UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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 Number 1-11057
- ----------------------------------------------------------------
COLONIAL DATA TECHNOLOGIES CORP.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2763229
- --------------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
80 Pickett District Road
New Milford, Connecticut 06776
-------------------------------
(Address of principal executive offices)
(Zip Code)
(860) 210-3000
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of the issuer's common
stock, as of July 31, 1996 was 15,460,455.
COLONIAL DATA TECHNOLOGIES CORP.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
December 31, 1995 and June 30, 1996
Consolidated Condensed Statements of Earnings for
the three and six months ended June 30, 1995 and 1996
Consolidated Condensed Statement of Stockholders'
Equity for the six months ended June 30, 1996
Consolidated Condensed Statements of Cash Flows for
the six months ended June 30, 1995 and 1996
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COLONIAL DATA TECHNOLOGIES CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND JUNE 30, 1996
(In thousands, except share and per share amounts)
December 31, June 30,
1995 1996
(Unaudited)
------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $15,873 $10,996
Short-term investments 15,759 19,100
Accounts receivable (net of allowances
of $332 in 1995 and $337 in 1996) 16,069 14,956
Inventories 26,512 31,908
Deferred income taxes 168 481
Other assets 371 914
------- -------
Total current assets 74,752 78,355
PROPERTY AND EQUIPMENT, NET:
Leased 3,541 2,055
Other 3,192 2,560
------- -------
Total property and equipment 6,733 4,615
DEFERRED INCOME TAXES 599 298
INTANGIBLE ASSETS 675 595
INVESTMENTS 3,646 3,761
------- -------
TOTAL ASSETS $86,405 $87,624
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,483 $ 1,762
Accrued liabilities 1,610 1,039
Accrued royalties 528 429
Income taxes payable 216
Short-term borrowings 1,000
------- -------
5,837 3,230
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share,
authorized 20,000,000 shares, issued
15,432,484 and 15,524,235 shares in 1995
and 1996; outstanding 15,417,484 and
15,460,455 shares in 1995 and 1996 154 155
Additional paid-in-capital 62,059 62,106
Retained earnings 18,601 23,307
Treasury stock, at cost, 15,000 shares
in 1995 and 63,780 shares in 1996 (210) (1,210)
Unrealized appreciation of
securities held for sale 69
Cumulative translation loss (36) (33)
------- -------
Total stockholders' equity 80,568 84,394
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $86,405 $87,624
======= =======
See notes to consolidated condensed financial statements.
COLONIAL DATA TECHNOLOGIES CORP.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(In thousands, except share and per share amounts; unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ -----------------
1995 1996 1995 1996
------- ------- ------- -------
REVENUES:
Products $12,478 $14,719 $22,180 $29,241
Leases 5,395 3,472 10,188 7,417
Services 435 503 1,146 950
------- ------- ------- -------
Total revenues 18,308 18,694 33,514 37,608
COST OF SALES:
Products 8,356 10,821 15,055 20,612
Leases 2,153 1,544 4,074 3,190
Services 295 307 776 567
------- ------- ------- -------
Total cost of sales 10,804 12,672 19,905 24,369
------- ------- ------- -------
GROSS PROFIT 7,504 6,022 13,609 13,239
OPERATING EXPENSES:
General and administrative 1,358 1,576 2,390 3,130
Selling and marketing 1,259 1,366 2,216 2,840
Research and development 367 386 645 756
------- ------- ------- -------
Total operating expenses 2,984 3,328 5,251 6,726
------- ------- ------- -------
INCOME FROM OPERATIONS 4,520 2,694 8,358 6,513
OTHER INCOME, NET 189 460 375 1,150
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 4,709 3,154 8,733 7,663
INCOME TAXES 1,884 1,199 3,494 2,957
------- ------- ------- -------
NET INCOME $ 2,825 $ 1,955 $ 5,239 $ 4,706
======= ======= ======= =======
WEIGHTED AVERAGE SHARES:
Primary 13,756 15,593 13,717 15,605
======= ======= ======= =======
Fully diluted 13,757 15,593 13,719 15,606
======= ======= ======= =======
PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE $ 0.21 $ 0.13 $ 0.38 $ 0.30
======= ======= ======= =======
See notes to consolidated condensed financial statements.
<TABLE>
COLONIAL DATA TECHNOLOGIES CORP.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(In thousands; unaudited)
COMMON STOCK UNREALIZED
-------------- ADDITIONAL APPRECIATION CUMULATIVE
PAR PAID-IN RETAINED TREASURY OF SECURITIES TRANSLATION
SHARES VALUE CAPITAL EARNINGS STOCK HELD FOR SALE LOSS TOTAL
------ ----- ---------- -------- -------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31,
1995 15,417 $ 154 $62,059 $ 18,601 $ (210) $ (36) $80,568
OPTIONS/
WARRANTS
EXERCISED 92 1 47 48
NET INCOME 4,706 4,706
ACQUISITION
OF TREASURY
STOCK (49) (1,000) (1,000)
UNREALIZED
APPRECIATION
OF SECURITIES
HELD FOR SALE $ 69 69
TRANSLATION
ADJUSTMENT 3 3
------ ----- ---------- -------- -------- ------------- ---------- ---------
BALANCE
JUNE 30,
1996 15,460 $ 155 $62,106 $23,307 $(1,210) $ 69 $(33) $84,394
====== ===== ========== ======== ======== ============= ========== =========
</TABLE>
See notes to consolidated condensed financial statements.
COLONIAL DATA TECHNOLOGIES CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(In thousands; unaudited)
1995 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,239 $ 4,706
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 1,910 1,881
Gain on sale of asset (Note 3) (250)
Deferred income taxes and changes in
reserves for accounts receivable and
inventories (282) (643)
Changes in assets and liabilities:
Accounts receivable (7,392) 1,149
Inventories (1,220) (4,868)
Other assets (368) (567)
Current liabilities 3,196 (1,421)
-------- --------
Net cash provided by (used in)
operating activities 1,083 (13)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of dispositions (3,671) (775)
Cash proceeds from sale of asset 250
Net purchase of investments (7,906) (3,387)
-------- --------
Net cash used in investing activities (11,577) (3,912)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 271 48
Payments on borrowings (970) (1,000)
-------- --------
Net cash used in financing activities (699) (952)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (11,193) (4,877)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 14,013 15,873
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,820 $10,996
======== ========
See notes to consolidated condensed financial statements.
COLONIAL DATA TECHNOLOGIES CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and
footnotes required by generally accepted accounting principles
for complete financial statements. However, except as disclosed
herein, there has been no material change in the information
disclosed in the notes to consolidated financial statements
included in the Annual Report on Form 10-K of Colonial Data
Technologies Corp. (the "Company") for the year ended December
31, 1995. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results
for the six month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1996.
2. Loan Agreement
On May 3, 1996, the Company renewed its credit facility,
increasing its credit line to $5 million and letter of credit
availability to $10 million from a line of credit of $4 million.
The loan agreement is subject to renewal on April 30, 1998.
3. Sale of Asset
Effective in March 1996, the Company sold an asset to an
officer and director of the Company for $1,250,000, paid by
48,780 shares of the Company's common stock and cash.
4. Subsequent Event
On August 5, 1996, the Company entered into an Agreement and Plan
of Merger (the "Merger Agreement") with US Order, Inc., a
Delaware corporation ("USO") pursuant to which the Company and
USO will be merged with and into Newco, a corporation to be
formed (the "Merger").
Under the terms of the Merger Agreement, upon consummation of the
Merger, each outstanding share of common stock of the Company,
$.01 par value, will be converted into one share of common stock
of Newco ("Newco Common Stock"), and each outstanding share of
common stock of USO, $.001 par value, will be converted into one
share of Newco Common Stock.
The Boards of Directors of the Company and USO have agreed to
recommend approval of the Merger to their respective
stockholders. The obligations of the Company and USO to
consummate the Merger are subject to the satisfaction of certain
conditions set forth in the Merger Agreement, including the
approval of the Merger by the stockholders of the Company and
USO. As a result of the Merger Agreement, share exchanges
stipulated under the April 6, 1995 stock exchange agreement with
USO, as modified, have been postponed.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - Three Months Ended June 30, 1996
Compared to Three Months Ended June 30, 1995
Revenues
Revenues for the second quarter of 1996 were $18,694,000 compared
to $18,308,000 for the same period in the prior year. Product
revenues increased 18% to $14,719,000 for the second quarter of
1996 from $12,478,000 for the second quarter of 1995. The growth
in product revenues resulted primarily from the sale of higher
priced products, the addition of new customers and revenues from
CDT Telecom Systems, Inc., the Company's small business product
subsidiary, offset in part by lower unit volume. Lease revenues
decreased to $3,472,000 for the second quarter of 1996 compared
to $5,395,000 for the same period in the prior year due to the
discontinuation of a leasing program and the resulting decline in
the number of units under lease by customers.
Cost of Sales
Cost of sales increased to $12,672,000 for the second quarter of
1996 from $10,804,000 for the second quarter of 1995 due to costs
associated with the increase in product revenues, offset in part
by decreased lease and support activity. Gross profit margin
derived from product revenues decreased to 26% for the second
quarter of 1996 from 33% for the second quarter of 1995,
primarily as a result of changes in product mix in connection
with promotional activities undertaken by certain telco and
retail customers and competitive pricing pressure. Gross profit
margin derived from Caller ID leasing decreased to 56% for the
second quarter of 1996 from 60% for the second quarter of 1995
primarily as a result of the level of certain fixed expenses as
compared to lower leasing revenues. Gross profit margins for
services increased to 39% for the second quarter of 1996 from 32%
for the second quarter of 1995. Overall gross margin decreased
to 32% for the second quarter of 1996 from 41% for the second
quarter of 1995. The Company anticipates that gross profit
margins may fluctuate in the future due to changes in product mix
and distribution, competitive pricing pressure, the introduction
of new products and changes in the volume and terms of leasing
activity.
General and Administrative Expenses
General and administrative expenses increased 16% to $1,576,000
for the second quarter of 1996 from $1,358,000 for the same
period in 1995, and increased to 8% from 7% of total revenues for
the respective periods. The increase was primarily attributable
to higher employee related expenses due to an increase in
personnel and salaries.
Selling and Marketing Expenses
Selling and marketing expenses increased 8% to $1,366,000 for the
second quarter of 1996 from $1,259,000 for the same period in
1995, but remained constant at 7% of total revenues for the
respective periods. The increase resulted from an increase in
personnel to support higher business volume, in addition to
higher commission expenses associated with increased Caller ID
revenues.
Research and Development Expenses
Research and development expenses increased 5% to $386,000 in the
second quarter of 1996 from $367,000 in the second quarter of
1995 primarily due to the hiring of additional personnel to
support increases in new product development, and research and
development activities related to the introduction of certain new
products and development of future products.
Other Income, Net
Net other income was $460,000 for the second quarter of 1996 and
consisted primarily of investment income compared to $189,000 for
the second quarter of 1995. This increase is attributable to a
larger investment portfolio in the second quarter of 1996
compared to the second quarter of 1995.
Income Taxes
Income taxes were $1,199,000 for the second quarter of 1996
compared to $1,884,000 for the second quarter of 1995. The
effective income tax rate decreased to 38% for the second quarter
of 1996 from 40% for the same period in the prior year, primarily
due to certain nontaxable interest income and the mix of taxable
income shifting to states with lower tax rates.
Weighted Average Shares
The fully diluted weighted average shares increased to 15,593,000
for the second quarter of 1996 compared to 13,757,000 for the
second quarter of 1995. The increase resulted primarily from the
issuance of 1,645,000 shares in a secondary common stock offering
in July 1995 and the exercise of certain stock options and
warrants.
Results of Operations - Six Months Ended June 30, 1996
Compared to Six Months Ended June 30, 1995
Revenues
Revenues for the six months ending June 30, 1996 were $37,608,000
compared to $33,514,000 for the same period in the prior year.
Product revenues increased 32% to $29,241,000 for the six months
ended June 30, 1996 from $22,180,000 for the six months ended
June 30, 1995. This growth in product revenues is attributable
primarily to the sale of higher priced products, the addition of
new customers, and additional revenues from CDT Telecom Systems,
Inc., the Company's small business product subsidiary, offset in
part by lower unit volume. Lease revenues decreased to
$7,417,000 for the six months ending June 30, 1996 compared to
$10,188,000 for the same period in the prior year due to the
discontinuation of a leasing program and the resulting decline in
the number of units under lease by customers. Service revenues
decreased 17% to $950,000 for the six months ended June 30, 1996
from $1,146,000 for the same period in the prior year, primarily
due to the completion of certain repair contracts.
Cost of Sales
Cost of sales increased to $24,369,000 for the six months ended
June 30, 1996 from $19,905,000 for the same period in the prior
year due to costs associated with the increase in product
revenues, offset in part by decreased lease and support activity.
Gross profit margin derived from product revenues decreased to
30% for the six months ended June 30, 1996 from 32% for the six
months ended June 30, 1995, primarily as a result of changes in
product mix in connection with promotional activities undertaken
by certain telco and retail customers and competitive pricing
pressure. Gross profit margin from Caller ID leasing decreased
to 57% for the six months ended June 30, 1996 from 60% for the
same period in the prior year. Gross profit margin for services
increased to 40% for the six months ended June 30, 1996 from 32%
for the same period in the prior year. Overall gross margin
decreased to 35% for the six months ended June 30, 1996 from 41%
for the same period in the prior year. The Company anticipates
that gross profit margins may fluctuate in the future due to
changes in product mix, the introduction of new products and
changes in the volume and terms of leasing activity.
General and Administrative Expenses
General and administrative expenses increased 31% to $3,130,000
for the six months ended June 30, 1996 from $2,390,000 for the
same period in 1995, and increased from 7% to 8% of total
revenues for the respective periods. The increase was primarily
attributable to higher employee related expenses due to an
increase in personnel to support higher business volume.
Selling and Marketing Expenses
Selling and marketing expenses increased 28% to $2,840,000 for
the six months ended June 30, 1996 from $2,216,000 for the same
period in 1995, and increased from 7% to 8% of total revenues for
the respective periods. The increase resulted from an increase
in personnel to support higher business volume, in addition to
higher commission expenses associated with increased Caller ID
revenues.
Research and Development Expenses
Research and development expenses increased 17% to $756,000 in
the second quarter of 1996 from $645,000 in the second quarter of
1995 primarily due to the hiring of additional personnel to
support higher levels of new product development activity and
research and development activities related to the introduction
of certain new products and development of future products.
Other Income, Net
Net other income was $1,150,000 for the six months ended June 30,
1996 and consisted primarily of investment income, including a
gain on the sale of an asset, compared to net other income of
$375,000 for the same period in the prior year. This increase in
investment income is attributable to a larger investment
portfolio in the first six months of 1996 compared to the same
period of 1995.
Income Taxes
Income taxes were $2,957,000 for the six months ended June 30,
1996 compared to $3,494,000 for the same period in the prior
year. The effective income tax rate decreased to 39% for the six
months ended June 30, 1996 from 40% for the same period in the
prior year, primarily due to nontaxable interest income and the
mix of taxable income shifting to states with lower tax rates.
