AMENDED AND RESTATED CREDIT AGREEMENT
BETWEEN
BANK LEUMI USA, AS LENDER
AND
DATA SYSTEMS & SOFTWARE INC., AS BORROWER
Dated: August 30, 1999
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..................................................1
1.1 Definitions..................................................1
1.2 Accounting Terms.............................................4
SECTION 2. EXTANT FACILITIES............................................5
2.1 March Loans..................................................5
2.2 Outstanding Letter of Credit.................................5
SECTION 3. FINANCING....................................................5
3.1 Term Loan....................................................5
3.2 Letter of Credit.............................................6
3.3 Interest.....................................................6
3.3.1 Calculation of Interest........................6
3.3.2 Interest Rate..................................6
3.3.3 Letter of Credit Commission....................6
3.3.4 Overdue Payments...............................6
3.4 Manner of Payments...........................................7
3.5 Security.....................................................7
3.5.1 Extant Security Agreements.....................7
3.5.2 New Security Agreements........................7
3.5.3 Extant Guarantee...............................8
3.5.4 New Guarantees.................................8
SECTION 4. CONDITIONS PRECEDENT.........................................8
4.1. Evidence of Corporate Action.................................8
4.1.1 Evidence of Corporate Action...................8
4.2. Representations and Warranties...............................8
4.3. Borrower's Obligations.......................................9
4.4. Guarantors' Documents........................................9
4.5. Pledged Shares...............................................9
4.7. Opinions.....................................................9
4.8. Event of Default.............................................9
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SECTION 5. REPRESENTATIONS AND WARRANTIES...............................9
5.1 Organization................................................10
5.1.1 Borrower's Corporate Existence
and Good Standing...........................10
5.1.2 Organization Chart............................10
5.1.3 Guarantors Corporate Existence
and Good Standing...........................10
5.2 Authority...................................................10
5.2.1 Borrower's Authority..........................10
5.2.2 Guarantors' Authority.........................11
5.3 No Conflicts................................................11
5.4 Compliance and Other Agreements.............................12
5.4.1 Agreements, etc...............................12
5.4.2 Orders, etc...................................12
5.4.3 No Binding Orders.............................12
5.5 ERISA.......................................................12
5.6 Investment Company..........................................13
5.7 Approvals and Consents......................................13
5.8 Regulation U, etc...........................................13
5.9 Financial Statements........................................14
5.10 Taxes.......................................................14
5.11 Title to Properties/Priority of Liens.......................14
5.11.1 Title.........................................14
5.11.2 Security Interest.............................15
5.12 Litigation..................................................15
5.13 Insurance...................................................15
5.14 Disclosure..................................................15
5.15 No Event of Default.........................................16
5.16 Use of Proceeds.............................................16
5.17 Valuation of Warrant........................................16
5.18 Change in Custodian.........................................16
5.19 Cash Flow...................................................16
5.20 Reduction in Loan...........................................17
SECTION 6. AFFIRMATIVE COVENANTS.......................................17
6.1 Preservation of Existence...................................17
6.2 Maintenance of Properties; Insurance........................17
6.2.1 Properties......................................17
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6.2.2 Insurance.......................................17
6.3 Payment of Taxes............................................18
6.4 Accounting; Financial Statements and
Other Information..........................18
6.4.1 Quarterly Financial Reports...................18
6.4.2 Annual Financial Reports......................19
6.4.3 Reports.......................................19
6.4.4 SEC Filings...................................19
6.4.5 Tower.........................................19
6.4.6 Other Information.............................19
6.5 Compliance .................................................20
6.6 ERISA.......................................................20
6.7 Payment of Indebtedness.....................................20
6.8 Notification to Bank........................................20
6.9 Further Assurances..........................................21
6.10 Inspection..................................................21
6.11 Year 2000...................................................22
6.12 Stock Ownership.............................................22
6.13 Tower Time Deposits.........................................22
6.14 Decision....................................................22
6.15 Perfection of Pledge in Isreal..............................23
6.16 Custodian...................................................23
6.17 Tower Shares................................................23
6.18 Guaranty by Decision........................................23
SECTION 7. NEGATIVE COVENANTS..........................................23
7.1 Limitation on Liens.........................................23
7.2 Mergers and Consolidations..................................24
7.3 Change in Business..........................................24
7.4 Tower Borrowings............................................24
7.5 Transfer of Assets..........................................24
7.6 No Pre-Payments.............................................24
7.7 Guarantees to Others........................................24
7.8 Change in Fiscal Year.......................................25
SECTION 8. EVENTS OF DEFAULT/REMEDIES..................................25
8.1.1 Principal or Interest.........................25
8.1.2 Obligations...................................25
8.1.3 Certain Covenants.............................25
8.1.4 Other Covenant................................25
8.1.5 Representations...............................25
8.1.6 Voluntary Insolvency
Proceedings.................................25
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8.1.7 Involuntary Insolvency
Proceedings.................................26
8.1.8 Divestiture of Assets.........................26
8.1.9 Judgments.....................................27
8.1.10 Other Defaults................................27
8.1.11 ERISA.........................................27
8.1.12 Levies........................................28
8.2 Remedies....................................................28
SECTION 9. MISCELLANEOUS...............................................28
9.1 Expenses....................................................28
9.2 Survival of Agreement.......................................29
9.3 No Waiver; Cumulative Remedies..............................29
9.4 Notices.....................................................29
9.5 Amendments and Waivers......................................30
9.6 Applicable Law..............................................30
9.7 Successors..................................................30
9.8 Partial Invalidity..........................................31
9.9 Headings....................................................31
9.10 Waiver of Jury Trial........................................31
9.11 Jurisdiction; Service of Process............................31
9.12 Conflicts...................................................31
EXHIBITS AND SCHEDULES
Exhibit A - Form of Warrant
Exhibit B - Organization Chart
Exhibit C - Confirmation of Security Agreements
Exhibit D - Confirmation of Guaranty
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AMENDED AND RESTATED CREDIT AGREEMENT, dated August 30, 1999, between DATA
SYSTEMS & SOFTWARE INC., a Delaware corporation (the "Borrower"), and BANK LEUMI
USA, a New York banking corporation having an office at 564 Fifth Avenue, New
York, New York 10017 (the "Bank").
R E C I T A L S:
A. Pursuant to a Credit Agreement, dated as of March 24, 1999 (the "March
Agreement"), the Borrower and its Affiliate Databit, Inc., a Delaware
corporation ("Databit") borrowed the principal sum of $2,065,000 from the Bank
on the terms and conditions set forth therein, and in the "Financing Agreements"
therein referred to (the "March Loans").
B. On November 20, 1998, the Bank issued a letter of credit for the benefit
of Databit for an amount not exceeding $52,518, on the terms and conditions set
forth therein.
C. Pursuant to this Agreement, the Bank has agreed to consolidate the March
Loans and the letter of credit referred to in Recital B into a new credit
facility, and subject to the terms and conditions herein set forth, to make
additional financial accommodations to the Borrower, which together with the
March Loans and said letter of credit will be in the aggregate principal amount
of $6,000,000.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. DEFINITIONS.
1.1 Definitions. As used in this Agreement and the Financing Agreements,
the following terms shall have the following meanings unless the context
otherwise requires:
"Affiliate" means and includes any Person (i) which directly or indirectly
controls, or is controlled by, or is under common control with the Borrower;
(ii) which directly or indirectly beneficially owns or holds fifty percent (50%)
or more of any voting stock of either the Borrower or of any Guarantor, or (iii)
fifty percent (50%) or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Borrower or one of its Affiliates.
The term "control" means the possession, directly or indirectly, of the power to
direct
or cause the direction of the management policies of the Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, as the same may be amended or
supplemented from time to time.
"Bank" means Bank Leumi USA, a New York banking corporation.
"Borrower" means Data Systems & Software, Inc., a Delaware corporation.
