Exhibit 10.1 LOAN AND SECURITY AGREEMENT
__________________________________________________
__________________________________________________
LOAN AND SECURITY AGREEMENT
Dated: July 13, 2000
$5,000,000
BY AND BETWEEN
__________________________________________________
__________________________________________________
ZOOM TELEPHONICS, INC.
("Borrower")
AND
__________________________________________________
FLEET CAPITAL CORPORATION
("Lender")
__________________________________________________
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TABLE OF CONTENTS
Page
SECTION 1. CREDIT FACILITY..................................................1
1.1 Revolving Credit Loans..................................................1
1.2 Letters of Credit; LC Guaranties........................................2
SECTION 2. INTEREST, FEES AND CHARGES.......................................2
2.1 Interest................................................................2
2.2 Computation of Interest and Fees........................................2
2.3 [Origination] [Commitment] [Closing] [Facility] Fee.....................3
2.4 [Letter of Credit and LC Guaranty Fees..................................3
2.5 Unused Line Fee.........................................................3
2.6 Collection Charges......................................................3
2.7 Audit and Appraisal Fees................................................3
2.8 Reimbursement of Expenses...............................................4
2.9 Bank Charges............................................................4
SECTION 3. LOAN ADMINISTRATION..............................................4
3.1 Manner of Borrowing Revolving Credit Loans..............................4
3.2 Payments................................................................5
3.3 Mandatory Prepayments...................................................6
3.4 Application of Payments and Collections.................................6
3.5 All Loans to Constitute One Obligation..................................6
3.6 Loan Account............................................................6
3.7 Statements of Account...................................................6
SECTION 4. TERM AND TERMINATION.............................................7
4.1 Term of Agreement.......................................................7
4.2 Termination.............................................................7
SECTION 5. SECURITY INTERESTS...............................................8
5.1 Security Interest in Collateral................................. .......8
5.2 Lien Perfection; Further Assurances.....................................8
SECTION 6. COLLATERAL ADMINISTRATION........................................9
6.1 General.................................................................9
6.2 Administration of Accounts.............................................10
6.3 Administration of Inventory............................................11
6.4 Administration of Equipment............................................11
6.5 Payment of Charges.....................................................12
SECTION 7. REPRESENTATIONS AND WARRANTIES..................................12
7.1 General Representations and Warranties.................................12
7.2 Continuous Nature of Representations and Warranties....................17
7.3 Survival of Representations and Warranties.............................17
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS.............................17
8.1 Affirmative Covenants..................................................17
8.2 Negative Covenants.....................................................19
8.3 Specific Financial Covenants...........................................21
SECTION 9. CONDITIONS PRECEDENT............................................21
9.1 Documentation..........................................................21
9.2 No Default.............................................................21
9.3 Equity.................................................................21
9.4 Availability...........................................................22
9.5 No Litigation..........................................................22
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON
DEFAULT.......................................................22
10.1 Events of Default.....................................................22
10.2 Acceleration of the Obligations.......................................24
10.3 Other Remedies........................................................24
10.4 Remedies Cumulative; No Waiver........................................25
SECTION 11. MISCELLANEOUS..................................................25
11.1 Power of Attorney.....................................................25
11.2 Indemnity.............................................................26
11.3 Modification of Agreement; Sale of Interest...........................26
11.4 Severability..........................................................27
11.5 Successors and Assigns................................................27
11.6 Cumulative Effect; Conflict of Terms..................................27
11.7 Execution in Counterparts.............................................27
11.8 Notice................................................................27
11.9 Lender's Consent......................................................28
11.10 Credit Inquiries.....................................................28
11.11 Time of Essence......................................................28
11.12 Entire Agreement.....................................................28
11.13 Interpretation.......................................................28
11.14 GOVERNING LAW; CONSENT TO FORUM......................................28
11.15 WAIVERS BY BORROWER..................................................29
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 13th day of July, 2000, by
and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation
with an office at One Federal Street, Boston, Massachusetts; and ZOOM
TELEPHONICS, INC. ("Borrower"), a Massachusetts corporation with its chief
executive office and principal place of business at 207 South Street, Boston,
Massachusetts 02111. Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix-A, General Definitions. Accounting terms not
otherwise specifically defined herein shall be construed in accordance with
GAAP consistently applied.
SECTION 1. CREDIT FACILITY SECTION
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to $5,000,000
available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, for so long as no Default or
Event of Default exists, to make Revolving Credit Loans to Borrower from time
to time, as requested by Borrower in the manner set forth in subsection 3.1.1
hereof, up to a maximum principal amount at any time outstanding equal to the
Borrowing Base at such time minus the LC Amount and reserves, if any. The
Revolving Credit Loan may be evidenced by one or more Promissory Notes in the
form of Exhibit "A" attached hereto (the "Revolving Note (s)"). Lender shall
have the right to establish reserves in such amounts, and with respect to such
matters, as Lender shall deem necessary or appropriate in its reasonable credit
judgement, against the amount of Revolving Credit Loans which Borrower may
otherwise request under this subsection 1.1.1, including, without limitation,
with respect to (i) price adjustments, damages, unearned discounts, returned
products or other matters for which credit memoranda are issued in the ordinary
course of Borrower's business; (ii) shrinkage, spoilage and obsolescence of
Inventory; (iii) other sums chargeable against Borrower's Loan Account as
Revolving Credit Loans under any section of this Agreement; (iv) amounts owing
by Borrower to any Person to the extent secured by a Lien on, or trust over,
any Property of Borrower (except for the Permitted Liens); and (v) such other
matters, events, conditions or contingencies as to which Lender, in its
reasonable credit judgment, determines reserves should be established from time
to time hereunder.
1.1.2 Use of Proceeds. The Revolving Credit Loans shall be used solely for
the satisfaction of existing Indebtedness of Borrower to Fleet National Bank,
as applicable, and for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable laws.
1.2 Letters of Credit; LC Guaranties1.3 Letters of Credit; LC Guaranties.
Lender agrees, for so long as no Default or Event of Default exists and if
requested by Borrower, to (i) issue its, or cause to be issued its Affiliate's
Letters of Credit for the account of Borrower or (ii) execute LC Guaranties by
which Lender or its Affiliate shall guaranty the payment or performance by
Borrower of its reimbursement obligations with respect to Letters of Credit,
provided that the aggregate LC aggregate Amount at any time shall not exceed
$1,000,000, and provided further that in determining said aggregate LC Amount,
(i) one hundred percent (100%) of the aggregate amount then undrawn on all
standby Letters of Credit and LC Guaranties of standby Letters of Credit, and
(ii) fifty-five percent (55%) of the outstanding face value of the undrawn
documentary Letter of Credit and LC Guaranties of documentary Letters of Credit
shall be included in the LC Amount. No Letter of Credit or LC Guaranty may have
an expiration date that is after the last day of the Original Term or the then
applicable Renewal Term. Any amounts paid by Lender under any LC Guaranty or in
connection with any Letter of Credit shall be treated as Revolving Credit
Loans, shall be secured by all of the Collateral and shall bear interest and be
payable at the same rate and in the same manner as Revolving Credit Loans.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest
2.1.1 Rates of Interest. Interest shall accrue on the principal amount of
the Revolving Credit Loans outstanding at the end of each day at a fluctuating
rate per annum equal to the Base Rate. The rate of interest shall increase or
decrease by an amount equal to any increase or decrease in the Base Rate,
effective as of the opening of business on the day that any such change in the
Base Rate occurs.
2.1.2 Default Rate of Interest. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, the principal amount of all
Loans shall bear interest at a rate per annum equal to two (2%) above the
interest rate otherwise applicable thereto (the "Default Rate").
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate of all
amounts deemed interest hereunder and charged or collected pursuant to the
terms of this Agreement exceed the highest rate permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If any provisions of this Agreement, are in contravention of
any such law, such provisions shall be deemed amended to conform thereto.
2.2 Computation of Interest and Fees[2.2] Computation of Interest and
Fees. Interest, Letter of Credit and LC Guaranty fees and unused line fees and
collection charges hereunder shall be calculated daily and shall be computed on
the actual number of days elapsed over a year of 360 days. For the purpose of
computing interest hereunder, all items of payment received by Lender shall be
deemed applied by Lender on account of the Obligations (subject to final
payment of such items) on the second Business Day after receipt by Lender of
such items in Lender's account.
2.3 Closing Fee2.3[Origination] [Commitment] [Closing] [Facility] Fee.
Borrower shall pay to Lender a closing fee of $25,000.00, which shall be fully
earned and nonrefundable on the Closing Date and shall be paid concurrently
with the initial Loan hereunder.
2.4 Letter of Credit and LC Guaranty Fees2.4 [Letter of Credit and LC
Guaranty Fees. Borrower shall pay to Lender:
(i) for standby Letters of Credit and LC Guaranties of standby Letters of
Credit, one and one-half percent (1.5%) per annum of the aggregate face amount
of such Letters of Credit and LC Guaranties outstanding from time to time
during the term of this Agreement, calculated for the actual number of days
such Letters of Credit and LC Guaranties are outstanding, plus all normal and
customary charges associated with the issuance thereof, which fees and charges
shall be deemed fully earned upon issuance of each such Letter of Credit or LC
Guaranty, shall be due and payable on the first Business Day of each month and
shall not be subject to rebate or proration upon the termination of this
Agreement for any reason; and
(ii) for documentary Letters of Credit and LC Guaranties of documentary
Letters of Credit, a fee equal to one and one-half percent (1.5%) per annum of
the aggregate face amount of each such Letter of Credit or LC Guaranty
outstanding from time to time during the term of this Agreement, calculated for
the actual number of days such Letters of Credit and LC Guaranties are
outstanding, plus the normal and customary charges associated with the issuance
and administration of each such Letter of Credit or LC Guaranty (which fees and
charges shall be fully earned upon issuance, renewal or extension (as the case
may be) of each such Letter of Credit or LC Guaranty, shall be due and payable
on the first Business Day of each month, and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason).
2.5 Unused Line Fee2.5 Unused Line Fee. Borrower shall pay to Lender a fee
equal to three-tenths of one percent (.30%) per annum of the average monthly
amount by which $5,000,000 exceeds the sum of the outstanding principal balance
of the Revolving Credit Loans plus the LC Amount. The unused line fee shall be
payable on a quarterly basis in arrears on the first day of each calendar
quarter hereafter.
2.6 Intentionally Deleted.
2.7 Audit and Appraisal Fees[2.7] Audit and Appraisal Fees. Borrower shall
pay to Lender audit and appraisal fees in accordance with Lender's current
schedule of fees in effect from time to time in connection with audits and
appraisals of Borrower's books and records and such other matters as Lender
shall deem appropriate, not to exceed $650 per auditor per day, for a maximum
amount of $2,000 per audit, plus all out-of-pocket expenses incurred by Lender
in connection with such audits and appraisals. Audit fees shall be payable on
the first day of the month following the date of issuance by Lender of a
request for payment thereof to Borrower. Provided there exists no default or
Event of Default hereunder, the Lender shall not conduct more than one (1) such
audit per quarter. Additionally, Lender shall not conduct an audit during any
time in which there are no Loans outstanding under this Agreement.
