Loan Agreement Dated as of January ___, 2010
Dated
as of January ___, 2010
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By
and between:
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Hotel
Outsource Management International, Inc., a Delaware corporation
whose address for the purposes of notices sent under this Agreement shall
be Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx XX 00000, Fax:
x0-000-000 5994, e-mail: xxxxxxxxxx@xx-xxxx.xxx;
with a copy to Xxxx & Xxxx Law Offices, 0-0 XxXxxxxxxx Xxxxxx., Xxx
Xxxxxxx 00000, Xxxxxx, Fax: x000-0-000-0000, e-mail: Xxxx@XxxxXxx.xxx
(the “Borrower”);
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And:
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Xxxxx Business
& Finance (1994) Ltd, of 00 Xxxxxxx Xxxxxx, Xxx-Xxxx 00000,
Xxxxxx (the “Lender”);
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Whereas:
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Borrower
requires immediate funds, which, in the current economic climate, it has
not been able to obtain in a timely manner from banking institutions, as
medium term financing until its business becomes cash-flow positive;
and
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Whereas:
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Borrower
has requested that Lender, which is owned by the Chairman of Borrower,
assist Borrower by agreeing to loan such funds to Borrower in the amount
and under the terms set forth in this Agreement below;
and
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Whereas:
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Lender
is willing to make a loan to Borrower, all subject to and in accordance
with the terms of this Agreement;
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Therefore,
the parties have made condition and agreed as follows:
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1.
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The
Loan
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1.1
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Upon
the terms and conditions set forth in this Agreement, Lender agrees to
loan to Borrower the principal amount of NIS 1,125,000 (one million, one
hundred and twenty-five thousands NIS) (the “Loan”).
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1.2
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The
Loan will be made available to Borrower within 3 business days of the date
hereof (hereinafter: the “Loan
Date”), by means of one or more bank transfers in New Israeli
Shekels, to the account of Borrower’s subsidiary, HOMI Israel Ltd, account
No. 640600/48 at Bank Leumi, branch No. 809 in Tel-Aviv,
Israel.
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2.
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Interest;
CPI Linkage
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2.1
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Interest
will accrue on the entire outstanding balance of the Loan, commencing as
of the Loan Date, at the rate of 6% per annum (the “Interest”).
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2.2
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The
Loan and the Interest shall be linked to Israel’s Consumer Price Index,
with the base index being the index most recently published prior to the
date of this Agreement. Each repayment of Loan and/or Interest hereunder
shall be adjusted in accordance with the ratio between the index most
recently published before the date of such repayment, and the base index
as described above. For example, if the base index was 10, and the index
at the repayment was 11, then the repayment would be adjusted upwardly by
10%. All references herein to payments of Loan and/or Interest shall be
deemed to refer to the payment as adjusted in accordance with the index
linking specified above.
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3.
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Repayment
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3.1
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Borrower
shall repay the entire Loan, with all accrued Interest in 16 (sixteen)
consecutive, quarterly payments, commencing as of April 1, 2010 and
thereafter on the first day of each calendar quarter, ending with the
final payment on January 1, 2014.
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3.2
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As
of the Loan Date, there will be a two year grace period prior to
commencement of repayment of the principal of the Loan (the “Grace
Period”). Accordingly, for each of the first eight quarterly
repayments, the repayment will comprise of accrued Interest, without
principal. The principal of the Loan will be repaid in eight equal
installments over the subsequent eight quarters, together with accrued
Interest.
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4.
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Conversion
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4.1
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During the Grace Period, Lender shall have the
right, in its discretion, to convert the Loan into shares of Borrower’s
common stock, in accordance with the provisions of this Section
4.
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4.2
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Conversion
may be of all of the Loan and accrued Interest, or any part thereof from
time to time during the Grace
Period.
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4.3
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During
the first year of the Grace Period, the conversion will be at a price per
share of $0.08, according to the Representative Dollar/Shekel Exchange
Rate known at the date of conversion. During the second year of the Grace
Period, the conversion will be at a price per share of $0.12, according to
the Representative Dollar/Shekel Exchange Rate known at the date of
conversion.
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4.4
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Conversion
will be by means of written notice by Lender to Borrower, stating the
amount of Loan and accrued Interest which is being converted. Within 30
days of receiving a conversion notice, the Borrower shall issue to Lender,
or to Lender’s order, the applicable quantity of shares of Borrower’s
common stock.
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4.5
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Any
and all amounts of the Loan and accrued Interest which are so converted by
Lender will be deemed repaid by Borrower upon the issue to Lender, or to
Lender’s order, of the applicable quantity of shares of Borrower’s common
stock.
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4.6
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The
conversion right shall expire at the end of the Grace
Period.
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5.
