EXHIBIT 10.49
BUSINESS LOAN AGREEMENT
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ELECTRONIC ASSOCIATES, INC.
BUSINESS LOAN AGREEMENT
This Business Loan Agreement made and entered into as of the 20th day
of October, 1994, by and between Electronic Associates, Inc., a New Jersey
corporation with offices at 185 Monmouth Parkway, West Long Branch, New Jersey
07764-9989 ("Lender") and BarOn R&D Ltd., an Israeli corporation with offices at
Gutwirth Science Park, Technion City, Haifa 32000 Israel ("Borrower").
BACKGROUND
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This Business loan Agreement is being entered into in connection with
the execution and delivery of that certain letter of intent dated October 20,
1994 between Lender and Borrower ("Letter of Intent"), and in contemplation of
the consummation of the transactions set forth in the Letter of Intent, to be
evidenced by a definitive Agreement, as contemplated by the Letter of Intent
(the "Definitive Agreement").
The amount loaned hereunder shall be deemed an advance on the cash
contribution to Borrower's capital to be paid by Lender, subject to and upon the
execution of the Definitive Agreement as contemplated by the Letter of Intent.
If the transactions contemplated by the Letter of Intent shall not
close before December 31, 1994 (unless extended by Lender and Borrower), all
amounts due hereunder shall be paid by Borrower to Lender, either by cash or in
the capital stock of Borrower, as provided in this Business Loan Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the premises
and of the mutual obligations set forth herein, and intending to be legally
bound hereby agree as follows:
ARTICLE I. DEFINITIONS
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"Closing" or "Closing Date" means the date hereof.
"Indebtedness" means all amounts of principal, interest, fees, expenses
or other costs owed Lender by Borrower arising under on in connection with this
Business Loan Agreement or any other Loan Document including, but not limited
to, costs and expenses of collection and any amounts incurred by Lender, in its
discretion, to maintain or protect any Collateral or other property securing a
Loan.
"Loan" means the sum which Lender agrees to lend to Borrower as
specified in Section 2.1 of this Business Loan Agreement and pursuant to the
terms and provision hereof.
"Loan Documents" means this Business Loan Agreement and each other
document delivered pursuant to this Business Loan Agreement including, but not
limited to, the Note and any security agreement, pledge agreement and guarantee.
"Note" means the promissory note executed by Borrower
hereunder to evidence the Loan.
"Officer Compensation" means the annualized aggregate amount of
salaries, withdrawals or compensation paid to the Chief Executive Officer,
President, Chief Financial Officer, Secretary and Vice Presidents of Borrower,
such amount to be determined as of the closing Date.
"Prime Rate" means that the rate of interest per annum announced by
CoreStates National Bank, N.A. from time to time as its "prime rate", at any
time, or from time to time.
"Term" means the period of time commencing on the closing Date and
ending on the Termination Date.
"Termination Date" means the earlier of the consummation of the
transactions (i.e. the execution and delivery of the Definitive Agreement) as
contemplated by Letter of Intent or December 31, 1994, unless extended by the
mutual consent of Lender and Borrower.
ARTICLE II. THE LOAN
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2.1 Under and subject to the terms and provisions hereof Lender
agrees to lend to Borrower, and Borrower hereby agrees to
repay to Lender, the sum of Five Hundred Thousand Dollars
($500,000.00)
2.2 The Loan shall bear interest at the rate of Prime Rate plus
2.25%. Interest on the unpaid balance of principal shall be
computed on a 365 day basis and the actual number of days
elapsed. The variable interest rate shall change when and as
the Prime Rate changes.
2.3 The entire outstanding principal balance of the Loan, together
with all accrued and unpaid interest thereon, and any other
amounts due hereunder (collectively, the "Outstanding
Balance"), shall be due and payable by Borrower to Lender on
the Termination Date and Borrower shall repay to Lender the
outstanding balance in the manner set forth in Sections 2.4,
2.5, and 2.6. The amount of the Outstanding Balance shall be
determined in
good faith by Lender, and shall be binding on the parties
absent manifest error.
2.4 If the Definitive Agreement has been consummated on or before
December 31, 1994 or such later date if mutually extended by
Lender and Borrower (i.e. the "Termination Date") the
Outstanding Balance shall be credited towards the $2,000,000
cash contribution due Borrower from Lender at time of Closing
as set forth in paragraph 1.A of the Letter of Intent.
