepted United Kingdom accounting principles consistently applied be classified as shareholders capital plus retained earnings of the Group but deducting assets the Group which would, in accordance with such principles, be classified as intangible assets. `Total Borrowing' means the total outstanding principal amount of all borrowings or monies otherwise raised by the Group from all sources whatever, whether by way of debenture, mortgage, unsecured loan, overdraft or in any other manner (including redeemable preference shares) plus the aggregate face amount of all discounted acceptance credits. 3 Availability of Loan From the Offer Date shown in term 1 of the agreement you will have 3O days in which you can draw the Loan. However, you can only accept this offer and draw the Loan if we have received the following items from you and are satisfied with them:- a) A copy of this agreement with the acceptance form signed on your behalf. b) A certified copy of a resolution of the board of directors showing that it - accepts the terms and conditions of the Loan; - agrees to give the security set out in term 11 of the agreement; and - authorises a person or persons to take such other action on your behalf as may be necessary for the purpose of the agreement. c) A copy of your Memorandum and Articles of Association certified by your secretary or a director as being up to date (including copies of all amending resolutions). d) The security set out in term 11 of the agreement together with copies of such certified board resolutions and copies of Memoranda and Articles of Association from the giver(s) of such security as we may require. You must give us three days' notice of your intention to draw the Loan. These days must be Business Days. We will credit your current account with the amount of the Loan on the day on which you accept the Quotation. You may not draw the Loan unto we are satisfied that you have accepted a Quotation. Acceptance of the offer contained In this agreement may be effected by receipt by us at the lending branch (please see term 3 of the agreement) within thirty days of the date specified In term 1 of the agreement Of the items specified in this paragraph. 4 Interest We will work out Interest on the balance of the loan outstanding from day to day on the basis of the actual number of days elapsed and a 365 day year. COMMERCIAL FIXED RATE LOAN You must pay interest to us on our usual charging days in March, June, September and December or by combined interest and principal instalments (where specified under term 10) on such dates as are specified under term 10 of the agreement. Option 1: You will pay a fixed rate of interest for the entire period of the Loan as specified in your Quotation. This rate of interest will be the rate shown in the Quotation. We may charge interest to your current account or to your loan account. If you do not make any payments on the due date under this agreement, then the rate of interest specified in term 14 shall apply to any overdue amounts. 5 Fixed Rate of Interest You must give us three days notice in writing of the date on which you want to draw the Loan. All these days must be Business Days If we have received the items listed in paragraph 3 of this appendix (within the time period set out there), you may ask for a Quotation at any time up to 4 p.m. on the required day for the Loan (which must be a Business Day). You must also tell us the interest rate option you want. You must accept or reject our Quotation immediately. If you do not accept the Quotation immediately you shall be deemed to have rejected it. Once you have accepted the Quotation we will normally send to you written details of the terms of the Quotation. These details will include the interest rate and the period for which such rate applies repayment dates and repayment instalment amounts but if you do not receive these written details it will not affect your obligations in respect of the Quotation which you have accepted. Accepting the Quotation in any way (whether by telephone telex or in any other way ) shall be binding on you and will mean that you will have to borrow the full amount of the Loan as set out in this agreement and the Quotation on the Quotation Date. If we do not receive instructions from you in relation to the Quotation which you have accepted we shall be entitled to credit the amount of the Loan to a current account in your name at the lending branch shown in term 3 of the agreement and you shall be deemed to have drawn the Loan. 6 Security You must give us the security shown in term 11 of the agreement and this will be a continuing security for the discharge on demand of all your indebtedness and your other liabilities to us from time to time. You undertake to provide any extra security which we need to maintain the value of the Security at the level specified in term 12 of the agreement within such period as we may require. The open market value of the Security shall be determined at our option from time to time by an independent professional valuation. You will have to pay for this valuation. 7 Fees and Costs We have the right to debit your current account with the fees set out in term 8 and 15 of the agreement. COMMERCIAL FIXED RATE LOAN 8 Early Repayment You may repay the Loan early subject to you giving us five business days irrevocable written notice and subject to you indemnifying us for the breakage costs and losses sustained or incurred by us as a result of such early repayment. The breakage costs of such early repayment will until further notice, be calculated in accordance with the formula provided in the attached schedule and it is understood that the breakage costs and losses can only be confirmed on the day early redemption takes place. On early repayment of the Loan you will also have to pay us the prepayment fee set out in Term 15 of the agreement. A certificate by one of our officers as to the amounts due from you under this paragraph shall, save for manifest error, be conclusive evidence (and admissible as such) against and binding on YOU. You cannot reborrow any amount you have pre-paid. 9 Liability If you are more than one person then the expression "you" shall mean all of such persons and (save where the context does not so admit) any of them and the obligation of those persons shall be joint and several. Each such person irrevocably appoints each other person as his agent for the service of any demand or notice under this agreement. 