Document:

minm_ex101

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this
“Agreement”)
dated as of March 12, 2021 (the “Effective Date”) between (a)
SILICON VALLEY BANK, a
California corporation (“Bank”), and (b) (i) ZOOM TELEPHONICS, INC., a Delaware
corporation (“Zoom”), and (ii) MINIM INC., a Delaware corporation
(“Minim”,
together with Zoom, jointly and severally, individually and
collectively, the “Borrower”), provides the terms on
which Bank shall lend to Borrower and Borrower shall repay Bank.
The parties agree as follows:

 

1 ACCOUNTING
AND OTHER TERMS

 

Accounting terms
not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall
have the meanings set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall have
the meaning provided by the Code to the extent such terms are
defined therein.

 

2 LOAN
AND TERMS OF PAYMENT

 

2.1 Promise
to Pay. Borrower hereby unconditionally promises to pay Bank
the outstanding principal amount of all Credit Extensions and
accrued and unpaid interest thereon as and when due in accordance
with this Agreement.

 

2.2 Revolving
Line.

 

(a) Availability.
Subject to the terms and conditions of this Agreement and to
deduction of Reserves, Bank may, in its sole discretion, make
Advances from time to time as the Borrower may request, but in no
event shall the aggregate amount of all Advances exceed the
Availability Amount. Amounts borrowed under the Revolving Line may
be repaid and, prior to the Revolving Line Maturity Date,
reborrowed, subject to the applicable terms and conditions
precedent herein.

 

(b) Termination;
Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the
Revolving Line shall be immediately due and payable.

 

2.3 Overadvances.
If, at any time, the outstanding principal amount of any Advances
exceeds the lesser of either the Revolving Line or the Borrowing
Base, Borrower shall immediately pay to Bank in cash the amount of
such excess (such excess, the “Overadvance”). Without limiting
Borrower’s obligation to repay Bank any Overadvance, Borrower
agrees to pay Bank interest on the outstanding amount of any
Overadvance, on demand, at a per annum rate equal to the rate that
is otherwise applicable to Advances plus five percent
(5.0%).

 

2.4 Payment
of Interest on the Credit Extensions.

 

(a) Interest Rate. Subject to
Section 2.4(b), the principal amount outstanding under the
Revolving Line shall accrue interest at a floating per annum rate
equal to (i) at all times when a Streamline Period is in effect,
the greater of (A) one-half of one percent (0.50%) above the Prime
Rate and (B) three and three-quarters of one percent (3.75%), and
(ii) at all times when a Streamline Period is not in effect, the
greater of (A) one percent (1.0%) above the Prime Rate and (B) four
and one-quarter of one percent (4.25%), which interest, in each
case, shall be payable monthly in accordance with Section 2.4(e)
below.

 

(b) Default Rate. Immediately upon
the occurrence and during the continuance of an Event of Default,
Obligations shall bear interest at a rate per annum which is five
percent (5.0%) above the rate that is otherwise applicable thereto
(the “Default
Rate”) unless Bank otherwise elects from time to time
in its sole discretion to impose a smaller increase. Fees and
expenses which are required to be paid by Borrower pursuant to the
Loan Documents (including, without limitation, Bank Expenses) but
are not paid when due shall bear interest until paid at a rate
equal to the highest rate applicable to the Obligations. Payment or
acceptance of the increased interest rate provided in this Section
2.4(b) is not a permitted alternative to timely payment and shall
not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Bank.

 

(c) Adjustment to Interest Rate.
Changes to the interest rate of any Credit Extension based on
changes to the Prime Rate shall be effective on the effective date
of any change to the Prime Rate and to the extent of any such
change.

 

 

 

 

(d) Minimum Interest. In the event
the aggregate amount of interest earned by Bank in connection with
the Revolving Line in any month (such period, the
“Minimum Interest
Period”, which period shall begin on the Effective
Date and continue with each month thereafter until the earlier of
the Revolving Line Maturity Date or the date this Agreement is
terminated) is less than Fourteen Thousand Dollars ($14,000.00)
(inclusive of any collateral monitoring fees and float charges, and
exclusive of any other fees and charges hereunder)
(“Minimum
Interest” ), Borrower shall pay to Bank, upon demand
by Bank, an amount equal to the (i) Minimum Interest minus (ii) the
aggregate amount of all interest earned by Bank (inclusive of any
collateral monitoring fees and float charges, and exclusive of any
other fees and charges hereunder) in such Minimum Interest Period.
The amount of Minimum Interest charged shall be prorated for any
partial Minimum Interest Period upon termination of this Agreement.
Borrower shall not be entitled to any credit, rebate, or repayment
of any Minimum Interest pursuant to this Section 2.4(d)
notwithstanding any termination of this Agreement or the suspension
or termination of Bank’s obligation to make loans and
advances hereunder. Bank may deduct amounts owing by Borrower under
this Section 2.4(d) pursuant to the terms of Section 2.6(c). Bank
shall provide Borrower written notice of deductions made from the
Designated Deposit Account pursuant to the terms of this Section
2.4(d).

 

(e)  Payment; Interest Computation.
Interest is payable monthly on the Payment Date of each month and
shall be computed on the basis of a 360-day year for the actual
number of days elapsed. In computing interest, (i) all payments
received after 12:00 p.m. Eastern time on any day shall be deemed
received at the opening of business on the next Business Day, and
(ii) the date of the making of any Credit Extension shall be
included and the date of payment shall be excluded; provided,
however, that if any Credit Extension is repaid on the same day on
which it is made, such day shall be included in computing interest
on such Credit Extension.

 

2.5 Fees.
Borrower shall pay to Bank:

 

(a) Revolving Line Commitment Fee.
A one-time fully earned, non-refundable revolving line commitment
fee of Twenty-Four Thousand Dollars ($24,000.00), on the Effective
Date;

 

(b) Termination Fee. Upon
termination of this Agreement or the termination of the Revolving
Line for any reason prior to the Revolving Line Maturity Date, in
addition to the payment of any other amounts then-owing, a
termination fee in an amount equal to two percent (2.0%) of the
Revolving Line if such termination occurs prior to the first
anniversary of the Effective Date, or (ii) one percent (1.0%) of
the Revolving Line if such termination occurs on or at any time
after the first anniversary of the Effective Date, provided that no
termination fee shall be charged if the credit facility hereunder
is replaced with a new facility from Bank; and

 

(c) Bank Expenses. All Bank
Expenses (including reasonable attorneys’ fees and expenses
for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, when due (or, if no stated
due date, upon demand by Bank).

 

Unless
otherwise provided in this Agreement or in a separate writing by
Bank, Borrower shall not be entitled to any credit, rebate, or
repayment of any fees earned by Bank pursuant to this Agreement
notwithstanding any termination of this Agreement or the suspension
or termination of Bank’s obligation to make loans and
advances hereunder. Bank may deduct amounts owing by Borrower under
the clauses of this Section 2.5 pursuant to the terms of Section
2.6(c). Bank shall provide Borrower written notice of deductions
made from the Designated Deposit Account pursuant to the terms of
the clauses of this Section 2.5.

 

2.6 Payments;
Application of Payments; Debit of Accounts.

 

(a) All payments to be
made by Borrower under any Loan Document shall be made in
immediately available funds in Dollars, without setoff or
counterclaim, before 12:00 p.m. Eastern time on the date when due.
Payments of principal and/or interest received after 12:00 p.m.
Eastern time are considered received at the opening of business on
the next Business Day. When a payment is due on a day that is not a
Business Day, the payment shall be due the next Business Day, and
additional fees or interest, as applicable, shall continue to
accrue until paid.