2.8 Reimbursement of Expenses[2.8] Reimbursement of Expenses. If, at any
time or times regardless of whether or not an Event of Default then exists,
Lender or any Participating Lender incurs out of pocket legal or accounting
expenses or any other costs or out-of-pocket expenses in connection with (i)
the negotiation and preparation of this Agreement or any of the other Loan
Documents, or any amendment of or modification of this Agreement or any of the
other Loan Documents; (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby;
(iii) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Lender, Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or Borrower's
affairs; (iv) any attempt to enforce any rights of Lender or any Participating
Lender against Borrower or any other Person which may be obligated to Lender by
virtue of this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt to inspect, verify,
protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or
realize upon the Collateral; then all such out of pocket legal and accounting
expenses, other costs and out of pocket expenses of Lender shall be charged to
Borrower. All amounts chargeable to Borrower under this Section 2.8 shall be
Obligations secured by all of the Collateral, shall be payable on demand to
Lender or to such Participating Lender, as the case may be, and shall bear
interest from the date such demand is made until paid in full at the rate
applicable to Revolving Credit Loans from time to time. Borrower shall also
reimburse Lender for expenses incurred by Lender in its administration of the
Collateral to the extent and in the manner provided in Section 6 hereof.
2.9 Bank Charges[2.9] Bank Charges. Borrower shall pay to Lender, on
demand, any and all reasonable and customary fees, costs or expenses which
Lender or any Participating Lender pays to a bank or other similar institution
(including, without limitation, any fees paid by Lender to any Participating
Lender) arising out of or in connection with (i) the forwarding to Borrower or
any other Person on behalf of Borrower, by Lender or any Participating Lender,
of proceeds of loans made by Lender to Borrower pursuant to this Agreement and
(ii) the depositing for collection, by Lender or any Participating Lender, of
any check or item of payment received or delivered to Lender or any
Participating Lender on account of the Obligations.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans Borrowings under the credit
facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan shall be made,
or shall be deemed to be made, in the following manner: (i) Borrower may give
Lender notice of its intention to borrow, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date,
no later than 11:00 a.m. New York time on the proposed borrowing date,
provided, however, that no such request may be made at a time when there exists
a Default or an Event of Default; and (ii) the becoming due of any amount
required to be paid under this Agreement or the Revolving Note(s), whether as
interest or for any other Obligation, shall be deemed irrevocably to be a
request for a Revolving Credit Loan on the due date in the amount required to
pay such interest or other Obligation. As an accommodation to Borrower, Lender
may permit telephonic requests for loans and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act
upon telephonic or electronic communications from Borrower, Lender shall have
no liability to Borrower for any loss or damage suffered by Borrower as a
result of Lender's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Lender by
Borrower and Lender shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this subsection 3.1.2 as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(i) shall be
disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrower, and
in the case of each subsequent borrowing, by wire transfer to such bank account
as may be agreed upon by Borrower and Lender from time to time or elsewhere if
pursuant to a written direction from Borrower; and (ii) the proceeds of each
Revolving Credit Loan requested under subsection 3.1.1(ii) shall be disbursed
by Lender by way of direct payment of the relevant interest or other Obligation
evidenced by the Revolving Note(s).
3.1.3 Authorization. Borrower hereby irrevocably authorizes Lender, in
Lender's sole discretion, to advance to Borrower, and to charge to Borrower's
Loan Account hereunder as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligations during the immediately preceding month and
to pay all costs, fees and expenses at any time owed by Borrower to Lender
hereunder.
3.2 Payments Except where evidenced by notes or other
instruments issued or made by Borrower to Lender specifically containing
payment provisions which are in conflict with this Section 3.2 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligation shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i) the
receipt by Lender or Borrower of any proceeds of any of the Collateral, to the
extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of
the Obligations, or (iii) termination of this Agreement pursuant to Section 4
hereof; provided, however, that if an Overadvance shall exist at any time,
Borrower shall, on demand, repay the Overadvance.
3.2.2 Interest. Interest accrued on the Revolving Credit Loans shall be
due on the earliest of (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations
or (iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable pursuant to
this Agreement shall be payable by Borrower as and when provided in Section 2
hereof, to Lender or to any other Person designated by Lender in writing.
3.2.4 Other Obligations. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrower to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or
on demand, whichever is later.
3.3 Application of Payments and Collections All items of payment received
by Lender by 12:00 noon, New York time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
New York time, on any Business Day shall be deemed received on the following
Business Day. Borrower irrevocably waives the right to direct the application
of any and all payments and collections at any time or times hereafter received
by Lender from or on behalf of Borrower, and Borrower does hereby irrevocably
agree that Lender shall have the continuing exclusive right to apply and
reapply any and all such payments and collections received at any time or times
hereafter by Lender or its agent against the Obligations, in such manner as
Lender may deem advisable, notwithstanding any entry by Lender upon any of its
books and records. If as the result of collections of Accounts as authorized by
subsection 6.2.6 hereof a credit balance exists in the Loan Account, such
credit balance shall not accrue interest in favor of Borrower, but shall be
available to Borrower at any time or times.
3.4 All Loans to Constitute One Obligation The Loans shall constitute one
general Obligation of Borrower, and shall be secured by Lender's Lien upon all
of the Collateral.
3.5 Loan Account Lender shall enter all Loans as debits
to the Loan Account and shall also record in the Loan Account all payments made
by Borrower on any Obligations and all proceeds of Collateral which are finally
paid to Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3.6 Statements of Account3.7 Statements of Account. Lender will account to
Borrower monthly with a statement of Loans, charges and payments made pursuant
to this Agreement, and such account rendered by Lender shall be deemed final,
binding and conclusive upon Borrower unless Lender is notified by Borrower in
writing to the contrary within 30 days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
SECTION 4. TERM AND TERMINATIONSECTION 4. TERM AND TERMINATION
4.1 Term of Agreement Subject to Lender's right to
cease making Loans to Borrower upon or after the occurrence of any Default or
Event of Default, this Agreement shall be in effect for a period of three (3)
years from the date hereof, through and including July 13, 2003 (the "Original
Term"), and this Agreement shall automatically renew itself for one-year
periods thereafter (the "Renewal Terms"), unless terminated as provided in
Section 4.2 hereof.
4.2 Termination
4.2.1 Termination by Lender. Upon at least 90 days prior written notice to
Borrower, Lender may terminate this Agreement as of the last day of the
Original Term or the then current Renewal Term and Lender may terminate this
Agreement without notice upon or after the occurrence of an Event of Default.
4.2.2 Termination by Borrower. Upon at least 90 days prior written notice
to Lender, Borrower may, at its option, terminate this Agreement; provided,
however, no such termination shall be effective until Borrower has paid all of
the Obligations in immediately available funds and all Letters of Credit and LC
Guaranties have expired or have been cash collateralized to Lender's
satisfaction. Any notice of termination given by Borrower shall be irrevocable
unless Lender otherwise agrees in writing, and Lender shall have no obligation
to make any Loans or issue or procure any Letters of Credit or LC Guaranties on
or after the termination date stated in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly.
4.2.3 Termination Charges. At the effective date of termination of this
Agreement for any reason, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other charges owing under the terms
of this Agreement and any of the other Loan Documents) as liquidated damages
for the loss of the bargain and not as a penalty, an amount equal to two (2%)
of the average outstanding obligations under the Credit Facility over the
immediately preceding twelve (12) month period if termination occurs during the
first twelve-month period of the Original Term (July 13, 2000 through July 13,
2001); one (1%) percent of the average outstanding obligations under the Credit
Facility over the immediately preceding twelve (12) month period if termination
occurs during the second 12-month period of the Original Term (July 13, 2001
through July 13, 2002). Thereafter, provided no Event of Default exists at such
time, if termination occurs prior to the last day of the Original Term or the
last day of any Renewal Term, no termination charge shall be due and payable.
4.2.4 Effect of Termination. All of the Obligations shall be immediately
due and payable upon the termination date stated in any notice of termination
of this Agreement. All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive any
such termination and Lender shall retain its Liens in the Collateral and all of
its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Lender, in full, in
immediately available funds, together with the applicable termination charge,
if any. Notwithstanding the payment in full of the Obligations, Lender shall
not be required to terminate its security interests in the Collateral unless,
with respect to any loss or damage Lender may incur as a result of dishonored
checks or other items of payment received by Lender from Borrower or any
Account Debtor and applied to the Obligations, Lender shall, at its option, (i)
have received a written agreement, executed by Borrower and by any Person whose
loans or other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such loss or damage; or (ii) have
retained such monetary reserves and/or Liens on the Collateral up to such
amount as Lender, in its reasonable discretion, determines is sufficient to
secure any loss or damage Lender may incur as set forth herein for such period
of time as Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTSSECTION
5.1 Security Interest in Collateral To
secure the prompt payment and performance to Lender of the Obligations,
Borrower hereby grants to Lender a continuing Lien upon all of Borrower's
assets, including all of the following Property and interests in Property of
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) All monies and other Property of any kind now or at any time or times
hereafter in the possession or under the control of Lender or a bailee or
Affiliate of Lender;
(vi) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (v) above,
including, without limitation, proceeds of and unearned premiums with respect
to insurance policies insuring any of the Collateral; and
(vii) All books and
records (including, without limitation, customer lists, credit files, computer
programs, print-outs, and other computer materials and records) of Borrower
pertaining to any of (i) through (vi) above.
As of the date hereof, the Lender has not taken and is not taking under
this Agreement, any security interest in the Real Property of the Borrower.
