<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CONOLOG CORPORATION
-------------------
(Name of Issuer)
Common Stock, $1.00 par value
-----------------------------
(Title of Class of Securities)
208254409
--------------------------------------------------------
(CUSIP Number for Common Stock)
Robert S. Benou
Conolog Corporation
5 Columbia Road
Somerville, NJ 08876
(908) 722-8081
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 12, 1996
--------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement. [X] (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than 5% of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of 5% or less of such class.)
Exhibit Index
is located at page 18.
<PAGE>
CUSIP No. 208254409 for Common Stock
1) Name of Reporting Person: CNL Holdings, Inc. SS or IRS
Identification No. of Above Person: ________________________
2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions): OO
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization: U.S.A.
Number of 7) Sole Voting None.
Shares Power:
Beneficially
Owned by Each
Reporting
Person With
8) Shared Voting None.
Power:
9) Sole CNL Holdings, Inc. owns an
Dispositive option to purchase 375,000
Power: shares of Common Stock and
an option to purchase a
Promissory Note convertible
into 1,400,000 shares of
Common Stock. All of such
shares are the subject of an
irrevocable proxy in favor of
Robert S. Benou, President of
the Issuer. CNL Holdings,
Inc. is controlled by James
R.Solakian and Dune Holdings,
Inc.
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CUSIP No. 208254409 for Common Stock
10) Shared None.
Dispositive
Power:
11) Aggregate Amount Beneficially Owned by the Reporting
Persons: 1,775,000 shares of Common Stock.
12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) [ ]
13) Percent of Class Represented by Amount in Row (11):
36.3% of the Common Stock based on 1,031,963 shares of
Common Stock outstanding as of August 31, 1996. (72.9%
of the Common Stock outstanding, assuming conversion of
Promissory Note into 1,400,000 shares of Common Stock).
14) Type of Reporting Person (See Instructions): CO
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CUSIP No. 208254409 for Common Stock
1) Name of Reporting Person: Dune Holdings, Inc. SS or IRS
Identification No. of Above Person:_______________________
2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions): OO
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization: U.S.A.
Number of 7) Sole Voting None.
shares Power:
Beneficially
Owned by Each
Reporting
Person With
8) Shared Voting None.
Power:
9) Sole CNL Holdings, Inc. owns an
Dispositive option to purchase 375,000
Power: shares of Common Stock and
an option to purchase a
Promissory Note convertible
into 1,400,000 shares of
Common Stock. All of such
shares are the subject of an
irrevocable proxy in favor of
Robert S. Benou, President of
the Issuer. CNL Holdings,
Inc. is controlled by James
R.Solakian and Dune Holdings,
Inc.
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CUSIP No. 208254409 for Common Stock
10) Shared None.
Dispositive
Power:
11) Aggregate Amount Beneficially Owned by the Reporting
Persons: 1,775,000 shares of Common Stock.
12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) [ ]
13) Percent of Class Represented by Amount in Row (11):
36.3% of the Common Stock based on 1,031,963 shares of
Common Stock outstanding as of August 31, 1996. (72.9%
of the Common Stock outstanding, assuming conversion of
Promissory Note into 1,400,000 shares of Common Stock).
14) Type of Reporting Person (See Instructions): CO
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CUSIP No. 208254409 for Common Stock
1) Name of Reporting Person: Randolph K. Pace SS or IRS
Identification No. of Above Person:_______________________
2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions): OO
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization: U.S.A.
Number of 7) Sole Voting None.
Shares Power:
Beneficially
Owned by Each
Reporting
Person With
8) Shared Voting None.
Power:
9) Sole CNL Holdings, Inc. owns an
Dispositive option to purchase 375,000
Power: shares of Common Stock and
an option to purchase a
Promissory Note convertible
into 1,400,000 shares of
Common Stock. All of such
shares are the subject of an
irrevocable proxy in favor of
Robert S. Benou, President of
the Issuer. CNL Holdings,
Inc. is controlled by James
R.Solakian and Dune Holdings,
Inc.
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CUSIP No. 208254409 for Common Stock
10) Shared None.
Dispositive
Power:
11) Aggregate Amount Beneficially Owned by the Reporting
Persons: 1,775,000 shares of Common Stock.
12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) [ ]
13) Percent of Class Represented by Amount in Row (11):
36.3% of the Common Stock based on 1,031,963 shares of
Common Stock outstanding as of August 31, 1996. (72.9%
of the Common Stock outstanding, assuming conversion of
Promissory Note into 1,400,000 shares of Common Stock).
14) Type of Reporting Person (See Instructions): IN
<PAGE>
CUSIP No. 208254409 for Common Stock
1) Name of Reporting Person: Judith Pace SS or IRS
Identification No. of Above Person:________________________
2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions): OO
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization: U.S.A.
Number of 7) Sole Voting None.
Shares Power:
Beneficially
Owned by Each
Reporting
Person With
8) Shared Voting None.
Power:
9) Sole CNL Holdings, Inc. owns an
Dispositive option to purchase 375,000
Power: shares of Common Stock and
an option to purchase a
Promissory Note convertible
into 1,400,000 shares of
Common Stock. All of such
shares are the subject of an
irrevocable proxy in favor of
Robert S. Benou, President of
the Issuer. CNL Holdings,
Inc. is controlled by James
R.Solakian and Dune Holdings,
Inc.
<PAGE>
CUSIP No. 208254409 for Common Stock
10) Shared None.
Dispositive
Power:
11) Aggregate Amount Beneficially Owned by the Reporting
Persons: 1,775,000 shares of Common Stock.
12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) [ ]
13) Percent of Class Represented by Amount in Row (11):
36.3% of the Common Stock based on 1,031,963 shares of
Common Stock outstanding as of August 31, 1996. (72.9%
of the Common Stock outstanding, assuming conversion of
Promissory Note into 1,400,000 shares of Common Stock).
14) Type of Reporting Person (See Instructions): IN
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CUSIP No. 208254409 for Common Stock
1) Name of Reporting Person: James R. Solakian SS or IRS
Identification No. of Above Person:___________________________
2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) [ ]
(b) [X]
3) SEC Use Only
4) Source of Funds (See Instructions): OO
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization: U.S.A.
Number of 7) Sole Voting None.
Shares Power:
Beneficially
Owned by Each
Reporting
Person With
8) Shared Voting None.
Power:
9) Sole CNL Holdings, Inc. owns an
Dispositive option to purchase 375,000
Power: shares of Common Stock and
an option to purchase a
Promissory Note convertible
into 1,400,000 shares of
Common Stock. All of such
shares are the subject of an
irrevocable proxy in favor of
Robert S. Benou, President of
the Issuer. CNL Holdings,
Inc. is controlled by James
R.Solakian and Dune Holdings,
Inc.
<PAGE>
CUSIP No. 208254409 for Common Stock
10) Shared None.
Dispositive
Power:
11) Aggregate Amount Beneficially Owned by the Reporting
Persons: 1,775,000 shares of Common Stock.
12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) [ ]
13) Percent of Class Represented by Amount in Row (11):
36.3% of the Common Stock based on 1,031,963 shares of
Common Stock outstanding as of August 31, 1996. (72.9%
of the Common Stock outstanding, assuming conversion of
Promissory Note into 1,400,000 shares of Common Stock).
14) Type of Reporting Person (See Instructions): IN
<PAGE>
CUSIP No. 208254409 for Common Stock
ITEM 1. SECURITY AND ISSUER
This statement relates to shares of Common Stock, $1.00 par value per
share, of Conolog Corporation, a Delaware corporation (the "Issuer"). The Issuer
has its principal executive offices at 5 Columbia Road, Somerville, NJ 08876.
ITEM 2. IDENTITY AND BACKGROUND
(a) CNL Holdings, Inc. ("CNL"), Randolph K. Pace, Judith Pace, Dune
Holdings, Inc. ("Dune") and James R.Solakian are the Reporting
Persons filing this statement. Randolph K. Pace and Judith Pace
are officers of CNL and Dune. Dune and James R. Solakian are the
Shareholders of CNL.
(b) CNL is a Delaware corporation. The principal business of CNL is
investing. Dune is a Delaware corporation. The principal business
of Dune is investing. The principal business of Randolph K. Pace
and Judith Pace is investing. The principal business of James R.
Solakian is as President of Solakian Associates, Inc., a public
relations firm.
(c) The Reporting Persons' (other than Mr. Solakian) principal
business address is 750 Lexington Avenue, New York, New York
10022. Mr. Solakian's principal business address is 3 Shelton
Road, Flemington, NJ 08822.
(d) The Reporting Persons have not during the last five (5) years,
been convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors.)
(e) Not applicable.
(f) CNL and Dune are corporations formed under the laws of the State
of Delaware. The individual Reporting Persons' are United States
citizens.
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CUSIP No. 208254409 for Common Stock
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
As described in Item 6 below, CNL paid $150,000 for the option to purchase
375,000 shares of Common Stock and a promissory note convertible into 1,400,000
shares of Common Stock of the Issuer (the "Note"). The source of funds were
loans to CNL by its shareholders, to wit, Dune ($127,500) and James R. Solakian
($22,500). In order to exercise the option, CNL must pay an additional
$1,350,000.
ITEM 4. PURPOSE OF TRANSACTION
The option to purchase shares of Common Stock were acquired by all
Reporting Persons for investment purposes.
The Reporting Persons do not currently have any plans or proposals which
relate to or would result in (i) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation of the Issuer, (ii) a sale or transfer
of a material amount of the assets of the Issuer, (iii) any change in the
present board of the directors of management of the Issuer, (iv) any material
change in the present capitalization or dividend policy of the Issuer, (v) any
other material change in the Issuer's business or corporate structure, including
but not limited to, if the issuer is a registered closed-end investment company,
any plans or proposals to make any changes in the Issuer's investment policy for
which a vote is required by Section 13 of the Investment Company Act of 1940,
(vi) any change in the Issuer's charter, by-laws or other actions which may
impede the acquisition or control of the Issuer by any person, (vii) any of the
securities of the Issuer's securities ceasing to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association, (viii) any of the Issuer's securities becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended or (ix) any action similar to any of those
enumerated above.
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CUSIP No. 208254409 for Common Stock
ITEM 5. INTEREST IN SECURITY OF THE ISSUER
(a) The Reporting Persons own an option to purchase 375,000 shares of
Common Stock, and an option to purchase the Note, representing an aggregate of
36.3% of the Issuer's Common Stock(or 72.9% assuming conversion of the Note).
(b) The Reporting persons do not have sole power to vote or direct the vote
of the shares of Common Stock. The Reporting Persons have the sole power to
dispose or to direct the disposition of such shares. The shares of Common Stock
owned by the Reporting persons are the subject of an irrevocable proxy issued by
the Reporting Persons' in favor of Robert S. Benou, as President of the Issuer.
(c) None.
