LOAN AGREEMENT Dated June 19, 2006 by and among AND THE LENDERS NAMED HEREIN
Dated
June 19, 2006
by
and among
IXI
MOBILE (R&D) LTD.
IXI
MOBILE, INC.
AND
THE
LENDERS NAMED HEREIN
INDEX
OF SCHEDULES & EXHIBITS
Schedules
|
Schedule
I:
|
Schedule
of Lenders
|
Company
Disclosure Schedules:
|
Section
4.1(a)
|
Organization
and Qualifications
|
|
|
Section
4.2(a)
|
Subsidiaries
|
|
|
Section
4.3(a)
|
Authorized
Capital Stock of The Parent Guarantor
|
|
|
Section
4.3(b)
|
Capitalization
Table
|
|
|
Section
4.6(a)`
|
Notices
of Non-Compliance
|
|
|
Section
4.6(b)
|
Government
Grants
|
|
|
Section
4.13
|
Pre-Existing
Encumbrances
|
|
|
Section
4.15
|
Brokers;
Third Party Expenses
|
|
|
Section
4.16(a)
|
Intellectual
Property
|
|
|
Section
4.16(d)
|
Intellectual
Property Agreements
|
|
|
Section
4.17
|
Insurance
|
|
|
Section
4.18
|
Governmental
Actions/Filings
|
|
|
Section
4.20
|
Interested
Party Transactions
|
|
|
Section
4.23
|
Pledged
Collateral
|
|
|
Section
4.24
|
Material
Contracts
|
|
|
Section
4.27
|
Environmental
Matters
|
Exhibits
|
Exhibit
A:
|
Form
of Note
|
|
Exhibit
B:
|
Form
of First Ranking Security Agreement
|
|
Exhibit
C:
|
Form
of First Ranking Debenture - Fixed and Floating Charge
|
|
Exhibit
D:
|
Form
of Guaranty Agreement
|
|
Exhibit
E:
|
Form
of ITAC Warrant
|
|
Exhibit
F:
|
Form
of Registration Rights Agreement
|
|
Exhibit
G-1:
|
Form
of Legal Opinion of Company Counsel
|
|
Exhibit
G-2:
|
Form
of Legal Opinion of Company Israeli Counsel
|
|
Exhibit
H:
|
9th
Amended and Restated Certificate of Incorporation
|
|
Exhibit
I
|
Form
of Guaranty Joinder
|
|
Exhibit
J
|
ITAC
Certification
|
|
Exhibit
K
|
Undertaking
|
THIS
LOAN AGREEMENT
(the
“Agreement”)
is
made and entered into as of June 19, 2006, by and among IXI
MOBILE (R&D) LTD.,
an
Israeli limited liability company, (the “Company”),
IXI MOBILE,
INC.,
a
Delaware corporation (the “Parent
Guarantor”)
and
each of the Persons named in the Schedule of Lenders attached hereto as
Schedule
I
(each a
“Lender”
and
collectively, the “Lenders”).
WHEREAS,
the
Parent Guarantor and Israel Technology Acquisition Corp., a Delaware corporation
(“ITAC”)
have
entered into that certain Agreement and Plan of Merger dated February 28, 2006
(the “Merger
Agreement”)
providing for a merger (the “ITAC/IXI
Merger”)
of
ITAC Acquisition Subsidiary Corp. (“ITAC
Subsidiary”),
a
wholly-owned subsidiary of ITAC with and into the Company, resulting in the
Parent Guarantor surviving the ITAC/IXI Merger and becoming a wholly owned
subsidiary of ITAC; and
WHEREAS,
to meet
the financial needs of the Company and the Parent Guarantor between signing
and
closing of the Merger Agreement, the Company desires to borrow from the Lenders,
and the Lenders desire to lend the Company, Twenty Million U.S. Dollars
($20,000,000), subject to the terms and conditions of this
Agreement;
NOW,
THEREFORE,
in
consideration of the mutual promises and covenants contained in this Agreement,
the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
When
used in this Agreement, the following terms have the meaning set forth below
(such meanings being equally applicable to both the singular and plural forms
of
the terms defined):
“Affiliate”
means
any Person which directly or indirectly controls, is controlled by, or is under
common control with the Company or the Parent Guarantor. “Control,” “controlled
by” and “under common control with” mean direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise); provided,
that control shall be conclusively presumed when any Person or affiliated group
directly or indirectly owns fifty percent (50%) or more of the securities having
ordinary voting power for the election of directors of a
corporation.
“Anti-Terrorism
Law”
shall
mean the laws referred to, directly or indirectly, in Section 4.29, The
Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal
Regulations), the Terrorism List Governments Sanctions Regulations(Title 31
Part
596 of the U.S. Code of Federal Regulations), the Foreign Terrorist
Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of
Federal Regulations), and the Cuban Assets Control Regulations (Title 31 Part
515 of the U.S. Code of Federal Regulations), and all other present and future
federal state and local laws ordinances, regulations, policies, lists
(including, without limitation the Specially Designated Nationals and Blocked
Persons List) and any other requirements of any Governmental Authority
(including, without limitation, the United States Department of Treasury Office
of Foreign Assets Control) addressing, relating to, or attempting to eliminate,
terrorist acts, drug trafficking and acts of war, each as hereafter
supplemented, amended or modified from time to time, and the present and future
rules, regulation and guidance documents promulgated under any of the foregoing,
or under similar laws, ordinances, regulations, policies or requirements of
other states or localities.
“Basic
Interest Rate”
means
with respect to each Loan: (i) 10% per annum during the period commencing on
the
Closing Date and ending on the first anniversary of the Closing Date; and (ii)
20% per annum during the period commencing on the first anniversary of the
Closing Date and ending on the payment in full of the Loan.
“Blocked
Person”
shall
have the meaning ascribed to such term in Section 4.29(b).
“Business
Day”
means
any day other than a Saturday, Sunday, legal holiday or other day on which
commercial banks in New York City are authorized or required to be closed for
business.
“Capital
Expenditures”
shall
mean all expenditures (by the expenditure of cash or the incurrence of
Indebtedness) during any measuring period for any fixed assets or improvements
or for replacements, substitutions, or additions thereto, that have a useful
life of more than one year and that are required to be capitalized under
GAAP.
“Collateral”
means
all tangible and intangible real and personal property and assets now owned
or
hereafter acquired by the Company and by the Parent Guarantor (as applicable),
including, but not limited to, all cash and cash equivalents, deposit and other
accounts (with customary lockbox and cash control agreements), investment
property, instruments, accounts receivable, inventory, machinery and equipment,
chattel paper, payment intangibles, real estate and leasehold interests,
Intellectual Property Rights, general intangibles, insurance proceeds, choses
in
action, 100% of all outstanding capital stock of the Company and all other
tangible and intangible properties and assets of every kind and description,
together with all products and proceeds of any of the foregoing.
“Company”
means
IXI Mobile (R&D) Ltd., an Israeli limited liability company and a wholly
owned subsidiary of the Parent Guarantor.
“Company
Intellectual Property Rights”
means
all Intellectual Property Rights owned by the Company or by the Parent Guarantor
(both domestic and foreign) or used by the Company or by the Parent Guarantor
in
their business as currently conducted or as currently proposed to be
conducted.
“Conversion
Amount”
means,
if the Conversion Participant (as defined below) is a Lender, all or any part
of
any outstanding principal amount of the Lender’s Note(s) plus all or any part of
any accrued interest thereon and any costs, and, if the Conversion Participant
is a Leumi Guarantor (as defined in Section 4.22(b) below), all or any part
of
any amount of the Leumi Debt (as defined in Section 4.22(b) below) assumed
by
the Leumi Guarantor pursuant to Section 3.1 below, plus all or any part of
any
accrued interest thereon, which such Lender and/or Leumi Guarantor elects to
convert into ITAC Stock or IXI Stock (as the case may be) on an Optional
Conversion.
2
“Conversion
Participant”
means
any Lender and/or Leumi Guarantor (as defined below) assuming any Leumi Debt
amount participating in an Optional Conversion.
“Conversion
Stock”
means
ITAC Stock or IXI Stock (as the case may be) issuable upon an Optional
Conversion.
“Dollar,”
“Dollars,”
“U.S.
Dollars”
and
the
symbol “$”
shall
mean lawful money of the U.S.
“Encumbrance”
means
any mortgages, Judgments, claims, Liens, security interests, pledges, escrows,
charges, preemptive rights, rights of first offer or first refusal or other
encumbrances of any kind or character whatsoever.
“Environmental
Law”
shall
mean any and all laws relating to protection of the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
petrochemicals or petroleum, chemicals or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface water,
ground water or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes.
“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as the same may be
amended or supplemented from time to time, and any successor statute of similar
import, and the rules and regulations thereunder, as from time to time in
effect.
“ERISA
Group”
shall
mean, at any time, the Company, the Parent Guarantor and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Parent Guarantor or the Company, are treated as a single employer under
Section 414 of the Internal Revenue Code.
“Event
of Default”
shall
mean has the meaning set forth in Article VIII.
“First
Ranking IL Debenture” shall
mean the First Ranking IL Debenture dated the Closing Date executed and
delivered by Company and the Lender, a form of which is attached
hereto as Exhibit C, as the same may be amended, modified, supplemented or
restated from time to time.
“First
Ranking Security Agreement”
shall
mean the First Ranking Security Agreement dated the Closing Date executed and
delivered by the Parent Guarantor and the Lender, a form of which is attached
hereto as Exhibit B, as the same may be amended, modified, supplemented or
restated from time to time.
“GAAP”
means
United States generally accepted accounting principles and practices consistent
with those principles and practices promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of Certified
Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have
the
meaning given it by GAAP.
3
“Governmental
Authority”
means
any legislature, agency, bureau, branch, department, division, commission,
court, tribunal, magistrate, justice, multi-national organization,
quasi-governmental body, or other similar recognized organization or body of
any
federal, state, county municipal, local, or foreign government or other similar
recognized organization or body exercising similar powers of
authority.
“Government
Grants”
means
grants, incentives, qualifications and subsidies from the Government of the
State of Israel or any agency thereof including Approved Enterprise Status
from
the Investment Center.
“Guarantor”
shall
mean the guarantors under the Guaranty Agreement. As of the Closing Date, the
only Guarantor is the Parent Guarantor.
“Guaranty”
of
any
Person shall mean any obligation of such Person guaranteeing or in effect
guaranteeing any liability or obligations of any other Person in any manner,
whether directly or indirectly, including any agreement to indemnify or hold
harmless any other Person, any performance bond or other suretyship arrangement
and any other form of assurance against loss, except endorsement of negotiable
or other instruments for deposit or collection in the ordinary course of
business and except obligations in the nature of subrogation or guarantees
for
the benefit of Persons providing performance bonds for actions by Company
specifically incident to the issuance of such performance bonds.
“Guaranty
Joinder”
shall
mean a joinder by a Person as a Guarantor under this Agreement, the Guaranty
Agreement, the First Ranking Security Agreement and the other Loan Documents
in
the form of Exhibit
I.
“Guaranty
Agreement”
shall
mean the Guaranty Agreement dated the Closing Date executed and delivered by
the
Guarantors to the Lenders, a form of which is attached hereto as Exhibit
D,
as the
same may be amended, modified, supplemented or restated from time to
time.
“Indebtedness”
shall
mean, as to any Person at any time, any and all indebtedness, obligations or
liabilities (whether matured or unmatured, liquidated or unliquidated, direct
or
indirect, absolute or contingent, or joint or several) of such Person for or
in
respect to: (i) borrowed money, (ii) amounts raised under or liabilities in
respect of any note purchase or acceptance credit facility, (iii) reimbursement
obligations (contingent or otherwise) under any letter of credit, currency
swap
agreement, interest rate swap, cap, collar or floor agreement or other interest
rate management devide, (iv) any other transaction (including forward sale
or
purchase agreements, capitalized leases and conditional sales agreements but
excluding operating leases) having the commercial effect of a borrowing of
money
entered into by such Person to finance its operations or capital requirements
(but not including trade payables and accrued expenses incurred in the ordinary
course of business which are not represented by a promissory note or other
evidence of indebtedness and which are not more than ninety (90) days past
due),
or (v) any Guaranty of Indebtedness for borrowed money.
“Intercreditor
Agreement”
shall
mean that certain Intercreditor and Collateral Agency Agreement between the
Leumi Guarantors and the Lender, as the same may be amended, modified,
supplemented or restated from time to time.
4
“Insolvency
Proceeding”
means
with respect to any Person, (a) a case, action or proceeding before any court
or
other Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding up or relief of debtors or
any
other similar law now or hereafter in effect, (b) the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar
official) of the Company, the Parent Guarantor or any of their Subsidiaries
or
otherwise relating to the liquidation, dissolution, winding-up or relief of
such
Person, or (c) any general assignment for the benefit of creditors, composition,
marshalling of assets for creditors, or other, similar arrangement in respect
of
its creditors generally or any substantial portion of its creditors, undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code, or
(d)
a “stay of proceedings” pursuant to Section 350 of the Israeli Companies Law
5759-1999.
“Intellectual
Property Rights”
means
all (i) worldwide copyright rights (including common law rights), including
rights to reproduce, and all registrations and applications for registrations
therefor, (ii) United States, International and foreign national patents, patent
applications, inventor’s certificates, invention registrations, utility models
and the like, and any divisional, continuation, continuation in part, reissue,
renewal or re-examination patent or patent application claiming priority
therefrom, or otherwise related thereto (including any foreign counterparts),
(iii) all trademarks worldwide, including International Trademarks, Community
trademarks, and national trademarks, common law trademarks, trade names, service
marks, logos, domain names or names, common law service marks and service names,
together with all registrations and applications for registration therefor,
including, without limitation, the trademarks listed in Section 4.16(a) of
the
Company Disclosure Schedules, (iv) all worldwide trade secrets, as defined
in
each applicable jurisdiction in which a given trade secret is maintained, and
all worldwide confidential business information, and (v) all know-how and other
intellectual property rights, including without limitation, all inventions
(and
improvements, derivatives, and enhancements thereof), processes, manufacturing
or marketing procedures, formulae, software, drawings, patterns, vendors lists,
customer lists, customer files and customer records.
“Interested
Party”
shall
have the meaning ascribed to it in Section 4.19 hereof.
“Investment
Center”
means
the Investment Center of the Israeli Ministry of Industry, Commerce and
Labor.
“ITAC
Certification”
means
the Certification of ITAC to the Lenders dated as of the Closing Date, attached
hereto as Exhibit J, as the same may be amended, modified, supplemented or
restated from time to time.
“Judgments”
means
all judgments, injunctions, citations, orders, decrees, writs and awards of
all
courts and arbitrators in proceedings or actions in which the Person in question
is a party or by which any of its assets or properties is bound.
“Law”
shall
mean any law (including common law), constitution, statute, treaty, regulation,
rule, ordinance, opinion, release, ruling, order, injunction, writ, decree,
bond, judgment, authorization or approval, lien or award of or settlement
agreement with or issued by any Official Body.
5
“Legal
Requirements”
means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Authority.
“Lien”
shall
mean any mortgage, deed of trust, pledge, lien, security interest, charge or
other encumbrance or security arrangement of any nature whatsoever, whether
voluntarily or involuntarily given, including any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security and any filed financing statement (other
than precautionary financing statement filed in respect of operating leases)
or
other notice of any of the foregoing (whether or not a lien or other encumbrance
is created or exists at the time of the filing), but excluding any Permitted
Encumbrance.
Notwithstanding the foregoing, any sales of products in ordinary course of
business by any of the Loan Parties or any of their respective Subsidiaries
subject to a standard commercial right of return, shall not be considered a
“Lien” for purposes of this Agreement.
“Loan
Documents”
means,
individually and collectively, this Agreement, the Note, the Guaranty Agreement,
any Account Control Agreements, the ITAC Certification, the First Ranking
Debenture, First Ranking Security Agreement, Intercreditor
Agreements, any
IP
Security Agreements, together
with the UCC-1 financing statements in respect of the Security
Agreements.
“Loan
Parties”
shall
mean the Company and the Guarantor.
“Material
Adverse Effect”
means,
when used in connection with an entity, any change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with other
changes, events, violations, inaccuracies, circumstances or effects, that (a)
is
materially adverse to the business, assets (including intangible assets),
revenues, financial condition or results of operations of such entity, (b)
has
or could reasonably be expected to have any material adverse effect whatsoever
upon the validity or enforceability of this Agreement or any other Loan
Document, (c) impairs or could reasonably be expected to impair the ability
of
the Company or the Parent Guarantor to duly and punctually pay or perform their
Obligations, or (d) impairs materially or could reasonably be expected to impair
the ability of Lender, to the extent permitted, to enforce its legal remedies
pursuant to this Agreement or any other Loan Document, it being understood
that
none of the following alone shall be deemed, in and of itself, to constitute
a
Material Adverse Effect: (i) changes attributable to the public announcement
or
pendency of the transactions contemplated hereby, or (ii) changes in general
national or regional economic conditions, to the extent that such conditions
do
not have a disproportionate impact on the Company; provided, however, that
any
change, event, violation, inaccuracy, circumstance or effect arising from or
relating to acts or omissions taken by the Company with the prior consent of
the
Majority Noteholders (following complete and accurate disclosure by the Company)
shall not constitute a Material Adverse Effect.
“Majority
Noteholders”
means
the holders of a majority-in-interest of the outstanding principal amount of
the
Notes, excluding any Lender that is in default of its obligation to advance
a
Loan pursuant to Article II hereof.
6
“Notes”
has
the
meaning given such term in Section 2.2.
“Obligations”
means
all debts, obligations and liabilities of any Loan Party to the Lenders,
currently existing or now or hereafter made, incurred or created under, pursuant
to or in connection with this Agreement or any other Loan Document, whether
voluntary or involuntary and however arising or evidenced, whether direct or
acquired by the Lenders by assignment or succession, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether such Loan Party may be liable individually or jointly, or whether
recovery upon such debt may be or become barred by any statute of limitations
or
otherwise unenforceable; and all renewals, extensions and modifications thereof;
and all attorneys’ fees and costs incurred by the Lenders in connection with the
collection and enforcement thereof as provided for in any Loan
Document.
“OCS”
means
Office of the Chief Scientist of the Israeli Ministry of Industry, Commerce
and
Labor.