5.2 Lien Perfection; Further Assurances5.2 Lien Perfection; Further
Assurances. Borrower shall execute such UCC-1 financing statements as are
required by the Code and such other instruments, assignments or documents as
are necessary to perfect Lender's Lien upon any of the Collateral and shall
take such other action as may be required to perfect or to continue the
perfection of Lender's Lien upon the Collateral. Unless prohibited by
applicable law, Borrower hereby authorizes Lender to execute and file any such
financing statement on Borrower's behalf. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
At Lender's request, Borrower shall also promptly execute or cause to be
executed and shall deliver to Lender any and all documents, instruments and
agreements reasonably deemed necessary by Lender to give effect to or carry out
the terms or intent of the Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1General
6.1.1 Location of Collateral. All Collateral, other than Inventory in
transit and motor vehicles, will at all times be kept by Borrower and its
Subsidiaries at one or more of the business locations set forth in Exhibit B
hereto and shall not, without the prior written approval of Lender, be moved
therefrom except, prior to an Event of Default and Lender's acceleration of the
maturity of the Obligations in consequence thereof, for (i) sales of Inventory
in the ordinary course of business; and (ii) removals in connection with
dispositions of Equipment that are authorized by subsection 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability and such other risks in
such amounts and with such insurance companies as are reasonably satisfactory
to Lender. Borrower shall deliver the originals of such policies to Lender with
satisfactory lender's loss payable endorsements, naming Lender as loss payee,
assignee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
30 days prior written notice to Lender in the event of cancellation of the
policy for any reason whatsoever and a clause specifying that the interest of
Lender shall not be impaired or invalidated by any act or neglect of Borrower
or the owner of the Property or by the occupation of the premises for purposes
more hazardous than are permitted by said policy. If Borrower fails to provide
and pay for such insurance, Lender may, at its option, but shall not be
required to, procure the same and charge Borrower therefor. Borrower agrees to
deliver to Lender, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal,
or local authority on any of the Collateral or in respect of the sale thereof
shall be borne and paid by Borrower. If Borrower fails to promptly pay any
portion thereof when due, Lender may, at its option, but shall not be required
to, pay the same and charge Borrower therefor. Lender shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Lender's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other person whomsoever, but the same shall be at
Borrower's sole risk.
6.2 Administration of Accounts
6.2.1 Records, Schedules and Assignments of Accounts. Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Lender on such periodic basis as Lender shall
request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the fifteenth day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form acceptable to
Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of
proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. If
requested by Lender, Borrower shall execute and deliver to Lender formal
written assignments of all of its Accounts weekly or daily, which shall include
all Accounts that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants any discounts,
allowances or credits that are not shown on the face of the invoice for the
Account involved, Borrower shall report such discounts, allowances or credits,
as the case may be, to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $5,000.00 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Lender with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence of an
Event of Default, Lender shall have the right to settle or adjust all disputes
and claims directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney's fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax payable to any
governmental taxing authority, Lender is authorized, in its sole discretion, to
pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge Borrower therefor, provided, however that Lender shall
not be liable for any taxes to any governmental taxing authority that may be
due by Borrower.
6.2.4 Account Verification. Whether or not a Default or an Event of
Default has occurred, any of Lender's officers, employees or agents shall have
the right, at any time or times hereafter, in the name of Lender, any designee
of Lender or Borrower, to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph or otherwise. Borrower
shall cooperate fully with Lender in an effort to facilitate and promptly
conclude any such verification process.
6.2.5 Maintenance of Dominion Account. Once either the outstanding LC
Amount exceeds $500,000, or the Borrower has initially drawn any amounts under
the Revolving Credit Loans, Borrower shall maintain a Dominion Account pursuant
to a lockbox arrangement acceptable to Lender with such banks as may be
selected by Borrower and be acceptable to Lender. Borrower shall issue to any
such banks an irrevocable letter of instruction directing such banks to deposit
all payments or other remittances received in the lockbox to the Dominion
Account for application on account of the Obligations. All funds deposited in
the Dominion Account shall immediately become the property of Lender and
Borrower shall obtain the agreement by such banks in favor of Lender to waive
any offset rights against the funds so deposited. Lender assumes no
responsibility for such lockbox arrangement, including, without limitation, any
claim of accord and satisfaction or release with respect to deposits accepted
by any bank thereunder.
6.2.6 Collection of Accounts, Proceeds of Collateral. To expedite
collection, Borrower shall endeavor in the first instance to make collection of
its Accounts for Lender. All remittances received by Borrower on account of
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in kind in the Dominion
Account. Provided that any Loans are outstanding, Lender retains the right at
all times after the occurrence of an Event of Default to notify Account Debtors
that Accounts have been assigned to Lender and to collect Accounts directly in
its own name and to charge the collection costs and expenses, including
attorneys' fees to Borrower.
6.3 Administration of Inventory
6.3.1 Records and Reports of Inventory. Borrower shall keep accurate and
complete records of its inventory. Borrower shall furnish to Lender Inventory
reports in form and detail satisfactory to Lender at such times as Lender may
request, but at least once each month, not later than the twentieth day of the
following month. Borrower shall conduct a physical inventory no less frequently
than annually and shall provide to Lender a report based on each such physical
inventory promptly thereafter, together with such supporting information as
Lender shall request.
6.3.2 Returns of Inventory. If at any time or times hereafter any Account
Debtor returns any Inventory to Borrower the shipment of which generated an
Account on which such Account Debtor is obligated in excess of $100,000,
Borrower shall immediately notify Lender of the same, specifying the reason for
such return and the location, condition and intended disposition of the
returned Inventory.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep accurate
records itemizing and describing the kind, type, quality, quantity and value of
its Equipment and all dispositions made in accordance with subsection 6.6.2
hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if reasonably
requested by Lender. Immediately on request therefor by Lender, Borrower shall
deliver to Lender any and all evidence of ownership, if any, of any of the
Equipment.
6.4.2 Dispositions of Equipment. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Event of Default
exists, to (i) dispositions of Equipment which, in the aggregate during any
consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $50,000.00 or less, provided that all proceeds thereof
are remitted to Lender for application to the Loans, or (ii) dispositions of
Equipment that is substantially worn, damaged or obsolete.
6.5 Payment of Charges. All amounts chargeable to Borrower under Section -6
hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until
paid in full at the rate applicable to Revolving Credit Loans from time to
time.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
7.1 General Representations and Warranties. To induce Lender to enter into
this Agreement and to make advances hereunder, Borrower warrants, represents
and covenants to Lender that:
7.1.1 Organization and Qualification. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each state or
jurisdiction listed on Exhibit C hereto and in all other states and
jurisdictions in which the failure of Borrower or any of its Subsidiaries to be
so qualified would have a material adverse effect on the financial condition,
business or Properties of Borrower or any of its Subsidiaries.
7.1.2 Corporate Power and Authority. Each of Borrower and its Subsidiaries
is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other
Loan Documents have been duly authorized by all necessary corporate action and
do not and will not (i) require any consent or approval of the shareholders of
Borrower or any of its Subsidiaries; (ii) contravene Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation or by-laws;
(iii) violate, or cause Borrower or any of its Subsidiaries to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to
Borrower or any of its Subsidiaries; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower or any of its Subsidiaries is a party or
by which it or its Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or hereafter acquired
by Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each of Borrower and its Subsidiaries
enforceable against it in accordance with its respective terms.
7.1.4 Capital Structure. Exhibit D hereto states (i) the correct name of
each of the Subsidiaries of Borrower, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by Borrower, (ii) the name of each of
Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and holder of all outstanding Securities
of Borrower and each Subsidiary of Borrower and (iv) the number of authorized,
issued and treasury shares of Borrower and each Subsidiary of Borrower.
Borrower has good title to all of the shares it purports to own of the stock of
each of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such shares have been duly issued and are fully paid and
non-assessable. There are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell,
or any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of Borrower or any of its
Subsidiaries. There are no outstanding agreements or instruments binding upon
any of Borrower's shareholders relating to the ownership of shares of capital
stock of the Borrower.
7.1.5 Corporate Names. Neither Borrower nor any of its Subsidiaries has
been known as or used any corporate, fictitious or trade names except those
listed on Exhibit E hereto. Except as set forth on Exhibit E, neither Borrower
nor any of its Subsidiaries has been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
7.1.6 Business Locations; Agent for Process. Each of Borrower's and its
Subsidiaries' chief executive office and other places of business are as listed
on Exhibit B hereto. During the preceding one-year period, neither Borrower nor
any of its Subsidiaries has had an office, place of business or agent for
service of process other than as listed on Exhibit B. Except as shown on
Exhibit B, no inventory is stored with a bailee, warehouseman or similar party,
nor is any Inventory consigned to any Person.
7.1.7 Title to Properties; Priority of Liens. Each of Borrower and its
Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged all lawful claims which, if unpaid, might
become a Lien against any of Borrower's Properties that is not a Permitted
Lien. The Liens granted to Lender under Section 5 hereof are first priority
Liens, subject only to Permitted Liens.
7.1.8 Accounts. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to be, and it is
not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of goods or
rendition of services by Borrower in the ordinary course of its business and in
accordance with the terms and conditions of all purchase orders, contracts or
other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the duplicate
invoice covering such sale or rendition of services, a copy of which has been
furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein, is not, and
will not (by voluntary act or omission of Borrower) be in the future, subject
to any offset, Lien, deduction, defense, dispute, counterclaim or any other
adverse condition except for disputes resulting in returned goods where the
amount in controversy is deemed by Lender to be immaterial, and each such
Account is absolutely owing to Borrower and is not contingent in any respect or
for any reason;
(v) Borrower has made no agreement with any Account Debtor thereunder for
any extension, compromise, settlement or modification of any such Account or
any deduction therefrom, except discounts or allowances which are granted by
Borrower in the ordinary course of its business for prompt payment and which
are reflected in the calculation of the net amount of each respective invoice
related thereto and are reflected in the Schedules of Accounts submitted to
Lender pursuant to subsection 6.2.1 hereof;
(vi) There are no facts, events or occurrences which in any way impair the
validity or enforceability of any Accounts or tend to reduce the amount payable
thereunder from the face amount of the invoice and statements delivered to
Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account Debtor thereunder
(1) had the capacity to contract at the time any contract or other document
giving rise to the Account was executed and (2) such Account Debtor is Solvent;
and
(viii) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any material adverse change in such Account Debtor's
financial condition or the collectibility of such Account.
7.1.9 Equipment. The Equipment is in good operating condition and repair,
and all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted. Borrower will not permit any of
the Equipment to become affixed to any real Property leased to Borrower so that
an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of and in form acceptable to Lender, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property other than Equipment that is subject to first priority
(except for Permitted Liens) Liens in favor of Lender.
7.1.10 Financial Statements; Fiscal Year. The balance sheets of Borrower
as of December 31, 1999, and the related statements of income, changes in
stockholder's equity, and changes in financial position for the periods ended
on such dates, have been prepared in accordance with GAAP, and present fairly
the financial positions of Borrower at such dates and the results of Borrower's
operations for such periods. Since January 1, 2000, there has been no material
change in the condition, financial or otherwise, of Borrower and no decrease in
the aggregate value of Equipment in excess of $50,000, and no change in the
real property owned by Borrower, except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse. The fiscal year of Borrower and each of its Subsidiaries ends on
December 31 of each year.
