Exhibit 10.1
LOAN AGREEMENT
This LOAN AGREEMENT (this "Agreement"), dated as of March 22, 2005, is
made by and between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, an individual with an address at ▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ("Lender"), and Databit, Inc., a Delaware
corporation ("Databit").
WHEREAS, Databit requires additional working capital to enable it to
purchase inventory for sale to customers;
WHEREAS, Databit and its parent company, Data Systems & Software Inc.
("DSSI"), have previously endeavored to obtaining financing from banks and
finance companies and have been unable to obtain such financing; and
WHEREAS, Lender, President and Chief Executive Officer and director of
Databit, is willing to make one or more advances to Databit up to an aggregate
of $500,000, subject to the terms and conditions of this Agreement.
In consideration of the foregoing and the covenants and conditions set
forth herein, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. Credit Line.
(a) Borrowings. Subject to the terms and conditions set forth herein,
(i) Lender shall upon and concurrently with the execution of this Agreement make
an advance to Databit in the amount of $250,000 (the "Initial Loan") and (ii)
Lender may, upon request of Databit, make available to Databit prior to the
Maturity Date (as defined below), at Lender's sole discretion, one or more
additional advances up to an aggregate additional principal amount not to exceed
$250,000 (the "Additional Loans"; and together with the Initial Loan, the
"Loans"). Databit shall use the proceeds from the Loans solely for purchase of
equipment and software for sale to customers.
(b) Maturity Date. The principal amount of the Initial Loan and any
Additional Loans shall be due and payable thirty days after the date of the
drawdown (the "Maturity Date"), which date may be extended until the earlier of
(i) 60 days from the respective Maturity Date or (ii) to August 31, 2005 (the
"Final Maturity Date") upon the written notice thereof delivered by Databit to
Lender.
2. Note. All Loans shall be evidenced by a promissory note of Databit
in the form of Exhibit A attached hereto (the "Note"). Lender is hereby
authorized to endorse the date and amount of each drawdown of each Loan and the
amount of each payment of principal and interest on the Loans on the schedule
annexed to and constituting a part of the Note which endorsement, together with
evidence of payment shall constitute prima facie evidence, absent demonstrated
error, of the accuracy of such information so endorsed. In lieu of endorsing
such schedule as hereinabove provided, Lender may record such transactions on
its books and records and such books and records, together with evidence of
payment shall constitute prima facie evidence, absent demonstrated error, of the
accuracy of the information contained therein. Failure by Lender, in either
case, to make such endorsement or recordation or any error with respect thereto,
shall not affect the obligations and liabilities of Databit under this Agreement
or under the Note.
3. Interest Rate. Databit shall pay interest on the outstanding unpaid
principal amount of the Loans from the date of drawdown of each Loan until its
Maturity Date at a floating rate per annum which, subject to the terms hereof,
shall be equal to the rate listed in the Wall Street Journal as the prime rate,
plus 3% (the "Interest Rate").
..
4. Payments and Interest.
(a) Pre-Payments. Prior to a Maturity Date, Databit may pre-pay, in
whole or in part, all or any portion of the Loans (together with interest
accrued thereon) without penalty or premium; provided, however, that the Loans,
together with the interest accrued thereon, shall be repaid by Databit in full
no later than the Final Maturity Date.
(b) Computation of Interest. Interest on the Loans shall be computed on
the basis of a year of 365 days, for the actual number of days elapsed and the
rate shall be adjusted daily to reflect changes in the prime rate.
(c) Payments. All payments to be made hereunder shall be made in
immediately available funds in United States Dollars, by check to Lender at the
address set forth in Section 10 hereof, or by wire transfer to the account of
Lender at such bank as Lender shall notify Databit in writing. If the date for
any payment due hereunder would otherwise fall on a Saturday, Sunday or legal
bank holiday in the State of New York, such payment shall be extended to the
next following business day with interest payable at the applicable rate
specified herein during such extension.
(f) Full Recourse Obligation. Repayment of the outstanding balance of
the principal of, and the accrued interest on, the Loans shall be a
full-recourse obligation of Databit.
