REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of ____________ 19___ between
Hertz Computer Corporation, a New York corporation, Me "Borrower") and United
Mizrahi Bank and Trust Company, a New York chartered commercial bank (the
"Bank"). The parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
"Advance(s)" shag have the meaning assigned to such term in
Section 2.01.
"Affiliate" means Any person (1 ) which directly or indirectly
controls, or is controlled by, or is under common control with the Borrower or
a Subsidiary; (2) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of the Borrower or any
Subsidiary; or (3) five percent (5%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Borrower or a
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Revolving Credit Agreement, as amended,
supplemented, or modified from time to time.
"Business Day" means any day other than a Saturday, Sunday, or other
day on which the Bank is closed.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and published interpretations thereof.
"Collateral" means all property which is subject or is to be subject
to the Lien granted by the Security Agreement.
"Commitment" means the Bank's obligation to make Advances to the
Borrower pursuant to Section 2.01 in the amount referred to therein.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 414(b) or 414(c) of the Code.
"Debt" means (1) indebtedness or liability for borrowed money; (2)
obligations evidenced by bonds, debentures, notes, or other similar
instruments; (3) obligations for the deferred purchase price of property or
services (including trade obligations); (4) obligations as lessee under Capital
Leases; (5) current liabilities in respect of unfunded vested benefits under
Plans covered by ERISA; (6) obligations under letters of credit; (7)
obligations under acceptance facilities; (8) ail guaranties, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or entity, or otherwise to assure a
creditor against loss; and (9) obligations secured by any Liens, whether or not
the obligations have been assumed.
"Default" means any of the events specified in Section 8.01, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Eligible Accounts Receivable" means that portion of the accounts
receivable consisting of domestic accounts actually owing to Borrower by its
account debtors subject to no counterclaim, defense, setoff or deduction and
for goods already shipped and/or services actually rendered, excluding,
however, any account: (1 ) with respect to which any portion thereof is more
than ninety (90) days past due; 12) which is owing by any account debtor
affiliated with Borrower (except those accounts receivable owed by Hertz
Computer Information Systems (1985) Ltd.) or with any of its shareholders,
directors or officers, as determined by the Bank in its sole discretion; (3)
the assignment of which is subject to any requirements set forth in any
Assignment of Claims Act except to the extent such requirements are satisfied;
or (4) which has otherwise been excluded by the Bank, which Bank reserves the
right to do, in Bank's sole discretion, for the purposes hereof. It is
understood and acknowledged that the Bank has the absolute right to exclude any
particular company and/or any particular receivable from the definition of
Eligible Accounts Receivable, irrespective of whether such company or such type
of receivable was previously deemed acceptable by the Bank ) all borrowing
against Eligible Accounts Receivable shall be subject to an eighty percent (80
% ) advance rate. Eligible Accounts Receivable from Israel are limited to
twenty five percent (25%) of the advance rate.
"Eligible Inventory" means that portion of the inventory consisting
of inventory in the possession and control of Borrower, which has not been
excluded by Bank, which it reserves the right to do, in Bank's sole discretion,
for the purposes hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"Event of Default" means any of the events specified in Section 7.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles in the United States.
"Guarantor" means individually and collectively, Eli E. HERTZ, I.
MARILYN HERTZ, HERGO ERGONOMIC SUPPORT SYSTEMS, INC. and HERTZ COMPUTER
INFORMATION SYSTEMS (1985) LTD.
"Guaranty" means the Absolute, Unconditional, Irrevocable and
Continuing Guaranty(s) of Payment in substantially the form of Exhibit "A" to
be delivered by the Guarantor under the terms of this Agreement.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other)m, or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
"Loan Documents" means this Agreement, the Note, the Security
Agreement, and the Guaranty.;
"Multiemployer Plan" means a Plan described in section 4001 (a)(3) of
ERISA.
"Note" shall have the meaning assigned to such term in Section 2.06.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any pension plan which is covered by Title IV of ERISA
and in respect of which the Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA.
"Prime Rate" means the rate of interest announced by the Bank from
time to time by Citibank, N.A. as its prime commercial lending rate (the "Prime
Rate"). Each change in the fluctuating interest rate hereunder shall take
effect simultaneously with the corresponding change in the Prime Rate.