"Collateral" means the property of the Borrower or of any Guarantor, except
for any Pledged Shares, in which the Bank has been, or shall hereafter be,
granted a lien or security interest under a Security Agreement. Such property
shall include, without limitation, all of the Borrower's or Guarantor's now
owned or existing and hereafter arising or acquired tangible and intangible
personal property, wherever located, including without limitation (i) all
accounts (including accounts receivable), contract rights and general
intangibles of the Borrower or Guarantor, and (ii) all goods of the Borrower or
Guarantor, including, without limitation, all inventory, and (iii) all
instruments, documents and chattel paper of such Borrower or Guarantor; and (d)
the proceeds of all of the foregoing.
"Comverge" means Comverge Technologies, Inc., a Delaware corporation.
"Databit" shall have the meaning defined in Recital A.
"Decision" means Decision Systems Israel Ltd., an Israeli corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which together with the Borrower would be treated as a single employer under
Section 4001 (b)(1) of ERISA.
"Financing Agreements" means the following agreements and instruments (as
such agreements and instru ments may be hereafter amended or supplemented): (i)
the
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Security Agreements,(ii) the Note, (iii) the Guarantees, and (iv) any other
agreements or other collateral documents delivered to the Bank in connection
with the Obligations, whether or not pursuant to this Agreement.
"GAAP" means generally accepted accounting prin ciples as used by the
United States Financial Accounting Standards Board, as in effect from time to
time, consistently applied.
"Guarantor" and "Guarantors" means, respectively, (i) each of Databit,
Comverge and IDO, and (ii) all of the foregoing.
"Guaranty" shall have the meaning set forth in Sections 3.5.3 and 3.5.4 of
this Agreement.
"IDO" means International Data Operations, Inc. a Delaware corporation.
"Knowledge" whether with an initial upper or lower case means the knowledge
of any senior executive of the Borrower or of any of the Guarantors, including,
but not limited to their Chief Financial Officers.
"Letter of Credit" shall have the meaning set forth in Section 2.2.
"March Agreement" shall have the meaning defined in Recital A.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA
which covers employees of the Borrower or any of its ERISA Affiliates.
"Note" shall have the meaning set forth in Section 3.2 of this Agreement.
"Obligations" means collectively the Term Loan and any fees, charges or
other financial obligations of the Borrower, any of the Guarantors or any of
their Affiliates to the Bank pursuant to this Agreement, any of the Financing
Agreements, or any other agreement with the Bank.
"Person" means an individual, partnership, joint venture, firm,
corporation, trust, charitable institution or other business or legal entity.
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"PBGC" means the Pension Benefit Guaranty Corpo ration or any entity
succeeding to any or all of its functions under ERISA.
"Plan" means any plan established, maintained or to which contributions
have been made by the Borrower or any of its ERISA Affiliates, and which is
subject to Title IV of ERISA.
"Pledged Shares" means all of the shares of stock pledged to the Bank as
security for the Obligations pursuant to a Security Agreement.
"Prohibited Transaction" means any transaction of the type set forth in
Section 406 of ERISA, and not exempt under Section 408 of ERISA or Section 4975
of the Internal Revenue Code of 1954, as amended from time to time.
"Reference Rate" means the rate of interest designated by the Bank, and in
effect from time to time, as the "Reference Rate."
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA, if such event reasonably may result in a liability of the Borrower to the
Plan or the PBGC.
"Security Agreement" shall have the meaning set forth in Sections 3.5.1 and
3.5.2 of this Agreement.
"Term Loan" shall have the meaning defined in Section 3.1 of this
Agreement.
"Tower" means Tower Semiconductor Ltd., an Israel corporation.
1.2 Accounting Terms. Any accounting terms used in this Agreement which are
not specifically defined herein shall have the meanings customarily given to
such terms in accordance with United States GAAP. In the event that changes in
GAAP shall be mandated by the United States Financing Accounting Standards
Board, and such changes would materially modify the interpretation or
computation of the financial covenants contemplated by this Agreement at the
time of execution hereof, then in such event such changes shall not be followed
in calculating the financial covenants.
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SECTION 2. EXTANT FACILITIES
This Agreement amends and restates the March Agreement in its entirety, and
together with the Financing Agreements sets forth the entire agreement between
the Borrower and the Bank with respect to the subject matter hereof.
2.1 March Loans. The Bank and the Borrower hereby acknowledge that the
unpaid principal balance of the March Loans are being repaid out of the proceeds
of the Term Loan, as provided for in Section 3.1 of this Agreement, and will be
evidenced by the Note. Concurrently with the execution and delivery of the Note,
the Bank will mark the "Grid Note" and "Bridge Note" executed and delivered
pursuant to the March Agreement evidencing the March Loans "superceded", and
return same to The Borrower and Databit.
2.2 Outstanding Letter of Credit. The outstanding standby letter of credit
issued by the Bank for the benefit of the Borrower, in an amount not to exceed
$52,518 (the "Letter of Credit"), as referred to in Recital B, is being included
in the credit facility being made available by the Bank to the Borrower, as
provided for in Section 3.2 of this Agreement.
SECTION 3. FINANCING.
3. Subject to and upon the terms and conditions set forth in this Agreement
and the Financing Agreements, the Bank hereby agrees to provide a Credit
Facility to the Borrower as follows:
3.1 Term Loan. Concurrently the Bank is making a term loan to the Borrower
in the principal amount of $5,947,482 (the "Term Loan"). The Term Loan will
mature on August 1, 2000. The principal of the Term Loan may be prepaid in whole
or in part at any time; provided, however that any partial prepayment shall be
in the minimum amount of $100,000, or an integral multiple thereof, upon two (2)
business day's prior written, telegraphic or telephonic notice to the Bank.
Concurrently with the execution and delivery of this Agreement, the Bank is
making a cash advance to the Borrower in the sum of $4,398,776.76, and applying
$1,548,705.24 out of the proceeds of the Term Loan in repayment of the March
Loans and the Borrower's and Databit's other obligations to the Bank.
Concurrently with the execution and delivery of this Agreement, the Borrower is
evidencing its obligation to pay the principal of, and
5
interest on, the Term Loan by executing and delivering a term note (the "Note")
to the Bank in the principal sum of $5,947,482.
3.2 Letter of Credit. The Bank heretofore issued the Letter of Credit, and
in connection with the Letter of Credit, the Borrower has executed and delivered
to the Bank the Bank's standard form of Letter of Credit Application. The Letter
of Credit has been issued subject to the Bank's standard fees and charges.
3.3 Interest. The Term Loan shall bear interest determined as follows:
3.3.1 Calculation of Interest. Interest on the Term Loan shall be based on
the Bank's Reference Rate and adjusted when such Reference Rate changes. The
Borrower acknowledges that the Reference Rate may not necessarily represent the
lowest rate of interest charged by the Bank to its customers. Interest on the
Term Loan shall be computed on the basis of a 360-day year over the actual
number of days elapsed. In no event shall the interest charged by the Bank on
the Term Loan exceed the maximum rate permitted by law.
3.3.2 Interest Rate. The outstanding principal balance of the Term Loan
shall bear interest, at the rate of one (1%) percent per annum above the
Reference Rate from the date hereof. The Reference Rate on the date hereof is
eight and one quarter (8-1/4%) percent. The Borrower will pay interest on the
outstanding principal balance on the Term Loan at the foregoing rate monthly on
the first day of each month, and at maturity (whether by acceleration or
otherwise) as provided in the Note.
3.3.3 Letter of Credit Commission. With respect to the Letter of Credit,
the Borrower will pay commissions and all the normal costs and expenses
generally charged by the Bank for letters of credit, as provided in the
application therefor.
3.3.4 Overdue Payments. If any payment of principal (whether due at
maturity, upon acceleration or otherwise), interest or other fees or charges
payable by the Borrower hereunder, or under any of the Financing Agreements,
shall not be paid when due, the Borrower will pay interest on the overdue
payment for the period for which it is overdue, on demand, at the higher of
twelve percent (12%) or three percent (3%) per annum in excess of the
6
interest rate specified in the instrument or agreement evidencing the
requirement to make such payment, but in no event in excess of the maximum rate
permitted by applicable law.