(d) Not Applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
The Reporting Persons acquired their option to purchase 375,000 shares of
Common Stock and the Note (convertible into 1,400,000 shares of Common Stock of
the Issuer), from Chase Manhattan Bank, a New York Banking corporation (the
"Bank"), pursuant to a Option and Purchase, Sale and Assignment Agreement, dated
as of September 12, 1996 ("Option Agreement") by and between the Bank and CNL.
Under the Option Agreement, the Bank has granted an option to CNL to purchase
all of the Bank's interest in (i) the Amended and Restated Term Loan Agreement
dated as of August 2, 1995 between the Issuer and the Bank, (ii) the Note and
(iii) the 375,000 shares of the Issuer's Common Stock owned by the Bank. CNL
paid $150,000 to the Bank for the option, which has an exercise price of
$1,500,000 and an expiration date of April 15, 1997. The Issuer and CNL have
entered into an agreement dated as of September 12, 1996 (the "Agreement"),
whereby CNL has agreed to lend up to $2,500,000 to the Issuer under certain
circumstances and the Issuer has agreed to file a registration statement (the
"Registration
<PAGE>
CUSIP No. 208254409 for Common Stock
Statement") with the Securities and Exchange Commission to register the 375,000
shares of Common Stock owned by the Bank and the 1,400,000 shares of Common
Stock into which the Note is convertible (collectively, the "Acquired Shares").
The proceeds of the sale of the Acquired Shares will be applied as follows:
the first $1,500,000 will be paid to CNL for the payments made to the Bank
pursuant to the Option Agreement; 50% of the balance, up to $2,500,000, will be
loaned to the Issuer (the "Loans") within five days of CNL's receipt of the
proceeds.
Each loan will be evidenced by a Note bearing interest at the rate of 4%
per annum and will be due 12 months from the date of such Loan. At maturity, the
Issuer will have the option to pay each Loan, together with all accrued interest
thereon, by issuing shares of a new Series C Preferred Stock (the "Series C
Preferred") having a value of $5.00 per share for purposes of such repayment.
The Series C Preferred will be non-voting and carry a cumulative dividend
of 8% per annum which may be payable by the issuance of shares of Common Stock
valued at $5.00 per share up to a maximum of 40,000 shares per annum. The Series
C Preferred will be convertible into Common Stock at the rate of one share of
common stock for each share of Series C Preferred and have a liquidating
preference of $5.00 per share.
The Agreement also provides that for the two year period commencing on the
issuance of any shares of Series C Preferred (the "Registration Period") CNL may
elect to include its Series C Preferred in any post-effective amendment to the
Registration Statement or any new registration statement under the Securities
Act of 1933, as amended. In addition, the Agreement also provides that during
the Registration Period, CNL may give notice to the Issuer to the effect that it
desires to register its shares under the Act for public distribution in which
case the Issuer will file a post-effective amendment to a then current
registration statement or a new registration statement.
<PAGE>
CUSIP No. 208254409 for Common Stock
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit # Description
--------- -----------
1 Option and Purchase, Sale and Assignment
Agreement, dated as of September 12, 1996 by and
between The Chase Manhattan Bank and CNL Holdings,
Inc.
2 Irrevocable proxy dated as of September 12, 1996
by and between CNL Holdings, Inc. and Conolog
Corporation.
3 Agreement dated September 12, 1996 by and between
CNL Holdings, Inc. and Conolog Corporation.
4 Promissory Note dated September 3, 1996 from CNL
Holdings, Inc. in favor of Dune Holdings, Inc.
5 Promissory Note dated September 3, 1996 from CNL
Holdings, Inc. in favor of James Solakian.
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CUSIP No. 208254409 for Common Stock
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 26, 1996
CNL Holdings, Inc.
By: /s/Randolph K. Pace
-----------------------------------
Randolph K. Pace, President
and Individually
/s/Judith Pace
-----------------------------------
Judith Pace, Secretary and
Treasurer, and Individually
/s/James R.Solakian
-----------------------------------
James R. Solakian, Individually
Dune Holdings, Inc.
By:/s/ Randolph K. Pace
-----------------------------------
Randolph K. Pace, President
and Individually
/s/Judith Pace
-----------------------------------
Judith Pace, Secretary and
Treasurer, and Individually
<PAGE>
CUSIP No. 208254409 for Common Stock
Exhibit Index
-------------
1 Option and Purchase, Sale and Assignment
Agreement, dated as of September 12, 1996 by and
between The Chase Manhattan Bank and CNL Holdings,
Inc.
2 Irrevocable proxy dated as of September 12, 1996
by and between CNL Holdings, Inc. and Conolog
Corporation.
3 Agreement dated September 12, 1996 by and between
CNL Holdings, Inc. and Conolog Corporation
4 Promissory Note dated September 3, 1996 from CNL
Holdings, Inc. in favor of Dune Holdings, Inc.
5 Promissory Note dated September 3, 1996 from CNL
Holdings, Inc. in favor of James Solakian.
<PAGE>
================================================================================
OPTION AND PURCHASE, SALE AND ASSIGNMENT AGREEMENT
Dated as of September 12, 1996
Among
THE CHASE MANHATTAN BANK,
formerly known as Chemical Bank,
and
CNL HOLDINGS, INC.
as Buyer,
relating to the obligations of
Conolog Corporation
to
The Chase Manhattan Bank,
formerly known as Chemical Bank
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS ................................................................. 1
SECTION 1. Definitions ................................................ 1
SECTION 2. Sale; Payment of Purchase Price ............................ 3
SECTION 3. Representations and Warranties of the Bank ................. 5
SECTION 4. Representations and Warranties of the Buyer ................ 8
SECTION 5. Limitations of Damages; Reimbursement Rights ............... 9
SECTION 5.1. Bank's Covenants ........................................... 10
SECTION 6. Bank's and Seller's Obligations ............................ 10
SECTION 6.1. Procedure for Reimbursement and Indemnification ............ 11
SECTION 7. Buyer's Obligations ........................................ 12
SECTION 8. Further Transfers .......................................... 12
SECTION 9. Miscellaneous .............................................. 12
<PAGE>
OPTION AND PURCHASE, SALE AND ASSIGNMENT AGREEMENT
AGREEMENT, dated as of September 12, 1996 (the "Agreement"), between The
Chase Manhattan Bank, a New York banking corporation (the "Bank"), formerly
known as Chemical Bank, and CNL HOLDINGS, INC., a Delaware corporation (the
"Buyer").
RECITALS
A. Conolog Corporation (the "Borrower") is a party to that certain
Amended and Restated Term Loan Agreement dated as of August 2, 1995 between the
Borrower and the Bank (the "Loan Agreement"), and that certain Amended and
Restated Term Note from the Borrower to the Bank dated August 24, 1995 in the
original principal amount of $1,025,000 (the "Original Note").
B. On September 11, 1996, the Original Note was modified pursuant to the
terms of an Allonge making the Original Note convertible into 1,400,000 shares
of the Borrower's common stock (the "Note Shares") (the Original Note, as
amended by the Allonge, the "Note").
C. As of the date hereof, the Bank is the sole legal and beneficial owner
of claims against the Borrower in the principal amount of $1,012,500.00,
together with interest and fees in the approximate amount of $65,488.45 as of
August 26, 1996, relating to the Note and the Loan Agreement. The Bank is also
the sole legal and beneficial owner of three hundred seventy-five thousand
(375,000) shares of the Borrower's common stock (the "Bank Shares"; and together
with the Note Shares, the "Shares"). Such claims and equity interest are
hereinafter referred to, together, as the "Claims".
D. The Buyer wishes to purchase all of the Bank's interest in the Loan
Agreement, the Note and the Claims from the Bank upon the occurrence of certain
events.
E. The Bank wishes to sell and assign all of the Bank's interest in the
Loan Agreement, the Note and the Claims to the Buyer.
AGREEMENT
In consideration of the mutual covenants and agreements contained
herein, the Bank and the Buyer hereby agree as follows:
SECTION 1. Certain Definitions.
<PAGE>
The following terms shall have the following meanings when used herein:
Affiliate: As defined in Section 101(2) of the United States Bankruptcy
Code.
Assigned Rights: Defined in Section 2(B).
Assignment Closing Date: Defined in Section 2(B).
Assignment Purchase Price: Defined in Section 2(C).
Assumed Obligations: Defined in Section 2(C).
Bank: Defined in the preamble to this Agreement.
Bank Shares: Defined in Recital C.
Borrower: Defined in Recital A.
Business Day: A day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
Buyer: Defined in the preamble to this Agreement.
Buyer Indemnitees: Defined in Section 6(A).
Buyer's Excluded Information: Defined in Section 3(L).
Buyer's Principal Claim Amount: $1,012,500.00
Call Money Rate: A rate per annum, calculated daily, equal to the average
of the percentages designated under the caption "call money", as published in
the "Money Rates" column of The Wall Street Journal.
Claims: Defined in Recital C.
Confidential Terms: Defined in Section 9(J).
Disallowed Amount: Defined in Section 5(B).
Final Order: An order, judgment or decree, rendered by a court of competent
jurisdiction that has not been reversed, stayed, modified or amended and as to
which (A) any appeal, petition for certiorari, or motion for rehearing or
reconsideration that has been filed has been dismissed or finally determined and
no appeal, petition for certiorari or motion for rehearing or reconsideration
has been granted; or (B) the time to appeal, seek certiorari or move for
rehearing or reconsideration has expired and no appeal, petition for certiorari
or motion for
2
<PAGE>
reconsideration or rehearing has been timely filed.
Governmental Authority: A Federal, state or other governmental agency,
authority, administrative or regulatory body, arbitrator, court or other
tribunal, foreign or domestic.
Liabilities: Defined in Section 6.1 of this Agreement.
Lien: Any security interest, mortgage, deed of trust, pledge, lien, adverse
claim, charge or other encumbrance of any kind.
Loan Agreement: Defined in Recital A.
Note: Defined in Recital B.
Note Shares: Defined in Recital B.
Option: Defined in Section 2(A).
Option Closing Date: Defined in Section 2(A).
Original Note: Defined in Recital A.
Reduction: Defined in Section 6.1.
Reduction Amount: Defined in Section 5(B).
Retained Interests: Defined in Section 2(B).
Retained Obligations: Defined in Section 2(C).
Seller: Defined in the preamble to this Agreement.
Seller's Excluded Information: Defined in Section 4(F).
Seller Indemnitees: Defined in Section 7(A).
Shares: Defined in Recital C.
SECTION 2. Sale; Payment of Purchase Price.