"Principal Office" means the Bank's office at 10 Rockefeller Plaza,
New York, NY 1 0020.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA of Section 4975 of the Code.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Security Agreement" means the Security Agreement in substantially the
form of Exhibit "B", to be delivered by the Borrower under the terms of this
Agreement.
"Subordination and Subrogation Agreement" means the Subordination and
Subrogation Agreement in substantially the form of Exhibit "C", to be delivered
by the Borrower under the terms of this Agreement.
"Subsidiary" means, as to the Borrower, a corporation of which shares
of stock having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation are at the time owned, or
the management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by the Borrower.
"Tangible Net Worth" means the total capital accounts (owned capital)
less miscellaneous assets (intangibles).
"Termination Date" means June 30, 1996.
Section 1.02 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
4.04, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
ARTICLE II
AMOUNT AND TERMS OF THE ADVANCES
Section 2.01. Revolving Credit. The Bank agrees on the terms and
conditions hereinafter set forth to make loans (the "Advances") to the Borrower
from time to time during the period from the date of this Agreement up to but
not including the Termination Date.
Section 2.06 Note. All Advances made by the Bank under this Agreement
shall be evidenced by, and repaid with interest in accordance with, a single
promissory note of the Borrower in substantially the form of Exhibit "D", duly
completed, in the principal amount of One Million Dollars ($1,000,000.00),
dated the date of this Agreement, payable to the Bank, and maturing as to
principal on the Termination Date (the "Note"). The Bank is hereby authorized
by the Borrower to endorse on the schedule attached to the Note the amount of
each Loan and of each payment of principal received by the Bank on account of
the Advances, which endorsement shall, in the absence of obvious error, be
conclusive as to the outstanding balance of the Advances made by the Bank and
the Bank shall send notice of each Advance made to the Borrower; provided,
however, that the failure to make such notation or give such notice with
respect to any Loan or payment shall not limit or otherwise affect the
obligations of the Borrower under this Agreement or the Note.
Section 2.07, Prepayments. The Borrower may prepay the Note in whole
or in part with accrued interest to the date of such prepayment on the amount
prepaid, provided that each partial prepayment shall be in a principal amount
not less than Fifteen Thousand ($1 5,000.00).
Section 2.08 Method of Payment. The Borrower shall make each payment
under this Agreement and under the Note not later than 11 a.m. on the date when
due in lawful money of the United States to the Bank at its Principal Office in
immediately available funds. The Borrower hereby authorizes the Bank, if and to
the extent payment is not made when due under this Agreement or under the Note,
to charge from time to time against any account of the Borrower with the Bank
any amount so due and to so notify the Borrower. Whenever any payment to be
made under this Agreement or under the Note shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extensions of time shall in such case be included in the
computation of the payment of interest and the commitment fee, as the case may
be.
Section 2.09 Use of Proceeds. The Line shall be used to support
Eligible Accounts Receivable.
Section 2.10 Interest Rate and Payments on Advances. Interest on
Advances made under the Line will accrue at the rate of One percent (1 %)
(floating daily), above the
Prime Rate, payable monthly, commencing the first day of the first month after
the Closing Date (defined hereinafter) on all
outstanding principal.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 Condition Precedent to Initial Advance. The obligation of
the Bank to make the initial Loan to the Borrower is subject to the condition
precedent that the Bank shall have received on or before the day of such Loan
each of the following, in form and substance satisfactory to the Bank and its
counsel:
(1) Note. The Note executed by the Borrower;
(2) Security Agreement. A Security Agreement duly executed by the
Borrower together with acknowledgment copies of the Financing Statements (WCC-1
) duly filed under the Uniform Commercial Code of all jurisdictions necessary
or, in the opinion of the Bank, desirable to perfect the security interest
created by the Security Agreement;
(3) Evidence of all corporate action by the Borrower. Certified (as of
the date of this Agreement) copies of all corporate action taken by the
Borrower, including resolutions of its Board of Directors, authorizing the
execution, delivery, and performance of the Loan Documents to which it is a
party and such other document to be delivered pursuant to this Agreement in
substantially the form of Exhibit "E";
(4) Incumbency and signature certificate of the Borrower. A
certificate (dated as of the date of this Agreement) of the Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign the Loan Documents to which it is a party and the
other documents to be delivered by the Borrower under this Agreement in
substantially the form of Exhibit "F";
(5) Opinion of counsel for the Borrower. A favorable opinion of
counsel of the Borrower and as to such other matters as the Bank may reasonably
request in substantially the form of Exhibit "G";
(6) Evidence of all corporate action by the corporate Guarantor.