Weighted Average Shares
The fully diluted weighted average shares increased to 15,606,000
for the six months ended June 30, 1996 compared to 13,719,000 for
the same period in the prior year. The increase resulted from
the issuance of 1,645,000 shares in a secondary common stock
offering in July 1995 and the exercise of certain stock options
and warrants.
Liquidity and Capital Resources
During the first six months of 1996, the Company's cash, cash
equivalents and short-term investments decreased by $1,536,000 to
$30,096,000. This decrease resulted from net cash used in
financing working capital, acquiring capital equipment and
payments of $1,000,000 on short-term borrowings. The Company
invests in financial instruments that are diversified among high
credit quality securities. These investments are reported at
cost, which approximates market value, as cash equivalents and
short-term investments and, if necessary, will be liquidated to
meet future cash requirements.
The Company's principal needs for cash are for investments in
property and equipment and to fund working capital, primarily
related to inventories. To support the Company's growth, capital
expenditures, net of dispositions, for the six months ended June
30, 1996 aggregated $775,000. The Company's working capital
increased to $75,125,000 at June 30, 1996 from $68,915,000 at
December 31,1995. The Company funded an inventory increase of
$4,868,000 for the six months ended June 30, 1996 to ensure that
units were available for timely fulfillment of expected sales
orders, including the purchase of certain longer lead-time parts.
Accounts receivable decreased by $1,149,000 for the six months
ended June 30, 1996 as a result of the timing of certain credit
sales and collections.
The Company renewed its bank credit facility on May 3, 1996, and
increased its line of credit to $5 million and its letter of
credit availability to $10 million in connection with such
renewal. The Company utilizes its line of credit to meet short-
term cash requirements and utilizes letters of credit in
connection with commercial transactions. At June 30, 1996,
all of the line of credit was available to fund draw downs, and
$9 million was available for letters of credit. The loan
agreement with the bank is subject to renewal on April 30, 1998.
Stockholders' equity increased to $84,394,000 at June 30, 1996
from $80,568,000 at December 31, 1995. This increase primarily
resulted from retained earnings of $4,706,000 for the six months
ended June 30, 1996, offset in part by the sale of an asset in
exchange for consideration consisting in part of shares of the
Company's common stock.
In order to meet the Company's anticipated needs for cash during
the foreseeable future, including cash required to fund working
capital, increases in customer service personnel, sales and
marketing operations, leasing activity, infrastructure and
systems, and new product development, the Company will utilize
existing cash, cash equivalents and short-term investments, line
of credit availability and cash provided by operations.
The above information includes forward-looking statements, the
realization of which may be impacted by the factors discussed
below. The forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 (the "Act").
The following factors, among others, in some cases have affected,
and in the future could affect, the business, financial
condition, liquidity, results of operations or prospects,
financial or otherwise, of the Company: the success of the
merger with US Order, Inc., the timing of implementation and
promotion of Caller ID service by telcos, the impact of
competitive products and pricing, product demand and market
acceptance, new product development, reliance on key strategic
alliances, concentration of customer base and resulting adverse
effects from the loss of any one or more of the Company's major
customers, pace and significance of technological advances,
availability of raw materials, the telecommunications regulatory
environment, fluctuations in operating results, changes in
general economic conditions and other risks detailed in the
Company's reports to the Securities and Exchange Commission,
which include the Company's Annual Report on Form 10-K for the
year ended December 31,1995. The foregoing list of factors
should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by the Company prior
to the date hereof or the effectiveness of said Act.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Amended and Restated Loan and Security Agreement
between Colonial Technologies Corp. (Subsidiary)
and People's Bank, dated May 3, 1996.
(ii) Revolving Credit Note between Colonial
Technologies Corp. (Subsidiary) and People's Bank,
dated May 3, 1996.
(iii) Guaranty Agreement between the Registrant and
People's Bank, dated May 3, 1996.
(iv) Master Trademark License Agreement between the
Registrant and Pacific Bell.
(v) Financial Data Schedule
(b) The Company filed a report on Form 8-K on August 5, 1996.
SIGNATURES
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.
COLONIAL DATA TECHNOLOGIES CORP.
Date: August 13, 1996 By: /s/ John N. Giamalis
----------------------------
JOHN N. GIAMALIS
Vice President, Finance,
Treasurer, Chief Financial Officer
and Secretary
(Principal Accounting Officer)
(Duly Authorized Officer)
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 3rd day of May, 1996, by and
between COLONIAL TECHNOLOGIES CORP. (formerly known as Colonial
Data Technologies Corp.), a Delaware corporation, having its
principal place of business and chief executive office at 80
Pickett District Road, New Milford, Connecticut 06776
(hereinafter referred to as the "Debtor"), and PEOPLE'S BANK, a
Connecticut banking corporation having a banking office at 255
Bank Street, Waterbury, Connecticut 06702 (hereinafter referred
to as "Secured Party"),
W I T N E S S E T H :
WHEREAS, Debtor and Secured Party have heretofore entered
into a Loan and Security Agreement dated April 11, 1994, pursuant
to which Secured Party made available to Debtor a revolving
credit loan in an amount of up to $6,000,000.00, which revolving
credit loan was secured by, among other collateral, a first
priority lien and security interest in all of Debtor's tangible
and intangible personal property assets; and
WHEREAS, on or about August 29, 1994, Debtor and Secured
Party entered into a First Amendment to Loan and Security
Agreement pursuant to which Secured Party agreed to increase the
maximum amount available to Debtor on account of the revolving
credit loan by the sum of $2,000,000.00, up to the maximum amount
of $8,000,000.00 (the Loan and Security Agreement dated as of
April 11, 1994, as amended by the First Amendment to Loan and
Security Agreement dated as of August 29, 1994, shall be
hereinafter referred to collectively as the "Existing Credit
Agreement"); and
WHEREAS, Debtor has requested that Secured Party make
available to it revolving credit loans and import, documentary
and standby letters of credit from time to time in an aggregate
maximum amount of up to $15,000,000.00 (such revolving credit
loans being hereinafter collectively referred to as "Revolving
Loans" and individually referred to as a "Revolving Loan"; and
such import, documentary and standby letters of credit being
hereinafter collectively referred to as "Letters of Credit" and
individually referred to as a "Letter of Credit") pursuant to the
provisions of Paragraph 4 of this Agreement, and Secured Party is
willing to make the Revolving Loans and Letters of Credit
available to Debtor on the terms and conditions and in reliance
upon the representations and warranties of Debtor hereinafter set
forth;
NOW, THEREFORE, in consideration of the foregoing and in
further consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. SECURITY INTEREST
Debtor hereby acknowledges, confirms and agrees that
Secured Party has and shall continue to have a perfected, first
priority lien on and security interest in all of the personal
property assets of Debtor covered by Article 9 of the Code and
heretofore granted to Secured Party pursuant to the Existing
Credit Agreement to secure the indebtedness of Debtor to Secured
Party described in the Existing Credit Agreement and, to the
extent not otherwise granted thereunder, Debtor hereby assigns
and grants, and re-assigns and re-grants, to Secured Party a
security interest in all of Debtor's tangible and intangible
personal property assets (excluding Motor Vehicles) whether now
owned or hereafter acquired by it, including, without limitation,
all of its Accounts, Equipment, Inventory, Chattel Paper, General
Intangibles and Instruments, together with the products and
proceeds thereof, including, without limitation, all insurance
proceeds payable by reason of loss or damage to any of the
foregoing (hereinafter sometimes collectively called the
"Collateral") to secure payment to Secured Party of the
Obligations.
2. DEFINITIONS
As used herein the following terms shall have the
following meanings:
(a) "Accounts" shall mean any right to payment held by
Debtor, whether in the form of accounts receivable, notes,
drafts, acceptances or other forms of obligations and receivables
now or hereafter received by or belonging to Debtor for Inventory
sold or leased by it or for services rendered by it whether or
not earned by performance, together with all guarantees and
security therefor and all proceeds thereof, whether cash proceeds
or otherwise, including, without limitation, all right, title and
interest of Debtor in the Inventory which gave rise to any such
Accounts, including, without limitation, the right of stoppage in
transit and all returned, rejected, rerouted or repossessed
Inventory;
(b) "Affiliate" shall mean any Person, directly or
indirectly, controlling, controlled by, or under common control
with Debtor. A Person shall be conclusively deemed to be in
control of or to be controlled by another Person if it holds 30%
or more of the outstanding equity interest in such other Person
or such other Person holds 30% or more of its outstanding equity
interest. As used herein the term "equity interest" in the case
of a corporation shall mean the outstanding shares of such
corporation having voting power to elect a majority of its Board
of Directors, whether or not at the time the holders of any other
class or classes of securities of such corporation shall or might
have such voting power by reason of the happening of any
contingency;
(c) "AT&T License Agreement" shall mean that certain
Technical Information and Patent License Agreement dated
effective as of August 1, 1987, by and between American Telephone
and Telegraph Company and Debtor, as same may be amended or
modified from time to time;
(d) "Business Day" shall mean and refer to any day
other than Saturday, Sunday or any other day on which commercial
banks in Connecticut are authorized or required to close under
the laws of such State, and whenever such day relates to a
Eurodollar Loan, a day on which dealings in U.S. Dollar deposits
are also carried out in the London interbank market;
(e) "Chattel Paper" shall mean a writing or writings
which evidence both a monetary obligation and a security interest
in or a lease of specific goods, whether now or hereafter held by
Debtor;
(f) "Code" shall mean the Uniform Commercial Code of
Connecticut in effect from time to time;
(g) "Credit Facilities" shall mean, collectively, the
Revolving Loans and the Letter of Credit Facility, each as
described in Paragraph 4 hereof;
(h) "Debt" shall mean at any time, without duplication,
(i) all items (except items of capital stock, capital surplus and
retained earnings) which in accordance with generally accepted
accounting principles would be included in determining total
liabilities of Debtor and as shown on the liability side of a
balance sheet of Debtor as at the date on which Debt is to be
determined; (ii) all obligations secured by any Lien to which any
property or asset owned or held by Debtor is subject, whether or
not the obligation secured thereby shall have been assumed by
Debtor; (iii) all obligations of any other Person which Debtor
has directly or indirectly guaranteed or for which Debtor becomes
contingently liable; and (iv) lease obligations of Debtor which,
in accordance with generally accepted accounting principles,
should be capitalized;
(i) "Debt Service" shall mean for any period, the sum
of Interest Expense and Principal Amortization;
(j) "Debt Service Coverage Ratio" shall mean for any
period, the ratio of (x) Net Income After Taxes plus interest,
depreciation and amortization minus the sum of dividends paid and
internally-funded capital expenditures to (y) Debt Service;
(k) "Equipment" shall mean all the machinery,
equipment, furniture, tools, goods and other tangible personal
property, excluding Motor Vehicles and Inventory, now owned or
hereafter acquired by Debtor;
(l) "Eurodollar Loans" shall mean any Revolving Loan
bearing interest determined with reference to LIBOR;
(m) "Event of Default" shall mean the existence of a
state of facts which constitute a default under the provisions of
Paragraph 12 of this Agreement or which after the applicable
passage of time and giving of notice, if any, would constitute
such a default under said Paragraph 12;
(n) "General Intangibles" shall mean any intangible
personal property (including, without limitation, things in
action, licenses, trademarks, tradenames, franchises and contract
rights) now or hereafter held by Debtor, other than Accounts,
Chattel Paper and Instruments;
(o) "Guarantor" shall mean and refer to the parent
corporation of Debtor, Colonial Data Technologies Corp., a
Delaware corporation, having its principal place of business and
chief executive office at 80 Pickett District Road, New Milford,
Connecticut 06776;
(p) "Instruments" shall mean a negotiable instrument or
a security, as defined in the Code, or any other writing which
evidences a right to the payment of money and is not itself a
security agreement or lease and is of a type which, in the
ordinary course of business, is transferred by delivery with any
necessary endorsement or assignment, whether now or hereafter
held by Debtor;
(q) "Interbank Offered Rate" shall mean the rate of
interest determined by Secured Party to be the prevailing rate
per annum at which deposits in U.S. Dollars are offered to
Secured Party by first-class banks in the London interbank market
in which it regularly participates on or about 11:00 a.m. (London
time) two (2) Business Days before the first day of such Interest
Period in an amount approximately equal to the Revolving Loan to
which any Interest Period is to apply for a period of time
approximately equal to such Interest Period;
(r) "Interest Expense" shall mean for any period all
amounts accrued by Debtor whether as interest, late charges,
service fees, or other charges for money borrowed, on account of
Debtor's indebtedness for money borrowed from Secured Party or
any other Person which is a lending or financial institution or
with respect to which Debtor or its properties are liable by
assumption, operation of law or otherwise, including, without
limitation, any leases which are required, in accordance with
generally accepted accounting principles, to be carried as a
liability on Debtor's balance sheet;
(s) "Interest Period" shall mean with respect to any
Eurodollar Loan, the period commencing on the date of the making
of such Revolving Loan and ending thirty (30) days thereafter;
provided, however, that (i) any Interest Period that would
otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day, and (ii) any
Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(t) "Inventory" shall mean all goods, merchandise, raw
materials, work in process, finished goods and products and other
tangible personal property now owned or hereafter acquired by
Debtor, wherever located, and held for sale or lease or furnished
or to be furnished under contracts of service or used or consumed
in Debtor's businesses;
(u) "Letter of Credit Facility" shall mean and refer to
the import and/or standby Letters of Credit now or hereafter
issued by Secured Party for the account of Debtor, as more fully
described in Paragraph 4B hereof;
(v) "Leverage Ratio" shall mean for any period the
ratio of Debt to Tangible Net Worth;
(w) "LIBOR" shall mean for any Eurodollar Loan for the
then current Interest Period a rate of interest (rounded upward,
if necessary, to the next higher 1/100 of 1%) obtained by
dividing (i) the Interbank Offered Rate by (ii) a percentage
equal to 100% minus the stated maximum rate of all reserves
required to be maintained by Secured Party against "Eurocurrency
Liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System as in effect from time to
time (or against any other category of liabilities which includes
deposits by reference to which LIBOR is determined or any
category of extensions of credit or other assets which includes
loans by a non-United States office of any lender to United
States residents);
(x) "LIBOR Rate" shall mean and refer to a rate of
interest per annum equal to LIBOR for the particular Interest
Period plus one and one-half percentage points (1 %);
(y) "Lien" shall mean any mortgage, deed of trust,
lien, pledge, assignment, security interest, encumbrance or any
transfer intended as security, including, without limitation, any
conditional sale or other title retention agreement;
(z) "Loan Account" shall mean that certain demand
deposit account number 31-7003826 maintained by Debtor with
Secured Party;
(aa) "Loan Documents" shall mean collectively this
Agreement, the Revolving Credit Note, the Letter of Credit
Reimbursement Agreement, and each and every agreement, instrument
or document executed and delivered or required to be executed and
delivered to Secured Party by Debtor pursuant to or in connection
with this Agreement together with any extensions, renewals and
amendments thereof;
(bb) "Maximum Amount of the Credit Facilities" shall
mean $15,000,000.00;
(cc) "Maximum Amount of Letters of Credit" shall mean
$10,000,000.00; provided, however, that Debtor may request that
Secured Party issue Letters of Credit for the account of Debtor
which would exceed the aggregate maximum of $10,000,000.00 and,
to the extent that Secured Party agrees to issue such additional
Letters of Credit, the stated amount of such Letters of Credit
above the aggregate sum of $10,000,000.00 shall be reduced from
the Maximum Amount of the Revolving Loans until such Letters of
Credit expire or are cancelled;
(dd) "Maximum Amount of the Revolving Loans" shall mean
$5,000,000.00;
(ee) "Motor Vehicles" shall have the same meaning as
that contained in Section 14-1(47) of the General Statutes of
Connecticut, as revised to 1995, as the same may be amended from
time to time;
(ff) "Net Income After Taxes" shall mean for any period
the consolidated net income of Guarantor and its Subsidiaries,
determined in accordance with generally accepted accounting
principles, after payment of all consolidated Federal and State
taxes attributable thereto;
(gg) "New Milford Property" shall mean and refer to that
certain improved real property leased by Debtor and located at 80
Pickett District Road, New Milford, Connecticut;
(hh) "Obligations" shall mean the Credit Facilities and
any and all other advances made hereunder, together with interest
thereon, and any and all other liabilities and obligations of
whatever nature of Debtor to Secured Party, no matter how or when
arising and whether under this Agreement, the other Loan
Documents, or under any other agreements, instruments and
documents required to be executed and delivered by Debtor to
Secured Party pursuant to the terms hereof, or under any other
agreements, guarantees, instruments or documents, past, present
or future, and the amount due on any notes, or other obligations
of Debtor given to, received by or held by Secured Party
(including, without limitation, overdrafts or any debt, liability
or obligation of Debtor to others which Secured Party may obtain
by assignment or otherwise) for or on account of any of the
foregoing, whether, in each case, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising, and all costs and expenses incurred in connection with
field exams or commercial audits of Debtor's books and records
and of the Collateral and in connection with any "workout" or
default resolution, negotiations involving legal counsel or other
professionals, and any re-negotiation or restructuring of any of
the Obligations;
(ii) "OSHA" shall mean the United Stated Occupational
Safety and Health Act;
(jj) "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, joint
stock company, trust, union-corporated organization, government
or any agency or political subdivision thereof, or any other form
of entity;
(kk) "Prime Rate" shall mean the index rate of interest
on certain commercial loans announced from time to time by
Secured Party at its principal banking office as its Prime Rate,
which rate may not necessarily be the lowest rate charged by
Secured Party to its customers;
(ll) "Prime Rate Loan" shall mean any Revolving Loan
bearing interest determined with reference to the Prime Rate;
(mm) "Principal Amortization" shall mean for any period
all amounts which Debtor is required to pay (whether regularly
scheduled or as a result of a default and whether or not actually
paid by Debtor) in reduction of Debtor's indebtedness referred to
in the definition of Interest Expense (but excluding the
outstanding principal amount due on account of the Revolving Loan
on the Termination Date), as required by the documents relating
to such indebtedness;
(nn) "Request for Advance" shall mean a request for
advance on account of the Revolving Loan, in the form of Exhibit
B attached hereto and made a part hereof;
(oo) "Revolving Loan" shall have the meaning ascribed to
such term in the preamble hereof;
(pp) "Revolving Credit Note" shall have the meaning set
forth in Paragraph 4A(ii) hereof;
(qq) "Subsidiary" shall mean a corporation (with respect
to another corporation) of which more than fifty percent (50%) of
the outstanding stock having voting power to elect a majority of
its Board of Directors (whether or not at the time the holders of
any other class or classes of securities of such corporation
shall or might have such voting power by reason of the happening
of any contingency) is at any time directly or indirectly owned
by another corporation or an Affiliate of any such other
corporation;
(rr) "Tangible Net Worth" shall mean as at the date of
determination, the excess, if any, of the assets of Guarantor and
its Subsidiaries on a consolidated basis, excluding intangible
assets such as goodwill, licenses and patents, minus the sum of
(i) the liabilities of Guarantor and its Subsidiaries on a
consolidated basis and (ii) any write-up in value of assets
occurring after the date hereof, such assets and liabilities to
be determined in accordance with generally accepted accounting
principles; and
(ss) "Termination Date" shall have the meaning set forth
in Paragraph 4A(v) hereof.
3. REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party that:
(a) The audited consolidated financial statements of
Guarantor and its Subsidiaries, as of December 31, 1995, audited
by Deloitte & Touche, and previously furnished to Secured Party
(a copy of which is attached hereto as Exhibit C), are correct in
every material respect, there has not been any material adverse
change in the financial condition of Guarantor and its
Subsidiaries since the date thereof, and neither Guarantor nor
any of its Subsidiaries has any liabilities, fixed or contingent,
which would be required to be shown as liabilities on such
consolidated financial statements in accordance with generally
accepted accounting principles and are not fully shown or
provided for in said consolidated financial statements as at the
date thereof except (i) as otherwise set forth in Exhibit C
annexed hereto and made a part hereof and (ii) obligations to
perform after such date under contracts, purchase orders and
other commitments incurred in the ordinary course of business;
(b) Debtor has, or will have, when acquired by it, good
and marketable title to the Collateral free from any adverse
liens, security interests or encumbrances, and no financing
statements covering all or any part of the Collateral (other than
those previously filed in favor of Secured Party in connection
with the Existing Credit Agreement) are on file in the offices of
the Secretary of State of the State of Connecticut or the Town
Clerk of New Milford, Connecticut, or in any other governmental
office, whether or not properly filed under applicable law, and
there are no liens or encumbrances on any of the other properties
of Debtor;
(c) Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with all the requisite corporate power and authority to
own, operate and lease its properties and to carry on its
business as now being conducted and is duly qualified and in good
standing in the State of Connecticut and in every other
jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to so qualify
would not have a materially adverse effect on the properties,
assets, financial condition or business of the Debtor;
(d) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with all the requisite corporate power and authority to
own, operate and lease its properties and to carry on its
business as now being conducted;
(e) Except as set forth on Exhibit G attached hereto,
there is no judgment, decree or order outstanding or litigation
or governmental proceeding or investigation pending, or, to the
knowledge of the officers of Debtor, threatened against Debtor
which might have a material adverse effect upon its position,
financial, operating or otherwise, and Debtor has filed all tax
returns and reports required to be filed by it with the United
States Government and all state and local governments and has
paid in full or made adequate provision for the payment of all
taxes, interest, penalties, assessments or deficiencies shown to
be due or claimed to be due on or in respect of such tax returns
and reports;
(f) The execution and delivery of this Agreement, the
Other Loan Documents and each and every other agreement,
instrument or document required to be executed and delivered to
Secured Party by Debtor pursuant to the terms hereof, have been
duly authorized, are each valid, legal and binding upon Debtor
and enforceable in accordance with their respective terms;
(g) The execution and delivery of this Agreement and
each and every other agreement, instrument or document required
to be executed and delivered to Secured Party by Debtor pursuant
to the terms hereof, the consummation of the transactions herein
contemplated, the fulfillment of or compliance with the terms and
provisions hereof and of each and every other instrument,
agreement or document required to be executed and delivered to
Secured Party by Debtor pursuant to the terms hereof, are within
its powers, are not in contravention of any provisions of its
Certificate of Incorporation or any amendments thereto, or of its
By-Laws, and will not conflict with or result in a breach of any
of the terms, conditions or provisions of any agreement,
instrument or other undertaking to which it is a party or by
which it is bound, except as would not have a materially adverse
effect on the properties, assets, financial condition or business
of Debtor, do not constitute a default thereunder or under any of
them, and will not result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of
its property or assets pursuant to the terms of any such
agreement, instrument or other undertaking, do not require the
consent or approval of any governmental body, agency or authority
and will not violate the provisions of any laws or regulations of
any governmental instrumentality applicable to Debtor, except as
would not have a materially adverse effect on the properties,
assets, financial condition or business of Debtor. Debtor is not
in default under any agreement, indenture, mortgage, deed of
trust, or any other agreement or any court order or other order
issued by any governmental regulatory authority to which they are
a party or by which they may be bound;
(h) The Collateral, the records relating thereto and
the place of business and chief executive office of Debtor is all
at the address of Debtor first hereinabove set forth;
(i) Subject to any limitations stated therein or in
connection therewith, all information furnished or to be
furnished by Debtor pursuant to the terms hereof will not, at the
time the same is furnished, contain any untrue statement of a
material fact and will not omit to state a material fact
necessary in order to make the information so furnished, in the
light of the circumstances under which such information is
furnished, not misleading;
(j) The indebtedness of Debtor for money borrowed by
it, as of April 30, 1996, is as shown on Exhibit D annexed hereto
and made a part hereof and Debtor has previously delivered to
Secured Party copies of all agreements, documents and instruments
relating to such indebtedness, including, without limitation, any
amendments, substitutions and renewals thereof. There does not
exist any default with respect to such indebtedness, or an event
which by the passage of time, the giving of notice, or both,
would constitute such a default, and which would give rise to a
right to accelerate such indebtedness;
(k) Debtor is in material compliance with all laws,
ordinances, rules or regulations, applicable to it, of all
Federal, state or local governments or any instrumentality or
agency thereof, including, without limitation, the Employee
Retirement Income Security Act (hereinafter referred to as
"ERISA"), OSHA and all Federal, state and municipal laws,
ordinances, rules and regulations relating to the environment,
except for the prior existence of certain hazardous waste
materials on the New Milford Property which Debtor has disclosed
to Secured Party, provided that such disclosure shall not
constitute an admission by Debtor that it violated any such
environmental law, ordinance, rule or regulation;
(l) Debtor has no Subsidiaries and has not invested in
the stock, common or preferred, of any other corporation, other
than as shown on said Exhibit E;
(m) Exhibit F annexed hereto and made a part hereof
sets forth all leases pursuant to which Debtor (as lessee) leases
real or personal property of every nature or description, the
amount of rent payable under each such lease and the terms
thereof;
(n) Debtor is not a party to any agreement or
instrument (other than this Agreement) or subject to any
corporate restriction (including any restriction set forth in its
Certificate of Incorporation) materially and adversely affecting
its operations, business, properties or financial condition;
(o) Debtor possesses all the trademarks, trade names,
copyrights, patents, licenses and governmental permits, licenses,
orders and approvals, or rights in any thereof, adequate for the
conduct of its business as now conducted and presently proposed
to be conducted, without conflict of the rights or claimed rights
of others, and no action or filing with or consent by, any Person
or any governmental or public body or authority, is required to
authorize or is otherwise required in connection with the conduct
of Debtor's business as now and presently proposed to be
conducted, except as would not have a materially adverse effect
on the properties, assets, financial condition or business of
Debtor;
(p) No defaults have occurred and are continuing under,
and no state of facts currently exists which, with the passage of
time or the giving of notice, or both, would result in the
occurrence of a default under, the AT&T License Agreement;
(q) To the best of Debtor's knowledge, the fair salable
value of its assets exceed and will, immediately following the
making and funding of the Credit Facilities, exceed its total
liabilities (including, without limitation, contingent
liabilities). To the best of Debtor's knowledge, the fair
salable value of its assets are and will, immediately following
the making and funding of the Credit Facilities, be greater than
its probable liabilities (including, without limitation,
contingent liabilities) on its debts as such debts become
absolute and matured. Debtor's assets do not and, immediately
following the making and funding of the Credit Facilities, will
not constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. Debtor
does not intend to, and does not believe that it will, incur
debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by
Debtor and the amounts to be payable on or in respect of
obligations of Debtor); and
(r) Debtor conducts its business solely in its own name
without the use of any other trade names (other than "Colonial
Data Technologies Corp.") or the intervention of or through any
other entity of any kind.
4. AMOUNT AND TERMS OF CREDIT FACILITIES
Pursuant to the terms of this Agreement and upon the
satisfaction of the conditions precedent referred to in Paragraph
13 hereof, Secured Party shall make the Credit Facilities
available to Debtor upon the terms and conditions hereinafter set
forth:
A. Revolving Loans.
(i) Maximum Amount of Revolving Loans. Subject to
the terms and conditions contained in this Agreement and upon the
satisfaction of the conditions precedent referred to in Paragraph
13 hereof, Secured Party hereby agrees to make advances to Debtor
from time to time on account of the Revolving Loans until the
Termination Date (as defined in Paragraph 4A(v) hereof) in
principal amounts not exceeding in the aggregate at any one time
outstanding the Maximum Amount of the Revolving Loans. If at any
time the sum of the outstanding principal balance of all
outstanding advances on account of the Revolving Loans exceeds
the Maximum Amount of the Revolving Loans, then Debtor shall
immediately pay to Secured Party cash or cash equivalents equal
to the amount of such excess.
(ii) Revolving Credit Note. The principal amount
of the Revolving Loans, or such part thereof as may be from time
to time outstanding, shall be evidenced by Debtor's promissory
note, in the form of Exhibit A attached hereto and made a part
hereof (herein referred to as the "Revolving Credit Note"), with
appropriate insertions of dates and amounts. The Revolving
Credit Note shall be in the amount of $5,000,000.00.
(iii) Procedure for the Advances.
(a) Request for Advance. In the event Debtor
desires an advance on account of the Revolving Loans (an
"Advance"), it must request same in writing by delivering to
Secured Party a Request for Advance, with appropriate insertions
of dates and amounts. If Debtor fails to pay to Secured Party
any amount due hereunder or under any of the other Loan
Documents, Secured Party may, in its discretion, advance such
amount to Debtor on account of the Revolving Loans (to the extent
of the availability thereof) and with the proceeds of such
Advance, pay such amount. All Advances shall be made by Secured
Party depositing the proceeds thereof in Debtor's Loan Account.
(b) Manner of Borrowing.
(i) Whenever Debtor desires to obtain
an Advance or continue a Revolving Loan hereunder or convert an
outstanding Revolving Loan to a Revolving Loan of a different
type provided for in this Agreement, Debtor shall notify Secured
Party in writing (which written notice shall be irrevocable) no
later than 10:00 a.m. Waterbury, Connecticut time on the date one
(1) Business Day before the day on which the requested Revolving
Loan is to be made or continued as or converted to a Prime Rate
Loan, and no later than 10:00 a.m. Waterbury, Connecticut time on
the date three (3) Business Days before the day on which the
requested Revolving Loan is to be made or continued as or
converted to an Eurodollar Loan. Such written notice shall
specify (A) the effective date and amount of the Revolving Loan
or portion thereof to be continued or converted and (B) the
interest rate option to be applicable thereto; and
(ii) Subject to the terms and conditions
hereof, Secured Party shall make each Revolving Loan on the
effective date specified therefor by crediting to amount of such
Revolving Loan to the Loan Account.
(c) Binding Effect of Requests for Advance.