(A) On the date of execution and delivery of this Agreement by the Buyer
and the Bank (the "Option Closing Date"), the Bank shall grant to the Buyer an
option (the "Option") to purchase the Claims under the terms and conditions set
forth herein. On the Option Closing
3
<PAGE>
Date, the Buyer shall make payment of an nonrefunadable fee for the Option to
the Bank at the Bank's New York, New York office in the amount of One Hundred
Fifty Thousand Dollars ($150,000.00) by wire transfer of immediately available
funds in the lawful currency of the United States of America in accordance with
the following wire instructions:
The Chase Manhattan Bank
ABA #021000021
For Credit to:
A/c #144-0-02419
i/n/o Special Loan Clearing Account
Reference: Conolog Corporation
Attention: Mark Rechan
The closing of the transaction contemplated herein shall occur by delivery
by each party to the other of a duly completed and executed counterpart of this
Agreement, together with payment from the Buyer to the Bank for the Option.
(B) On the date the Shares may be registered under the Securities Act, or
such other date as the parties may agree (the "Assignment Closing Date"), the
Buyer shall exercise the Option, and the Bank shall sell, assign, transfer and
set over to the Buyer, without recourse, representation, or warranty (in each
case except as expressly provided herein), and the Buyer shall purchase, subject
to the terms and conditions hereof, an undivided one hundred percent (100%)
interest in (i) all right, title and interest of the Bank in and to the Claims;
(ii) all right, title and interest of the Bank in and to the Loan Agreement;
(iii) any property which may be exchanged for or distributed or collected in
respect of any of the foregoing; and (iv) any and all causes of action or claims
of the Bank (whether known or unknown) against any person or entity which are in
any way based upon, arise out of, or are related to any of the foregoing (the
items described in clauses (i), (ii), (iii), and (iv) being collectively
referred to herein as the "Assigned Rights"), excluding, however, any and all
claims which may arise out of services rendered by the Bank to the Borrower
other than under, and wholly unrelated to, the Loan Agreement (the "Retained
Interests"). If the Assignment Closing Date has not occurred before April 15,
1997, the Buyer may exercise the Option and purchase the Assigned Rights on that
date on the terms and conditions set forth herein. If the Buyer does not
purchase the Assigned Rights on or before that date, the purchase, sale and
assignment portion of this Agreement shall become null and void and be of no
further force or effect unless extended in writing by the Bank and the Buyer.
On the Assignment Closing Date, the Bank shall deliver or cause to be
delivered to the Buyer: (a) the originally executed Note, duly endorsed to the
Buyer or, at the Buyer's request, to the Buyer's nominee, (b) Borrower's stock
certificate number U 9156 representing the Bank Shares, together with an
executed stock power with signature guaranteed, and (c) such other instruments
and documents as the Buyer may reasonably request to evidence the Buyer's
ownership of the Assigned Rights.
4
<PAGE>
(C) Also on the Assignment Closing Date, the Buyer shall (i) pay to the
Bank at the Bank's New York, New York office the sum of One Million Five Hundred
Thousand Dollars ($1,500,000.00)(the "Assignment Purchase Price") by wire
transfer of immediately available funds in the lawful currency of the United
States of America in accordance with the wire instructions set forth in Section
2(A) hereof; and (ii) assume the Bank's obligations under the Loan Agreement in
respect of the Assigned Rights, which arise, accrue and are chargeable to the
period after the Assignment Closing Date, other than the Retained Obligations
(defined below) (collectively, the "Assumed Obligations"). The Bank (and not the
Investors) shall pay and duly perform all obligations or liabilities (a) arising
from the breach by the Bank of its representations, warranties, covenants,
agreements or indemnities made by the Bank in the Loan Documents; (b) for which
the Investors are indemnified under Section 6 hereof, or (c) arising from the
Bank's gross negligence or willful misconduct (collectively, the "Retained
Obligations"). The Assignment Purchase Price shall be reduced by the amount paid
to the Bank for the Option.
(D) (i) The obligations of the Buyer to acquire the Assigned Rights, and
to assume the Assumed Obligations on the Assignment Closing Date shall be
subject to the conditions that (x) the representations and warranties of the
Bank contained in this Agreement shall have been true and correct in all
respects when made and as of the Assignment Closing Date (it being agreed that
such representations and warranties shall be deemed to have been confirmed by
the Bank as of the Assignment Closing Date, without the need for further written
certification, unless the Bank shall have otherwise notified the Buyer in
writing to the contrary, in which event the Buyer may, but shall not be
obligated to, acquire the Assigned Rights); and (y) the Bank shall have complied
in all respects with all covenants required by this Agreement to be complied
with by it on or prior to the Assignment Closing Date, including but not limited
to the Bank's obligations under Section 2(B).
(ii) The obligations of the Bank to assign, sell and convey the
Assigned Rights on the Assignment Closing Date shall be subject to the
conditions that (w) the representations and warranties of the Buyer contained in
this Agreement shall have been true and correct in all respects when made and as
of the Assignment Closing Date (it being agreed that such representations and
warranties shall be deemed to have been confirmed by the Buyer as of the
Assignment Closing Date, without the need for further written certification,
unless the Buyer shall otherwise notify the Bank in writing to the contrary);
(x) the Buyer shall have complied in all respects with all covenants required by
this Agreement to be complied with by it on or prior to the Assignment Closing
Date, including but not limited to the Buyer's obligations under Section 2(C);
and (y) the Buyer shall have paid to the Bank the Assignment Purchase Price.
SECTION 3. Representations and Warranties of the Bank.
The Bank hereby represents and warrants to the Buyer that:
(A) The Bank is a New York banking corporation duly organized, validly
existing and
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<PAGE>
in good standing under the laws of the State of New York. The execution,
delivery and performance by the Bank of this Agreement and the Loan Agreement to
which it is a party are within its powers, have been duly authorized by all
necessary action and do not contravene, or result in a default under, any of its
charter documents or any law, agreement or other obligation to which it is
subject.
(B) This Agreement and the Loan Agreement to which the Bank is a party have
been duly and validly authorized, executed and delivered by the Bank, and are
the legal, valid and binding obligations of the Bank, enforceable against the
Bank in accordance with their respective terms. No registration with, or consent
or approval of, or any other action by, any Governmental Authority or other
person is now or was required in connection with the execution, delivery and
performance of this Agreement or the Loan Agreement by the Bank. The Bank has
not made any offers to sell, or solicitations of offers to buy, any portion of
the Assigned Rights in violation of any applicable securities laws.
(C) The Bank is the sole legal and beneficial owner and holder of the
Assigned Rights and has good title to, and on the Assignment Closing Date will
convey to the Buyer legal and beneficial ownership of and good title to, the
Assigned Rights. Such conveyance of ownership and title will be free and clear
of any Lien whatsoever.
(D) No proceedings are pending, or to the best of the Bank's knowledge,
threatened in writing against or affecting the Bank or the Assigned Rights
before any Governmental Authority, nor has any other person or entity asserted
any challenge to the validity or enforceability of the Assigned Rights. To the
best of the Bank's knowledge, no basis for any such challenge to the Assigned
Rights exists. No judgment has been entered on the Note.
(E) The Bank is not (i) a director or officer of the Borrower, (ii) a
partnership in which the Borrower is a general partner, (iii) a general partner
of the Borrower, or (iv) a managing agent of the Borrower.
(F) The Bank has not engaged in any acts, conduct or omissions with respect
to the Assigned Rights or the Retained Interests that could result in the holder
of the Assigned Rights receiving, in the aggregate, a proportionately smaller
repayment in respect thereof than the repayment required under the terms of the
Loan Agreement.
(G) The Bank is not aware of the existence of and is not a party to any
agreements, pleadings or other information that could reasonably be expected to
materially and adversely affect the Assigned Rights, other than such agreements,
pleadings and information as have been made available to the Buyer and which
have previously been furnished to the Buyer, or any information disseminated
publicly through electronic or print media or filed or referred to in filings by
the Borrower with the Securities and Exchange Commission, or information that
constitutes Buyer's Excluded Information.
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(H) The Bank has no obligation to acquire additional notes or to make
additional loans or extensions of credit under the Loan Agreement or in respect
of the Assigned Rights.
(I) Recitals A, B, C, and E in this Agreement are each true and correct.
(K) The Bank is a sophisticated seller with respect to the Assigned Rights,
has adequate information concerning the business and financial condition of the
Borrower to make an informed decision regarding the sale of the Assigned Rights
and has independently and without reliance upon the Buyer, and based upon such
information as the Bank has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that the Bank has relied upon the
representations, warranties, covenants, agreements and indemnities of the Buyer
contained in this Agreement. The Bank acknowledges that the Buyer has not made
and does not make any representation or warranty, whether express or implied,
except as expressly set forth in this Agreement. The Bank acknowledges that the
sale of the Assigned Rights by the Bank to the Buyer is irrevocable, and that
the Bank shall have no recourse to the Assigned Rights or the Buyer, except with
respect to breaches of representations, warranties, covenants and agreements
expressly set forth in this Agreement, and pursuant to indemnities contained
herein. The Bank acknowledges that the consideration received pursuant hereto
for the sale of the Assigned Rights may differ both in kind and in amount from
any payments or distributions which may ultimately be received with respect
thereto. The Bank is not an agent for the Buyer in this transaction.
(L) The Bank acknowledges that the Buyer currently may possess and
hereafter may come into possession of certain information concerning the Loan
Agreement, the Assigned Rights, and the Borrower which is not known to the Bank
and which may be material to a decision to sell the Assigned Rights, including,
without limitation, information received by the Buyer on a confidential basis
from the Borrower or on a privileged basis from the Buyer's counsel or advisors
(the "Buyer's Excluded Information"), that it has determined to sell the
Assigned Rights notwithstanding its lack of knowledge of any Buyer's Excluded
Information, and that the Buyer shall have no liability to it and the Bank
hereby waives and releases any claims which it might have against the Buyer or
any Buyer Indemnitee (as hereinafter defined), whether pursuant to applicable
securities laws or otherwise, with respect to the non-disclosure of any Buyer's
Excluded Information; and no broker, finder or other person acting pursuant to
the authority of the Bank is entitled to maintain a claim against the Buyer for
a broker's or other type of commission in connection with the transactions
contemplated hereby.
(M) None of the Seller's Excluded Information (as defined below) is
inconsistent with any of the representations and warranties of the Bank
contained herein.
(N) The Bank has complied with, and is not in breach of, its
representations, warranties, covenants and agreements under the Loan Agreement.
(O) The Assigned Rights are not subject to any defense, right of set-off,
recoupment,
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or counterclaim, or subject to avoidance, disallowance, expungement, reduction
or subordination, in whole or in part.
SECTION 4. Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Bank that:
(A) The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The execution, delivery and
performance by the Buyer of this Agreement are within its powers, have been duly
authorized by all necessary action and do not contravene, or result in a default
under, any of its charter documents or any law, agreement or other obligation to
which it is subject.
(B) This Agreement has been duly and validly authorized, executed and
delivered by the Buyer, and is the legal, valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms. No
registration with, or consent or approval of, or any other action by, any
Governmental Authority or other person is required in connection with the
execution, delivery and performance of this Agreement by the Buyer.