“Optional
Conversion”
means
a
conversion under either (i) Section 3.2(a) and the ITAC Certification or (ii)
Section 3.2(b) below (as the case may be).
“Parent
Guarantor”
means
IXI Mobile,
Inc.,
a
Delaware corporation.
“PBGC”
shall
mean the Pension Benefit Guaranty Corporation established pursuant to subtitle
A
of Title IV of ERISA or any successor.
“Permitted
Encumbrance”
means
any of the following encumbrances: (a) liens for Taxes or assessments or other
governmental charges incurred in the ordinary course of business not yet due
and
payable as of the date hereof or which are being contested provided that
appropriate provisions shall have been established therefor in accordance with
GAAP; (b) pledges or deposits of money securing statutory obligations under
workmen’s compensation, unemployment insurance, social security or public
liability laws or similar legislation provided that appropriate provisions
shall
have been established therefor in accordance with GAAP; (c) inchoate and
unperfected workers’ mechanics’, carriers’, warehousemen’s, suppliers’ or other
similar liens or possessory liens arising in the ordinary course of business
and
securing liabilities each in an outstanding amount of not in excess of $10,000
or $50,000 in the aggregate; (d) Pre-Existing
Encumbrances;
(e) the
Leumi Guarantors’ Security Interest (as defined below); (f) the Ampa Security
Interest (as defined below) provided that the principal amount secured thereby
is not hereafter increased, and no additional assets become subject to such
Encumbrances; and (g) the liens and security interests granted to the Lenders
under the Security Documents (as defined below).
“Person”
shall
be construed in the broadest sense and means and includes any natural person,
a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization,
governmental or political subdivision or agency thereof or any other entity
or
Governmental Authority.
“Pre-Existing
Encumbrances”
means
Encumbrances disclosed in Section 4.13 of
the
Company Disclosure Schedules except for any such Encumbrances which will be
terminated prior to the Closing Date pursuant to the terms of this
Agreement.
7
“Prohibited
Transaction”
shall
mean any prohibited transaction as defined in Section 4975 of the Internal
Revenue Code or Section 406 of ERISA for which neither an individual nor a
class
exemption has been issued by the United States Department of Labor.
“Property”
shall
mean all real property leased or owned by any Loan Party or any Subsidiary
of
any Loan Party.
“Registration
Rights Agreement”
means
the registration rights agreement substantially in the form attached hereto
as
Exhibit F consisting of the registration rights provided by ITAC to certain
of
the Parent Guarantor’s stockholders as part of the ITAC/IXI Merger, as the same
may be amended, modified, supplemented or restated from time to
time.
“Reportable
Event”
shall
mean a reportable event described in Section 4043 of ERISA and regulations
thereunder with respect to a Plan or Multiemployer Plan.
“Returns”
shall
have the meaning ascribed to the term in Section 4.14(b).
“Security
Documents”
means
the First Ranking Security Agreement (as defined below), the First Ranking
IL
Debenture (as defined below) and the Parent Guarantor’s Guaranty (as defined
below).
“Shares”
shall
mean all outstanding equity interest of IXI Mobile (R&D) Ltd.
“Subsidiary”
of
any
Person at any time shall mean (i) any corporation or trust of which 50% or
more
(by number of shares or number of votes) of the outstanding capital stock or
shares of beneficial interest normally entitled to vote for the election of
one
or more directors or trustees (regardless of any contingency which does or
may
suspend or dilute the voting rights) is at such time owned directly or
indirectly by such Person or one or more of such Person’s Subsidiaries, (ii) any
partnership of which such Person is a general partner or of which 50% or more
of
the partnership interests is at the time directly or indirectly owned by such
Person or one or more of such Person’s Subsidiaries, (iii) any limited liability
company of which such Person is a member or of which 50% or more of the limited
liability company interests is at the time directly or indirectly owned by
such
Person or one or more of such Person’s Subsidiaries or (iv) any corporation,
trust, partnership, limited liability company or other entity which is
controlled or capable of being controlled by such Person or one or more of
such
Person’s Subsidiaries.
“Taxes”
as
defined in Section 4.14(a) below.
“UCC”
means
the Uniform Commercial Code as the same may, from time to time, be in effect
in
the State of New York; provided,
that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, the security
interests granted to the Lenders on any Collateral pursuant to any of the
Security Documents is governed by the Uniform Commercial Code as enacted and
in
effect in a jurisdiction other than the State of New York or is governed by
any
comparable law of any other jurisdiction, the term “UCC”
shall
mean the Uniform Commercial Code or such other comparable law as enacted and
in
effect in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions. Unless otherwise defined herein,
terms that are defined in the New York UCC and used herein shall have the
meanings given to them in the New York UCC.
8
ARTICLE
II
AMOUNT
AND TERMS OF THE LOAN
2.1 Loan.
Subject
to the terms and conditions hereof, as of the Closing, the Company will borrow,
and each of the Lenders, severally and not jointly, will lend the Company the
amount specified opposite such Lender’s name on the Schedule of Lenders (each
such amount, a “Loan”
and
collectively, the “Loans”).
2.2 Notes.
Each
Loan shall be evidenced by a senior secured convertible promissory note of
the
Company, each substantially in the form attached hereto as Exhibit
A
(each a
“Note”
and
collectively, the “Notes”),
payable to the order of the applicable Lender and representing the obligation
of
the Company to pay the principal amount of the Loan, together with interest
thereon as prescribed in Section 2.4 hereof and in the Note.
2.3 Repayment.
All
payment obligations under the Loan Documents, including, without limitation,
payment of the entire unpaid principal amount of any Note and any accumulated
unpaid interest thereon, as well as any payment obligations of the Loan Parties
with respect to the Leumi Debt or to any Leumi Guarantors (both terms as defined
in Section 4.22(b) below) assuming any part of the Leumi Debt pursuant to
Section 3.1 below, including, without limitation, payment of the entire unpaid
principal of such assumed amount and any accumulated unpaid interest thereon,
shall be due and payable on the earlier to occur of: (i) the date 60 Business
Days following the closing date of the ITAC/IXI Merger (the “Repayment
Date”);
(ii)
the acceleration of the Loans in accordance with the terms of this Agreement;
and (iii) June 19, 2008 (subsections (ii) and (iii) to be
referred to herein as the “Maturity
Date”),
unless the principal amount of such Note and any accumulated unpaid interest
thereon has already been prepaid in full pursuant to Section 2.5 hereof. The
parties hereby agree that the Lenders shall have the right to convert all any
part of each their respective Loan pursuant to Section 3.2 below and that any
amount so converted into Conversion Stock will be deemed fully paid and all
Obligations relating thereto will be deemed fully satisfied.
2.4 Loan
Interest Rate.
The
Company shall pay interest on the unpaid principal amount of each Loan from
the
Closing Date until such Loan has been paid in full, at a per annum rate of
interest equal to the Basic Interest Rate. All computations of interest on each
Loan shall be based on a year of 360 days for actual days elapsed.
Notwithstanding any other provision hereof, the amount of interest payable
hereunder shall not in any event exceed the maximum amount permitted by the
law
applicable to interest charged on commercial loans. Accrued and
unpaid interest
on each Loan shall be payable as follows: first payment on June 30, 2007 (the
“First
Interest Payment Date”)
and
thereafter quarterly in arrears or upon a Prepayment (as defined below). In
any
event, all unpaid principal and accrued and unpaid interest shall be due and
payable in full on the earlier to occur of the (i) Repayment Date or (ii) the
Maturity Date. In addition to payment of interest, the Lenders shall be entitled
to the rights and benefits conferred to them by Sections 3.2 and 3.3
below.
9
2.5 Prepayment.
Should
the ITAC/IXI Merger be declined by the stockholders of ITAC or fail to become
effective for any other reason, the Company may, at any time following such
declination or failure to become effective at its sole and exclusive option,
prepay the entire outstanding principal amount of the Loans (“Prepayment”)
along
with accrued and unpaid interest thereon; provided, however, that in addition
to
principal and accrued and unpaid interest, the Company pays the Lenders premium
interest on the outstanding principal amount of the Loans at the then-applicable
Basic Interest Rate for the term commencing on the date of Prepayment and ending
on the earlier to occur of: (i) a date 6 months following the date of
Prepayment, and (ii) the Maturity Date.
2.6 Application
of Payments.
So long
as no Event of Default has occurred, all payments hereunder shall first be
applied to interest, then to principal and then to any outstanding Obligations.
Upon an Event of Default, all payments hereunder shall first be applied to
the
Obligations at Lender’s sole discretion.
2.7 Currency.
All
payments hereunder shall be made in lawful money of the United States of
America.
2.8 Date
of Payments.
Whenever any payment due hereunder shall fall due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees,
as
the case may be.
2.9 Crediting
Payments.
The
receipt by Lender of any wire transfer of funds, check, or other item of payment
shall not be considered a payment on account unless such wire transfer is of
immediately available federal funds and is made to the appropriate deposit
account of Lender or unless and until such check or other item of payment is
honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Lender after 12:00
noon New York time shall be deemed to have been received by Lender as of the
opening of business on the immediately following Business Day.
2.10 Security
Interests.
To
secure the Company’s and the Parent Guarantor’s full and timely performance of
the Obligations, the Parent Guarantor shall grant, and shall cause the Company
to grant, to the Lenders, a continuing first priority (except as otherwise
set
forth in this Agreement or in any of the other Loan Documents) security interest
in all of their respective right, title and interest in and to the Collateral
pursuant to the First Ranking Security Agreement substantially in the form
attached hereto as Exhibit B (the “First
Ranking Security Agreement”)
to be
entered into by the Parent Guarantor on the Closing Date and the First Ranking
Debenture - Fixed and Floating Charge substantially in the form attached hereto
as Exhibit C (the “First
Ranking IL Debenture”)
to be
entered into by the Company on the Closing Date. The security interests granted
by the Company and by the Parent Guarantor pursuant to this Section 2.10 and
the
Security Documents referenced herein, shall rank equally with the Leumi
Guarantors’ Security Interest (as defined below) and the Obligations secured
thereby will constitute senior obligations of the Loan Parties having priority
over any other obligations of the Loan Parties, subject only to the obligations
secured by the Pre-Existing Encumbrances and the Permitted
Encumbrances.
10
2.11 INDEMNIFICATION
BY COMPANY.
IN
CONSIDERATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE LENDERS
AND
THE AGREEMENT TO EXTEND THE COMMITMENTS PROVIDED HEREUNDER, EACH LOAN
PARTY HEREBY
AGREES TO INDEMNIFY, EXONERATE AND HOLD THE LENDERS AND EACH OF THE OFFICERS,
DIRECTORS, EMPLOYEES, AFFILIATES AND AGENTS OF THE LENDERS (EACH, A
“LENDER
PARTY”)
FREE
AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
LOSSES, LIABILITIES, DAMAGES AND EXPENSES, INCLUDING REASONABLE ATTORNEY COSTS
(COLLECTIVELY, THE “INDEMNIFIED
LIABILITIES”)
INCURRED BY THE LENDER PARTIES OR ANY OF THEM AS A RESULT OF, OR ARISING OUT
OF,
OR RELATING TO (A) ANY TENDER OFFER, MERGER (INCLUDING THE ITAC MERGER),
PURCHASE OF CAPITAL SECURITIES, PURCHASE OF ASSETS OR OTHER SIMILAR TRANSACTION
FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY,
WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE USE, HANDLING, RELEASE, EMISSION,
DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR DISPOSAL OF ANY HAZARDOUS
SUBSTANCE AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY, (C) ANY VIOLATION
OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS AT ANY PROPERTY OWNED
OR
LEASED BY ANY LOAN PARTY OR THE OPERATIONS CONDUCTED THEREON, (D) THE
INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH ANY LOAN
PARTY OR THEIR RESPECTIVE PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY OR
INDIRECTLY DISPOSED OF HAZARDOUS SUBSTANCES OR (E) THE EXECUTION, DELIVERY,
PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY
THE
LENDER, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE
LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A FINAL,
NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION. IF AND TO THE
EXTENT THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON,
EACH
LOAN PARTY HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND
SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER
APPLICABLE LAW. ALL OBLIGATIONS PROVIDED FOR IN THIS SECTION 2.11 SHALL SURVIVE
REPAYMENT OF THE LOANS, CANCELLATION OF THE NOTES, ANY FORECLOSURE UNDER, OR
ANY
MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE LOAN DOCUMENTS AND
TERMINATION OF THIS AGREEMENT.
2.12 Parent
Guarantor’s Guaranty.
The
Parent Guarantor shall absolutely, continually, unconditionally and irrevocably
guarantee the prompt and full performance by the Company of the Obligations
pursuant to the Guaranty Agreement substantially in the form attached hereto
as
Exhibit D.
2.13 Closing.
(a) The
closing (“Closing”)
of the
transactions contemplated by the Loan Documents shall take place on
June 19, 2006 (the “Closing
Date”),
or at
such other time and place as the Company and the Majority Noteholders may
mutually agree.
11
(b) Subject
to the fulfillment of the conditions set forth in Article
VII
below,
the Lender hereby agrees to advance its respective Loan to the Company on the
Closing Date by, at the option of the Lender, a check or checks payable to
the
order of the Company or by wire transfer, in exchange for the sale and issuance
by the Company to each such Lender of a Note evidencing the principal amount
of
such Lender’s Loan.
ARTICLE
III
ASSUMPTION
OF LEUMI DEBT; CONVERSION; COMMITMENTS TO ISSUE EQUITY
SECURITIES
3.1 Leumi
Debt Assumption.
The
parties agree that, at any time or from time to time following the date of
execution of this Agreement, each of the Leumi Guarantors (as defined in Section
4.22(b) below) shall have the right: (i) to assume all or any part of the Leumi
Debt (as defined in Section 4.22(b) below) (the “Assumed
Debt”),
and
(ii) upon the consummation of the ITAC/IXI Merger or the failure thereof (as
the
case may be), to participate in an Optional Conversion and to convert such
assumed amount into ITAC Stock or IXI Stock (as the case may be) pursuant to
the
terms and conditions set forth in Section 3.2 below.
3.2 Conversion.
(a) In
the
event the ITAC/IXI Merger becomes effective and subject to and conditioned
upon
the ITAC/IXI Merger becoming effective, each Conversion Participant shall have
the option to convert its respective Conversion Amount pursuant to this
Agreement and the ITAC Certification into such number of fully paid and
non-assessable shares of ITAC’s Common Stock, par value $0.0001 per share
(“ITAC
Stock”)
as
determined by dividing (A) such Conversion Participant’s Conversion Amount by
(B) $6.50, appropriately adjusted for stock dividends, stock splits and other
recapitalizations subsequent to the date of ITAC’s most recent publicly
available securities law filing prior to the execution of this
Agreement.
(b) At
any
time on or after the First Interest Payment Date, in the event the ITAC/IXI
Merger is rejected by ITAC’s shareholders or otherwise fails to become
effective, each Conversion Participant shall have the option to convert its
respective Conversion Amount into such number of fully paid and non-assessable
shares of Series E Preferred Stock, par value $0.01, of the Parent Guarantor
(“IXI
Stock”)
as
determined by dividing (A) such Conversion Participant’s Conversion Amount by
(B) $0.656. The rights, preferences and privileges of the IXI Stock shall be
as
set forth in the currently effective 9th Amended
and Restated Certificate of Incorporation of the Parent Guarantor attached
hereto as Exhibit H (the “Amended
and Restated Certificate of Incorporation”).
(c) No
fractional shares of Conversion Stock shall be issued upon an Optional
Conversion. If, upon an Optional Conversion, a fraction of a share would
otherwise result, then in lieu of such fractional share the Parent Guarantor
(in
the case of an Optional Conversion pursuant to Section 3.2(b) above) or ITAC
(in
the case of an Optional Conversion pursuant to the combined provisions of
Section 3.2(a) above and the ITAC Certification) will pay the cash value of
that
fractional share.
12
(d) An
Optional Conversion shall be effectuated by the Conversion Participant by
furnishing both the Parent Guarantor and ITAC (in the case of an Optional
Conversion pursuant to the combined provisions of Section 3.2(a) above and
the
ITAC Certification) or by furnishing the Parent Guarantor (in the case of an
Optional Conversion pursuant to Section 3.2(b) above), no later than within
sixty (60) Business Days following the closing date of the ITAC/IXI Merger
(in
the case of an Optional Conversion pursuant to the combined provisions of
Section 3.2(a) above and the ITAC Certification) or no later than within sixty
(60) Business Days following the date on which the Conversion Participant
receives notice from the Parent Guarantor that the ITAC/IXI Merger failed to
become effective and the Company failed to make the first interest payment
on
the First Interest Payment Date (in the case of an Optional Conversion pursuant
to Section 3.2(b) above), a notice indicating the Conversion Participant’s
Conversion Amount and otherwise evidencing such Conversion Participant’s
intention to convert its respective Conversion Amount (the “Conversion
Notice”).
Should any Lender and/or Leumi Guarantor fail to deliver a Conversion Notice
within the timeframe and to the party or parties set forth above, such Lender
and/or Leumi Guarantor shall be deemed to have waived its right for Optional
Conversion and such right shall automatically, without any action on the part
of
the Parent Guarantor and/or ITAC, be of no further force and effect with respect
to such Lender and/or Leumi Guarantor.
(e) The
date
on which the Conversion Participant delivers the Conversion Notice, duly
executed, to the Parent Guarantor shall be deemed to be the date of Optional
Conversion (the “Optional
Conversion Date”)
for
the purposes of determining the Conversion Amount. Facsimile delivery of the
Conversion Notice shall be accepted by the Parent Guarantor. Certificates
representing the shares of Conversion Stock issuable upon an Optional
Conversion, containing the restrictive legend then in effect, will be delivered
to the Conversion Participant as soon as practicable after the Optional
Conversion Date.
(f) Any
Conversion Amount converted into Conversion Stock will be deemed fully paid
and
all Obligations relating thereto will be deemed fully satisfied. Upon issuance
of the conversion stock, such shares shall be duly and validly
issued.
3.3 Equity
Securities.