Each Request for Advance shall be irrevocable and binding on the
Debtor. In the case of any borrowing that the related Request
for Advance specifies is to be comprised of Eurodollar Loans, the
Debtor shall indemnify the Secured Party against any loss, cost
or expense incurred by Secured Party as a result of any failure
to fulfill on or before the date specified in the Request for
Advance for such borrowing the applicable conditions set forth in
Paragraph 13 hereof, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred
by reason of the liquidation or reemployment of deposits or other
funds acquired by Secured party to fund the Eurodollar Loan to be
made by Secured Party as part of such borrowing when such
Eurodollar Loan, as a result of such failure, is not made on such
date.
(iv) Repayment of Advances. Debtor shall pay to
Secured Party on the Termination Date, in immediately available
funds, the aggregate outstanding principal amount of all of the
Advances then outstanding.
(v) Monthly Statement. On a monthly basis,
Secured Party shall render to Debtor a written statement of the
Loan Account, which statement shall be considered correct and
accepted by Debtor and conclusively binding on Debtor unless
Debtor notifies Secured Party in writing to the contrary within
fifteen (15) days after its receipt of said monthly statement.
(vi) Interest, Payment of Interest and Prepayments.
(a) Interest.
(1) Pre-Default Interest Rates. So
long as no Event of Default has occurred, the Revolving Loans
shall bear interest at such rates per annum as the Debtor may
elect subject to the provisions of this Agreement. During the
period from the date made through and including the date of
payment in full, each Advance shall bear interest on the
outstanding principal amount thereof at a rate per annum equal
to, at the election of the Debtor, either: (A) the Prime Rate,
on a floating basis, or (B) the LIBOR Rate (as determined for
each Interest Period) for the available thirty (30) day Interest
Period.
(2) Default Rates of Interest.
Notwithstanding the foregoing, interest on the Revolving Loans,
at all times after the occurrence of and during the continuance
of an Event of Default, and interest on all payments of interest
that are not paid when due, shall accrue at a rate per annum
equal to two percentage points (2.0%) above the Prime Rate, which
rate shall change contemporaneously with any change in the Prime
Rate.
(b) Payment of Interest. So long as any of
the Obligations remain outstanding, interest on the Revolving
Loans shall be due and payable without notice or demand as
follows:
(1) Eurodollar Loans. Interest on each
Eurodollar Loan shall be due and payable monthly in arrears
beginning on June 1, 1996 and continuing on the first day of each
and every month thereafter and on the last Business Day of each
Interest Period.
(2) Prime Rate Loans. Interest on each
Prime Rate Loan shall be due and payable monthly in arrears
beginning on June 1, 1996 and continuing on the first day of each
and every month thereafter.
(3) Calculation of Interest. Interest
on the Revolving Loans shall be calculated on the basis of a 360
day year and the actual number of days elapsed.
(4) Lawful Interest. It being the
intent of Secured Party and Debtor that the rate of interest and
all other charges to Debtor be lawful, if for any reason the
payment of a portion of interest, fees or charges as required by
this Agreement would exceed the limit established by applicable
law which commercial lenders such as Secured Party may charge to
commercial borrowers such as Debtor, then the obligation to pay
interest or charges shall automatically be reduced to such limit
and, if any amounts in excess of such limits shall have been
paid, then such amounts shall be applied to the unpaid principal
amount of the Obligations or refunded so that under no
circumstances shall interest or charges required hereunder exceed
the maximum rate, if any, allowed by law.
(c) Prepayments.
(1) Prime Rate Loans. Debtor may, at
its option, prepay any Revolving Loan which is a Prime Rate Loan,
in whole or in part, without premium or penalty, provided that
Debtor shall pay all accrued interest on the principal being paid
to the date of the prepayment and, in the case of prepayments in
full, all fees, charges, costs, expenses and other amounts then
due under any of the Revolving Loans.
(2) Eurodollar Loans. Debtor may, at
its option, prepay any Revolving Loan which is a Eurodollar Loan,
in whole or in part, on the following conditions: (1) the Debtor
shall pay all accrued interest on the principal being paid to the
date of the prepayment and, in the case of prepayments in full,
all fees, charges, costs, expenses and other amounts then due
under any of the Revolving Loans; and (2) such Eurodollar Loan
shall only be prepaid on the last Business Day of the then
current Interest Period with respect thereto.
Eurodollar Loans may be prepaid prior to the expiration date
of an Interest Period applicable thereto only upon payment to
Secured Party of a prepayment premium computed pursuant to the
following formula:
L = (R - T) x P x D
_______________
360
L = amount payable to Secured Party
R = interest rate on such Advance
T = effective interest rate per annum at which United States
Treasury securities, selected at Secured Party's sole
discretion, maturing on or near the last day of the then
applicable Interest Period of such Advance and in
approximately the same amount as such Advance can be
purchased by Secured Party on the Business Day of such
prepayment of principal
P = the amount of principal prepaid
D = the number of days remaining in the Interest Period as
of the date of such payment.
Notwithstanding the foregoing, no amount so prepaid may be
reborrowed at the LIBOR Rate accruing on such Advance prior to
the last day of the Interest Period pertaining to the Advance
prepaid. Said prepayment shall be irrevocable once Debtor has
notified Secured Party of such prepayment and Debtor will
reimburse Secured Party for any and all loss, cost, liability and
expense incurred by Secured Party in the event Debtor for any
reason does not make such prepayment. A determination by Secured
Party as to the amounts payable pursuant to this subparagraph
shall be conclusive absent arithmetical error.
(3) Notice of Prepayment. In its
notice, Debtor shall specify the date and amount of the
prepayment, whether the Revolving Loan being prepaid is a Prime
Rate Loan, Eurodollar Loan or a combination thereof, and, if a
combination thereof, the amount allocable to each.
(v) Termination. The provisions of this
Paragraph 4A shall continue in effect until April 30, 1998 (or
the next succeeding Business Day if such day is not a Business
Day). Secured Party may terminate the provisions of this
Paragraph 4A at any time upon the happening of an Event of
Default. The date on which the provisions of this Paragraph 4A
terminate in accordance with this subparagraph (viii), whether by
the passage of time or default, is herein called the "Termination
Date". ON THE TERMINATION DATE, ALL OBLIGATIONS MATURE AND
DEBTOR SHALL IMMEDIATELY PAY TO SECURED PARTY THE THEN
OUTSTANDING AGGREGATE PRINCIPAL AMOUNT OF THE REVOLVING LOANS,
TOGETHER WITH INTEREST ACCRUED THEREON TO THE DATE OF PAYMENT AND
ALL OTHER CHARGES OWING TO SECURED PARTY UNDER THE LOAN DOCUMENTS
AS OF SUCH DATE OF PAYMENT. No such termination shall (i) in any
way affect or impair any rights of Secured Party under any of the
Loan Documents, arising prior to any such termination or by
reason thereof, (ii) relieve Debtor of any obligation to Secured
Party under any of the Loan Documents, or otherwise, until all
the Obligations are fully paid and performed, or (iii) affect any
right or remedy of Secured Party under any of the Loan Documents.
(vi) Unused Commitment Fee. Debtor shall pay
to Secured Party on the first day of each August, November,
February and May following the date hereof until the Termination
Date, and on the Termination Date, a nonrefundable commitment fee
for the calendar quarter immediately preceding such payment in an
amount equal to one-quarter of one percent ( %) per annum times
the excess, if any, of (i) the average daily Maximum Amount of
the Revolving Loans minus (ii) the average daily outstanding
principal amount of the Revolving Loans during such quarter. In
the case of the first payment and the last payment hereunder, if
the immediately preceding period is less than a full calendar
quarter, the commitment fee as so calculated shall be prorated by
multiplying the same by a fraction, the denominator of which
shall be 91 and the numerator of which shall be the actual number
of days elapsed in such period.
B. Letter of Credit Facility.
Upon Debtor's request therefor, Secured Party
shall, from time to time so long as no Event of Default has
occurred and is continuing as of such date of request, issue
Letters of Credit for the account of Debtor up to the Maximum
Amount of Letters of Credit, provided the aggregate amounts
available to be drawn under such Letters of Credit (or actually
drawn but not yet reimbursed by Debtor), together with the sum of
the Advances then outstanding, shall not exceed the Maximum
Amount of the Credit Facilities. No Letter of Credit shall be
issued by Secured Party for the account of Debtor which has an
expiration date later than thirty (30) days prior to the
Termination Date. Upon payment by Secured Party under any Letter
of Credit, any amount so paid shall be immediately due and
payable by Debtor and Secured Party shall have the right (but not
the obligation) to effect payment thereof, together with payment
of any of the fees, expenses and charges described below,
immediately by a charge to the Loan Account, notwithstanding that
additional Revolving Loans are not available for borrowing to
Debtor. Any charge made to the Loan Account as aforesaid shall
be considered a Revolving Loan which shall bear interest until
paid in full by Debtor at a rate per annum equal to the one
percentage point (1%) above the Prime Rate in effect from time to
time; provided, however, that Debtor shall have no right to
request to borrow, and Secured Party shall not be obligated to
lend, any amount contemplated by the immediately preceding
sentence, it being understood that any such Revolving Loans would
be in Secured Party's sole discretion and would be made only to
satisfy any reimbursement obligation of Debtor to Secured Party
arising in connection with the issuance of the Letters of Credit.
Secured Party shall charge Debtor its then prevailing fee for the
issuance of such Letters of Credit, based upon the fee schedules
attached hereto as Exhibit I and made a part hereof, which will
be payable by Debtor to Secured Party upon the issuance thereof.
In the event Debtor desires a Letter of Credit, the documentation
thereof shall consist of Secured Party's standard forms therefor,
copies of which are attached hereto as Exhibit H and made a part
hereof (collectively, the "Letter of Credit Reimbursement
Agreement"), and Debtor specifically acknowledges that (i) the
reimbursement obligation of Debtor and any fee on account of such
Letters of Credit shall be included in the Obligations; and (ii)
the occurrence of an Event of Default hereunder shall constitute
a default under the documentation relating to such Letters of
Credit and entitle Secured Party to exercise its rights
thereunder with respect to such default. To the extent that any
of the provisions of the Letter of Credit Reimbursement Agreement
conflict with the terms of this Agreement, the provisions of this
Agreement shall govern.
5. CAPITAL ADEQUACY PROVISIONS.
(a) Illegality. Notwithstanding any other provisions
herein, if any applicable law, regulation or directive, or any
change therein or in the interpretation or application thereof
shall make it unlawful for Secured Party to make or maintain any
Eurodollar Loans as contemplated by this Agreement: (a) the
obligation of Secured Party to make Eurodollar Loans or to
continue Eurodollar Loans as such and convert Prime Rate Loans to
Eurodollar Loans shall forthwith be canceled, and (b) such
Revolving Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically, without notice, to Prime Rate
Loans on the respective last days of the then current Interest
Periods with respect thereto or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan is
made on a day that is not the last Business Day of the then
current Interest Period applicable thereto, Debtor shall pay
Secured Party such amount or amounts as may be required pursuant
to subparagraph (iv)(c)(2) of Paragraph 4A hereof.
(b) Basis for Determining LIBOR Rate Inadequate or
Unfair. In the event that Secured Party shall have determined
(which determination shall be conclusive and binding upon Debtor)
that (a) by reason of circumstances affecting the interbank LIBOR
market, adequate and reasonable means do not exist for
determining LIBOR, or (b) U.S. Dollar deposits in the relevant
amount and for the relevant maturity are no longer available to
Secured Party in the interbank LIBOR market, or (c) the making or
continuation of Eurodollar Loans has been made impractical or
unlawful by the occurrence of a contingency that materially and
adversely affects the interbank LIBOR market, or (d) the LIBOR
Rate will not adequately and fairly reflect the cost to Secured
Party of making or maintaining Eurodollar Loans, or (e) the LIBOR
Rate shall no longer represent the effective cost to Secured
Party of U.S. Dollar deposits in the relevant market for deposits
in which it regularly participates, Secured Party shall give
Debtor notice of such determination as soon as practicable. If
such notice is given (i) any requested Eurodollar Loan shall be
made as a Prime Rate Loan, unless Debtor gives Secured Party
three (3) Business Days' prior written notice that its request
for such borrowing is canceled, (ii) any Prime Rate Loan that was
to have been converted to a Eurodollar Loan shall be continued as
a Prime Rate Loan, and (iii) any outstanding Eurodollar Loan
shall be automatically converted, without notice, to a Prime Rate
Loan effective on the last Business Day of the then current
Interest Period applicable thereto. Until such notice has been
withdrawn, no further Eurodollar Loans shall be made or continued
as such, nor shall the Debtor have the right to convert Prime
Rate Loans to Eurodollar Loans.
(c) Survival. The obligations and covenants of Debtor
under this Paragraph 5 shall survive the termination of this
Agreement and the full, final and indefeasible payment of the
Revolving Loans and the other Obligations.