(C) To the best of the Buyer's knowledge, no proceedings are pending or
threatened against or affecting the Buyer before any Governmental Authority
which, in the aggregate, could reasonably be expected to materially and
adversely affect any action taken or to be taken by the Buyer under this
Agreement.
(D) The Buyer is a sophisticated investor (as such term is used under the
rules promulgated under the Securities Act of 1933, as amended) with respect to
the Assigned Rights, has adequate information concerning the business and
financial condition of the Borrower to make an informed decision regarding the
purchase of the Assigned Rights and has independently and without reliance upon
the Bank, and based upon such information as the Buyer has deemed appropriate,
made its own analysis and decision to enter into this Agreement, except that the
Buyer has relied upon the representations, warranties, covenants, agreements and
indemnities of the Bank contained in this Agreement. The Buyer acknowledges that
the Bank has not made and does not make any representation or warranty, whether
express or implied, except as expressly set forth in this Agreement. The Buyer
acknowledges that the sale of the Assigned Rights by the Bank to the Buyer is
irrevocable, and that the Buyer shall have no recourse to the Bank, except with
respect to breaches of representations, warranties, covenants and agreements
expressly set forth in this Agreement and pursuant to indemnities contained
herein. The Buyer acknowledges that the consideration paid pursuant hereto for
the purchase of the Assigned Rights may differ both in kind and amount from any
payments or distributions which may ultimately be received with respect thereto.
The Buyer (i) will continue to make its own analysis and decisions with respect
to the Assigned Rights without any reliance upon the Bank (except as previously
stated), and (ii) will not rely upon the Bank to furnish any documents or
information, except as otherwise required by this Agreement, regarding the
credit, officers, financial
8
<PAGE>
condition or business of, or any other matter concerning, the Borrower
(including without limitation documents and information received from the
Borrower under the Loan Agreement or otherwise). The Buyer acknowledges that it
is assuming the risk of full or partial loss which is inherent in the credit,
and all collateral and collectability risks associated therewith. The Buyer is
not an agent for the Bank in this transaction.
(E) Without implying characterization of the Assigned Rights as a security
within the meaning of applicable security laws, the Buyer is not purchasing the
Assigned Rights with a view to resale or distribution in a manner that would
violate applicable securities laws and has no present intention of making any
distribution of the Assigned Rights in any manner that would violate applicable
security laws.
(F) The Buyer acknowledges that the Bank currently may possess and
hereafter may come into possession of certain information concerning the Loan
Agreement, the Assigned Rights, and the Borrower which is not known to the Buyer
and which may be material to a decision to acquire the Assigned Rights,
including, without limitation, information received by the Bank on a
confidential basis from the Borrower or on a privileged basis from the Bank's
counsel and advisors (the "Seller's Excluded Information"), that it has
determined to acquire the Assigned Rights notwithstanding its lack of knowledge
of the Seller's Excluded Information, and that the Bank shall have no liability
to it and the Buyer hereby waives and releases any claims which it might have
against the Bank, whether pursuant to applicable securities laws or otherwise,
with respect to the non-disclosure of the Seller's Excluded Information; and no
broker, finder or other person or entity acting pursuant to the authority of the
Buyer is entitled to a broker's or other type of commission in connection with
the transactions contemplated hereby other than commissions exclusively for the
account of the Buyer.
SECTION 5. Limitation of Damages; Reimbursement Rights.
(A) In the event of a breach of any of the representations and warranties
of the Bank set forth in Section 3 of this Agreement which results in (i) the
Claims or any portion thereof being disallowed, reduced, offset, expunged, or
subordinated pursuant to a Final Order while the Claims are held by the Buyer or
its successors, assignees or transferees, or (ii) the Buyer's rights to
distributions in respect of the Claims being denied, offset, reduced or
otherwise disallowed in whole or in part pursuant to a Final Order, the Buyer's
damages against the Bank in respect of such breach shall not exceed, in the
aggregate, a sum equal to the Reduction Amount (as hereinafter defined) plus
interest at a rate per annum, calculated daily, equal to the Call Money Rate
from, and including, the date on which the Purchase Price is paid to the Bank,
to, but excluding the date on which the Reduction Amount is paid (so long as
such payment is received before noon on a business day ("Business Day");
otherwise, the Business Day next following the date of payment).
(B) For purposes of this Section 5, the "Reduction Amount" shall mean with
respect to the Claims, an amount equal to the product obtained by multiplying
(X), a fraction, the
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<PAGE>
numerator of which shall be the amount by which the Claims have been reduced,
disallowed, offset, expunged, denied or subordinated as described in paragraph
(A) above (the "Disallowed Amount") and the denominator of which shall be the
Buyer's Principal Claim Amount by (Y) the Purchase Price.
(C) If the Buyer exercises its remedies under this Section 5 and recovers
the Reduction Amount from the Bank, the Buyer shall reassign to the Bank,
without recourse, all of the Buyer's right, title and interest in that portion
of the Assigned Rights representing the Disallowed Amount, including but not
limited to all of the Buyer's rights to receive distributions on such portion of
the Assigned Rights.
SECTION 5.1 Bank's Covenants.
(A) Until the Buyer is substituted as the record holder of the Assigned
Rights, the Bank shall deliver to the Buyer all information or materials
received by the Bank after the Assignment Closing Date relating to the Assigned
Rights unless the Bank is bound to keep the same confidential by applicable law
or by an agreement executed prior to the date hereof except where the Buyer
agrees in writing to be bound by the terms and conditions of such agreement
which govern the confidential nature of the information furnished thereunder as
if it were a signatory thereto.
(B) In the event that the Bank receives any Assigned Proceeds after the
Assignment Closing Date, (i) the Bank shall accept the same as agent on behalf
of and for the sole benefit of the Buyer, and pay or deliver the same forthwith
to the Buyer (free of any withholding, set-off or deduction of any kind) in the
same form received, with the endorsement of the Bank, when necessary and
appropriate; and (ii) the Bank shall have no legal, beneficial or equitable
interest in such Assigned Proceeds.
SECTION 6. Bank's Obligations.
(A) The Bank hereby agrees to indemnify, defend and hold the Buyer and its
agents, affiliates, controlling persons, officers, directors and employees
(collectively, the "Buyer Indemnities") harmless from and against any and all
expenses, losses, claims, damages or liabilities which are incurred by the Buyer
Indemnities or any of them, including but not limited to reasonable attorneys'
fees and expenses, caused by, resulting from or relating to (i) any obligation
of the Buyer to disgorge, in whole or in part, or otherwise reimburse the
Borrower or any third party for payments received by the Bank prior to the
Assignment Closing Date in respect of the Assigned Rights; (ii) any default by
the Bank in the performance prior to the Assignment Closing Date of any of its
obligations under the Loan Agreement; or (iii) the Bank's breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, subject to the limitations set forth in Section 5 of this Agreement.
(B) The Bank shall pay and be liable for the payment of all costs and
expenses of the
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Bank (including, without limitation, attorneys' fees and expenses) incurred or
chargeable to the period up to and including the Assignment Closing Date.
(C) Notwithstanding any other provision of this Agreement, the Bank shall
not be obligated to take any action which will require the Bank to incur any
monetary obligation or advance any funds to the Borrower for any funding
obligations under the Loan Agreement which arise or accrue on or after the
Assignment Closing Date.
(D) Notwithstanding any other provision of this Agreement, the Buyer
understands and agrees that the Bank shall not be required to take any action
which contravenes the Loan Agreement.
SECTION 6.1 Procedure for Reimbursement and Indemnification.
If there is asserted any claim, liability or obligation that in the
judgment of the party indemnified pursuant to Sections 5 or 6 hereof may give
rise to any liabilities (the "Liabilities") or the Claims being reduced,
disallowed, offset, expunged, denied or subordinated as described in paragraph A
of Section 6 hereof (any of the foregoing, a "Reduction") or if the indemnified
party determines the existence of the foregoing, whether or not the same shall
have been asserted, such indemnified party shall give the indemnifying party
notice within thirty (30) business days after the assertion of any claim,
liability or obligation, or promptly, but in no event later than five (5)
business days after receipt of notice of the filing of any lawsuit based upon
such assertion, or, with respect to a claim not yet asserted against the
indemnified party, promptly upon the determination by an officer of the
indemnified party of the existence of the same, and shall give the indemnifying
party a reasonable opportunity to assume the defense of such claim, liability or
obligation, using counsel of the indemnifying party's choosing; provided,
however, that notwithstanding the foregoing the indemnified party shall have the
right to participate in such defense and retain separate counsel at its own cost
and expense. Failure by the indemnified party to give timely notice pursuant to
this Section 6.1 shall not relieve the indemnifying party of its obligations,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give timely notice. No settlement or adjustment shall be made without
the indemnified party's prior written consent, which consent will not be
unreasonably withheld. If, in any case, the indemnifying party fails to contest
in good faith any such claim, liability or obligation, the indemnified party
shall have the right to defend, settle or pay the same and pursue its remedies
against the indemnifying party hereunder. The indemnified party shall cooperate
with the indemnifying party in any such defense which the indemnifying party
elects to assume in the event the indemnifying party makes such request to the
indemnified party and such request is reasonable, provided the indemnifying
party will hold the indemnified party harmless from all of its out-of-pocket
expenses, including reasonable attorneys' fees, incurred in connection with the
indemnified party's cooperation. In the event of a disagreement among the
parties as to whether any claim, liability or obligation may give rise to any
Liability or Reduction, then the indemnified party shall have the right to
defend, settle or pay the same, and pursue its remedies against the indemnifying
party hereunder.
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SECTION 7. Buyer's Obligations.
(A) The Buyer hereby agrees to indemnify, defend and hold the Bank and its
agents, including but not limited to the Seller, affiliates, controlling
persons, officers, directors and employees (collectively the "Seller
Indemnities") harmless from and against any and all claims, liabilities or
obligations which are incurred by the Seller Indemnities or any of them,
including but not limited to reasonable attorneys' fees and expenses, caused by,
resulting from or relating to the Buyer's breach of any of the representations,
warranties, covenants or agreements of the Buyer set forth in this Agreement.
(B) The Buyer shall pay and be liable for the payment of all costs and
expenses of the Buyer insofar as they relate to the Assigned Rights (including,
without limitation, attorney's fees and expenses) incurred or chargeable to any
period after the Option Closing Date.
(C) The Buyer and the Bank intend and agree that, except as otherwise
expressly set forth herein, the Bank shall assign the Assigned Rights and the
Buyer shall assume the Assumed Obligations on the Assignment Closing Date. Until
such assignment and assumption occur, the Bank will retain all of its rights and
obligations with respect to the Assigned Rights and the Assumed Obligations.
SECTION 8. Further Transfers.