3.4 Manner of Payments. All payments required to be made by the Borrower
hereunder on account of principal, interest or fees shall be made in lawful
money of the United States, in immediately available funds, at the office of the
Bank at 564 Fifth Avenue, New York, New York 10017 or at such other place as the
holder of the Note shall specify in writing. Whenever any payment hereunder, or
under any of the Financing Agreements, becomes due on a day on which the Bank is
closed (as required or permitted by law or otherwise), such payment shall be
made not later than the next succeeding business day of the Bank, and such
extension of time shall be included in the computation of interest. The Borrower
authorizes (but shall not require) the Bank to debit any account maintained by
the Borrower with the Bank, on any date on which a payment is due hereunder or
under any of the Financing Agreements, in an amount equal to any unpaid portion
of such payment.
3.5 Security.
3.5.1 Extant Security Agreements. Con currently with or prior to the
execution and delivery of the March Agreement, each of the Borrower, Databit,
and IDO granted a valid, perfected first priority security interest to the Bank
in its Collateral, and in the instance of the Borrower the Pledged Shares, to
secure payment by the Borrower and Databit of all of their obligations to the
Bank pursuant to the March Agreement by executing and delivering to the Bank
security agreements, dated as of even date therewith (each a "Security
Agreement"). Concurrently with the execution and delivery of this Agreement,
each of the Borrower, Databit and IDO is confirming its Security Agreement by
executing the Confirmation of Security Agreement annexed as Exhibit C.
3.5.2 New Security Agreement. Concurrently with the execution and delivery
of this Agreement, Comverge is granting a valid perfected first priority
security interest to the Bank in its Collateral, to secure payment by the
Borrower of all of its Obligations to the Bank, by executing and delivering to
the Bank a Security Agreement, dated as of even date herewith (a "Security
Agreement").
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3.5.3 Extant Guarantee. Concurrently with or prior to the execution and
delivery of the March Agreement, IDO guaranteed payment of all of the
obligations of the Borrower and Databit to the Bank by executing and delivering
to the Bank a guaranty, dated as of even date therewith (a "Guaranty").
Concurrently with the execution and delivery of this Agreement, IDO is
confirming its Guaranty by executing the Confirmation of Guaranty annexed as
Exhibit D.
3.5.4 New Guarantees. Concurrently with the execution and delivery of this
Agreement, each of Databit and Comverge is guaranteeing payment of all of the
Obligations of the Borrower to the Bank by executing and delivering to the Bank
a Guarantee, dated as of even date herewith (each a "Guaranty").
SECTION 4. CONDITIONS PRECEDENT.
4. The obligation of the Bank to execute and deliver this Agreement, and to
make the Term Loan, is subject to the conditions precedent that:
4.1. Evidence of Corporate Action. The Bank shall have received (a)
Certificates of Good Standing from the Secretary of State of Delaware, listing
all charter documents of the Borrower and the Guarantors on file; (b) a
Certificates of an authorized officer of the Borrower and each of the Guarantors
certifying (i) that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors of the Borrower or such Guarantor, as is
appropriate, authorizing the execution, delivery and performance of this
Agreement and such Financing Agreements as to which it is a party, (ii) the
incumbency and specimen signature of each officer of the Borrower and each of
the Guarantors executing the said documents, and a certification by another
officer thereof as to the incumbency and signature of the authorized officer,
(c) copies of the Certificate of Incorporation and By-Laws of the Borrower and
each of the Guarantors, each as amended to date, certified as complete and
correct by its Secretary, and (d) such other documents as the Bank or its
counsel may reasonably request, in order that all legal matters incident to the
making of the Term Loan, shall be satisfactory to the Bank and its counsel.
4.2. Representations and Warranties. All representations and warranties
contained herein or otherwise made to the Bank pursuant to or in connection with
this
8
Agreement or any of the Financing Agreements, shall be correct and complete in
all material respects.
4.3. Borrower's Obligations. The Borrower shall have executed and delivered
to the Bank (i) the Note, (ii) its Security Agreement, (iii) Warrant Agreement
in the form of Exhibit A, and (iv) such other documents as the Bank shall
reasonably require. The Borrower shall concurrently pay the Bank $25,000 as a
commitment fee.
4.4. Guarantors' Documents. Each of the Guarantors shall have executed and
delivered to the Bank (i) a Guaranty or an amended and restated Guaranty, as is
appropriate, and (ii) a Security Agreement or an amended or restated Guaranty as
is appropriate.
4.5. Pledged Shares. The Bank shall have received from the Borrower (i)
6,001 shares of Tower Semiconductor Holdings (1993) Ltd. being all of the shares
of Tower Semiconductor Holdings (1993) Ltd. owned by the Borrower, together with
duly executed stock powers therefor, and (ii) 6,196,439 shares of Decision,
together with duly executed stock powers therefor, and a security interest in
the Borrower's beneficial interest in the 1,600,000 shares of Decision referred
to in Section 6.14 of this Agreement; which 1,600,000 shares shall become
Pledged Shares upon delivery to the Bank.
4.6. Opinions. The Bank shall have received a written opinions from counsel
to the Borrower and the Guarantors, in form and substance satisfactory to the
Bank and its counsel.
4.7. Event of Default. There shall exist no Event of Default and no
condition, event or act which, with notice or lapse of time, or both, would
constitute either an Event of Default or an event of default under the March
Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5. In order to induce the Bank to enter into this Agreement and to make the
Term Loan hereunder, the Borrower represents and warrants to the Bank as
follows:
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5.1 Organization.
5.1.1 Borrower's Corporate Existence and Good Standing. The Borrower is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware with perpetual corporate existence and has all
requisite legal right, power and authority and all necessary licenses and
permits to own and operate its assets and properties and to carry on its
business as now conducted and as presently proposed to be conducted. The
Borrower has qualified and is in good standing as a foreign corporation in each
state or other jurisdiction where the nature of its business or the ownership or
use of its property requires such qualification.
5.1.2 Organization Chart. A correct and complete organization chart is
annexed as Exhibit B hereto, which sets forth (i) the jurisdiction where the
Borrower, each of the Guarantors and each issuer of Pledged Shares is
incorporated, (ii) the authorized and outstanding stock of the Borrower, each of
the Guarantors and each issuer of Pledged Shares, and (iii) the record and
beneficial ownership of the stock of each Guarantor and each issuer of Pledged
Shares.
5.1.3 Guarantors Corporate Existence and Good Standing. Each of the
Guarantors is a duly organized and validly existing corporation in good standing
under the laws of the State or other jurisdiction shown on Exhibit B, with
perpetual corporate existence and has all requisite legal right, power and
authority and all necessary licenses and permits to own and operate its assets
and properties and to carry on its business as now conducted and as presently
proposed to be conducted. Each of the Guarantors has qualified and is in good
standing as a foreign corporation in each other jurisdiction where the nature of
its business or the ownership or use of its property requires such
qualification.
5.2 Authority.
5.2.1 Borrower's Authority. The Borrower has, all requisite legal right,
power and authority to execute, deliver and perform the terms and provisions of
this Agreement, the Financing Agreements executed by it, and all other
instruments or documents delivered by it pursuant hereto and thereto. The
Borrower has taken or caused to be taken all necessary action to authorize the
execution, delivery and performance of this Agreement, the Financing
10
Agreements executed by it, and all other instruments or documents delivered or
to be delivered by it pursuant hereto and thereto. This Agreement, the Financing
Agreements executed by the Borrower, and all related instruments or documents
delivered or to be delivered pursuant hereto or thereto constitute and will
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, except to the extent that enforcement
thereof may be limited by applicable bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and the
availability of equitable remedies.
5.2.2 Guarantors' Authority. Each of the Guarantors has all requisite legal
right, power and authority to execute, deliver and perform the terms and
provisions of the Guaranty, the other Financing Agreements executed by it, and
all other instruments and documents delivered by it pursuant hereto and thereto.