(g) Guarantee and Security. The Loans will be (i) guaranteed by DSSI
pursuant to a Guarantee (as defined in Section 6 hereof), and (ii) secured by
the inventory and accounts receivable of Databit pursuant to the Security
Agreement (as defined in Section 6 hereof).
5. Borrowing Procedures for Additional Loans. Databit may from time to
time request that Lender make one or more Additional Loans. Such request shall
be made in writing and shall specify (i) the funding date of the requested
Additional Loan, which shall be a business day, (ii) the amount of the
Additional Loan. Such request shall hereinafter be referred to as a "Request for
Borrowing". No Request for Borrowing shall be made on or after June 30, 2005.
Upon receipt of the Request for Borrowing, Lender shall promptly notify Databit
in writing whether or not the Additional Loan will be made pursuant to the
Request for Borrowing. The Request for Borrowing shall be revocable at any time
prior to such notification by Lender.
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6. Conditions to the Initial Loan and any Additional Loan(s).
(a) The Initial Loan. Lender shall make the Initial Loan upon receipt
of (i) the Note dated the date hereof executed by Databit, (ii) a Security
Agreement, dated the date hereof, substantially in the form of Exhibit B
attached hereto (the "Security Agreement") executed by Databit, and (iii) an
executed guarantee substantially in the form of Exhibit C attached hereto (the
"Guarantee"), executed by DSSI.
(b) All Additional Loans. All Additional Loans shall be made at the
sole discretion of the Lender and Databit acknowledges that it shall have no
reasonable basis for relying on the availability of any Additional Loan unless
and until such Additional Loan has been made.
7. Remedies.
(a) Upon the occurrence of an Insolvency Event (as defined below) or an
Event of Default (as defined below) by Databit and at any time thereafter,
Lender may at any time declare all obligations and liabilities of Databit
hereunder then outstanding immediately due and payable, and Lender's commitment
to make any Additional Loans shall be terminated, whereupon all Loans shall
immediately become due and payable and terminated without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by
Databit.
(b) As used herein, an "Insolvency Event" shall mean that Databit shall
suspend or discontinue its business, or shall make an assignment for the benefit
of, or composition with, creditors, or shall become insolvent or be unable (or
admit in writing its inability) or generally fail to pay its debts when due, or
becomes in any jurisdiction a party or subject to (voluntarily or involuntarily)
any liquidation or dissolution action or proceeding, or any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors is commenced with respect to it, or a receiver, liquidator,
custodian or trustee shall be appointed for it, or a substantial part of its
assets (and with respect to any involuntary action or proceeding, an order
entered in the proceeding is not dismissed within 30 days) or it shall take any
action to effect or which indicates its acquiescence in any of the foregoing.
(c) As used herein, "Event of Default" shall mean the lapse of 10 days
after written notice by Lender to Databit of (i) Databit's failure to make
timely payment of any amounts due and payable under the Loans, (ii) Databit's
breach of a representation, warranty or covenant set forth in this Agreement,
the Note, the Security Agreement, a Request for Borrowing, or any other
agreements, certificates or instruments entered into or delivered from time to
time in connection herewith and therewith (the "Financing Documents"), (iii) any
money judgment in excess of $15,000 shall be entered against Databit and shall
not have been paid or bonded within 10 days.
8. Representations and Warranties of Databit. Databit hereby represents
and warrants to Lender that (i) Databit is duly incorporated, validly existing
and in good standing in the State of Delaware, and is duly qualified to do
business in the State of New York, (ii) this Agreement has been duly authorized,
executed and delivered by Databit, and constitutes Databit's valid and legally
binding obligation, enforceable against Databit in accordance with its terms,
(iii) Databit is not in breach of any material agreement to which it is a party,
(iv) Databit is not a defendant in any material litigation, and (v) Databit has
conducted its business in compliance with applicable laws. The statements set
forth in any Request for Borrowing, or in any certificate or instrument included
in the Financing Documents delivered by Databit to Lender from time to time
shall be deemed to be representations and warranties on the part of Databit.