The Buyer may sell, assign, grant a participation in, or otherwise transfer
the Assigned Rights and its rights hereunder, or any portion thereof or any
interest therein, without the consent of the Bank; provided, however, that (i)
such sale, assignment, participation or transfer complies with any applicable
requirements set forth in the Loan Agreement and does not violate any applicable
laws including laws governing the sale of securities, as applicable, and (ii)
notwithstanding any such sale, assignment, participation or transfer, the
obligations of the Buyer, and the Bank hereunder shall remain in full force and
effect until fully paid, performed and satisfied, but only to the extent such
obligations are not assumed by the Buyer's successors or assigns.
SECTION 9. Miscellaneous.
(A) Survival. All representations, warranties, covenants and other
provisions made by the parties hereto shall be considered to have been relied
upon by the parties hereto and shall survive the execution, delivery and
performance of this Agreement and all other documents contemplated herein.
(B) Successors and Assigns. This Agreement, including, without limitation,
the representations, warranties, covenants and agreements contained herein, (i)
shall inure to the benefit of and be enforceable by the respective parties
hereto, and the Buyer's and the Bank's successors and assigns, and (ii) shall be
binding upon and enforceable against the respective
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parties hereto, and their successors and assigns.
(C) Further Assurances. Each of the parties hereto agrees to execute and
deliver, or to cause to be executed and delivered, all such instruments, and to
take all such action, as the other party may reasonably request in order to
effectuate the intent and purposes of this Agreement, all at the sole expense of
the requesting party.
(D) Costs and Expenses. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its own costs and expenses, including but not
limited to attorneys' fees and expenses, in connection with the transactions
contemplated hereby. Each of the Buyer and the Bank represents that it has not
retained any broker or other intermediary to act on its behalf in connection
with this transaction.
(E) Counterpart Execution; Telecopies. This Agreement may be executed in
any number of counterparts, each of which, when so executed and delivered, shall
be an original, but all of which together shall constitute one agreement binding
upon all of the parties hereto. Transmission by telecopier of an executed
counterpart of this Agreement shall be deemed to constitute due and sufficient
delivery of such counterpart, provided that the party so delivering such
counterpart shall, promptly after such delivery, deliver the original of such
counterpart of this Agreement to the other party hereto.
(F) Amendments; Waivers. (i) No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by the Bank and
the Buyer, and no waiver of any provision of this Agreement, nor consent to any
departure therefrom by the Bank or the Buyer shall be effective unless it is in
writing and signed by the party affected thereby, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(ii) No failure on the part of any party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof by such party,
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of each party provided herein (x) are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law
(except as otherwise expressly set forth herein) and (y) are not conditional or
contingent on any attempt by such party to exercise any of its rights under any
other related document against the other party or any other entity.
(G) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND THE OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO ANY CONFLICT OF LAWS PROVISIONS THEREOF).
(H) Notices. All demands, notices, requests, consents and communications
hereunder
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<PAGE>
shall be in writing and shall be deemed to have been duly given if personally
delivered by courier service, messenger, or telecopy (with a confirmed
answerback) at, or when duly deposited in the mails, by certified or registered
mail (postage prepaid -- return receipt requested), to the following addresses,
or such addresses as may be furnished hereafter by notice in writing, to the
following parties:
in the case of the Buyer:
CNL Holdings, Inc.
750 Lexington Avenue, 27th Floor
New York, New York 10022
Attention: President
Telephone: 212-980-3344
Telecopier: 212-980-6653
with a copy to:
Bernstein & Wasserman LLP
950 Third Avenue
New York, New York 10022
Attention: Stuart Neuhauser, Esquire
Telephone: 212-826-0730
Telecopier: 212-371-4730
in the case of the Bank:
The Chase Manhattan Bank
270 Park Avenue, 30th Floor
New York, New York 10017
Attention: Mark Rechan
Vice President
Telephone: 212-270-1937
Telecopier: 212-270-5748
with a copy to:
The Chase Manhattan Bank
270 Park Avenue, 39th Floor
New York, New York 10017
Attention: E. Lee Smith
Vice President & Assistant General Counsel
Telephone: 212-270-5293
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<PAGE>
Telecopier: 212-270-6509
(I) Integration. This Agreement constitutes the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements, understandings or representations
pertaining to the subject matter hereof, whether oral or written. There are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as specifically set forth or
incorporated herein or therein.
(J) Captions and Headings. The section captions and headings in this
Agreement are for convenience only and are not intended to be full or accurate
descriptions of the contents hereof. They shall not be deemed to be part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provision hereof.
(K) Severability. The invalidity, illegality or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, all of which shall remain in full force
and effect.
(L) Relations of the Parties. The relationship between the Bank and the
Buyer shall be that of seller and purchaser. This Agreement shall not be
construed to create a partnership, joint venture or creditor-debtor relationship
between the parties hereto.
(M) Reservation of Rights. The Bank and the Buyer reserve all rights and
remedies under this Agreement and under applicable law in respect of the Bank or
the Buyer's material breach of any of the representations, warranties, covenants
or agreements contained herein.
(N) To the extent that there are any inconsistencies between this Agreement
and any other document executed in connection herewith, the Bank and the Buyer
intend that (as between themselves) the terms and conditions of this Agreement
shall control and be enforceable over any such other document.
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<PAGE>
IN WITNESS WHEREOF, the Bank and the Buyer have executed this Agreement by
their duly authorized officers as of the date first set forth above.
THE CHASE MANHATTAN BANK
By: /s/Michael Rechan
-----------------------------
Name: Michael Rechan
Title:Vice President
CNL HOLDINGS, INC.
By: _____________________________
Name:
Title:
16
<PAGE>
IN WITNESS WHEREOF, the Bank and the Buyer have executed this Agreement by
their duly authorized officers as of the date first set forth above.
THE CHASE MANHATTAN BANK
By: _____________________________
Name:
Title:
CNL HOLDINGS, INC.
By: /s/R.K. Pace
-----------------------------
Name: R.K. Pace
Title: President
16
<PAGE>
Dated: September 12, 1996
IRREVOCABLE PROXY
The undersigned, CNL Holding, Inc., a Delaware corporation, does hereby
constitute and appoint Conolog Corporation, a Delaware corporation ("Conolog"),
acting solely through its President, Robert S. Benou ("Benou"), as the
undersigned's true and lawful substitute attorney and proxy, with full power to
act for and in the name, place and stead of the undersigned to vote according to
the number of votes which the undersigned would be entitled to cast and with all
powers which the undersigned would be entitled to exercise if personally present
at any meeting of the stockholders of Conolog or any adjournment thereof, upon
any matter coming before such meeting or adjournment or to otherwise consent or
withhold consent from any action of stockholders of Conolog; provided, however,
that if Benou shall die while this Irrevocable Proxy remains in effect, any
successor to Benou as President of Conolog shall succeed to Benou as the person
through whom Conolog shall exercise its rights under this Irrevocable Proxy.
The undersigned does hereby revoke all other proxies given by the
undersigned to any other person or entity prior to the date hereof with respect
to the aforesaid matters.
This proxy is irrevocable and shall not expire until the earlier of the
tenth anniversary hereof and the date on which the undersigned no longer owns
any of the capital stock of Conolog.
IN WITNESS WHEREOF, the undersigned has executed this proxy as of the date
first set forth hereinabove.
CNL HOLDING, INC.
By /s/ Roberrt Benou President
-----------------------------------
(Title)
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AGREEMENT made this 12th day of September, 1996 between CNL HOLDING, INC.,
a Delaware corporation (the "Investor") and CONOLOG CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, the Company is indebted to The Chase Manhattan Bank, formerly
known as Chemical Bank (the "Bank"), in the principal amount of $1,025,000 plus
interest and fees thereon as evidenced by that certain Amended and Restated Term
Note from the Company to the Bank, dated August 24, 1995, as modified by an
Allonge dated September 11, 1996 (as so modified, the "Note");
WHEREAS, the Note is convertible into 1,400,000 shares of the Company's
common stock;
WHEREAS, the Bank is also the holder of 375,000 shares of the Company's
common stock (the "Bank Shares");
WHEREAS, the Investor has agreed to enter into an Option Agreement with the
Bank, dated the date hereof (the "Option Agreement"), pursuant to which, under
certain circum stances, the Investor has the right to purchase the entire
indebtedness of the Company to the Bank and all of the Bank Shares;
WHEREAS, the Investor has agreed to lend up to $2,500,000 to the Company,
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
1. Registration of Shares Being Acquired. The Company will use its best
efforts to file a registration statement with the Securities and Exchange
Commission (the "Commission")
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covering the 375,000 Bank Shares and the 1,400,000 shares of common stock into
which the Note is convertible (collectively, the "Acquired Shares"), all of
which are subject to the Option Agreement. The Company will use its best efforts
to have such registration statement declared effective as soon as possible after
the filing thereof, and to keep such registration statement current and
effective for a period of two years or until such earlier date as all of the
Shares registered pursuant to such registration statement shall have been sold
or otherwise transferred.
2. Use of Proceeds. All proceeds of the sale of the Acquired Shares shall
be applied as follows: The first $1,500,000 shall be paid to reimburse the
Investor for the payments made to the Bank pursuant to the Option Agreement.
Fifty percent (50%) of the balance of the proceeds shall be loaned by the
Investor to the Company within five days of the Investor's receipt of such
proceeds, provided, however, that the Investor shall not be required to lend the
Company more than $2,500,000. Such loans are hereinafter collectively called the
"Loans". The balance of the proceeds shall belong to the Investor.
3. Terms of Loans. Each Loan shall be evidenced by a note which shall be
due 12 months after the making of each such Loan. Each Loan shall bear interest
at the rate of 4% per annum commencing with the date the Loan is made. Interest
will accrue prior to maturity. At maturity, the Company will have the option to
repay each of the Loans, together with all accrued interest
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thereon, by issuing a new Series C Preferred Stock (the "Preferred Stock"). For
purposes of such repayment, the shares of Preferred Stock shall be valued at
$5.00 per share.
4. The Preferred Stock. As more particularly described in Exhibit A hereto,
the Preferred Stock will be non-voting and will carry a cumulative dividend of
8% per annum, which may be payable by the issuance of shares of common stock
valued at $5.00 per share up to a maximum of 40,000 shares per annum. The
Preferred Stock will be convertible into common stock at the rate of one share
of common stock for each share of Preferred Stock. The Preferred Stock will
carry a liquidating preference of $5.00 per share.
