<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file no. 0-6272
DATUM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2512237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
9975 TOLEDO WAY, IRVINE, CA 92718-1819
(Address of principal executive offices) (Zip code)
(714) 380-8880
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. YES X NO
--- ---
The registrant had 4,066,110 shares of common stock outstanding as of
June 30, 1996.
Total number of sequentially numbered pages contained herein are: ______
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INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations . . . 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
A S S E T S
Current assets
Cash and short-term investments $ 1,392,000 $ 587,000
Accounts receivable 13,907,000 13,572,000
Accounts receivable, unbilled 253,000 66,000
Inventories
Purchased parts 7,511,000 7,801,000
Work-in-process 8,907,000 9,002,000
Finished products 2,540,000 3,358,000
----------- -----------
18,958,000 20,161,000
Prepaid expenses 365,000 200,000
Deferred income taxes 1,830,000 1,830,000
Income tax refund receivable 108,000 109,000
----------- -----------
Total current assets 36,813,000 36,525,000
Plant and equipment
Land 2,040,000 2,040,000
Buildings 4,483,000 4,474,000
Equipment 15,819,000 15,145,000
Leasehold improvements 1,400,000 1,150,000
----------- -----------
23,742,000 22,809,000
Less accumulated depreciation and amortization 8,553,000 7,155,000
----------- -----------
15,189,000 15,654,000
----------- -----------
Excess of purchase price over net assets acquired 13,467,000 13,914,000
Other assets 55,000 44,000
----------- -----------
$65,524,000 $66,137,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,841,000 $ 5,155,000
Accrued salaries and wages 1,932,000 2,102,000
Accrued warranty 1,158,000 1,337,000
Other accrued expenses 1,047,000 1,822,000
Customer deposits --- 74,000
Income taxes payable 265,000 105,000
Notes payable to bank 11,206,000 10,442,000
Current portion of long-term debt 3,407,000 3,178,000
----------- -----------
Total current liabilities 23,856,000 24,215,000
----------- -----------
Long-term debt 7,070,000 7,938,000
----------- -----------
Postretirement benefits 368,000 290,000
----------- -----------
Other long-term liabilities 1,373,000 1,388,000
----------- -----------
Deferred income taxes 993,000 993,000
----------- -----------
Stockholders' equity
Preferred stock, par value $.25 per share
Authorized - 1,000,000 shares in 1996
- 0 shares in 1995
Issued - 0 shares -- --
Common stock, par value $.25 per share
Authorized - 10,000,000 shares in 1996
8,000,000 shares in 1995
Issued - 4,066,110 shares in 1996
4,018,968 shares in 1995 1,017,000 1,005,000
Additional paid-in capital 24,742,000 24,418,000
Retained earnings
Beginning of period 5,982,000 5,922,000
Net income 333,000 60,000
----------- -----------
End of period 6,315,000 5,982,000
Cumulative translation adjustment (210,000) (92,000)
----------- -----------
Total stockholders' equity 31,864,000 31,313,000
----------- -----------
$65,524,000 $66,137,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net product sales and
contract revenues $20,248,000 $16,853,000 $39,850,000 $26,685,000
----------- ----------- ----------- -----------
Costs and expenses
Cost of products sold and
contract revenues 12,268,000 9,283,000 23,979,000 14,833,000
Selling 2,946,000 2,523,000 5,646,000 4,119,000
Product development 1,882,000 2,288,000 3,915,000 3,230,000
General and administrative 2,319,000 1,995,000 4,620,000 3,207,000
Interest expense 577,000 520,000 1,132,000 649,000
Interest (income) (1,000) (3,000) (7,000) (6,000)
----------- ----------- ----------- -----------
19,991,000 16,606,000 39,285,000 26,032,000
----------- ----------- ----------- -----------
Income before income taxes 257,000 247,000 565,000 653,000
Income tax provision 106,000 102,000 232,000 268,000
----------- ----------- ----------- -----------
Net income $ 151,000 $ 145,000 $ 333,000 $ 385,000
=========== =========== =========== ===========
Earnings per common and
common equivalent share $ 0.04 $ 0.03 $ 0.08 $ 0.11
=========== =========== =========== ===========
Weighted average number
of common and common
equivalent shares outstanding 4,247,000 4,241,000 4,225,000 3,665,000
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
JUNE 30, June 30,
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 333,000 $ 385,000
---------- -----------
Adjustments to reconcile income to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,088,000 1,129,000
Contribution of the Company's shares of common stock 243,000 99,000
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable (335,000) (301,000)
(Increase) decrease in accounts receivable,
unbilled - current portion (187,000) 8,000
Decrease in income tax refund receivable 1,000 6,000
(Increase) decrease in inventories 1,203,000 (2,682,000)
Increase in prepaid expenses (165,000) (634,000)
(Increase) decrease in other assets (11,000) 10,000
Increase (decrease) in accounts payable (314,000) 255,000
Increase (decrease) in accrued expenses (1,094,000) 377,000
Decrease in customer deposits (74,000) ---
Increase (decrease) in income taxes payable 160,000 (246,000)
Increase in postretirement benefits 78,000 38,000
Decrease in other long-term liabilities (15,000) ---
---------- -----------
Total reconciling items 1,578,000 (1,941,000)
---------- -----------
Net cash provided by (used in) operating activities 1,911,000 (1,556,000)
---------- -----------
Cash flows from investing activities:
Book value of equipment disposals 56,000 8,000
Capital expenditures (1,232,000) (911,000)
Payment for acquisition, net of cash --- (14,494,000)
Other (118,000) (31,000)
---------- -----------
Net cash used in investing activities (1,294,000) (15,428,000)
---------- -----------
Cash flows from financing activities:
Proceeds from line of credit 764,000 6,100,000
Proceeds from (reductions to) long-term debt (669,000) 10,574,000
Exercise of stock options 93,000 125,000
---------- -----------
Net cash provided by financing activities 188,000 16,799,000
---------- -----------
Net increase in cash and cash equivalents 805,000 (185,000)
Cash and cash equivalents at beginning of period 587,000 221,000
---------- -----------
Cash and cash equivalents at end of period $1,392,000 $ 36,000
========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 7
DATUM INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes which would be presented were such
financial statements prepared in accordance with generally accepted accounting
principles, and should be read in conjunction with the audited financial
statements presented in the Company's 1995 Annual Report to Stockholders. In
the opinion of management, the accompanying financial statements reflect all
adjustments which are necessary for a fair presentation of the results for the
interim period presented. The results of operations for such interim period are
not necessarily indicative of results to be expected for the full year.
NOTE B - EARNINGS PER SHARE
Earnings per share is calculated by dividing net earnings by the weighted
average number of common and common equivalent shares outstanding during each
period taking into consideration dilutive effects of common stock equivalents.