(a) As
an
inducement to the Lenders to advance the Loans to the Company, in the event
the
ITAC/IXI Merger becomes effective and subject and conditioned upon the ITAC/IXI
Merger becoming effective, ITAC shall issue pursuant to the combined provisions
of this Section 3.3(a) and the ITAC Certification, as soon as practicable
following the consummation of the ITAC/IXI Merger, to the Lender a total amount
of Six Hundred Thousand (600,000) shares of ITAC’s Common Stock (“ITAC
Stock”),
par
value $0.0001 per share, appropriately adjusted for stock dividends, stock
splits and other recapitalizations subsequent to the date of ITAC’s most recent
publicly available securities law filing prior to the execution of this
Agreement, with each Lender receiving the amount of ITAC Stock set forth
apposite such Lender’s name on the Schedule of Lenders. For clarification
purposes the parties acknowledge and agree that pursuant to the Leumi
Guarantors’ Agreement, as an inducement to the Leumi Guarantors to enter into
the Leumi Guarantors’ Agreement, the Leumi Guarantors will receive 240,000
shares of ITAC Stock as described in Section 4.22(d) below.
13
(b) As
an
inducement to the Lenders and to the Leumi Guarantors assuming any part of
the
Leumi Debt to convert at least 50% (the “Conversion
Inducement Threshold”)
of
each their respective Loan amount or assumed Leumi Debt amount into ITAC Stock
in the event the ITAC/IXI Merger closes, subject and conditioned upon the
ITAC/IXI Merger becoming effective, ITAC shall issue pursuant to the combined
provisions of this Section 3.3(b) and the ITAC Certification, as soon as
practicable following the consummation of the ITAC/IXI Merger, to any Conversion
Participant meeting or exceeding the Conversion Inducement Threshold, warrants
(“ITAC
Warrants”)
to
purchase that number of ITAC Stock (as defined above) equal to the product
obtained by multiplying (A) each converted Dollar ($1.00) of each such
Conversion Participant’s Conversion Amount by (B) 0.0357. The parties agree that
Conversion Participants wishing to utilize the benefit conferred by this Section
3.3(b) (combined with the ITAC Certification) shall be required to convert
a
Conversion Amount such that the foregoing formula will result a whole number
of
ITAC Warrant shares. The ITAC Warrants shall be in the form attached hereto
as
Exhibit E. Notwithstanding anything to the contrary herein, the Company and
the
Parent Guarantor represent and warrant that the benefit to the Leumi Guarantors
described in this Section 3.3(b) and conferred by any similar section in the
Leumi Guarantors’ Agreement, shall be pre-conditioned upon the Leumi Guarantors
assuming collectively at least 50% of the Leumi Debt.
3.4 Covenants
Relating to Securities.
The
Parent Guarantor shall, prior to an Optional Conversion pursuant to Section
3.2(b), take any and all actions necessary to authorize and reserve a sufficient
number of shares of IXI Stock to effect such Optional Conversion. The Parent
Guarantor covenants and agrees that upon delivery, all shares of IXI Stock
shall
be duly authorized, validly issued, fully paid and non-assessable.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE LOAN PARTIES
Except
as
set forth on a Company Disclosure Schedule attached hereto (the “Company
Disclosure Schedules”)
specifically identifying the relevant Section hereof (provided that any such
disclosures shall also be deemed to be representations and warranties
hereunder), each Loan Party, jointly and severally, hereby represents and
warrants to each Lender as of the Closing Date as follows:
4.1 Organization
and Qualification.
(a) The
Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of Israel and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as
it
is now being or currently planned by the Company to be conducted. The Parent
Guarantor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its assets and properties and
to
carry on its business as it is now being or currently planned by the Parent
Guarantor to be conducted. The Loan Parties are in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders (“Approvals”)
necessary to own, lease and operate the properties such Loan Party purports
to
own, operate or lease and to carry on its respective business as it is now
being
or currently planned by such Loan Party to be conducted, except where the
failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on such Loan Party.
Each Loan Party is not in violation of any of the provisions of the such Loan
Party’s respective certificate of incorporation, by-laws and the charters of all
committees of the board of directors (or other comparable governing instruments
with different names) (collectively referred to herein as “Charter
Documents”).
14
(b) Each
Loan
Party is duly licensed or qualified and in good standing in each jurisdiction
listed on Section 4.1(a) of the Company Disclosure Schedules. Each Loan Party
is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not, individually or
in
the aggregate, reasonably be expected to have a Material Adverse Effect on
such
Loan Party.
4.2 Subsidiaries.
(a) Other
than the Company (which wholly owns IXI Mobile (Europe) Ltd., IXI Mobile (Asia
Pacific) Ltd. and IXI Mobile (East Europe) SRL), and Neo Mobile, Inc. (which
wholly owns Neo Mobile Ltd. and Neo Mobile Telecom LLC) (each, a “Subsidiary”
and
collectively, the “Subsidiaries”),
the
Parent Guarantor has no subsidiaries. The Company directly or indirectly owns
all of the outstanding equity securities of the Subsidiaries, free and clear
of
all Encumbrances. Except for the Company and the Subsidiaries, the Parent
Guarantor does not own, directly or indirectly, any ownership, equity, profits
or voting interest in any Person or has any agreement or commitment to purchase
any such interest, and has not agreed and is not obligated to make nor is bound
by any written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment or undertaking of any
nature, as of the date hereof or as may hereafter be in effect under which
it
may become obligated to make, any future investment in or capital contribution
to any other entity. Section 4.2(a) of the Company Disclosure Schedules states
the name of each Subsidiary of the Loan Parties and its jurisdiction of
incorporation, its authorized capital stock issued and outstanding equity
interests and the owners thereof (collectively, the “Subsidiary
Shares”).
All
Subsidiary Shares have been validly issued, and all Subsidiary Shares are fully
paid and are nonassessable. All capital contributions and other consideration
required to be made or paid in connection with the issuance of all Subsidiary
Shares have been made or paid, as the case may be. There are no options,
warrants or other rights outstanding to purchase any such Subsidiary Shares
except as indicated on Section 4.2(a) of the Company Disclosure
Schedules.
(b) Each
Subsidiary (in jurisdictions that recognize the following concepts) is a
corporation or limited liability company duly incorporated, validly existing
and
in good standing under the laws of the jurisdiction of its incorporation and
has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being or currently
planned by the Subsidiary to be conducted.
15
4.3 Capitalization
and Ownership.
(a) The
authorized capital stock of the Parent Guarantor is owned as indicated in this
Section 4.3(a) of the Company Disclosure Schedules and consists of 89,642,361
shares of capital stock, of which 49,000,000 shares are Parent Guarantor Common
Stock, 333,334 shares are Preferred A Stock, 1,604,791 shares are Preferred
B
Stock, 3,104,236 shares are Preferred C Stock, 6,000,000 shares are Preferred
D
Stock and 29,600,000 shares are Preferred D-1 Stock, (collectively “Parent
Guarantor
Preferred Stock”),
of
which 4,418,249 shares of Parent Guarantor Common Stock, 285,801 shares of
Preferred A Stock, 439,206 shares of Preferred B Stock, 1,439,581 shares of
Preferred C Stock, 3,448,473 shares of Preferred D Stock and 29,591,387 shares
of Preferred D-1 Stock are issued and outstanding as of the date of this
Agreement (collectively “Parent
Guarantor
Shares”),
all
of which are validly issued, fully paid and nonassessable. All Parent Guarantor
Shares have been validly issued, and all Parent Guarantor Shares are fully
paid
and are nonassessable. All capital contributions and other consideration
required to be made or paid in connection with the issuance of all Parent
Guarantor Shares have been made or paid, as the case may be. There are no
options, warrants or other rights outstanding to purchase any such Parent
Guarantor Shares except as indicated on Section 4.3(a) of the Company Disclosure
Schedules.
(b) Outstanding
Parent Guarantor options and warrants as of the Closing Date are as set forth
in
the Capitalization Table included in Section 4.3(b) of the Company Disclosure
Schedules.
4.4 Authority
Relative to this Agreement.
The
Loan Parties have all necessary power and authority to execute and deliver
this
Agreement and the other Loan Documents (to the extent the Company or Parent
Guarantor is a party thereto) and to perform their Obligations hereunder and
thereunder to incur the Indebtedness contemplated by the Loan Documents to
which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other Loan
Documents and the consummation by the Loan Parties of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of such Loan Party, and no other
proceedings on the part of the Loan Parties are necessary to authorize this
Agreement and the other Loan Documents or to consummate the transactions
contemplated hereby and thereby pursuant to applicable Law and the terms and
conditions of this Agreement, other than the giving of notice to the
stockholders of the Company and the adoption of this Agreement. This Agreement
and the other Loan Documents have been duly and validly executed and delivered
by the Loan Parties and, assuming the due authorization, execution and delivery
thereof by the other parties hereto, constitute the legal and binding obligation
of the Loan Parties, enforceable against the Loan Parties in accordance with
its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity.
4.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement and the other Loan Documents by any
Loan Party do not, and the performance of this Agreement and the other Loan
Documents by any Loan Party shall not (i) conflict with or violate each of
the
Loan Party’s Charter Documents, (ii) conflict with or violate any Legal
Requirements, or (iii) result in any breach of or constitute a default (or
an
event that with notice or lapse of time or both would become a default) under,
or materially impair such Loan Party’s rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the properties or assets of the Parent Guarantor, the
Company or any of its Subsidiaries pursuant to, any Legal Requirement or
material agreement to which such Loan Party or any of its Subsidiaries is a
party or instrument, order, writ, judgment, injunction or decree to which any
Loan Party or any of its Subsidiaries is a party, except for any such conflicts,
violations, breaches, defaults or other occurrences that would not, individually
or in the aggregate, have a Material Adverse Effect on the Parent Guarantor,
the
Company or any of its Subsidiaries.
16
(b) The
execution and delivery of this Agreement and the other Loan Documents by the
Company does not, and the performance of its Obligations hereunder will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the U.S. Securities Act of 1933, as amended (the
“Securities
Act”),
the
Securities Exchange Act of 1934, as amended or applicable U.S. state securities
laws (“Blue
Sky Laws”),
and
the rules and regulations thereunder, (ii) appropriate documents received
from or filed with the relevant authorities of other jurisdictions in which
the
Company is licensed or qualified to do business, and (iii) where the failure
to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or
prevent the parties hereto from performing their obligations under any of the
Loan Documents.
4.6 Compliance.
(a) The
Loan
Parties have complied with and are not in violation of any Legal Requirements
with respect to the conduct of their business, or the ownership or operation
of
their respective business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely
to
have a Material Adverse Effect on such Loan Party. The businesses and activities
of the Loan Parties have not been and are not being conducted in violation
of
any Legal Requirements except for violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Material Adverse
Effect on such Loan Party. The Loan Parties are not in default or violation
of
any term, condition or provision of any applicable Charter Documents. The Loan
Parties are not in default or violation of any term, condition or provision
of
any agreement to which either Loan Party is a party, except for defaults or
violations in connection with such agreements which, individually or in the
aggregate, have not had and are not reasonably likely to have a Material Adverse
Effect on such Loan Party. Except as set forth on Section 4.6(a) of the Company
Disclosure Schedules, no written notice of non-compliance with any Legal
Requirements has been received by any Loan Party or any of its
Subsidiaries.
(b) Section
4.6(b) of the Company Disclosure Schedules provides a complete list of all
pending and outstanding Government Grants granted to the Loan Parties and any
grants received from the OCS. The Company is in material compliance with all
of
the terms, conditions and requirements of its Government Grants and has duly
fulfilled in all material respects all the undertakings relating thereto. The
Loan Parties have no knowledge of any intention of the Investment Center or
the
OCS to revoke or materially modify any of the Government Grants or that the
Investment Center or the OCS believes that the Loan Parties are not in
compliance in all material respects with the terms of any Government
Grant.
17
4.7 Financial
Statements.
(a) The
Company has provided to the Lenders a correct and complete copy of the audited
consolidated financial statements (including any related notes thereto) of
the
Parent Guarantor and its Subsidiaries for the fiscal years ended December 31,
2005, December 31, 2004 and December 31, 2003 (the “Financial
Statements”).
The
Financial Statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in
the notes thereto), and each are correct and complete and fairly presents the
consolidated financial position of the Parent Guarantor, the Company and their
Subsidiaries at the respective dates thereof and the results of its operations
and cash flows for the periods indicated.
(b) The
accounts and notes receivable of the Parent Guarantor, the Company and its
Subsidiaries reflected on the balance sheets included in the Financial
Statements (i) arose from bona fide sales transactions in the ordinary course
of
business and are payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their terms, except as such may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors’ rights generally, and
by general equitable principles, (iii) are not subject to any valid set-off
or
counterclaim except to the extent set forth in such balance sheet contained
therein, (iv) are collectible in the ordinary course of business consistent
with
past practice in the aggregate recorded amounts thereof, net of any applicable
reserve reflected in such balance sheet referenced above, and (v) are not the
subject of any actions or proceedings brought by or on behalf of the Parent
Guarantor, the Company or any of their Subsidiaries.
4.8 No
Undisclosed Liabilities.
Neither
the Parent Guarantor, the Company nor any of their Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) or forward or long-term
commitments that are not disclosed in the Financial Statements or in the notes
thereto and except as disclosed therein, there are no unrealized or anticipated
losses from any commitments of the Parent Guarantor, the Company or any of
their
Subsidiaries; other than such liabilities arising in the ordinary course of
the
Parent Guarantor’s or the Company’s business and consistent with past practice
since December 31, 2005, none of which would have a Material Adverse Effect
on
the Parent Guarantor, the Company or any of their Subsidiaries.
4.9 Absence
of Certain Changes or Events.
Since
December 31, 2005 there has not been, except where it would not have a Material
Adverse Effect on the Parent Guarantor, the Company or any of their Subsidiaries
and except as permitted and/or required by the Merger Agreement (a) any material
liability incurred by the Parent Guarantor, the Company or any of their
Subsidiaries, other than current liabilities incurred in the ordinary course
of
business consistent in type and amount with past practices, (b) any material
asset or property of the Parent Guarantor, the Company or any of their
Subsidiaries made subject to any Encumbrance of any kind (except pursuant to
the
Security Documents), (c) any cancellation of any debt owed to or claim held
by
the Parent Guarantor, the Company or any of their Subsidiaries, (d) any payment
of dividends on, or other distribution with respect to, or any direct or
indirect redemption, purchase or acquisition of, any shares of the capital
stock
or other securities of the Parent Guarantor, the Company or any of their
Subsidiaries., (f) any disposition of any tangible or intangible material asset
of the Parent Guarantor, the Company or any of their Subsidiaries, (g) any
loan by the Parent Guarantor, the Company or any of their Subsidiaries to any
officer, director, employee, consultant, agent, Affiliate or stockholder of
the
Parent Guarantor, the Company or any of their Subsidiaries (other than advances
to such persons in the ordinary course of business consistent with past
practices in connection with bona fide business expenses), (h) any damage,
destruction or loss (whether or not covered by insurance) of any asset of the
Parent Guarantor, the Company or any of their Subsidiaries, (i) any
extraordinary increase, direct or indirect, in the compensation paid or payable
to any officer, director, employee, consultant or agent of the Parent Guarantor,
the Company or any of their Subsidiaries, (j) any write-down of the value of
any
inventory, or any write-off as uncollectible of any account or note receivable
of the Parent Guarantor, the Company or any of their Subsidiaries that is not
consistent in type and amount with the Parent Guarantor’s, the Company’s or any
of their Subsidiaries’ past practices or for which adequate amounts had not been
reserved, (k) any change in the accounting methods, practices or policies
followed by the Parent Guarantor, the Company or any of their Subsidiaries
or
any change in depreciation or amortization policies or rates theretofore
adopted, which has not been adequately provided for or disclosed in the
Financial Statements.
18
4.10 Litigation.
There
are no claims, suits, actions, investigations pending or proceedings pending
or,
to the knowledge of any Loan Party, threatened against any Loan Party or any
of
their Subsidiaries before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seeks to restrain
or enjoin the consummation of the transactions contemplated by this Agreement
or
which could reasonably be expected, either singularly or in the aggregate with
all such claims, actions or proceedings, to have a Material Adverse Effect
in
the aggregate on any Loan Party or have a Material Adverse Effect on the ability
of the Loan Parties to consummate the transactions contemplated by the Loan
Documents.
4.11 Labor
Matters.
(a) The
Company and the Parent Guarantor are not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or the Parent Guarantor nor does the Company
or the
Parent Guarantor know of any activities or proceedings of any labor union to
organize any such employees.
(b) Each
employee and consultant of the Company and the Parent Guarantor is terminable
“at
will”
subject
to applicable notice periods as set forth by law or in the employment agreement,
but in any event not more than ninety (90) days, and there are no agreements
or
understandings between the Loan Parties and any of its employees or consultants
that their employment or services will be for any particular period. The Loan
Parties are not aware that any of its officers or key employees intends to
terminate his or her employment with such Loan Party. Such Loan Party is in
compliance in all material respects and, to the Loan Parties’ knowledge, each of
its employees and consultants is in compliance in all material respects, with
the terms of the respective employment and consulting agreements between the
Loan Parties and such individuals. There are not, and there have not been,
any
oral or informal arrangements, commitments or promises between the Loan Parties
and any employees or consultants of the Loan Parties that have not been
documented as part of the formal written agreements between any such individuals
and the Loan Parties that have been made available to the Lenders.
19
(c) All
Loan
Party obligations to provide statutory severance pay to its employees in Israel
are fully funded or accrued on the Financial Statements and any Loan Party
has
no knowledge of any circumstance that could give rise to any valid claim by
a
current or former employee for compensation on termination of employment (beyond
the statutory severance pay to which employees are entitled). All amounts that
the Loan Parties are legally or contractually required either (x) to deduct
from
its employees’ salaries or to transfer to such employees’ pension or provident,
life insurance, incapacity insurance, continuing education fund or other similar
funds or (y) to withhold from its employees’ salaries and benefits and to pay to
any Governmental Authority as required by applicable Legal Requirements have,
in
each case, been duly deducted, transferred, withheld and paid, and the Loan
Parties do not have any outstanding obligation to make any such deduction,
transfer, withholding or payment. There are no pending, or to the Loan Parties’
knowledge, threatened or reasonably anticipated claims or actions against the
Loan Parties by any employee in connection with such employee’s employment or
termination of employment by the Loan Parties.