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9. Covenants. So long as this Agreement shall be in effect, and so long
as any amounts shall be outstanding hereunder, Databit shall conduct its
business in the usual and ordinary course, in compliance with applicable laws;
maintain its corporate existence and qualifications; and maintain at all times
true and complete books, records and accounts in accordance with generally
accepted accounting principles applied on a consistent basis.
10. Miscellaneous.
(a) No Waiver. No failure or delay on the part of Lender in exercising
any right, power or privilege hereunder and no course of dealing between the
parties shall operate as a waiver therefor, nor preclude the ability of Lender
to insist at any future time on strict performance of the same or any other
provision, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other rights or remedies which Lender would otherwise have. No
notice to or demand on Databit in any case shall entitle Databit to any other or
future notice or demand in similar or other circumstances or constitute the
waiver of the rights of Lender to any other or future action in any
circumstances.
(b) Maximum Interest Rate. It is the express intention of Lender and
Databit that nothing contained in this Agreement or in the Note shall require
Databit to pay any interest (before or after an Insolvency Event, an Event of
Default, as scheduled, compounded, or otherwise accrued or charged) on any of
the Loans at a rate exceeding the maximum permissible rate (which means the rate
that if exceeded could, under applicable law, result in civil or criminal
penalties being imposed on Lender or result in Lender being unable to enforce
payment or repayment of all or part of the principal of, or the interest due or
to become due on such Loans). If Databit should pay or Lender should collect or
receive any interest in excess of the rate specified in the preceding sentence,
such payment shall be deemed to be the property of Databit in all regards, and
shall be held in trust by Lender for the benefit of Databit, and shall be repaid
to Databit with interest accrued thereon from the date of receipt by Lender to
the date of repayment to Databit, at the overnight federal funds rate as
determined by Lender.
(c) Successors and Assigns. Neither party may assign or transfer this
Agreement or any of its rights and obligations hereunder without the prior
written consent of the other party. Any attempted assignment or transfer without
such prior consent shall be void and without effect. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Notwithstanding the foregoing, after the
occurrence of an Event of Default or an Insolvency Event, Lender shall have the
right to assign, transfer and endorse over the Note to any third party
whatsoever, who shall thereupon have all of the rights, powers and privileges
with regard to the Note as Lender has hereunder.
(d) Notices. All notices, consents or other communications (each being
a "Notice") to either party under this Agreement shall be in writing and shall
be deemed to be sufficiently given (i) if delivered by overnight courier, in
which case the Notice shall be deemed to have been received one business day
after the sending thereof, (ii) if delivered in person, against receipt, to a
representative of such party, in which case the Notice shall be deemed to have
been received on the date of delivery thereof, or (iii) if sent by confirmed
telecopier to such party, in which case the Notice shall be deemed to have been
received on the date of delivery if delivered during the recipient's normal
business hours, and if not so delivered shall be deemed to have been received on
the business day following the sending thereof, in each case addressed as
follows:
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(i) If to Databit, to it at:
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Director of Finance
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) if to Lender, to him at:
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as the party to whom Notice is to be given may have
furnished to the other party in accordance with the terms hereof.
(e) Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes any
previous agreement or understanding between the parties, whether written or
oral.
(f) Amendments and Waivers. This Agreement may not be amended except by
a written instrument signed by the parties hereto. No waiver or release of any
provision of this Agreement shall be effective unless made in writing by the
party against which the same is to be enforced, and no such waiver or release
shall extend to anything other than the specific subject matter thereof.
(g) Severability. If any provision of this Agreement shall be held
invalid or unenforceable to any extent in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision (or such portion thereof,
if less than the full provision) in such jurisdiction and shall not in any
manner affect such provision or render it invalid or unenforceable in any other
jurisdiction or affect any other provision of this Agreement in any
jurisdiction.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws.