Certified (as of the date of this Agreement) copies of all corporate action
taken by the Corporate Guarantor, including resolutions of their respective
Board of Directors, authorizing the execution, delivery, and performance of the
Loan Documents to which each is a party and each other document to be delivered
pursuant to this Agreement in substantially the form of Exhibit " H ";
(7) Incumbency and signature certificate of the Corporate Guarantor. A
certificate (dated as of the date of this Agreement) of the Secretary of the
respective Corporate Guarantor certifying the names and true signatures of the
officers of the
respective Corporate Guarantor authorized to sign the Loan Documents to which
it is a party and the other documents to be delivered by the respective
Corporate Guarantor under this Agreement in substantially the form of Exhibit
"I";
(8) Guarantv. A Guaranty duly executed by the Guarantors.
(9) Subordination and Subronation. A Subordination and Subrogation
Agreement in favor of the Bank subordinating and subrogating any and ail
interest it may have in Borrower to the Bank and shall be executed by the
following entities: Celia Levisky
(10) Opinion of counsel for the Borrower. A favorable opinion of
counsel of the respective corporate Guarantors and as to such other matters as
the Bank may reasonably request in substantially the form of Exhibit "J";
(11) Proof of Insurance. A non-assignable key man life insurance
policy in the amount of One Million One Hundred Thousand Dollars
($1,100,000.00) on the life of Eli E. Hertz, naming the Bank as beneficiary,
with such company as is acceptable to the Bank in its sole discretion;
(12) Undertaken by Hertz computer Information Systems (1985) Ltd. to
deliver Guarantv. An Undertaking by Hertz Computer Information Systems (1985)
Ltd. to deliver Guaranty to Bank subject to approval under Israeli law.
Section 3.02 Conditions Precedent to All Advances. The obligation of
the Bank to make each Advance (including the initial Advance) shall be subject
to the further conditions precedent that on the date of such Advance;
(1) Borrower shall furnish to the Bank a Compliance
Certificate in substantially the form of Exhibit "K" signed by a duly
authorized officer of the Borrower dated the date of such Advance; and
(2) the Bank shall have received such other approvals,
opinions, or documents as the Bank may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Incorporation, Good Standing, and Due Qualification. The
Borrower and each of its Subsidiaries is a corporation duly incorporated,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation; has the corporate power and authority to own its assets and
to transact the business in which it is now engaged or proposed to be engaged
in; and is duly qualified as a foreign corporation and
in good standing under the laws of each ether jurisdiction in which such
qualification is required.
Section 4.02 Corporate Power and Authority. The execution, delivery,
and performance by the Borrower of the Loan Documents to which it is a party
have been duly authorized by all necessary corporate action and do not and will
not 11 ) require any consent or approval of the stockholders of such
corporation; (2) contravene such corporation's charter or bylaws; (3) violate
any provision of any law, rule, regulation (including, without limitation,
Regulations U and X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination, or award presently in
effect having applicability to such corporation; (4) result in a breach of or
constitute a default under any indenture of loan or credit agreement or any
other agreement, lease, or instrument to which such corporation is a party or
by which it or it's properties may be bound or affected; (5) result in, or
require, the creation or imposition of any Lien, upon or with respect to any of
the properties now owned or hereafter acquired by such corporation; and (6)
cause such corporation to be in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award or any such
indenture, agreement, lease, or instrument.
Section 4.03 Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid and binding obligations of the Borrower, as the case may be,
enforceable against the Borrower in accordance with their respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors' rights
generally.
Section 4.04 Financial Statements. The balance sheet of the Borrower
as at August 31, 1994, and the related statements of income and retained
earnings of the Borrower of the fiscal year then ended, and the accompanying
footnotes, together with the opinion thereon, of the accountants, copies of
which have been furnished to the Bank, are complete and correct and fairly
present the financial condition of the Borrower as at such dates and the
results of the operations of the Borrower for the periods covered by such
statements, all in accordance with GAAP consistently applied and since August
31. 1994, there has been no material adverse change in the condition (financial
or otherwise), business or operations of the Borrower. There are no liabilities
of the Borrower, fixed or contingent, which are material but are not reflected
in the financial statements or in the notes thereto, other than liabilities
arising in the ordinary course of business since December 31, 1 994. No
information, exhibit, or report furnished by the Borrower to the Bank in
connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statement contained therein not materially misleading.