(d) No
employee or former employee of the Company, the Parent Guarantor or any of
their
Subsidiaries is owed any wages, benefits or other compensation for past services
(other than wages, benefits and compensation accrued in the ordinary course
of
business during the current pay period and any accrued benefits for services,
which by their terms or under applicable law, are payable in the future, such
as
accrued vacation, recreation leave and severance pay).
4.12 Restrictions
on Business Activities.
There
is no agreement, commitment, judgment, injunction, order or decree binding
upon
the Parent Guarantor, the Company or any of their Subsidiaries or their assets
or to which the Parent Guarantor, the Company or any of their Subsidiaries
is a
party which has the effect of prohibiting or materially impairing any
acquisition of property by the Parent Guarantor, the Company or any of their
Subsidiaries or the conduct of business by the Parent Guarantor, the Company
or
any of their Subsidiaries as currently conducted other than such effects,
individually or in the aggregate, which have not had and could not reasonably
be
expected to have a Material Adverse Effect on any of the Parent Guarantor,
the
Company or any of their Subsidiaries.
4.13 Title
to Property.
(a) Neither
the Company nor the Parent Guarantor presently owns and has not in the past
owned any real property. There are no options or other contracts under which
the
Company or the Parent Guarantor has a right or obligation to acquire any real
property.
(b) All
leases of real property held by the Company or by the Parent Guarantor, and
all
personal property and other property and assets of the Company or of the Parent
Guarantor owned, used or held for use in connection with the business of the
Company or of the Parent Guarantor (the “Personal
Property”)
are
shown or reflected on the balance sheet included in the Financial Statements.
The Loan Parties own and have good and marketable title to the Personal
Property, and all such Personal Property is in each case held free and clear
of
all Encumbrances.
20
(c) The
Loan
Parties have valid leasehold interest in all properties, assets and other rights
which they purport to lease or which are reflected as leased on their books
and
records, free and clear of all Encumbrances except Permitted Encumbrances,
and
subject to the terms and conditions of the applicable leases. All leases of
property are in full force and effect without the necessity for any consent
which has not previously been obtained upon consummation of the transactions
contemplated hereby except to the extent failure to do so would not cause a
Material Adverse Effect. All leases pursuant to which the Loan Parties lease
from others material real or Personal Property are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default of any Loan Party or, to the Loan Parties’
knowledge, any other party (or any event which with notice or lapse of time,
or
both, would constitute a material default thereunder).
4.14 Taxes.
(a) For
the
purposes of this Agreement, “Tax”
or
“Taxes”
refers
to any and all federal, state, local, foreign taxes or any other taxes,
including, without limitation, gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments and duties
together with all interest, penalties and additions imposed with respect to
any
such amounts, any obligations under any agreements or arrangements with any
other person with respect to any such amounts, any liability of a predecessor
entity for any such amounts and any taxes or liability with respect thereto
arising under Treasury Regulation Section 1.1502-6 or comparative provision
of
state, local or foreign law.
(b) The
Parent Guarantor, the Company and their Subsidiaries have timely filed all
federal, state, local and foreign returns, estimates, information statements
and
reports relating to Taxes (“Returns”)
required to be filed by the Parent Guarantor, the Company and their Subsidiaries
with any tax authority. All such Returns are true, correct and complete in
all
material respects. The Parent Guarantor, the Company and their Subsidiaries
have
paid all Taxes (whether or not shown to be due on such Returns) that have become
due and payable on or before the date hereof, except for Taxes which are being
contested in good faith and for which adequate reserves have been established
in
accordance with GAAP. As of the Closing Date, there are no arrangements or
waivers extending the statutory period of limitations applicable to any federal
income tax return of the Loan Parties or their Subsidiaries for any
period.
(c) All
Taxes
that the Parent Guarantor, the Company and their Subsidiaries are required
by
law to withhold or collect have been duly withheld or collected, and have been
timely paid over to the proper tax authorities to the extent due and
payable.
(d) There
are
no material Tax deficiencies outstanding, assessed or, to the knowledge of
the
Company or the Parent Guarantor, threatened against the Company or the Parent
Guarantor or any of their Subsidiaries, nor has the Parent Guarantor, the
Company or their Subsidiaries executed any waiver of any statute of limitations
or extended any period for the assessment or collection of any Tax.
(e) No
audit
or other examination of any Return of the Parent Guarantor, the Company and
their Subsidiaries by any tax authority is presently pending, nor has the Parent
Guarantor, the Company and their Subsidiaries been notified of any request
for
such an audit or other examination.
21
(f) No
adjustment relating to any Returns filed by the Parent Guarantor, the Company
and their Subsidiaries has been proposed in writing, formally or informally,
by
any tax authority to the Parent Guarantor, the Company or their Subsidiaries
or
any representative thereof.
(g) There
are
no Tax liens upon the assets of the Company, except liens for current Taxes
not
yet due and payable.
(h) The
Parent Guarantor, the Company and their Subsidiaries are not liable for the
Taxes of any Person, is not currently under any contractual obligation to
indemnify any Person with respect to Taxes (except for customary agreements
to
indemnify lenders) and is not a party to or bound by any Tax sharing
agreement.
4.15 Brokers;
Third Party Expenses.
The
Parent Guarantor has incurred liability for brokerage, finders’ fees, agent’s
commissions and other similar charges in connection with this Agreement and
the
transactions contemplated hereby. Shares of common stock, options, warrants
or
other securities of the Parent Guarantor are payable to certain third parties
by
the Parent Guarantor as a result of this Agreement. Such arrangements are fully
described in Section 4.15 of the Company Disclosure Schedules.
4.16 Intellectual
Property Rights.
(a) Section
4.16(a) of the Company Disclosure Schedules lists all of the Parent Guarantor’s,
the Company’s and their Subsidiaries’ Intellectual Property Rights (the
“Company
IP List”),
and
all licenses, sublicenses or other agreements pertaining to any Intellectual
Property Rights of third-parties to which the Parent Guarantor, the Company
and
their Subsidiaries are a party or used by any of the Parent Guarantor, the
Company or their Subsidiaries in its business within the past 3 years. Each
of
the patent applications included in the Company IP List has been filed with
the
U.S. Patent and Trademark Office or other appropriate office in the applicable
jurisdiction and is a current active application pending review by such
office.
(b) The
Company and the Parent Guarantor collectively own all right, title and interest
in and to, or are licensed or otherwise possess a valid and enforceable right
to
use, all the Company Intellectual Property Rights without known possible alleged
or actual conflict with the rights of others, except to the extent that failure
to have such rights would not reasonably be expected to have a Material Adverse
Effect. The Company and the Parent Guarantor have full right and power to pledge
in favor of the Lenders all of the Company’s and the Parent Guarantor’s title,
rights and interest in and to the Company Intellectual Property Rights free
and
clear of Encumbrances, except to the extent that failure to have such right
and
power would not reasonably be expected to have a Material Adverse
Effect.
(c) No
claims
have been asserted against the Company or the Parent Guarantor or any licensee
of the Company or the Parent Guarantor, and no claims are pending against the
Company or the Parent Guarantor or any licensee of the Company or the Parent
Guarantor, and to their knowledge no claims are threatened by any Person (i)
regarding the Company’s or the Parent Guarantor’s or such licensee’s use of any
of the Company Intellectual Property Rights; or (ii) regarding infringement
of
such Person’s rights (including, without limitation, Intellectual Property
Rights) resulting from the operation of the business of the Company or the
Parent Guarantor as such business was conducted by the Company or the Parent
Guarantor prior to the Closing Date.
22
(d) Other
than agreements entered into in the ordinary course of business and which are
listed on Section 4.16(d) of the Company Disclosure Schedules, the Company
and
the Parent Guarantor are not a party to any agreement pursuant to which any
third party has any right to manufacture, reproduce, distribute, market or
exploit any of the Company Intellectual Property Rights or any adaptations,
translations, or derivative works based on the Company Intellectual Property
Rights or any portion thereof.
(e) No
Company employee or employees of any of the Parent Guarantor’s Subsidiaries is
in violation of any material term of any employment contract, patent disclosure
agreement, confidentiality, noncompetition and/or non-solicitation agreement
or
any other contract or agreement with the Company or any Affiliate of the Company
or, to the Company’s knowledge, any former employer of such employee with
respect to the Company Intellectual Property Rights.
(f) All
Company employees, Parent Guarantor employees and employees of all of the Parent
Guarantor’s Subsidiaries are party to and bound by valid and enforceable
contracts with Company, Parent Guarantor, or Parent Guarantor’s Subsidiaries, as
applicable and where legal, whereby said employees are required: to assign
all
right, title and interest in and to any and all inventions of said employees
and
patents or patent applications directed thereto, to Company, Parent Guarantor,
or Parent Guarantor’s Subsidiaries; to carry out all necessary and reasonable
actions, upon request, to effect such assignment; to maintain the confidential
nature of the Company Intellectual Property Rights.
4.17 Insurance.
Section
4.17 of the Company Disclosure Schedules contains a list of all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors (collectively, the
“Insurance
Policies”)
of the
Loan Parties and each such policy is valid and in full force and effect. No
notice of cancellation or termination has been received, no claim made and
no
ground exists to conceal or avoid the Insurance Policies or to reduce coverage
thereby by the Loan Parties with respect to the Insurance Policies. Except
as
disclosed in Section 4.17 of the Company Disclosure Schedules, to the Company’s
knowledge, there are no pending claims against such insurance by the Loan
Parties as to which the insurers have denied coverage or otherwise reserved
rights. Such Insurance Policies provide adequate coverage from reputable and
financially sound insurers in amounts sufficient to insure the assets and risks
of each Loan Party in accordance with prudent business practice in the industry
of the Loan Parties.
4.18 Governmental
Actions/Filings.
The
Parent Guarantor, the Company and their Subsidiaries have been granted and
hold,
and have made, all Governmental Actions/Filings necessary for the Loan Parties
to own, lease and operate their properties or to carry on their business as
it
is now being conducted and as presently proposed to be conducted. Each such
Governmental Action/Filing is in full force and effect and, except as set forth
in Section 4.18 of the Company Disclosure Schedules, will not expire prior
to
December 31, 2006, and the Loan Parties are in compliance with all of their
obligations with respect thereto. No event has occurred and is continuing which
requires or permits, or after notice or lapse of time or both would require
or
permit, and consummation of the transactions contemplated by this Agreement
or
any ancillary documents will not require or permit (with or without notice
or
lapse of time, or both), any modification or termination of any such
Governmental Actions/Filings. Except as set forth in Section 4.18 of the Company
Disclosure Schedules, no Governmental Action/Filing is necessary to be obtained,
secured or made by the Loan Parties to enable it to continue to conduct its
businesses and operations and use its properties after the Closing Date in
a
manner which is consistent with current practice.
23
For
purposes of this Agreement, the term “Governmental
Action/Filing”
shall
mean any franchise, license, certificate of compliance, authorization, consent,
order, permit, approval, consent or other action of, or any filing, registration
or qualification with, any federal, state, municipal, foreign or other
governmental, administrative or judicial body, agency or authority.
4.19 Interested
Party Transactions.
No
employee, officer, director or stockholder of the Parent Guarantor, the Company
or any of their Subsidiaries (each an “Interested
Party”)
or a
member of his or her immediate family is indebted to the Parent Guarantor,
the
Company or any of their Subsidiaries, nor is the Parent Guarantor, the Company
or any of their Subsidiaries indebted (or committed to make loans or extend
or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Parent Guarantor, the Company and their Subsidiaries, and (iii) for
other
employee benefits made generally available to all employees. No Interested
Party
has any direct or indirect ownership interest in any Person with whom the Parent
Guarantor, the Company or their Subsidiaries is affiliated or with whom the
Parent Guarantor, the Company or their Subsidiaries have a contractual
relationship, or in any Person that competes with the Parent Guarantor, the
Company or their Subsidiaries, except that each employee, stockholder, officer
or director of Parent Guarantor, the Company or any of their Subsidiaries and
members of their respective immediate families may own less than 5% of the
outstanding stock in publicly traded companies that may compete with the Parent
Guarantor, the Company or their Subsidiaries. To the knowledge of the Loan
Parties, no officer, director or 5% stockholder or any member of their immediate
families is, directly or indirectly, interested in any material agreement to
which the Parent Guarantor, the Company or their Subsidiaries is a party (other
than such contracts as relate to any such Person’s ownership of capital stock or
other securities of the Company or such Person’s employment with the Parent
Guarantor, the Company or their Subsidiaries).
4.20 Certain
Business Practices.
The
Company and the Parent Guarantor have not: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or (c) made any other unlawful payment.
4.21 Priority
of Obligations and Security Interests.
(a) All
Obligations will constitute senior obligations of the Company and the Parent
Guarantor (as applicable) having priority over any other obligations of the
Company or the Parent Guarantor, subject only to the obligations secured by
the
Pre-Existing Encumbrances and, for the avoidance of doubt, the Company’s
obligations secured by the Ampa Security Interest (as defined in Section 4.22(e)
below), which shall rank senior to the Obligations. Anything to the contrary
notwithstanding, the parties agree and acknowledge that Company’s or the Parent
Guarantor’s obligations under the Leumi Guarantors’ Agreement shall rank equally
with the Obligations. The Leumi Guarantors shall enter into the appropriate
Intercreditor Agreement.
24
(b) The
security interests granted by the Company and by the Parent Guarantor to the
Lenders pursuant to the Security Documents shall rank senior to any other
security interests granted by the Company
and the
Parent Guarantor, except that, for the avoidance of any doubt: (i) with respect
to any items of collateral subject to any of the Pre-Existing Encumbrances,
for
so long as the Pre-Existing Encumbrances remain outstanding, the Lenders shall
not have a charge or pledge in such items of collateral, and once the
Pre-Existing Encumbrances are terminated, such items of collateral shall be
considered part of the Collateral and the charges and pledges in favour of
the
Lenders with respect to such items of collateral shall be first ranking charges
and pledges, and (ii) with respect the Ampa Collateral (as defined in Section
4.22(e) below), for so long as the Ampa Security Interest remains outstanding,
the Lenders shall not have a charge or pledge in the Ampa Collateral, and once
the Ampa Security Interest is terminated, any then-existing items of the Ampa
Collateral shall be considered part of the Collateral and the charges and
pledges in favour of the Lenders with respect to such then-existing items of
the
Ampa Collateral shall be first ranking charges and pledges. Anything to the
contrary notwithstanding, the parties agree and acknowledge that only the Leumi
Guarantors’ Security Interests (as defined in Section 4.22(d) below) shall rank
equally with the security interests granted in the Security Documents to the
Lenders.
4.22 Existing
Credit Lines/Security Interests.
Below
is a description of all material existing obligations and Encumbrances of the
Company and/or the Parent Guarantor:
(a) The
Parent Guarantor has entered into that certain Loan and Security Agreement
dated
as of August 8, 2003 and that certain Loan and Security Agreement dated as
of
October 22, 2004 with Venture Lending and Leasing III, Inc. and Venture Lending
and Leasing IV, Inc. (Collectively “WTI”
and
the
“WTI
Facility”)
pursuant to which the Company and the Parent Guarantor granted WTI a blanket
lien on all of the Company’s assets and on all of the assets of the Parent
Guarantor, such liens including 65% of the Parent Guarantor’s shares in the
Company and 100% of the shares of the Parent Guarantor in the Subsidiary Neo
Mobile Inc. (collectively, the “WTI
Security Interests”).
As of
the date of this Agreement, the outstanding debt under the WTI Facility is
$1,030,702.27 (the “Outstanding
WTI Debt”).
The
Company and the Parent Guarantor have undertaken to repay the Outstanding WTI
Debt in full as a condition to the Closing, provided the Lenders pay an amount
equal to the Outstanding WTI Debt out of any Loan amount directly to WTI on
the
Closing Date.
(b) The
Parent Guarantor obtained a credit line and a loan from Bank Leumi Le’Israel
Ltd. (respectively, “Bank
Leumi”
and
the
“Leumi
Credit Line”).
The
Leumi Credit Line is guaranteed by Gemini and ▇▇▇▇▇ (collectively, the
“Leumi
Guarantors”).
As of
the date of this Agreement, the commitment under the Leumi Credit Line is
$8,000,000 and the aggregate principal amount of advances outstanding under
the
Leumi Credit Line plus all accrued and unpaid interest thereon is
$7,800,000.00 (collectively
with any future amounts owed by the Parent Guarantor under the Leumi Credit
Line, the “Leumi
Debt”).
The
Leumi Credit Line will remain outstanding until the Repayment Date, and in
the
event the ITAC/IXI Merger does not close, until the Maturity Date.
25
(c) The
Company has obtained a loan from Bank Leumi (the “Second
Leumi
Loan”).
The
Second Leumi Loan is guaranteed by one of the two Leumi
Guarantors.
As of
the date of this Agreement, the aggregate principal amount outstanding of the
Second Leumi Loan is $2,000,000.00, plus
all
accrued and unpaid interest thereon. The Company has undertaken to repay the
Second Leumi Loan in full as a condition to the Closing, provided the Lenders
pay an amount equal to the Second Leumi Loan out of any Loan amount directly
to
Bank Leumi on the Closing Date.
(d) The
Parent Guarantor has entered into an agreement with the Leumi Guarantors (the
“Leumi
Guarantors’ Agreement”)
pursuant to which, among other things: (i) the Parent Guarantor is obligated
to
repay the Leumi Guarantors any part of the Leumi Debt assumed by any of the
Leumi Guarantors and to indemnify the Leumi Guarantors for any amounts paid
by
the Leumi Guarantors to Bank Leumi pursuant to their guaranty of the Leumi
Credit Line and any related make-whole and other amounts payable by the Parent
Guarantor in connection with such guaranty; (ii) as consideration for the
guaranty provided and continued by the Leumi Guarantors, the Leumi Guarantors
will receive: (A) in the event the ITAC/IXI Merger becomes effective and subject
and conditioned upon the ITAC/IXI Merger becoming effective, a total amount
of
Two Hundred Forty Thousand (240,000) shares of ITAC Stock (as defined above),
and, additionally, (B) an amount equal to the balance between the Basic Interest
Rate and the interest rate owed under the Leumi Credit Line calculated on
$8,000,000 for the Period commencing on the date on which the guaranty of the
Leumi Guarantors was extended and ending on the Repayment Date (if the ITAC/IXI
Merger closes) or on the First Interest Payment Date (if the ITAC/IXI Merger
does not close) (depending on when any interest first gets repaid to the
Lenders); (iii) in addition to the consideration set forth in Subsection
(c)(iii) above, to secure the Parent Guarantor’s obligations pursuant to the
Leumi Guarantors’ Agreement, concurrently with the execution of this Agreement,
the Parent Guarantor is granting the Leumi Guarantors the same security
interests provided to the Lenders by the Security Documents (collectively,
the
“Leumi
Guarantors’ Security Interests”)
with
such Leumi Guarantors’ Security Interests ranking equally with any security
interests provided to the Lenders by the Security Documents. The transactions
described in this Section 4.22(d) above shall collectively be referred to
hereunder as the “Leumi
Guarantors’ Arrangement”.