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(j) Descriptive Headings. The descriptive headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
[Signatures appear on next page]
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IN WITNESS WHEREOF each of the parties hereto has executed this
Agreement as of the date first above written.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
DATABIT, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
AGREED AS TO SECTIONS 4(g) AND 10 ONLY:
DATA SYSTEMS & SOFTWARE INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
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EXHIBIT A - FORM OF NOTE
PROMISSORY NOTE
Mahwah, New Jersey
March 22, 2005
FOR VALUE RECEIVED, the undersigned, DATABIT, INC. (the "Borrower")
hereby unconditionally promises to pay to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (the "Lender") at
the Lender's offices located at ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or,
at the Lender's option, at such other place as may be designated from time to
time by the Lender, on the Maturity Date, the principal sum of Five Hundred
Thousand Dollars ($500,000.00) or, if less, the unpaid principal amount of all
Loans, in accordance with the terms of the Loan Agreement (as defined below).
This Note evidences the Loans and is the Note referred to in, and is
entitled to the benefits and subject to the terms and conditions of, the Loan
Agreement dated the date hereof (the "Loan Agreement") among the Borrower and
the Lender.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Loan Agreement.
This Note shall bear interest on the unpaid outstanding principal
amount of Loans evidenced hereby, at a fluctuating rate per annum equal to the
rate listed in the Wall Street Journal as the prime rate, plus 3% (the "Interest
Rate").
Interest will be calculated based on a year of 365 days for the actual
number of days elapsed and the rate shall be adjusted daily to reflect changes
in the prime rate. Payment of all accrued and unpaid interest shall be due and
payable on the respective Maturity Date on which the entire outstanding
principal amount of a Loan shall be due and payable.
The date and amount of each Loan shall be set forth and entered in the
Lender's books and records and/or endorsed by the Lender on the grid attached to
and made a part of this Note. The treatment of such recordation and endorsement
is set forth in the Loan Agreement.
If an Event of Default or an Insolvency Event on the part of the
Borrower shall occur, the principal of, accrued interest on and all other
amounts due under this Note may be declared to be immediately due and payable,
in the manner set forth in and pursuant to the terms and conditions of the Loan
Agreement.
The Borrower shall have the right to repay at any time, without premium
or penalty, all or any portion of the principal indebtedness evidenced by this
Note, together with accrued interest on the principal so prepaid to the date of
such prepayment.
No failure by the Lender hereof to exercise, and no delay in
exercising, any right or remedy hereunder precludes any other or further
exercise thereof or the exercise of any other right or remedy. The rights and
remedies of the Lender as herein specified are cumulative and not exclusive or
any other rights of remedies which such holder may otherwise have.
No rescission, waiver, forbearance, release or amendment of any
provision of this Note shall be made, except by a written agreement duly
executed by the Borrower and the Lender.
It is the express intention of the Lender and the Borrower that nothing
contained in this Note shall require Databit to pay any interest (before or
after an Insolvency Event, an Event of Default, as scheduled, compounded, or
otherwise accrued or charged) on any of the Loans at a rate exceeding the
maximum permissible rate (which means the rate that if exceeded could, under
applicable law, result in civil or criminal penalties being imposed on Lender or
result in Lender being unable to enforce payment or repayment of all or part of
the principal of, or the interest due or to become due on such Loans). If the
Borrower should pay, or Lender should collect or receive any interest in excess
of the rate specified in the preceding sentence, such payment shall be deemed to
be the property of the Borrower in all regards, and shall be held in trust by
Lender for the benefit of the Borrower, and shall be repaid to the Borrower with
interest accrued thereon from the date of receipt by Lender to the date of
repayment to the Borrower, at the overnight Federal federal funds rate as
determined by Lender.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, without regard to principles of conflicts of
laws. This Note may not be assigned by the Borrower and shall be binding upon
the successors and assigns of the Borrower and inure to the benefit of the
Lender and his successors, endorsees and assigns.
The Borrower agrees to pay all costs and expenses incurred by the
holder hereof in enforcing this Note, including, without limitation, attorneys'
fees and disbursements incurred in connection therewith, to the extent permitted
by law.
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.
DATABIT, INC.
By:________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
ACKNOWLEDGED:
DATA SYSTEMS & SOFTWARE INC.
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President and Chief Financial Officer
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GRID TO NOTE
OF
DATABIT, INC.