10 Current Accounts You agree to maintain a current account with us throughout the period of the Loan. 11 Payments We may transfer amounts from your current account to meet the repayments set out in term 10 of the agreement. We may use any repayment instalment (including instalments of principal and interest) or any part of any repayment instalment to: - - reduce the amount of principal outstanding on the Loan. - - pay interest accrued on the Loan. - - discharge any other payment due under this agreement. You must make all payments under this agreement In full in pounds sterling without any deduction or withholding (whether in respect of set-off, counterclaim, duties, taxes, charges or otherwise howsoever). if you are compelled by law to make any deduction or withholding, you will promptly pay to us such additional amounts as will make the net amount received by us equal to the full amount payable by you had there been no deduction or withholding. 12 Set Off We shall be entitled to set off against any of your liabilities to us under this agreement (whether present, future, actual or contingent) any of your credit balances on any of your accounts with us or in your name. We do not have to give you any prior notice to do this. COMMERCIAL FIXED RATE LOAN 13 Default If any of the following events occur, we may, by giving you written notice, cancel our outstanding commitments to you (including the availability of the Loan if you have not drawn it) and demand immediate repayment of your indebtedness to us and exercise our rights under any Security:- (a) If you breach any term or condition (including any covenant) of this agreement. (b) If you do not make any payment on the date it is due under this agreement and whether by way of principal, interest or otherwise. (c) If you do not use the Loan for the purpose set out in term 5 of the agreement. (d) If the Security or any part of the Security shall cease to be fully enforceable in accordance with its terms or with effect from the date on which the determination of the continuing nature of the Security or any part of the Security occurs, such continuing nature is determined whether such determination be by actual or constructive notice or be deemed to have occurred or any binding undertaking provided in the Security or any part of the Security shall be breached or any guarantor gives or purports to give notice to terminate its liabilities under any guarantee in respect of the Loan. (e) If you sell or dispose of any asset listed in term 11 of the agreement or it ceases to be in your sole possession. (f) If your current account becomes overdrawn after the debiting of any payment due from you under the Loan or it becomes overdrawn in excess of any limit agreed with us and you do not offer payment in cash to us when we inform you of this. (g) If any representation, warranty or statement made to us by you in connection with the Loan is breached or is false or if you fail to tell us anything which in our opinion is material to the Loan. (h) If you or any member of the Group make any default in the performance of any other agreement for borrowed money whether with us or any other lender whereby the due date of repayment thereunder Is rendered capable of acceleration; or If any of your indebtedness or the indebtedness of any member of the Group becomes or is declared by the holder or the lender thereof to he due and payable prior to its stated maturity or such indebtedness Is not repaid in full at its stated maturity; or If your indebtedness or the indebtedness of any member of the Group is repayable On demand and is not repaid in full immediately upon demand being made or if any guarantee or indemnity given by any giver of security in connection with any of your liabilities to us or the liabilities of any member of the Group to us or any other leader is not honoured when due and called upon. (i) If a petition is presented or a resolution passed for your winding up or that of any member of the Group or a petition is presented for an administration order to be made in relation to you or any member of the Group; or your directors or the directors of any member of the Group make a proposal for a voluntary arrangement with your creditors or the creditors of any member of the Group; or you are unable to pay your debts within the meaning of Section 123 of the Insolvency Act 1986 or any member of the Group is unable to pay its debts within the meaning of such section or an encumbrancer takes possession of or a receiver or an administrative receiver is appointed over any of your assets or over the assets of any member of the Group. (j) If there shall occur in our opinion a material effective change of control (as defined by Section 840 of the income and Corporation Taxes Act 1988) of you or your Parent. COMMERCIAL FIXED RATE LOAN (k) If there has occurred any change which in our reasonable opinion is a material adverse change in your business, assets or financial condition or in the business, assets or financial condition of the Group or any member of the Group which, in our reasonable opinion, may affect your ability to comply with your obligations under this agreement. (1) If any judgement, distress, warrant of attachment, writ of execution or similar process is Issued, levied or enforced upon any of your assets or the assets of any member of the Group or if any asset held by the Bank as security for the Loan is charged or becomes encumbered elsewhere. (m) If you or any member of the Group ceases or threatens to cease to carry on its business or sells, transfers or otherwise disposes of in any one transaction or series of related transactions any substantial part of its assets. 14 Delay in exercising our rights If we delay in giving any notice or exercising any of our rights under this agreement this should not he construed as a waiver of any of our rights. 