 

(b) Subject to Section
6.3(c) hereof, Bank has the exclusive right to determine the order
and manner in which all payments with respect to the Obligations
may be applied. Borrower shall have no right to specify the order
or the accounts to which Bank shall allocate or apply any payments
required to be made by Borrower to Bank or otherwise received by
Bank under this Agreement when any such allocation or application
is not specified elsewhere in this Agreement.

 

(c) Bank may debit any
of Borrower’s deposit accounts, including the Designated
Deposit Account, for principal and interest payments or any other
amounts Borrower owes Bank when due. These debits shall not
constitute a set-off.

 

 

 

 

2.7 Withholding.
Payments received by Bank from Borrower under this Agreement will
be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any
Governmental Authority (including any interest, additions to tax or
penalties applicable thereto). Specifically, however, if at any
time any Governmental Authority, applicable law, regulation or
international agreement requires Borrower to make any withholding
or deduction from any such payment or other sum payable hereunder
to Bank, Borrower hereby covenants and agrees that the amount due
from Borrower with respect to such payment or other sum payable
hereunder will be increased to the extent necessary to ensure that,
after the making of such required withholding or deduction, Bank
receives a net sum equal to the sum which it would have received
had no withholding or deduction been required, and Borrower shall
pay the full amount withheld or deducted to the relevant
Governmental Authority. Borrower will, upon request, furnish Bank
with proof reasonably satisfactory to Bank indicating that Borrower
has made such withholding payment; provided, however, that Borrower
need not make any withholding payment if the amount or validity of
such withholding payment is contested in good faith by appropriate
and timely proceedings and as to which payment in full is bonded or
reserved against by Borrower. The agreements and obligations of
Borrower contained in this Section 2.7 shall survive the
termination of this Agreement.

 

3 CONDITIONS
OF LOANS

 

3.1 Conditions
Precedent to Initial Credit Extension. Bank’s
obligation to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, such documents, and completion of
such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:

 

(a) duly executed
signatures to the Loan Documents;

 

(b) the Operating
Documents and a long-form good standing certificate of each
Borrower certified by the Secretary of State of the State of
Delaware and each other jurisdiction in which such Borrower is
qualified to conduct business, each as of a date no earlier than
thirty (30) days prior to the Effective Date;

 

(c) duly executed
secretary’s corporate borrowing certificate of each Borrower
with respect to such Borrower’s Operating Documents,
incumbency, specimen signatures and resolutions authorizing the
execution and delivery of this Agreement and the other Loan
Documents to which it is a party;

 

(d) duly executed
signatures to the completed Borrowing Resolutions for each
Borrower;

 

(e) certified copies,
dated as of a recent date, of financing statement searches, as Bank
may reasonably request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any
such financing statements either constitute Permitted Liens or have
been or, in connection with the initial Credit Extension, will be
terminated or released;

 

(f) the Perfection
Certificate of each Borrower, together with the duly executed
signature thereto;

 

(g) a landlord’s
consent in favor of Bank for Borrower’s leased location at
848 Elm Street, Suite 201, Manchester, New Hampshire 03101, by the
landlord thereof, together with the duly executed signatures
thereto;

 

 

(h) evidence
satisfactory to Bank that the insurance policies required by
Section 6.5 hereof are in full force and effect;

 

(i) duly executed
signature to a payoff letter from Rosenthal & Rosenthal
;

 

(j) evidence that (i)
the Liens securing Indebtedness owed by Borrower to Rosenthal &
Rosenthal will be terminated and (ii) the documents and/or filings
evidencing the perfection of such Liens, including without
limitation any financing statements and/or control agreements, have
or will, concurrently with the initial Advance, be
terminated;

 

(k) with respect to the
initial Advance, the completion of the Initial Audit;

 

(l) with respect to the
initial Advance, a completed Borrowing Base Statement (and any
schedules related thereto and including any other information
requested by Bank with respect to Borrower’s Accounts);
and

 

(m) payment of the fees
and Bank Expenses then due as specified in Section 2.5
hereof.

 

 

 

 

3.2 Conditions
Precedent to all Credit Extensions. Bank’s obligations
to make each Credit Extension, including the initial Credit
Extension, is subject to the following conditions
precedent:

 

(a) timely receipt of
the Credit Extension request and any materials and documents
required by Section 3.4;

 

(b) the representations
and warranties in this Agreement shall be true, accurate, and
complete in all material respects on the date of the proposed
Credit Extension, and on the Funding Date of each Credit Extension;
provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and
complete in all material respects as of such date, and no Event of
Default shall have occurred and be continuing or result from the
Credit Extension. Each Credit Extension is Borrower’s
representation and warranty on that date that the representations
and warranties in this Agreement remain true, accurate, and
complete in all material respects; provided, however, that such
materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material
respects as of such date; and

 

(c) Bank determines to
its satisfaction that there has not been a Material Adverse
Change.

 

3.3 Covenant
to Deliver. Borrower agrees to deliver to Bank each item
required to be delivered to Bank under this Agreement as a
condition precedent to any Credit Extension. Borrower expressly
agrees that a Credit Extension made prior to the receipt by Bank of
any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and the making of
any Credit Extension in the absence of a required item shall be in
Bank’s sole discretion.

 

3.4 Procedures
for Borrowing. Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth
in this Agreement, to obtain an Advance, Borrower (via an
individual duly authorized by an Administrator) shall notify Bank
(which notice shall be irrevocable) by electronic mail by 12:00
p.m. Eastern time on the Funding Date of the Advance. Such notice
shall be made by Borrower through Bank’s online banking
program, provided, however, if Borrower is not utilizing
Bank’s online banking program, then such notice shall be in a
written format acceptable to Bank that is executed by an Authorized
Signer. Bank shall have received satisfactory evidence that the
Board has approved that such Authorized Signer may provide such
notices and request Advances. In connection with any such
notification, Borrower must promptly deliver to Bank by electronic
mail or through Bank’s online banking program such reports
and information, including without limitation, sales journals, cash
receipts journals, accounts receivable aging reports, as Bank may
request in its sole discretion. Bank shall credit proceeds of an
Advance to the Designated Deposit Account. Bank may make Advances
under this Agreement based on instructions from an Authorized
Signer or without instructions if the Advances are necessary to
meet Obligations which have become due.

 

4 CREATION
OF SECURITY INTEREST

 

4.1 Grant
of Security Interest. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations, a
continuing security interest in, and pledges to Bank, the
Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products
thereof.

 

Borrower
acknowledges that it previously has entered, and/or may in the
future enter, into Bank Services Agreements with Bank. Regardless
of the terms of any Bank Services Agreement, Borrower agrees that
any amounts Borrower owes Bank thereunder shall be deemed to be
Obligations hereunder and that it is the intent of Borrower and
Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein
(subject only to Permitted Liens that are permitted pursuant to the
terms of this Agreement to have superior priority to Bank’s
Lien in this Agreement).