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Aggregate Outstanding
Date Drawdown Principal Paid Interest Paid Principal
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3/22/05 $250,000
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EXHIBIT B - FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of March 22, 2005 ("Security
Agreement"), is made by and between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (the "Secured Party")
and Databit, Inc., a Delaware corporation, with a principal place of business at
▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower").
W I T N E S S E T H:
WHEREAS, pursuant to the Loan Agreement dated today's date between the
parties hereto (the "Loan Agreement") the Secured Party has agreed to make an
initial loan in the principal amount of $250,000 and may from time to time make
$250,000 of additional loans up to an aggregate of $500,000 in Loans to the
Borrower (hereinafter the "Loans");
WHEREAS, the Loans are to be evidenced by the Note (hereinafter the
"Note");
WHEREAS, it is a condition precedent to the Loan Agreement and to the
Secured Party making the Loans, that this Security Agreement be executed by the
Borrower and duly delivered to the Secured Party; and
WHEREAS, the Secured Party will derive substantial direct and indirect
benefit from the Loans:
NOW, THEREFORE, in consideration of the foregoing and to induce the
Secured Party to make the Loans to the Borrower evidenced by the Note, the
Borrower hereby agrees with the Secured Party as follows:
SECTION I. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the meaning given thereto in the Loan Agreement, and
the following terms shall have the following meanings:
"Collateral" shall mean and include all of the Borrower's right, title
and interest in and to the following property of Borrower whether now or
hereafter existing, tangible and intangible, now owned or hereafter acquired and
wherever located:
(a) all accounts, instruments, documents, notes, claims, contract
rights, deposit accounts, inventory (including, but not limited to, finished
goods, returned goods, goods held for display or demonstration or out on lease
or consignment, in transit goods, goods under letters of credit or trust
receipts, and ▇▇▇▇ and hold goods), demands and the proceeds (including any
insurance proceeds), products and accessions of and to any thereof; and
(b) all books and records pertaining to all of the foregoing, all of
which are and shall at all times remain, free and clear of all Liens (as defined
herein).
Notwithstanding the foregoing, the term "Collateral" shall exclude
any of the foregoing in which the Borrower is contractually precluded from
granting a security interest.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Obligations" shall mean the unpaid principal of and interest on the
Note and all other obligations and liabilities of the Borrower to the Secured
Party, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Note, this Security Agreement, the Loan Agreement, or
otherwise.
"Security Interest" shall have the meaning set forth in Section 2(b).
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York from time to time.
SECTION 2. Grant of Security Interest. (a) In order to secure the
prompt performance and indefeasible payment of the Obligations, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower hereby grants to the Secured Party a first, prior,
continuing security interest in all of the Collateral.
(b) The security interest granted pursuant to this Section 2 (the
"Security Interest") is granted as security only and shall not subject the
Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of the Borrower under any of the Collateral or any transaction which
gave rise thereto.
(c) To the extent the granting of a Security Interest in any
contract rights of the Borrower would, with or without the giving of notice or
the passage of time or both, conflict with the contract giving rise to such
rights or result in a default or loss of rights, or give rise to any right of
termination, cancellation or acceleration, under such contract, the Borrower
agrees to take any action, other than the payment of money, which the Secured
Party may reasonably request in order to obtain any necessary consent of the
parties to such contract to allow for the granting of a Security Interest in the
rights arising thereunder. Failure to obtain such consent will not constitute a
default under the Note or this Security Agreement; provided that Borrower agrees
to use reasonable commercial efforts to do so.
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SECTION 3. Filing; Further Assurances. The Borrower, at its expense,
will execute, deliver, file (in such manner and form as the Secured Party may
reasonably require), or permit the Secured Party to file and record, any
financing statements, any carbon, photographic or other reproduction of a
financing statement or this Security Agreement (which shall be sufficient as a
financing statement hereunder), any specific assignments or other paper that may
be reasonably necessary or desirable, or that the Secured Party may reasonably
request, in order to create, preserve, perfect or validate any Security Interest
or to enable the Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. The Borrower hereby appoints the Secured
Party, which appointment is irrevocable and coupled with an interest, as its
attorney-in-fact to execute in the name and on behalf of Borrower such
additional financing statements as the Secured Party may reasonably request.