Each of the Guarantors has taken or caused to be taken all necessary action to
authorize the execution, delivery and performance of the Guaranty, the other
Financing Agreements executed by it and all other instruments or documents
delivered or to be delivered by it pursuant hereto and thereto. The Guaranty and
all other instruments or documents delivered or to be delivered pursuant hereto
and thereto constitute and will constitute a legal, valid and binding obligation
of such Guarantor, enforceable in accordance with their respective terms, except
to the extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and the availability of equitable remedies.
5.3 No Conflicts. Neither the execution and delivery of this Agreement, the
Financing Agreements, or any of the instruments and documents delivered or to be
delivered pursuant hereto or thereto, or the consummation of the transactions
herein or therein contemplated, nor compliance with the provisions hereof or
thereof, will violate any law or regulation, or any order, writ or decree of any
court or governmental instrumentality, or will conflict with, or result in the
breach of, or constitute a default in any respect under, any indenture,
mortgage, deed of trust, agreement or other instrument to which the Borrower or
any of the Guarantors is a party, or by which any of them or any of their
respective properties may be bound or affected, or will result in the creation
or imposition of any lien, charge or encumbrance upon any of the property of
either of them (except as contemplated hereunder
11
or under the Financing Agreements) or will violate any provision of the
certificate of incorporation (as amended to date) or by-laws (as currently in
effect) of either of the Borrower or any of the Guarantors.
5.4 Compliance and Other Agreements.
5.4.1 Agreements, etc. Neither the Borrower nor any of the Guarantors is in
default under any indenture, mortgage, deed of trust, agreement or other
instrument to which it is a party, or by which it or any of its properties may
be bound or affected, except for such defaults which, individually or in the
aggregate, will not have a material and adverse effect on the business,
operations, property or assets or in the condition, financial or otherwise, of
the Borrower or such Guarantor.
5.4.2 Orders, etc. Neither the Borrower nor any of the Guarantors is in
default with respect to any order, writ, injunction or decree of any court or of
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or authority, domestic or foreign, or in violation of any
law, statute or regulation, domestic or foreign, to which it is, or any of its
properties are subject, except for such defaults or violations which,
individually or in the aggregate, will not have a material and adverse effect on
the business, operations, property or assets or in the condition, financial or
otherwise, of the Borrower or Guarantor.
5.4.3 No Binding Orders. Neither the Borrower nor any of the Guarantors is
a party to or bound by, nor are any of their respective properties bound or
affected by, any agreement, deed, lease or other instrument, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award, or any law, statute, rule or regulation, any of which
materially and adversely affects or in the future may (so far as the Borrower
should reasonably foresee) materially and adversely affect the business,
operations, prospects, properties or assets, or the condition, financial or
otherwise, of such Borrower or Guarantor, except that the Pledged Shares of
Tower Semiconductor Holdings (1993) Ltd. are subject to a Shareholders Agreement
dated as of February 28, 1993, as amended, a copy of which has been provided to
the Bank.
5.5 ERISA. The Borrower is in compliance in all material respects with all
applicable provisions of ERISA in
12
connection with any Plan. 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 under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administrate a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower, nor any ERISA Affiliate of the Borrower has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer
Plan; the Borrower, and each of its ERISA Affiliates has met its minimum funding
requirements under ERISA with respect to all of their Plans, and the present
fair market value of all Plan assets exceeds the present value of all vested
benefits under each Plan, as determined on the most recent valuation date of the
Plan, and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Borrower, or any of
its ERISA Affiliates to PBGC or the Plan under Title IV of ERISA; and neither
the Borrower, nor any of its ERISA Affiliates has incurred any liability to the
PBGC under ERISA.
5.6 Investment Company. Neither the Borrower nor any of the Guarantors is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940.
5.7 Approvals and Consents. All authorizations, consents, registrations,
exemptions, approvals and licenses (governmental or otherwise) or the taking of
any other action (including, without limitation, by the shareholders of the
Borrower or any of the Guarantors) which are required as a condition to the
validity or enforceability of this Agreement, the Financing Agreements or any of
the instru ments or documents delivered or to be delivered pursuant hereto or
thereto have been effected or obtained and are in full force and effect.
5.8 Regulation U, etc. Neither the Borrower nor any of the Guarantor is
engaged in the business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulation U or G of the Board
of Governors of the Federal Reserve System). The Term Loan will not be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock or for any other purpose which might constitute any of the Loans a
"purpose credit" within the meaning of such Regulation U.
13
5.9 Financial Statements. The Borrower has heretofore delivered to the Bank
consolidated financial statements of the Borrower, the Guarantors, Decision and
Tower Semiconductor Holdings (1993) Ltd. for the fiscal years ended December 31,
1997, and December 31, 1998 and for the six months ended June 30, 1998 and June
30, 199 (consisting of a consolidated balance sheet and the related consolidated
statements of operations, retained earnings, stockholders equity and changes in
financial position for the respective periods then ended, including the related
notes thereto). The annual financial statements referred to have been audited
and include an unqualified report and opinion of Deloitte & Touche, LLP,
independent certified public accountants. All such annual and interim financial
statements are correct and complete and were prepared in accordance with GAAP
and present fairly the consolidated financial position and results of operation
of the Borrower, the Guarantors, Decision and Tower Semiconductor Holdings
(1993) Ltd. as of the dates of and for the periods involved. There are no
liabilities, direct or indirect, fixed or contingent, of the Borrower and the
Guarantors as of the date of such financial statements which are required to be
reflected or disclosed therein under GAAP which are not so reflected or
disclosed therein or in the notes thereto.
5.10 Taxes. The Borrower and the Guarantors have filed or caused to be
filed all tax returns required to be filed by each of them. The Borrower and the
Guarantors have paid all taxes (including interest and penalties) as shown on
such returns, or any assessment or notice of tax claim or deficiency received by
them to the extent that such taxes have become due. Neither the Borrower nor any
of the Guarantors knows of any proposed material tax assessment against or
affecting it and is not otherwise obligated by any agreement, instrument or
otherwise to contribute to the payment of taxes owed by any other Person. All
tax liabilities are adequately provided for or reserved against on the books of
the Borrower and the Guarantors (as the case may be) in accordance with GAAP.
5.11 Title to Properties/Priority of Liens.
5.11.1 Title. The Borrower and each of the Guarantors has good and
marketable title to, or valid lease hold interests in, all of the properties and
assets reflected on their latest financial statements referred to in Section 5.9
of this Agreement or acquired by it after the date of such financial statements
and prior to the date hereof, except for those properties and assets which have
14
been disposed of since such dates in the ordinary course of business. All such
properties and assets are owned or leased by the Borrower or one of the
Guarantors, as the case may be, free and clear of all mortgages, pledges, liens,
security interests, encumbrances or charges of any kind, except such as are
identified in such Financial Statements.
5.11.2 Security Interest. The security interests granted by the Borrower
and the Guarantors to the Bank under the Security Agreements constitute valid
and perfected first priority security interests in and lien on the Collateral,
and in the instance of the Borrower, a valid and perfected first priority
security interest and lien on the Pledged Shares, as contemplated by the
Security Agreements executed by such Borrower or Guarantor.
5.12 Litigation. There are no actions, suits, investigations or
administrative proceedings of or before any court, arbitrator or governmental
authority, pending or threatened against the Borrower or any of the Guarantors
or any of their respective properties or assets, which (i) either in any case or
in the aggregate, if adversely deter mined, would materially and adversely
affect the business, operations, prospects, properties or assets or the
condition, financial or otherwise, of the Borrower or any of the Guarantors, or
(ii) question the validity or enforce ability of this Agreement, the Financing
Agreements, or any action to be taken in connection with the transactions
contemplated hereby or thereby.
5.13 Insurance. All physical properties and assets of the Borrower and the
Guarantors are covered by fire and other insurance with responsible insurance
companies against casualty and other losses customarily obtained to cover
comparable properties and assets by businesses in the region in which such
properties and assets are located, in amounts, scope and coverage which are
reasonable in light of existing conditions.