5. Registration Rights. (a) During the period commencing on the issuance of
any shares of Preferred Stock to the Investor and ending on the second
anniversary thereof (the "Registration Period"), the Company shall advise the
Investor by written notice at least 30 days prior to the filing of any
post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the Securities
Act of 1933, as amended (the "Act") covering any securities of the Company, for
its own account or for the account of others (other than a registration
statement on Form S-4 or S-8 or any successor forms thereto), and will include
in any such post-effective amendment or registration statement, such informa
tion as may be required to permit a public offering of the shares of Preferred
Stock and all or any of the common stock then issu able under the terms of the
then outstanding shares of Preferred
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Stock (the "Registrable Securities"). The Company shall supply prospectuses and
such other documents as the Investor may request in order to facilitate the
public sale or other disposition of the Registrable Securities, use its best
efforts to register and qualify any of the Registrable Securities for sale in
such states as the Investor designates provided that the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or
execute a general consent to service of process in any jurisdiction in any
action and do any and all other acts and things which may be reasonably
necessary or desirable to enable the Investor to consummate the public sale or
other disposition of the Registrable Securities, and furnish indemnification in
the manner provided in Section 6 hereof. The Investor shall furnish information
and indemnification as set forth in Section 6. The Company shall use its best
efforts to cause the managing under writer or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in the registration to include such securities in such underwritten
offering on the same terms and conditions as any similar securities of the
Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering advises the Investor that the total
amount of securities which it intends to include in such offering is such as to
materially and adversely affect the success of such offering, then the amount of
securities to be offered for the account of the Investor shall be eliminated,
reduced, or limited to the extent necessary to reduce the total amount of
securities to be
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included in such offering to the amount, if any, recommended by such managing
underwriter or underwriters. The Investor will pay its own legal fees and
expenses and any underwriting discounts and commissions on the securities sold
by the Investor but shall not be responsible for any other expenses of such
registration.
(b) If the Investor shall give notice to the Company at any time during the
Registration Period to the effect that the Investor desires to register under
the Act its shares of Preferred Stock or any of the common stock then issuable
under the terms of the then outstanding shares of Preferred Stock under such
circumstances that a public distribution (within the meaning of the Act) of any
such securities will be involved, then the Company will promptly, but no later
than 60 days after receipt of such notice, file a post-effective amendment to a
then current Registration Statement or a new registration statement pursuant to
the Act, to the end that such shares of Preferred Stock and such shares of
common stock may be publicly sold under the Act as promptly as practicable
thereafter and the Company will use its best efforts to cause such registration
to become and remain effective for a period of 120 days (including the taking of
such steps as are reasonably necessary to obtain the removal of any stop order);
provided that the Investor shall furnish the Company with appropriate
information in connection therewith as the Company may reasonably request in
writing. The Investor may, at its option, request the filing of a post-effective
amendment to a then current Registration Statement or a new registration
statement under the Act with respect to the Registrable
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Securities on only two occasions during the Registration Period. All costs and
expenses of such post-effective amendment or new registration statement shall be
borne by the Company, except that the Investor shall bear the fees of its own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by it.
The Company shall be entitled to postpone the filing of any registration
statement pursuant to this subsection (b) other wise required to be prepared and
filed by it if (i) the Company is engaged in a material acquisition,
reorganization, or divestiture, (ii) the Company is currently engaged in a self
tender or exchange offer and the filing of a registration statement would cause
a violation of Rule 10b-6 or any other Rule under the Securities Exchange Act of
1934, (iii) the Company is engaged in an underwritten offering and the managing
underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lockup as a result
of an underwritten public offering and such underwriter has refused in writing,
the Company's request to waive such lock-up. In the event of such postponement,
the Company shall be required to file the registration statement pursuant to
this subsection (b), within 60 days of the consummation of the event requiring
such postponement.
The Company will use its best efforts to maintain such registration
statement or post-effective amendment current under
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the Act for a period of at least six months (and for up to an additional three
months if requested by the Investor) from the effective date thereof. The
Company shall supply prospectuses, and such other documents as the Investor may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities, use its best efforts to register and qualify any
of the Registrable Securities for sale in such states as such holder designates,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any jurisdiction in any action.
6. Indemnification. (a) Whenever pursuant to Section 5 a registration
statement relating to the Preferred Stock or any shares issued or issuable
pursuant to the terms of any Preferred Stock, is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless the Investor (herein
after called the "Distributing Holder"), and each person, if any, who controls
(within the meaning of the Act) the Distributing Holder, and each underwriter
(within the meaning of the Act) of such securities and each person, if any, who
controls (within the meaning of the Act) any such underwriter, against any
losses, claims, damages, or liabilities, joint or several, to which the
Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
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contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement
in reliance upon and in conformity with written information furnished by such
Distributing Holder, for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, or liabilities, joint and several, to which the Company or any such
director, officer, or controlling person may become subject, under the Act or
otherwise, insofar as
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such losses, claims, damages, or liabilities arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus, or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder for use in the preparation thereof; and
will reimburse the Company or any such director, officer, or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 6.
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(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof.
7. Company's Representations and Warranties. The Company covenants and
agrees that the Preferred Stock and all shares of common stock which may be
issued pursuant to the terms of the Preferred Stock will, upon issuance, be duly
and validly issued, fully paid and nonassessable. The Company further covenants
and agrees that so long as any shares of Preferred Stock are outstanding, the
Company will at all times have authorized and reserved a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred Stock
and that it will have authorized and reserved a sufficient number of shares of
Common Stock for issuance upon conversion of the Preferred Stock.
8. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company as follows:
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(a) The Investor has the full right, power and authority to enter into
this Agreement and to carry out and consummate the transactions contemplated
herein. This Agreement constitutes the legal, valid and binding obligation of
the Investor.
(b) The Investor acknowledges that it and each of its shareholders has
received and reviewed all publicly filed documents concerning the Company and
has had an opportunity to meet with and ask questions of the management of the
Company.
(c) The Investor and each of its shareholders is an accredited
investor within the meaning of Rule 501 of the Commission under the Securities
Act, has the financial ability to bear the economic risk of its or his
investment, can afford to sustain a complete loss of such investment and has
adequate means of providing for its or his current needs and personal contingen
cies, and has no need for liquidity in its or his investment in the Company; and
the amount invested in the Company by the Investor does not constitute a
substantial portion of its or his net worth.
(d) The Investor is acquiring the Shares being purchased by it for
investment and not with a view to the sale or distribution thereof, for its own
account and not on behalf of others and has not granted any other person any
right or option or any participation or beneficial interest in any of the
securities. The Investor acknowledges its understanding that the Acquired Shares
constitute restricted securities within the
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meaning of Rule 144 of the Commission under the Act, and that none of such
securities may be sold except pursuant to an effective registration statement
under the Act or in a trans action exempt from registration under the Act, and
acknowledges that it understands the meaning and effect of such restriction. The
Investor has sufficient knowledge and experience in financial and business
matters so that it is capable of evaluating the risks and merits of the purchase
of the Acquired Shares. The Investor is aware that no Federal or state
regulatory agency or authority has passed upon the sale of the Acquired Shares
or any of the terms of the Preferred Stock or the terms of the sale or the
accuracy or adequacy of any material provided to the Investor and that the price
of the Acquired Shares was negotiated between the Investor and the Bank and does
not necessarily bear any relationship to the underlying assets or value of the
Company and that the terms of the Preferred Stock was negotiated between the
Investor and the Company and does not necessarily bear any relationship to the
underlying assets or value of the Company. THE INVESTOR UNDERSTANDS THAT AN
INVESTMENT IN THE SHARES BEING PURCHASED BY IT INVOLVES A HIGH DEGREE OF RISK.
(e) THE INVESTOR UNDERSTANDS THAT IN CONNECTION WITH ITS EVALUATION OF
THE COMPANY, THE INVESTOR HAS BEEN OR MAY HAVE BEEN PROVIDED WITH ACCESS TO
CERTAIN INFORMATION CONCERNING THE COMPANY WHICH HAS NOT BEEN PUBLICLY
DISCLOSED. THE INVESTOR FURTHER UNDERSTANDS THAT ANY TRADING BY IT IN SECURITIES
OF THE COMPANY USING NON-PUBLIC INFORMATION COULD CONSTITUTE A VIOLATION OF
FEDERAL AND STATE SECURITIES LAWS AND/OR OTHER LAWS AND MAY
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SUBJECT IT TO CRIMINAL AND/OR CIVIL PENALTIES AND LIABILITY. In view of the
foregoing, the Investor agrees not to (i) purchase or sell, including a short
sale, any of the Company's securities or rights to purchase or sell such
securities as long as the Investor is in possession of material non-public
information or (ii) disclose any non-public information to any other person.
(f) There is no finder's fee or brokerage commission payable with
respect to the purchase by the Investor of the Acquired Shares or the
consummation of the transactions contemplated by this Agreement and the Investor
agrees to indemnify and hold harmless the Company from and against any and all
cost, damage, liability or expense (including fees and expenses of counsel)
arising out of or relating to claims for such fees or commissions, except to the
extent that any such fees or commissions have been directly incurred by the
Company.
9. Further Agreements of the Investor.
(a) The Investor hereby agrees that all sales, transfers and
dispositions of the Acquired Shares, any shares of Preferred Stock and any
shares of common stock issuable pursuant to the terms of the Preferred Stock
shall be made exclusively to bona fide third party purchasers pursuant to a
registered public offering or Rule 144 under the Act, if applicable.
(b) While the Investor holds any shares of common stock, it agrees to
vote such shares as recommended by Robert S. Benou. In furtherance of the
foregoing, the Investor is delivering to Robert S. Benou an Irrevocable Proxy in
substantially the form of Exhibit B attached hereto.
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10. Termination of Underwriting Agreement. Concurrently with the execution
hereof, the Company and I.A. Rabinowitz & Co. are executing and delivering an
agreement terminating certain provisions of the Underwriting Agreement between
them dated August 16, 1995 and providing that with respect to the terminated
provisions, neither the Company nor I.A. Rabinowitz & Co. will have any further
rights or obligations pursuant thereto.
11. Further Assurances. From and after the date of this Agreement and the
date of Closing, each party hereto shall from time to time, at the request of
the other party and without further consideration, do, execute and deliver, or
cause to be done, executed and delivered, all such further acts, things and
instruments as may be reasonably requested or required more effectively to
evidence and give effect to the transactions provided for in this Agreement.
12. Expenses. Each party shall bear and pay all legal, accounting and other
fees and expenses incurred by it in connection with, and with the transactions
provided for in, this Agreement and the performance of all its obligations and
agreements hereunder.
13. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered against receipt or if
mailed by first class registered or certified mail return receipt requested,
addressed
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to the parties at their respective addresses set forth on the first page of this
Agreement, with copies to their respective counsel, Milberg Weiss Bershad Hynes
& Lerach LLP, Att: Arnold N. Bressler, Esq., One Pennsylvania Plaza, New York,
New York 10119, in the case of the Company, and Bernstein & Wasserman LLP, Att:
Stuart Neuhauser, Esq., 950 Third Avenue, New York, New York 10022, in the case
of the Investor, or to such other person or address as may be designated by like
notice hereunder.
14. Parties in Interest. This Agreement shall be binding upon, and shall
inure to the benefit of and be enforceable by, the parties hereto and their
respective legal representatives, successors and assigns, but no other person
shall acquire or have any rights under this Agreement.