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<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" presented in the
Company's 1995 Annual Report to Stockholders.
INTRODUCTORY NOTE
This Report on Form 10-Q contains certain forward-looking statements, including
(i) statements related to potential rescheduling, or elimination of orders for
the Company's products, (ii) the necessary elements for the successful
management of growth, and (iii) the need for, and availability of, additional
financing. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. The
forward-looking statements are based on assumptions that the Company will not
lose a significant customer or customers or experience increased fluctuations
of demand or rescheduling of purchase orders, that the Company's markets will
continue to grow, that the Company's products will remain accepted within their
respective markets and will not be replaced by new technology, that competitive
conditions within the Company's markets will not change materially or
adversely, that the Company will retain key technical and management personnel,
that the Company's forecasts will accurately anticipate market demand, and that
there will be no material adverse change in the Company's operations or
business. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.
Overview
The Company designs, manufactures and markets a wide variety of high-quality,
high performance time and frequency products used to synchronize the flow of
information in telecommunications and enterprise computing networks. The
Company also is a leading supplier of high-performance timing products for a
wide variety of scientific and industrial test and measurement applications.
On March 17, 1995, the Company completed its acquisition of Efratom Time and
Frequency Products, Inc., a Colorado corporation, and Efratom Elektronik GmbH,
a corporation organized under the laws of the Republic of Germany
(collectively, "Efratom"), the inventor and leading supplier of high-stability,
rubidium-based oscillators widely used in cellular and PCS systems, from Ball
Corporation. The purchase price consisted of $15,000,000 cash and 1,277,778
shares of the Company's Common Stock. The final purchase price is subject to a
post-closing adjustment. The transaction has been accounted for as a purchase
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair market values at the date of the acquisition. In
connection with the acquisition, the Company recorded $12,117,000 in goodwill,
which amount will be amortized (and charged against earnings) for 15 years from
the date of the acquisition. Included in goodwill is an amount that the
Company expects to settle with Ball Corporation upon final negotiations of the
purchase price adjustment.
As a result of the acquisition, the Company has experienced significant
increases (in absolute terms) in revenue, selling expenses, general and
administrative expenses, accounts receivable, inventory and accounts payable,
in the six months ended June 30, 1996 from the corresponding period of 1995.
The Datum companies traditionally have operated on a relatively independent
basis. In the fourth quarter of 1995, the Company combined the operations of
its Bancomm Division and its Timing Division. Should the Company desire to
integrate its operations to a greater extent in the future, certain operational
changes, cost controls, systems integrations, marketing focus and the
coordination of new product development may be required. There can be no
assurance that the Company will be successful in completing any such efforts or
that such efforts will result in increased revenues or earnings. See
"Introductory Note."
The Company's ability to manage its growth effectively will require it to
enhance its operational, financial and management systems; to expand its
facilities and equipment; and to successfully hire, train and motivate
additional employees. The failure of the Company to manage its growth on an
effective basis could have a material adverse effect on the Company's operating
results and financial conditions. The Company will be required to increase
staffing and other expenses as well as its expenditures on capital equipment
and leasehold improvements in order to meet the demands of its customers or to
enter new markets. Customers, however, may not commit to firm production
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<PAGE> 9
schedules for more than a short time in advance, and new products may have
uncertain market acceptance. The Company's profitability would be adversely
affected if the Company increases its expenditures in anticipation of future
sales that do not materialize. See "Introductory Note."
A small number of customers account for a substantial portion of the Company's
net sales. There can be no assurance that a major customer will not reduce,
delay or eliminate its purchases. Any such reduction, delay or loss in orders
could have a material adverse effect on the Company's business and results of
operations. See "Introductory Note."
Results of Operations
The following table sets forth, for the fiscal periods indicated, certain
income and expense items expressed as a percentage of the Company's total
sales:
<TABLE>
<CAPTION>
Percentage of Total Sales
-----------------------------------------------------------------------
Year Ended December 31, Three Months Ended June 30,
--------------------------------- ---------------------------
1993 1994 1995 1995 1996
----- ----- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net product sales and contract revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of products sold and
contract revenue . . . . . . 59.6% 56.6% 59.5% 55.1% 60.6%
Selling . . . . . . . . . . . . 18.1% 16.8% 14.6% 15.0% 14.5%
Product development . . . . . . 7.6% 8.1% 10.5% 13.6% 9.3%
General and administrative . . . 13.4% 12.7% 12.6% 11.8% 11.5%
Interest expense . . . . . . . . 0.8% 0.8% 2.5% 3.1% 2.8%
Interest income . . . . . . . . 0.0% 0.0% 0.0% 0.0% 0.0%
Income before income taxes . . . . 0.4% 5.0% 0.3% 1.5% 1.3%
Income tax provision . . . . . . . 0.1% 2.0% 0.2% 0.6% 0.5%
Net income . . . . . . . . . . . . 0.3% 3.0% 0.1% 0.9% 0.7%
</TABLE>
Consolidated net product sales and contract revenues increased 20.1% for the
quarter ended June 30, 1996, when compared to the corresponding quarter of
1995. For the six month period of 1996, the sales increase was 49.3% when
compared to the same two quarters of 1995. The quarterly increase is
attributable to increased sales of telecommunications products at Efratom and
the Company's Austron subsidiary. The six month increase is also due to the
acquisition of Efratom on March 17, 1995. Contract revenues as a component of
total revenues are not significant.
Cost of products sold and contract revenues as a percentage of product sales for
the quarter ended June 30, 1996, was 60.6%, compared with 55.1% for the
corresponding quarter of 1995. For the six month period of 1996, cost of
products sold as a percentage of sales was 60.2% when compared to 55.6% for the
corresponding period of 1995. Price changes and the mix of telecommunication
products sold in 1996 contributed to the increase in cost of products sold and
contract revenue compared to three- and six-month periods ended June 30, 1995.
Selling expense increased by $423,000 for the quarter ended June 30, 1996 over
the similar period in 1995, due to additional marketing programs in each
division and commissions on increased sales volume. However, sales expense as
a percentage of product sales decreased to 14.5% for the quarter ended June 30,
1996 from 15.0% for the corresponding quarter of 1995, due to a larger sales
base. For the six month period ended June 30, 1996, the increase of $1,527,000
over the corresponding period of 1995 is largely attributable to the
acquisition of Efratom on March 17, 1995.
Product development expense as a percentage of product sales decreased to 9.3%
for the quarter ended June 30, 1996, compared with 13.6% for the corresponding
quarter of 1995 due to an increased sales base and the efficiencies gained by
combining Company's Bancomm and Timing divisions at the end of 1995. The six
month period ended June 30, 1996, was $708,000 over the corresponding period of
1995 due mainly to the acquisition of Efratom on March 17, 1995.