(e) The
Company has entered, or as soon as practicable following the execution of this
Agreement may enter, into a factoring arrangement with AMPA Capital Ltd., or
any
other entity providing PO factoring facilities, (collectively, “Ampa”),
pursuant to which: (i) Ampa has agreed to provide the Company funding for any
costs and expenses related to supply by the Company of certain devices ordered
from the Company by 1&1 Internet AG (“1&1”)
in
Purchase Order No. 4500000457 dated March 20, 2006 and in Purchase Order No.
4500000575 dated April 10, 2006 (collectively, the “1&1
Purchase Orders”),
and
(ii) in exchange for said funding by Ampa, the Company has agreed to charge
and
pledge by way of first ranking fixed charge in favor of Ampa (the “Ampa
Security Interest”)
on all
receivables and/or monies arising from time to time from the 1&1 Purchase
Orders, any and all letters of credit related thereto and any and all items
of
inventory used in the supply of the 1&1 Purchase Orders and any contractual
right pertaining thereto (the “Ampa
Collateral”).
26
4.23 Status
of the Pledged Collateral.
All the
shares of capital stock, partnership interests or LLC interests or other equity
interests included in the Pledged
Collateral to
be
pledged pursuant to the Loan Documents are or will be upon issuance validly
issued and nonassessable and owned beneficially and of record by the pledgor
free and clear of any Encumbrance or restriction on transfer, except as
otherwise provided by the Loan Documents except as the right of the Lender
to
dispose of the Shares, partnership interests or LLC interests may be limited
by
the Securities Act of 1933, as amended, and the regulations promulgated by
the
Securities and Exchange Commission thereunder and by applicable state securities
laws. There are no shareholder, partnership, limited liability company or other
agreements or understandings with respect to the Shares included in the Pledged
Collateral except for the partnership agreements and limited liability company
agreements described on Section 4.23 of the Company Disclosure Schedules. The
Loan Parties have delivered true and correct copies of such partnership
agreements and limited liability company agreements to the Lender.
4.24 Material
Contracts; Burdensome Restrictions.
Section
4.24 of the Company Disclosure Schedules lists as of the Closing Date all
material contracts relating to the business operations of the Loan Parties,
including all employee benefit plans and labor contracts. All such material
contracts are valid, binding and enforceable upon the Loan Parties and each
of
the other parties thereto in accordance with their respective terms except
to
the extent any lack of such validity, binding effect or enforceability would
not
cause a Material Adverse Effect, and there is no default thereunder, to the
Loan
Parties’ knowledge, with respect to parties other than the Loan Parties except
for defaults of the Loan Parties which would not cause a Material Adverse
Effect. No Loan Party is nor is any Subsidiary of any Loan Party bound by any
contractual obligation, or subject to any restriction in any organization
document, or any requirement of Laws which could result in a Material Adverse
Effect. For purposes of this Section, a “material contract” means a contract
that obligates a Loan Party to pay money in an amount, or provide services
valued, in excess of $5,000,000 during any 12-month period.
4.25 Investment
Companies; Regulated Entities.
None of
the Loan Parties is an “investment company” registered or required to be
registered under the Investment Company Act of 1940 or under the “control” of an
“investment company” as such terms are defined in the Investment Company Act of
1940 and shall not become such an “investment company” or under such “control.”
No Loan Party is subject to any other Federal or state statute or regulation
limiting its ability to incur Indebtedness for borrowed money.
4.26 Employment
Matters.
Each
Loan Party is in compliance with all applicable federal, state and local labor
and employment laws including those related to equal employment opportunity
and
affirmative action, labor relations, minimum wage, overtime, child labor,
medical insurance continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material Adverse Effect. There are no outstanding
grievances, arbitration awards or appeals therefrom arising out of any labor
contracts or current or, to the Loan Parties’ knowledge, threatened strikes,
picketing, handbilling or other work stoppages or slowdowns at facilities of
the
Loan Parties which in any case would constitute a Material Adverse
Effect.
4.27 Environmental
Matters.
Except
as set forth on Section 4.27 of the Company Disclosure Schedules, as of the
Closing Date, there are no violations, or allegations thereof in writing, of
any
Environmental Law applicable to any Property and, to the knowledge of the Loan
Parties, to any property of any predecessor of the Loan Parties or its
Subsidiary.
27
4.28 Stockholder
Approval.
The
Stockholders of the Company listed on Section 4.3(a) of the Company Disclosure
Schedules have executed a stockholder consent adopting and approving the Loan
Documents (other than the ITAC Certification) and such stockholders hold the
requisite amount of shares of Company Common Stock and Company Preferred Stock,
voting together as a single class, necessary for the adoption of this Agreement
and the other Loan Documents (other than the ITAC Certification) and the
approval of the transactions contemplated hereunder and thereunder, including
but not limited to, (i) the 9th
Amended
and Restated Certificate of Incorporation, (ii) the issuance of any IXI Stock
and (iii) the ITAC Merger by the stockholders of the Company in accordance
with applicable Legal Requirements.
4.29 Anti-Terrorism
Laws.
(a) General.
None of
the Loan Parties or any of their Subsidiaries, nor or any Affiliate of any
Loan
Party, is in violation of any Anti-Terrorism Law or engages in or conspires
to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.
(b) Executive
Order No. 13224.
(i) None
of
the Loan Parties, nor or any Affiliate of any Loan Party, or their respective
agents acting or benefiting in any capacity in connection with the Loans or
other transactions hereunder, is any of the following (each a “Blocked
Person”):
(1) a
Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;
(2) a
Person
owned or controlled by, or acting for or on behalf of, any Person that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive
Order No. 13224;
(3) a
Person
or entity with which any bank is prohibited from dealing or otherwise engaging
in any transaction by any Anti-Terrorism Law;
(4) a
Person
or entity that commits, threatens or conspires to commit or supports
“terrorism”
as defined in the Executive Order No. 13224;
(5) a
Person
or entity that is named as a “specially designated national” on the most current
list published by the U.S. Treasury Department Office of Foreign Asset Control
at its official website or any replacement website or other replacement official
publication of such list, or
(6) a
person
or entity who is affiliated or affiliated with a person or entity listed
above.
28
No
Loan
Party or to the knowledge of any Loan Party, any of its agents acting in any
capacity in connection with the Loans or other transactions hereunder
(i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (ii) deals in, or otherwise engages in any transaction relating
to,
any property or interests in property blocked pursuant to the Executive Order
No. 13224.
4.30 Updates
to Schedules.
Should
any of the information or disclosures provided on the Company Disclosure
Schedules attached hereto become outdated or incorrect in any material respect,
the Company shall provide the Lenders in writing with such revisions or updates
to such Schedule as may be necessary or appropriate to update or correct same
as
soon as available but no later than ninety (90) days after the end of each
quarter of each of its financial years. Such revisions shall become effective
upon such Loan Party’s delivery of the same to the Lender together with a
certificate of an authorized officer, that such revision and restatement
reflects changes that are permitted by this Agreement and the other Loan
Documents but no such update or revision shall constitute a waiver of any breach
under any Loan Document. Notwithstanding the foregoing, any transaction of
any
of the Loan Parties approved by the Lenders pursuant to the terms of this
Agreement shall be considered an update of the Company Disclosure Schedules
without any further action on the part of the Company.
4.31 Solvency,
Etc.
On the
Closing Date and after giving effect to the borrowing hereunder and the use
of
the proceeds thereof, with respect to each Loan Party, individually,
(a) the fair value of its assets is greater than the amount of its
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated, (b) the present fair
saleable value of its assets is not less than the amount that will
be required to pay the probable liability on its debts as they become
absolute and matured, (c) it is able to realize upon its assets
and pay its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business,
(d) it does not intend to, and does not believe that it will, incur
debts or liabilities beyond its ability to pay as such debts and liabilities
mature, and (e) it is not engaged in business or a transaction, and is not
about
to engage in business or a transaction, for which its property would constitute
unreasonably small capital.
4.32 Representations
and Warranties Complete.
The
representations and warranties of the Loan Parties included in this Agreement
and any of the other Loan Documents and any list, statement, document or
information set forth in, or attached to, any Schedule provided pursuant to
this
Agreement or any of the other Loan Documents or delivered hereunder or
thereunder, are accurate, true and complete in all material respects and do
not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements contained
therein not misleading, under the circumstance under which they were
made.
ARTICLE
V
REPRESENTATIONS,
AGREEMENTS AND UNDERTAKINGS OF THE LENDERS
Each
of
the Lenders, severally but not jointly, hereby represents to the Loan Parties
that:
29
5.1 Requisite
Power and Authority.
The
Lenders have all requisite power and authority to execute, deliver and perform
the Loan Documents and to consummate the transactions contemplated thereby
and
hereby. The execution, delivery and performance of the Loan Documents by such
Lender, the fulfillment of and the compliance with the respective terms and
provisions hereof and the due consummation of the transactions contemplated
hereby, have been duly and validly authorized by all necessary action on the
part of such Lender. The Loan Documents, when executed and delivered by such
Lender, will constitute valid and legally binding obligations of such Lender,
enforceable in accordance with their terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and
other laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
5.2 Investment
Representations.
(a) This
Agreement is made with such
Lender
in reliance upon such
Lender’s representation to the Company (to the extent the Lender is entitled to
any equity securities of the Company), which by such
Lender’s execution of this Agreement such
Lender
hereby confirms, that, for so long as the Notes, the
ITAC
Stock, the ITAC Warrants, the shares of Common Stock issuable upon exercise
of
the ITAC Warrants,
the
shares of Optional Conversion Stock and any shares of Common Stock issuable
upon
conversion Optional Conversion Stock (if applicable) (collectively, the
“Securities”)
are
not covered by an effective registration statement under the Securities Act,
such
Lender
will be acquiring the Securities for its own account, for investment and not
with a view to the distribution of any part thereof, nor with any intention
of
distributing the same of any part thereof. By executing this Agreement,
such
Lender
further represents that such
Lender
does not presently have, and will not enter into, any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of
the
Securities and such
Lender
has not been formed for the specific purpose of acquiring such
securities.
(b) Such
Lender understands that the Securities have not been nor will they be registered
under the Securities Act by reason of their issuance or potential issuance
in a
transaction exempt from the registration requirements of the Securities Act,
and
that they must be held indefinitely unless a subsequent disposition thereof
is
registered under the Securities Act or is exempt from registration. Such Lender
recognizes that because of these restrictions such Lender will have to bear
the
economic risk of part of such Lender’s investment for an indefinite period of
time. Such Lender has adequate means for providing for such Lender’s financial
needs and personal contingencies and has no need for liquidity in such Lender’s
Securities.
(c) Such
Lender understands that the exemption from registration afforded by Rule 144
(the provisions of which are known to such Lender) promulgated under the
Securities Act depends on the satisfaction of various conditions and that,
if
applicable, Rule 144 may only afford the basis for sales under certain
circumstances and only in limited amounts.
(d) Such
Lender has had a reasonable time prior to the date hereof to ask questions
and
receive answers concerning the terms and conditions of the offering (or
potential offering) of the Securities, as well as the business, properties,
prospects and financial condition of the Company, and to obtain any additional
information which the Company possesses or could acquire without unreasonable
effort or expense, and has generally such knowledge and experience in business
and financial matters and with respect to investments in securities of privately
held companies as to enable such Lender to understand and evaluate the risks
of
such investment and form an investment decision with respect thereto. In
addition, such Lender represents that it has received all the information it
requested for deciding whether to purchase the Securities. The foregoing,
however, does not limit or modify the representations and warranties of the
Company set forth in this Agreement. In addition, such Lender is able to bear
the economic risk of the transaction contemplated by this
Agreement.
30
(e) Such
Lender is an “accredited investor,” as such term is defined in Rule 501 (the
provisions of which are known to such Lender) promulgated under the Securities
Act.
(f) If
the
Lender is an individual, then the Lender resides in the state or province
identified in the address of the Lender set forth on the Schedule of Lenders;
if
the Lender is a partnership, corporation, limited liability company or other
entity, then the office or offices of the Lender in which its investment
decision was made is located at the address or addresses of the Lender set
forth
in the Schedule of Lenders.
5.3 Brokers
and Finders.
No
Person acting on behalf or under the authority of such Lender is or will be
entitled to any broker’s, finder’s, or similar fee or commission in connection
with the transactions contemplated hereby.
5.4 Legends.
It is
understood that the Securities may bear a legend in substantially the form
set
forth below and any other legend required by any Blue Sky Laws or other laws
of
any state of the United States to the extent such laws are applicable to the
securities represented by the certificate so legended:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES
LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL (OR WRITTEN WAIVER THEREOF FROM THE ISSUER) IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.”
The
Company need not register a transfer of such legended securities, and may also
instruct its transfer agent not to register the transfer of such legended
securities, unless the conditions specified in the foregoing legends are
satisfied.
31
5.5 Existing
Credit Lines.
Each of
the Lenders hereby acknowledges and agrees as follows:
(a) The
Lenders shall pay the Outstanding WTI Debt directly to WTI out of any Loan
amount on the Closing Date, subject to the Company providing the Lenders on
the
Closing Date with the written document described in Section 6.1(o) below duly
executed by WTI.
(b) In
the
event the ITAC/IXI Merger closes, the Leumi Credit Line will remain outstanding
until the Repayment Date, and in the event the ITAC/IXI Merger does not close,
until the Maturity Date.
(c) The
terms
of the Leumi Guarantors’ Arrangement described in Section 4.22(d) above, as well
as the right of the Leumi Guarantors to assume any amount of the Leumi Debt
and
their right to participate in an Optional Conversion and to receive ITAC Stock,
ITAC Warrants or IXI Warrants in connection therewith (as applicable), are
acceptable to the Lenders in their entirety. The Lenders agree that their
foregoing consent is irrevocable.
(d) Each
of
the Lenders hereby covenants and agrees, from time to time after the Closing
Date, at the Company’s request and without further consideration, to execute and
deliver such consents and instruments and to take such other action as the
Company may reasonably require in order to effectively vest in the Leumi
Guarantors the Leumi Guarantors’ Security Interests.
5.6 Priority
of Obligations and Security Interests.
Each of
the Lenders hereby acknowledges and agrees to the Company’s representations and
exceptions thereto set forth in Section
4.22
above.
5.7 Use
of Proceeds.
The
Lenders acknowledge and agree to the use by the Company of the proceeds of
the
Loans for the purposes set out in Section 7.20 below.
ARTICLE
VI
CONDITIONS
TO CLOSING; POST CLOSING COVENANTS
6.1 Conditions
to Closing.
The
obligation of Lenders to advance the Loans on the Closing Date is subject to
the
fulfillment of the following conditions and to the receipt by the Lenders of
the
documents described below, duly executed and in form and substance satisfactory
to Lenders and their counsel, and the undertaking by the Company of its
obligations hereunder on the Closing Date is subject to the fulfillment of
the
following:
(a) Accuracy
of representations and warranties.
The
representations and warranties of the Loan Parties contained in Articles IV
shall be true and correct in all material respects on and as of such date as
if
made on and as of such date. The representations and warranties of ITAC
contained in the ITAC Certification shall be true and correct in all material
respects on and as of the Closing Date, as if made on such date.
(b) Performance.
The
Loan Parties shall have performed and complied with all agreements, obligations
and conditions contained in the Loan Documents that are required to be performed
or complied with by any one of them prior to the Closing Date.
32
(c) Approvals.
All
material governmental and third party approvals necessary in connection with
the
Loan Documents, the continuing operations of the Loan Parties and the
transactions contemplated hereby shall have been obtained and be in full force
and effect.
(d) Lien
Searches.
The
Lenders shall have received the results of recent lien searches in Israel and
in
Washington D.C. and the state of Delaware, U.S.A., and such search shall reveal
no liens on any of the assets of the Company or the
Parent
Guarantor
except
for Permitted Encumbrances, and the liens specified in Section 4.22 which will
be discharged within the timeframe set forth therein.
(e) Qualifications.
The
Loan Parties shall have obtained any and all consents (including the consent
of
the OCS as well as all other governmental or regulatory consents, approvals,
or
authorizations required in connection with the valid execution and delivery
of
this Agreement and the other Loan Documents), permits, and waivers necessary
or
appropriate for consummation of the transactions contemplated by this Agreement
and the other Loan Documents, and the same shall be effective as of the Closing
Date.
(f) Company
Compliance Certificate.
The
Chief Executive Officer of the Parent
Guarantor shall
deliver to the Lenders at the Closing a certificate certifying that the
conditions specified in Sections 6.1(a) (save for any reference to ITAC
representations and warranties) through 6.1(c) and in Section 6.1(e) have been
fulfilled as to the Loan Parties.
(g) Loan
Documents.
The
Lenders shall have received the Notes, the Guaranty Agreement, any Account
Control Agreements, the ITAC Certification, the First Ranking Debenture, First
Ranking Security Agreement, any Intercreditor Agreements,
any IP
Security Agreements, together
with the UCC-1 financing statements in respect of the First Ranking Security
Agreements, duly executed by the parties thereto, together with all appropriate
financing statements and appropriate stock powers and certificates evidencing
the Company Shares,
as well
as such other documents and instruments as the Lenders may reasonably request
to
effectuate the intents and purposes of this Agreement. The Parent
Guarantor
authorizes Lender to cause to be filed any such UCC-1 financing statements
in
such locations as the Lender may deem appropriate and further authorizes the
description of the assets as “all assets” thereunder.
(h) Corporate
Proceedings of the
Loan Parties.