Section 4.05 Labor Disputes and Acts of G-d. Neither the business nor
the properties of the Borrower or the Guarantor are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of G-d
or of the public enemy, or other casualty (whether or not covered by insurance)
materially and adversely affecting such business properties or the operation of
the Borrower or the Guarantor as of the date of execution hereof.
Section 4.06 Other Agreements. Neither the Borrower nor the Guarantor
is a party to any indenture, loan, or credit agreement, or to any lease or
other agreement or instrument, or subject to any charter; or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations, or conditions, financial or otherwise, of the
Borrower or the Guarantor, or the ability of the Borrower or the Guarantor to
carry out its obligations under the loan Documents to which it is a party.
Neither the Borrower nor the Guarantor is in default in any respect in the
performance, observance, or fulfillment of any of the obligations, covenants or
conditions contained in any agreement of instrument material to its business to
which it is a party.
Section 4.07 Litigation. There is no pending or threatened action or
proceeding against or affecting the Borrower or any of its Subsidiaries or the
Guarantor before any court, governmental agency, or arbitrator other than as
previously disclosed to the Bank in writing.
Section 4.08 No Defaults on Outstanding Judgments or Orders. The
Borrower and its Subsidiaries and the Guarantor have satisfied all judgments
and neither the Borrower nor the Guarantor is in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Section 4.09 Ownership and Liens. The Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in the
financial statements referred to in Section 4.04 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Borrower and none of its leasehold interests
is subject to any Lien, except such as may be permitted pursuant to Section
6.01 of this Agreement.
Section 4.10 Subsidiaries and Ownership of Stock. Set forth in Exhibit
"L" is a complete and accurate list of the Subsidiaries of the Borrower,
showing the jurisdiction of incorporation of each and showing the percentage of
the Borrower's ownership of the outstanding stock of each Subsidiary. All of
the outstanding capital stock of each Subsidiary has been validly issued, is
fully paid and nonassessable, and is owned by the Borrower free and clear of
ail liens.
Section 4.11 ERISA. The Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event
nor a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed, nor has any Plan
been terminated; no circumstances exist which constitute grounds entitling the
PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; the Borrower and
each Commonly Controlled Entity have met their minimum funding requirements
under ERISA with respect to all of their Plans, and the present value of all
vested benefits under each Plan does not exceed the fair market value of all
Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with the provisions of ERISA; and
neither the Borrower nor any Commonly Controlled Entity has incurred any
liability to the PBGC under ERISA.
Section 4.12 Operation of Business. The Borrower and its Subsidiaries
and the Guarantor possess all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and the Borrower and its Subsidiaries and the Guarantor are
not in violation of any valid rights of others with respect to any of the
foregoing.
Section 4.13 Taxes. The Borrower and each of its Subsidiaries and the
Guarantor have filed all tax returns (federal, state, and local) required to be
filed and have paid all taxes, assessments, and governmental charges and levies
thereon to be due, including interest and penalties as determined by its
accounting professionals which are acceptable to the Bank. The federal income
tax liabilities of the Borrower and its Subsidiaries have been paid for all
taxable years up to and including the taxable year ended August 31, 1994.
Section 4.14 Debt. Exhibit "M" is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital Leases,
and other investments, agreements, and arrangements presently in effect
providing for or relating to extension of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in respect of which the Borrower is in any manner directly or contingently
obligated; and the maximum principal or face amounts of the credit in question,
which are outstanding and which can be outstanding, are correctly stated, and
all Liens of any nature given or agreed to be given as security therefor are
correctly described or indicated in such Exhibit.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will:
Section 5.01 Maintenance of Existence. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified, as a foreign corporation in each jurisdiction
in which such qualification is required.
Section 5.02 Maintenance of Records. Keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Borrower and
its Subsidiaries.
Section 5.03 Maintenance of Properties. Maintain, keep, and preserve
all of it's properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted.
Section 5.04 Conduct of Business. Continue to engage in an efficient
and economical manner in a business of the same general type as conducted by it
on the date of this Agreement.