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<PAGE> 10
General and administrative expense increased by $324,000 for the quarter ended
June 30, 1996, over the corresponding period of 1995. This increase is largely
due to additional charges, resulting from the Company's relocation of its
headquarters, for facilities, personnel, insurance and post retirement benefits
in the current quarter period. For the six month period ended June 30, 1996,
the differential over the corresponding period of 1995 is due largely to the
acquisition of Efratom on March 17, 1995.
Interest expense increased by $57,000 for the quarter ended June 30, 1996, to
$577,000 when compared to the corresponding quarter of 1995. The borrowing
level at June 30, 1996 was $21.6 million, while the corresponding borrowing
level at June 30, 1995 was $19.7 million. Increased working capital needs,
especially inventory, accounted for the additional borrowing at quarter end.
Net income as a percentage of net sales decreased to 0.7% in the current
quarter from 0.9% in the same quarter of 1995. The mix of products sold, the
added cost of selling and general and administrative, along with the additional
interest expense accounted for this differential.
The common and common equivalent shares for the six months ended June 30, 1996
were affected by the shares issued to Ball Corporation for the acquisition of
Efratom on March 17, 1995 and, to a lesser extent by the exercise of stock
options adding to outstanding shares.
Liquidity and Capital Resources
Accounts receivable, including accounts receivable unbilled, increased at June
30, 1996 to $14,160,000 from $13,638,000 at December 31, 1995. The increase is
due to larger shipments in the final month of the June 30, 1996 quarter by
$1,460,000 over the final month of 1995.
Inventories decreased from $20,161,000 at December 31, 1995, to $18,958,000 at
June 30, 1996 as a result of larger June shipments and an effort to reduce
inventory.
Accounts payable decreased from $5,155,000 at December 31, 1995, to $4,841,000
at June 30, 1996, in part, as a result of continuing control of inventory
purchases.
At June 30, 1996, the Company had working capital of $12,957,000 and a current
ratio of 1.54:1. This compares to working capital of $12,310,000 and a current
ratio of 1.51:1 at December 31, 1995.
Due to contractual obligations and the nature of its manufacturing processes,
Efratom maintains higher levels of inventories, both on absolute and percentage
bases, than the Company historically maintained. As a result, the Company
anticipates that inventories as a percentage of total assets, will continue
above levels experienced prior to the Efratom acquisition, which will have the
effect of increasing the Company's working capital requirements.
In connection with the acquisition of Efratom in March 1995, the Company
financed the cash portion of the purchase price and expenses and provided for
an ongoing credit facility under a credit agreement with an aggregate credit
availability of $22,000,000. The credit facility included, (i) an $11,000,000
Revolving Line of Credit bearing interest at the bank's prime rate plus 0.5%,
(ii) a $2,500,000 Term Loan bearing interest at the bank's prime rate plus
0.75% with interest and principal payable ratably over 72 months (Term Loan I),
(iii) a $2,500,000 Term Loan bearing interest at the Bank's prime rate plus
0.5% amortized over 25 years, payable in five years (Term Loan II), and (iv) a
$6,000,000 Term Loan bearing interest at the bank's prime rate plus 0.75% with
interest and principal payable ratably over 48 months (Term Loan III). The
loans are secured by the accounts receivable, inventory, real estate and
equipment of the Company. Upon repayment of Term Loan III, the interest rates
on each of the Revolving Line of Credit and Term Loan I will be reduced by
0.25%. On August 31, 1995, the credit facility was amended to increase the
Revolving Line of Credit from $11,000,000 to $14,000,000 and to provide for an
additional Term Commitment of up to $2,000,000 through January 10, 1996,
bearing interest at the bank's prime rate plus .75%, with interest payable
monthly and principal payable in 36 monthly installments commencing February
1996. On March 14, 1996, the credit facility was amended to permit an
over-advance on the borrowing base calculation by up to $2,000,000. As
consideration for this over-advance line, the Company will pay a non-refundable
fee of 0.5% on the revolving line of credit amount. Effective June 6, 1996,
the credit facility was amended to extend the credit agreement to October 7,
1996, to increase the amount by which outstanding borrowings under the Line of
Credit may at any time exceed the
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<PAGE> 11
Borrowing Base by $2,000,000 and make certain changes in the terms and
conditions set forth in the credit agreement. The Company is continuing to
seek alternative financing facilities. However, there can be no assurance that
the Company will be successful in obtaining alternative financing on
commercially acceptable terms. See "Introductory Note."
On June 30, 1996, an aggregate of approximately $21,574,000 was outstanding
under the Company's bank credit arrangement. The notes payable to the bank of
$11,206,000 at June 30, 1996, reflects the balance outstanding under the
$14,000,000 Revolving Line of Credit. The balance reflects usage to date and
includes $4,000,000 utilized as a portion of the $15,000,000 cash purchase
price of Efratom. The additional usage is partially to cover the higher levels
of accounts receivable and inventory.
The current portion of long term-debt reflects the banking arrangements
described above which are due and payable in the current year.
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<PAGE> 12
PART II. OTHER INFORMATION
Items 1 through 3 and Item 5 have been omitted because the related information
is either inapplicable or has been previously reported.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on June 6, 1996
(b) (i) Set forth below is the name of each director elected at the
meeting and the number of votes cast for their election,
the number of votes withheld and the number of broker
non-votes:
<TABLE>
<CAPTION>
Number of Number of
Name Votes "For" Votes "Withheld"
---- ----------- ----------------
<S> <C> <C>
G. Tilton Gardner 3,517,839 234,186
Donovan B. Hicks 3,516,469 235,556
Michael M. Mann 3,516,269 235,756
</TABLE>
(ii) The terms of the following directors of the company
continued after the meeting: R. David Hoover, Edward A.
Money, Thomas J. O'Rourke, Louis B. Horwitz and Dan L.
McGurk.
(c) (i) Set forth below are the results of the voting at the
meeting with respect to the proposal to amend the Company's
Certificate of Incorporation to authorize 1,000,000 shares
of Preferred Stock, with such designations, preferences,
limitations and relative rights as the Board of Directors
shall determine:
<TABLE>
<CAPTION>
Number of Number of Number of Number of
Votes "For" Votes "Against" "Abstentions" Broker "Non-Votes"
----------- --------------- ------------- ------------------
<S> <C> <C> <C>
2,457,243 441,355 15,383 838,044
</TABLE>
(ii) Set forth below are the results of the voting at the
meeting with respect to the proposal to amend the Company's
Certificate of Incorporation to increase the authorized
number of shares of Common Stock issuable thereunder from
8,000,000 to 10,000,000:
<TABLE>
<CAPTION>
Number of Number of Number of Number of
Votes "For" Votes "Against" "Abstentions" Broker "Non-Votes"
----------- --------------- ------------- ------------------
<S> <C> <C> <C>
3,626,700 101,934 22,391 1,000
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation, as amended to date
10.30.4 Fourth amendment to the Credit Agreement dated
June 6, 1996
27.2 Financial Data Schedule
(b) No current reports on Form 8-K were filed during the quarter
covered by this report.