6. AFFIRMATIVE COVENANTS
Debtor covenants and agrees that, from the date hereof
until the termination of the provisions of Paragraph 4A of this
Agreement and full payment of the Obligations, unless Secured
Party otherwise agrees in writing, Debtor or Guarantor, where
specified below, shall:
(a) Guarantor shall, on a consolidated basis with its
Subsidiaries, maintain at all times (although tested on a
quarterly basis by Secured Party): (i) a ratio of current assets
to current liabilities (with the entire outstanding balance of
the Revolving Loans and the face amount of all issued and
outstanding Letters of Credit included in Debtor's current
liabilities) not less than 2.0 to 1.0; (ii) a Leverage Ratio of
not more than .5 to 1.0; (iii) a Tangible Net Worth of not less
than $50,000,000.00; and (iv) a Debt Service Coverage Ratio of
not less than 4.0 to 1.0, as determined in each instance, by
generally accepted accounting principles consistently applied
from year to year;
(b) Pay and discharge all taxes, general and special,
charges and assessments, and other governmental obligations,
which may have been or shall be levied, charged or assessed on or
against it, its property, or its income or profits before they
become delinquent and pay and discharge on or before their due
date any and all other lawful claims and demands whatsoever,
including, without limitation, trade obligations; provided,
however, that the payment of any such taxes, assessments,
governmental obligations or other claims and demands may be
postponed so long as they or any of them are being diligently
contested in good faith and by appropriate proceedings,
appropriate reserves have been provided therefor by Debtor and no
Lien (other than Liens for which the enforcement thereof has been
effectively stayed by such contested proceedings) is placed on
any assets of Debtor in connection with such taxes, assessments,
governmental obligations or other claims or demands so contested
by Debtor;
(c) Maintain, at all times:
(i) Insurance on its properties against loss by
fire and all available extended coverage risks in such amounts
and with such insurers as is usually carried by companies engaged
in similar businesses and owning similar properties in the same
general geographical area as Debtor, which insurance shall by the
terms of the policy provide that (x) in the event of loss or
damage, if any, the proceeds thereof shall be payable to Secured
Party, as the holder of a security interest, mortgage or other
lien or interest in the personal or real property of Debtor
insured under the policy as Secured Party's interest may appear;
(y) the insurance, as to the interest of Secured Party, shall not
be invalidated by any act or neglect of Debtor, its directors,
officers, agents or employees, by any foreclosure, or other
proceeding, or notice of sale relating to said property or any of
it; by any change in the title or ownership of the property, or
any of it; or by the occupation of the premises where the
property, or any of it, is located for purposes more hazardous
than are permitted by the policy; and (z) if the policy is to be
canceled, for whatever reason, the insurance shall continue in
full force and effect for the benefit of Secured Party for not
less than thirty (30) days after written notice of cancellation
to Secured Party from the insurer which notice the insurer shall
agree to give to Secured Party. Debtor shall cause the insurer
to supply to Secured Party certificates, or other evidence of
insurance satisfactory to Secured Party, indicating compliance
with the foregoing, including evidence of continuation thereof no
later than thirty (30) days prior to the expiration of any policy
of insurance. Secured Party shall have the right to apply the
proceeds of any such insurance in reduction of the Obligations,
whether or not then due and payable, in such manner as Secured
Party in its sole discretion may determine or to pay over, at
such times and in such amounts, such proceeds or part thereof, as
Secured Party in its sole discretion may determine, to Debtor for
the purpose of replacing the Collateral affected by any loss
relating thereto; and
(ii) General public liability insurance against
claims for personal injury, death or property damage in such
amounts as are customary in Debtor's business and Workers'
Compensation insurance in statutory amounts with companies
licensed to do business in the State of Connecticut;
(d) Maintain and preserve the Collateral in good order
and condition, ordinary wear and tear excepted, and not permit or
suffer the Collateral to be wasted or destroyed;
(e) Furnish to Secured Party:
(i) Within ninety (90) days after the end of each
of Debtor's fiscal years following the date hereof, (x) a
duplicate copy of Debtor's and Guarantor's consolidated annual
report (with all exhibits actually being filed) on Form 10-K
filed by Debtor with the Securities and Exchange Commission
("SEC"), and (y) a copy of Debtor's and Guarantor's consolidating
unaudited, management-prepared fiscal year-end financial
statements, including consolidating balance sheets, statements of
income and statements of cash flow;
(ii) Within forty-five (45) days after the end of
each fiscal quarter following the date hereof, a duplicate copy
of Debtor's and Guarantor's consolidated quarterly report (with
all exhibits actually being filed) on Form 10-Q filed by Debtor
with the SEC;
(iii) Within ten (10) days after the end of
each month in which Debtor requests an Advance on account of the
Revolving Loan, a detailed written report, in form satisfactory
to Secured Party, showing as of the end of such preceding month,
an aging of all Accounts of Debtor and such other information
relating to the Accounts as Secured Party may reasonably request
in writing; and
(iv) Promptly upon Secured Party's request
therefor, such other information relating to Debtor and its
operations and affairs as Secured Party may from time to time
reasonably request in writing;
(f) Maintain its properties in good repair, working
order and condition and make all needed and proper repairs,
renewals, replacements, additions or improvements thereto and
immediately notify Secured Party of any event causing material
loss or depreciation in the value of the Collateral and the
amount of such loss or depreciation;
(g) After reasonable prior notice, allow Secured Party
by or through any of its officers, agents, attorneys, or
accountants designated by it, for the purpose of ascertaining
whether or not each and every provision hereof and of any related
agreement, instrument and document is being performed and for the
purpose of examining the Collateral and the records relating
thereto, to enter, during normal business hours, the offices and
plants of Debtor to examine or inspect any of the properties,
books and financial records of Debtor, to make copies of such
books and records or extracts therefrom, and to discuss the
affairs, finances and accounts of Debtor with Debtor all at such
reasonable times and as often as Secured Party may reasonably
request;
(h) Defend the Collateral constituting personal
property against all claims and demands of all persons at any
time claiming the same or any interest therein and, in the event
Secured Party's security interest in the Collateral, or part
thereof, would be impaired by an adverse decision, allow Secured
Party to contest or defend any such claim or demand in Debtor's
name and pay, upon demand, Secured Party's reasonable costs,
charges and expenses, including, without limitation, attorneys'
fees, incurred by Secured Party in connection therewith;
(i) Pay to Secured Party, on demand, any and all
reasonable expenses, including attorneys' fees, incurred or
expended by Secured Party in preparation of this Agreement and
the other Loan Documents, in making or processing the Credit
Facilities, in the collection or attempted collection of the
Obligations and in protecting and/or enforcing the rights of
Secured Party against Debtor and sustaining and/or enforcing the
security interest and other liens, if any, granted to Secured
Party hereunder and under any of the other Loan Documents;
(j) From time to time, at the request of Secured Party,
execute, deliver and file one or more financing statements on
Form UCC-1 and other agreements, instruments or documents, and do
all other acts as Secured Party deems reasonably necessary or
desirable to perfect fully its security interest in the
Collateral and pay, upon demand, all reasonable expenses,
including, without limitation, attorneys' fees, incurred by
Secured Party in connection therewith;
(k) Keep complete and accurate books and records
reflecting all material facts concerning the Collateral, and
pertaining to the Obligations and Debtor's covenants under this
Agreement;
(l) Comply in all material with all laws, ordinances
and rules and regulations applicable to Debtor of any Federal,
state or local government or any instrumentality or agency
thereof, including, without limitation, ERISA, OSHA, and all
Federal, state and municipal laws, ordinances, rules and
regulations concerning the environment, except to the extent any
such law, ordinance, rule or regulation, is being contested in
good faith by appropriate proceedings provided that said contest
or an adverse decision therein will not have an adverse effect on
the condition, financial, operating or otherwise, of Debtor;
(m) Maintain its primary operating accounts with
Secured Party;
(n) Maintain in full force and effect the AT&T License
Agreement; and
(o) Promptly advise Secured Party of (i) the happening
of an Event of Default or the existence of a state of facts which
by the passage of time, the giving of notice, or both, would
constitute an Event of Default; and (ii) the occurrence of any
action, suit or litigation commenced by or against Debtor which,
if adversely determined, could reasonably be anticipated to have
a material adverse effect on Debtor's condition, financial,
operating or otherwise.
7. NEGATIVE COVENANTS
Debtor covenants and agrees that, from the date hereof
until the termination of the provisions of Paragraph 4A of this
Agreement and full payment of the Obligations, unless Secured
Party shall otherwise consent in writing, Debtor or Guarantor,
where specified below, shall not:
(a) Sell, lease, mortgage, pledge or otherwise dispose
of or encumber the Collateral (other than the disposition of
Inventory permitted by Paragraph 9 hereof) except: (i) Liens
granted in favor of Secured Party or otherwise permitted hereby;
(ii) Liens for taxes, assessments or governmental charges or
levies not delinquent; (iii) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens and other similar
Liens arising in the ordinary course of business; (iv) Liens
arising out of pledges or deposits under workers' compensation
laws, unemployment insurance, old age pensions or other social
security or retirement benefits; (iv) attachments or other Liens
in connection with litigation provided the same are removed or
contested in good faith by Debtor within thirty (30) days; and
(v) sales of Collateral with an aggregate fair market value not
in excess of $1,000,000.00 to third Persons for fair and adequate
consideration; (vi) Liens securing purchase money indebtedness
permitted under Paragraph 7(b) below; and (vii) Liens arising in
the ordinary course of business;
(b) Create or assume any obligations for money borrowed
from any Person other than Secured Party, other than (i) purchase
money indebtedness in an aggregate amount not to exceed the sum
of $1,000,000.00 at any one time outstanding, and (ii)
indebtedness with respect to ordinary trade accounts;
(c) Guarantor shall not declare or pay any dividends or
make any other distributions on any shares of its capital stock
(other than dividends payable solely in such shares) in any
fiscal year hereafter in excess of an amount equal to fifty
percent (50%) of Guarantor's and its Subsidiaries' Net Income
After Taxes for such fiscal year, or purchase, redeem, retire or
otherwise acquire, directly or indirectly, any such shares in
excess of 500,000 shares during the period commencing on the date
hereof and ending on April 30, 1998;
(d) Endorse, guaranty, or become surety for the
obligations of any third Person, except for (i) the endorsement
of checks in the ordinary course of business; (ii) guaranties of
the obligations of any Persons (excluding Affiliates) in excess
of the aggregate amount of $1,000,000.00 at any one time
outstanding; and (iii) guaranties of the obligations of
Affiliates in excess of the aggregate amount of $1,000,000.00 at
any one time outstanding;
(e) Make any loans or advances, at any one time
outstanding to its directors, officers, shareholders or
Affiliates in excess of the aggregate amount of $1,000,000.00, or
loans or advances to employees for travel and other minor
business expenses in the ordinary course of business in excess of
the aggregate amount of $100,000.00 at any one time outstanding;
(f) Enter into any merger or consolidation, or sell all
or substantially all of Debtor's assets, or liquidate, dissolve
or otherwise terminate or alter Debtor's existence;
(g) Without giving Secured Party at least thirty (30)
days' prior written notice, change its corporate name, adopt any
trade names, conduct its business under any trade name or style
other than as hereinabove set forth, or change its chief
executive office, places of business or the present locations of
the Collateral or the records relating to the Collateral; or
(h) Acquire, form or dispose of any Subsidiaries, or
acquire all or substantially all of the assets of any other
Person or any portion of the assets of any Person which
constitutes a division, product line or line of business if the
purchase price to be paid by Debtor for the assets of such Person
(including the stock of such Person) would exceed, on an
aggregate basis, an amount equal to ten percent (10%) of
Guarantor's and its Subsidiaries' consolidated total revenues for
the immediately prior fiscal year.
8. PAYMENTS BY SECURED PARTY
At its option, Secured Party may pay for insurance on
the Collateral and taxes, assessments or other charges which
Debtor fails to pay in accordance with the provisions hereof, or
of any related agreement, instrument or document, and may
discharge any security interest in or lien upon the Collateral.
No such payment or discharge of any such security interest or
lien shall be deemed to constitute a waiver by Secured Party of
the violation of any covenant by Debtor as a result of Debtor's
failure to make any such payment or Debtor's suffering of any
such security interest or lien. Any payment made or expense
incurred by Secured Party pursuant to this or any other provision
of this Agreement shall be added to and become a part of the
Obligations of Debtor to Secured Party, shall bear interest at
the rate per annum charged pursuant to Paragraph 4A hereof and
shall be payable on demand.
9. USE OF INVENTORY
Until the happening of an Event of Default, Debtor may
use the Inventory in any lawful manner not inconsistent with this
Agreement or the terms or conditions of any policy of insurance
thereon and, notwithstanding any other provisions contained in
the Loan Documents, may also sell, lease or consume the Inventory
in the ordinary course of business. A sale in the ordinary
course of business does not include a bulk transfer or transfer
as security for or in partial or total satisfaction of a debt.
10. RIGHTS OF SECURED PARTY; NOTICES
When the Obligations, or any of them, become immediately
due and payable upon the occurrence of an Event of Default,
Secured Party may, in addition to and not in limitation of
Secured Party's rights set forth in Paragraph 11 of this
Agreement, pursue any legal remedy available to it to collect the
Obligations outstanding at said time, to enforce its rights
hereunder, and to enforce any and all other rights or remedies
available to it both under the Code and otherwise, including,
without limitation, the right to take possession of the
Collateral and dispose of the same on Debtor's premises, all
without judicial process, Debtor hereby waiving any right Debtor
might otherwise have to require Secured Party to resort to
judicial process and further waiving Debtor's right to notice and
a hearing under the Constitution of the United States or under
any Federal or state law, and no such action shall operate as a
waiver of any other right or remedy of Secured Party under the
terms of any of the Loan Documents, or the law, all rights and
remedies of Secured Party being cumulative and not alternative.
In addition, Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to
be designated by Secured Party which is reasonably convenient to
both parties. In the event reasonable notice is required to be
given by Secured Party to Debtor under the provisions of the
Code, such notice shall be deemed to have been given if mailed,
postage prepaid, certified mail, return receipt requested, at
least seven (7) days prior to the happening of the event for
which such notice is being given, to Debtor at Debtor's address
first hereinabove written. Any notice required to be given by
Secured Party to Debtor or by Debtor to Secured Party, pursuant
to the terms of any Loan Documents, shall be deemed to have been
given (except as otherwise specifically provided in this
Agreement), upon mailing the same, postage prepaid, certified
mail, return receipt requested, to Debtor or Secured Party, as
the case may be, at its address first hereinabove written.
Either of the parties hereto may notify the other that such
notice shall be given to such other address as such party may so
instruct by written notice similarly given.
11. COLLECTION OF ACCOUNTS
Upon written notice from Secured Party after the
occurrence of an Event of Default, Debtor shall make collections
of proceeds upon its Accounts, hold the proceeds received from
collections in trust for Secured Party and turn over such
proceeds to Secured Party daily in the exact form in which they
are received, together with a collection report in form
satisfactory to Secured Party. Secured Party shall immediately
apply such proceeds, and any proceeds of Accounts received by it
pursuant to the following provisions of this Paragraph 11,
subject to collection, to the payment of the Obligations in such
order of application as Secured Party, in its sole discretion,
may determine. Debtor shall, when requested by Secured Party
after the happening of an Event of Default or upon demand:
(a) Assign or endorse the Accounts to Secured Party,
and notify account debtors that the Accounts have been assigned
and should be paid directly to Secured Party;
(b) Turn over to Secured Party all Inventory returned
in connection with any of the Accounts;
(c) Mark or stamp each of its individual ledger sheets
or cards pertaining to its Accounts with the legend "Assigned to
People's Bank", and stamp or otherwise mark and keep its books,
records, documents and instruments relating to the Accounts in
such manner as Secured Party may require; and
(d) Mark or stamp all invoices with a legend
satisfactory to Secured Party so as to indicate that the same
should be paid directly to Secured Party.
Notwithstanding the foregoing, Secured Party shall have
the right after the happening of an Event of Default or demand,
to itself so notify such account debtors to make such payments of
the Accounts directly to Secured Party. Secured Party shall have
the further right to notify the post office authorities to change
the address for delivery of mail of Debtor to an address
designated by Secured Party and to receive, open and dispose of
all mail addressed to Debtor with respect to the Accounts.
For the purposes of this Paragraph 11, Debtor hereby
irrevocably constitutes Secured Party as Debtor's attorney-in-
fact, effective upon the occurrence of an Event of Default and
continuing only so long as such Event of Default is continuing,
to issue in the name and execute or endorse on behalf of Debtor
each and every notice, instrument and document necessary to carry
out the purposes of the provisions of this Paragraph 11, and to
take such action in connection with the collection of the
Accounts, including, without limitation, suing thereon,
compromising or adjusting the same, as Secured Party, in its
reasonable discretion, deems necessary. The power of attorney
granted hereby shall be self-executing, but Debtor shall promptly
execute and deliver to Secured Party, upon written request of
Secured Party such additional separate powers of attorney, as
Secured Party may from time to time reasonably request.