Section 5.05 Maintenance of Insurance. Maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated, which insurance may
provide for reasonable deductibility from coverage thereof.
Section 5.06 Compliance With Laws. Comply in all respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments, and governmental charges imposed upon it or upon its property.
Section 5.07 Right of Inspection. At any reasonable time and from time
to time, permit the Bank or any agent or representative thereof to examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower and to discuss the affairs, finances, and
accounts of the Borrower with any of their respective officers and directors
and the Borrower's independent accountants, all at Borrower's sole expense.
Section 5.08 Reporting Requirements. Furnish to the Bank:
(1) Month Eligible Accounts Receivable. Monthly Eligible Accounts
Receivable aging along with a borrowing base certificate duly signed by an
authorized
officer of the Borrower within 15 days after the end of each calendar month.
The borrowing base certificate shall specify the amount of goods on memo and
shall be substantially in the form of Exhibit "N".
(2) Annual Financial Statement. An unqualified, audited financial
statement prepared in accordance with generally accepted accounting principles
within 120 days of the end of its fiscal year. This financial statement must be
addressed to the Bank and prepared by certified public accountants acceptable to
the Bank.
ARTICLE Vl NEGATIVE COVENANTS
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will not: ,
Section 6.01 Liens. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist, any Lien
upon or with respect to any of its accounts receivable, now owned or hereafter
acquired, not previously disclosed to the Bank in writing, except for liens in
favor of the Bank.
Section 6.02 Debt. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist, any Debt,
except;
(1) Debt of the Borrower under this Agreement or the
Note;
(2) Debt described in Exhibit "M" but no voluntary
prepayments, renewals, extensions;
(3) Debt of the Borrower subordinated on terms
satisfactory to the Bank to the Borrower's obligation under this Agreement and
the Note;
(4) Debt incurred in the ordinary course of business.
Section 6.03 Mergers, Etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all or substantially all
of the assets (whether in one transaction or in a series of transactions) all
or substantially all of its assets (whether now owned or hereafter acquired) to
any Person, or acquire all or substantially all of the assets or the business
of any Person, or permit any Subsidiary to do so, except that (1 ) any
Subsidiary may merge into or transfer assets to the Borrower and (2) any
Subsidiary may merge into or consolidate with or transfer assets to any other
Subsidiary.
Section 6.04 Leases. Create, incur, assume, or suffer to exist, or
permit any subsidiary to create, incur, assume, or suffer to exist, any
obligation as lessee for the rental
or hire of any real or personal property, except: (1) Capital Leases permitted
by Section 6.01; (2) leases existing on the date of this Agreement and any
extensions or renewals thereof; (3) leases (other than Capital Leases) which do
not in the aggregate require the Borrower and its Subsidiaries on a
consolidated basis to make payments (including taxes, insurance, maintenance,
and similar expenses which the Borrower or any Subsidiary is required to pay
under the terms of any lease) in any fiscal year of the Borrower in excess of
One Hundred Thousand Dollars ( $100,000.00); and (4) leases between the
Borrower and any Subsidiary or between any Subsidiaries.
Section 6.05 Sale and Leaseback. Sell, transfer, or otherwise dispose
of, or permit any Subsidiary to sell, transfer, or otherwise dispose of, any
real or personal property to any Person and thereafter directly or indirectly
lease back the same or similar property.
Section 6.06 Dividends. If Borrower's tangible effective net worth is
less than Seven Hundred Seventy Thousand Dollars ($770,000.00), declare or pay
any dividends; or purchase, redeem, retire, or otherwise acquire for value any
of its capital stock now or hereafter outstanding; or make any distribution of
assets to its stockholders as such whether in cash, assets, or obligations of
the Borrower; or allocate or otherwise set apart any sum for the payment of any
dividend or distribution on, or for the purchase, redemption, or retirement of
any shares of its capital stock; or make any other distribution by reduction of
capital or Otherwise in respect of any shares of its capital stock; or permit
any of its Subsidiaries to purchase or otherwise acquire for value any stock of
the Borrower or another Subsidiary, except that the Borrower { 1 ) may declare
and deliver dividends and make distributions payable solely in common stock of
the Borrower and (2) may purchase or otherwise acquire shares of its capital
stock by exchange for or out of the proceeds received from a substantially
concurrent issue of new shares of its capital stock.