SECTION 4. Representations and Warranties of the Borrower. The Borrower
hereby represents and warrants to the Secured Party that (a) this Security
Agreement has been duly authorized, executed and delivered by the Borrower, and
constitutes the Borrower's valid and legally binding obligation, enforceable
against the Borrower in accordance with its terms, and (b) the Collateral is
free and clear of any Liens other than the Lien created by the Financing
Documents.
SECTION 5. Covenants of the Borrower. The Borrower hereby covenants and
agrees with the Secured Party that it:
(a) will defend the Collateral against all claims and demands of all
persons at any time claiming any interest therein senior to that of the Secured
Party;
(b) will promptly, in accordance with its normal business practices,
pay any and all taxes, assessments and governmental charges upon the Collateral
prior to the date penalties are attached thereto, except to the extent otherwise
permitted by the Loan Agreement, the Note or the Secured Party;
(c) will immediately notify the Secured Party of any event which
affects the value of the Collateral, the ability of the Borrower or the Secured
Party to dispose of the Collateral, the ability of the Borrower to repay the
Loans, or the rights and remedies of the Secured Party with regard to the Loans
or the Collateral;
(d) will have and maintain insurance on the Collateral in such
amounts as is commercially reasonable;
(e) will not sell or offer to sell or otherwise assign, transfer or
dispose of the Collateral or any interest therein (other than the sale of
inventory, or licensing in the ordinary course of business), without the written
consent of the Secured Party, which consent shall not be unreasonably withheld;
(f) will keep the Collateral free from any adverse Lien and will not
waste or destroy the Collateral or any material part thereof;
(g) will not knowingly use the Collateral in violation of any
statute or ordinance, the violation of which could materially impair the value
of the Collateral; and
(h) will immediately notify the Secured Party of any change in the
location of the Collateral or the Borrower's name, location or corporate
structure.
SECTION 6. Records Relating to Collateral. The Borrower will keep its
records concerning the Collateral at its address indicated on the signature page
hereof or at such other place or places of which the Secured Party shall have
been notified in writing upon no less than ten (10) days advance written notice.
The Borrower will hold and preserve such records and will permit, upon
reasonable advance notice, representatives of the Secured Party, during normal
business hours without disrupting Borrower's business, to examine, inspect and
make abstracts from such records and will furnish to the Secured Party such
information and reports regarding the Collateral as the Secured Party may from
time to time reasonably request; provided, however, that the Secured Party and
its representatives shall keep such abstracts, records, information and reports
confidential.
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SECTION 7. Rights and Remedies. (a) Upon the occurrence of any
Insolvency Event or Event of Default, such default not having previously been
remedied or waived, the Secured Party shall have the following rights and
remedies:
(i) The right, at its option, by written notice
to the Borrower, to declare the entire
unpaid balance of the Note to be immediately
due and payable and thereupon such amount
together with all costs, fees and expenses
incurred in connection therewith, shall be
immediately due and payable,
(ii) All rights and remedies provided by law,
including, without limitation, those
provided by the UCC.
(iii) The right to take possession of the
Collateral and, in addition thereto, the
right to enter upon any premises, during
normal business hours, on which the
Collateral or any part thereof may be
situated, without notice, and remove the
same therefrom, and to complete any
uncompleted inventory in the process of
completion. The Secured Party may require
the Borrower to make the Collateral (to the
extent the same is moveable) available to
the Secured Party at a place to be
designated by the Secured Party which is
convenient to the Secured Party.
(iv) Sell the Collateral or any part thereof in
one or more parcels at public or private
sale, for cash, on credit or for future
delivery, and upon such other terms as the
Secured Party may deem commercially
reasonable. Unless the Collateral is
perishable or threatens to decline speedily
in value or is of a type customarily sold on
a recognized market, the Secured Party will
give the Borrower at least ten (10) days'
prior written notice at the address of the
Borrower set forth above (or at such other
address or addresses as the Borrower shall
specify in writing to the Secured Party) of
the time and place of any public sale
thereof or of the time after which any
private sale or any other intended
disposition thereof is to be made. Any such
notice shall be deemed to meet any
requirement hereunder or under any
applicable law (including the UCC) that
reasonable notification be given of the time
and place of such sale or other disposition.