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<PAGE> 13
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATUM INC.
/s/ Louis B. Horwitz Date August 13, 1996
- ------------------------------------------ ---------------
Louis B. Horwitz, President
/s/ David A. Young Date August 13, 1996
- ------------------------------------------ ---------------
David A. Young, Chief Financial Officer
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<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ------------
<S> <C>
3.1 Certificate of Incorporation, as amended to date
10.30.4 Fourth amendment to the Credit Agreement dated June 6, 1996
27.2 Financial Data Schedule
</TABLE>
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
DATUM DELAWARE, INC.
(A DELAWARE CORPORATION)
FIRST: The name of the corporation is Datum Delaware, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name and address of the
registered agent of the Corporation is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, State of Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The Corporation is authorized to issue one class of shares of
stock to be designated "Common." The total number of shares that the
corporation is authorized to issue is five million (5,000,000) shares. The
Common shares shall each have a twenty-five cents ($.25) par value. The
aggregate par value is one million two hundred fifty thousand dollars
($1,250,000).
FIFTH: The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The term of
the initial Class I directors shall terminate on the date of the 1988 annual
meeting of stockholders; the term of the initial Class II directors shall
terminate on the date of the 1989 annual meeting of stockholders and the term
of the initial Class III directors shall terminate on the date of the 1990
annual meeting of stockholders. At each annual meeting of stockholders
beginning in 1988, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional directors of any class elected to fill a
vacancy resulting from an increase in such class will hold office for a term
that shall coincide with the remaining term of that class, but in no case shall
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year
in which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
SIXTH: A director shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director; provided that this sentence shall not eliminate or limit the
liability of a director (i) for any breach of his duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the General
<PAGE> 2
Corporation Law, or (iv) for any transaction from which the director derives an
improper personal benefit.
SEVENTH: Except as expressly set forth herein or as otherwise
provided by law, the board of directors is empowered to adopt bylaws, and amend
the same from time to time, by a majority vote of the directors pertaining to
any matter that is pertinent to the business of the Corporation and as
permitted by law.
EIGHTH: This Certificate of Incorporation may be amended by a
majority vote of the authorized and outstanding Common shares.
NINTH: The incorporator is V. A. Brookens, whose mailing address is
1209 Orange Street, Wilmington, Delaware 19801.
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and, accordingly, have hereto set my hand and seal this 15th day of
April, 1987.
By: /s/ V. A. Brookens
----------------------------
V. A. Brookens, Incorporator
2
<PAGE> 3
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of April 20, 1987, is entered into
between Datum, Inc., a California corporation ("Datum California"), and Datum
Delaware, Inc., a Delaware corporation ("Datum Delaware"). Datum California
and Datum Delaware are hereinafter sometimes collectively referred to as the
"Constituent Corporations."
RECITALS:
A. Datum California is a corporation duly organized and existing
under the laws of the State of California;
B. Datum Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;
C. On the date of this Agreement, Datum California has authority
to issue 5,000,000 shares of twenty-five cents ($.25) par value Common Stock
("California Common Stock"), of which 2,728,890 shares are issued and
outstanding or reserved for issuance at the date hereof;
D. On the date of this Agreement, Datum Delaware has authority to
issue 5,000,000 shares of Common Stock, par value twenty-five cents ($.25) per
share ("Delaware Common Stock"), 1,000 shares of which are issued and
outstanding and owned by Datum California;
E. The Boards of Directors of Datum California and Datum Delaware
have determined that it is advisable and in the best interest of their
respective corporations that Datum California merge with and into Datum
Delaware upon the terms and subject to the conditions set forth in this
Agreement for the purpose of effecting the change of the state of incorporation
of Datum California from California to Delaware;
F. The respective Boards of Directors of Datum California and
Datum Delaware have, by resolutions duly adopted, approved this Agreement;
G. Datum California has approved this Agreement as the sole
stockholder of Datum Delaware, and
H. The Board of Directors of Datum California has directed that
this Agreement be submitted to a vote of its shareholders.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, Datum California and Datum Delaware hereby agree as
follows:
1. Merger. Datum California shall be merged with and into Datum
Delaware (the "Merger"), and Datum Delaware shall be the surviving corporation
(hereinafter sometimes referred to as the "Surviving Corporation"). The Merger
shall become effective upon the date and at the time of filing of an
appropriate certificate of merger, providing for the Merger, with the Secretary
of State of the State of California and an appropriate certificate of merger,
1
<PAGE> 4
providing for the Merger, with the Secretary of State of Delaware, whichever
later occurs (the "Effective Time").
2. Governing Documents. The Certificate of Incorporation of
Datum Delaware, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation without change or
amendment until thereafter amended in accordance with the provisions thereof
and applicable laws, except that at the Effective Time, Article First of said
Certificate of Incorporation shall be amended to read in its entirety as
follows: "The name of the corporation is Datum Inc. (hereinafter referred to
as the "Corporation")." The bylaws of Datum Delaware, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving Corporation,
without change or amendment until thereafter amended in accordance with the
provisions thereof, the provisions of the Certificate of Incorporation of the
Surviving Corporation and applicable laws.
3. Succession. At the Effective Time, the separate corporate
existence of Datum California shall cease, and Datum Delaware shall possess all
the rights, privileges, powers and franchises of a public and private nature
and be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations and all and singular, the rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to each of the Constituent Corporations,
shall be vested in the Surviving Corporation and all property, rights,
privileges, powers and franchises, and all and every other interest, shall be
thereafter as effectually the property of the Surviving Corporation as they
were of the respective Constituent Corporations, and the title to any real
estate vested by deed or otherwise in either of such Constituent Corporations
shall not revert or be in any way impaired by reason of the Merger, but all
rights of creditors and all liens upon any property of Datum California shall
be preserved and unimpaired. To the extent permitted by law, any claim
existing or action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted as if the Merger had not taken
place. All debts, liabilities and duties of the respective Constituent
Corporations shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it. All corporate acts, plans, policies,
agreements, arrangements, approvals and authorizations of Datum California, its
stockholders, Board of Directors and committees thereof, officers and agents
which were valid and effective immediately prior to the Effective Time, shall
be taken for all purposes as the acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving Corporation and
shall be as effective and binding thereon as the same were with respect to
Datum California. The employees and agents of Datum California shall become
the employees and agents of the Surviving Corporation and continue to be
entitled to the same rights and benefits which they enjoyed as employees and
agents of Datum California, subject to the same limitations with respect
thereto. The requirements of any plans or agreements of Datum California
involving the issuance or purchase by Datum California of certain shares of its
capital stock shall be satisfied by the issuance or purchase of a like number
of shares of the Surviving Corporation.