15. Entire Agreement; Modification; Waiver. This Agreement (as below
defined) contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior
negotiations and understandings, if any, and there are no agreements, representa
tions or warranties other than those set forth, provided for or referred to
herein. All exhibits and schedules to this Agreement are expressly made a part
of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein, in any of such writings or elsewhere shall
be deemed to refer to and include all such writings. Neither this Agreement nor
any provisions hereof may be modified, amended, waived, discharged or
terminated, in whole or in part, except in writing
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signed by the party to be charged. Any party may extend the time for or waive
performance of any obligation of any other party or waive any inaccuracies in
the representations or warranties of any other party or compliance by any other
party with any of the provisions of this Agreement. No waiver of any such
provisions or of any breach of or default under this Agreement shall be deemed
or shall constitute a waiver of any other provisions, breach or default, nor
shall any such waiver constitute a continuing waiver.
16. Interpretation.
16.(a) This Agreement shall be governed and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed exclusively in that State without giving effect to the
principles of conflict of laws.
16.(b) All pronouns and words used in this Agreement shall be read in the
appropriate number and gender, the masculine, feminine and neuter shall be
interpreted interchangeably and the singular shall include the plural and vice
versa, as the circumstances may require.
17. Headings; Counterparts. The article and section headings in this
Agreement are for reference purposes only and shall not define, limit or affect
the meaning or interpretation of this Agreement. This Agreement maybe executed
in two or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
CNL HOLDING, INC.
By /s/ R.K. Pace, Pres.
---------------------------------
(Title)
CONOLOG CORPORATION
By /s/ Robert S. Benou
---------------------------------
Robert S. Benou, President
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EXHIBIT A
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CERTIFICATE OF THE DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF
of the
SERIES C PREFERRED STOCK (par value $.50)
of
CONOLOG CORPORATION
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Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware
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We, the undersigned, being the President and the Secretary, respectively,
of CONOLOG CORPORATION, a corporation organized and existing under the laws of
the State of Delaware (hereinafter called the "Corporation"), do hereby certify
pursuant to the provisions of Section 151(g) of the General Corporation Law of
the State of Delaware, as amended, that at a meeting of the Board of Directors
of the Corporation duly convened and held on ______ __, 199_, the following
resolutions were duly adopted:
RESOLVED that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (hereinafter called the "Board of
Directors" or the "Board") by the provisions of Article FIFTH of the Certificate
of Incorporation, as amended, of the Corporation, this Board of Directors hereby
creates a series of Preferred Stock, par value $.50 per share, of the
Corporation to consist of 600,000 shares, which number may be increased or
decreased (but not below the number of shares thereof then outstanding) by
further resolution or resolutions of the Board of
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Directors, and this Board of Directors hereby fixes the designations, rights,
voting powers, preferences, and the relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series as follows:
I. Designation. The designation of said series of Preferred Stock shall be
"Series C Preferred Stock" (hereinafter called "this Series" or the "Series C
Preferred Stock").
II. Dividends. The holders of outstanding shares of the Series C Preferred
Stock shall be entitled to receive, out of any funds legally available therefor,
dividends at the rate of eight percent (8%) per annum, and no more, payable
annually in cash or shares of the Common Stock of the corporation on the
________ day of ____________________ in each year, commencing ________________,
199_, to registered holders thereof on said payment date. Such dividends shall
be cumulative and shall accrue (whether or not in any annual period there shall
be net profits or surplus of the Corporation legally available therefor) from
the annual dividend payment date next preceding the date of their issue.
If for any annual dividend period or periods after _______________, 199_,
full dividends upon the outstanding Series C Preferred Stock at the aforesaid
rate shall not have been paid, or declared and set apart for payment, the amount
of the deficiency shall be paid (but without interest), or declared and set
apart for payment, before any sum or sums shall be set aside for or applied to
the purchase or redemption of Preferred Stock of any series or the purchase,
redemption or other acquisition for value of shares of any junior stock) shall
be paid or
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declared, or any other distribution shall be ordered or made, upon shares of any
junior stock. The term "junior stock" as used in this resolution with respect to
the Series C Preferred Stock means the Common Stock, as well as any other class
of stock of the Corporation ranking junior to the Series C Preferred Stock as to
dividends or assets.
III. Voting. Except as otherwise required by law or this Resolution, the
holders of Series C Preferred Stock shall have no voting rights and shall not be
entitled to notice of any stockholders' meetings or to vote upon the election of
directors or upon any question affecting the management or affairs of this
Corporation.
IV. Liquidation. In the event of a liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of Series C
Preferred Stock shall be entitled to receive out of the assets of this
Corporation, whether such assets are capital or surplus of any nature, an amount
equal to five dollars ($5) per share and, in addition to such amount, a further
amount equal to the dividends unpaid and accumulated thereon, as provided in
paragraph II of this Resolution, to the date that payment is made to the holders
of Series C Preferred Stock, whether earned or declared or not, and no more,
before any payment shall be made or any assets distributed to the holders of
junior stock. If upon such liquidation, dissolution, or winding up, whether
voluntary or involuntary, the assets thus distributable among the holders of the
Series C Preferred Stock shall be insufficient to permit the payment to such
stockholders of the full preferential amounts
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aforesaid, then the entire assets of this Corporation to be distributed shall be
distributed ratably among the holders of Series C Preferred Stock. In the event
of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, subject to all of the preferential rights of the
holders of Series C Preferred Stock on distribution or otherwise, the holders of
junior stock shall be entitled to receive, ratably, all remaining assets of this
Corporation. A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be liquidation, dissolution or
winding up, within the meaning of this paragraph.
V. Redemption. The Corporation, at its election, expressed by resolution of
the Board of Directors, may at any time or from time to time on or after
____________, 199_ (but not prior thereto) redeem the whole or any part of the
outstanding shares of Series C Preferred Stock by paying in cash therefor five
dollars ($5) per share and, in addition to the foregoing amount, an amount in
cash equal to all dividends on shares of Series C Preferred Stock unpaid and
accumulated as provided in paragraph II of this Resolution, whether earned or
declared or not, to and including the date fixed for redemption, such sum being
hereinafter sometimes referred to as the "Redemption Price." In case of the
redemption of a part of only of the outstanding shares of Series C Preferred
Stock, the Corporation shall designate by lot, in such manner as the Board of
Directors may determine, the shares to be redeemed, or shall effect such
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redemption pro rata. Less than all of the shares of Series C Preferred Stock at
any time outstanding may not be redeemed until all dividends accrued and in
arrears upon all shares of Series C Preferred Stock outstanding shall have been
paid for all past dividend periods, and until full dividends for the then
current dividend period on all shares of Series C Preferred Stock then
outstanding, other than the shares to be redeemed, shall have been paid or
declared and the full amount thereof set apart for payment. At least ninety (90)
days' prior notice by first class mail, postage prepaid, shall be given to the
holders of record of shares of Series C Preferred Stock to be redeemed, such
notice to be addressed to each such stockholder at his post office address as
shown by the records of the Corporation, but failure of any holder of Series C
Preferred Stock to receive any such notice, if given, shall not affect the
validity of the proceedings for such redemption. On or after the date fixed for
redemption and stated in such notice, each holder of shares of Series C
Preferred Stock called for redemption shall surrender his certificate(s)
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Redemption Price. In
case less than all the shares represented by any such surrendered certificate(s)
are redeemed, a new certificate shall be issued representing the unredeemed
shares. If such notice of redemption shall have been duly given, and if on the
date fixed for redemption funds necessary for the redemption shall be available
therefor, then notwithstanding that the certificates evidencing any shares of
Series C Preferred Stock so called for redemption shall not have been
surrendered,
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all dividends with respect to the shares so called for redemption shall cease to
accrue after the date fixed for redemption and all rights with respect to the
shares so called for redemption shall forthwith after such date cease and
terminate, except only the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor.
If, on or prior to any date fixed for redemption of shares of Series C
Preferred Stock, the Corporation deposits, with any bank or trust company in the
City of New York, State of New York, as a trust fund, a sum sufficient to
redeem, on the date fixed for redemption thereof, the shares called for
redemption, with irrevocable instructions and authority to the bank or trust
company to give the notice of redemption thereof if such notice shall not
previously have been given by the Corporation, or to complete the giving of such
notice if theretofore commenced, and to pay, on or after the date fixed for
redemption or prior thereto, the Redemption Price of the shares to their
respective holders upon the surrender of their share certificate(s), then from
and after the date of the deposit (although prior to the date fixed for
redemption), the shares so called shall (except as hereinafter provided) be
deemed to be redeemed and dividends on those shares shall cease to accrue after
the date fixed for redemption. The deposit shall be deemed to constitute full
payment of the shares to their holders and from and after the date of the
deposit the shares shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares, and shall
have no rights with respect thereto except the right to receive from the
6
<PAGE>
bank or trust company payment of the Redemption Price of the shares, without
interest, upon the surrender of their certificates therefor, and the right to
surrender said shares and receive Common Stock as provided in paragraph IV of
this Resolution at any time up to but not after the close of business on the
fifth day prior to the date fixed for redemption of such shares. Any moneys so
deposited on account of the Redemption Price of shares of Series C Preferred
Stock converted subsequent to the making of such deposit shall be repaid to the
Corporation forthwith upon the conversion of such shares. Any moneys so
deposited which remain unclaimed by the holders of shares of Series C Preferred
Stock after the expiration of six years from the redemption date, together with
any interest thereon allowed by the bank or trust company with which the deposit
shall have been made, shall be paid to the Corporation.
VI. Right to Convert into Common Stock. Holders of shares of Series C
Preferred Stock shall have the right to convert their shares of Series C
Preferred Stock into shares of the Common Stock of the Corporation upon the
following terms and conditions:
1. At any time between _____________, 199_ and the fifth day prior to
such date, if any, as may have been fixed for the redemption of shares of Series
C Preferred Stock in any notice of redemption given as provided in paragraph V
hereof, holders of shares of Series C Preferred Stock may, at their option,
receive for each share of Series C Preferred Stock held one (1) fully paid and
non-assessable share of the Common Stock of the Corporation upon surrender of
the certificate for such
7
<PAGE>
shares of the Series C Preferred Stock to the Corporation at the office of the
Corporation or the transfer agent for the Series C Preferred Stock. The
conversion ratio of one share of Series C Preferred Stock for each share of
common stock as aforesaid at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Conversion Ratio." The Conversion
Ratio shall be subject to adjustment from time to time in certain instances as
hereinafter provided. The Corporation shall make no payment or adjustment on
account of any dividends accrued on shares of Series C Preferred Stock
surrendered for conversion. In case of the call for redemption of any shares of
Series C Preferred Stock, such right to convert into shares of Common Stock
shall terminate as to the shares of Series C Preferred Stock designated for
redemption at the close of business on the fifth day preceding the day fixed for
redemption, unless default is made by the Corporation in the payment of the
redemption price.