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After deducting all costs and expenses of
collection, storage, custody, sale or other
disposition and delivery (including
reasonable legal costs and attorneys' fees)
and all other charges against the
Collateral, the remaining proceeds of any
such sale or disposition shall be applied to
the payment of the Obligations in such order
of priority as the Secured Party shall
determine and any surplus shall be returned
to the Borrower or to any person or party
lawfully entitled thereto (including, if
applicable, any subordinated creditors of
the Borrower). In the event the proceeds of
any sale, lease or other disposition of the
Collateral hereunder are insufficient to pay
all of the Obligations in full, the Borrower
will be liable for the deficiency, together
with interest thereon at the highest rate of
interest provided in the Note, and the costs
and expenses of collection of such
deficiency, including (to the extent
permitted by law), without limitation,
reasonable attorneys' fees, expenses and
disbursements. The Secured Party shall have
the right upon any public sale, and to the
extent permitted by law in any private sale,
to purchase for its own benefit the whole or
any part of the Collateral so sold, free of
any right or equity of redemption of the
Borrower, which right or equity is hereby
waived and released by the Borrower.
(v) Any cash held by the Secured Party as
Collateral and all cash proceeds received by
the Secured Party in respect of any sale of,
collection from, or other realization upon
all or any part of the Collateral may, in
the discretion of the Secured Party, be held
by the Secured Party as collateral for,
and/or then or at any time thereafter be
applied in whole or in part by the Secured
Party against all or any part of the
Obligations in such order as the Secured
Party may elect.
(b) The Borrower hereby appoints, which appointment is irrevocable
and coupled with an interest, the Secured Party its lawful attorney with full
power of substitution, in its name, for the sole use and benefit of the Secured
Party, but at the Borrower's expense, to exercise, all or any of the foregoing
powers with respect to all or any of the Collateral following an Event of
Default or an Insolvency Event.
(c) All rights and remedies available to the Secured Party pursuant
to the provisions of this Security Agreement, applicable law and otherwise are
cumulative, not exclusive, and enforceable alternatively, successively and/or
concurrently by Secured Party.
SECTION 8. Expenses; Secured Party's Lien. The Borrower will forthwith
upon demand pay to the Secured Party:
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(a) the amount of any taxes which the Secured Party may have been
required to pay by reason of the Security Interest (including any applicable
transfer and personal property taxes but excluding taxes in respect of the
Secured Party's income, profits and business activities) or to free any of the
Collateral from any Lien thereon; and
(b) the amount of any and all reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of its counsel and of any agents
not regularly in their employ, which the Secured Party may incur in connection
with (i) the collection, sale or other disposition of any of the Collateral,
(ii) the exercise by the Secured Party of any of the powers conferred upon it
hereunder, or (iii) any default on the part of the Borrower hereunder.
SECTION 9. Termination of Security Interest; Release of Collateral.
Upon the final and full repayment and performance of all the Obligations, the
Security Interest shall terminate and all rights to the Collateral shall revert
to the Borrower. Upon any such termination of the Security Interest or release
of Collateral, the Secured Party, at the Borrower's expense, will execute and
deliver to the Borrower such documents as the Borrower shall reasonably request
to evidence the termination of the Security Interest or the release of such
Collateral, as the case may be.
SECTION 10. Notices. All notices, demands and other communications
pursuant hereto shall be given to the parties in accordance with Section 10(d)
of the Loan Agreement.
SECTION 11. Miscellaneous.
(a) No failure on the part of the Secured Party to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or remedy under this Security Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy under this Security Agreement preclude any other right, power or remedy.
The remedies in this Security Agreement are cumulative and are not exclusive of
any other remedies provided by law. Neither this Security Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally but
only by a statement in writing signed by the party against which the enforcement
of the change, waiver, discharge or termination is sought. Such amendment,
waiver, or discharge shall be effective only in the specific instance and for
the specific purpose for which given.