Section 6.07 Sale of Assets. Sell, lease, assign, transfer, or
otherwise dispose of, or permit any Subsidiary to sell, lease, assign,
transfer, or otherwise dispose of, any of its now owned or hereafter acquired
assets (including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except: (1) inventory
disposed of in the ordinary course of business; (2) the sale or other
disposition of assets no longer used or useful in the conduct of it business;
and (3) that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to the Borrower.
Section 6.08 Investments. Make, or permit any Subsidiary to make, any
loan or advance to any Person, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person, or participate as a
partner or joint venturer with any other Person, except: (1 ) direct
obligations of the United States or any agency thereof with maturities of one
year or less from the date of acquisition; (2) commercial paper of a domestic
issuer rated at least "A-1 " by Standard & Poor's Corporation or "P-1 " by
Moody's Investors Service, Inc.; (3) certificates of deposit with maturities of
one year or less in an amount of One Hundred Thousand Dollars ($ 100,000.00) or
less in any one particular bank or in such other
amount as may be required to retain Federal Deposit Insurance Corporation
coverage of said certificate of deposit; and (4) stock, obligations, or
securities received in settlement of debts (created in the ordinary course of
business) owing to the Borrower of any Subsidiary.
Section 6.09 Guaranties, Etc. Assume, guaranty, endorse, or otherwise
be or become directly or contingently responsible or liable, or permit any
Subsidiary to assume, guaranty, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or an agreement to maintain or
cause such Person to maintain a minimum working capital or net worth, or
otherwise to assure the creditors of any Person against loss) for obligations
of any Person, except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
Section 6.10 Transaction With Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than would obtain in
comparable arm's-length transaction with a Person not an Affiliate.
ARTICLE Vl1
FINANCIAL COVENANTS
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement:
Section 7.01 Loans to Affiliates. The Borrower shall not lend an
amount greater than Two Hundred Seventy Five Thousand Dollars ($275,000.00) to
Hergo Ergonomic Support Systems, Inc.The currently existing loan to Hergo
Ergonomic Support Systems, Inc. shall be reduced by Seventy Five Thousand
Dollars ($75,000.00) within six (6) months from the date of execution of this
Agreement.
ARTICLE Vl11
EVENTS OF DEFAULT
Section 8.01 Events of Default. If any of the following events shall
occur:
(1) The Borrower should fail to pay the principal of, or interest on,
the Note, or any amount of a commitment or other fee, as and when due and
payable;
(2) Any representation or warranty made or deemed made by the Borrower
in this Agreement or the Security Agreement or by the Guarantor in the Guaranty
or which is contained in any certificate, document, opinion, or financial or
other statement furnished at any time under or in connection with any Loan
Document shall prove to have been incorrect, incomplete, or misleading in any
material respect on or as of the date made or deemed made;
(3) The Borrower or the Guarantor shall fail to perform or observe any
term, covenant, or agreement contained in Articles V, Vl, or Vll hereof;
(4) The Borrower or any of its Subsidiaries or the Guarantor shall (a)
fail to pay any indebtedness for borrowed money (other than the Note) of the
Borrower or such Subsidiary or the Guarantor, as the case may be, or any
interest or premium thereon, when due whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise), or (b) fail to perform or
observe any term, covenant, or condition on its part to be performed or
observed under any agreement or instrument relating to any such indebtedness,
when required to be performed or observed, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of, after
the giving of notice or passage of time, or both, the maturity of such
indebtedness, when required to be performed or observed, if the effect of such
failure to perform or observe is to accelerate, or to permit the acceleration
of, after the giving of notice or passage of time, or both, the maturity of
such indebtedness, whether or not such failure to perform or observe shall be
waived by the holder of such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
(5) The Borrower or any of its Subsidiaries or the Guarantor (a) shall
generally not pay, or shall be unable to pay, or shall admit in writing its
inability to pay its debts as such debts become due; or (b) shall make an
assignment for the benefit of creditors, or petition or apply to any tribunal
for the appointment of custodian, receiver, or trustee for it or a substantial