5.14 Disclosure. None of the information contained in the representations
and warranties made by the Borrower and the Guarantors set forth in this
Agreement, the Financing Agreements, or in any other agreement, instrument,
document, list, certificate, statement, schedule or exhibit heretofore delivered
or to be delivered to the Bank, as contemplated in this Agreement or in the
Financing Agree ments, contains or will contain any untrue statement of a
material fact or omits or will omit to state a fact necessary
15
in order to make the statements contained herein or therein not materially
misleading.
5.15 No Event of Default. After giving effect to the transactions
contemplated by this Agreement, the Financing Agreements, and the other
instruments or documents delivered in connection herewith and therewith, there
does not exist any condition, event or act which constitutes an Event of Default
hereunder or which, after notice or lapse of time, or both, would constitute an
Event of Default hereunder.
5.16 Use of Proceeds. The proceeds of the Term Loan will be used (i) to
repay the March Loans and the other outstanding obligations of the Borrower and
Databit to the Bank, and all interest accrued thereon, (ii) to finance the
acquisition by Comverge of substantially all of the assets of the Control
Systems Division of Scientific-Atlanta Corporation, as provided in their
contract dated June 11, 1999, a true and complete copy of which, as amended to
date, has been provided by the Borrower to the Bank, and (iii) for working
capital for the Borrower and the Guarantors.
5.17 Valuation of Warrant. The Borrower has valued the warrants to be
delivered concurrently herewith, as provided in Section 4.3, at $25,000, and
represents that for income tax purposes it will value the warrant at said
amount.
5.18 Change in Custodian. Compliance with the covenant set forth in Section
6.16 has been approved by the Board of Directors of the Borrower.
5.19 Cash Flow. After Closing under this Agreement and the acquisition by
Comverge of substantially all of the assets of the Control Systems Division of
Scientific-Atlanta Corporation, the Borrower and those of its subsidiaries which
are included in its consolidated financial statements shall have sufficient
available cash to meet the financial obligations of their businesses, in the
ordinary course, on a current basis. Effective as of November 1 and through
December 31, 2000, the Borrower and those of its subsidiaries which are included
in its consolidated financial statement shall have sufficient available cash
from their business operations, and from possible sales by the Borrower of
shares of Tower to meet the financial obligations of their businesses, in the
ordinary course, on a current basis.
16
5.20 Reduction in Loan. If Tower Semiconductor Holdings (1993) Ltd. or the
Borrower should sell any shares of Tower, the Borrower shall give the Bank
notice thereof within five (5) days of the completion of such sale, which notice
shall include the number of shares sold and the net proceeds of such sale.
Concurrently, the Borrower shall prepay the Term Loan in an amount equal to such
net proceeds.
SECTION 6 AFFIRMATIVE COVENANTS.
6. The Borrower covenants and agrees that, until the Term Loan has been
paid in full and all other Obligations discharged in full, and all fees and
charges payable hereunder or under any the Financing Agreements have been paid,
it shall comply or cause compliance with the following covenants:
6.1 Preservation of Existence. The Borrower and each of the Guarantors will
(i) preserve and maintain its corporate existence and its rights, franchises and
privil eges in the jurisdiction of its incorporation, and (ii) qualify and
remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or in view of the ownership of its properties.
6.2 Maintenance of Properties; Insurance.
6.2.1 Properties. The Borrower and each of the Guarantors will maintain in
good repair, working order and condition all properties used in its respective
business (ordinary wear and tear excepted), and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements, additions
and improvements thereto.
6.2.2 Insurance. The Borrower and each of the Guarantors will maintain, at
their expense, with financially sound and reputable insurers reasonably
acceptable to the Bank, insurance, with respect to its properties and business,
against loss or damage of the kinds and in amounts reasonably acceptable to the
Bank. All insurance of the Borrower and each of the Guarantors shall name the
Bank as loss payee with respect to its Collateral, and shall contain such other
provisions as the Bank may reasonably require to fully protect its interest in
the Collateral, and in payments to be made under such insurance policies; which
policies shall provide for not less than
17
thirty (30) days' prior written notice to the Bank of the exercise of any right
of cancellation or material modification of the policy. Correct and complete
copies of all certificates of renewal of such insurance policies shall be
delivered to the Bank within fifteen (15) days after the execution of any such
renewal, but in any event prior to the expiration of the policies (and as soon
as available, and in any event within thirty (30) days after the execution
thereof, correct and complete copies of all the policies as so renewed).
6.3 Payment of Taxes. The Borrower and each of the Guarantors will pay and
discharge promptly all taxes (including, without limitation, all payroll
withholdings), assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any of its property, real, personal or mixed,
or upon any part thereof, before the same shall become in default; provided,
however, that neither the Borrower nor any Guarantor shall be required to pay
any such tax, assessment, charge, levy or claim if the validity or amount
thereof shall be contested in good faith by proper proceedings and if the
Borrower or such Guarantor, as the case may be, shall have set aside appropriate
and proper reserves which are reflected on its books.
6.4 Accounting; Financial Statements and Other Information. The Borrower
and each of the Guarantors will maintain a system of accounting established and
administered in accordance with GAAP and will set aside on its books all such
proper reserves for each fiscal year as shall be required by GAAP. The Borrower
will deliver, or cause to be delivered, to the Bank:
6.4.1 Quarterly Financial Reports. As soon as practicable after the end of
each of the first three (3) quarter annual periods in each fiscal year of the
Borrower, and in any event within sixty (60) days thereafter, a consolidated
balance sheet of the Borrower, the Guarantors, Decision and Tower Semiconductor
Holdings (1993) Ltd. as at the end of such period, and the related consolidated
state ments of operations, retained earnings, stockholders equity and changes in
the financial position of the Borrower, the Guarantors, Decision and Tower
Semiconductor Holdings (1993) Ltd. for each such period and for that part of the
fiscal year of the Borrower and the Guarantors then ended, all in the form filed
by the Borrower with the Securities and Exchange Commission, setting forth in
each case in compara tive form the corresponding figures for the corresponding
18
periods of the preceding fiscal year, each of which statements shall be prepared
in accordance with GAAP, and subject to normal year-end audit adjustments, shall
fairly present the consolidated financial position of the Borrower, the
Guarantors, Decision and Tower Semiconductor Holdings (1993) Ltd. as at the end
of and results of operations for the periods reported.
6.4.2 Annual Financial Reports. As soon as practicable after the end of
each fiscal year of the Borrower, and in any event within ninety (90) days
thereafter, an certified consolidated balance sheet of the Borrower, the
Guarantors, Decision and Tower Semiconductor Holdings (1993) Ltd. as at the end
of such year and the related certified consolidated statements of income,
retained earnings, stockholders equity and changes in financial position of the
Borrower, the Guarantors, Decision and Tower Semiconductor Holdings (1993) Ltd.
for such year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, which statements shall be prepared in
accordance with GAAP, and shall include an unqualified report and opinion of
Deloitte & Touche, LLP or another independent certified public accountant of
recognized standing selected by the Borrower and reasonably acceptable to the
Bank.
6.4.3 Reports. Promptly upon receipt thereof, copies of any reports
(including, without limitation, any management letters) submitted to the
Borrower or any of the Guarantors by any independent certified public accountant
in connection with the examination of the annual or interim financial statements
of the Borrower and the Guarantors by such accountant.
6.4.4 SEC Filings. Within ten (10) days after filing with the United States
Securities and Exchange Commission, copies of all Forms 10Q and 10K and any
other forms so filed by the Borrower.
6.4.5 Tower. Within ten (10) days of general distribution, copies of all
reports provided by Tower to its shareholders.
6.4.6 Other Information. With reasonable promptness, such other data and
information as from time to time may be reasonably requested by the Bank with
respect to the Borrower or any of the Guarantors.
19
6.5 Compliance. The Borrower and the Guarantors will comply with the
requirements of all applicable laws, rules, regulations or orders of any
applicable governmental or administrative authority, and all agreements to which
the Borrower or any of the Guarantors (as the case may be) is a party, the
noncompliance with which laws, rules, regula tions, orders and agreements would
materially adversely affect the business, operations, property or assets, or the
condition, financial or otherwise, of the Borrower or the Guarantor (as the case
may be).