(b) This Security Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to any
principles of conflicts of laws.
(c) This Security Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same Security Agreement.
(d) The Borrower hereby agrees to execute and deliver such further
instruments and documents as may be reasonably requested by the Secured Party in
order to carry out fully the intent and accomplish the purposes of this Security
Agreement. The Borrower agrees to take any action which the Secured Party may
reasonably request in order to obtain and enjoy the full rights and benefits
granted to the Secured Party by this Security Agreement including specifically,
at the Borrower's own cost and expense, the use of diligent efforts to assist in
obtaining the consent of any agency or governmental authority for an action or
transaction contemplated by this Security Agreement which is then required by
law.
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(e) If any provision of this Security Agreement shall be held
invalid or unenforceable to any extent in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision (or such portion thereof,
if less than the full provision) in such jurisdiction and shall not in any
manner affect such provision or render it invalid or unenforceable in any other
jurisdiction or affect any other provision of this Security Agreement in any
jurisdiction.
(f) This Security Agreement is separate, distinct and in addition to
any liability and/or obligation that the Borrower may have under any other
agreement executed by the Borrower in connection with the Loans.
(g) In any action brought by the Secured Party under this Security
Agreement, the Secured Party waives its right to a jury trial in connection
therewith.
(h) This Security Agreement shall be binding upon the respective
successors and assigns of the Borrower and shall inure to the benefit of the
Secured Party and its successors and assigns.
[Signatures appear on next page]
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IN WITNESS WHEREOF, this Security Agreement has been executed by the
parties hereto as of the day and year first above written.
Secured Party:
-------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Borrower:
DATABIT, INC.
By:_________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
Address: ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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EXHIBIT C - FORM OF GUARANTEE
GUARANTEE
In consideration of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("Lender") making that one or
more loans of up to an aggregate of $500,000 to Databit, Inc. pursuant to that
certain Loan Agreement, dated as of the date hereof, by and between Databit Inc.
and Lender (the "Loan Agreement") and the Note (as defined in the Loan
Agreement), the undersigned does unconditionally guarantee to Lender the prompt
payment of all sums to be paid under the Note (including, but not limited to all
unpaid principal and accrued but unpaid interest thereon), together with the
legal rate of judgement interest from the date of default and the reasonable
costs of collection. This is a guarantee of payment, not of collection. The
undersigned waives notice of any demand to which the undersigned might be
entitled. Neither the changing of the terms or forms of the Note, nor the
illegality thereof, nor the lack of diligence on any party in exercising any
remedies against the undersigned shall release the undersigned from its absolute
and unconditional liability hereunder.
The undersigned shall pay or repay to Lender within thirty (30) days
after receiving written demand for payment from Lender of any and all past due
payments and accelerated payments in respect of the Note as specified in such
written demand.
This Guarantee shall remain in full force and effect until the earlier
of (i) the date on which this Guarantee is terminated pursuant to a written
agreement between the undersigned and Lender, or (ii) the date on which (A) the
Note has been irrevocably paid and satisfied in full, or (B) the undersigned has
irrevocably satisfied and discharged all of its duties, obligations, and
liabilities hereunder.
The undersigned shall not assign this guarantee or delegate any of its
duties hereunder without the express written consent of Lender.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York (without regard to the principles of conflicts
of laws). This writing is the complete and exclusive statement of the terms of
this Guarantee and supersedes all prior oral or written representations,
understandings, and agreements between Lender and the undersigned with respect
to the subject matter hereof.
All notices (including demands for payment hereunder) and other
communications under this Guarantee must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile transmission (with written confirmation of
receipt), provided that a copy is also mailed to such party, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested) or by certified mail (return receipt requested), in
the case of the undersigned to the appropriate address and facsimile number set
forth below in this Guarantee and in the case of Lender to the appropriate
address and facsimile number set forth in the Loan Agreement (or to such other
addresses and facsimile numbers as the undersigned and Lender may designate to
one another).
IN WITNESS WHEREOF, the undersigned has duly signed this Guarantee on
this 22nd day of March, 2005.
DATA SYSTEMS & SOFTWARE INC.
By:__________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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