The
Lenders shall have received a copy of resolutions of the Board of Directors
of
each of the Loan Parties, authorizing the execution, delivery and performance
of
any of the Loan Documents to which each of them is a party certified by the
Secretary or an Assistant Secretary of each of the Loan Parties, which
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(i) Corporate
Proceedings of ITAC.
The
Lenders shall have received (i) a copy of resolutions of the Board of Directors
of the ITAC, authorizing the execution, delivery and performance of the ITAC
Certification, certified by the Secretary or an Assistant Secretary of ITAC,
which certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded.
33
(j) Legal
Opinions.
The
opinion of legal counsel for the Loan Parties substantially in the forms
attached hereto as Exhibit
G-1 and G-2,
as well
as opinion of legal counsel for ITAC in form and substance reasonably
satisfactory to the Lenders.
(k) Officer’s
Certificate.
An
Officer’s Certificate of each Loan Party certifying (i) the representations and
warranties of each of the Loan Parties contained in Article IV and in each
of
the other Loan Documents executed on the Closing Date shall be true and accurate
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of
the
specific dates or times referred to therein), and (ii) each of the Loan Parties
shall have performed and complied with all covenants and conditions hereof
and
thereof, (iii) no Event of Default or potential Event of Default shall have
occurred or shall exist, and (iv) such Loan Party shall have obtained any and
all consents (including the consent of the OCS as well as all other governmental
or regulatory consents, approvals, or authorizations required in connection
with
the valid execution and delivery of this Agreement and the other Loan
Documents), permits, and waivers necessary or appropriate for consummation
of
the transactions contemplated by this Agreement and the other Loan Documents,
and the same shall be effective as of the Closing Date
(l) Secretary’s
Certificate.
There
shall be delivered to the Lender a certificate dated the Closing Date and signed
by the Secretary or an Assistant Secretary of each of the Loan Parties,
certifying as to the appropriateness or validity of documents, as applicable,
of:
(i) all
action taken by such Loan Party in connection with this Agreement and the other
Loan Documents;
(ii) the
names
of the officer or officers authorized to sign this Agreement and the other
Loan
Documents and the true signatures of such officer or officers and specifying
the
authorized officers permitted to act on behalf of such Loan Party for purposes
of this Agreement and the other Loan Documents and the true signatures of such
officers, on which the Lenders may conclusively rely;
(iii) copies
of
its organizational documents, including its certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement, certificate
of formation, and limited liability company agreement as in effect on the
Closing Date certified by the appropriate state official where such documents
are filed in a state office together with certificates from the appropriate
state officials as to the continued existence and good standing of each Loan
Party in each state where organized or qualified to do business;
(iv) copy
of
the Merger Agreement together with all schedules and exhibits and any amendments
thereto;
(v) copy
of
the Board of Directors and Stockholder resolutions authorizing the execution,
delivery and performance of the Merger Agreement.
(m) Legal
Details.
All
legal details and proceedings in connection with the transactions contemplated
by this Agreement and the other Loan Documents shall be in form and substance
satisfactory to the Lender and counsel for the Lender, and the Lender shall
have
received all such other counterpart originals or certified or other copies
of
such documents and proceedings in connection with such transactions, in form
and
substance satisfactory to the Lender and said counsel, as the Lender or said
counsel may reasonably request.
34
(n) No
MAE.
Since
the execution of this Agreement there shall not have been a Material Adverse
Effect on the Parent Guarantor, the Company or any of their
Subsidiaries.
(o) ITAC/IXI
Merger.
The
Merger Agreement shall be in full force and effect and there shall be no
defaults, prepayment events or creation of liens under debt instruments or
other
agreements as a result of the ITAC/IXI Merger and all consents, approvals and
authorizations required in connection with the valid execution of the Merger
Agreement have been obtained.
(p) 9th
Amended and Restated Certificate of Incorporation.
The
Lenders shall have received evidence from the appropriate governmental authority
of the proper filing of the 9th Amended
and Restated Certificate of Incorporation, and such Certificate shall be
effective as of the Closing Date.
(q) Financials.
The
Lenders shall have received the most recently available monthly consolidated
and
consolidating financial statements of the Parent Guarantor, the Company and
their Subsidiaries.
(r) Compliance
with Laws.
The
Company and the Parent Guarantor shall be in compliance with all applicable
Legal Requirements (including but not limited to ERISA (as defined in Section
9.1(g) below), margin regulations and environmental laws).
(s) WTI
Encumbrances.
The
Lenders shall have received a written document duly executed by WTI authorizing
the Israeli Registrar of Companies (the “Registrar
of Companies”)
to
terminate all charges registered with the Registrar of Companies in favor of
WTI
in connection with the WTI Facility and authorizing the Company or the Parent
Guarantor (as applicable) to file termination statements (Forms UCC-3) with
any
applicable U.S. Governmental Authority effectuating the termination of all
financing statements registered in favor of WTI with any such U.S. Governmental
Authority.
(t) Consent
to Joinder (ITAC).
The
Lenders shall have received a written document signed by ITAC and by the
individuals or entities consisting of the majority required for an amendment
of
the Registration Rights Agreement, evidencing the consent of such parties to
the
joinder of the Lenders as parties to the Registration Rights Agreement,
effective on the closing of the ITAC/IXI Merger and the Lenders becoming
stockholders of IXI.
(u) Consent
to Joinder (IXI). The
Lenders shall have received a written document signed by Parent Guarantor and
by
the individuals or entities consisting of the majority required for an amendment
of the Parent Guarantor's Amended and Restated Stockholders Agreement made
as of
August 24, 2004, as amended, as well as a written document signed by Parent
Guarantor and by the individuals or entities consisting of the majority required
for an amendment of the Parent Guarantor's Amended and Restated Investors Rights
Agreement made as of August 24, 2004, as amended, evidencing the consent of
such
parties to the joinder of the Lenders as parties to such Agreements, effective
on the occurrence of an optional conversion pursuant to Section 3.2(b) above
and
the Lenders becoming stockholders of Parent Guarantor.
35
(v) No
Violation of Legal Requirements.
The
making of the Loans shall not contravene any Laws applicable to the Loan Parties
or the Lender.
(w) No
Actions or Proceedings.
No
action, proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed in writing before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of, this Agreement, the other Loan Documents or the consummation
of
the transactions contemplated hereby or thereby or which, in the Lender’s sole
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or any of the other Loan Documents.
(x) OCS
Undertaking.
The
Lenders shall have executed the document attached hereto as Exhibit K as
required by the OCS.
(y) Appointment
of Agent.
The
Loan Parties shall have appointed an Agent for Service of Process as required
pursuant to Section 9.11.
(z) Search
Results; Lien Terminations.
The
Lender shall have received certified copies of Uniform Commercial Code search
reports (including without limitations lien searches in Israel, Washington,
D.C.
and the state of Delaware) or other lien searches dated a date reasonably near
to the Closing Date, listing all effective financing statements which name
any
Loan Party (under their respective present names and any previous names) as
debtors, together with (i) copies of such financing statements, (ii) payoff
letters evidencing repayment in full of any debt to be repaid, the termination
of all agreements relating thereto and the release of all Liens granted in
connection therewith, with Uniform Commercial Code or other appropriate
termination statements and documents effective to evidence the foregoing (other
than Permitted Encumbrances and the Liens specified in Section 6.2(a) below
which will be subsequently discharged pursuant to Section 6.2(a), and (iii)
such
other Uniform Commercial Code termination statements and Israeli termination
statements as the Lender may reasonably request.
(aa) Filings,
Registrations and Recordings.
The
Lenders shall have received each document (including Uniform Commercial Code
financing statements) required by the Loan Documents or under Law or reasonably
requested by the Lender to be filed, registered or recorded in order to create
in favor of the Lender, a perfected Lien on the collateral described therein,
prior to any other Liens (other than Permitted Encumbrances) in proper form
for
filing, registration or recording.
6.2 Post
Closing Covenants.
(a) The
Loan
Parties covenant and agree to provide the Lenders no later than 10 Business
Days
following the Closing Date, evidence of filing satisfactory to the Lenders
and
their counsel, such termination statement and such other documents evidencing
the termination of all charges registered with the Registrar of Companies in
favor of WTI in connection with the WTI facility
(b) The
Loan
Parties covenant and agree to provide the Lenders no later than 10 Business
Days
following the Closing Date, evidence of filing satisfactory to the Lenders
and
their counsel of such UCC financing statements, Israeli debenture registrations,
collateral assignments, account control agreements, and termination statements,
with respect to the Collateral as the Lenders shall reasonably
request.
36
(c) The
Loan
Parties shall have delivered evidence acceptable to the Lenders that adequate
insurance in compliance with Section 7.16 Insurance, is in full force and effect
and that all premiums then due thereon have been paid, together with a certified
copy of the Loan Parties’ casualty insurance policy or policies evidencing
coverage reasonably satisfactory to the Lender, with additional insured,
mortgagee and lender loss payable special endorsements attached thereto in
form
and substance reasonably satisfactory to the Lender and its counsel naming
the
Lender as additional insured, mortgagee and lender loss payee.
ARTICLE
VII
COVENANTS
OF THE LOAN PARTIES
7.1 Duration.
The
covenants in this Article VIII remain in force from the date of this Agreement
for so long as any amount is or may be outstanding under this Agreement or
any
of the other Loan Documents. All of those covenants (and any undertakings or
restrictions in any other clause of the Loan Documents) are cumulative, and
accordingly none of them shall (except to the extent expressly stated) be
limited by any exception to any other undertaking or by implication from the
terms of any other undertaking.
7.2 Affirmative
and Negative Covenants.
Each
Loan Party, jointly and severally, covenants and agrees that until payment
in
full of the Loans, and interest thereon, satisfaction of all of the Loan
Parties’ other Obligations under the Loan Documents (other than contingent
indemnification obligations to the extent no claims giving rise thereto have
been asserted), the Loan Parties shall comply at all times with the covenants
contained in Article VII.
7.3 Financial
Information.
The
Loan Parties shall supply to the Lenders:
(a) As
soon
as available but no later than one hundred twenty (120) days after and as of
the
end of each financial reporting year, a complete copy of the Parent Guarantor’s
consolidated audit report, which shall include balance sheet, income statement,
statement of changes in equity and statement of cash flows for such year, on
a
consolidated basis, prepared in accordance with United States GAAP, and
certified by an independent certified public accountant selected by the Company
or the Parent Guarantor (as applicable) and reasonably satisfactory to the
Lenders (the “Accountant”).
The
Accountant’s certification shall not be qualified or limited due to a restricted
or limited examination by the Accountant of any material portion of the
Company’s records or otherwise.
(b) As
soon
as available but no later than ninety (90) days after the end of each quarter
of
each of its financial years,
unaudited interim financial statements of the the Parent Guarantor, the Company
and all of their Subsidiaries as of the end of such period, on a consolidated
basis, prepared in accordance with United States GAAP (except that they may
exclude notes and period-end accruals required by GAAP) and attested by an
authorized representative of the Company (e.g., the Company’s chief financial
officer) as being complete and correct in all material respects and fairly
presenting the consolidated financial position and the results of operations
of
the Parent Guarantor, the Company and all of their Subsidiaries for such
quarter.
37
(c) Such
other statements, lists of property and accounts (including, without limitation,
the Collateral), budgets, forecasts, reports, or other information as the
Lenders may from time to time reasonably request.
7.4 Other
Information.
(a) The
Loan
Parties shall supply to the Lenders:
(i) promptly
upon becoming aware of them, details of any litigation, arbitration or
administrative proceedings of a material nature relating to the Loan Parties
or
to any of their Subsidiaries which are current, threatened or pending, and,
together, in each case, with details of how it proposes to conduct the
litigation, arbitration or proceedings or otherwise resolve the dispute in
question; and
(ii) forthwith,
details of any event of which it is aware which may have a Material Adverse
Effect on the Loan Parties or any of their Subsidiaries; and
7.5 Accounting
Records.
Maintain adequate books, accounts and records, and prepare all financial
statements in accordance with GAAP to the extent applicable (except for certain
non-cash adjustments by year-end and certain adjustments that may be made as
a
result of an audit), and in compliance with the regulations of any governmental
or regulatory authority having jurisdiction over the Loan Parties or any of
their businesses; and upon reasonable prior notice, permit employees or agents
of the Lenders at such reasonable times during normal business hours as the
Lenders may request, at the Loan Parties’ expense, to inspect the Loan Parties’
properties, and to examine, and make copies and memoranda of the Loan Parties’
books, accounts and records subject to any confidentiality and nondisclosure
requirements that the Loan Parties may reasonably request. Notwithstanding
the
foregoing, if no Event of Default has occurred, the Lenders shall limit such
inspections to no more than once every six months.
7.6 Notification
of Event of Default.
The
Company shall notify the Lenders of, immediately upon it becoming aware of
any
of the following:
(a) any
Event
of Default or potential Event of Default with the passing of time is reasonably
likely to become an Event of Default (and the steps, if any, being taken to
remedy it); and
(b) any
event
of default or potential event of default arising under any material agreement
entered into by the Loan Parties.
7.7 Authorizations.
The
Loan Parties shall promptly obtain, maintain and comply with the terms of any
authorization required at any relevant time under any law or regulation to
enable it to perform its obligations under, or for the validity or
enforceability of, any Loan Document.
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7.8 Negative
Pledge.
The
Loan Parties shall not, and shall ensure that their Subsidiaries shall not,
create or permit to subsist any Encumbrance on any of its present or future
assets.
7.9 Transfer
of Assets.
The
Loan Parties shall not, and shall ensure their Subsidiaries do not, sell,
transfer, lease, license, abandon, or otherwise dispose of (a “Transfer”)
any
assets except (i) non-exclusive licenses of Company Intellectual Property Rights
in the ordinary course of business consistent with industry practice, and
exclusive licenses of Company Intellectual Property Rights granted by the
Company or by the Parent Guarantor (as the case may be) that are limited to
a
field of use that is not the sole or primary field of use of such Company
Intellectual Property Rights and is not being exploited by the Company or by
the
Parent Guarantor (as the case may be); (ii) Transfers of worn-out, obsolete
or
surplus property (each as determined by the Company in its reasonable judgment);
(iii) Transfers constituting Permitted Encumbrances; (iv) disposals of assets
in
exchange for other assets comparable or superior as to type, value and quality
and payment of cash as consideration for the acquisition of such assets; and
(i)
any other disposal approved by the Lenders (such approval not to be unreasonably
withheld).
7.10 Borrowings.
The
Loan Parties shall not at any time create, incur, assume or suffer to exist
any
Indebtedness except:
(a) Indebtedness
incurred for the acquisition of supplies of inventory on normal trade
credit;
(b) Leumi
Credit Line;
(c) Indebtedness
in the ordinary course of business arising from the endorsement of any
“instrument,”
as such term is defined in the UCC, now owned or hereafter acquired by the
Company or by the Parent Guarantor (as the case may be) or in which the Company
or the Parent Guarantor (as the case may be) now holds or hereafter acquires
any
interest;
(d) Indebtedness
of the Loan Parties under the Loan Document;
(e) Trade
payables and accrued expenses incurred in the ordinary course of business which
are not represented by a promissory note or other evidence of indebtedness
and
which are not the subject of a genuine dispute or are not more than ninety
(90)
days past due or, if more than ninety (90) days past due, and for which adequate
reserves in conformity with GAAP have been established on the books of the
Loan
Parties;
(f) Any
indebtedness approved by the Lenders prior to the Closing Date and listed on
Section 4.13 of the Company Disclosure Schedules; and
(g) Indebtedness
incurred in connection with currency hedge transactions entered into by the
Loan
Parties or by any of their Subsidiaries (as the case may be).
39
7.11 Mergers
and Acquisitions.
The
Loan Parties shall not, and shall ensure their Subsidiaries do not, liquidate
or
dissolve; or enter into any consolidation, merger or other combination in which
the stockholders of the Loan Parties or their Subsidiaries (as the case may
be)
immediately prior to such transaction own less than 50% of the voting stock
of
such Loan Party or of such Subsidiary (as the case may be) immediately after
giving effect to such transaction or related series of such transactions; or
sell all, or substantially all, of the Loan Party’s or any of their Subsidiary’s
assets in a single transaction or related series of transactions, except for
the
ITAC/IXI Merger pursuant to the Merger Agreement as in effect on the Closing
Date, so long as (A)-(B) are met in the following sentence. Additionally,
notwithstanding the foregoing, the Loan Parties or their Subsidiaries (as the
case may be) may consolidate, merge or sell all or substantially all its assets
so long as: (A) the entity that results from such merger or consolidation,
or
proposes to purchase all, or substantially all, of the Company’s or the Parent
Guarantor’s assets (as applicable, the “Surviving
Entity”),
shall have executed and delivered to the Lenders an agreement in form and
substance reasonably satisfactory to the Lenders, containing an assumption
by
the Surviving Entity of the due and punctual payment and performance of all
Obligations and performance and observance of each covenant and condition of
the
Company and the Parent Guarantor in the Loan Documents to which each is a party;
(B) all such obligations of the Surviving Entity to the Lenders shall be
guaranteed by any entity that directly or indirectly owns or controls more
than
50% of the voting stock of the Surviving Entity; (C) immediately after giving
effect to such merger, consolidation or sale of assets, no Event of Default
or,
event which with the lapse of time or giving of notice or both, would result
in
an Event of Default shall have occurred; and (D) the credit risk to the Lenders,
as determined in its sole discretion, of the Surviving Entity shall not be
increased. In determining whether the proposed merger, consolidation or
sale of assets, would result in an increased credit risk, the Lenders may
consider, among other things, changes in the Loan Parties’ (as the case may be)
management team, employee base, access to equity markets, venture capital
support, financial position and/or disposition of Intellectual Property Rights
which may reasonably be anticipated as a result of the transaction.
Notwithstanding anything to the contrary in this Section 7.11: (a) changes
in
ownership resulting from additional bona fide private equity financings by
financial investors shall be permitted so long as all rights and obligations
thereunder are subordinated to the rights and Obligations owed to the Lenders;
and (b) the Parent Guarantor, the Company and their Subsidiaries shall be
permitted to create additional direct or indirect subsidiaries so long as the
Parent Guarantor, the Company or their Subsidiaries, as applicable, promptly
pledges to the Lenders its ownership interest in each such subsidiary to secure
the timely payment and performance of the Obligations and such Subsidiary
guarantees the Obligations under the Loan documents by executing a Guaranty
Joinder.