 

If this
Agreement is terminated, Bank’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity
obligations, any obligations which, by their terms, are to survive
the termination of this Agreement, and any Obligations under Bank
Services Agreements that are cash collateralized in accordance with
this Section 4.1) are repaid in full in cash. Upon payment in full
in cash of the Obligations (other than inchoate indemnity
obligations, any obligations which, by their terms, are to survive
the termination of this Agreement, and any Obligations under Bank
Services Agreements that are cash collateralized in accordance with
this Section 4.1) and at such time as Bank’s obligation to
make Credit Extensions has terminated, Bank shall, at the sole cost
and expense of Borrower, release its Liens in the Collateral and
all rights therein shall revert to Borrower. In the event (x) all
Obligations (other than inchoate indemnity obligations, any
obligations which, by their terms, are to survive the termination
of this Agreement, and any Obligations under Bank Services
Agreements that are cash collateralized in accordance with this
Section 4.1), except for Bank Services, are satisfied in full, and
(y) this Agreement is terminated, Bank shall terminate the security
interest granted herein upon Borrower providing cash collateral
acceptable to Bank in its good faith business judgment consistent
with Bank’s then current practice for Bank Services, if any.
In the event such Bank Services consist of outstanding Letters of
Credit, Borrower shall provide to Bank cash collateral in an amount
equal to (x) if such Letters of Credit are denominated in Dollars,
then at least one hundred five percent (105.0%); and (y) if such
Letters of Credit are denominated in a Foreign Currency, then at
least one hundred ten percent (110.0%), of the Dollar Equivalent of
the face amount of all such Letters of Credit plus all interest,
fees, and costs due or to become due in connection therewith (as
estimated by Bank in its business judgment), to secure all of the
Obligations relating to such Letters of Credit.

 

 

 

 

4.2 Priority
of Security Interest. Borrower represents, warrants, and
covenants that the security interest granted herein is and shall at
all times continue to be a first priority perfected security
interest in the Collateral (subject only to Permitted Liens that
are permitted pursuant to the terms of this Agreement to have
superior priority to Bank’s Lien under this Agreement). If
Borrower shall acquire a commercial tort claim with a value in
excess of One Hundred Fifty Thousand Dollars ($150,000.00),
Borrower shall promptly notify Bank in a writing signed by Borrower
of the general details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and
substance reasonably satisfactory to Bank.

 

4.3 Authorization
to File Financing Statements. Borrower hereby authorizes
Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions to perfect or protect Bank’s
interest or rights hereunder, including a notice that any
disposition of the Collateral not permitted by this Agreement, by
either Borrower or any other Person, shall be deemed to violate the
rights of Bank under the Code. Such financing statements may
indicate the Collateral as “all assets of the Debtor”
or words of similar effect, or as being of an equal or lesser
scope, or with greater detail, all in Bank’s
discretion.

 

5 REPRESENTATIONS
AND WARRANTIES

 

Borrower represents
and warrants as follows:

 

5.1 Due
Organization, Authorization; Power and Authority. Borrower
is duly existing and in good standing as a Registered Organization
in its jurisdiction of formation and is qualified and licensed to
do business and is in good standing in any jurisdiction in which
the conduct of its business or its ownership of property requires
that it be qualified except where the failure to do so could not
reasonably be expected to have a material adverse effect on
Borrower’s business. In connection with this Agreement, each
Borrower has delivered to Bank a completed certificate signed by
such Borrower, entitled “Perfection Certificate” (the
“Perfection
Certificate”). Borrower represents and warrants to
Bank that (a) Borrower’s exact legal name is that indicated
on the Perfection Certificate and on the signature page hereof; (b)
Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the
Perfection Certificate accurately sets forth Borrower’s
organizational identification number or accurately states that
Borrower has none; (d) the Perfection Certificate accurately sets
forth Borrower’s place of business, or, if more than one, its
chief executive office as well as Borrower’s mailing address
(if different than its chief executive office); (e) Borrower (and
each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational structure or
type, or any organizational number assigned by its jurisdiction;
and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete (it being understood and agreed that Borrower
may from time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If Borrower is not
now a Registered Organization but later becomes one, Borrower shall
promptly notify Bank of such occurrence and provide Bank with
Borrower’s organizational identification number.

 

The
execution, delivery and performance by Borrower of the Loan
Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s organizational
documents, (ii) contravene, conflict with, constitute a default
under or violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental
Authority by which Borrower or any of its Subsidiaries or any of
their property or assets may be bound or affected in any material
respect, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental
Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect), or (v) conflict
with, contravene, constitute a default or breach under, or result
in or permit the termination or acceleration of, any material
agreement by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound
in which the default could reasonably be expected to have a
material adverse effect on Borrower’s business.

 

5.2 Collateral.
Borrower has good title to, rights in, and the power to transfer
each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted
Liens. Borrower has no Collateral Accounts at or with any bank or
financial institution other than Bank or Bank’s Affiliates
except for the Collateral Accounts described in the Perfection
Certificate delivered to Bank in connection herewith and which
Borrower has taken such actions as are necessary to give Bank a
perfected security interest therein, pursuant to the terms of
Section 6.8(b). The Accounts are bona fide, existing obligations of
the Account Debtors.

 

The
Collateral is not in the possession of any third party bailee (such
as a warehouse) except as otherwise provided in the Perfection
Certificate. None of the components of the Collateral shall be
maintained at locations other than as provided in the Perfection
Certificate or as permitted pursuant to Section 7.2.

 

All
Inventory is in all material respects of good and marketable
quality, free from material defects.

 

 

 

 

Borrower is the
sole owner of the Intellectual Property material to
Borrower’s business which it owns or purports to own except
for (a) non-exclusive licenses granted to its customers in the
ordinary course of business, (b) over-the-counter software that is
commercially available to the public, and (c) material Intellectual
Property licensed to Borrower and noted on the Perfection
Certificate. Each Patent which it owns or purports to own and which
is material to Borrower’s business is valid and enforceable,
and no part of the Intellectual Property which Borrower owns or
purports to own and which is material to Borrower’s business
has been judged invalid or unenforceable, in whole or in part. To
the best of Borrower’s knowledge, no claim has been made that
any part of the Intellectual Property violates the rights of any
third party except to the extent such claim would not reasonably be
expected to have a material adverse effect on Borrower’s
business.

 

Except
as noted on the Perfection Certificate, Borrower is not a party to,
nor is it bound by, any Restricted License.

 

5.3 Accounts
Receivable; Inventory.

 

(a) For each Account
with respect to which Advances are requested, on the date each
Advance is requested and made, such Account shall be an Eligible
Account.

 

(b) All statements made
and all unpaid balances appearing in all invoices, instruments and
other documents evidencing the Eligible Accounts are and shall be
true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all
respects what they purport to be. All sales and other transactions
underlying or giving rise to each Eligible Account shall comply in
all material respects with all applicable laws and governmental
rules and regulations. Borrower has no knowledge of any actual or
imminent Insolvency Proceeding of any Account Debtor whose accounts
are Eligible Accounts in any Borrowing Base Statement. To the best
of Borrower’s knowledge, all signatures and endorsements on
all documents, instruments, and agreements relating to all Eligible
Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their
terms.

 

(c) For any item of
Inventory consisting of Eligible Inventory in any Borrowing Base
Statement, such Inventory (i) consists of finished goods, in good,
new, and salable condition, which is not perishable, returned,
consigned, obsolete, not sellable, damaged, or defective, and is
not comprised of demonstrative or custom inventory, works in
progress, packaging or shipping materials, or supplies; (ii) meets
all applicable governmental standards; (iii) has been manufactured
in compliance with the Fair Labor Standards Act; (iv) is not
subject to any Liens, except the first priority Liens granted or in
favor of Bank under this Agreement or any of the other Loan
Documents; (v) is located in the United States at the locations
identified by Borrower in the Perfection Certificate where it
maintains Inventory (or at any location permitted under Section
7.2) and such locations are subject to a bailee waiver/ and or
landlord’s consent, in form and substance acceptable to Bank
in its sole discretion; and (vi) is aged no more than one hundred
eighty (180) days unless Bank approves in writing for a longer
period of time.