12. DEFAULT PROVISIONS
(a) The Revolving Credit Note and the Revolving Loans
shall forthwith become due and payable and Debtor's eligibility
to request any further advances on account of the Revolving Loans
or to request the issuance of any further Letters of Credit by
Secured Party shall automatically terminate, without presentment,
protest, demand or notice of any kind, if Debtor or Guarantor
becomes insolvent (including in said term a negative net worth or
an inability to pay their respective debts as they mature) or
bankrupt, or makes an assignment for the benefit of its
creditors, or consents to the appointment of a trustee or
receiver of all or a substantial part of their respective
properties or such appointment is made without their consent, or
if bankruptcy, reorganization, arrangement, receivership or
liquidation proceedings are instituted by or against Debtor or
Guarantor;
(b) Secured Party may at its option declare the
Revolving Credit Note due and payable whereupon the same shall
become due and payable forthwith and Debtor's eligibility to
request any further advances on account of the Revolving Loans or
to request the issuance of any further Letters of Credit by
Secured Party shall automatically terminate, without presentment,
protest, demand or notice of any kind in any of the following
cases:
(i) If any payment of principal or interest or any
other payment required by the terms hereof, by the Revolving
Credit Note, or by any other instrument, agreement or document
executed and delivered to Secured Party pursuant to the terms
hereof shall not be fully paid when demand (to the extent the
same is payable on demand) is made for the payment of the same or
within ten (10) days after the same shall fall due if payable
other than on demand;
(ii) If any warranty or representation by Debtor
contained herein or in any of the other Loan Documents, or in any
statement furnished by it to Secured Party, proves incorrect in
any material respect;
(iii) If default exists in the due observance
of any of the covenants or agreements of Debtor set forth in this
Agreement or in any of the other Loan Documents and, with respect
to the covenants set forth in subparagraphs (b), (c), (d), (f),
(h) and (l) of Paragraph 6 hereof, such default is not cured
within thirty (30) days after Debtor has actual knowledge of the
existence of such default;
(iv) If default exists in the due observance of any
of the covenants or agreements of Guarantor set forth in the
Continuing Guaranty;
(v) If a judgment in the amount of $250,000.00 or
more is entered against Debtor and remains unsatisfied for a
period of thirty (30) days after such judgment is final and all
rights to appeal therefrom shall have expired or any appeals
taken shall have been finally resolved against Debtor;
(vi) If the AT&T License Agreement is terminated
for any reason; or
(vii) If Debtor incurs operating losses for two
(2) consecutive calendar quarters.
Upon the occurrence of an Event of Default hereunder or
upon demand by Secured Party, the applicable interest rate
charged on the outstanding principal balance of the Revolving
Loans shall be increased to a default rate equal to two
percentage points (2%) above the Prime Rate in effect at such
time (and from time to time thereafter) as set forth in Paragraph
4A hereof. Such default rate of interest shall remain in effect
until the earliest of (i) such Event of Default is cured by
Debtor, (ii) all of the Obligations are paid in full by Debtor,
or (iii) Secured Party agrees in writing to waive the charge of
the default rate of interest hereunder.
13. CONDITIONS PRECEDENT TO MAKING LOAN
(a) On or prior to the first borrowing hereunder,
Secured Party shall have actually received from the party or
parties designated below in form and content satisfactory to
Secured Party:
(i) A currently dated certified copy of the
resolutions of the Board of Directors of Debtor authorizing John
N. Giamalis, the Chief Financial Officer of Debtor, to execute
and deliver this Agreement and the other Loan Documents required
to be executed and delivered by it to Secured Party by the terms
hereof;
(ii) A currently dated certified copy of the
resolutions of the Board of Directors of Guarantor authorizing
John N. Giamalis, the Chief Financial Officer of Guarantor, to
execute and deliver the Continuing Guaranty and the other Loan
Documents required to be executed and delivered by it to Secured
Party by the terms hereof;
(iii) Certificates of Good Standing for Debtor
from the State of Delaware and the State of Connecticut;
(iv) Certificate of Good Standing for Guarantor
from the State of Delaware;
(v) Certified copies of Debtor's Certificate of
Incorporation and By-Laws, and all amendments thereto;
(vi) The Revolving Credit Note duly executed by
Debtor;
(vii) The Continuing Guaranty duly executed by
Guarantor;
(viii) Reimbursement of all of Secured Party's
expenses pursuant to subparagraph (i) of Paragraph 6 hereof;
(ix) A certificate or other proof of insurance
satisfactory to Secured Party evidencing compliance with the
provisions of subparagraphs (c)(i) and (c)(ii) of Paragraph 6 of
this Agreement;
(x) A certificate of the Secretary of Debtor which
shall certify the names of its officers authorized to sign and
deliver to Secured Party requests for advances, together with the
true signature of each such officer. Secured Party may
conclusively rely on such certificate until it shall receive a
further certificate of such Secretary canceling or amending the
prior certificate and submitting the name and signature of each
officer named in such further certificate as being authorized to
so sign and deliver such requests on behalf of Debtor;
(xi) Such UCC-1 financing statements executed by
Debtor as Secured Party requests;
(xii) A waiver executed by Debtor with respect
to any rights under Federal or state law which it might otherwise
have to any hearing prior to the exercise by Secured Party of its
rights against it or its properties;
(xiii) A letter from the Connecticut Department
of Revenue Services stating that Debtor has filed all necessary
tax returns relating to corporate, use and sales taxes,
respectively, and has paid all amounts shown thereon;
(xiv) A real estate waiver and consent from CEE
Associates Limited Partnership, the owner of the New Milford
Property;
(xv) The Letter of Credit Reimbursement Agreement
duly executed by Debtor; and
(xvi) An opinion letter addressed to Secured
Party from Debtor's Connecticut counsel in the form of Exhibit J
attached hereto and made a part hereof.
(b) At the time of each borrowing hereunder:
(i) The representations and warranties set forth
in Paragraph 3 of this Agreement shall be true and correct in all
material respects on and as of such time to the same effect as
though such representations and warranties had been made on and
as of such time;
(ii) Debtor shall be in compliance in all material
respects with all the terms and provisions set forth in this
Agreement and in the other Loan Documents and no Event of Default
shall be in existence at such time; and
(iii) Debtor shall have actually made a request
for such borrowing by written notice as provided in Paragraph 4A
of this Agreement. Any such request for an Advance shall
constitute an affirmation by Debtor as to the matters set forth
in (i) and (ii) above.
14. SET-OFF
Debtor hereby grants to Secured Party a lien on and a
right of set-off against all monies, deposits and securities and
the proceeds thereof, now or hereafter held or received by, or in
transit to, Secured Party from or for Debtor, whether for
safekeeping, pledge, custody, transmission, collection or
otherwise, and all deposits (general or special), balances, sums
and credits with and all claims of Debtor against Secured Party
at any time existing. Upon the occurrence of and during the
continuance of an Event of Default, Secured Party may at any time
apply the same or any part thereof to the Obligations, or any
part thereof, whether or not matured at the time of such
application. Secured Party shall notify Debtor after any such
set-off.
15. ACKNOWLEDGMENT AND RESTATEMENT BY DEBTOR
(a) Existing Indebtedness. Debtor hereby acknowledges,
confirms and agrees that it is, as of the date hereof, legally
indebted to Secured Party for loans, advances and other financial
accommodations made to it by Secured Party under the Existing
Credit Agreement in the aggregate principal amount of
$1,764,390.00, together with all interest accrued and accruing
thereon, and all costs, expenses and other charges now or
hereafter owed by it to Secured Party, without offset, defense or
counterclaim of any kind, nature or description whatsoever.
(b) Restatement. Except as otherwise stated in
Paragraph 1 hereof and this Paragraph 15(b), as of the date
hereof, the terms and conditions of, and the agreements,
representations and warranties set forth in the Existing Credit
Agreement are hereby replaced and superseded in their entirety by
the terms, conditions, agreements, representations and warranties
set forth in this Agreement and the other Loan Documents, and the
Existing Credit Agreement shall be of no further force and
effect, except that nothing contained herein or in any of the
other Loan Documents shall impair, limit or affect the
continuation of the liability of Debtor for the Obligations
heretofore incurred and the security interests, Liens and other
collateral interests heretofore granted, pledged and/or assigned
to Secured Party by Debtor. As more fully described in Paragraph
4 hereof, all loans, advances and other financial accommodations
under the Existing Credit Agreement and all other Obligations of
Debtor to Secured Party outstanding and unpaid as of the date
hereof pursuant to the Existing Credit Agreement shall be deemed
to be Obligations pursuant to the terms hereof, and shall
constitute and be deemed a Revolving Loan by Secured Party to
Debtor and shall be repayable in accordance with the terms of
this Agreement.
(c) Release. Debtor and Guarantor do hereby remise,
release and discharge and hold Secured Party, its officers,
directors, agents and employees, and their respective
predecessors, successors and assigns, harmless from all claims,
demands, debts, sums of money, accounts, damages, judgments,
financial accommodations, actions, causes of action, suits at law
or in equity, of any kind or nature whatsoever, whether or not
now existing or known, which Debtor or Guarantor has had or may
now or hereafter claim to have had against Secured Party, its
officers, directors, agents and employees, and their respective
predecessors, successors and assigns, in any way arising from or
connected with the Existing Credit Agreement (but only to the
extent that the provisions thereof do not survive this Agreement
in accordance with the terms of clause (b) above) or related
documents, agreements or instruments, or the arrangements set
forth therein or transactions thereunder.
16. GENERAL PROVISIONS
(a) No delay or failure of Secured Party in exercising
any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise
preclude any further exercise thereof or the exercise of any
other rights, powers or privileges;
(b) This Agreement, the security interest hereby
granted to Secured Party by Debtor and every representation,
warranty, covenant, promise and other term herein contained shall
survive until the Obligations have been paid in full and the
provisions of Paragraph 4 of this Agreement have been terminated
as provided herein;
(c) This Agreement is an integrated document and all
terms and provisions are embodied herein and shall not be varied
by parol evidence;
(d) This Agreement is made, executed and delivered in
the State of Connecticut, and it is the specific desire and
intention of the parties that it shall in all respects be
construed under the laws of the State of Connecticut;
(e) The captions for the paragraphs contained in this
Agreement have been inserted for convenience only and form no
part of this Agreement and shall not be deemed to affect the
meaning or construction of any of the covenants, agreements,
conditions or terms hereof;
(f) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns, provided, however, that Debtor shall not assign,
voluntarily, by operation of law or otherwise, any of its rights
hereunder without the prior written consent of Secured Party and
any such attempted assignment without such consent shall be null
and void.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, and to a duplicate instrument of the same
tenor at Waterbury, Connecticut, the day and year first above
written.
Signed, sealed and delivered
in the presence of COLONIAL TECHNOLOGIES CORP.
(witnesses as to both (formerly known as Colonial Data
signatures): Technologies, Corp.)
_________________________ By_________________________
John N. Giamalis
Its Chief Financial Officer
PEOPLE'S BANK
_________________________ By_________________________
Richard M. Harmonay, Jr.
Its Assistant Vice President
ACKNOWLEDGEMENT OF GUARANTOR
The undersigned, being the Guarantor identified in the
foregoing Agreement, hereby agrees to be bound by the provisions
of the Agreement applicable to it and further agrees to cause
Debtor and its other Subsidiaries to comply with the terms of
this Agreement.
COLONIAL DATA TECHNOLOGIES CORP.
By_________________________
John N. Giamalis
Its Chief Financial Officer
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this the 3rd day of May, 1996 before me, the undersigned
officer, personally appeared John N. Giamalis who acknowledged
himself to be the Chief Financial Officer of COLONIAL
TECHNOLOGIES CORP. (formerly known as Colonial Data Technologies
Corp.), a Delaware corporation, and that he, as such Chief
Financial Officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as Chief Financial
Officer.
In witness whereof I hereunto set my hand.
__________________________________
Mark M. Socha
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this the 3rd of May, 1996, before me, the undersigned
officer, personally appeared Richard M. Harmonay, Jr. who
acknowledged himself to be an Assistant Vice President of
PEOPLE'S BANK, and that he, as such Assistant Vice President,
being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the
corporation by himself as Assistant Vice President.
In witness whereof I hereunto set my hand.
__________________________________
Joseph L. Kinsella
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this the 3rd day of May, 1996 before me, the undersigned
officer, personally appeared John N. Giamalis who acknowledged
himself to be the Chief Financial Officer of COLONIAL DATA
TECHNOLOGIES CORP., a Delaware corporation, and that he, as such
Chief Financial Officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as Chief Financial
Officer.
In witness whereof I hereunto set my hand.
__________________________________
Mark M. Socha
Commissioner of the Superior Court
LIST OF EXHIBITS
A - Copy of Revolving Credit Note
B - Form of Request for Advance
C - Copy of Guarantor's and its Subsidiaries' December 31,
1995 Audited Fiscal Year-End Consolidated Financial
Statements
D - Indebtedness For Borrowed Money as of April 30, 1996
E - List of Subsidiaries, etc.
F - List of Real and Personal Property Leases
G - Schedule of Litigation
H - Form Documentation for Letters of Credit
I - Fee Schedules for Letters of Credit
J - Form of Opinion Letter
REVOLVING CREDIT NOTE
Waterbury, Connecticut
$5,000,000.00 May 3, 1996
FOR VALUE RECEIVED, COLONIAL TECHNOLOGIES CORP. (formerly
known as Colonial Data Technologies Corp.), a Delaware
corporation ("Maker"), hereby unconditionally promises to pay to
the order of PEOPLE'S BANK ("Payee"), at its banking office at
255 Bank Street, Waterbury, Connecticut 06702, or at such other
place as may be designated in writing from time to time by Payee,
the principal sum of FIVE MILLION DOLLARS ($5,000,000.00) or so
much thereof as may have been advanced, together with interest on
the outstanding principal sum, for the period commencing on the
date hereof until the date on which the entire principal balance
hereof has been paid in full, at the rates per annum and on the
dates provided in the Amended and Restated Loan and Security
Agreement (as defined below). Interest shall be charged on the
principal balance from time to time outstanding on the basis of
the actual number of days elapsed computed on the basis of a 360
day year.
Interest accrued on the principal sum from time to time
outstanding shall be paid on the first day of each and every
month following the date hereof, commencing on June 1, 1996,
until the principal amount has been paid in full. The principal
amount of this Note shall be payable at the time set forth in
Paragraph 4A(v) or Paragraph 12 of the Amended and Restated Loan
and Security Agreement (as defined below). All payments
hereunder shall be first applied to interest and then to
principal. After maturity (whether by acceleration or
otherwise), the interest rate charged on the outstanding
principal balance of this Note shall be increased to a default
rate equal to two percentage points (2%) above the then-
applicable Prime Rate (as defined in the Amended and Restated
Loan and Security Agreement), as more fully described in
Paragraph 12 of the Loan and Security Agreement.
Maker further promises to pay, on demand, in addition to
said principal sum and interest, all taxes (other than income
taxes) assessed upon this Note or on any collateral securing the
same, all taxes (other than income taxes), assessments and
insurance premiums upon all property securing the payment of this
Note, and all costs and expenses, including without limitation,
reasonable attorneys' fees, incurred in the collection of this
Note or in enforcing any security interest securing the same or
in sustaining the lien of any such security interest.