6.6 ERISA. The Borrower shall maintain compliance in all material respects
with any applicable provisions of ERISA in connection with each Plan. The
Borrower will deliver to the Bank, promptly after the filing or receipt thereof,
copies of all reports, including annual reports and notices, which the Borrower
files with or receives from the PBGC or the U.S. Department of Labor under ERISA
with respect to any Plan; and as soon as possible and in any event within thirty
(30) days after either of the Borrower knows or has reason to know that any
Reportable Event or Prohibited Transaction has occurred with respect to any Plan
or that the PBGC or the Borrower has instituted or will institute proceedings
under Title IV of ERISA to terminate any Plan, the Borrower will deliver to the
Bank a certificate of its Chief Financial Officer setting forth the details as
to such Reportable Event or Prohibited Transaction or Plan termination and the
action the Borrower proposes to take with respect thereto.
6.7 Payment of Indebtedness. The Borrower and the Guarantors, in accord
with their past practices, shall promptly pay, discharge, or satisfy before they
become delinquent all of their material indebtedness; provided, however, that
neither the Borrower nor any Guarantor shall be required to pay any such
indebtedness if the validity or amount thereof shall be contested in good faith
by proper proceedings, and the Borrower or such Guarantor, as the case may be,
shall have set aside appropriate and proper reserves which are reflected on its
books.
6.8 Notification to Bank. The Borrower shall promptly notify the Bank of
(i) any Event of Default hereunder, (ii) any event, condition or act which with
the giving of notice or the lapse of time, or both, would constitute an Event of
Default hereunder, (iii) any material litigation or proceedings that are
instituted or threatened (to the knowledge of the Borrower or any of the
Guarantors as the case may be) against the Borrower or any of the
20
Guarantors or any of their respective assets, except when the relief sought is
monetary damages which in any one litigation or proceeding in the aggregate do
not exceed $100,000 and the litigation or proceeding resulted from or arose out
of transactions in the regular course of the Borrower's or such Guarantor's
business, (iv) each and every default by the Borrower or any of the Guarantors
under any obligation for borrowed money which would permit the holder of such
obligation to accelerate its maturity, including the names and addresses of the
holders of such obligation and the amount thereof, (v) any change in the
location of the chief executive offices of the Borrower or any of the Guarantors
as identified in its Security Agreement, and (vi) the relocation of any of its
Collateral, or the location of any such Collateral at a new address.
6.9 Further Assurances. The Borrower will duly execute and deliver, or will
cause to be duly executed and delivered, such further instruments and documents,
including, without limitation, additional security agreements, Uniform
Commercial Code financing statements or amendments or continuations thereof, and
will do or use its best efforts to cause to be done such further acts as may be
necessary or proper in the Bank's opinion to effectuate the provisions or
purposes of this Agreement or the Financing Agreements.
6.10 Inspection. The Bank, or any Person designated by the Bank, shall have
the right, from time to time, to visit the Borrower's and any of the Guarantors'
place or places of business (or any other place where the Collateral or any
information relating thereto is kept or located) during reasonable business
hours, and absent an Event of Default upon reasonable notice, without hindrance
or delay, (i) to inspect, audit, check and make copies of and extracts from the
Borrower's or any of the Guarantors' books, records, journals, orders, receipts,
correspondence and other data relating to the Borrower's and/or any of the
Guarantors' business, (ii) to verify such matters concerning the Collateral
and/or the Pledged Shares, as the Bank (in its sole and absolute discretion) may
consider appropriate, and (iii) to discuss the affairs, finances and business of
the Borrower and any of the Guarantors with their officers and directors. Upon
request, the Borrower and the Guarantors will provide the Bank with copies of
such documents as the Bank may reasonably request. The Bank shall have the
right, at any time or times hereafter after an Event of Default has occurred, to
verify by mail, telephone, telegraph or other communication with any account
21
debtor, under any name and in any form, the validity, amount or any other matter
relating to any or all of the accounts receivable. The Borrower shall pay on
demand all expenses reasonably incurred by the Bank in acquiring information
pursuant to this Section 6.10, including but not limited to appraisers and asset
based lender review auditors.
6.11 Year 2000. The Borrower and each of the Guarantors has (i) undertaken
a sufficient inventory review and assessment of all of the Borrower's and each
Guarantors' areas within their businesses and operations that could be adversely
affected by the failure to be Year 2000 Compliant on a timely basis, (ii)
developed a plan and timeline for becoming Year 2000 Compliant on a timely
basis, (iii) to date, implemented that plan in accordance with that timberline
in all material respects, and (iv) made inquiry of its key suppliers, vendors
and customers as to whether such person(s) will, on a timely basis, be Year 2000
Compliant in all material respects and on the basis of such inquiry reasonably
believes that all such Person(s) will be Year 2000 Compliant. "Year 2000
Compliant" shall mean that, in all material respects, all computer and software
related applications shall be able to recognize and perform properly, date
sensitive functions involving dates prior to and after December 31, 1999. The
Borrower shall take all action necessary to ensure that the Borrower and all of
the Guarantors shall be Year 2000 Compliant, and that no material adverse change
will arise in their financial conditions as a result of its efforts or failure
to be Year 2000 Compliant.
6.12 Stock Ownership. The Borrower, at all times, shall own not less than
seventy (70%) percent of all of the issued and outstanding stock of each class
of Comverge.
6.13 Tower Time Deposits. Tower, at all times prior to September 15, 1999,
shall maintain time deposits with the Bank in a principal amount which shall not
be less than $10,000,000, and at all times thereafter maintain time deposits
with the Bank in a principal amount which shall not be less than $20,000,000.
6.14 Decision. The Borrower shall (i) deliver to the Bank as part of the
Pledged Shares, the 1,600,000 shares of Decision currently held of record by the
Registry Company of Bank Discount, Ltd., upon the Borrower acquiring possession
thereof, and (ii) use all reasonable efforts to obtain possession and record
ownership of such shares of Decision free and clear of liens and encumbrances.
22
6.15 Perfection of Pledge in Israel. The pledge by the Borrower of its
shares in Tower Semiconductor Holdings (1993) Ltd. has been perfected in Israel
by a filing of a notification with the Pledge Registry. The Borrower, as soon as
is practicable, but in any event within ten (10) days, shall cause its pledge to
the Bank of its shares in Decision to be perfected in Israel by a notification
with the Pledge Registry in Israel, and shall give the Bank notice thereof.
6.16 Custodian. The Bank, or Bank Leumi le Israel BM, within thirty (30)
days of the date of this Agreement, shall become custodian of the certificates
evidencing the issued and outstanding shares of Tower owned of record by Tower
Semiconductor Holdings (1993), Ltd.
6.17 Tower Shares. Prior to December 31, 1999, record and beneficial
ownership of 60% of the shares of Tower owned of record by Tower Semiconductor
Holdings (1993) Ltd., as of the date of this Agreement, will be transferred to
the Borrower free and clear of all liens and encumbrances, and the Borrower
shall have given the Bank notice of such transfer.
6.18 Guaranty by Decision. The Borrower shall use its best efforts to
obtain all consents necessary in order for Decision to become a guarantor of the
Borrower's Obligations, and upon obtaining such consents shall cause Decision to
execute and deliver to the Bank its guaranty in the same form executed by the
Guarantors, together with the Bank's form of Certificate of Authority and
Shareholders Consent.
SECTION 7. NEGATIVE COVENANTS
7. The Borrower covenants and agrees that, until the Term Loan has been
paid in full and all of its Obligations hereunder or under the Financing
Agreements have been paid in full, it shall comply or cause compliance with the
following covenants:
7.1 Limitation on Liens. The Borrower and the Guarantors will not create,
assume or suffer to exist any lien, mortgage, or other encumbrance of any kind
with respect to the Collateral or the Pledged Shares, except for: (i) liens in
favor of the Bank, (ii) liens for taxes or assessments or other government
charges or levies not yet due and payable; (iii) judgments and other similar
liens arising in connection with court proceedings, provided the
23
execution or other enforcement of such liens is effectively stayed within twenty
(20) days after docketing and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings, and (iv) liens incurred
in the normal course of business, including, but not limited to liens arising
out of purchase money financing provided, however, that thirty (30) days written
notice thereof shall have been given to the Bank. The failure to give such
notice shall be deemed to be a material breach of this Covenant.