2.5 If the Definitive Agreement has not been consummated on or
before December 31, 1994 (unless extended by the mutual
consent of Lender and Borrower), the Outstanding Balance shall
be immediately due and payable, and Borrower shall either (a)
pay the Outstanding Balance in cash (unless Lender exercises
its right to receive payment of the Outstanding Balance in
stock of Borrower, as set forth in Section 2.6) or, (b) in
lieu of paying the Outstanding Balance in cash, Borrower may
issue and deliver to Lender the Conversion amount of common
stock outstanding shares:
2.6 a. If the Definitive Agreement has not been consummated
on or before December 31, 1994 (unless extended by
mutual consent of Lender and Borrower). and Borrower
has not as of such time issued and delivered to
Lender, in repayment of the Loan, common stock
representing the equity stock of Borrower set forth
in Section 2.6(b), Lender may, at its option,
require Borrower to (a) immediately repay the
Outstanding Balance in cash, or,
b. Conversion amount shall mean: issue and deliver to
Lender common stock of Borrower representing (i) 5%
of Borrower's equity capital, if the failure to
consummate the Definitive Agreement is caused by
Borrower, or (ii) 2.5% of Borrower's equity capital,
if the failure to consummate the Definitive Agreement
is caused by Lender.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BORROWER
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Borrower makes the following representations and warranties,
both with respect to itself and all subsidiaries of Borrower, to
Lender:
3.1 Borrower is and on the Closing Date will be a corporation duly
organized, validly existing and in good standing as such under
the laws of the jurisdiction in which it is organized and is
and on the closing Date will be entitled to own its properties
and conduct its business in the places where such properties
are now owned and such business is now conducted.
3.2 Neither the execution nor delivery of this compliance with the
terms and conditions hereof or thereof will conflict with or
result in a breach of or constitute a default under the terms,
conditions or provisions, of Borrower's charter documents or
By-Laws or of any contract, agreement or instrument (including
any provisions of any debt) to which Borrower is a party or by
which Borrower or any of its properties is bound.
3.3 All corporate action on the part of Borrower, its officers,
directors and shareholders necessary for the authorization,
execution, delivery and performance of this Business Loan
Agreement have been duly taken and the Loan Documents
constitute valid and binding obligations of Borrower
enforceable against Borrower in accordance with its and their
terms.
3.4 The proceeds of the Loan made hereunder shall be used by
Borrower exclusively for working capital and for no other
purpose.
3.5 There are no actions, suits or proceedings pending, or
threaten against Borrower or its property by or before any
court or administrative agency. Borrower has complied in all
material respects with all laws, rules and regulations
relating to the conduct of Borrower's business.
3.6 All of Borrower's financial statements furnished to Lender
were prepared in accordance with Israeli Accounting rules
consistently applied, are true and correct and fully and
accurately present Borrower's financial condition and results
of operations at and for the periods therein specified; and
there has been and on the Closing date hereunder there will
have been no material adverse change in the conditions,
financial or otherwise, of Borrower since the date of the last
financial statement provided to Lender, other than normal
seasonal variations occurring in the ordinary course of
business.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LENDER
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4.1 Lender is and on the Closing Date will be a corporation
duly organized, validly existing and in good standing as such
under the laws of the state in which it is organized and is
and on the Closing Date will be entitled to own its properties
and conduct its business in the places where such properties
are now owned and such business is now conducted
4.2 Neither the execution nor delivery of this Business Loan
Agreement or any other Loan Document nor the fulfillment
of compliances with the terms and conditions hereof or thereof
will conflict with or result in a breach of or constitute a
default under the terms, conditions or provisions, of
Borrower's charter documents or By-Laws or of any contract,
agreement or instrument (including any provisions of any debt)
to which Borrower is a party or by which Borrower or any of
its properties is bound.
4.3 All corporate action on the part of Lender, its officers,
directors and shareholders necessary for the authorization,
execution, delivery and performance of this Business Loan
Agreement and the Loan Documents constitute valid binding
obligations of Lender enforceable against Lender in accordance
with its and their terms.
ARTICLE V SECURITY
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As a security for the loan made hereunder, BarOn undertakes to provide EA with
documents satisfactory to EA, evidencing that:
5.1 Mr. Yossi Shimoni ("The Trustee") received from BarOn the
following documents:
-A power of attorney authorizing him to register 389,555
shares of common stock of BarOn representing 5% of BarOn's
outstanding and issued stock (The Conversion Shares).
-BarOn's Board of Director's resolution under which the Board
of Directors irrevocably authorizes the allotment, issuance &
registration of 389,555 the conversion shares to EA.
-Two blank dated forms of stock registration customary at the
Israeli companies registerer each one of them for a number of
shares which is 50% of the amount of Conversion Shares.