 

5.4 Litigation.
There are no actions or proceedings pending or, to the knowledge of
any Responsible Officer, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than,
individually or in the aggregate, One Hundred Thousand Dollars
($100,000.00).

 

5.5 Financial
Statements; Financial Condition. All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to
Bank by submission to the Financial Statement Repository fairly
present in all material respects Borrower’s consolidated
financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in
Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to the Financial
Statement Repository.

 

5.6 Solvency.
The fair salable value of Borrower’s consolidated assets
(including goodwill minus disposition costs) exceeds the fair value
of Borrower’s liabilities; Borrower is not left with
unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade
debts) as they mature.

 

5.7 Regulatory
Compliance. Borrower is not an “investment
company” or a company “controlled” by an
“investment company” under the Investment Company Act
of 1940, as amended. Borrower is not engaged as one of its
important activities in extending credit for margin stock (under
Regulations X, T and U of the Federal Reserve Board of Governors).
Borrower (a) has complied in all material respects with all
Requirements of Law, and (b) has not violated any Requirements of
Law the violation of which could reasonably be expected to have a
material adverse effect on its business. None of Borrower’s
or any of its Subsidiaries’ properties or assets has been
used by Borrower or any Subsidiary or, to the best of
Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous
substance other than legally. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all
Governmental Authorities that are necessary to continue their
respective businesses as currently conducted.

 

 

 

 

5.8 Subsidiaries;
Investments. Borrower does not own any stock, partnership,
or other ownership interest or other equity securities except for
Permitted Investments.

 

5.9 Tax
Returns and Payments; Pension Contributions. Borrower has
timely filed all required tax returns and reports, and Borrower has
timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except (a)
to the extent such taxes are being contested in good faith by
appropriate proceedings promptly instituted and diligently
conducted, so long as such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have
been made therefor, or (b) if such taxes, assessments, deposits and
contributions do not, individually or in the aggregate, exceed
Twenty-Five Thousand Dollars ($25,000.00).

 

To the
extent Borrower defers payment of any contested taxes, Borrower
shall (i) notify Bank in writing of the commencement of, and any
material development in, the proceedings, and (ii) post bonds or
take any other steps required to prevent the Governmental Authority
levying such contested taxes from obtaining a Lien upon any of the
Collateral that is other than a “Permitted Lien.”
Borrower is unaware of any claims or adjustments proposed for any
of Borrower’s prior tax years which could result in
additional taxes becoming due and payable by Borrower in excess of
Twenty-Five Thousand Dollars ($25,000.00). Borrower has paid all
amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms, and
Borrower has not withdrawn from participation in, and has not
permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental
agency.

 

5.10 Use
of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general
business requirements and not for personal, family, household or
agricultural purposes.

 

5.11 Full
Disclosure. No written representation, warranty or other
statement of Borrower in any report, certificate, or written
statement submitted to the Financial Statement Repository, as of
the date such representation, warranty, or other statement was
made, taken together with all such written reports, written
certificates or written statements submitted to the Financial
Statement Repository, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the
statements contained in the reports, certificates, or written
statements not misleading (it being recognized by Bank that the
projections and forecasts provided by Borrower in good faith and
based upon reasonable assumptions are not viewed as facts and that
actual results during the period or periods covered by such
projections and forecasts may differ from the projected or
forecasted results).

 

5.12 Definition
of “Knowledge.” For purposes of the Loan
Documents, whenever a representation or warranty is made to
Borrower’s knowledge or awareness, to the “best
of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge,
after reasonable investigation, of any Responsible
Officer.

 

6 AFFIRMATIVE
COVENANTS

 

Borrower shall do
all of the following:

 

6.1 Government
Compliance.

 

(a) Maintain its and
all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse
effect on Borrower’s business or operations. Borrower shall
comply, and have each Subsidiary comply, in all material respects,
with all laws, ordinances and regulations to which it is
subject.

 

(b) Obtain all of the
Governmental Approvals necessary for the performance by Borrower of
its obligations under the Loan Documents to which it is a party and
the grant of a security interest to Bank in all of its property.
Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Bank.

 

6.2 Financial
Statements and Reports. Provide Bank with the following by
submitting to the Financial Statement Repository:

 

(a) a Borrowing Base
Statement (and any schedules related thereto and including any
other information requested by Bank with respect to
Borrower’s Accounts, including, without limitation, a
detailed inventory and account receivable ledger) within seven (7)
days after the end of each month;

 

 

 

 

(b) within thirty (30)
days after the end of each month, (i) monthly accounts receivable
agings, aged by invoice date, (ii) monthly accounts payable agings,
aged by invoice date, and outstanding or held check registers, if
any, (iii) monthly reconciliations of accounts receivable agings
(aged by invoice date), Deferred Revenue report, detailed debtor
listing, and general ledger, (iv) sell through reports, and (v)
monthly perpetual inventory reports for Inventory valued on a
first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are
requested by Bank in its good faith business judgment;

 

(c) as soon as
available, but no later than thirty (30) days after the last day of
each month, a company prepared consolidated balance sheet and
income statement covering Borrower’s consolidated operations
for such month certified by a Responsible Officer and in a form
acceptable to Bank (the “Monthly Financial
Statements”);

 

(d) within thirty (30)
days after the last day of each month and together with the Monthly
Financial Statements, a duly completed Compliance Statement,
confirming that as of the end of such month, Borrower was in full
compliance with all of the terms and conditions of this Agreement,
and setting forth calculations showing compliance with the
financial covenants set forth in this Agreement (if any) and such
other information as Bank may reasonably request;

 

(e) within the sixty
(60) days after the last day of each fiscal year of Borrower, and
contemporaneously with any updates or amendments thereto, (A)
annual operating budgets (including income statements, balance
sheets and cash flow statements, by month), and (B) annual
financial projections (on a quarterly basis), in each case as
approved by the Board, together with any related business forecasts
used in the preparation of such annual financial
projections;

 

(f) as soon as
available, and in any event within one hundred eighty (180) days
following the end of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm
reasonably acceptable to Bank;

 

(g) in the event that
Borrower becomes subject to the reporting requirements under the
Exchange Act within five (5) days of filing, copies of all periodic
and other reports, proxy statements and other materials filed by
Borrower and/or any Guarantor with the SEC, any Governmental
Authority succeeding to any or all of the functions of the SEC or
with any national securities exchange, or distributed to its
shareholders, as the case may be. Documents required to be
delivered pursuant to the terms hereof (to the extent any such
documents are included in materials otherwise filed with the SEC)
may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date on which Borrower posts
such documents, or provides a link thereto, on Borrower’s
website on the internet at Borrower’s website address;
provided, however, Borrower shall promptly notify Bank in writing
(which may be by electronic mail) of the posting of any such
documents;

 

(h) within five (5)
Business Days of delivery, copies of all statements, reports and
notices made available to Borrower’s security holders or to
any holders of Subordinated Debt;

 

(i) prompt written
notice of any changes to the beneficial ownership information set
out in Section 14 of the Perfection Certificate. Borrower
understands and acknowledges that Bank relies on such true,
accurate and up-to-date beneficial ownership information to meet
Bank’s regulatory obligations to obtain, verify and record
information about the beneficial owners of its legal entity
customers;

 

(j) prompt report of
any legal actions pending or threatened in writing against Borrower
or any of its Subsidiaries that could result in damages or costs to
Borrower or any of its Subsidiaries of, individually or in the
aggregate, Fifty Thousand Dollars ($50,000.00) or more;
and

 

(k) promptly, from time
to time, such other financial information reasonably requested by
Bank.