apart of its assets; or (c) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or (d)
shall have had any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or an adjudication
or appointment is made, and which remains undismissed for a period of thirty
(30) days or more; or (e) shall take any corporate action indicating its
consent to, approval of, or acquiescence in any such petition, application,
proceeding, or order for relief or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties; or (f) shall suffer
any such custodianship, receivership, or trusteeship t continue undischarged
for a period of thirty (30) days or more;
(6) One or more judgments, decrees, or orders for the payment of money
in excess of One Hundred Thousand Dollars ($100,000.00) in the aggregate shall
be rendered against the Borrower or any of its Subsidiaries and such judgments,
decrees, or
orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied, or stayed or
bonded pending appeal;
(7) The Security Agreement shall at any time after its execution and
delivery and for any reason cease (a) to create a valid and perfected first
priority security interest in and to the property purported to be subject to
such Security Agreement; or (b) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the Borrower, or the Borrower shall deny it has any further
liability or obligation under the Security Agreement, or the Borrower shall
fail to perform any of its obligations under the Security Agreement;
(8) The Guaranty shall at any time after its execution and delivery
and for any reason cease to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof shall be contested by
the Guarantor or the Guarantor shall deny it has any further liability or
obligation under, or shall fail to perform its obligations under, the Guaranty;
(9) Any of the following events shall occur or exist with respect tot
the Borrower and any Commonly Controlled Entity under ERISA: any Reportable
Event shall occur; complete or partial withdrawal from any Multiemployer Plan
shall take place; and Prohibited Transaction shall occur; a notice of intent to
terminate a Plan shall be filed, or a Plan shall be terminated; or
circumstances shall exist which constitute grounds entitling the PBGC to
terminate a Plan; or
(10) If the Bank receives its first notice of a hazardous discharge or
an environmental complaint from a source other than the Borrower, and Bank does
not receive notice (which may be given in oral form, provided same is followed
with all due dispatch by written notice given by Certified Mail, Return Receipt
Requested) of such hazardous discharge or Environmental complaint from the
Borrower within twenty-four (24) hours of the time the Bank first receives said
notice from a source other than the Borrower; or if any federal, state, or
local agency asserts or creates a Lien upon any or all of the assets,
equipment, property, leaseholds, or other facilities of the Borrower by reason
of the occurrence of a hazardous discharge or an environmental complaint; or if
any federal, state, or local agency asserts or creates a Lien upon any or all
of the assets, equipment, property, leaseholds, or other facilities of the
Borrower by reason of the occurrence of a hazardous discharge or an
environmental complaint; provided, however, that such claim shall not
constitute a default if, within five (5) Business Days of the occurrence giving
rise to the claim, (a) the Borrower can prove to the Bank's satisfaction that
the Borrower has commenced and is diligently pursuing either: (i) a cure or
correction of the event which constitutes the basis for the claim, and
continues diligently to pursue such cure or correction to completion or {ii)
proceedings for an injunction, a restraining order, or other appropriate
emergent relief preventing such agency or agencies from asserting such claim,
which relief is granted within ten (10) Business Days of the occurrence giving
rise to the claim and the injunction, order, or emergency relief is not
thereafter resolved or reversed on appeal; and (b) in either of the foregoing
events, the Borrower has posted a bond, letter of credit, or other security
satisfactory in form, substance, and amount to both the Bank and the agency or
entity asserting the claim to secure the proper and complete cure or correction
of the event which constitutes the basis for the claim; then, and in any such
event, the Bank may, by notice to the Borrower, (1 ) declare its obligation to
make Advances to be terminated, whereupon the same shall forthwith terminate,
and (2) declare the Note, all interest thereon, and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Note, all
such interest, and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Borrower.
(11) The death or incompetence of Eli E. Hertz. (This clause shall
become null and void upon Borrower's compliance with Paragraph 3.01(11).