5.2 The Trustee received irrevocable instructions signed by BarOn
and EA under which the Trustee is instructed to register 50%
of the conversion stock in the name of EA within 14 days of
receipt of a written request by either EA or BarOn to do so,
unless within 7 days following a notice sent by him to both
parties, either of them can show that a Definitive Investment
Agreement between the parties has been executed.
In the event that EA requests: the registration of the second
part of 50% of the Conversion Shares in its name, and BarOn is
rejecting such a request, the Trustee shall act as a sole
arbitrator authorized the resolve (within 3 months) whether
under the Business loan Agreement EA is
entitled to the full amount of the Conversion Shares or
to 50% only.
The Trustee's judgment as an arbitrator shall become final and
binding upon the parties.
5.3 The Trustee accepts his nomination as trustee and as a sole
arbitrator between the parties according to this article V of
the Business Loan Agreement and undertakes to act in
compliance thereof.
5.4 No action will be taken by the Trustee before the proposed
closing date (Dec. 31, 1994) or any postponed date to which
the parties may mutually agree.
ARTICLE VI CONDITIONS TO CLOSING
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As conditions precedent to the performance by Lender of any of its
obligations hereunder, Borrower shall deliver (or cause to be
delivered) to Lender, on or before the Closing Date, in form and
substance satisfactory to Lender, in addition to this Business loan
Agreement and an executed Letter of Intent: (a) the Note; (b) the
documents list in article V. (c) and Incumbency Certificate of
Borrower; (d) Certified Copy of Borrower's Articles of Incorporation
and By-Laws or other charter documents; (e) Certified Copy of
Borrower's Authorizing Board of Director's Resolutions; and (f) such
other documents as Lender shall require.
ARTICLE VII. BORROWER'S NEGATIVE COVENANTS.
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During the term of this Agreement, and so long as any part of the
indebtedness shall remain unpaid, Borrower and its Subsidiaries will
operate only in the ordinary course of its business, and will not do
any of the following, without the prior written consent of Lender:
7.1 Create or permit to exist against any properties or assets,
real or personal, tangible or intangible, now or hereafter
acquired, any mortgage, security interest, or other lien or
encumbrance, other than those already existing as of the date
of this Business Loan Agreement;
7.2 Purchase or acquire all or substantially all of the
property, assets or business of any other person, firm or
corporation;
7.3 Purchase or acquire, directly or indirectly, any shares
of stock, evidences of indebtedness or other securities
of any person, firm, partnership, or corporation
(including a subsidiary), except in settlement of
customers' accounts;
7.4 Liquidate, or discontinue its normal operations with intention
to liquidate, or merge or consolidate with or into any other
corporation or company (including a parent or subsidiary
company) other than Lender or a subsidiary or nominee of
Lender, or convey, lease, sell or license all or substantially
all, or any important part of its property, assets or business
to any other person, firm or corporation;
7.5 Create or incur any indebtedness for borrowed money, except
(a) as provided under this Agreement; or (b) pursuant to
existing indebtedness as disclosed on Schedule 7.5(b) attached
hereto;
7.6 Sell, assign, transfer or dispose of any of its accounts
or notes receivable, with or without recourse, except to
Lender;
7.7 Make loans to others;
7.8 Become a guarantor, ?surety? or otherwise liable for the
debts or obligations of others, except to Lender, and
except as an endorser of checks or drafts negotiated in
the ordinary course of business;
7.9 Declare or pay any dividends or make any form of
withdrawal from capital, including the purchase of
treasury stock;
7.10 Incur, create or assume any commitment to make any Lease
Payments except as set forth on Schedule 7.10 attached
hereto;
7.11 Enter into any sale-leaseback transaction;
7.12 Prepay any amounts not required or cause to be
accelerated any amounts on any outstanding indebtedness
now existing or hereafter arising;
7.13 Pay salaries, withdrawals or compensation to officers of
Borrower in an amount exceeding Officer Compensation in
the aggregate per year;
7.14 Make capital expenditures during the term of the Loan, or
until all Indebtedness has been repaid hereunder, in an
amount in excess of One Hundred Thousand Dollars
($100,000.00);
7.15 Sell, issue, or agree to sell or issue, any shares (voting,
non-voting, preferred or common of any class) of Borrower, or
purchase such shares except (a) with respect to the exercise
of stock options outstanding as of the Closing Date, or (b) to
Lender, as contemplated by the Letter of Intent.