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Late
Payment
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Without derogating from any statutory remedies and/or
other remedies available under the terms of this Agreement, any sums not paid by
Borrower at the appointed time under this Agreement shall be subject
to interest at the highest rate of interest then charged by Bank Leumi of Israel
in respect of Dollar sums overdrawn beyond an agreed credit facility, such
interest to accrue from the date payment was originally due until the date of
actual payment; this interest rate shall initially be determined on the date
payment was originally due, and thereafter monthly until the date of actual
payment. Nothing in this Section
5 may be construed in any way as derogating from
Borrower’s undertaking and obligation to repay the Loan and pay the Interest as
set forth above. Arrears interest accruing pursuant to the terms of this Section
5 shall, for all intents and purposes, be deemed
part of the Interest, as defined herein.
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6.
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Specified
Purpose of Loan
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6.1
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The
Parties hereby confirm and agree that Borrower requested the Loan for the
sole purpose of using all of said Loan to finance its activity in the
ordinary course of business, including making financing available to one
or more of its subsidiaries, to finance their activity in the ordinary
course of business (the “Specified
Purpose”).
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6.2
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Borrower
hereby undertakes to use the Loan solely for the Specified Purpose and not
to use any part of the Loan for any purpose other than the Specified
Purpose.
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6.3
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Borrower hereby recognizes and acknowledges that
Lender’s consent to make the Loan to Borrower in accordance with the terms
hereof is inter alia subject to and in reliance upon Borrower’s
undertaking as set forth in Section
6.2 above, which is a fundamental condition of
this Agreement.
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7.
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Borrower’s
General Covenants
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7.1
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Borrower
shall keep proper records and books of account in accordance with
generally accepted accounting principles consistently applied, and shall
maintain, preserve and keep all of its properties and assets in good
working order and condition, subject to ordinary wear and
tear.
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7.2
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Borrower
shall conduct its affairs in such manner as is appropriate for a public
company whose shares are traded on the New York OTCBB, and in accordance
with all laws and regulations by which it is
bound.
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7.3
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Other
than in the ordinary course of business or otherwise as agreed to in
writing by the Lender, on a case by case basis, Borrower shall not create,
incur, or assume any indebtedness, nor shall it create incur, assume or
suffer any mortgage, pledge, lien, security interest, charge or
encumbrance of any kind or nature in or upon any of its property or
assets, whether now owned or hereafter acquired, nor shall it sell, lease,
assign, transfer or otherwise dispose of any of its assets, including its
accounts receivable.
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8.
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Representations
and Warranties
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Borrower
hereby represents and warrants to Lender as follows:
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8.1
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that
it is duly organized and existing under the laws of the jurisdiction in
which it was incorporated, with the requisite corporate or other power to
own and operate its properties and assets, and to carry on its business as
presently conducted and to execute and perform its obligations under this
Agreement;
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8.2
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that
this Agreement is valid and binding upon it and it is bound by it and
obliged to act in accordance with its terms; and that the execution and
performance by it of this Agreement, and compliance therewith, and the
consummation of the transactions contemplated by this Agreement will not
result in any violation of and will not conflict with, or result in a
breach of any of the terms of, or constitute a default under, any
document, other obligation, law, regulation or order to which it is or
will be party or by which it is or will be
bound;
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8.3
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that
all actions on its part and on the part of its directors, required for the
authorization, execution, and performance by it, of this Agreement, and
the consummation of all the transactions contemplated herein, have been
obtained, or that they will be obtained within 30 days of the date hereof
and until such time as they are obtained no use will be made of the Loan,
which will, until such time, be deemed held in trust for Lender by
Borrower;
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8.4
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that
this Agreement and the entire contents thereof do not require that any
notice be made to any authorities, other
than notice which has already been made by Borrower or which will
be made by Borrower in a timely manner (such as a Form 8-K), in
accordance with all laws and regulations by which Borrower is bound, in
accordance with directions which Borrower will receive from its US Legal
Counsel.
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9.