This Note is issued pursuant to and secured by a security
interest granted under a certain Amended and Restated Loan and
Security Agreement of even date herewith (hereinafter referred to
as the "Amended and Restated Loan and Security Agreement"), by
and between the Maker and the Payee, a copy of which Amended and
Restated Loan and Security Agreement is on file at the office of
the Payee at 255 Bank Street, Waterbury, Connecticut 06702, to
which Amended and Restated Loan and Security Agreement reference
is hereby made for a more particular statement of certain
representations, warranties, covenants and agreements of the
Maker and providing for events of default.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS
OF THE STATE OF CONNECTICUT.
This Note is given in partial renewal and extension of that
certain revolving credit note dated as of August 29, 1994, in the
original principal amount of $8,000,000.00, made by Maker and
payable to the order of Payee.
COLONIAL TECHNOLOGIES CORP.
By:_____________________________
John N. Giamalis
CONTINUING GUARANTY
Date: May 3, 1996
People's Bank
255 Bank Street
Waterbury, Connecticut 06702
I. In consideration of the indebtedness of the
undersigned's wholly-owned subsidiary, Colonial Technologies
Corp. (formerly known as Colonial Data Technologies Corp.), a
Delaware corporation (hereinafter referred to as the "Borrower"),
to you and/or in order to induce you, in your discretion, at any
time and from time to time hereafter to make, grant or extend any
loans, advances, payments, extensions of credit, benefits or
financial accommodations to or for the account of or at the
request of the Borrower, including, without limitation, any loans
advances, either with or without security, overdrafts, the
purchase or discount of any notes, bills receivable, drafts,
acceptances, checks or other instruments or evidences of
indebtedness upon which the Borrower is or may become liable as
maker, endorser, acceptor, or otherwise (all such liabilities and
obligations of the Borrower to you, now or hereafter existing,
being hereinafter referred to as "Obligations"), the undersigned
agrees to be, without deduction by reason of set-off, defense or
counterclaim, unconditionally liable to you for the due
performance of all of the Obligations, both past, present and
future and any and all renewals, continuations, modifications,
supplements and amendments thereto, and further agrees to be
unconditionally liable to you without deduction by reason of
set-off, defense or counterclaim for and hereby unconditionally
guarantees the prompt payment to you of the Obligations and each
of them which may be presently due and owing or which shall in
the future become due and owing to you from the Borrower, whether
by acceleration or otherwise, together with interest thereon and
any and all other amounts charged or chargeable to the account of
the Borrower and sums due or to become due to you, under any
agreements, instruments, documents, contracts relating to the
Obligations or any of them, or any renewals, continuations,
modifications, supplements and amendments thereto, whether or not
such indebtedness shall arise under any contract or agreement or
shall be represented by or payable under any instruments of
indebtedness; and in addition, the undersigned agrees to pay all
costs of collection, including, without limitation, reasonable
attorneys' fees, which may be incurred by you in collecting any
or all of the Obligations and/or in enforcing any rights
hereunder.
II. As implementing the foregoing, it is understood
and agreed the (i) the undersigned guarantees that the
Obligations will be paid to you strictly in accordance with the
terms and provisions of any agreements, express or implied,
instruments or other documents which have or may hereafter be
made or entered into by the Borrower with reference thereto (such
agreements being hereinafter collectively called the "Loan
Documents"), regardless of any law, regulation or decree, now or
hereafter in effect which might in any manner affect any of the
terms or provisions of any of the Loan Documents or your rights
with respect thereto as against the Borrower, or cause or permit
to be invoked any alteration in the time, amount or manner of
payment by the Borrower of any of the Obligations, and (ii) in
each instance when the Borrower shall have agreed, relative to
any one or more of the Obligations to pay or provide you at your
banking office at 255 Bank Street, Waterbury, Connecticut or at
any of your branches or correspondents with any amount of money
that is other than that which is locally in common circulation at
the time as currency in the place where such agreement is made,
and such amount is not actually paid or provided as and when
agreed or within such time as you may deem reasonable, the
undersigned will, upon request and as you may elect, either pay
or provide the amount in the exact currency and place as agreed
by the Borrower.
III. In event of the happening of a default or an
event of default (and the expiration of all applicable grace
and/or cure periods) under the Loan Documents, then, or at any
time(s) after the happening of any such default or event of
default, any or all of the Obligations shall, at your option,
become, for the purposes of this Guaranty immediately due and
payable by the undersigned, without demand or notice.
Furthermore, upon the occurrence of any such event of default you
shall have all of the rights and remedies provided to a secured
party by the Uniform Commercial Code in effect in the State of
Connecticut at that time and, in addition thereto, the
undersigned further agrees that (1) in the event that notice is
necessary, written notice mailed to the undersigned at the
address given below seven (7) business days prior to the date of
public sale of the property subject to the lien and security
interest created herein or prior to the date after which private
sale or any other disposition of said property will be made shall
constitute reasonable notice, but notice given in any other
reasonable manner or at any other reasonable time shall be
sufficient, (2) in the event of sale or other disposition of such
property, you may apply the proceeds of any such sale or
disposition first to the satisfaction of your reasonable
attorney's fees, legal expenses and other costs and expenses
incurred in connection with your retaking, holding, preparing for
sale, and selling the property, and (3) without precluding any
other methods of sale, the sale of property shall have been made
in a commercially reasonable manner if conducted in conformity
with reasonable commercial practices of banks disposing of
similar property, but in any event, you may sell at your option
on such terms as you may choose without assuming any credit risk
and without any obligation to advertise.
IV. Any and all present or future indebtedness for
borrowed money of Borrower to the undersigned together with any
and all interest accrued or to accrue thereon (hereinafter
referred to as "Secondary Obligations") are subject and
subordinate to the payment of the Obligations. The undersigned
shall not ask, demand, sue for, exercise any right of setoff or
otherwise seek to enforce or collect, or take or receive payment
of or security for all or any part of the Secondary Obligations
until and unless all and every part of the Obligations shall have
been fully paid and discharged. In the event of any
distribution, dividend, or application, partial or complete,
voluntary or involuntary, by operation of law or otherwise, of
all or any part of the assets of the Borrower or of the proceeds
thereof to the creditors of the Borrower or upon any indebtedness
of the Borrower, occurring by reason of the liquidation,
dissolution, or other winding up of the Borrower, or by reason of
any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of
or for the Borrower or involving the Borrower's property, no
dividend, distribution or application shall be made, and the
undersigned shall not be entitled to receive or retain any
dividend, distribution, or application on or in respect of
principal of or interest on the Secondary Obligations, unless and
until all principal of and interest on the Obligations then
outstanding shall have been indefeasibly paid and satisfied in
full; and in any such event, any dividend, distribution or
application otherwise payable in respect of the Secondary
Obligations shall be paid and applied to the Obligations until
the same have been fully paid and satisfied. To enable you to
assert and enforce your rights hereunder in any such proceeding
or upon the happening of any such event, you, or any person whom
you may designate, are hereby irrevocably appointed attorney-in-
fact for the undersigned with full power to act in the place and
stead of the undersigned, including the right to make, present,
file and vote such proofs of claim against the Borrower on
account of all or any part of the Secondary Obligations as you
may deem advisable and to receive and collect any and all
dividends or other payments made thereon and to apply the same on
account of the Obligations. The undersigned will execute and
deliver to you such instruments as may be required by you to
enforce any and all the Secondary Obligations, to effectuate such
power of attorney and to effect collection of any and all
dividends or other payments which may be made at any time on
account thereof.
V. The undersigned hereby consents and agrees that
you may at any time, or from time to time, in your discretion:
(1) extend or change the time of payment, and/or the manner,
place or terms of payment of all or any of the Obligations; (2)
exchange, release and/or surrender all or any of the collateral
security, or any part(s) thereof, by whomsoever deposited, which
is now or may hereafter be held by you in connection with all or
any of the Obligations; (3) proceed against the undersigned
before taking any action against the Borrower for payment of the
Obligations and/or to liquidate or preserve any collateral
therefor; (4) amend, modify and/or waive the provisions of any of
the Loan Documents; (5) sell and/or purchase all or any such
collateral at public or private sale, or at any broker's board,
and after deducting all costs and expenses of every kind for
collection, sale or delivery, the net proceeds of any such
sale(s) may be applied by you upon all or any of the Obligations,
and (6) settle or compromise with the Borrower, and/or any other
person(s) liable on the Obligations, any and all of the
Obligations, and/or subordinate the payment of same, or any
part(s) thereof, to the payment of any other debts or claims,
which may at any time(s) be due or owing to you and/or any other
person(s) or corporations(s); all in such manner and upon such
terms as you may deem proper, and without notice to or further
assent from the undersigned, it being hereby agreed that the
undersigned shall be and remain bound upon this Guaranty,
irrespective of the existence, value or condition of any
collateral, and notwithstanding also that the Obligations may at
any time(s) exceed the aggregate principal sum, if any,
hereinabove prescribed.
VI. The undersigned hereby acknowledges that it has
examined the affairs of the Borrower and made such other
inquiries as it deemed necessary and sufficient to fully inform
itself of the financial conditions of the Borrower and/or
Borrower's business and the risk which the undersigned may incur.
The undersigned hereby waives notice of any future Obligations
which may be incurred by the Borrower and expressly assumes the
obligation to keep itself informed as to the state of the
Borrower's financial condition and any of the Obligations or
other financial undertakings incurred by the Borrower or any
changes made with respect to or the extent of the risk assumed by
the undersigned. The undersigned hereby expressly acknowledges
that any notices which you may give to it shall not in any way be
deemed an undertaking by you or impose upon you a duty to advise
it on any future Obligations or changes in the financial or
business undertakings of the Borrower, or a change in the risk
assumed by the undersigned.
VII. THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THE
TRANSACTION(S) INVOLVING THE OBLIGATIONS IS A "COMMERCIAL
TRANSACTION" WITHIN THE MEANING OF CHAPTER 903A OF THE
CONNECTICUT GENERAL STATUTES, AS AMENDED. THE UNDERSIGNED WAIVES
ANY RIGHT WHICH THE UNDERSIGNED MIGHT HAVE TO A NOTICE AND A
HEARING OR A PRIOR COURT ORDER, UNDER SAID CHAPTER 903A OR AS
OTHERWISE PROVIDED UNDER ANY APPLICABLE FEDERAL OR STATE LAW, IN
THE EVENT YOU SEEK ANY PREJUDGMENT REMEDY AND/OR "EX PARTE"
ATTACHMENT OF REAL OR PERSONAL PROPERTIES IN CONNECTION WITH ANY
SUIT ON THE OBLIGATIONS, INCLUDING ANY EXTENSIONS OR RENEWALS
THEREOF OR ANY DEFICIENCY THEREON. THE UNDERSIGNED FURTHER
ACKNOWLEDGES THAT BUT FOR THE ACKNOWLEDGMENT AND WAIVER CONTAINED
IN THIS PARAGRAPH, YOU MIGHT OTHERWISE HAVE TO ESTABLISH PROBABLE
CAUSE AND/OR POST A BOND OR OTHER SECURITY IN CONNECTION WITH
SUCH AN ATTACHMENT, UNDER THE "DUE PROCESS" CONSIDERATIONS OR
OTHERWISE OF ANY APPLICABLE STATE OR FEDERAL LAW, AND THE
UNDERSIGNED SPECIFICALLY WAIVES ANY OF SUCH REQUIREMENTS IMPOSED
ON YOU.
VIII. This is a continuing guaranty and shall (i)
remain in full force and effect until written notice shall have
been received by you from the undersigned (or the successor or
legal representative of the undersigned) that it has been
revoked, but any such notice shall not release the undersigned
from any liability as to any Obligations which may be held by
you, or in which you may have any interest, at the time of the
receipt of such notice; (ii) be binding upon the undersigned, the
heirs, executors, administrators, successors and assigns of the
undersigned, and shall inure to the benefit of, and be
enforceable by you, your successors, transferees and assigns, and
(iii) BE DEEMED TO HAVE BEEN MADE UNDER AND SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF CONNECTICUT IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, and it is
understood and agreed that none of its terms or provisions may be
waived, altered, modified or amended except in writing duly
signed for and on your behalf.
IX. The undersigned represents and warrants to you
that its execution and delivery of this Guaranty has been duly
authorized by all necessary corporate action and that this
Guaranty is valid, legal and binding upon the undersigned and
enforceable against it in accordance with its terms.
COLONIAL DATA TECHNOLOGIES CORP.,
a Delaware corporation
By:________________________________
John N. Giamalis
Its Chief Financial Officer
Address:
80 Pickett District Road
New Milford, Connecticut 06776
THIS MASTER TRADEMARK LICENSE AGREEMENT ("Agreement"),
effective March 15, 1996 is between Colonial Data Technologies
Corporation, a Delaware corporation ("CDT") and PACIFIC BELL, a
California corporation ("Pacific").
BACKGROUND
Pacific offers the Caller ID service ("Caller ID"), which
causes the calling party's telephone number to be displayed when
Pacific's customer receives a call. Pacific's customer can
receive that display only if the customer has first obtained a
specially designed display unit, which may be either a stand-
alone unit or a telephone set incorporating such a display unit,
either of which is referred to in this Agreement as customer
premises equipment ("CPE"). Pacific does not offer such CPE
directly to its customers.
CDT designs, supplies, distributes, and sells such CPE. CDT
has demonstrated its ability to supply, distribute, and sell CPE.
CDT desires to enter into an agreement that will enable it
to offer CPE displaying Pacific's name and insignia for sale to a
retailer who will serve Pacific's customers. Pacific desires to
enter into certain agreements to ensure that such CPE displaying
Pacific's name and insignia will be made available to customers
to permit them to receive displays in a timely manner when they
order Caller ID from Pacific. Following a competitive bidding
process, Pacific has agreed to grant CDT certain rights to sell
CPE displaying Pacific's insignia, subject to the terms and
conditions of this Agreement.
CDT and Pacific, intending to be legally bound, agree as
follows:
TERMS AND CONDITIONS
A. MASTER AGREEMENT
1. This Agreement anticipates the future execution of
Schedules by Pacific and CDT. During the term of this Agreement,
Pacific shall grant CDT the right and license to display
Pacific's insignia and name on the CPE identified in Schedules.
For purposes of this Agreement and such Schedules, the term
"insignia" refers to the proprietary trademarks, service marks,
symbols, signs, tradenames, logos or decorative designs of either
party. Each Schedule shall be deemed to be a separate and
independent agreement between the parties with respect to the
subject matter thereof and shall incorporate all of the
provisions of this Agreement (including any appendices, exhibits,
and other documents attached to or referenced in this Agreement
or such Schedule) as it may be amended from time to time.