Upon the occurrence and during the continuance of any Event of
Default, the Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at any
time owing by the Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement or the Note or any other Loan Document,
irrespective of whether or not the Bank shall have made any demand under this
Agreement or the Note or such other Loan Document and although such obligations
may be unmatured. The Bank agrees promptly to notify the Borrower after any
such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of the
Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Bank may
have.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments, Etc. No amendment, modification, termination,
or waiver Of any provision of any Loan Document to which the Borrower is a
party, nor consent to any departure by the Borrower from any Loan Document to
which it is a party, shall in any event be effective unless he same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 9.02 ; Notices, Etc. All notices and other communications
provided for under this Agreement and under the other Loan Documents to which
the Borrower is a party shall be in writing [including telegraphic, telex, and
facsimile transmissions) and mailed or transmitted or delivered, if to the
Borrower, at its address at 321 Fifth Avenue, New York, NY, 10016 Attention:
Mr. Eli E. Hertz, President, and if to the Bank, at its address at 1
Rockefeller Plaza, New York, NY 10020, Attention: Mr. Marvin Factor,
Vice President; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section. Except as otherwise provided in this
Agreement, all such notices and communications shall be effective when
deposited in the mails or delivered to the telegraph company, or sent,
answerback received, respectively, addressed as aforesaid, except that notices
to the Bank pursuant to the provisions of Article II shall not be effective
until received by the Bank. All notices must be evidenced by receipt.
Section 9.03 No Waiver. No failure or delay on the part of the Bank in
exercising any right, power, or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise of any such right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise.
Section 9.04 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Bank.
Section 9.05 Costs, Expenses, and Taxes. The Borrower agrees to pay on
demand all costs and expenses incurred by the Bank in connection with the
delivery and filing of the Loan Documents (except for attorneys' fees), and of
any amendment, modification, or supplement to the Loan Documents. The Borrower
agrees to pay all such costs and expenses, including attorneys fees and court
costs, incurred in connection with enforcement of the Loan Documents, or any
amendment, modification, or supplement thereto, whether by negotiation, legal
proceedings, or otherwise. In addition, the Borrower shall pay any and all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of any of the
Loan Documents and the other documents to be delivered under any such Loan
Documents, and agrees to hold the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay such taxes and fees. This provision shall survive termination of this
Agreement.
Section 9.06 Integration. This Agreement and the Loan Documents
contain the entire agreement between the parties relating to the subject matter
hereof and supersede all oral statements and prior writings with respect
thereto.
Section 9.07 Indemnity. The Borrower hereby agrees to defend,
indemnify, and hold the Bank harmless from and against any and all claims,
damages, judgments, penalties, costs, and expenses (including attorney fees and
court costs now or hereafter arising from the aforesaid enforcement of this
clause) arising directly or indirectly from the activities of the Borrower and
its Subsidiaries, its predecessors in interest, or third parties with whom it
has a contractual relationship, or arising directly or indirectly from the
violation of any environmental protection, health, or safety law, whether such
claims are asserted by any governmental agency or any other person. This
indemnity shall survive termination of this Agreement.
Section 9.08 Governing Law. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of New
York
Section 9.09 Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, s to
such jurisdiction, be ineffective t the extent of such prohibition or
unenforceability without invalidating the remaining provision of such Loan
Document of affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 9.10 Headings. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
Section 9.11 Jury Trial Waiver. BORROWER AND BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO A TRIAL BY JURY
IN RESPECT TO ANY LITIGATION BASED HEREIN, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT, AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED
IN CONJUNCTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EACH PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS
AGREEMENT. BORROWER FURTHER ACKNOWLEDGES THAT THIS JURY TRIAL WAIVER PROVISION
HAS BEEN EXPLAINED TO IT BY ITS COUNSEL AND THAT IT UNDERSTANDS AND AGREES TO
SAME. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT THIS AGREEMENT OR ANY
DOCUMENT RELATING HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTING AND DELIVERING THIS AGREEMENT, THE
BORROWER ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENT, WHICH
ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH JURISDICTION.
THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS.
SUCH SERVICE WILL BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto by their respective corporate officers "hereunto duly authorized, all as
of the date first hereinabove written.
United Mizrahi Bank and Trust Company
By: /s/ Marvin Factor
MARVIN FACTOR, Vice President
By: /s/ Marvin Veitch
MARVIN VEITCH, Vice President
Hertz Computer Corporation
By: /s/ Eli E. Hertz
ELI E. HERTZ, President
STATE OF NEW YORK
COUNTY OF NEW YORK
SWORN TO, SUBSCRIBED AND ACKNOWLEDGED before me this 28th day of June,
1995, by MARVIN FACTOR as Vice President of United Mizrahi Bank and Trust
Company, a New York chartered commercial bank, on behalf of said bank.
/s/ Eric S. Goldman
Notary Public, State of New York
My Commission Expires: 6/29/97