7.1.11 Full Disclosure. The financial statements referred to in subsection
7.1.10 hereof do not, nor does this Agreement or any other written statement of
Borrower to Lender, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact which Borrower has failed to disclose to Lender in
writing which materially affects adversely or, so far as Borrower can now
foresee, will materially affect adversely the Properties, business, prospects,
profits or condition (financial or otherwise) of Borrower or any of its
Subsidiaries or the ability of Borrower or its Subsidiaries to perform this
Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. Each of Borrower and its Subsidiaries
is now and, after giving effect to the Loans to be made and the Letters of
Credit and LC Guaranties to be issued hereunder, at all times will be, Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract issued or entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
7.1.14 Taxes. Borrower's federal tax identification number is
________________. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit F hereto. Borrower and each of its
Subsidiaries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all taxes, assessments, fees, levies and other governmental charges
upon it, its income and Properties as and when such taxes, assessments, fees,
levies and charges that are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books therefor.
The provision for taxes on the books of Borrower and its Subsidiaries are
adequate for all years not closed by applicable statutes, and for its current
fiscal year.
7.1.15 Brokers. There are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each of Borrower and
its Subsidiaries owns or possesses all the patents, trademarks, service marks,
trade names, copyrights and licenses necessary for the present and planned
future conduct of its business without any known conflict with the rights of
others. All such patents, trademarks, service marks, tradenames, copyrights,
licenses and other similar rights are listed on Exhibit G hereto.
7.1.17 Governmental Consents. Each of Borrower and its Subsidiaries has,
and is in good standing with respect to, all governmental consents, approvals,
licenses, authorizations, permits, certificates, inspections and franchises
necessary to continue to conduct its business as heretofore or proposed to be
conducted by it and to own or lease and operate its Properties as now owned or
leased by it.
7.1.18 Compliance with Laws. Each of Borrower and its Subsidiaries has
duly complied with, and its Properties, business operations and leaseholds are
in compliance in all material respects with, the provisions of all federal,
state and local laws, rules and regulations applicable to Borrower or such
Subsidiary, as applicable, its Properties or the conduct of its business and
there have been no citations, notices or orders of noncompliance issued to
Borrower or any of its Subsidiaries under any such law, rule or regulation.
Each of Borrower and its Subsidiaries has established and maintains an adequate
monitoring system to insure that it remains in compliance with all federal,
state and local laws, rules and regulations applicable to it. No Inventory has
been produced in violation of the Fair Labor Standards Act (29 U.S.C. ' 201 et
seq.), as amended.
7.1.19 Restrictions. Neither Borrower nor any of its Subsidiaries is a
party or subject to any contract, agreement, or charter or other corporate
restriction, which materially and adversely affects its business or the use or
ownership of any of its Properties. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract or agreement which restricts
its right or ability to incur Indebtedness, other than as set forth on Exhibit
H hereto, none of which prohibit the execution of or compliance with this
Agreement or the other Loan Documents by Borrower or any of its Subsidiaries,
as applicable.
7.1.20 Litigation. Except as set forth on Exhibit I hereto, there are no
actions, suits, proceedings or investigations pending, or to the knowledge of
Borrower, threatened, against or affecting Borrower or any of its Subsidiaries,
or the business, operations, Properties, prospects, profits or condition of
Borrower or any of its Subsidiaries. Neither Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute a Default or an Event of Default. Neither
Borrower nor any of its Subsidiaries is in default, and no event has occurred
and no condition exists which constitutes, or which with the passage of time or
the giving of notice or both would constitute, a default in the payment of any
Indebtedness to any Person for Money Borrowed.
7.1.22 Leases. Exhibit J hereto is a complete listing of all capitalized
leases of Borrower and its Subsidiaries and Exhibit K hereto is a complete
listing of all operating leases of Borrower and its Subsidiaries. Each of
Borrower and its Subsidiaries is in full compliance with all of the terms of
each of its respective capitalized and operating leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit L hereto, neither
Borrower nor any of its Subsidiaries has any Plan. Borrower and each of its
Subsidiaries is in full compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
7.1.24 Trade Relations. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower or any of its Subsidiaries and any customer or
any group of customers whose purchases individually or in the aggregate are
material to the business of Borrower or any of its Subsidiaries, or with any
material supplier, and there exists no present condition or state of facts or
circumstances which would materially affect adversely Borrower or any of its
Subsidiaries or prevent Borrower or any of its Subsidiaries from conducting
such business after the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
7.1.25 Labor Relations. Except as described on Exhibit M hereto, neither
Borrower nor any of its Subsidiaries is a party to any collective bargaining
agreement. There are no material grievances, disputes or controversies with any
union or any other organization of Borrower's or any of its Subsidiaries'
employees, or threats of strikes, work stoppages or any asserted pending
demands for collective bargaining by any union or organization.
7.2 Continuous Nature of Representations and Warranties.2 Continuous
Nature of Representations and Warranties. Each representation and warranty
contained in this Agreement and the other Loan Documents shall be continuous in
nature and shall remain accurate, complete and not misleading at all times
during the term of this Agreement, except for changes in the nature of
Borrower's or its Subsidiaries' business or operations that would render the
information in any exhibit attached hereto either inaccurate, incomplete or
misleading, so long as Lender has consented to such changes or such changes are
expressly permitted by this Agreement.
7.3 Survival of Representations and Warranties.3 Survival of
Representations and Warranties. All representations and warranties of Borrower
contained in this Agreement or any of the other Loan Documents shall survive
the execution, delivery and acceptance thereof by Lender and the parties
thereto and the closing of the transactions described therein or related
thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visits and Inspections. Permit representatives of Lender, from time
to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of Borrower and each of its
Subsidiaries, inspect, audit and make extracts from its books and records, and
discuss with its officers, its employees and its independent accountants,
Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations.
8.1.2 Notices. Promptly notify Lender in writing of the occurrence of any
event or the existence of any fact which renders any representation or warranty
in this Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading.
8.1.3 Financial Statements. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities
in which proper entries are made in accordance with GAAP reflecting all its
financial transactions; and cause to be prepared and furnished to Lender the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrower's certified public accountants concur in any change
therein and such change is disclosed to Lender and is consistent with GAAP):
(i) not later than one hundred five (105) days after the close of each
fiscal year of Borrower, unqualified audited financial statements of Borrower
and its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified by a firm of independent certified public
accountants of recognized standing selected by Borrower but acceptable to
Lender (except for a qualification for a change in accounting principles with
which the accountant concurs);
(ii) not later than forty-five (45) days after the end of each month
hereafter, including the last month of Borrower's fiscal year, unaudited
interim financial statements of Borrower and its Subsidiaries as of the end of
such month and of the portion of Borrower's financial year then elapsed, on a
Consolidated and consolidating basis, certified by the principal financial
officer of Borrower as prepared in accordance with GAAP and fairly presenting
the Consolidated financial position and results of operations of Borrower and
its Subsidiaries for such month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain
notes;
(iii) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which Borrower
has made available to its shareholders and copies of any regular, periodic and
special reports or registration statements which Borrower files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any annual report to be
filed with ERISA in connection with each Plan; and
(v) such other data and information (financial and otherwise) as Lender,
from time to time, may reasonably request, bearing upon or related to the
Collateral or Borrower's and each of its Subsidiaries' financial condition or
results of operations.
Notwithstanding anything to the contrary, Lender acknowledges that the
Borrower is the United States subsidiary of its publicly-traded Canadian parent
company (the "Parent Company") (also named Zoom Telephonics, Inc.); therefore,
the financial statements delivered to the Lender hereunder will be those
year-end audited, consolidated financial statements of said Parent Company as
filed with the Securities and Exchange Commission and consolidating financial
statements of the Borrower on a quarterly basis.
Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1.3, Borrower shall forward to Lender a copy of
the accountants' letter to Borrower's management that is prepared in connection
with such financial statements and also shall cause to be prepared and shall
furnish to Lender a certificate of the aforesaid certified public accountants
certifying to Lender that, based upon their examination of the financial
statements of Borrower and its Subsidiaries performed in connection with their
examination of said financial statements, they are not aware of any Default or
Event of Default, or, if they are aware of such Default or Event of Default,
specifying the nature thereof, and acknowledging, in a manner satisfactory to
Lender, that they are aware that Lender is relying on such financial statements
in making its decisions with respect to the Loans. Concurrently with the
delivery of the financial statements described in clauses (i) and (ii) of this
subsection 8.1.3, or more frequently if requested by Lender, Borrower shall
cause to be prepared and furnished to Lender a Compliance Certificate in the
form of Exhibit N hereto executed by the Chief Financial Officer of Borrower.
8.1.4 Landlord and Storage Agreements. Provide Lender with copies of all
agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.5 Guarantor Financial Statements. Deliver or cause to be delivered to
Lender financial statements for each Guarantor, if any, in form and substance
satisfactory to Lender at such intervals and covering such time periods as
Lender may request.
8.1.6 Projections. No later than 30 days prior to the end of each fiscal
year of Borrower, deliver to Lender Projections of Borrower for the forthcoming
fiscal year, month by month.
8.2 Negative Covenants During the term of this
Agreement, and thereafter for so long as there are any Obligations to Lender,
Borrower covenants that, unless Lender has first consented thereto in writing,
it will not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate, or
permit any Subsidiary of Borrower to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any substantial
part of the Properties of any Person.
8.2.2 Loans. Make, or permit any Subsidiary of Borrower to make, any loans
or other advances of money (other than for salary, travel advances, advances
against commissions and other similar advances in the ordinary course of
business) to any one or more Person or Persons in excess of $100,000 in the
aggregate.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to exist, or
permit any Subsidiary of Borrower to create, incur or suffer to exist, any
Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this Agreement;
(iii) Indebtedness of any Subsidiary of Borrower to Borrower;
(iv) accounts payable to trade creditors and current operating expenses
(other than for Money Borrowed) which are not aged more than 60 days from the
due date, in each case incurred in the ordinary course of business and paid
within such time period, unless the same are being actively contested in good
faith and by appropriate and lawful proceedings; and Borrower or such
Subsidiary shall have set aside such reserves, if any, with respect thereto as
are required by GAAP and deemed adequate by Borrower or such Subsidiary and its
independent accountants;
(v) Obligations to pay Rentals permitted by subsection 8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary course
of business;
(viii) Indebtedness with respect to the Real Property in the form of those
monetary Liens set forth in Section 8.2.5 hereunder; and
(ix) Indebtedness not included in paragraphs (i) through (viii) above
which does not exceed at any time, in the aggregate, the sum of $100,000.00.