4. Directors and Officers. The directors and officers of Datum
California at the Effective Time shall be and become directors and officers,
holding the same titles and positions, of the Surviving Corporation at the
Effective Time, and after the Effective Time shall serve in accordance with the
bylaws of the Surviving Corporation.
2
<PAGE> 5
5. Further Assurances. From time to time, as and when required
by the Surviving Corporation or by its successors or assigns, there shall be
executed and delivered on behalf of Datum California such deeds and other
instruments, and there shall be taken or caused to be taken by it all such
further and other actions, as shall be appropriate, advisable or necessary in
order to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation the title to and possession of all property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of Datum
California, and otherwise to carry out the purposes of this Agreement, and the
officers and directors of the Surviving Corporation are fully authorized in the
name and on behalf of Datum California otherwise, to take any and all such
action and to execute and deliver any and all such deeds and other instruments.
6. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) each share of California Common Stock outstanding
immediately prior to the Effective Time shall be changed and converted
into and shall be one fully paid and nonassessable share of Delaware
Common Stock; and
(b) the 1,000 shares of Delaware Common Stock presently
issued and outstanding in the name of Datum California shall be
cancelled and retired and resume the status of authorized and unissued
shares of Delaware Common Stock, and no shares of Delaware Common
Stock or other securities of Datum Delaware shall be issued in respect
thereof.
7. Condition to Merger. The Merger shall have received the
requisite approval of the holders of California Common Stock pursuant to the
Corporations Code of the State of California.
8. Stock Certificates. At and after the Effective Time, all of
the outstanding certificates which, immediately prior to the Effective Time,
represented shares of California Common Stock shall be deemed for all purposes
to evidence ownership of, and to represent, as the case may be, shares of
Delaware Common Stock into which the shares of California Common Stock,
formerly represented by such certificates, have been converted as herein
provided. The registered owner on the books and records of the Surviving
Corporation or its transfer agents of any such outstanding stock certificate
shall, until such certificate shall have been surrendered for transfer or
otherwise accounted for to the Surviving Corporation or its transfer agents,
have and be entitled to exercise any voting and other rights with respect to,
and to receive any dividends and other distributions upon, the shares of Datum
Delaware evidenced by such outstanding certificate as above provided.
9. Options. Each (i) option to purchase shares of California
Common Stock granted under the 1984 Stock Option Plan and right to receive
shares of California Common Stock granted under the 1981 Restricted Stock Award
Plan of Datum California (the "Plans") and (ii) other warrant or option to
purchase shares of California Common Stock which is outstanding immediately
prior to the Effective Time, shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become an
option, right or warrant, as the case may be, to purchase or receive the same
number of shares of Delaware Common Stock upon the same terms and subject to
the same conditions as set forth in the Plans or other warrants or
3
<PAGE> 6
option agreements with respect thereto as in effect at the Effective Time. The
same number of shares of Datum Delaware Common Stock shall be reserved for
purposes of said Plans or other warrants or options as is equal to the number
of shares of Datum California Common Stock so reserved as of the Effective
Time. As of the Effective Time, Datum Delaware hereby assumes the Plans and
all obligations of Datum California under the Plans (including the outstanding
options and rights or portions thereof granted pursuant to the Plans) as well
as all other warrants and options of Datum California and any agreements of
Datum California with respect thereto.
10. Other Employee Benefit Plans. As of the Effective Time, Datum
Delaware hereby assumes all obligations under any and all employee benefit
plans of Datum California in effect as of the Effective Time or with respect to
which employee rights or accrued benefits are outstanding as of the Effective
Time.
11. Amendment. Subject to applicable laws, this Agreement may be
amended, modified or supplemented by written agreement of the parties hereto at
any time prior to the Effective Time with respect to any of the terms contained
herein; provided, however, that no such amendment, modification or supplement
not adopted and approved by the shareholders of Datum California and Datum
Delaware shall affect the rights of the shareholders of either or both such
corporations in a manner which is materially adverse to the shareholders of
either or both such corporations.
12. Abandonment. At any time prior to the Effective Time, this
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of Datum California, notwithstanding approval of this Agreement by
the shareholder of Datum Delaware or by the shareholders of Datum California,
or both, if in the opinion of such Board of Directors, the Merger is for any
reason inadvisable.
13. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns; provided, however, that this Agreement may not be assigned to any
party without the prior written consent of the other party hereto.
4
<PAGE> 7
IN WITNESS WHEREOF, Datum California and Datum Delaware have caused
this Agreement to be signed by their respective duly authorized officers as of
the date first above written.
DATUM INC., a California corporation
By: /s/ Louis B. Horwitz
---------------------------
Louis B. Horwitz, President
ATTEST:
By /s/ Benjamin F. Tarver
-----------------------------
Benjamin F. Tarver, Secretary
DATUM DELAWARE, INC.,
a Delaware corporation
By: /s/ Louis B. Horwitz
---------------------------
Louis B. Horwitz, President
ATTEST:
By: /s/ Benjamin F. Tarver
-----------------------------
Benjamin F. Tarver, Secretary
5
<PAGE> 8
DATUM DELAWARE, INC.
CERTIFICATE OF SECRETARY
I, BENJAMIN F. TARVER, the Secretary of DATUM DELAWARE, INC. ("DATUM
DELAWARE"), a corporation organized and existing under the laws of the State of
Delaware, hereby certify that the Agreement of Merger to which this Certificate
is attached, having been duly signed on behalf of DATUM DELAWARE and having
been signed on behalf of DATUM, INC., a corporation of the State of California,
was duly adopted pursuant to Delaware General Corporation Law Section 228 by
the unanimous written consent of the stockholders holding 1,000 shares of the
capital stock of DATUM DELAWARE, the same being all of the shares issued and
outstanding having voting power, and that thereby the Agreement of Merger was
adopted as the act of the stockholders of DATUM DELAWARE and the duly adopted
agreement and act of said corporation.
WITNESSED my hand this 5th day of June, 1987.
/s/ BENJAMIN F. TARVER
-----------------------------
Benjamin F. Tarver, Secretary
6
<PAGE> 9
DATUM INC.
CERTIFICATE OF SECRETARY
I, BENJAMIN F. TARVER, the Secretary of DATUM INC. (the "Company"), a
corporation organized and existing under the laws of the State of California,
hereby certify that the Agreement of Merger to which this Certificate is
attached, having been duly signed on behalf of the Company and having been
signed on behalf of DATUM DELAWARE, INC., a corporation of the State of
Delaware, was duly approved and adopted at the Company's Annual Meeting of
Stockholders held on May 27, 1987 by the holders of a majority of the
outstanding stock entitled to vote, and that such number equaled or exceeded
the vote required thereon, and that thereby the Agreement of Merger was adopted
as the act of the stockholders of the Company and the duly adopted agreement
and act of said corporation.