7.2 Mergers and Consolidations. Neither the Borrower nor any of the
Guarantors shall merge or consolidate with any Person, or acquire the assets of
any Person except with the Bank's prior written consent; except that any
Guarantor may merge with or acquire the assets of the Borrower or any other
Guarantor provided the Bank is given concurrent notice thereof.
7.3 Change in Business. Neither the Borrower nor any of the Guarantors will
make any material change in the character of its business, as carried on at the
date hereof.
7.4 Tower Borrowings. Tower shall not draw against its existing line of
credit with Bank Leumi Le- Israel BM.
7.5 Transfer of Assets. Neither the Borrower nor any of the Guarantors will
sell, lease, assign, transfer or otherwise dispose of, or permit any of the
Guarantors to sell, lease, assign, transfer or otherwise dispose of, any of its
now owned or hereafter acquired assets other than in the ordinary course of its
business, without the prior consent of the Bank.
7.6 No Pre-Payments. Neither the Borrower nor any of the Guarantors shall
pre-pay any indebtedness other than (i) indebtedness to the Bank, and (ii) trade
indebtedness incurred in the ordinary course of the businesses where by the
terms of sale, a discount is allowed for a payment made within a limited period
after the invoice date.
7.7 Guarantees to Others. Neither the Borrower nor any of the Guarantors
shall guarantee, endorse, stand as surety for or otherwise be contingently
liable for any indebtedness, or the obligations of any other Person, except the
Borrower may guarantee the obligations of any
24
Guarantor and any Guarantor may guarantee any obligations of the Borrower or any
other Guarantor.
7.8 Change in Fiscal Year. Neither of the Borrower nor any of the
Guarantors shall not change its fiscal year without the prior consent of the
Bank, which consent shall not be unreasonably withheld.
SECTION 8. EVENTS OF DEFAULT/REMEDIES.
8.1 The occurrence of any one or more of the fol lowing events shall
constitute an "Event of Default ":
8.1.1 Principal or Interest. If the Borrower shall fail to pay any
installment of principal or interest on the Note when due and payable; or
8.1.2 Obligations. If the Borrower shall fail to pay and satisfy any
Obligation when due and payable; or
8.1.3 Certain Covenants. If there shall be a default in the observance or
performance of any covenant, condition or agreement set forth in Sections 6.1,
6.12 or 6.13 or Section 7 (other than with respect to an involuntary lien or
encumbrance as prohibited in Section 7.1 of this Agreement); or
8.1.4 Other Covenant. If there shall be a default in the observance or
performance of any other covenant, condition or agreement contained in this
Agreement, in any of the Financing Agreements or in any other document or
instrument referred to herein or therein, which default shall continue
unremedied or uncured for a period of fifteen (15) days after notice thereof has
been given to the Borrower; or
8.1.5 Representations. If any material representation or warranty made by
or on behalf of the Borrower or any of the Guarantors, whether contained in this
Agreement, in any of the Financing Agreements, or in any other document or
instrument referred to herein or therein or delivered in connection with any of
the transactions contemplated herein or therein, shall prove to have been false
or incorrect in any material respect when made; or
8.1.6 Voluntary Insolvency Proceedings. If the Borrower or any of the
Guarantors or any of their Affiliates shall (i) apply for or consent to or
acquiesce in
25
the appointment of or the taking of possession by a receiver, liquidator,
custodian or trustee of itself or of all or a substantial part of its property,
(ii) admit in writing its inability, or be generally unable, to pay its debts as
such debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect) or any similar foreign law, (v) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, (vi) fail to
controvert in a timely or appropriate manner, or acquiesce in writing to, any
petition filed against itself in an involuntary case under such Bankruptcy Code,
or any similar foreign law, or (vii) take any action for the purpose of
effecting any of the foregoing; or
8.1.7 Involuntary Insolvency Proceedings. A proceeding or case shall be
commenced, without the application or consent of the Borrower or any of the
Guarantors in any court of competent jurisdiction, seeking (i) liquidation,
reorganization, dissolution, winding-up or composition or adjustment of debts of
the Borrower or such Guarantor, (ii) the appointment of a trustee, receiver,
liquidator, custodian or the like of the Borrower, or any Guarantor or of all or
any substantial part of any of their assets, or (iii) similar relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgement or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
thirty (30) days; or any order for relief against the Borrower or any of the
Guarantors, shall be entered in an involuntary case under the Bankruptcy Code,
or any similar foreign law, and shall continue unstayed and in effect for a
period of thirty (30) days; or
8.1.8 Divestiture of Assets. If any order, judgment, or decree shall be
entered in any proceeding requiring the Borrower, or any of the Guarantors, to
divest itself of a substantial part of its assets, and if, within sixty (60)
days after entry thereof (unless or until enforcement is sooner commenced), such
order, judgment or decree shall not have been discharged or execution thereof
stayed pending appeal; or if, within thirty (30) days after the expiration of
any such stay (unless or until enforcement is sooner commenced), such judgment,
order or decree shall not have been discharged; or
26
8.1.9 Judgments. If one or more judgments exceeding $100,000 in the
aggregate, against the Borrower or any of the Guarantors or attachments to
recover more than $100,000 against any Borrower's or Guarantor's property remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of thirty (30) days, or enforcement proceedings are commenced with respect to
any judgment against the Borrower or any of the Guarantors; or
8.1.10 Other Defaults. If the Borrower or any of the Guarantors or any of
their Affiliates shall (i) fail to pay any indebtedness for borrowed money or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or (ii) 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 indebtedness for
borrowed money, 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
after the giving of notice or passage of time, or both, of the maturity 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; or (iii) allow any account
maintained by them at the Bank to be overdrawn for a period which exceeds five
(5) days after notice from the Bank; or
8.1.11 ERISA. Any of the following events occur or exist with respect to
the Borrower or any of its ERISA Affiliates: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan; (iii)
the filing under Section 4041 of ERISA of a notice of intent to terminate any
Plan or the termination of any Plan; (iv) any event or circumstance that might
constitute grounds entitling the PBGC to institute proceedings under Section
4042 of ERISA for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such proceedings;
(v) complete or partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency or termination of any Multi
employer Plan; and in each case above, such event or con dition, together with
all other events or conditions, if any, could in the reasonable opinion of the
Bank subject either the Borrower or any ERISA Affiliate to any material tax,
penalty or other liability to a Plan, a Multiemployer Plan, the PBGC or
otherwise (or any combination thereof); or
27
8.1.12 Levies. Any material portion of the Collateral or the Pledged Shares
is attached, seized, becomes subject to a writ or distress or a warrant, or is
levied upon.
8.2 Remedies. Upon the occurrence and continuance beyond any applicable
cure period of any one or more of such Events of Default, the Bank may, at its
option, without presentment for payment, demand, notice of dishonor or notice of
protest or any other notice, all of which are hereby expressly waived by the
Borrower, declare any and all of the liabilities of the Borrower to the Bank
(including, without limitation, the Term Loan) to be due and payable together
with interest at the rate specified in this Agreement until fully paid. The Bank
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State of New York and under the Uniform Commercial Code
of any other state in which any of the Collateral may be situated, and,
additionally, all of the rights and remedies set forth in this Agreement and the
Financing Agreements, and in any instrument or document referred to herein or
therein, and under any other applicable law relating to this Agreement or the
Financing Agreements. The Bank may, at its option, cure any default by the
Borrower or any of the Guarantors under any agreement with a third party which
constitutes, or would with notice or lapse of time or both constitute, an Event
of Default hereunder, and may add the reasonable amount expended in such cure to
the liabilities of the Borrower or such Guarantor hereunder and charge the
Borrower's account therefor, such amounts to be repayable by Borrower on demand;
the Bank shall be under no obligation to effect such cure and shall not by
making any payment for the Borrower's account be deemed to have assumed any
obligation or lia bility of the Borrower or any Guarantor.