8.2.4 Affiliate Transactions. Enter into, or be a party to, or permit any
Subsidiary of Borrower to enter into or be a party to, any transaction with any
Affiliate of Borrower or stockholder, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms which are fully disclosed to Lender
and are no less favorable to Borrower than would obtain in a comparable arm's
length transaction with a Person not an Affiliate or stockholder of Borrower or
such Subsidiary.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of its
Property, including any real property owned by Borrower (the "Real Property")
income or profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to any of the
provisions of ERISA) not yet due, or being contested in the manner described in
subsection 7.1.14 hereto, but only if in Lender's judgment such Lien does not
adversely affect Lender's rights or the priority of Lender's Lien in the
Collateral;
(iii) Liens arising in the ordinary course of Borrower's business by
operation of law or regulation, but only if payment in respect of any such Lien
is not at the time required and such Liens do not, in the aggregate, materially
detract from the value of the Property of Borrower or materially impair the use
thereof in the operation of Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's Subsidiaries to
Borrower or another such Subsidiary;
(vi) such other Liens as appear on Exhibit O hereto;
(vii) Monetary Liens on any Real Property resulting from a refinance of
the Real Property provided that with respect to such monetary Liens, the
proceeds therefrom shall at the Lender's discretion, be applied to pay down the
outstanding balance of the Loans hereunder; provided further that in the event
that if, at the time said proceeds become available, no Loans are then
currently outstanding, said proceeds shall be used as general working capital
for Borrower's business in the ordinary course;
(viii) Non-monetary liens on Real Property for those certain easements and
restrictions which benefit the Real Property or which otherwise do not
adversely affect the value or use of the Real Property; and (ix) such other
Liens as Lender may hereafter approve in writing.
8.2.6 Subordinated Debt. Make, or permit any Subsidiary of Borrower to
make, any payment of any part or all of any Subordinated Debt or take any other
action or omit to take any other action in respect of any Subordinated Debt,
except in accordance with the Subordination Agreement relative thereto.
8.2.7 Distributions. Declare or make, or permit any Subsidiary of Borrower
to declare or make, any Distributions.
8.2.8 Capital Expenditures. Make Capital Expenditures (including, without
limitation, by way of capitalized leases) which, in the aggregate, as to
Borrower and its Subsidiaries, exceed $1,500,000.00 during any fiscal year of
Borrower.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of any of,
or permit any Subsidiary of Borrower to sell, lease or otherwise dispose any
of, its Properties, including any Real Property, including any disposition of
Property, including Real Property as part of a sale and leaseback transaction,
to or in favor of any Person, except (i) sales of Inventory in the ordinary
course of business for so long as no Event of Default exists hereunder, (ii) a
transfer of Property and/or Real Property to Borrower by a Subsidiary of
Borrower or (iii) dispositions expressly authorized by this Agreement.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to issue any
additional shares of its capital stock except director's qualifying shares.
8.2.11 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis except in the
normal course of Borrower's business operations.
8.2.12 Restricted Investment. Make or have, or permit any Subsidiary of
Borrower to make or have, any Restricted Investment.
8.2.13 Leases. Become, or permit any of its Subsidiaries to become, a
lessee under any operating lease (other than a lease under which Borrower or
any of its Subsidiaries is lessor) of Property or Real Property if the
aggregate Rentals payable during any current or future period of 12 consecutive
months under the lease in question and all other leases under which Borrower or
any of its Subsidiaries is then lessee would exceed $_______________, annually.
The term "Rentals" means, as of the date of determination, all payments which
the lessee is required to make by the terms of any lease.
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary of
Borrower.
Nothing contained in Sections 8.1 or 8.2 hereof shall restrict Borrower
from terminating the Loan in accordance with Borrower's termination rights
pursuant to Section 4 herein.
SECTION 9. CONDITIONS PRECEDENTS
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Loan under this Agreement unless and until each of the following conditions has
been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Lender and its counsel.
9.2 No Default or Event of Default shall exist.
9.3 Other Loan Documents9.3 Other Loan Documents. Each of the conditions
precedent set forth in the other Loan Documents shall have been satisfied.
9.4 Availability9.5 Availability. Lender shall have determined that
immediately after Lender has made an initial advance of funds hereunder and/or
issued any Letters of Credit and/or LC Guaranties contemplated hereby, and paid
all closing costs incurred in connection with the transactions contemplated
hereby, Aggregate Adjusted Availability shall not be less than $2,000,000.
9.5 No Litigation[9.6] No Litigation. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain damages in respect of, or which is
related to or arises out of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT SECTION
10.1 Events of Default The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrower shall fail to pay any of the
Obligations, including but not limited to, payments due under the Revolving
Credit Note on the due date therefore and in the event of a default resulting
from Borrower exceeding the available credit hereunder after five (5) days
written notice thereof (whether due at stated maturity, on demand, upon
acceleration or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other statement
made or furnished to Lender by or on behalf of Borrower, any Subsidiary of
Borrower or Guarantor in this Agreement, any of the other Loan Documents or any
instrument, certificate or financial statement furnished in compliance with or
in reference thereto proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to Section 7.2
hereof.
10.1.3 Breach of Specific Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in Sections 5.2, 6.1.1, 6.2,
8.1.1, 8.1.3, or 8.2 hereof on the date that Borrower is required to perform,
keep or observe such covenant, provided that with respect to Sections 6.2,
8.1.1 and 8.1.3, Borrower shall have five (5) days after written notice to cure
after Borrower's failure to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
the breach of such other covenant is not cured to Lender's satisfaction within
15 days after the sooner to occur of Borrower's receipt of notice of such
breach from Lender or the date on which such failure or neglect first becomes
known to any officer of Borrower, or in the event that such default cannot be
cured within such time period despite Borrower's diligent efforts to cure, then
such reasonable time as may be necessary to cure such default provided that
Borrower has commenced cure during said 15 day period and continues to
diligently pursue such cure, but in any event, not beyond sixty (60) days.
10.1.5 Default Under Security Documents/Other Agreements. Any event of
default shall occur under, or Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents; or the Other Agreements and such default shall continue
beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or event of default
on the part of Borrower under any agreement, document or instrument to which
Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) if the
payment or maturity of such Indebtedness is accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made.
10.1.7 Uninsured Losses. Any material loss, theft, damage or destruction
of any of the Collateral not fully covered (subject to such deductibles as are
reasonable and customary and otherwise such deductibles as Lender shall have
permitted) by insurance.
10.1.8 Adverse Changes. There shall occur any material adverse change in
the financial condition or business of Borrower or any Guarantor, provided
however that depletion of the Borrower's current available cash and any cash
remitted back to Borrower by Lender (the "Excess Cash") in the ordinary course
shall not constitute a material adverse change.
10.1.9 Insolvency and Related Proceedings. Borrower or any Guarantor shall
cease to be Solvent or shall suffer the appointment of a receiver, trustee,
custodian or similar fiduciary, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
Borrower or any Guarantor under the Bankruptcy Code (if against Borrower or any
Guarantor, the continuation of such proceeding for more than 45 days), or
Borrower or any Guarantor shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
10.1.10 Business Disruption; Condemnation. There shall occur a cessation
of a substantial part of the business of Borrower, any Subsidiary of Borrower
or any Guarantor, if any, for a period which significantly affects Borrower's
or any such Guarantor's capacity to continue its business, on a profitable
basis; or Borrower, any Subsidiary of Borrower or any Guarantor shall suffer
the loss or revocation of any license or permit now held or hereafter acquired
by Borrower or any such Guarantor which is necessary to the continued or lawful
operation of its business; or Borrower or any Guarantor shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which Borrower or any Guarantor leases,
uses or occupies any Property shall be canceled or terminated prior to the
expiration of its stated term; or any part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
10.1.11 Change of Officer. Frank Manning ("Manning") shall cease to
operate as Chief Financial Officer ("CEO") of the Borrower and a substitute or
replacement CEO satisfactory to Lender in Lender's reasonable discretion has
not been appointed within sixty (60) days from the earlier of Borrower's
receipt of notice of Manning's departure or Manning's actual departure from
said office.
10.1.12 ERISA. A Reportable Event shall occur which Lender, in its
reasonable discretion, shall determine in good faith constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee
for any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if Borrower, any Subsidiary of Borrower or any
Guarantor is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from Borrower's, such
Subsidiary's or such Guarantor's complete or partial withdrawal from such Plan.
10.1.13 Challenge to Agreement. Borrower, any Subsidiary of Borrower or
any Guarantor, or any Affiliate of any of them, shall challenge or contest in
any action, suit or proceeding the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or enforceability
of any of the Obligations or the perfection or priority of any Lien granted to
Lender.
10.1.14 Repudiation of or Default Under Guaranty Agreement. Any Guarantor
shall revoke or attempt to revoke the Guaranty Agreement signed by such
Guarantor, or shall repudiate such Guarantor's liability thereunder or shall be
in default under the terms thereof.
10.1.15 Criminal Forfeiture. Borrower, any Subsidiary of Borrower or any
Guarantor shall be criminally convicted or entered a nolo plea under any law
that could lead to a forfeiture of any Property or Real Property of Borrower,
any Subsidiary of Borrower or any Guarantor.
10.1.16 Judgments. Any uninsured money judgment, writ of attachment or
similar process is filed against Borrower, any Subsidiary of Borrower or any
Guarantor, or any of their respective Property or Real Property seeking amounts
exceeding the greater of fifty (50%) percent of Borrower's Excess Cash (as
defined in Section 10.1.8), but not exceeding $1,000,000, or at such time as
Excess Cash has been depleted, then not exceeding money judgments, writs of
attachments or similar process of $150,000.
10.2 Acceleration of the Obligations
Without in any way limiting the right of Lender to demand payment of any
portion of the Obligations payable on demand in accordance with Section 3.2
hereof, upon or at any time after the occurrence of an Event of Default, all or
any portion of the Obligations shall, at the option of Lender and without
presentment, demand protest or further notice by Lender, become at once due and
payable and Borrower shall forthwith pay to Lender, the full amount of such
Obligations, provided, that upon the occurrence of an Event of Default
specified in subsection 10.1.9 hereof, all of the Obligations shall become
automatically due and payable without declaration, notice or demand by Lender.
10.3 Other Remedies Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
10.3.1 All of the rights and remedies of a secured party under the Code or
under other applicable law, and all other legal and equitable rights to which
Lender may be entitled, all of which rights and remedies shall be cumulative
and shall be in addition to any other rights or remedies contained in this
Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral, and to
(i) require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral in
its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Lender, in its sole
discretion, may deem advisable. Borrower agrees that 10 days written notice to
Borrower of any public or private sale or other disposition of Collateral shall
be reasonable notice thereof, and such sale shall be at such locations as
Lender may designate in said notice. Lender shall have the right to conduct
such sales on Borrower's premises, without charge therefor, and such sales may
be adjourned from time to time in accordance with applicable law. Lender shall
have the right to sell, lease or otherwise dispose of the Collateral, or any
part thereof, for cash, credit or any combination thereof, and Lender may
purchase all or any part of the Collateral at public or, if permitted by law,
private sale and, in lieu of actual payment of such purchase price, may set off
the amount of such price against the Obligations. The proceeds realized from
the sale of any Collateral may be applied, after allowing 2 Business Days for
collection, first to the reasonable costs, expenses and attorneys' fees
incurred by Lender in collecting the Obligations, in enforcing the rights of
Lender under the Loan Documents and in collecting, retaking, completing,
protecting, removing, storing, advertising for sale, selling and delivering any
Collateral, second to the interest due upon any of the Obligations; and third,
to the principal of the Obligations. If any deficiency shall arise, Borrower
shall remain liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, tradenames, trademarks and advertising matter, or any Property
of a similar nature, as it pertains to the Collateral, in advertising for sale
and selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit.