WITNESSED my hand this 5th day of June, 1987.
/s/ BENJAMIN F. TARVER
-----------------------------
Benjamin F. Tarver, Secretary
7
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DATUM INC.,
A DELAWARE CORPORATION
(Pursuant to Section 242 of the Delaware General Corporation Law)
DATUM INC., a corporation organized and existing under and by virtue
of the Delaware General Corporation Law (the "Corporation"), does hereby
certify that:
FIRST: At a duly held meeting of the Board of Directors of the
Corporation, the Board of Directors of the Corporation duly adopted a
resolution setting forth an amendment to the Certificate of Incorporation of
the Corporation, declaring said amendment to be advisable and directing that
said amendment be submitted to the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
"NOW, THEREFORE, BE IT RESOLVED, that Article Fourth of the
Corporation's Certificate of Incorporation be amended and restated to
read as follows:
The Corporation is authorized to issue one class of shares of
stock to be designated "Common." The total number of shares
that the Corporation is authorized to issue is eight million
(8,000,000) shares. The common shares shall each have a
twenty-five cents ($.25) par value."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a Special Meeting of the Stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the Delaware
General Corporation Law, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: Said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
8
<PAGE> 11
IN WITNESS WHEREOF, DATUM INC. has caused this Certificate of
Amendment to be signed by Louis B. Horwitz, its duly authorized Chairman and
President, this 16th day of March, 1995.
DATUM INC.,
a Delaware corporation
By: /s/ LOUIS B. HORWITZ
------------------------------
Louis B. Horwitz
Chairman and President
9
<PAGE> 12
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DATUM INC.,
A DELAWARE CORPORATION
(Pursuant to Section 242 of the Delaware General Corporation Law)
DATUM INC., a corporation organized and existing under and by virtue
of the Delaware General Corporation Law (the "Corporation"), does hereby
certify that:
FIRST: At a duly held meeting of the Board of Directors of the
Corporation, the Board of Directors of the Corporation duly adopted a
resolution setting forth an amendment to the Certificate of Incorporation of
the Corporation, declaring said amendment to be advisable and directing that
said amendment be submitted to the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
"NOW, THEREFORE, BE IT RESOLVED, that Article Fourth of the
Corporation's Certificate of Incorporation be amended and restated to
read as follows:
FOURTH: The total number of shares of stock which the
Corporation shall have the authority to issue is eleven
million (11,000,000) shares, consisting of a class of one
million (1,000,000) shares of Preferred Stock par value $.25
per share, and a class of ten million (10,000,000) shares of
Common Stock par value $.25 per share, (the Preferred Stock,
par value $.25 per share, being herein referred to as
"Preferred Stock"; and the Common Stock, par value $.25 per
share, being herein referred to as "Common Stock"). The Board
of Directors is expressly authorized to provide for the
issuance of the shares of Preferred Stock in one or more
series and, by filing a Certificate pursuant to the applicable
law of the State of Delaware, to establish from time to time
the number of shares to be included in each series, and to fix
the designations, powers, preferences and relative,
participation, optional or other special rights, if any, of
the shares of each such series and the qualifications,
limitations and restrictions thereof, if any, with respect to
each such series of Preferred Stock.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, an Annual Meeting of the Stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the Delaware
General Corporation Law, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
<PAGE> 13
THIRD: Said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, DATUM INC. has caused this Certificate of
Amendment to be signed by Louis B. Horwitz, its duly authorized Chairman and
President, this 11th day of June, 1996.
DATUM INC.,
a Delaware corporation
By: /s/ LOUIS B. HORWITZ
-----------------------
Louis B. Horwitz
Chairman and President
2
<PAGE> 1
EXHIBIT 10.30.4
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Fourth Amendment to Credit Agreement ("Fourth Amendment")
dated as of June 6, 1996, is made by and between DATUM INC., a Delaware
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
This Fourth Amendment is made with reference to the following facts:
A. Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement by and between Borrower and Bank
dated as of December 16, 1994 (as amended from time to time, including without
limitation, as amended by (i) that certain First Amendment to Credit Agreement
dated as of August 31, 1995, (ii) that certain Second Amendment to Credit
Agreement dated as of November 1, 1995 and (iii) that certain Third Amendment
to Credit Agreement dated as of March 14, 1996, the "Credit Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth for such terms in the Credit Agreement (as amended pursuant to this
Fourth Amendment).
B. Borrower has requested that Bank (i) extend the scheduled maturity
date of the Line of Credit to October 7, 1996, (ii) increase the amount by
which outstanding borrowings under the Line of Credit may at any time exceed
the Borrowing Base by $2,000,000.00 and (iii) otherwise make certain changes in
the terms and conditions set forth in the Credit Agreement. Subject to the
terms and conditions set forth herein, Bank has agreed to make such requested
changes in the terms and provisions of the Credit Agreement and Borrower and
Bank have agreed to amend the Credit Agreement as set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and benefits
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are acknowledged, Borrower and Bank agree as follows:
1. AMENDMENTS OF CREDIT AGREEMENT.
1.1 Section 1.1(a). Section 1.1(a) of the Credit Agreement is
amended by deleting "June 6, 1996" as the last day
<PAGE> 2
on which Bank agrees to make advances to Borrower on the Line of Credit, and by
substituting for such date "October 7, 1996".
1.2 Section 1.1(c). Section 1.1(c) of the Credit Agreement is
amended (a) by deleting "$2,000,000.00" as the maximum permitted aggregate
outstanding borrowings under the Line of Credit that may at any time exceed the
Borrowing Base, and by substituting for such amount "$4,000,000.00" and (b) by
deleting "June 6, 1996" as the last day on which such overadvance(s) shall be
permitted on the Line of Credit, and by substituting for such date "October 7,
1996".
1.3 Section 1.1(e). Section 1.1 of the Credit Agreement is
further amended by adding the following new subsection (e), to read as follows:
(e) Loan Fees.
(i) Base Loan Fee. Borrower shall pay to Bank a
non-refundable monthly fee on or before the 16th day of each month
(the "Payment Date"), commencing July 16, 1996, calculated as
follows:
A + B x .005
--------- --------
2 12
A = the aggregate principal balance
outstanding under the Credits
(excluding the undrawn amount of
issued and outstanding Letters of
Credit) as of the 7th day of the
month immediately preceding the
Payment Date.
B = the aggregate principal balance
outstanding under the Credits
(excluding the undrawn amount of
issued and outstanding Letters of
Credit) as of the 6th day of the
month in which the Payment Date
occurs.