7.16 Take any action to diminish the value of the Collateral.
ARTICLE VIII. DEFAULT
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8.1 Borrower shall be in default under this Business Loan
Agreement and under the Note, and the other Loan Documents,
upon the occurrence of any of the following:
(a) Borrower fails to pay Lender the principal, interest or other
liabilities incurred pursuant to this Business Loan Agreement
or any other Loan Document when the same is due and payable
(unless Borrower has issued stock to Lender in lieu of such a
payment, in a manner permitted in Section 2.4, 2.5 or 2.6 of
this Business Loan Agreement);
(b) Borrower's failure to observe, perform or comply with any
of Borrower's obligations under the Letter of Intent or
under this Business Loan Agreement;
(c) Any warranty or representation of Borrower set forth
herein being or becoming untrue;
(d) Any default by Borrower under the provisions of the Note,
or any other Loan Document;
(e) The filing by or against Borrower of any proceeding under any
applicable law relating to bankruptcy, insolvency,
receivership, reorganization or debt adjustment, or the
appointment of a trustee or receiver for property of or
assignment for the benefit of creditors by Borrower.
8.2 Upon any default by Borrower, Lender, at its option, may
declare immediately due and payable, the unpaid balance of the
Loan and may exercise all rights and remedies provided to
Lender in this Business Loan Agreement, in the Note, and any
other Loan Document or otherwise available to Lender in law or
in equity.
ARTICLE IX. MISCELLANEOUS
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9.1 Lender shall not be deemed to have waived any of the terms,
agreements, conditions and covenants hereof, except by writing
signed by an authorized officer of Lender and delivered to
Borrower.
9.2 Borrower hereby forever indemnifies and saves Lender and its
directors, officers, employees and agents harmless from and
against any and all liability which Lender or any of them may
incur or which may be assessed against Lender or any of them
with respect to this Business Loan Agreement or any other Loan
Document, provided that such liability is not due to the
negligence or intentional acts of or on the part of the Lender
or any of its directors, officers, employees or agents.
9.3 This Business Loan Agreement contains the entire agreement and
understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior or
contemporaneous agreements with respect to such subject
matter. The terms of any other Loan Documents are expressly
incorporated herein and made a part hereof; provided, however,
that in any case where a term or condition contained in any
other Loan Document cannot be construed (despite every effort
to do so) as consistent with the terms of this Business Loan
Agreement, this Business Loan Agreement shall govern. This
Business Loan Agreement may be amended only by a written
instrument which is signed by the parties hereto and which
specifically refers to this Business Loan Agreement and states
that it is an amendment hereto.
9.4 This Business Loan Agreement and all rights hereunder shall be
governed by the laws of the State of Israel and shall be
binding upon Borrower, its successors and assigns, and shall
inure to the benefit of Lender, and its successors and
assigns.
9.5 If any term of this Business Loan Agreement shall be held to
be invalid, illegal or unenforceable, the validity of all
other terms hereof shall in no way be affected thereby.
9.6 This Business Loan Agreement shall be in full force and effect
until Borrower shall have satisfied in full or been released
from all of Borrower's liabilities and obligations to Lender
hereunder and Lender shall have no further obligations to
Borrower pursuant to the terms hereof.
9.7 Any and all actions at law or in equity relating to this
Business Loan Agreement, the Note, any other Loan Documents or
the Loan shall be brought and jurisdiction shall be had
exclusively in Israel.
9.8 If Borrower shall pay any interest under the terms of the Note
at a rate higher than the maximum rate allowed by applicable
law, then such excess payment shall be credited as a payment
of principal of the Loan, unless Borrower notifies Lender in
writing to return any excess payment to Borrower.
9.9 Any notices required or permitted to be given pursuant to this
Business Loan Agreement or any Loan Document shall be
sufficiently given if delivered in person or by overnight
delivery service or sent by United States mail, postage
prepaid to the addresses set forth on the first page hereof.
9.10 Until the Indebtedness has been paid in full and Lender has no
further obligations to Borrower hereunder, Lender shall have
the right of first refusal to offer loans to Borrower of all
types (including capital leases) and Borrower shall promptly
deliver to Lender a copy of all commitment letters or
proposals received by Borrower with respect thereto. Lender
shall have 10 days after receipt of each such commitment
letter or proposal to exercise the right of first refusal
granted hereby.
9.11 This Business Loan Agreement may be executed on one or more
counterparts and all such counterparts shall together
constitute one Business Loan Agreement notwithstanding that
all of the parties are not signatories to the original or same
counterpart.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Business Loan Agreement this 20th day of October,
1994.
Attest ELECTRONIC ASSOCIATES, INC.
By: /s/ Jules M. Seshens
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Secretary Director
Attest
By: /s/ Ehud Baron
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Secretary President