2. Before any holder of shares of Series C Preferred Stock shall be
entitled to receive shares of Common Stock, he shall surrender the certificate
or certificates for shares of Series C Preferred Stock, with the Conversion Form
annexed thereto or other form as prescribed by the Board of Directors duly
executed, at the office of the Corporation or of any transfer agent for the
Series C Preferred Stock and shall state in writing therein the name and names
in which he wishes the certificates for Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of shares of Series C Preferred Stock,
8
<PAGE>
or to his nominee or nominees, certificates for the number of full shares of
Common Stock to which he shall be entitled, as aforesaid, together with cash in
lieu of any fraction of a share as hereinafter provided. Conversion shall be
deemed to have been made as of the date of such surrender of the shares of
Series C Preferred Stock, and the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock on said date.
3. In case the Corporation shall at any time subdivide the outstanding
shares of Common Stock, or shall issue as a dividend on Common Stock such number
of shares of Common Stock as shall equal five percent (5%) or more of the number
of shares of Common Stock outstanding immediately prior to the issuance of such
dividend, then in either of such cases, the Conversion Ratio per share of Common
Stock in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased and the number of shares of Common
Stock issuable hereunder shall be proportionately increased, and conversely, in
case the Corporation shall at any time combine the outstanding shares of Common
Stock, the Conversion Ratio in effect immediately prior to such combination
shall be proportionately adjusted, and the number of shares of Common Stock
issuable hereunder shall be proportionately reduced, in each case effective at
the close of business on the date of such subdivision, dividend or combination,
as the case may be. For the purposes of this subparagraph 3, the date of
issuance of any such dividend shall be the record date fixed by the Board of
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<PAGE>
Directors of the Corporation. In the absence of a record date so fixed, the
first business day during which the stock transfer books of the Corporation
shall be closed for the purpose of such determination shall be deemed to be the
record date.
4. No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon the conversion of Series C Preferred
Stock into Common Stock hereunder. If any fractional interest in a share of
Common Stock would, except for the provisions of this subparagraph 4, be
deliverable, the Corporation shall, in lieu of delivering the fractional share
therefor, pay to the holder of such surrendered shares of Series C Preferred
Stock an amount in cash equal (computed to the nearest cent) to the current
market value of such fractional interest, which current market value shall be
determined in such reasonable manner as may be prescribed by the Board of
Directors.
5. Whenever the Conversion Ratio is adjusted, as herein provided, the
Corporation shall forthwith maintain at its office and file with the transfer
agents for shares of Series C Preferred Stock a statement, signed by the
Chairman of the Board, the President or a Vice President of the Corporation and
by its Treasurer or an Assistant Treasurer, showing in detail the facts
requiring such adjustment and the Conversion Ratio after such adjustment. Such
transfer agent shall be under no duty or responsibility with respect to any such
statement except to exhibit the same from time to time to any holder of shares
of Series C Preferred Stock desiring an inspection thereof.
10
<PAGE>
6. In case of any capital reorganization or any reclassification of
the capital stock of the Corporation or in case of the consolidation or merger
of the Corporation with or into another corporation (other than a merger with a
subsidiary in which the Corporation is the continuing corporation and which does
not result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock) or the conveyance of all or substantially
all of the assets of the Corporation to another corporation, each share of
Series C Preferred Stock shall thereafter be entitled, upon surrender thereof,
to receive the number and kind of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation issuable upon surrender of such share of Series C Preferred Stock
would have been entitled upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (ad determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of shares of Series C Preferred Stock, to
the end that the provisions set forth herein (including provisions with respect
to changes in and other adjustments of the Conversion Ratio) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon such surrender of shares of Series
C Preferred Stock.
11
<PAGE>
7. In case:
(1) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend, or any
other distribution, payable otherwise than in cash; or
(2) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase any
shares of stock of any class or to receive any other rights; or
(3) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another corporation, or
conveyance of all or substantially all of the assets of the Corporations to
another corporation; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, and in any such case, the Corporation shall
cause to be mailed to the transfer agent for the Series C Preferred Stock, and
to the holders of record of the outstanding Series C Preferred Stock, at least
thirty (30) days' prior to the date hereinafter specified, a notice stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to exchange their shares
12
<PAGE>
of Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
8. The Corporation shall at all times reserve and keep available, out
of its authorized but unissued Common Stock, solely for the purpose of effecting
conversions upon surrender of Series C Preferred Stock, the full number of
shares of Common Stock issuable upon the surrender of all shares of Series C
Preferred Stock, from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and stockholder approval), in
accordance with the laws of the State of Delaware, increase the authorized
amount of its Common Stock if at anytime the authorized number of shares of
Common Stock remaining unissued shall not be sufficient to permit the conversion
of all of the shares of Series C Preferred Stock at the time outstanding. If
shares of Common Stock of the Corporation are listed on any securities exchange
and the listing thereon of the shares of such Common Stock to be reserved as
aforesaid is required by the rules of said exchange as a condition precedent to
the issue thereof upon conversion, the Corporation shall make application for
such listing, on notice of issuance, of said shares and shall use its best
efforts to effect such listing. Also, if any shares of Common Stock so to be
reserved shall require registration or qualification with or approval of any
governmental authority or under any Federal or State law as a condition to the
issue thereof upon conversion, the Corporation shall use its best efforts to
cause such shares to be duly registered, qualified or approved, as the case may
be.
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<PAGE>
9. The Corporation shall be any and all issue and other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock
pursuant hereto. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the shares
of Series C Preferred Stock so surrendered were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
10. Whenever reference is made in these provisions to the issue or
sale of shares of Common Stock, the term "Common Stock" shall include any stock
of any class of the Corporation other than preferred stock with a fixed limit on
dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
11. All certificates for shares of Series C Preferred Stock
surrendered shall be appropriately cancelled on the books of the Corporation,
and the shares so surrendered represented by such certificates shall be restored
to the status of authorized but unissued shares of Preferred Stock of the
Corporation.
RESOLVED FURTHER, that the President or any Vice-President and the
Secretary or any Assistant Secretary of this Corporation, be and they hereby are
authorized and directed to prepare and file a certificate setting forth a copy
of these
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<PAGE>
resolutions in accordance with the provisions of the General Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned do hereby declare, certify and
affirm, under penalties of perjury, that the facts herein stated are true, and
accordingly have hereunto executed this Certificate and affixed the seal of the
Corporation, this ____ day of ________________, 199_.
-----------------------------
Robert S. Benou, President
-----------------------------
Arpad Havasy, Secretary
[SEAL]
- 15 -
<PAGE>
EXHIBIT B
<PAGE>
Dated: , 1996
IRREVOCABLE PROXY
The undersigned, CNL Holding, Inc., a Delaware corporation, does
hereby constitute and appoint Conolog Corporation, a Delaware corporation
("Conolog"), acting solely through its President, Robert S. Benou ("Benou"), as
the undersigned's true and lawful substitute attorney and proxy, with full power
to act for and in the name, place and stead of the undersigned to vote according
to the number of votes which the undersigned would be entitled to cast and with
all powers which the undersigned would be entitled to exercise if personally
present at any meeting of the stockholders of Conolog or any adjournment
thereof, upon any matter coming before such meeting or adjournment or to
otherwise consent or withhold consent from any action of stockholders of
Conolog; provided, however, that if Benou shall die while this Irrevocable Proxy
remains in effect, any successor to Benou as President of Conolog shall succeed
to Benou as the person through whom Conolog shall exercise its rights under this
Irrevocable Proxy.
The undersigned does hereby revoke all other proxies given by the
undersigned to any other person or entity prior to the date hereof with respect
to the aforesaid matters.
This proxy is irrevocable and shall not expire until the earlier of
the tenth anniversary hereof and the date on which the undersigned no longer
owns any of the capital stock of Conolog.
IN WITNESS WHEREOF, the undersigned has executed this proxy as of the
date first set forth hereinabove.
CNL HOLDING, INC.
By
-------------------------
(Title)
<PAGE>
PROMISSORY NOTE
$127,500 September 3, 1996
New York, New York
FOR VALUE RECEIVED, CNL HOLDINGS, INC., a Delaware corporation ("Maker"),
promises to pay to Dune Holdings, Inc. ("Holder") at such place as Holder may
designate in writing, the entire principal sum of one hundred twenty seven
thousand five hundred dollars ($127,500.00), together with interest at the rate
of eight percent (8%) per annum,upon the demand of the Holder of the Note, at
which time all principal and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in lawful
money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days after notice and a reasonable
opportunity to cure; (ii) the entering into of a decree or order by a court of
competent jurisdiction adjudicating Maker a bankrupt or the appointing of a
receiver or trustee of Maker upon the application of any creditor in an
insolvency or bankruptcy proceeding or other creditor's suit; (iii) a court of
competent jurisdiction approving as properly filed, a petition for
reorganization or arrangement filed against Maker under the Federal bankruptcy
laws and such decree or order not being vacated within thirty (30) days; (iv)
the pendency of any bankruptcy proceeding or other creditors' suit against
Maker; (v) a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws with respect to Maker; (vi) an assignment for the
benefit of creditors by Maker; (vii) Maker consents to the appointment of a
receiver or trustee in an insolvency or bankruptcy proceeding or other
creditors' suit; (viii) the existence of any uncured event of default under the
terms of any instrument in writing evidencing a debt to someone other than
Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
<PAGE>
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
CNL HOLDINGS, INC.
By: /s/ Randolph K. Pace
--------------------------------
Randolph K. Pace
President
<PAGE>
PROMISSORY NOTE
$22,500
September 3, 1996
New York, New York
FOR VALUE RECEIVED, CNL HOLDINGS, INC., a Delaware corporation ("Maker"),
promises to pay to James Solakian ("Holder") at such place as Holder may
designate in writing, the entire principal sum of twenty two thousand five
hundred dollars ($22,500.00), together with interest at the rate of eight
percent (8%) per annum,upon the demand of the Holder of the Note, at which time
all principal and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in lawful
money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days after notice and a reasonable
opportunity to cure; (ii) the entering into of a decree or order by a court of
competent jurisdiction adjudicating Maker a bankrupt or the appointing of a
receiver or trustee of Maker upon the application of any creditor in an
insolvency or bankruptcy proceeding or other creditor's suit; (iii) a court of
competent jurisdiction approving as properly filed, a petition for
reorganization or arrangement filed against Maker under the Federal bankruptcy
laws and such decree or order not being vacated within thirty (30) days; (iv)
the pendency of any bankruptcy proceeding or other creditors' suit against
Maker; (v) a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws with respect to Maker; (vi) an assignment for the
benefit of creditors by Maker; (vii) Maker consents to the appointment of a
receiver or trustee in an insolvency or bankruptcy proceeding or other
creditors' suit; (viii) the existence of any uncured event of default under the
terms of any instrument in writing evidencing a debt to someone other than
Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
<PAGE>
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
CNL HOLDINGS, INC.
By: /s/ Randolph K. Pace
--------------------------------
Randolph K. Pace
President