(ii) Additional Overadvance Fee. As additional
consideration for the permitted overadvance provided in subsection
(c) above, Borrower shall pay to Bank on or before each Payment
Date (commencing on July 16, 1996), a non-refundable monthly
overadvance fee equal to one-half percent (0.50%) per annum of the
average daily aggregate principal balance outstanding under the
Line of Credit (excluding the undrawn amount of issued and
-2-
<PAGE> 3
outstanding Letters of Credit) exceeding the sum of (A) the
Borrowing Base plus (B) $2,000,000.00.
(iii) Adjusted Risk Fee. In the event the
aggregate outstanding balance of the Credits exceeds $6,000,000.00
as of October 7, 1996, Borrower shall pay to Bank on or before
October 10, 1996, a non-refundable adjusted risk fee equal to the
sum of (A) $12,500 plus (B) one-half percent (0.50%) per annum of
the average daily aggregate principal balance outstanding under the
Credits (excluding the undrawn amount of issued and outstanding
Letters of Credit) for the four (4) month period ending October 7,
1996 less any overadvance fees paid pursuant to subsection (e)(ii)
above.
1.4 Section 1.8. In addition to the collateral described in
Section 1.8 of the Credit Agreement, Borrower (a) grants to Bank security
interests of first priority in all of Borrower's right, title and interest in
and to the capital stock of Austron, Systems and the Company, (b) grants to
Bank security interests of first priority in all Borrower's present and future
patents and patent applications and (c) shall cause Austron, Systems and the
Company to grant to Bank security interests of first priority in all of their
present and future patents and patent applications. All of the foregoing
security interests shall be evidenced by and subject to the terms of such
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank, immediately upon demand,
for all costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation filing and recording fees.
1.5 Section 2.12. The following new Section 2.12 is added to
the Credit Agreement:
SECTION 2.12. DOMESTIC SUBSIDIARIES OF BORROWER. Other
than Austron, Systems and the Company, Borrower has no
subsidiaries organized under the laws of the United States
of America or any State thereof.
1.6 Section 4.3(d). Section 4.3(d) of the Credit Agreement is
amended and restated in its entirety to read as follows:
(d) As soon as available, but in no event later than 45
days after and as of the end of each fiscal quarter, financial
statements of each Guarantor, prepared by such Guarantor, to include
an income statement, a balance sheet and a statement of cash flow,
on a stand-alone basis and
-3-
<PAGE> 4
an income statement on a consolidating basis with the other
Guarantors and Borrower.
2. AMENDMENT OF LINE OF CREDIT NOTE.
2.1 Line of Credit Note. Subparagraph (a) of the section
entitled "BORROWING AND REPAYMENT" of the Line of Credit Note is amended by
deleting "June 6, 1996" as the last day on which Bank agrees to make advances
to Borrower thereunder, and by substituting for such date "October 7, 1996".
3. CONDITIONS PRECEDENT
The effectiveness of this Fourth Amendment and Bank's agreements
set forth herein are subject to the satisfaction of each of the following
conditions precedent on or before August 2, 1996:
3.1 Documentation. Borrower shall have delivered or caused to
be delivered to Bank, at Borrower's sole cost and expense, the following, each
of which shall be in form and substance satisfactory to Bank:
(a) Two (2) executed counterparts of this Fourth
Amendment;
(b) A General Pledge Agreement executed by Borrower,
together with (i) the original share certificates representing all
capital stock of Austron, Systems and the Company owned by Borrower
and (ii) stock assignments relating thereto, separate from such
certificates, executed in blank;
(c) Patent Collateral Assignments executed by
Borrower, Austron, Systems and the Company, respectively, together
with UCC-2 amendments as may be required by Bank in connection
therewith as well as such documents as Bank may require for the
purpose of filing and recording such Patent Collateral Assignments
with the United States Patent and Trademark Office;
(d) The Consent and Reaffirmation of
Guarantors/Pledgors attached hereto; and
(e) Such additional agreements, certificates, reports,
approvals, instruments, documents, consents and/or reaffirmations as
Bank may reasonably request.
-4-
<PAGE> 5
3.2 Guarantors' Prior Annual Financial Statements. Borrower shall
have caused each Guarantor to deliver to Bank such Guarantor's financial
statements for the fiscal years ending December 31, 1994 and December 31, 1995
to include income statements, balance sheets and statements of cash flow, in
each case both on a stand-alone basis and on a consolidating basis with the
other Guarantors and Borrower.
3.3 Extension and Amendment Fee. In consideration for the
extension of the maturity date of the Line of Credit and the increase in the
permitted overadvance as provided above, Borrower shall have paid Bank a
$12,500 non-refundable extension and amendment fee.
3.4 Amendment Costs and Expenses. Without limiting the
provisions of Section 7.3 of the Credit Agreement, Borrower shall have paid all
of the costs and expenses of Bank incurred in connection with the negotiation,
preparation, delivery and execution of this Fourth Amendment and all documents,
instruments and agreements relating hereto (collectively, the "Fourth Amendment
Documents") as well as in connection with the continued administration of the
Credits including, without limitation, Bank's reasonable attorneys' fees and
costs (to include outside counsel fees and all allocated costs of Bank's
in-house counsel).
3.5 Representations and Warranties. All of Borrower's
representations and warranties contained herein shall be true and correct on
and as of the date of execution hereof and no Event of Default shall have
occurred and be continuing under the Credit Agreement or any of the other Loan
Documents, as modified hereby.
4. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank
as of the date hereof, which representations and warranties shall survive the
execution, termination or expiration of this Fourth Amendment and shall
continue in full force and effect until the full and final satisfaction and
discharge of all obligations of Borrower to Bank under the Credit Agreement and
the other Loan Documents:
4.1 Reaffirmation of Prior Representations and Warranties.
Borrower hereby reaffirms and restates as of the date hereof, all of the
representations and warranties made by Borrower in the Credit Agreement and the
other Loan Documents, except to the extent such representations and warranties
specifically relate to an earlier date.
-5-
<PAGE> 6
4.2 No Default. No Event of Default, breach or failure of
condition has occurred and is continuing or would occur with the passage of
time or the giving of notice or both, under any of the Loan Documents.
4.3 Due Execution. The execution, delivery and performance of
this Fourth Amendment and any instruments, documents or agreements executed in
connection herewith are within the powers of Borrower, have been duly
authorized by all necessary action, and do not contravene any law or the
certificate of incorporation or bylaws of Borrower, result in a breach of, or
constitute a default under, any contractual restriction, indenture, trust
agreement or other instrument or agreement binding upon Borrower.
4.4 No Further Consent. The execution, delivery and
performance of this Fourth Amendment and any documents or agreements executed
in connection herewith do not require any consent or approval not previously
obtained of any stockholder, beneficiary or creditor of Borrower.