 

Any
submission by Borrower of a Compliance Statement, a Borrowing Base
Statement or any other financial statement submitted to the
Financial Statement Repository pursuant to this Section 6.2 or
otherwise submitted to Bank shall be deemed to be a representation
by Borrower that (i) as of the date of such Compliance Statement,
Borrowing Base Statement or other financial statement, the
information and calculations set forth therein are true, accurate
and correct, (ii) as of the end of the compliance period set forth
in such submission, Borrower is in complete compliance with all
required covenants except as noted in such Compliance Statement,
Borrowing Base Statement or other financial statement, as
applicable, (iii) as of the date of such submission, no Events of
Default have occurred or are continuing, (iv) all representations
and warranties other than any representations or warranties that
are made as of a specific date in Section 5 remain true and correct
in all material respects as of the date of such submission except
as noted in such Compliance Statement, Borrowing Base Statement or
other financial statement, as applicable, (v) as of the date of
such submission, Borrower and each of its Subsidiaries has timely
filed all required tax returns and reports, and Borrower has timely
paid all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9, and (vi) as of the
date of such submission, no Liens have been levied or claims made
against Borrower or any of its Subsidiaries relating to unpaid
employee payroll or benefits of which Borrower has not previously
provided written notification to Bank.

 

 

 

 

6.3 Accounts
Receivable.

 

(a) Schedules and Documents Relating to
Accounts. Borrower shall deliver to Bank transaction reports
and schedules of collections, as provided in Section 6.2, on
Bank’s standard forms; provided, however, that
Borrower’s failure to execute and deliver the same shall not
affect or limit Bank’s Lien and other rights in all of
Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit
Bank’s Lien and other rights therein. If requested by Bank,
Borrower shall furnish Bank with copies (or, at Bank’s
request, originals (to the extent applicable)) of all contracts,
orders, invoices, and other similar documents, and all shipping
instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of
which gave rise to such Accounts. In addition, Borrower shall
deliver to Bank, on its request, the originals of all instruments,
chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Accounts, if any, in the
same form as received, with all necessary indorsements, and copies
of all credit memos.

 

(b) Disputes. Borrower shall
promptly notify Bank of all disputes or claims relating to Accounts
involving an amount in excess of One Hundred Thousand Dollars
($100,000.00), individually or in the aggregate. Borrower may
forgive (completely or partially), compromise, or settle any
Account for less than payment in full, or agree to do any of the
foregoing so long as (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business,
in arm’s-length transactions, and reports the same to Bank in
the regular reports provided to Bank; (ii) no Event of Default has
occurred and is continuing; and (iii) after taking into account all
such discounts, settlements and forgiveness, the total outstanding
Advances will not exceed the lesser of the Revolving Line or the
Borrowing Base.

 

(c) Collection of Accounts.
Borrower shall direct Account Debtors to deliver or transmit all
proceeds of Accounts into a lockbox account, or such other
“blocked account” as specified by Bank (either such
account, the “Cash Collateral
Account”). Whether or not an Event of Default has
occurred and is continuing, Borrower shall immediately deliver all
payments on and proceeds of Accounts to the Cash Collateral
Account. Subject to Bank’s right to maintain a reserve
pursuant to Section 6.3(d), all amounts received in the Cash
Collateral Account shall be (i) when a Streamline Period is not in
effect, applied to immediately reduce the Obligations under the
Revolving Line (unless Bank, in its sole discretion, at times when
an Event of Default exists, elects not to so apply such amounts),
or (ii) when a Streamline Period is in effect, transferred on a
daily basis to Borrower’s operating account with Bank.
Borrower hereby authorizes Bank to transfer to the Cash Collateral
Account any amounts that Bank reasonably determines are proceeds of
the Accounts (provided that Bank is under no obligation to do so
and this allowance shall in no event relieve Borrower of its
obligations hereunder).

 

(d) Reserves. Notwithstanding any
terms in this Agreement to the contrary, at times when an Event of
Default exists, Bank may hold any proceeds of the Accounts and any
amounts in the Cash Collateral Account that are not applied to the
Obligations pursuant to Section 6.3(c) above (including amounts
otherwise required to be transferred to Borrower’s operating
account with Bank when a Streamline Period is in effect) as a
reserve to be applied to any Obligations regardless of whether such
Obligations are then due and payable.

 

(e) Returns. Provided no Event of
Default has occurred and is continuing, if any Account Debtor
returns any Inventory to Borrower, Borrower shall promptly (i)
determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and
(iii) provide a copy of such credit memorandum to Bank, upon
request from Bank. In the event any attempted return occurs after
the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for Bank, and
immediately notify Bank of the return of the
Inventory.

 

(f) Verifications; Confirmations; Credit
Quality; Notifications. Bank may, from time to time, (i)
verify and confirm directly with the respective Account Debtors the
validity, amount and other matters relating to the Accounts, either
in the name of Borrower or Bank or such other name as Bank may
choose, and notify any Account Debtor of Bank’s security
interest in such Account and/or (ii) conduct a credit check of any
Account Debtor to approve any such Account Debtor’s credit.
Notwithstanding the foregoing, provided no Event of Default has
occurred or is continuing, Bank shall consult with and provide
notice to Borrower before contacting Account Debtors
directly.

 

(g) No Liability. Bank shall not be
responsible or liable for any shortage or discrepancy in, damage
to, or loss or destruction of, any goods, the sale or other
disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Account, or
for settling any Account in good faith for less than the full
amount thereof, nor shall Bank be deemed to be responsible for any
of Borrower’s obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve
Bank from liability for its own gross negligence or willful
misconduct.

 

6.4 Remittance
of Proceeds. Except as otherwise provided in Section 6.3(c),
deliver, in kind, all proceeds arising from the disposition of any
Collateral to Bank in the original form in which received by
Borrower not later than the following Business Day after receipt by
Borrower, to be applied to the Obligations (a) prior to an Event of
Default, pursuant to the terms of Section 6.3(c) hereof, and (b)
after the occurrence and during the continuance of an Event of
Default, pursuant to the terms of Section 9.4 hereof; provided
that, if no Event of Default has occurred and is continuing,
Borrower shall not be obligated to remit to Bank the proceeds of
the sale of worn out or obsolete Equipment disposed of by Borrower
in good faith in an arm’s length transaction for an aggregate
purchase price of Twenty Five Thousand Dollars ($25,000.00) or less
(for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of
Borrower’s other funds or property, but will hold such
proceeds separate and apart from such other funds and property and
in an express trust for Bank. Nothing in this Section 6.4 limits
the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.

 

 

 

 

6.5 Taxes;
Pensions. Timely file, and require each of its Subsidiaries
to timely file, all required tax returns and reports and timely
pay, and require each of its Subsidiaries to timely pay, all
foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower and each of its Subsidiaries, except
for deferred payment of any taxes contested pursuant to the terms
of Section 5.9 hereof, and shall deliver to Bank, on demand,
appropriate certificates attesting to such payments, and pay all
amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their
terms.