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Events
of Default
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The
occurrence and continuation of any of the following events shall be considered
an Event of Default upon the occurrence of which the entire unpaid balance of
the Loan and Interest, and all reasonable costs of collection, including
reasonable attorney fees and expenses, shall become immediately due and
payable:
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9.1
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Borrower
shall fail to make any payment which it is obliged to make under the terms
of this Agreement and such failure is not fully remedied within thirty
(30) days after the occurrence
thereof;
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9.2
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for the
avoidance of doubt it is hereby stipulated and emphasized that it is the
fundamental obligation and undertaking of Borrower to repay the Loan and
pay the Interest, in accordance with the schedule set forth herein, and
that failure by Borrower to repay the Loan and pay the Interest in such
manner shall be considered an Event of Default, regardless of the reason
for such failure, and without Lender being required to deliver any kind of
notice to Borrower;
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9.3
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Borrower
shall default in the performance of any material covenant or obligation
contained herein or in any other agreement, debenture, pledge, promissory
note or other instrument of indebtedness with Lender and such default is
not remedied within thirty (30) days after the occurrence
thereof;
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9.4
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Borrower
uses and/or attempts and/or permits use of the Loan, or any part thereof,
for any purpose other than the Specified
Purpose;
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9.5
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any
representation or warranty made by or on behalf of Borrower to Lender,
howsoever in connection with the Loan and/or this Agreement, shall at any
time prove to have been incorrect or
misleading;
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9.6
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any
judgment materially affecting the ability of Borrower to repay the Loan
and pay the Interest shall be entered against Borrower or any attachment,
levy or execution against a substantial portion of its properties shall
remain unpaid, or shall not be released, discharged, dismissed, suspended
or stayed for a period of thirty (30) days or more after its entry, issue
or levy, as the case may be;
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9.7
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any
proceedings seeking to declare Borrower bankrupt, or insolvent, or seeking
liquidation, winding up, reorganization, arrangement with creditors,
composition of debts or any other similar proceedings shall be initiated
against Borrower, and such proceeding shall not be dismissed within thirty
(30) days;
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9.8
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any
event shall occur materially affecting the ability of Borrower to repay
the Loan and pay the Interest under the terms of this
Agreement.
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10.
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Miscellaneous
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10.1
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In
view of the fact that Lender is owned by a shareholder in Borrower who is
currently the Chairman of Borrower’s Board of Directors, Lender hereby
agrees that, so long as its owner owns more than 1% of Borrower’s issued
and outstanding share capital or is a member of Borrower’s Board of
Directors, he will not participate in any vote taken by any of the organs
within Borrower’s corporate structure in connection with this Agreement.
This clause is in addition to, and without derogating from, the provisions
of applicable law that may apply to this Agreement in connection with its
being an agreement between a corporation and individuals who are
shareholders and directors of that
corporation.
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10.2
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Lender
shall be entitled, at any time and without requiring the consent of
Borrower or any other individual, to assign all or any part of its rights
under this Agreement, to any other entity. Borrower shall not be entitled
to assign all or any part of its rights and/or obligations under this
Agreement, without Lender’s advance written
consent.
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10.3
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No
Amendment to this Agreement, or any part thereof, shall be valid or
binding upon the Parties unless drawn up in writing and signed by both
Parties.
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10.4
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As
used in this Agreement, the term “including”, and all derivations thereof,
shall mean “including, without limitation”, unless expressly stipulated to
the contrary. Where the context permits, use of the singular number
includes the plural and vice versa and words denoting any gender shall
include all genders. The Preamble, and any Appendices, Exhibits or
Schedules to this Agreement, constitute an integral part hereof. Section
headings are for convenience purposes only, and may not be used in the
construction or interpretation of this
Agreement.
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10.5
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No
failure or delay on the part of any party in exercising any right and/or
remedy to which it may be entitled hereunder and/or by law shall operate
as a waiver by that party of any right whatsoever. No waiver of any right
under this Agreement shall be deemed as a waiver of any further or future
right hereunder, whether or not such right is the same kind of right as
was waived in a previous instance.
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10.6
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In
case any provision of the Agreement shall be declared invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and shall
continue in full force and effect.
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10.7
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This
Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and replaces any previous agreements
between the parties, if at all, whether written or verbal, pertaining to
any of the subject-matter
hereof.
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10.8
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This
Agreement shall be governed by and construed in accordance with the laws
of Israel, without regard to its rules of conflict of laws. The parties
hereby agree and submit to the exclusive jurisdiction of the competent
courts in the city of Tel-Aviv, with respect to any claim or dispute
arising out of and/or in connection with this Agreement. For this purpose,
Borrower hereby gives notice that an address for service of court papers
in any action relating to this Agreement shall be c/o HOMI Israel Ltd.,
Gav-Yam Center, Building #3, 3rd Floor, 9 Xxxxxxx Xxxxxx, Xxxxxxxx Xxxxxxx
00000, Xxxxxx.
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10.9
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Notices
sent by one party to the other under this Agreement will be sent by
registered mail to the addresses specified herein, delivered by hand, or
transmitted by fax and will be deemed to have reached their destination
within 5 days of being deposited with the Post Office for dispatch as
registered mail (10 days in the case of air mail), upon actual delivery
when delivered by hand, and upon receipt of the recipient’s confirmation
of receipt when sent by fax.
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10.10
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This
Agreement may be executed in any number of counterparts, in original or by
facsimile, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
one and the same agreement.
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In witness
whereof the parties have executed this
Loan
Agreement on the date first above written:
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SIGNED
for and on behalf of
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)
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Hotel
Outsource Management International, Inc.
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)
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)
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By:
Xxxxxx Xxxxx, Xxxxx Xxxxxx
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)
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SIGNED
by:
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)
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Xxxxx Business
& Finance (1994) Ltd
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)
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