4.5 Binding Agreement. This Fourth Amendment and each of the
other Fourth Amendment Documents constitute the legal, valid and binding
obligation of Borrower or such other party thereto and are enforceable against
Borrower and any such other parties in accordance with their terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws or equitable principles relating to or limiting
creditors' rights generally.
5. MISCELLANEOUS
5.1 Recitals Incorporated. The Recitals set forth above are
incorporated into and are made a part of this Fourth Amendment.
5.2 Further Assurances. Borrower at its sole cost and expense,
agrees to execute all documents and instruments and to take all other actions
as may be specifically provided for herein and as may be required in order to
consummate the purposes of this Fourth Amendment. Borrower shall diligently
and in good faith pursue the satisfaction of any conditions or contingencies in
this Fourth Amendment.
5.3 No Third Parties. Except as specifically provided herein,
no third party shall be benefited by any of the provisions of this Fourth
Amendment; nor shall any such third party have the right to rely in any manner
upon any of the terms hereof, and none of the covenants, representations,
warranties or agreements herein contained shall run in favor of any third
party.
-6-
<PAGE> 7
5.4 Time is of the Essence. Time is of the essence for the
performance of all obligations and the satisfaction of all conditions of this
Fourth Amendment. The parties intend that all time periods specified in this
Fourth Amendment shall be strictly applied, without any extension (whether or
not material) unless specifically agreed to in writing by all parties hereto.
5.5 Integration; Interpretation. The Loan Documents, including
this Fourth Amendment and the other Fourth Amendment Documents, contain or
expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated herein and supersede all prior
negotiations, discussions and correspondence. The Loan Documents shall not be
modified except by written instrument executed by all parties.
5.6 Counterparts and Execution. This Fourth Amendment may be
executed in counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument. However, this
Fourth Amendment shall not be binding on Bank until all parties have executed
it.
5.7 Governing Law. This Fourth Amendment and all of the other
Fourth Amendment Documents shall be governed by, and construed and enforced in
accordance with, the laws of the State of California.
5.8 Non-Impairment of Loan Documents. On the date all
conditions precedent set forth herein are satisfied in full, this Fourth
Amendment shall be a part of the Credit Agreement. Except as expressly
provided in this Fourth Amendment or in any other document, instrument or
agreement executed by Bank, all provisions of the Loan Documents shall remain
in full force and effect, and the Bank shall continue to have all its rights
and remedies under the Loan Documents.
5.9 No Waiver. Nothing herein shall be deemed a waiver by Bank of
any Event of Default or act, event or condition which, with the passage of
time, the giving of notice or both, would constitute an Event of Default. No
delay or omission of Bank to exercise any right, remedy or power under any of
the Loan Documents shall impair such right, remedy or power or be construed to
be a waiver of any default or an acquiescence therein, and single or partial
exercise of any such right, remedy or power shall not preclude other or further
exercise thereof or the exercise of any other right, remedy or power. No
waiver of any term, covenant, or condition shall be deemed to waive Bank's
right to enforce such term, covenant or condition at any other time.
-7-
<PAGE> 8
5.10 Successors and Assigns. The terms of this Fourth Amendment
shall be binding upon and inure to the benefit of the successors and assigns of
the parties to this Fourth Amendment.
IN WITNESS WHEREOF, this Fourth Amendment has been duly executed as
of the date first set forth above.
DATUM INC., WELLS FARGO BANK,
a Delaware corporation NATIONAL ASSOCIATION
By:__________________________ By:________________________
Louis B. Horwitz Ronald K. Peters
Chief Executive Officer Vice President
By:__________________________
David A. Young
Chief Financial Officer
-8-
<PAGE> 9
CONSENT AND REAFFIRMATION OF GUARANTORS/PLEDGORS
Reference is hereby made to the foregoing Fourth Amendment to
Credit Agreement ("Fourth Amendment") dated as of June 6, 1996, by and between
Datum Inc. ("Borrower") and Wells Fargo Bank, National Association ("Bank").
In order to induce Bank to enter into the Fourth Amendment, each of
the undersigned hereby consents to the execution, delivery and performance by
Borrower and Bank of the Fourth Amendment and all other documents, instruments
and agreements now or hereafter executed in connection therewith (collectively,
together with the Fourth Amendment, the "Fourth Amendment Documents"). In
connection therewith, each of the undersigned expressly and knowingly reaffirms
its liability under its Continuing Guaranty and any and all security
agreements, pledge agreements, deeds of trust, mortgages and other collateral
documents (collectively, together with such Continuing Guaranty, the "Third
Party Documents"), heretofore executed and delivered by the undersigned from
time to time in favor of Bank, expressly agrees to be and remain liable under
the terms of such Third Party Documents for the obligations of Borrower to Bank
and acknowledges that it has no defense, offset or counterclaim whatsoever
against Bank with respect to the Third Party Documents to which it is a party.
Each of the undersigned further agrees that the Third Party
Documents to which it is a party shall remain in full force and effect and are
hereby ratified and confirmed and shall guarantee payment and performance of,
or continue to constitute collateral security for, as the case may be, of all
of Borrower's obligations under the Credit Agreement and related Loan
Documents, as any one or more of the same may be amended by the Fourth
Amendment Documents. Each of the undersigned acknowledges that (a) Bank has no
obligation to inform it of the particulars of any modification or amendment to
the Credit Agreement or any other Loan Document executed in connection
therewith, and (b) it has established satisfactory means by which Borrower
keeps it informed with respect to any modification of or amendment to the
Credit Agreement and related Loan Documents.
Each of the undersigned further agrees that the execution of this
Consent and Reaffirmation is not necessary for the continued validity and
enforceability of the Third Party Documents to which it is a party, but is
executed to induce Bank to enter into the Fourth Amendment Documents. Each of
the undersigned further agrees that Bank shall have no obligation to notify it
of any actions or omissions to act with respect to Bank's dealings with
Borrower.
-9-
<PAGE> 10
IN WITNESS WHEREOF, each of the undersigned, intending to be
legally bound hereby, has caused this Consent and Reaffirmation to be executed
as of June 6, 1996.
AUSTRON, INC., a Texas corporation
By:
-----------------------------------
Louis B. Horwitz
Chief Executive Officer
By:
-----------------------------------
David A. Young
Chief Financial Officer
FREQUENCY & TIME SYSTEMS, INC., a
Delaware corporation
By:
-----------------------------------
Louis B. Horwitz
Chief Executive Officer
By:
-----------------------------------
David A. Young
Chief Financial Officer
EFRATOM TIME AND FREQUENCY PRODUCTS,
INC., a Colorado corporation
By:
-----------------------------------
Louis B. Horwitz
Chief Executive Officer
By:
-----------------------------------
David A. Young
Chief Financial Officer
-10-
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