 

6.6 Access
to Collateral; Books and Records. At reasonable times, on
one (1) Business Day’s notice (provided no notice is required
if an Event of Default has occurred and is continuing), Bank, or
its agents, shall have the right to (a) inspect the Collateral and
other tangible assets of Borrower, conduct field examinations and
the right to audit and copy Borrower’ s Books (each such
inspection, field examination and audit, a “Field Exam” ), and (b) inspect,
perform appraisals of, and conduct a liquidation analysis with
respect to the Borrower’ s Inventory (each such inspection,
appraisal, and analysis, an “Inventory Appraisal” ). Such Field
Exams and Inventory Appraisals shall be conducted as frequently as
Bank determines in its sole discretion that conditions warrant.
Field Exams and Inventory Appraisals shall be conducted at
Borrower’ s expense. The charge for Field Exams shall be One
Thousand Dollars ($1,000.00) per person per day (or such higher
amount as shall represent Bank’ s then-current standard
charge for the same), and the charge for Inventory Appraisals shall
be the then-current standard charge of Bank’ s independent
outside appraiser, plus, in each case reasonable out-of-pocket
expenses. In the event Borrower and Bank schedule a Field Exam or
Inventory Appraisal more than eight (8) days in advance, and
Borrower cancels or seeks to or reschedules the audit with less
than eight (8) days written notice to Bank, then (without limiting
any of Bank’ s rights or remedies) Borrower shall pay Bank a
fee of Two Thousand Dollars ($2,000.00) (or in respect of any
Inventory Appraisal that is cancelled or rescheduled as noted
above, such higher amount charged by the firm conducting such
Inventory Appraisal) plus any out-of-pocket expenses incurred by
Bank to compensate Bank for the anticipated costs and expenses of
the cancellation or rescheduling. Borrower hereby acknowledges that
the Initial Audit shall be completed prior to the initial Advance
under the Revolving Line.

 

6.7 Insurance.

 

(a) Keep its business
and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may
reasonably request. Insurance policies shall be in a form, with
financially sound and reputable insurance companies that are not
Affiliates of Borrower, and in amounts that are satisfactory to
Bank. All property policies shall have a lender’s loss
payable endorsement showing Bank as the sole lender loss payee. All
liability policies shall show, or have endorsements showing, Bank
as an additional insured. Bank shall be named as lender loss payee
and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral.

 

(b) Ensure that
proceeds payable under any property policy are, at Bank’s
option, payable to Bank on account of the Obligations.

 

(c) At Bank’s
request, Borrower shall deliver certified copies of insurance
policies and evidence of all premium payments. Each provider of any
such insurance required under this Section 6.7 shall agree, by
endorsement upon the policy or policies issued by it or by
independent instruments furnished to Bank, that it will give Bank
thirty (30) days prior written notice before any such policy or
policies shall be materially altered or canceled. If Borrower fails
to obtain insurance as required under this Section 6.7 or to pay
any amount or furnish any required proof of payment to third
persons and Bank, Bank may make all or part of such payment or
obtain such insurance policies required in this Section 6.7, and
take any action under the policies Bank deems prudent.

 

6.8 Accounts.

 

(a) Maintain all of its
and all of its Subsidiaries’ Cash Collateral Account,
operating accounts and all excess cash with Bank and Bank’ s
Affiliates. Notwithstanding the foregoing, Borrower shall be
permitted to maintain one (1) Stripe account (the
“Stripe
Account”), provided that Borrower shall transfer any
and all funds deposited into the Stripe Account into an account
maintained with Bank or Bank’s Affiliates within two (2)
Business Days after such deposit into the Stripe Account. In
addition to the foregoing, Borrower shall conduct all of its
primary banking with Bank, including, without limitation, letters
of credit and business credit cards. Any Guarantor shall maintain
all of its operating accounts and all excess cash with Bank and
Bank’ s Affiliates.

 

(b) In addition to and
without limiting the restrictions in (a), Borrower shall provide
Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution
other than Bank or Bank’s Affiliates. For each Collateral
Account that Borrower at any time maintains, Borrower shall cause
the applicable bank or financial institution (other than Bank) at
or with which any Collateral Account is maintained to execute and
deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder
which Control Agreement may not be terminated without the prior
written consent of Bank. The provisions of the previous sentence
shall not apply to (i) the Stripe Account, or (ii) deposit accounts
exclusively used for payroll, payroll taxes, and other employee
wage and benefit payments to or for the benefit of Borrower’s
employees and identified to Bank by Borrower as such.

 

 

 

 

6.9 Protection
of Intellectual Property Rights.

 

(a) (i) Protect, defend
and maintain the validity and enforceability of its Intellectual
Property material to Borrower’s business; (ii) promptly
advise Bank in writing of material infringements or any other event
that could reasonably be expected to materially and adversely
affect the value of such Intellectual Property; and (iii) not allow
such Intellectual Property material to Borrower’s business to
be abandoned, forfeited or dedicated to the public without
Bank’s written consent.

 

(b) Provide written
notice to Bank within ten (10) days of entering or becoming bound
by any Restricted License (other than over-the-counter software
that is commercially available to the public). Borrower shall take
such steps as Bank requests to obtain the consent of, or waiver by,
any person whose consent or waiver is necessary for (i) any
Restricted License to be deemed “Collateral” and for
Bank to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such
Restricted License, whether now existing or entered into in the
future, and (ii) Bank to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in
accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

 

6.10 Litigation
Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without
expense to Bank and upon at least one (1) Business Days’
notice (provided no notice is required if an Event of Default has
occurred and is continuing), Borrower and its officers, employees
and agents and Borrower’s books and records, to the extent
that Bank may deem them reasonably necessary to prosecute or defend
any third-party suit or proceeding instituted by or against Bank
with respect to any Collateral or relating to Borrower (excluding
any attorney-client privileged communications).

 

6.11 Online
Banking.

 

              (a)                      Utilize
Bank’s online banking platform for all matters requested by
Bank which shall include, without limitation (and without request
by Bank for the following matters), uploading information
pertaining to Accounts and Account Debtors, requesting approval for
exceptions, requesting Credit Extensions, and uploading financial
statements and other reports required to be delivered by this
Agreement (including, without limitation, those described in
Section 6.2 of this Agreement).

 

               (b)                      Comply
with the terms of Bank’s Online Banking Agreement as in
effect from time to time and ensure that all persons utilizing
Bank’s online banking platform are duly authorized to do so
by an Administrator. Bank shall be entitled to assume the
authenticity, accuracy and completeness of any information,
instruction or request for a Credit Extension submitted via
Bank’s online banking platform and to further assume that any
submissions or requests made via Bank’s online banking
platform have been duly authorized by an
Administrator.

 

6.12 Further
Assurances. Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue
Bank’s Lien in the Collateral or to effect the purposes of
this Agreement. Deliver to Bank, within five (5) days after the
same are sent or received, copies of all correspondence, reports,
documents and other filings with any Governmental Authority
regarding compliance with or maintenance of Governmental Approvals
or Requirements of Law or that could reasonably be expected to have
a material effect on any of the Governmental Approvals or otherwise
on the operations of Borrower or any of its
Subsidiaries.

 

6.13 Post-Closing
Conditions.

 

(a)
Within thirty (30) days of the Effective Date, Borrower shall
deliver to Bank a bailee’s waiver in favor of Bank for each
location where Borrower maintains property with a third party, by
each such third party, together with the duly executed signatures
thereto.

 

(b)
Within thirty (30) days of the Effective Date, Borrower shall
deliver to Bank evidence satisfactory to Bank that the insurance
endorsements required by Section 6.5 hereof are in full force and
effect, together with appropriate evidence showing lender loss
payable and/or additional insured clauses or endorsements in favor
of Bank.