15 Demands and Notices Any demand or notice to you will be made in writing and be signed by one of our officers and served either by personal delivery on you at any place or by post addressed to you at your place of business last known to us. Service by post on you shall be deemed to be effective on the next Business Day after the date of posting even if it is returned undelivered. Any notice to us under this agreement must be made in writing and signed by a duly authorised officer on your behalf. it must be delivered by hand or by post to the lending branch specified in term 3 of the agreement. 16 Costs and Expenses You will pay all costs, charges and expenses arising in connection with the Loan and the Security including the negotiation and preparation of this agreement and the Security and all costs, charges and expenses arising in connection with the preservation and/or enforcement of our rights under this agreement or under the Security and will indemnify us for any and all losses, costs and expenses occasioned by the occurrence of an Event of Default. 17 Increased Costs and Illegality (a) If we determine in our sole opinion that as a result of any law, regulation, directive or official request (whether or not having the force of law) ("Requirement") or compliance by us with any Requirement (including compliance by us with any change in any Requirement or change In the interpretation of any Requirement) the cost to us of funding, maintaining or making available the Loan (or any undrawn amount of the Loan) is increased or the effective return to us on the Loan is reduced then you shall pay to us on demand such sum as may he certified to you by us as shall compensate us for such increased cost or such reduction. (b) If the effect of the introduction of or any change in applicable law or directive or the interpretation of such law or directive is to make or purport to make the Loan unlawful then our obligations under this agreement shall cease and you will on demand pay to us all amounts outstanding under the Loan. COMMERCIAL FIXED RATE LOAN 18 General Points (a) If at any time any one or more of the provisions in this agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions of this agreement shall not in any way be affected or impaired. (b) Unless we expressly agree to do so in writing we do not hold ourselves out as providing advice on or considering the general suitability of this Loan for your particular circumstances (including tax circumstances) and neither we nor our employees shall be liable for any indications given as to such suitability. We make no warranties or representations about the advisability of any underlying transaction entered into by you. You should obtain independent professional advice on such matters, and upon any Security required by us. (c) This agreement is governed by the laws of England. (d) All expressions in this letter bearing a plural meaning shall (where the context so admits) also bear the singular meaning and vice versa. (e) All references in this letter to any statutory provision shall be deemed to include any statutory modification or re-enactment of such provision. 19 Representations and Warranties You represent and warrant that you have full power to accept and be bound by the terms and conditions set out in this agreement and to draw the Loan and that you have taken all necessary steps and obtained all necessary consents and authorisations to do so and that accordingly this agreement constitutes your legal, valid and binding obligations fully enforceable in accordance with their terms. You represent and warrant as follows:- (a) You are duly incorporated and validly existing under the laws of England. (b) No Event of Default has occurred or is outstanding and no event has occurred which with the giving of notice or the lapse of time would constitute an Event of Default. (c) All information, exhibits and reports furnished to us in connection with this agreement were and remain true and accurate in all respects and do not omit any facts thereby rendering misleading any statement contained therein. (d) The representations and warranties set out above shall survive your acceptance of this agreement and the drawing of the Loan and shall be deemed to be repeated on each day throughout the period of the Loan with reference to the facts and circumstances existing at that time. John McLellan Manager For and on behalf of National Westminster Bank Plc COMMERCIAL FIXED RATE LOAN FORM OF ACCEPTANCE We accept the loan on the terms and conditions set out in this letter By For and on behalf of VICON INDUSTRIES (UK) LTD Date: 8-4-97 COMMERCIAL FIXED RATE LOAN SCHEDULE Indicative Calculation of Maximum Breakage Costs Actuarial Style (Reducing Capital and Interest) Original Loan Amount 500,000 pounds Terms of Loan 2 Years Fixed Rate 10.25 percent Term Expired 1 Year Loan Amount Outstanding 251,505 pounds Available Rate at Early Repayment Date 8.625 percent Breakage Costs 4,401 * pounds As a guide only, the formula which will apply, can be stated as follows: Current amount of loan outstanding Multiplied by Remaining period (in years) to maturity of the fixture Multiplied by (Existing loan rate minus(Current available fixed rate for the remaining term - 0.125 percent)) Actual breakage costs will be confirmed on the day early redemption takes place *Note: The breakage cost payable is subject to a minimum of 0.125% of the amount of the Loan, and is in addition to the 0.5 percent prepayment fee. EX-27 4
5 3-MOS 9-MOS SEP-30-1997 SEP-30-1997 JUN-30-1997 JUN-30-1997 105,224 105,224 0 0 10,510,946 10,510,946 (476,320) (476,320) 18,330,779 18,330,779 28,470,629 28,470,629 15,214,065 15,214,065 (10,689,376) (10,689,376) 32,995,318 32,995,318 13,413,381 13,413,381 9,417,378 9,417,378 0 0 0 0 28,027 28,027 10,136,532 10,136,532 32,995,318 32,995,318 13,725,759 37,351,404 0 0 9,815,328 26,867,870 0 0 2,961,130 8,458,061 81,053 196,053 309,274 834,207 558,974 995,213 16,000 71,000 542,974 924,213 0 0 0 0 0 0 542,974 924,213 .18 .31 .18 .30
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