2. Each Schedule executed under this Agreement shall be
separately numbered and shall include, but not be limited to,
each of the following items whenever such item is applicable to
the CPE covered by such Schedule:
(1) The effective date of the Schedule;
(2) The license term of the Schedule (including the
duration of the initial license term and the periods and
methods of renewal or extension as applicable);
(3) A description of the CPE covered by the Schedule,
including make, model name, and model number, as
appropriate;
(4) The territory in which CDT is authorized to offer the
CPE covered by the Schedule (or, if the Schedule is intended
to authorize CDT to offer CPE only to a vendor identified as
a "fulfillment center," the identity of such fulfillment
center);
(5) Any special terms and conditions agreed to by Pacific
and CDT in connection with the Schedule.
3. In the event of any conflict or inconsistency between a
term of this Agreement and the terms of any Schedule, the
Schedule shall control, but, except for such Schedule, the terms
of this Agreement shall not be deemed to be waived, modified, or
amended unless amended by a separate written agreement, signed by
both parties.
B. RIGHTS GRANTED BY LICENSE
The license granted by Pacific under a Schedule shall
constitute a personal, nontransferable, nonexclusive right to
reproduce and display Pacific's name and insignia in the
connection with the marketing and distribution of the CPE
identified in the Schedule, in the territory defined by the
Schedule, during the term established by the Schedule. CDT shall
display Pacific's name and insignia only on or in connection with
the marketing and distribution of CPE actually manufactured by
CDT as specified in the appropriate Schedule, unless Pacific
consents in the Schedule to the use of Pacific's name on or in
connection with the marketing and distribution of CPE
manufacturing by CDT's subcontractors or suppliers identified in
the Schedule. The license granted in a Schedule shall not extend
to any other item not identified in the Schedule. No ownership
of, or other right, title, or interest in, Pacific's name or
insignia is conveyed by any license granted hereunder.
C. PUBLICITY AND INSIGNIA
1. CDT shall use and display Pacific's name and insignia
only in conformance with the basic graphic standard set forth in
the Pacific Telesis Group document entitled "Four Basic Rules"
attached to this Agreement as Exhibit A. Pacific's name and
insignia will be affixed to CPE by silk screening.
2. Each party shall submit for approval by the other party
all CPE, packaging, package insert materials (with the exception
of the materials referred to in Section D(2) above), labels,
displays, advertising, sales literature, promotional literature
(collectively, "materials"), and other publicity relating to the
subject matter of this Agreement in which the other party's name
is mentioned, or the other party's insignia are used, or from
which the identity of the other party could reasonably be
inferred. Pacific retains the right to participate at each stage
in the development of all such CPE, including product
enhancements and modifications of CPE models previously licensed
under a Schedule, materials, and publicity prior to production by
CDT, and to approve or withhold approval based upon appearance,
quality, and distribution. Such approval shall not be
unreasonably withheld. Neither party shall distribute, publish,
or use such CPE, materials, or publicity without obtaining prior
approval from the other party.
3. Before selling or disposing of CPE in any manner not
licensed in the applicable Schedule, CDT shall remove Pacific's
name and insignia from any CPE so marked, and shall repackage
such CPE in packages not bearing Pacific's name or insignia, or
including any of Pacific's package insert materials. Sales of
CPE as "seconds" or "irregulars" or similar terminology
indicating a reduced level of quality shall not be licensed or
deemed to be licensed under any Schedule, and shall have
Pacific's insignia thereon removed prior to distribution or sale.
D.
E. CONSUMER PRODUCT WARRANTIES
All CPE licensed under a Schedule shall be covered by a one-
year consumer product warranty against defects in materials and
workmanship.
F. PRODUCT REGISTRATIONS AND STANDARDS
1. CDT represents and warrants that all CPE identified in
a Schedule shall conform to all applicable standards set forth in
Bell Communications Research ("Bellcore") Special Report SR-TSV-
002476 Issue 1, December 1992, entitled "Customer Premises
Equipment Compatibility Considerations for the Voiceband Data
Transmission Interface," as amended from time to time, and in
Bellcore Generic Requirements document GR-30-CORE, Issue 1,
December 1994,entitled "LSSGR: Voiceband Data Transmission
Interface, Section 6" as amended from time to time.
2. CDT represents and warrants that all CPE identified in
a Schedule is registered under and complies with Part 68 of the
Rules and Regulations of the Federal Communications Commission,
including, but not limited to, all applicable labeling and
customer instruction requirements.
3. CDT represents and warrants that all CPE identified in
a Schedule complies with any and all applicable requirements of
Part 2, Subpart J and Part 15, Subpart C of the Rules and
Regulations of the Federal Communications Commission, including,
but not limited to, those sections concerning the labeling of
such CPE and those sections dealing with the suppression of radio
frequency and electromagnetic radiation to specified levels.
4. CDT represents and warrants that all licensed CPE
offered for sale following pre-production approval by Pacific
shall conform to the sample approved by Pacific.
G. REPORTS AND ACCOUNTS
1. CDT shall maintain accurate records and accounts of all
matters which relate to CDT' obligations under this Agreement in
accordance with generally accepted accounting principles, which
CDT shall apply consistently within each accounting period and
from period to period. CDT shall maintain such records and
accounts in a manner which will permit audit in accordance with
generally accepted auditing standards for a period of 4 calendar
years following the close of the calendar quarter following the
quarter to which they relate. To the extent that audit of such
records may be reasonably necessary to determine whether CDT is
complying with its obligations under this Agreement or any
Schedule, CDT shall permit Pacific and its authorized
representatives (which may include auditors appointed by
Pacific's regulators), to have reasonable access to such records
for audit and inspection, during normal business hours, upon
reasonable advance notice. If any audit shall disclose that CDT
has understated or underpaid its obligations to Pacific in an
amount in excess of 5% of the amount required by this Agreement
or the Schedule in question, then CDT, and not Pacific, shall
bear the cost of that audit.
2. When rendering quarterly payments in accordance with
Section C (LICENSE FEES), CDT shall also render quarterly reports
to Pacific showing (i) copies of all manufacturing or purchase
orders for licensed CPE submitted by CDT to its factories,
manufacturers, or suppliers during the quarter; (ii) copies of
price lists showing CDT's regular wholesale price from time to
time during the quarter; (iii) names and addresses of retailers
to whom shipments were made during the quarter; (iv) prices paid
by retailers (by model number and style) during the quarter; (v)
CDT's net selling price; and (vi) returns and allowances, by
model number and style, during the quarter.
H. NONEXCLUSIVE AGREEMENT AND CONFLICTS OF INTEREST
1. This Agreement is a nonexclusive agreement. Pacific
expressly retains the right to license other manufacturers and
suppliers to affix Pacific's name and insignia to other products.
2. CDT shall notify Pacific whenever CDT undertakes to
market or distribute, within the territory covered by a Schedule,
CPE marked with the name or insignia of a telecommunications
carrier in competition with Pacific in that territory.
I. TRADEMARK OBLIGATIONS
CDT shall not contest, or assist any third party in
contesting, and will reasonably assist Pacific in enforcing
Pacific's claim that Pacific is the owner of the exclusive right,
title, and interest in all trademark and service mark interests
embodied in or connected with Pacific's name and insignia. CDT
shall not take or cause any action to impair or infringe
Pacific's right, title, and interest so claimed. CDT shall not
in any matter represent that it has any right, title, or
trademark interest in connection with the use of Pacific's name
or insignia, nor shall CDT register or attempt to register
Pacific's name or insignia under the trademark or service mark
laws and regulations of the United States or any country. During
the term of this Agreement and any Schedule, CDT shall use
Pacific's name and insignia only for the benefit of Pacific as
provided in this Agreement. CDT shall not adopt or use any other
trademark or service mark which is likely to be confusing with or
similar to Pacific's insignia. Upon termination or cancellation
of any Schedule, CDT shall promptly cease any and all use of
Pacific's name and insignia as provided by such Schedule.
J. INDEPENDENCE OF THE PARTIES
Each party shall perform its obligations under this
Agreement as an independent contractor, and neither party shall
act as, or represent itself to be, an agent of the other with
respect to any action to be performed under this Agreement. Each
party shall be solely responsible for the management and
supervision of its own employees, agents, and contractors. Each
party will bear its own costs and expenses of preparing to
perform and performing under this Agreement, including all direct
and indirect costs of preparation and performance. Pacific's
estimates of the number of customer lines that it expects to
serve with to Caller ID are offered for planning purposes only,
and do not represent binding commitments that Pacific will
achieve such expectations or any percentage of Pacific's
customers will order CDT's CPE even if such expectations are
achieve. Pacific does not represent, warrant, or guarantee that
CDT will achieve any volume of sales with respect to any CPE that
CDT offers for sale as provided in this Agreement.
K. TERM
This Agreement is effective for an initial term of three
years, beginning on the effective date. During the initial term,
this Agreement may only be terminated or canceled in accordance
with Section M (TERMINATION AND CANCELLATION). This Agreement
shall remain in effect, following the initial term, until
terminated by either party on thirty days' written notice to the
other, or until terminated or canceled, without such written
notice in accordance with Section M.
L. TERMINATION AND CANCELLATION
1. If either party is in material default of any of its
obligations under this Agreement and such default continues for
thirty days after written notice thereof is given by the party
not in default, such nondefaulting party may cancel this
Agreement and any Schedules which may be affected by the default.
2. Pacific may terminate this Agreement and any Schedule
at any time, during the initial term, or any renewal term if, in
Pacific's sole judgment, any obligation undertaken by Pacific in
connection with this Agreement or a Schedule, including any
related obligation undertaken in connection with a fulfillment
center, becomes or is likely to become the subject of a violation
of any restriction set forth in the Telecommunications Act of
1996 or any order, rule, decision, or regulation of the Federal
Communications Commission, the United States Department of
Justice, or the California Public Utilities Commission.
M. SURVIVAL
Provisions contained in this Agreement that by their sense
and context are intended to survive completion of performance,
termination or cancellation of this Agreement shall so survive.
N. INDEMNIFICATION
CDT will indemnify Pacific and hold Pacific harmless against
any liability or loss arising from any claim (a) that any item of
CPE licensed under any Schedule infringes upon or violates any
U.S. patent or copyright, (b) that any item of CPE licensed under
any Schedule fails to conform to the representations and
warranties set forth in Section F (PRODUCT REGISTRATIONS AND
STANDARDS), and (c) that Pacific is liable to a consumer by
reason of any breach of Section E (CONSUMER PRODUCT WARRANTIES)
with respect to CPE licensed under a Schedule. Pacific will
promptly notify CDT of any such claim. Upon request of Pacific,
CDT shall, at no cost or expense to Pacific, defend or settle any
such claim, proceeding, or suit against Pacific and pay any
costs, including reasonable attorney's fees, that may be incurred
by Pacific under this Section. CDT shall control the defense and
settlement of such claim, proceeding, or suit, except that CDT
shall keep Pacific informed of the course of the settlement and
defense. Pacific shall cooperate with CDT in the defense or
settlement, and CDT shall afford Pacific an opportunity to
appoint its own separate counsel, at Pacific's expense, to
monitor CDT's defense and settlement.
O. INSURANCE
CDT will maintain all insurance and bonds required by law,
including but not limited to, workers' compensation insurance as
prescribed by the laws of each state in which CPE is provided or
any warranty service is performed; employer's liability insurance
with a minimum of $100,000 per person, $300,000 each occurrence,
and Commercial General Liability Insurance (including automobile
liability insurance) with a combined limit of at least $1,000,000
per occurrence. CDT will furnish certificates of insurance to
Pacific. The fulfillment of the insurance obligations hereunder
shall not otherwise limit any obligation of CDT or relieve CDT of
any obligation under this Agreement or in any way modify CDT's
obligation to indemnify Pacific.
P. NO WAIVER
No course of dealing or failure of either party to strictly
enforce any term, right or condition of this Agreement shall be
construed as a waiver or modification of such term, right, or
condition.
Q. NOTICES
Notices and other communications under this Agreement shall
be transmitted in writing by U.S. mail, postage prepaid,
addressed to the parties as follows, and shall be presumed
effective five days after the date of deposit in the mail.
To Pacific: PACIFIC BELL
2420 Camino Ramon, Room 340
San Ramon, California 94583
Attn: CPE Product Manager
To CDT: Colonial Data Technologies Corp.
80 Pickett District Road
New Milford, CT 06776
Attn: EVP Sales and Marketing
R. CHOICE OF LAW
This Agreement shall be governed and construed in accordance
with the laws of the State of California, as though executed and
to be performed entirely within the State of California by two
parties both domiciled there.
S. DISPUTE RESOLUTION
1. The parties will attempt in good faith to resolve any
controversy or claim arising out of this Agreement promptly by
negotiations between senior executives of the parties who have
authority to settle the controversy (and who do not have direct
responsibility for administration of this Agreement).
2. The disputing party shall give the other party written
notice of the dispute. Within twenty days after receipt of said
notice, the receiving party shall submit to the other a written
response. The notice and response shall include (a) a statement
of each party's position and a summary of the evidence and
arguments supporting its position, and (b) the name and title of
the executive who will represent that party. The executives
shall meet at a mutually acceptable time and place within thirty
days of the date of the disputing party's notice and thereafter
as often as they reasonably deem necessary to exchange relevant
information and to attempt to resolve the dispute.
3. If the matter has not been resolved within sixty days
of the disputing party's notice, or if the party receiving said
notice will not meet within thirty days, either party may
initiate mediation of the controversy or claim in accordance with
the Center for Public Resources Model Procedure for Mediation of
Business Disputes.
4. If the matter has not been resolved pursuant to the
aforesaid mediation procedure within sixty days of the initiation
of such procedure, or if either party will not participate in a
mediation, the controversy shall be settled by arbitration in
accordance with the Center for Public Resources Rules for Non-
Administered Arbitration of Business Disputes, by a sole
arbitrator. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. sections 1 through 16, and
judgment upon the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof. The place of the
arbitration shall be San Francisco, California. The arbitrator
is not empowered to award damages in excess of actual damages,
including punitive damages.
5. All deadlines specified in this Section S may be
extended by mutual written agreement.
6. The procedures specified in this Section T shall be the
sole and exclusive procedures for the resolution of disputes
between the parties arising out of this Agreement; provided,
however, that a party may seek a preliminary injunction or other
preliminary judicial relief if in its judgment such action is
necessary to avoid irreparable damage. Despite such action the
parties will continue to participate in good faith in the
procedures specified in this Section T. Applicable statutes of
limitation shall be tolled while the procedures specified in this
Section T are pending. The parties will take such action, if
any, required to effectuate the tolling.
T. ENTIRE AGREEMENT
This Agreement and any Schedules, including all exhibits and
subordinate documents attached to or referenced in this Agreement
or any Schedule, and all proposals, descriptions, drawings, and
other literature published by CDT in connection with or
contemplation of this Agreement or any Schedule shall constitute
the entire Agreement between Pacific and CDT with respect to the
subject matter.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective duly authorized
representatives.
COLONIAL DATA TECHNOLOGIES CORP.
By:________________________________
Print Name:________________________
Title:_____________________________
Date Signed:_______________________
PACIFIC BELL
By:________________________________
Print Name:________________________
Title:_____________________________
Date Signed:_______________________
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