 

 

 

 

7 NEGATIVE
COVENANTS

 

Borrower shall not
do any of the following without Bank’s prior written
consent:

 

7.1 Dispositions.
Convey, sell, lease, transfer, assign, or otherwise dispose of
(including, without limitation, pursuant to a Division)
(collectively, “Transfer”), or permit any of its
Subsidiaries to Transfer, all or any part of its business or
property, except for Transfers (a) of Inventory in the ordinary
course of business; (b) of worn-out or obsolete Equipment that is,
in the reasonable judgment of Borrower, no longer economically
practicable to maintain or useful in the ordinary course of
business of Borrower; (c) consisting of Permitted Liens and
Permitted Investments, and (d) other Transfers not otherwise
permitted by Section 7.1 not exceeding One Hundred Thousand Dollars
($100,000.00) individually or in the aggregate in any fiscal
year.

 

7.2 Changes
in Business, Management, Control, or Business Locations. (a)
Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower
and such Subsidiary, as applicable, or reasonably related thereto;
(b) liquidate or dissolve; (c) fail to provide notice to Bank of
any Key Person departing from or ceasing to be employed by Borrower
within five (5) days after such Key Person’s departure from
Borrower; or (d) permit or suffer any Change in
Control.

 

Borrower shall not,
without at least thirty (30) days prior written notice to Bank: (1)
add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than
Twenty-Five Thousand Dollars ($25,000.00) in Borrower’s
assets or property) or deliver any portion of the Collateral
valued, individually or in the aggregate, in excess of Twenty-Five
Thousand Dollars ($25,000.00)to a bailee at a location other than
to a bailee and at a location already disclosed in the Perfection
Certificate, (2) change its jurisdiction of organization, (3)
change its organizational structure or type, (4) change its legal
name, or (5) change any organizational number (if any) assigned by
its jurisdiction of organization. If Borrower intends to add any
new offices or business locations, including warehouses, containing
in excess of Twenty-Five Thousand Dollars ($25,000.00)of Borrower's
assets or property, then Borrower will first receive the written
consent of Bank, and the landlord of any such new offices or
business locations, including warehouses, shall execute and deliver
a landlord consent in form and substance satisfactory to Bank. If
Borrower intends to deliver any portion of the Collateral valued,
individually or in the aggregate, in excess of Twenty-Five Thousand
Dollars ($25,000.00)to a bailee, and Bank and such bailee are not
already parties to a bailee agreement governing both the Collateral
and the location to which Borrower intends to deliver the
Collateral, then Borrower will first receive the written consent of
Bank, and such bailee shall execute and deliver a bailee agreement
in form and substance satisfactory to Bank.

 

7.3 Mergers
or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or
acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another
Person (including, without limitation, by the formation of any
Subsidiary or pursuant to a Division). A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.

 

7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or permit
any Subsidiary to do so, other than Permitted
Indebtedness.

 

7.5 Encumbrance.
Create, incur, allow, or suffer any Lien on any of its property, or
assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except
for Permitted Liens, permit any Collateral not to be subject to the
first priority security interest granted herein, or enter into any
agreement, document, instrument or other arrangement (except with
or in favor of Bank) with any Person which directly or indirectly
prohibits or has the effect of prohibiting Borrower or any
Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of
Borrower’s or any Subsidiary’s Intellectual Property,
except as is otherwise permitted in Section 7.1 hereof and the
definition of “Permitted Liens” herein.

 

7.6 Maintenance
of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.8(b) hereof.

 

7.7 Distributions;
Investments. (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock; or (b)
directly or indirectly make any Investment (including, without
limitation, by the formation of any Subsidiary) other than
Permitted Investments, or permit any of its Subsidiaries to do
so.

 

 

 

 

7.8 Transactions
with Affiliates. Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower,
except for transactions that are in the ordinary course of
Borrower’s business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an
arm’s length transaction with a non-affiliated
Person.

 

7.9 Subordinated
Debt. (a) Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is
subject, or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof, provide
for earlier or greater principal, interest, or other payments
thereon, or adversely affect the subordination thereof to
Obligations owed to Bank.

 

7.10 Compliance.
Become an “investment company” or a company controlled
by an “investment company”, under the Investment
Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin
stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower’s business, or permit any
of its Subsidiaries to do so; withdraw or permit any Subsidiary to
withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred
compensation plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other
governmental agency.

 

8 EVENTS
OF DEFAULT

 

Any one
of the following shall constitute an event of default (an
“Event of
Default”) under this Agreement:

 

8.1 Payment
Default. Borrower fails to (a) make any payment of principal
or interest on any Credit Extension when due, or (b) pay any other
Obligations within three (3) Business Days after such Obligations
are due and payable (which three (3) Business Day cure period shall
not apply to payments due on the Revolving Line Maturity Date).
During the cure period, the failure to make or pay any payment
specified under clause (b) hereunder is not an Event of Default
(but no Credit Extension will be made during the cure
period);

 

8.2 Covenant
Default. Borrower (a) fails or neglects to perform any
obligation in Section 6 of this Agreement or violates any covenant
in Section 7 of this Agreement or (b) fails or neglects to perform,
keep, or observe any other term, provision, condition, covenant or
agreement contained in this Agreement or any Loan Documents and as
to any default (other than those specified in clause (a)) under
such other term, provision, condition, covenant or agreement that
can be cured, has failed to cure the default within ten (10) days
after the occurrence thereof; provided, however, grace and cure
periods provided under this Section 8.2 shall not apply, among
other things, to financial covenants or any other covenants that
are required to be satisfied, completed or tested by a date certain
or any covenants set forth in clause (a).

 

8.3 Material
Adverse Change. A Material Adverse Change
occurs;

 

8.4 Attachment;
Levy; Restraint on Business.

 

(a) (i) The service of
process seeking to attach, by trustee or similar process, any funds
of Borrower or of any entity under the control of Borrower
(including a Subsidiary), or (ii) a notice of lien or levy is filed
against any of Borrower’s assets by any Governmental
Authority, and the same under subclauses (i) and (ii) hereof are
not, within ten (10) days after the occurrence thereof, discharged
or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any
ten (10) day cure period; or

 

(b)  (i) any
material portion of Borrower’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver, or
(ii) any court order enjoins, restrains, or prevents Borrower from
conducting all or any material part of its business;

 

8.5 Insolvency.
(a) Borrower or any of its Subsidiaries is unable to pay its debts
(including trade debts) as they become due or otherwise becomes
insolvent; (b) Borrower or any of its Subsidiaries begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun
against Borrower or any of its Subsidiaries and is not dismissed or
stayed within forty-five (45) days (but no Credit Extensions shall
be made while any of the conditions described in clause (a) exist
and/or until any Insolvency Proceeding is dismissed);

 

8.6 Other
Agreements. There is, under any agreement to which Borrower
or any Guarantor is a party with a third party or parties, (a) any
default resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount individually or in the aggregate in
excess of One Hundred Thousand Dollars ($100,000.00); or (b) any
breach or default by Borrower or Guarantor, the result of which
could reasonably be expected to have a material adverse effect on
Borrower’s or any Guarantor’s business;

 

 

 

 

8.7 Judgments;
Penalties. One or more fines, penalties or final judgments,
orders or decrees for the payment of money in an amount,
individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000.00) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance
carrier) shall be rendered against Borrower by any Governmental
Authority, and the same are not, within ten (10) days after the
entry, assessment or issuance thereof, discharged, satisfied, or
paid, or after execution thereof, stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any
such stay (provided that no Credit Extensions will be made prior to
the satisfaction, payment, discharge, stay, or bonding of such
fine, penalty, judgment, order or decree);