7.12 Compliance
with Laws and Payment of Taxes.
(a) The
Loan
Parties shall comply (and shall ensure that the Subsidiaries comply) with all
laws and regulations applicable to it to the extent that failure to do so would
have a Material Adverse Effect.
(b) The
Loan
Parties shall, and shall ensure that the Subsidiaries:
(i) file,
or
procure the filing of, all Tax and informational returns that are required
to be
filed by it in any jurisdiction; and
(ii) pay
all
its Taxes when due, except to the extent the Taxes are contested in good faith
and by appropriate means, and a reserve reasonably regarded as adequate has
been
set aside for payment of those Taxes.
40
7.13 Change
of Business.
The
Loan Parties shall not, and shall ensure that the Subsidiaries do not, engage
in
any material line of business other than the business the Parent Guarantor,
the
Company
and their Subsidiaries
conduct
as of the Closing Date or any business closely related or incidental
thereto.
7.14 Share
Capital.
The
Parent Guarantor, the Company
and their Subsidiaries shall
not, without the prior consent of the Lenders purchase, cancel or redeem any
of
their share capital (other than repurchases from employees, directors, or
consultants of the Company or the Parent Guarantor upon termination of their
service with the Company or the Parent Guarantor).
7.15 Distributions.
The
Loan Parties shall not, and shall ensure that none of their Subsidiaries shall
pay any dividends or make any other distribution with respect to any of the
Loan
Parties’ or the Subsidiaries’ capital stock, share capital or equity interests,
except dividends by the Subsidiaries to the Loan Parties.
7.16 Insurance.
Each
Loan Party shall insure its properties and assets against loss or damage by
fire
and such other insurable hazards as such assets are commonly insured (including
fire, extended coverage, property damage, workers’ compensation, public
liability insurance) and against other risks in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary. At the request
of
the Lenders, the Loan Parties shall deliver to the Lender (x) within ninety
(90)
days after the Closing Date and annually thereafter an original certificate
of
insurance signed by the Loan Parties’ independent insurance broker describing
and certifying as to the existence of the insurance on the Collateral required
to be maintained by this Agreement and the other Loan Documents, together with
a
copy of the endorsement described in the next sentence attached to such
certificate and (y) from time to time a summary schedule indicating all
insurance then in force with respect to the Loan Parties. Such policies of
insurance shall contain special endorsements, in form and substance reasonably
acceptable to the Lender, which shall (i) specify the Lender as an additional
insured, mortgagee and lender loss payee as its interests may appear, with
the
understanding that any obligation imposed upon the insured (including the
liability to pay premiums) shall be the sole obligation of the Loan Parties
and
not that of the insured, (ii) provide that the interest of the Lender shall
be
insured regardless of any breach or violation by the Loan Parties of any
warranties, declarations or conditions contained in such policies or any action
or inaction of the Loan Parties or others insured under such policies, (iii)
provide a waiver of any right of the insurers to set off or counterclaim or
any
other deduction, whether by attachment or otherwise, (iv) provide that any
and
all rights of subrogation which the insurers may have or acquire shall be,
at
all times and in all respects, junior and subordinate to the prior payment
in
full of the Obligations hereunder and that no insurer shall exercise or assert
any right of subrogation until such time as the Obligations hereunder have
been
paid in full, (v) provide, except in the case of public liability insurance
and
worker’s compensation insurance, that all insurance proceeds for losses of less
than $1,000,000 shall be adjusted with and payable to the Loan Parties and
that
all insurance proceeds for losses of $1,000,000 or more shall be adjusted with
and payable to the Lenders, (vi) include effective waivers by the insurer of
all
claims for insurance premiums against the Lenders, (vii) provide that no
cancellation of such policies for any reason (including non-payment of premium)
nor any change therein shall be effective until at least thirty (30) days after
receipt by the Lenders of written notice of such cancellation or change, (viii)
be primary without right of contribution of any other insurance carried by
or on
behalf of any additional insureds with respect to their respective interests
in
the Collateral, and (ix) provide that inasmuch as the policy covers more than
one insured, all terms, conditions, insuring agreements and endorsements (except
limits of liability) shall operate as if there were a separate policy covering
each insured. The Loan Parties shall notify the Lenders promptly of any
occurrence causing a material loss or decline in value of the Collateral and
the
estimated (or actual, if available) amount of such loss or decline.
41
7.17 Maintenance
of Properties and Leases.
The
Loan Parties shall maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties useful
or necessary to its business, and from time to time, the Loan Parties will
make
or cause to be made all appropriate repairs, renewals or replacements thereof;
provided that nothing in this Section 7.17 shall prevent the Loan Parties
from discontinuing the operation and maintenance of any of its properties or
any
of those of its Subsidiaries if such discontinuance is desirable in the conduct
of its or their business and does not, together with other such discontinuances
in the aggregate, cause a Material Adverse Effect.
7.18 Maintenance
of Patents, Trademarks, Etc.
The
Loan Parties shall maintain in full force and effect all patents, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, domain name registrations, trade names, copyrights, licenses,
franchises, permits and other authorizations necessary for the ownership and
operation of its properties and business. The Loan Parties shall not abandon,
lapse or otherwise allow to become abandoned, lapsed or expired (other than
by
natural expiration of full statutory term) any patents, patent applications,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and other authorizations or assets included in the Company Intellectual
Property Rights, without prior written consent of the Lenders.
7.19 Conduct
of Business.
The
Loan Parties shall, and shall ensure that each of their Subsidiaries
shall:
(a) maintain
and preserve the Loan Parties’ and each of their Subsidiaries existence, present
form of business, and all rights and privileges necessary in the normal course
of its business. Keep all the property in good working order and condition,
ordinary wear and tear and obsolescence excepted; and
(b) in
all
material respects conduct their business in a reasonable and prudent manner
in
accordance with all applicable Laws and regulations and the terms of the Loan
Documents; and
(c) meet
all
of their material obligations as they fall due; and
(d) promptly
perform their material obligations, and enforce their material rights under
each
agreement to which they, or any of them, are a party.
7.20 Use
of Proceeds.
The
Loan Parties shall use the proceeds of the Loans solely for (i) working capital;
(ii) other general corporate purposes, including payment of account payables
of
the Loan Parties; (iii) payment of any costs, fees and expenses related to
the
transactions contemplated by any of the Loan Documents; (iv) repayment of the
Outstanding WTI Debt (as defined above) on the Closing Date to WTI; and (v)
repayment of the Second Leumi Loan (as defined above) on the Closing Date to
Bank Leumi. Notwithstanding the previous sentence, the Loan Parties shall not
distribute more than $600,000 of the proceeds of the Loans to any of their
Subsidiaries, unless prior to such distribution, (i) the
Loan
Parties or any of their Subsidiaries, as applicable, promptly pledges to the
Lenders all of their ownership interest in each of their domestic Subsidiaries
and 65% of its ownership interest in each of their foreign Subsidiaries to
secure the timely payment and performance of the Obligations, in form and
substance satisfactory to the Lender, and (ii) each such Subsidiary guarantees
the Obligations under the Loan Documents by executing the Guaranty
Joinder.
42
7.21 Amendments
and Agreements.
The
Loan Parties shall not, directly or indirectly, terminate, cancel or suspend,
or
permit or consent to any termination, cancellation or suspension of, or enter
into or consent to or permit an assignment of the rights or obligations of
any
party to, any material agreement pertaining to the business of any Loan Party
as
currently conducted or as currently proposed to be conducted to which it is
a
party without receiving the prior written consent of the Lenders (which shall
not be unreasonably withheld).
7.22 Special
Collateral Covenants.
The
Loan Parties will:
(a) Do
all
things reasonably necessary to maintain, preserve, protect and keep all
Collateral in good working order and salable condition, ordinary wear and tear
excepted and obsolescence, deal with the Collateral in all ways as are
considered good practice by owners of like property, and use the Collateral
lawfully and, to the extent applicable, only as permitted by the Loan Parties’
insurance policies (as applicable). The Loan Parties shall maintain, or cause
to
be maintained, materially complete and accurate records relating to the
Collateral. Upon reasonable prior notice at reasonable times during normal
business hours (but in no case more than once every six (6) months if no Event
of Default has occurred), the Loan Parties hereby authorizes a representative
appointed by the Majority Noteholders, to inspect the Collateral and to discuss
the Collateral and the records relating thereto with the Loan Parties’ officers
(as applicable).
(b) Execute
and deliver to the Lenders all financing statements, notices, instruments and
other documents (including, without limitation, any filings with the United
States Patent and Trademark Office, the Registrar of Companies and the Registrar
of Pledges in Israel) from time to time reasonably requested by the Lenders
to
maintain either (i) a first fixed and floating security interest in the
Collateral in favor of the Lenders (subject only to the exceptions set forth
in
Section 4.21 above), or (ii) a perfected security interest in the Collateral,
in
favor of the Lenders, except in each case to the extent a Permitted Encumbrance
is permitted to be senior to, or pari-passu with, the Lenders’ security
interest; perform such other acts and execute and deliver to the Lenders such
additional conveyances, assignments, agreements and instruments, as the Lenders
may at any time reasonably request in connection with the administration and
enforcement of this Agreement or the Lenders’ rights, powers and remedies
hereunder.
(c) Not
create, incur, assume or permit to exist any Encumbrance or grant any other
Person a negative pledge on any Collateral, except Permitted
Encumbrances.
43
(d) Without
at least 30 days’ prior written notice to the Lenders: (i) not relocate any
material portion of the Collateral, or establish a place of business at a
location other than as in effect on the Closing Date; (ii) not change its name,
mailing address, location of the Collateral (except as otherwise permitted
herein); and (iii) not change its jurisdiction of organization or legal
structure.
(e) At
the
request of the Lenders, to the extent commercially practicable, firmly affix
a
decal, stencil or other marking to designated items of the Collateral,
indicating thereon the security interest of the Lenders; provided, however,
that
the Lenders agree to not make such a request unless the Lenders reasonably
believe that an event which would have a Material Adverse Effect with respect
to, or cause confusion as to the identification of, such item of the Collateral
or Lender’s security interests therein, is reasonably likely to
occur.
(f) Other
than in the ordinary course of business or as determined in good faith, not
make
any material discount, credit, rebate or other reduction in the original amount
owing on a right to payment or accept in satisfaction of a right to payment
an
amount materially less than the original amount thereof.
7.23 Loans.
The
Loan Parties will not make or suffer to exist any loans, guaranties, advances,
except:
(a) Accounts
receivable in the ordinary course of the Company’s or the Parent Guarantor’s
business (as the case may be);
(b) Temporary
advances, including travel advances to employees, to cover incidental expenses
to be incurred in the ordinary course of business;
(c) Loans
consisting of (i) employee relocation loans and other employee loans in the
ordinary course of business not to exceed $100,000 in aggregate amount
outstanding at any time and (ii) loans to employees, officers, consultants
or
directors relating to the purchase of equity securities of the Company or the
Parent Guarantor pursuant to employee stock purchase plans or agreements
approved by the Parent Guarantor’s or the Company's Board of Directors (as
applicable);
(d) Debt
obligations received in connection with the bankruptcy or reorganization of
customers or suppliers and in settlement of delinquent obligations of, and
other
disputes with, customers or suppliers arising in the ordinary course of
business;
(e) Notes
receivable or, prepaid royalties and other credit obligations to customers
and
suppliers who are not Affiliates, in the ordinary course of
business;
(f) Endorsements
of negotiable instruments for deposit or collection or similar transactions
in
the ordinary course of business; and
(g) Deferred
purchase obligations accepted in connection with Transfers permitted by Section
7.9.
44
7.24 Transactions
With Related Persons.
The
Loan Parties will not directly or indirectly enter into any material transaction
with or for the benefit of a Related Person on terms more favorable to the
Related Person than would have been obtainable in an “arms’ length” dealing
unless such transaction is approved by the majority of the Parent Guarantor’s or
the Company's disinterested directors (as applicable). For purposes of this
Section 7.24 the term “Related
Person”
means
any Affiliate of the Parent Guarantor, or any officer, employee, director or
equity security holder of the Company or any Affiliate.
7.25 Compliance
with Laws.
Each
Loan Party shall comply with all applicable Laws in all material respects,
provided that it shall not be deemed to be a violation of this Section 7.25
if
any failure to comply with any Law would not result in fines, penalties,
remediation costs, other similar liabilities or injunctive relief which in
the
aggregate would constitute a Material Adverse Effect. Without limiting the
generality of the foregoing, or limiting any other subsection of this Section
7.25, each Loan Party shall ensure, and cause each other Loan Party to ensure,
that no person who owns a controlling interest in or otherwise controls a Loan
Party is or shall be (i) in compliance, and cause each other Loan Party to
comply, with all applicable Bank Secrecy Act (“BSA”)
and
anti-money laundering laws and regulations and (ii) pay, and cause each other
Loan Party to pay, prior to delinquency, all taxes and other governmental
charges against it or any collateral, as well as claims of any kind which,
if
unpaid, could become a Lien on any of its property; provided that the foregoing
shall not require any Loan Party to pay any such tax or charge so long as it
shall contest the validity thereof in good faith by appropriate proceedings
and
shall set aside on its books adequate reserves with respect thereto in
accordance with GAAP and, in the case of a claim which could become a Lien
on
any collateral, such contest proceedings shall stay the foreclosure of such
Lien
or the sale of any portion of the collateral to satisfy such claim.
7.26 Further
Assurances.
Each
Loan Party shall, from time to time, at its expense, faithfully preserve and
protect the Lender’s Liens on and first priority security interest in the
Collateral as a continuing first priority perfected Lien, subject only to
Permitted Encumbrances, and shall do such other acts and things as the Lender
may reasonably deem necessary or advisable from time to time in order to
preserve, perfect and protect the Liens granted under the Loan
Documents.
7.27 Anti-Terrorism
Laws.
The
Loan Parties and their respective Affiliates and agents shall not (i) conduct
any business or engage in any transaction or dealing with any Blocked Person,
including the making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage
in any transaction relating to, any property or interests in property blocked
pursuant to the Executive Order No. 13224; or (iii) engage in or conspire
to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in the Executive Order No. 13224 or the USA Patriot Act. The Company shall
deliver to the Lender any certification or other evidence requested from time
to
time by the Lender in its sole discretion, confirming Company’s compliance with
this Section 7.27.
7.28 Liens.
The
Loan Parties shall not at any time create, incur, assume or suffer to exist
any
Lien on any of their property or assets, tangible or intangible, now owned
or
hereafter acquired, or agree or become liable to do so, except Permitted
Encumbrances.
45
7.29 Guaranties.
The
Loan Parties shall not at any time, directly or indirectly, become or be liable
in respect of any Guaranty, or assume, guarantee, become surety for, endorse
or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for
Guaranties of Indebtedness of the Loan Parties or other obligations permitted
hereunder.
7.30 Loans
and Investments.
The
Loan Parties shall not at any time make or suffer to remain outstanding any
loan
or advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:
(i) trade
credit extended on usual and customary terms in the ordinary course of business;
and
(ii) advances
to employees to meet expenses incurred by such employees in the ordinary course
of business.
7.31 Fiscal
Year.
The
Loan Parties shall not change their fiscal year from the twelve-month period
ending December 31.
7.32 Changes
in Documents.
The
Loan Parties shall not amend in any respect their certificate of incorporation
(including any provisions or resolutions relating to capital stock), by-laws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational documents
without providing at least thirty (30) calendar days’ prior written notice to
the Lender and, in the event such change would be adverse to the Lender as
determined by the Lender in its sole discretion, obtaining the prior written
consent of the Lenders.
7.33 Capital
Expenditures.
Loan
Parties in the aggregate shall not make Capital Expenditures in excess of
$500,000, each in any one fiscal year.
7.34 Notice
of Default.
Promptly after any officer of any Loan Party has learned of the occurrence
of an
Event of Default or potential Event of Default, the Loan Parties shall provide
Lender with a certificate signed by the Chief Executive Officer, President
or
Chief Financial Officer of the Loan Parties setting forth the details of such
Event of Default or potential Default and the action which each Loan Party
proposes to take with respect thereto.
7.35 Notice
of Litigation.
Promptly after any officer of any Loan Party has learned thereof, the Loan
Parties shall provide written notice to Lender of all actions, suits,
proceedings or investigations before or by any Official Body or any other Person
against the Loan Parties or any Subsidiary of any Loan Party which relate to
the
Collateral, involve a claim or series of claims in excess of $100,000 or which
if adversely determined would constitute a Material Adverse Effect.
7.36 Certain
Events.
Each of
the Loan Parties shall provide written notice to the Lender:
(a) at
least
thirty (30) calendar days prior thereto, with respect to any proposed sale
or
transfer of assets pursuant to Section 7.9;
46
(b) within
the time limits set forth in Section 7.32, any amendment to the organizational
documents of such Loan Party; and
(c) at
least
thirty (30) calendar days prior thereto, with respect to any change in any
such
Loan Party’s locations from the locations set forth in this
Agreement.
ARTICLE
VIII
EVENTS
OF DEFAULT; REMEDIES
8.1 Events
of Defaults.
The
occurrence of any one or more of the following events shall constitute an Event
of Default (each an “Event
of Default”):
(a) Any
representation or warranty made by any Loan Party to the Lenders in the Loan
Documents or any representation or warranty made by ITAC to the Lenders in
the
ITAC Certification shall be materially false or misleading as of the date on
which made or deemed made.
(b) The
Company shall not have made payment of (i) principal of the Loans when due,
or
(ii) interest on the Loans or of any other monetary Obligations under any of
the
Loan Documents for five (5) Business Days or more after the same shall have
become due and payable.
(c) The
breach by any Loan Party (other than a breach which constitutes an Event of
Default under Sections 8.1(a) or (b) above) of any of the terms or provisions
of
the Loan Documents or a breach by ITAC (other than a breach with constitutes
an
Event of Default under Section 8.1(a) above) of any of the terms of the ITAC
Certification, which is not remedied within fifteen (15) Business Days after
written notice from the Lenders.
(d) Unless
the subject of a good faith dispute, the Company shall fail to pay its debts
generally as they become due; a notice of Lien or assessment in excess of
$100,000 which is not a Permitted Encumbrance is filed of record with respect
to
all or any part of any Loan Parties’ or any of its Subsidiaries’ assets by the
United States, or any department, agency or instrumentality thereof, or by
any
state, county, municipal or other governmental agency, including the PBGC,
or
any taxes or debts owing at any time or times hereafter to any one of these
becomes payable and the same is not paid within thirty (30) days after the
same
becomes payable.