10.3.5 Lender may, at its option, require Borrower to deposit with Lender
funds equal to the LC Amount and, if Borrower fails to promptly make such
deposit, Lender may advance such amount as a Revolving Credit Loan (whether or
not an Overadvance is created thereby). Any such deposit or advance shall be
held by Lender as a reserve to fund future payments on such LC Guaranties and
future drawings against such Letters of Credit. At such time as all LC
Guaranties have been paid or terminated and all Letters of Credit have been
drawn upon or expired, any amounts remaining in such reserve shall be applied
against any outstanding Obligations, or, if all Obligations have been
indefeasibly paid in full, returned to Borrower.
10.4 Remedies Cumulative; No Waiver10.4 Remedies Cumulative; No Waiver.
All covenants, conditions, provisions, warranties, guaranties, indemnities, and
other undertakings of Borrower contained in this Agreement and the other Loan
Documents, or in any document referred to herein or contained in any agreement
supplementary hereto or in any schedule or in any Guaranty Agreement, if any,
given to Lender or contained in any other agreement between Lender and
Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrower herein contained. The failure
or delay of Lender to require strict performance by Borrower of any provision
of this Agreement or to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans
and all other Obligations owing or to become owing from Borrower to Lender
shall have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Event of Default by
Borrower under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is by
an instrument in writing specifying such suspension or waiver and is signed by
a duly authorized representative of Lender and directed to Borrower.
SECTION 11. MISCELLANEOUS SECTION
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
11.1.1 At such time or times upon or after the occurrence of a Default or
an Event of Default as Lender or said agent, in its sole discretion, may
determine, endorse Borrower's name on any checks, notes, acceptances, drafts,
money orders or any other evidence of payment or proceeds of the Collateral
which come into the possession of Lender or under Lender's control.
11.1.2 At such time or times upon or after the occurrence of an Event of
Default as Lender or its agent in its sole discretion may determine: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the
Accounts or other Collateral; (iii) sell or assign any of the Accounts and
other Collateral upon such terms, for such amounts and at such time or times as
Lender deems advisable; (iv) take control, in any manner, of any item of
payment or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (vi) receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as
Lender may designate; (vii) endorse the name of Borrower upon any of the items
of payment or proceeds relating to any Collateral and deposit the same to the
account of Lender on account of the Obligations; (viii) endorse the name of
Borrower upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to the Accounts,
Inventory and any other Collateral; (ix) use Borrower's stationery and sign the
name of Borrower to verifications of the Accounts and notices thereof to
Account Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, Equipment and any other Collateral; (xi) make and adjust
claims under policies of insurance; and (xii) do all other acts and things
necessary, in Lender's determination, to fulfill Borrower's obligations under
this Agreement.
11.2 Indemnity11.2 Indemnity. Borrower hereby agrees to indemnify Lender
and hold Lender harmless from and against any liability, loss, damage, suit,
action or proceeding ever suffered or incurred by Lender (including reasonable
attorneys fees and legal expenses) as the result of Borrower's failure to
observe, perform or discharge Borrower's duties hereunder. In addition,
Borrower shall defend Lender against and save it harmless from all claims of
any Person with respect to the Collateral. Without limiting the generality of
the foregoing, these indemnities shall extend to any claims asserted against
Lender by any Person under any Environmental Laws or similar laws by reason of
Borrower's or any other Person's failure to comply with laws applicable to
solid or hazardous waste materials or other toxic substances. Notwithstanding
any contrary provision in this Agreement, the obligation of Borrower under this
Section 11.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
11.3 Modification of Agreement; Sale of Interest11.3 Modification of
Agreement; Sale of Interest. This Agreement may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and Lender.
Borrower may not sell, assign or transfer any interest in this Agreement, any
of the other Loan Documents, or any of the Obligations, or any portion thereof,
including, without limitation, Borrower's rights, title, interests, remedies,
powers, and duties hereunder or thereunder. Borrower hereby consents to
Lender's participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement and any of the other Loan Documents,
or of any portion hereof or thereof, including, without limitation, Lender's
rights, title, interests, remedies, powers, and duties hereunder or thereunder.
In the case of an assignment, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were
"Lender" hereunder and Lender shall be relieved of all obligations hereunder
upon any such assignments. Borrower agrees that it will use its best efforts to
assist and cooperate with Lender in any manner reasonably requested by Lender
to effect the sale of participations in or assignments of any of the Loan
Documents or any portion thereof or interest therein, including, without
limitation, assisting in the preparation of appropriate disclosure documents.
Borrower further agrees that Lender may disclose credit information regarding
Borrower and its Subsidiaries to any potential participant or assignee.
11.4 Severability11.4 Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
11.5 Successors and Assigns11.5 Successors and Assigns. This Agreement,
the Other Agreements and the Security Documents shall be binding upon and inure
to the benefit of the successors and assigns of Borrower and Lender permitted
under Section 11.3 hereof.
11.6 Cumulative Effect; Conflict of Terms11.6 Cumulative Effect; Conflict
of Terms. The provisions of the Other Agreements and the Security Documents are
hereby made cumulative with the provisions of this Agreement. Except as
otherwise provided in Section 3.2 hereof and except as otherwise provided in
any of the other Loan Documents by specific reference to the applicable
provision of this Agreement, if any provision contained in this Agreement is in
direct conflict with, or inconsistent with, any provision in any of the other
Loan Documents, the provision contained in this Agreement shall govern and
control.
11.7 Execution in Counterparts11.7 Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument.
11.8 Notice11.8Notice. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto, to be effective, shall be in
writing and shall be sent by certified or registered mail, return receipt
requested, by personal delivery against receipt, by overnight courier or by
facsimile, except that any notice of Default hereunder shall not be delivered
via facsimile but shall be delivered by any other such method hereunder
provided that a return receipt is requested, and unless otherwise expressly
provided herein, shall be deemed to have been validly served, given or
delivered immediately when delivered against receipt, one Business Day after
deposit in the mail, postage prepaid, or with an overnight courier or, in the
case of facsimile notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
One Boston Place, Suite 500
Boston, MA 02108
Attention: Charles J. Wyrwa, III
Facsimile No.: (617) 619-3511
With a copy to: Burns & Levinson LLP
125 Summer Street
Boston, MA 02110
Attention: Frank A. Segall, Esquire
Facsimile No.: (617) 345-3299
If to Borrower: Zoom Telephonics, Inc.
207 South Street
Boston, MA 02111
Attention: Chief Financial Officer
Facsimile No.: (617) 423-4859
Zoom Telephonics, Inc.
207 South Street
Boston, MA 02111
Attention: Chief Executive Officer
Facsimile No.: (617) 423-4859
Zoom Telephonics, Inc.
207 South Street
Boston, MA 02111
Attention: Executive Vice President
Facsimile No.: (617) 423-4859
Zoom Telephonics, Inc.
207 South Street
Boston, MA 02111
Attention: Corporate Controller
Facsimile No.: (617) 423-4859
With a copy to: Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02110
Attention: Harry Hutton, Esquire
Facsimile No.: (617) 856-8201
or to such other address as each party may designate for itself by notice
given in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2
hereof shall not be effective until received by Lender.
Notwithstanding anything to the contrary contained herein, only notice(s)
of Default to Borrower shall be required to be delivered to the Corporate
Controller and Executive Vice President of the Borrower; all other notices to
Borrower hereunder shall be effective when given to the Chief Financial Officer
and Chief Executive Officer of the Borrower pursuant to the terms hereunder.
Lender shall endeavor to mark any notices of Default delivered hereunder with
the word "Urgent" on the envelope; however, failure by the Lender to do so
shall not affect in any way, the effectiveness of the notice delivered
hereunder.
11.9 Lender's Consent Whenever Lender's consent is
required to be obtained under this Agreement, any of the Other Agreements or
any of the Security Documents as a condition to any action, inaction, condition
or event, Lender shall be authorized to give or withhold such consent in its
reasonable discretion and to condition its consent upon the giving of
additional collateral security for the Obligations, the payment of money or any
other matter.
11.10 Credit Inquiries Borrower hereby authorizes
and permits Lender to respond to usual and customary credit inquiries from
third parties concerning Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this
Agreement, the Other Agreements and the Security Documents.
11.12 Entire Agreement. This Agreement and the other
Loan Documents, together with all other instruments, agreements and
certificates executed by the parties in connection therewith or with reference
thereto, embody the entire understanding and agreement between the parties
hereto and thereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings and inducements, whether express
or implied, oral or written.
11.13 Interpretation. No provision of this Agreement
or any of the other Loan Documents shall be construed against or interpreted to
the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN BOSTON,
MASSACHUSETTS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS: PROVIDED, HOWEVER, THAT IF
ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN THE
COMMONWEALTH OF MASSACHUSETTS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE
METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH
COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH
COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM
OR INCONSISTENT WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. AS PART OF
THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER, BORROWER
HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF SUFFOLK COUNTY,
MASSACHUSETTS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MASSACHUSETTS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY
OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i)
THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY
OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii) PRESENTMENT,
DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY
WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS
REGARD; (iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS
THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement has been duly executed in Boston,
Massachusetts on the day and year specified at the beginning of this Agreement.
ATTEST: ZOOM TELEPHONICS, INC.
("Borrower")
By
Name: Robert A. Crist
Title: Vice President Finance and
Chief Financial Officer
[CORPORATE SEAL]
Accepted in Boston, Massachusetts:
FLEET CAPITAL CORPORATION
("Lender")
By
Name: Charles J. Wyra, III
Title: Senior Vice President
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of July 13, 2000, by
and between Fleet Capital Corporation and Zoom Telephonics, Inc., the following
terms shall have the following meanings (terms defined in the singular to have
the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by Borrower or in
which Borrower now has or hereafter acquired any interest.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; (ii) which beneficially owns or holds
5% or more of any class of the Voting Stock of a Person; or (iii) 5% or more of
the Voting Stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held by a Person
or a Subsidiary of a Person.
Aggregate Adjusted Availability - means an amount equal to (a) Formula
Availability minus (b) the sum of (i) the unpaid aggregate balance of the
revolving Credit Loan and the L/C's on the date such determination is made,
plus (ii) all amounts due to trade creditors that are past due.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix-A, all Exhibits thereto and this Appendix - A.