SECTION 9. MISCELLANEOUS.
9.1 Expenses. The Borrower, whether or not the transactions contemplated
hereby are consummated, shall pay to the Bank, or reimburse the Bank for, all
out-of-pocket expenses incurred by the Bank in connection with the preparation
and enforcement of this Agreement, the Financing Agreements, all other
agreements, instruments and documents executed in connection herewith and
therewith and the transactions contemplated hereunder and thereunder, together
with any amendments, supplements, consents or modifications which may be
hereafter made or entered into in respect
28
thereof, including, but not limited to, filing fees, expenses for searches, and
the reasonable fees and disbursements of counsel to the Bank. The Bank shall
invoice the Borrower for the amounts to be reimbursed by the Borrower to the
Bank as is provided in this Section, and if same are not paid by the Borrower
within ten (10) days of the date of such invoice, the Bank is hereby authorized
to charge any amounts payable hereunder directly to the account(s) of the
Borrower maintained with the Bank.
9.2 Survival of Agreement. All agreements, representations and warranties
contained herein or made in writing by the parties hereto in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement, the Financing Agreements and the consummation of the
transactions contemplated herein or therein regardless of any investigation made
by or on behalf of the Bank.
9.3 No Waiver; Cumulative Remedies. No failure to exercise, and no delay in
exercising on the part of the Bank, any right, power or privilege under this
Agreement or under any of the Financing Agreements or other documents referred
to herein or therein shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power and privilege. The rights and remedies of the Bank hereunder and
under the Financing Agreements and under any other present and future agreements
between the Bank and the Borrower are cumulative and not exclusive of any rights
or remedies provided by law, or under any of said Financing Agreements or
agreements and all such rights and remedies may be exercised successively or
concurrently.
9.4 Notices. All notices, approvals, consents, requests, demands or other
communications (collectively, "Communications") to or upon the respective
parties hereto shall be made in writing in one of the following ways and shall
be deemed to have been given, received and dated: if by hand, immediately upon
delivery; if by telegram, express mail or any other overnight delivery service,
one (1) day after dispatch; and if by certified mail, return receipt requested,
or first class mail, three (3) business days after mailing. All Communications
are to be given to the following addresses (or to such other address as any
party may designate by Communication in accordance with this Section):
29
If to the Bank: Bank Leumi USA
562 Fifth Avenue
New York, New York 10036
Attn: Mr. Steven Laufer
Assistant Vice President
with a copy to: Warshaw Burstein Cohen
Schlesinger & Kuh, LLP
555 Fifth Avenue
New York, New York 10017
Attn: Allen N. Ross, Esq.
If to the
Borrower: Data Systems & Software Inc.
200 Route 17
Mahwah, New Jersey 07430
Attn: Mr. George Morgenstern,
President
With a copy to: Ehrenreich Eilenberg Krause
& Zivian, LLP
11 East 44th Street
New York, New York 10017
Attn: Sheldon Krause, Esq.
9.5 Amendments and Waivers. Neither this Agreement, nor any of the
Financing Agreements or any other instrument or document referred to herein or
therein may be changed, waived, discharged or terminated orally, except by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
9.6 Applicable Law. This Agreement and the Financing Agreements and any
other document referred to herein or therein and the obligations of the parties
hereunder or thereunder are being executed and delivered in New York, New York
and shall be construed and interpreted in accordance with the laws of the State
of New York applied to agreements entered into and performed therein.
9.7 Successors. This Agreement, the Financing Agreements and any other
document referred to herein or therein shall be binding upon and inure to the
benefit of and be enforceable by the parties and their respective heirs, legal
representatives, successors and assigns, except that the Borrower may not assign
its rights under this Agreement, the Financing Agreements and any other document
30
referred to herein or therein without the prior written
consent of the Bank.
9.8 Partial Invalidity. If any provision of this Agreement or the Financing
Agreements is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement or the Financing Agreements
as a whole but this Agreement or the particular Financing Agreement, as the case
may be, shall be construed as though it did not contain the particular provision
or provisions held to be invalid or unenforceable and the rights and obligations
of the parties shall be construed and enforced only to such extent as shall be
permitted by law.
9.9 Headings. The headings used herein are for convenience only and do not
constitute matters to be considered in interpreting this Agreement.
9.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT
OF THIS AGREEMENT, THE FINANCING AGREEMENTS OR ANY INSTRUMENT, DOCUMENT OR
GUARANTY DELIVERED PURSUANT HERETO OR THERETO, OR THE VALIDITY, PROTECTION,
INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF, OR
ANY OTHER CLAIM OR DISPUTE HEREUNDER OR THEREUNDER.
9.11 JURISDICTION; SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY
CONSENTS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK FOR
THE COUNTY OF NEW YORK, AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE FINANCING AGREEMENTS OR ANY DOCUMENT,
INSTRUMENT OR GUARANTY DELIVERED PURSUANT HERETO OR THERETO. IN ANY SUCH
LITIGATION THE BORROWER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS AND AGREES THAT THE SERVICE THEREOF MAY BE MADE IN ANY OTHER
MANNER PERMITTED BY THE RULES OF EITHER OF SAID COURTS.
9.12 Conflicts. In the event that any provision of this Agreement conflicts
with the Financing Agreements, or with any document or instrument delivered in
connection herewith or therewith, the terms of this Agreement shall control,
notwithstanding such conflict.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DATA SYSTEMS & SOFTWARE INC.
By: /s/ George Morgenstern
--------------------------
George Morgenstern
President and Chief
Executive Officer
BANK LEUMI USA
By: /s/ Sarit Brosh
-------------------------
Sarit Brosh
First Vice President
By: /s/ Steven Laufer
-------------------------
Steven Laufer
Assistant Vice President
32
EXHIBIT C
CONFIRMATION OF SECURITY AGREEMENTS
-----------------------------------
Each of the undersigned hereby confirms that:
It has executed and delivered a Security Agreement wherein and whereby it
has granted the Bank a security interest in certain Collateral, as therein
described, to secure to the Bank any and all Obligations of the Borrower to the
Bank, including interest and attorneys' fees, costs and expenses of collection
incurred by the Bank in enforcing any of the Obligations. Each of the
undersigned acknowledges that concurrently the Borrower's Obligations to the
Bank are being increased by reason of the Bank's making the Term Loan provided
in the annexed Amended and Restated Credit Agreement, and that the Obligations
include, without limitation, the Term Loan and the Letter of Credit as therein
provided.
The Security Agreement of each of the undersigned is in full force and
effect, has not been terminated, rescinded, amended or modified, and each of the
undersigned has no defenses or assets with respect to its Obligations to the
Bank under the Security Agreement.
INTERNATIONAL DATA
OPERATIONS, INC.
By:_______________________
DATA SYSTEMS & SOFTWARE, INC.
By:_______________________
George Morgenstern
President
DATABIT, INC.
By:_______________________
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EXHIBIT D
CONFIRMATION OF GUARANTY AGREEMENTS
-----------------------------------
The undersigned hereby confirms that:
It has executed and delivered an Unlimited Guaranty in favor of the Bank,
wherein and whereby the undersigned, among other things, unconditionally
guaranteed to the Bank payment when due, whether by acceleration or otherwise of
any and all Obligations of the Borrower to the Bank, including interest and
attorneys' fees, costs and expenses of collection incurred by the Bank in
enforcing any of the Obligations. The undersigned acknowledges that concurrently
the Borrower's Obligations to the Bank are being increased by reason of the
Bank's making the Term Loan provided in the annexed Amended and Restated Credit
Agreement, and that the Obligations include, without limitation, the Term Loan
and the Letter of Credit as therein provided.
The Guaranty of the undersigned is in full force and effect, has not been
terminated, rescinded, amended or modified, and the undersigned has no defenses
or assets with respect to its Obligations to the Bank under the Guaranty.
INTERNATIONAL DATA
OPERATIONS, INC.
By:_______________________
34