(e) A
default
or event of default shall occur at any time under the terms of any other
agreement involving borrowed money or the extension of credit, or any other
obligations under which any Loan Party may be obligated as a borrower or
guarantor, and such breach, default or event of default causes any or all of
the
obligations thereunder to become, or to be declared, due and payable before
its
stated maturity by acceleration or otherwise, and such occurrences, in
the
aggregate, could reasonably be expected to have a Material Adverse Effect on
such Loan Party.
(f) Any
Loan
Party ceases to be solvent or admits in writing its inability to pay its debts
as they mature.
47
(g) A
proceeding shall have been instituted in a court having jurisdiction in the
premises seeking a decree or order for relief in respect of any Loan Party
an
involuntary case under any applicable bankruptcy, insolvency, reorganization
or
other similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party for any substantial part of its
property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period
of
sixty (60) consecutive days or such court shall enter a decree or order granting
any of the relief sought in such proceeding.
(h) Any
Loan
Party shall commence a voluntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect,
shall consent to the entry of an order for relief in an involuntary case under
any such law, or shall consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or other similar official) of itself or for any substantial part of its
property or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
action in furtherance of any of the foregoing.
(i) Any
Judgment(s) singly or in the aggregate in excess of the One Hundred Thousand
U.S. Dollars ($100,000) that is not covered by insurance shall be entered
against the Company which remains unsatisfied, unvacated or unstayed pending
appeal for sixty (60) or more days after entry thereof.
(j) The
Company or the Parent Guarantor effectuates a change of control without the
prior written consent of the Lenders which is prohibited by Section 7.11
above.
(k) The
Company or the Parent Guarantor is in default under the U.S. the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)
or any
defaults under similar non-U.S. laws in excess of One Hundred Thousand U.S.
Dollars ($100,000).
(l) Any
Loan
Party ceases to conduct its business as contemplated, except as expressly
permitted under Section 7.11, or any Loan Party is enjoined, restrained or
in
any way prevented by court order from conducting all or any material part of
its
business and such injunction, restraint or other preventive order is not
dismissed within thirty (30) days after the entry thereof.
(m) Any
Loan
Document is not or ceases to be a valid, binding and enforceable obligation
of,
or is repudiated by, the Loan Parties. Any of the Loan Documents shall cease
to
be legal, valid and binding agreements enforceable against the party executing
the same or such party’s successors and assigns (as permitted under the Loan
Documents) in accordance with the respective terms thereof or shall in any
way
be terminated (except in accordance with its terms) or become or be declared
ineffective or inoperative or shall in any way be challenged or contested or
cease to give or provide the respective Liens, security interests, rights,
titles, interests, remedies, powers or privileges intended to be created
thereby.
(n) The
occurrence of an event which would have a Material Adverse Effect on any Loan
Party.
48
8.2 Consequences
of Default.
(a) If
an
Event of Default shall occur and be continuing beyond any grace period permitted
therefor as set forth above, the Lenders by notice to the Company may declare
the entire amount of the Note together with accrued interest and other amounts
payable hereunder and under any of the other Loan Documents to be immediately
due and payable.
(b) In
the
event the Note shall be declared or become due and payable by acceleration
as
provided above, the Note, accrued interest thereon and all sums payable under
this Agreement, the Note and under the other Loan Documents shall become
immediately due and payable without presentment, demand, protest or notice
of
any kind other than the notice specifically required by Section
8.2(a), all other notice being expressly waived by the Company.
(c) If
an
Event of Default specified under Sections 8.1(e), (f), (g), or (h) above
shall occur, the unpaid principal amount of the Loans then outstanding and
all
interest accrued thereon, any unpaid fees and all other Obligations of the
Loan
Parties to the Lender hereunder and thereunder shall be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived.
(d) Upon
the
occurrence and during the continuance of an Event of Default, the Lenders shall
be entitled to, at the option of the Majority Noteholders, exercise any or
all
of the rights and remedies available to a secured party under the UCC or any
other applicable law (including laws of Israel), and exercise any or all of
its
rights and remedies provided for in this Agreement and in any other Loan
Document. The Obligations under this Agreement or any of the other Loan
Documents shall continue to be effective or be reinstated, as the case may
be,
if at any time any payment of any Obligations is rescinded or must otherwise
be
returned by any of the Lenders upon, on account of, or in connection with,
the
insolvency, bankruptcy or reorganization of the Company or the Parent Guarantor
(as applicable) or otherwise, all as though such payment had not been
made.
(e) Upon
the
occurrence and during the continuance of an Event of Default, the Majority
Noteholders may sell all or any part of the Collateral, at public or private
sales, to the Lenders, a wholesaler, retailer or investor, for cash, upon credit
or for future delivery, and at such price or prices as Majority Noteholders
may
deem commercially reasonable, provided, that the Lenders shall comply with
all
laws, rules and regulations applicable to, and all orders and directives of
any
governmental or regulatory authority having jurisdiction over, the Company
or
the Parent Guarantor (as applicable) or the Collateral. To the extent permitted
by law, the Company hereby specifically waives all rights of redemption and
any
rights of stay or appraisal which it has or may have under any applicable law
in
effect from time to time. Any such public or private sales shall be held at
such
times and at such place(s) as the Majority Noteholders may determine. In case
of
the sale of all or any part of the Collateral on credit or for future delivery,
the Collateral so sold may be retained by the Lenders until the selling price
is
paid by the purchaser, but the Lenders shall not incur any liability in case
of
the failure of such purchaser to pay for the Collateral and, in case of any
such
failure, such Collateral may be resold. The Lenders may, instead of exercising
their power of sale, proceed to enforce the security interest in the Collateral
by seeking a judgment or decree of a court of competent
jurisdiction.
49
8.3 Company’s
Obligations Upon Default.
Upon
the request of the Majority Noteholders after the occurrence and during the
continuance of an Event of Default, the Company will:
(a) Assemble
and make available to the Lenders the Collateral at such place(s) within the
states, provinces or jurisdictions, as applicable, where such Collateral is
located as the Majority Noteholders shall reasonably designate, segregating
all
Collateral so that each item is capable of identification; and
(b) Subject
to the rights of any lessor, permit the Lender, by a representative appointed
by
the Majority Noteholders, to enter any premises where any Collateral is located,
to take possession of the Collateral, to complete the processing, manufacture
or
repair of any Collateral, and to remove the Collateral, or to conduct any public
or private sale of the Collateral, all without any liability of the Lenders
for
rent or other compensation for the use of the Company’s premises.
8.4 Preservation
of Rights.
No
delay or omission of the Lenders to exercise any right under the Loan Documents
shall impair such right or be construed to be a waiver of any Event of Default
or an acquiescence therein. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Majority Noteholders and the Company, and then only
to
the extent in such writing specifically set forth. All remedies contained in
the
Loan Documents or by law afforded shall be cumulative and all shall be available
to the Lenders until the Obligations have been performed in full.
8.5 Indemnification;
Expenses.
The
Company shall indemnify each Lender and its officers, directors, shareholders,
partners, members, trustees, employees, agents, representatives and Affiliates
against any and all out-of-pocket losses, damages, liabilities and expenses
of
any kind incurred by each such Lender in connection with: (i) enforcing,
defending or declaring (or determining whether or how to enforce, defend or
declare) any rights or remedies under the Loan Documents; (ii) responding to
any
subpoena or other legal process or participating (whether voluntarily or
involuntarily) in any legal or other proceeding or investigation; and (iii)
any
insolvency or bankruptcy of the Company or any affiliate thereof. Without
limiting the generality of the foregoing, the Company shall, upon demand, pay
or
reimburse each indemnitee for all indemnified costs and expenses (including
reasonable attorneys’ fees and expenses) incurred thereby. Notwithstanding the
foregoing, no person shall be entitled to any indemnification, payment or
reimbursement in respect of any suit, action or other proceeding or any claim,
loss, damage, liability or expense to the extent arising out of or in connection
with any gross negligence or willful misconduct of such person.
ARTICLE
IX
MISCELLANEOUS
9.1 Assignments;
Parties in Interest.
This
Agreement shall bind and inure to the benefit of the parties and each of their
respective successors and permitted assigns. The Loan Parties may not assign
either this Agreement or any of their rights, interests, or Obligations
hereunder. Any Lender may assign any of its rights hereunder; provided,
however,
that
the transferee agrees to be bound by, and entitled to the benefits of, this
Agreement as an original party hereto.
50
9.2 No
Implied Waivers; Cumulative Remedies; Writing Required.
No
course of dealing and no delay or failure of the Lender or any Loan Party in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy
or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Lender and each Loan Party
under this Agreement and any other Loan Documents are cumulative and not
exclusive of any rights or remedies which they would otherwise have. Any waiver,
permit, consent or approval of any kind or character on the part of any Lender
or any Loan Party of any breach or default under this Agreement or any such
waiver of any provision or condition of this Agreement must be in writing and
shall be effective only to the extent specifically set forth in such
writing.
9.3 Disclosure.
Except
as otherwise required by law, the Lenders and the Loan Parties agree that they
shall make no written or other public disclosures regarding this transaction
or
regarding the parties hereto to any individual or organization without the
prior
written consent of the other parties hereto, which consent shall not be
unreasonably withheld, or as required by applicable law.
9.4 Counterparts.
This
Agreement may be executed in two (2) or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. The parties agree that facsimile signatures shall be
binding.
9.5 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.6 Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b)
when sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day of the recipient, (c) five
(5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company and
the
Lenders at the address for such party set forth below or at such other address
as the Company or any such Lender may designate by ten (10) days advance written
notice to the other parties hereto.
If
to any
of the Loan Parties:
IXI
Mobile, Inc./IXI Mobile (R&D) Ltd.
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Ra’anana
Israel
43665
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇, Chairman
▇▇▇-▇-▇▇▇-▇▇▇▇
telephone
▇▇▇-▇-▇▇▇-▇▇▇▇
telecopy
51
With
copies to:
Alon
Sahar, Esq.
▇▇▇▇▇▇,
▇▇▇ & ▇▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇
(fax:
▇▇▇▇ (▇) ▇▇▇▇▇▇▇▇).
If
to the
Lender:
Southpoint
Master Fund, LP
c/o
Southpoint Capital Advisors LP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
9.7 Expenses.
The
Company shall pay all of its expenses incurred in connection with the
preparation, execution and delivery of the Loan Documents and the consummation
of the transactions contemplated hereby and thereby. In addition, the Company
shall pay the Lenders all reasonable out-of-pocket costs and other expenses
incurred from time to time by such Lenders in connection with their due
diligence review and the drafting and negotiating of the Loan Documents up
to an
amount not to exceed $150,000.
9.8 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Majority Noteholders, and following the consummation of the ITAC/IXI
Merger and the assumption by ITAC of the Assumed Obligations (as defined in
the
ITAC Certification), then by ITAC and the Majority Noteholders. Any amendment
or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Notes purchased under this Agreement at the time outstanding,
each
future holder of all such Notes, the Company and its Subsidiary, and following
the consummation of the ITAC/IXI Merger and the assumption by ITAC of the
Assumed Obligations (as defined in the ITAC Certification), by
ITAC.
9.9 Entire
Agreement; Severability.
The
Loan Documents contain the entire understanding of the parties with respect
to
the subject matter hereof and supersede all prior agreements and understandings
among the parties with respect to such subject matter. It is the desire and
intent of the parties that the provisions of the Loan Documents be enforced
to
the fullest extent permissible under the law and public policies applied in
each
jurisdiction in which enforcement is sought. Accordingly, in the event that
any
provision of the Loan Documents would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of the Loan Documents or affecting the validity or enforceability
of
such provision in any other jurisdiction. Notwithstanding the foregoing, if
such
provision could be more narrowly drawn so as not be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of the Loan
Documents or affecting the validity or enforceability of such provision in
any
other jurisdiction.
52
9.10 Governing
Law.
This
Agreement shall be governed by and construed under the laws of the State of
New
York, exclusive of the provisions thereof governing conflicts of
laws.
9.11 Authorized
Agent.
The
Loan Parties do hereby designate and appoint Corporation Service Company, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as their authorized agent in the United
States to accept and acknowledge on their behalf service of any and all process
which may be served upon Loan Parties in connection with any suit, action or
proceeding regarding injunctive or other equitable relief in connection with
or
under this Agreement or to enforce any award under this Agreement,
and
agrees that service of process upon said agent at said address and written
notice of said service mailed or delivered in the manner provided herein shall
be deemed in every respect effective service of process upon the Company and/or
the Parent Guarantor in connection with any suit, action or proceeding regarding
injunctive or other equitable relief in connection with or under this Agreement
or to enforce any award under this Agreement.
The
Loan Parties (i) shall give prompt notice to Lender of any changed address
of
their authorized agent hereunder, (ii) may at any time and from time to time
designate a substitute authorized agent with an office in the United States
(which substitute agent and office shall be designated as the person and address
for service of process), and (iii) shall promptly designate such a substitute
if
their authorized agent ceases to have an office in the United States or is
dissolved without leaving a successor.
9.12 Sovereign
Immunity Waived.
Any
Party that now or hereafter has a right to claim sovereign immunity for itself
or any of its assets hereby waives any such immunity to the fullest extent
permitted by applicable Law. This waiver includes immunity from (i) any
judicial, administrative or other proceedings and (ii) any effort to confirm,
enforce or execute any decision, settlement, award, Judgment, service of
process, execution order or attachment (including pre-judgment attachment)
that
results from an expert determination, mediation, arbitration or any judicial
or
administrative proceedings commenced pursuant to this Agreement. Each Party
acknowledges that its rights and obligations hereunder are of a commercial
and
not a governmental nature.
53
9.13 CONSENT
TO FORUM; WAIVER OF JURY TRIAL.
THE
LOAN PARTIES HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE JURISDICTION OF
THE
NEW YORK SUPREME COURT SITTING IN NEW YORK COUNTY, NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND WAIVE PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENT THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY
AT
THE ADDRESSES PROVIDED FOR IN SECTION 9.6 AND SERVICE SO MADE SHALL BE DEEMED
TO
BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY OBJECTION
TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN
AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE.
EACH LOAN PARTY, THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT
PERMITTED BY LAW.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
54
IN
WITNESS WHEREOF,
the
undersigned have hereunto set their hands to this Loan Agreement as of the
day
and year first above written.
IXI
MOBILE
(R&D), LTD.
By:/s/
▇▇▇▇
▇▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇▇
Title:
Chief Executive Officer
Address:
IXI
Mobile(R&D), Ltd.
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Ra’anana
Israel
43665
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇, Chairman
▇▇▇-▇-▇▇▇-▇▇▇▇
telephone
▇▇▇-▇-▇▇▇-▇▇▇▇
telecopy
with
a
copy to:
Alon
Sahar, Esq.
▇▇▇▇▇▇,
▇▇▇ & ▇▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇
Attention:
Alon Sahar, Adv.
▇▇▇-▇-▇▇▇▇▇▇▇/1
telephone
▇▇▇-▇-▇▇▇▇▇▇▇
telecopy
IXI
MOBILE, INC.
By:
/s/
▇▇▇▇ ▇▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇▇
Title:
Chief Executive Officer
Address:
Same
as
the address (and address for copies) set forth for IXI Mobile (R&D) Ltd.
above
IN
WITNESS WHEREOF,
the
undersigned have hereunto set their hands to this Loan Agreement as of the
day
and year first above written.
LENDER:
SOUTHPOINT
MASTER FUND, LP
By: Southpoint
GP, LP, its general partner
By: Southpoint
GP, LLC
By:
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇
▇.
▇▇▇▇▇
Title: Manager
By:
/s/
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
Name: ▇▇▇▇
▇.
▇▇▇▇▇, ▇▇
Title: Manager
| Address: |
c/o
Southpoint Capital Advisors LP
|
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
SCHEDULE
I
SCHEDULE
OF LENDERS
|
Lender
|
Principal
Amount
|
Address
|
|
Southpoint
Master Fund, LP
|
$20,000,000.00
Six
Hundred Thousand (600,000)
shares
of ITAC Common Stock
|
Southpoint
Capital Advisors LP
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇;
▇▇▇▇▇
▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
Total
Principal Amount
|
$20,000,000.00
|
|
|
Maximum
Principal
Amount in
the
event of a Luemi Debt assumption*
|
$8,000,000.00
Two
Hundred Forty Thousand (240,000)
shares
of ITAC Common Stock
|
▇/▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇
Ventures Ltd.
Begin
7 St.
Ramat
Gan, Israel
|
|
Total
Maximum Principal Amount in
the
event of a Luemi Debt assumption*
|
$28,000,000.00
|
* In
the
event of an assumption by any of the Leumi Guarantors of any Leumi Debt, this
Schedule of Lenders shall be revised to include the name of the assuming Leumi
Guarantor(s) and the respective amount of the assumed Leumi Debt.
Exhibit
A
Form
of Note
See
attached form of Note attached
Exhibit
B
Form
of First Ranking Security Agreement
See
attached form of First Ranking Security Agreement attached
Exhibit
C
Form
of First Ranking Debenture - Fixed and Floating Charge
See
attached form of First Ranking Debenture - Floating Charge
attached
Exhibit
D
Form
of Parent Guarantor’s Guaranty
See
attached form of Parent Guarantor’s Guaranty
Form
of ITAC Warrant
See
attached form of ITAC Warrant
Exhibit
F
Form
of Registration Rights Agreement
See
attached form of Registration Rights Agreement
Exhibit
G-1
Form
of Legal Opinion of Company Counsel
See
attached form of Legal Opinion of Company Counsel
Exhibit
G-2
Form
of Legal Opinion of Company Israeli Counsel
See
attached form of Legal Opinion of Company Israeli
Counsel
Exhibit
H
9th
Amended and Restated Certificate of Incorporation
See
attached form of 9th
Amended and Restated Certificate of Incorporation
Exhibit
I
Guaranty
Joinder
See
attached form of Guaranty
Joinder
Exhibit
J
ITAC
Certification
See
attached form of ITAC Certification
Exhibit
K
Undertaking
See
attached form of Undertaking