Availability-- the amount of money which Borrower is entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the sum of the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Lender may have paid for the account
of Borrower pursuant to any of the Loan Documents and which have not been
reimbursed by Borrower) and the LC Amount is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
Bank - Fleet Capital Corporation.
Base Rate - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if such prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
Borrowing Base - as at any date of determination thereof, an amount equal
to the lesser of:
(i) $5,000,000 at such date; or
(ii) an amount equal to
(a) eighty-five (85%) percent of the net amount of Eligible
Accounts outstanding at such date ("Receivables Formula Availability");
PLUS
(b) the lesser of (1) $3,000,000 or (2) fifty (50%) percent, of
the value of Eligible Inventory at such date calculated on the basis of
the lower of cost or market with the cost of raw materials and finished
goods calculated on a first-in, first-out basis ("Inventory Formula
Availability");
MINUS
(iii) the Permanent Reserve initially set at $2,000,000;
MINUS
(iv) such additional reasonable reserves as Lender may in its
discretion deem necessary from time to time.
For purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates,
discounts (which may, at Lender's option, be calculated on shortest terms),
credits, allowances or excise taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in connection with
such Accounts at such time.
Additionally, the Receivables Formula Availability and the Inventory
Formula Availability shall be subject to adjustment by the Lender upon prior
notice to Borrower, and in Lender's reasonable judgment.
Business Day - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of The Commonwealth of Massachusetts or is a day
on which banking institutions located in the state are closed.
Capital Expenditures - expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Loan is made or the
initial Letter of Credit or LC Guaranty is issued under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in The
Commonwealth of Massachusetts, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
Consolidated - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
Current Assets - at any date means the amount at which all of the current
assets of a Person would be properly classified as current assets shown on a
balance sheet at such date in accordance with GAAP except that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Distribution - in respect of any corporation means and includes: (i) the
payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net proceeds
of the sale of Securities.
Dominion Account - a special account of Lender established by Borrower
pursuant to the Agreement at a bank selected by Borrower, but acceptable to
Lender in its reasonable discretion, and over which Lender shall have sole and
exclusive access and control for withdrawal purposes.
EBIT-- with respect to any fiscal period, the sum of Borrower's
Consolidated net earnings (or loss) before interest expense and taxes for said
period as determined in accordance with GAAP.
Eligible Account - an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services which Lender, in its
reasonable credit judgment, deems to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrower to a Subsidiary or an
Affiliate of Borrower or to a Person controlled by an Affiliate of Borrower; or
(ii) it is unpaid for more than 60 days after the original due date
shown on the invoice; or
(iii) it is due or unpaid more than 120 days after the original
invoice date; or
(iv) 50% or more of the Accounts from any one Account Debtor are not
deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of any one Account Debtor exceed 20%
of the net amount of all Eligible Accounts, to the extent of such excess; or
(vi) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vii) the Account Debtor is also Borrower's creditor or supplier, or
the Account Debtor has disputed liability with respect to such Account, or the
Account Debtor has made any claim with respect to any other Account due from
such Account Debtor to Borrower, or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor; or
(viii) the Account Debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal bankruptcy laws, as
now constituted or hereafter amended, or any other petition or other
application for relief under the federal bankruptcy laws has been filed
against the Account Debtor, or if the Account Debtor has failed, suspended
business, ceased to be Solvent, or consented to or suffered a receiver,
trustee, liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs; or
(ix) it arises from a sale to an Account Debtor outside the United
States, unless the sale is on letter of credit, guaranty or acceptance terms,
in each case acceptable to Lender in its sole discretion; or
(x) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns its
right to payment of such Account to Lender, in a manner satisfactory to
Lender, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C.
'203 et seq., as amended); or
(xii) the Account is subject to a Lien other than a Permitted Lien; or
(xiii) the goods giving rise to such Account have not been delivered
to and accepted by the Account Debtor or the services giving rise to such
Account have not been performed by Borrower and accepted by the Account Debtor
or the Account otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument of
any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances which are made in the
ordinary course of business for prompt payment and which discounts or
allowances are reflected in the calculation of the face value of each invoice
related to such Account; or
(xvi) Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof.
Eligible Inventory - such Inventory of Borrower (other than packaging
materials and supplies) which Lender, in its reasonable credit judgment, deems
to be Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(i) it is not raw materials or finished goods, or work-in-process
that is, in Lender's opinion, readily marketable in its current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any governmental
agency or authority; or
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement,
(vi) it is not at all times subject to Lender's duly perfected,
first priority security interest and no other Lien except a Permitted Lien; or
(vii) it is not situated at a location in compliance with the
Agreement or is in transit.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or owned
by Borrower or in which Borrower has an interest, whether now owned or
hereafter acquired by Borrower and wherever located, and all parts, accessories
and special tools and all increases and accessions thereto and substitutions
and replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Formula Availability - the amount equal to (x) the sum of the Receivables
Formula Availability and Inventory Formula Availability minus (y) the Permanent
Reserve and all additional reserves.
GAAP - generally accepted account principles in the United States of
America in effect from time to time.
General Intangibles - all personal property of Borrower (including things
in action) other than goods, Accounts, chattel paper, documents, instruments
and money, whether now owned or hereafter created or acquired by Borrower.
Indebtedness - as applied to a Person means, without duplication
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has guaranteed,
(iii) all reimbursement obligations in connection with letters of credit
or letter of credit guaranties issued for the account of such Person, and
(iv) in the case of Borrower (without duplication), the Obligations.
Inventory - all of Borrower's inventory, whether now owned or hereafter
acquired including, but not limited to, all goods intended for sale or lease by
Borrower, or for display or demonstration; all work in process; all raw
materials and other materials and supplies of every nature and description used
or which might be used in connection with the manufacture, printing, packing,
shipping, advertising, selling, leasing or furnishing of such goods or
otherwise used or consumed in Borrower's business; and all documents evidencing
and General Intangibles relating to any of the foregoing, whether now owned or
hereafter acquired by Borrower.
LC Amount-- at any time, the aggregate undrawn face amount of all Letters
of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Lender or any Affiliate of
Lender shall guaranty the payment or performance by Borrower of its
reimbursement obligation under any letter of credit.
Letter of Credit - any letter of credit issued by Lender or any of
Lender's Affiliates for the account of Borrower.
Lien - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, Borrower shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
Loan Account - the loan account established on the books of Lender
pursuant to Section 3.5 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - all loans and advances of any kind made by Lender pursuant to the
Agreement.
Money Borrowed - means (i) Indebtedness arising from the lending of money
by any Person to Borrower; (ii) Indebtedness, whether or not in any such case
arising from the lending by any Person of money to Borrower, (A) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Indebtedness of Borrower under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof, if owed directly by Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and other
charges thereon, owing, arising, due or payable from Borrower to Lender of any
kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under the Agreement or any of the
other Loan Documents or otherwise whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due or
to become due, now existing or hereafter arising and however acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other third
party and delivered to Lender in respect of the transactions contemplated by
the Agreement.
Overadvance - the amount, if any, by which the outstanding principal
amount of Revolving Credit Loans plus the LC Amount exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and who
shall have entered into a participation agreement in form and substance
satisfactory to Lender.
Permanent Reserve - the reserve account (initially established at
$2,000,000), required to be established by the Borrower with the Lender for so
long as any Obligations remain outstanding hereunder, as consideration for the
Lender's waiver of required financial covenants under this Agreement.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of the
Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when aggregated with the principal amount of all other such
Indebtedness of Borrower at the time outstanding, does not exceed $100,000.00;
additionally, Borrower's aggregate Capitalized Lease Obligations throughout the
term of the Loan and while any obligations are outstanding to the Lender by the
Borrower, shall not exceed $2,000,000. For the purposes of this definition, the
principal amount of any Purchase Money Indebtedness consisting of capitalized
leases shall be computed as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
Projections - Borrower's forecasted (a) balance sheets, (b) profit and
loss statements, (c) cash flow statements, and (d) capitalization statements,
all prepared on a consistent basis with Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
Property - any interest in any kind of property or asset, whether personal
or mixed, or tangible or intangible, but excluding any real property.
Purchase Money Indebtedness - means and includes (i) Indebtedness (other
than the Obligations) for the payment of all or any part of the purchase price
of any fixed assets, (ii) any Indebtedness (other than the Obligations)
incurred at the time of or within 10 days prior to or after the acquisition of
any fixed assets for the purpose of financing all or any part of the purchase
price thereof, and (iii) any renewals, extensions or refinancings thereof, but
not any increases in the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
Rentals - as defined in subsection 8.2.13 of the Agreement.
Renewal Terms - as defined in Section 4.1 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of ERISA.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any
Property except the following:
(i) investments in one or more Subsidiaries of Borrower to the
extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in
the ordinary course of business of Borrower and its Subsidiaries;
(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United States
of America, provided that such obligations mature within one year from the
date of acquisition thereof;
(v) investments in certificates of deposit maturing within one year
from the date of acquisition issued by a bank or trust company organized under
the laws of the United States or any state thereof having capital surplus and
undivided profits aggregating at least $100,000,000; and
(vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from the date
of creation thereof.
Revolving Credit Loan - a Loan made by Lender as provided in Section 1.1 of
the Agreement.
Schedule of Accounts-- as defined in subsection 6.4.1 of the Agreement.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - this Loan and Security Agreement, those certain UCC-1
Financing Statements filed in connection herewith and all other instruments and
agreements now or at any time hereafter securing the whole or any part of the
Obligations.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
Subordinated Debt - Indebtedness of Borrower that is subordinated to the
Obligations in a manner satisfactory to Lender.
Subordination Agreement - the Subordination Agreement to be dated on or
about the Closing Date among Borrower, Lender and ________________.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
Total Credit Facility- Five Million and 00/100 Dollars ($5,000,000.00).
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Other Terms. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect
the interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
LIST OF EXHIBITS
Exhibit A Revolving Note
Exhibit B Borrower's and each Subsidiary's Business Locations
Exhibit C Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Exhibit D Capital Structure of Borrower
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Compliance Certificate
Exhibit O Permitted Liens
EXHIBIT A
REVOLVING PROMISSORY NOTE
$5,000,000 July 13, 2000
FOR VALUE RECEIVED, ZOOM TELEPHONICS, INC., a Massachusetts corporation
with a business address of 207 South, Boston, Massachusetts 02211 (hereinafter
referred to as the "Borrower"), promises to pay to the order of Fleet Capital
Corporation, a Rhode Island (the "Lender"), at the offices located at One
Boston Place, Suite 500, Boston, Massachusetts 02108, the lesser of (i) the
principal sum of Five Million and 00/100 Dollars ($5,000,000.00), or (ii) the
aggregate unpaid principal amount of all advances of funds under the Revolving
Credit Loan made by the Lender to the Borrower pursuant to that certain Loan
and Security Agreement dated as of the date hereof by and between the Borrower
and the Lender, as the same may be amended (the "Loan Agreement").
The Borrower shall pay in full all unpaid principal, interest, fees and
other amounts due under this Note upon termination hereof pursuant to the Loan
Agreement.
The Borrower promises to pay to the order of the Lender interest before
and after maturity on the principal amount of this Note outstanding from time
to time from the date hereof until payment in full of all principal, interest,
fees and other sums due under this Note in accordance with the Loan Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
principal amount of all Loans shall bear interest at a rate per annum equal to
two percent (2.0%) above the interest rate otherwise applicable thereto.
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement
or as otherwise directed in writing from the Agent to the Borrower.
This Note is one of the Revolving Credit Notes referred to in, and is
entitled to the benefits of, the Loan Agreement. The applicable terms and
provisions of the Loan Agreement are incorporated herein by reference as if
fully set forth herein. In the event of any conflict between any provision of
this Note and any provision(s) of the Loan Agreement, such provision(s) of the
Loan Agreement shall control. Each capitalized term used in this Note and not
expressly defined in this Note shall have the meaning ascribed to such term in
the Loan Agreement. The Loan Agreement, among other things, contains provisions
for acceleration of the maturity of this Note upon the happening of certain
stated events and also for prepayments on account of principal of this Note
prior to the maturity of this Note upon the terms and conditions specified in
the Loan Agreement.
This Note is secured by the Security Documents.
If this Note shall not be paid when due and shall be placed by the holder
hereof in the hands of an attorney for collection, through legal proceedings or
otherwise, the Borrower will pay reasonable attorneys' fees to the holder
hereof together with reasonable costs and expenses of collection.
All provisions of this Note and any other agreements between the Borrower
and the Lender are expressly subject to the condition that in no event, whether
by reason of acceleration of maturity of the Indebtedness evidenced by this
Note or otherwise, shall the amount paid or agreed to be paid to the Lender
which is deemed interest under applicable law exceed the maximum permitted rate
of interest under applicable law (the "Maximum Permitted Rate"), which shall
mean the law in effect on the date of this Note, except that if there is a
change in such law which results in a higher Maximum Permitted Rate, then this
Note shall be governed by such amended law from and after its effective date.
In the event that fulfillment of any provision of this Note, or the Loan
Agreement or any document, instrument or agreement providing security for this
Note results in the rate of interest charged hereunder being in excess of the
Maximum Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess. If, notwithstanding the foregoing, the Lender
receives an amount which under applicable law would cause the interest rate
hereunder to exceed the Maximum Permitted Rate, the portion thereof which would
be excessive shall automatically be deemed a prepayment of and be applied to
the unpaid principal balance of this Note to the extent of then outstanding
Base Rate Loans and not a payment of interest and to the extent said excessive
portion exceeds the outstanding principal amount of Base Rate Loans, said
excessive portion shall be repaid to the Borrower.
The Borrower expressly waives presentment, notice of acceleration and
intent to accelerate, demand for payment and protest and notice of protest and
nonpayment.
This Note shall for all purposes be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
such state's conflict of laws rules.
Executed as a sealed instrument as of the date first above written.
In the presence of: ZOOM TELEPHONICS, INC.
_________________________ By:_______________________________________________
(Witness) Name: Frank B. Manning
Title: President
4
73
EXHIBIT B
BUSINESS LOCATIONS
1. Borrower currently has the following business locations, and no others:
Chief Executive Office: 207 South Street, Boston, MA 02111
Other Locations:
A sales office located in the United Kingdom at ______________________________
______________________________________.
2. Borrower maintains its books and records relating to Accounts and
General Intangibles at: 207 South Street, Boston, MA 02111
3. Borrower has had no office, place of business or agent for process
located in any county other than as set forth above, except:
4. Each Subsidiary currently has the following business locations, and no
others:
Chief Executive Office: N/A
Other Locations: N/A
5. Each Subsidiary maintains its books and records relating to Accounts
and General Intangibles at:N/A
6. Each Subsidiary has had no office, place of business or agent for
process located in any county other than as set forth above, except: N/A
. The following bailees, warehouseman, similar parties and consignees hold
inventory of7. The following bailees, warehouseman, similar parties and
consignees hold inventory of Borrower or one of its Subsidiaries:
EXHIBIT C
JURISDICTIONS IN WHICH BORROWER
AND ITS SUBSIDIARIES
ARE AUTHORIZED TO DO BUSINESS
Name of Entity Jurisdictions
Zoom Telephonics, Inc. Delaware
Zoom Telephonics, Inc. Massachusetts
Zoom Telephonics, Inc. d/b/a Texas
Award Technologies
EXHIBIT D
CAPITAL STRUCTURE
1. The classes and number of authorized shares of Borrower and each
Subsidiary and the record owner of such shares are as follows:
Borrower:
<TABLE>
<S> <C> <C> <C>
----------------------- -------------------------- --------------------------- ==============================
Class of Stock Number of Shares Record Owners Number of Shares
Common Issued and Outstanding Authorized but Unissued
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
Subsidiaries:
----------------------- -------------------------- --------------------------- ==============================
Class of Stock Number of Shares Record Owners Number of Shares
Issued and Outstanding Authorized but Unissued
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
----------------------- -------------------------- --------------------------- ==============================
</TABLE>
2. The number, nature and holder of all other outstanding Securities of
Borrower and each Subsidiary are as follows:
3. The correct name and jurisdiction of incorporation of each Subsidiary
of Borrower and the percentage of its issued and outstanding shares owned by
Borrower are as follows:
------------------ ----------------------------- =====================
Name Jurisdiction of Incorporation Percentage of Shares
Owned by Borrower
------------------ ----------------------------- =====================
------------------ ----------------------------- =====================
----------------- ----------------------------- =====================
4. The name of each of Borrower's corporate or joint venture Affiliates
and the nature of the affiliation are as follows:
EXHIBIT E
CORPORATE NAMES
1. Borrower's correct corporate name, as registered with the Secretary of
State of Delaware and in The Commonwealth of Massachusetts and in the State of
Texas is Zoom Telephonics, Inc.
2. In the conduct of its business, Borrower has used the following names:
Zoom
Zoom Telephonics, Inc.
Award Technologies
3. Each Subsidiaries' correct corporate name, as registered with the
Secretary of State of the State of its incorporation, is: N/A
4. In the conduct of its business, each Subsidiary has used the following
names: N/A
EXHIBIT F EXHIBIT F
TAX IDENTIFICATION NUMBERS OF SUBSIDIARIES
Subsidiary Number
Not Applicable
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
1. Borrower's and its Subsidiaries' patents: See Attached prepared lists
2. Borrower's and its Subsidiaries' trademarks: See Attached prepared lists
3. Borrower's and its Subsidiaries' copyrights: See Attached prepared lists
4. Borrower's and its Subsidiaries' licenses (other than routine business
licenses, authorizing them to transact business in local jurisdictions): See
Attached prepared lists
EXHIBIT H
CONTRACTS RESTRICTING BORROWER'S RIGHT TO INCUR DEBTS
Contracts that restrict the right of Borrower to incur Indebtedness:
----------------- ------------------- --------------------- =================
Title of Contract Identity of Parties Nature of Restriction Term of Contract
----------------- ------------------- --------------------- =================
----------------- ------------------- --------------------- =================
----------------- ------------------- --------------------- =================
EXHIBIT I
LITIGATION
1. Actions, suits, proceedings and investigations pending against Borrower
or any Subsidiary: None.
2. The only threatened actions, suits, proceedings or investigations of
which Borrower or any Subsidiary is aware are as follows: None.
EXHIBIT J
CAPITALIZED LEASES
Borrower and its Subsidiaries have the following capitalized leases:
----------------- -------- ------------------ ================
Lessee Lessor Term of Lease Property Covered
----------------- -------- ------------------ ================
----------------- -------- ------------------ ================
----------------- -------- ------------------ ================
EXHIBIT K
OPERATING LEASES
Borrower and its Subsidiaries have the following operating leases:
----------------- -------- ------------------ ================
Lessee Lessor Term of Lease Property Covered
----------------- -------- ------------------ ================
----------------- -------- ------------------ ================
----------------- -------- ------------------ ================
EXHIBIT L
PENSION PLANS
Borrower and its Subsidiaries have the following Plans:
-------------------------------------- =======================================
Party Type of Plan
-------------------------------------- =======================================
-------------------------------------- =======================================
Borrower
-------------------------------------- =======================================
-------------------------------------- =======================================
-------------------------------------- =======================================
-------------------------------------- =======================================
[Subsidiaries]
-------------------------------------- =======================================
-------------------------------------- =======================================
-------------------------------------- =======================================
EXHIBIT M
COLLECTIVE BARGAINING AGREEMENTS; LABOR CONTROVERSIES
1. Borrower and its Subsidiaries are parties to the following collective
bargaining agreements:
--------------------- ----------- ==========================
Type of Agreement Parties Term of Agreement
--------------------- ----------- ==========================
--------------------- ----------- ==========================
--------------------- ----------- ==========================
2. Material grievances, disputes of controversies with employees are as
follows:
--------------------------- ===========================================
Parties Involved Nature of Grievance, Dispute or Controversy
--------------------------- ===========================================
--------------------------- ===========================================
--------------------------- ===========================================
3. Threatened strikes, work stoppages and asserted pending demands for
collective bargaining are as follows:
------------------------------------------------- =======================
Parties Involved Nature of Matter
------------------------------------------------- =======================
------------------------------------------------- =======================
------------------------------------------------- =======================
EXHIBIT N
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
__________________, 20__
_______________________________
_______________________________
_______________________________
_______________________________
The undersigned, the chief financial officer of _________
_______________________, a _______________ [corporation] [limited partnership]
("Borrower"), gives this certificate to Fleet Capital Corporation ("Lender") in
accordance with the requirements of subsection 8.1.2 of that certain Loan and
Security Agreement dated ______________, 20__, between Borrower and Lender
("Loan Agreement"). Capitalized terms used in this Certificate, unless
otherwise defined herein, shall have the meanings ascribed to them in the Loan
Agreement.
1. Based upon my review of the balance sheets and statements of income of
Borrower for the [fiscal year] [quarterly period] ending __________________,
20__, copies of which are attached hereto, I hereby certify that:
Capital Expenditures during the period ad for the fiscal year to date
total $__________ and $__________, respectively.
2. No Default exists on the date hereof, other than: __________________
________________________________________________ [if none, so state]; and
3. No Event of Default exists on the date hereof, other than __________
____________________________________________________ [if none, so state].
Very truly yours,
_______________________________
Chief Financial Officer
EXHIBIT O
PERMITTED LIENS
------------------------------------- ==========================
Secured Party Nature of Lien
------------------------------------- ==========================
------------------------------------- ==========================
------------------------------------- ==========================