 

8.8 Misrepresentations.
Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or
to induce Bank to enter this Agreement or any Loan Document, and
such representation, warranty, or other statement is incorrect in
any material respect when made;

 

8.9 Subordinated
Debt. Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or
otherwise cease to be in full force and effect, any Person shall be
in breach thereof or contest in any manner the validity or
enforceability thereof or deny that it has any further liability or
obligation thereunder, or the Obligations shall for any reason be
subordinated or shall not have the priority contemplated by this
Agreement or any applicable subordination or intercreditor
agreement; or

 

8.10 Governmental
Approvals. Any Governmental Approval shall have been (a)
revoked, rescinded, suspended, modified in an adverse manner or not
renewed in the ordinary course for a full term or (b) subject to
any decision by a Governmental Authority that designates a hearing
with respect to any applications for renewal of any of such
Governmental Approval or that could result in the Governmental
Authority taking any of the actions described in clause (a) above,
and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) causes, or could reasonably be
expected to cause, a Material Adverse Change, or (ii) adversely
affects the legal qualifications of Borrower or any of its
Subsidiaries to hold such Governmental Approval in any applicable
jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect
the status of or legal qualifications of Borrower or any of its
Subsidiaries to hold any Governmental Approval in any other
jurisdiction.

 

9 BANK’S
RIGHTS AND REMEDIES

 

9.1 Rights
and Remedies. Upon the occurrence and during the continuance
of an Event of Default, Bank may, without notice or demand, do any
or all of the following:

 

(a) declare all
Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);

 

(b) stop advancing
money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and
Bank;

 

(c) demand that
Borrower (i) deposit cash with Bank in an amount equal to at least
(A) one hundred five percent (105.0%) of the Dollar Equivalent of
the aggregate face amount of all Letters of Credit denominated in
Dollars remaining undrawn, and (B) one hundred ten percent (110.0%)
of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit denominated in a Foreign Currency remaining
undrawn (plus, in each case, all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its
good faith business judgment)), to secure all of the Obligations
relating to such Letters of Credit, as collateral security for the
repayment of any future drawings under such Letters of Credit, and
Borrower shall forthwith deposit and pay such amounts, and (ii) pay
in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of
Credit;

 

(d) terminate any FX
Contracts;

 

(e) verify the amount
of, demand payment of and performance under, and collect any
Accounts and General Intangibles, settle or adjust disputes and
claims directly with Account Debtors for amounts on terms and in
any order that Bank considers advisable, and notify any Person
owing Borrower money of Bank’s security interest in such
funds. Borrower shall collect all payments in trust for Bank and,
if requested by Bank, immediately deliver the payments to Bank in
the form received from the Account Debtor, with proper endorsements
for deposit;

 

(f) make any payments
and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of
the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and
pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of
Bank’s rights or remedies;

 

(g) apply to the
Obligations any (i) balances and deposits of Borrower it holds, or
(ii) amount held by Bank owing to or for the credit or the account
of Borrower;

 

 

 

 

(h) ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral. Bank is hereby granted
a non-exclusive, royalty-free license or other right to use,
without charge, Borrower’s labels, Patents, Copyrights, mask
works, rights of use of any name, trade secrets, trade names,
Trademarks, and advertising matter, or any similar property as it
pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection
with Bank’s exercise of its rights under this Section 9.1,
Borrower’s rights under all licenses and all franchise
agreements inure to Bank’s benefit;

 

(i) place a
“hold” on any account maintained with Bank and/or
deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement
or similar agreements providing control of any
Collateral;

 

(j) demand and receive
possession of Borrower’s Books; and

 

(k) exercise all rights
and remedies available to Bank under the Loan Documents or at law
or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms
thereof).

 

9.2 Power
of Attorney. Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact to: (a) exercisable following the
occurrence of an Event of Default, (i) sign Borrower’s name
on any invoice or bill of lading for any Account or drafts against
Account Debtors; (ii) demand, collect, sue, and give releases to
any Account Debtor for monies due, settle and adjust disputes and
claims about the Accounts directly with Account Debtors, and
compromise, prosecute, or defend any action, claim, case, or
proceeding about any Collateral (including filing a claim or voting
a claim in any bankruptcy case in Bank’s or Borrower’s
name, as Bank chooses); (iii) make, settle, and adjust all claims
under Borrower’s insurance policies; (iv) pay, contest or
settle any Lien, charge, encumbrance, security interest, or other
claim in or to the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (v)
transfer the Collateral into the name of Bank or a third party as
the Code permits; and (vi) receive, open and dispose of mail
addressed to Borrower; and (b) regardless of whether an Event of
Default has occurred, (i) endorse Borrower’s name on any
checks, payment instruments, or other forms of payment or security;
and (ii) notify all Account Debtors to pay Bank directly. Borrower
hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower’s name on any documents necessary to perfect or
continue the perfection of Bank’s security interest in the
Collateral regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and the Loan
Documents have been terminated. Bank’s foregoing appointment
as Borrower’s attorney in fact, and all of Bank’s
rights and powers, coupled with an interest, are irrevocable until
all Obligations have been fully repaid and performed and the Loan
Documents have been terminated.

 

9.3 Protective
Payments. If Borrower fails to obtain the insurance called
for by Section 6.7 or fails to pay any premium thereon or fails to
pay any other amount which Borrower is obligated to pay under this
Agreement or any other Loan Document or which may be required to
preserve the Collateral, Bank may obtain such insurance or make
such payment, and all amounts so paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then highest
rate applicable to the Obligations, and secured by the Collateral.
Bank will make reasonable efforts to provide Borrower with notice
of Bank obtaining such insurance at the time it is obtained or
within a reasonable time thereafter. No payments by Bank are deemed
an agreement to make similar payments in the future or Bank’s
waiver of any Event of Default.

 

9.4 Application
of Payments and Proceeds. Bank shall have the right to apply
in any order any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any
collection of Accounts or other disposition of the Collateral, or
otherwise, to the Obligations. Bank shall pay any surplus to
Borrower by credit to the Designated Deposit Account or to other
Persons legally entitled thereto; Borrower shall remain liable to
Bank for any deficiency. If Bank, directly or indirectly, enters
into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option,
exercisable at any time, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction
of the Obligations until the actual receipt by Bank of cash
therefor.

 

9.5 Bank’s
Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the
Collateral in the possession or under the control of Bank, Bank
shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person.
Borrower bears all risk of loss, damage or destruction of the
Collateral.

 

9.6 No
Waiver; Remedies Cumulative. Bank’s failure, at any
time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not
waive, affect, or diminish any right of Bank thereafter to demand
strict performance and compliance herewith or therewith. No waiver
hereunder shall be effective unless signed by the party granting
the waiver and then is only effective for the specific instance and
purpose for which it is given. Bank’s rights and remedies
under this Agreement and the other Loan Documents are cumulative.
Bank has all rights and remedies provided under the Code, by law,
or in equity. Bank’s exercise of one right or remedy is not
an election and shall not preclude Bank from exercising any other
remedy under this Agreement or other remedy available at law or in
equity, and Bank’s waiver of any Event of Default is not a
continuing waiver. Bank’s delay in exercising any remedy is
not a waiver, election, or acquiescence.

 

 

 

 

9.7 Demand
Waiver. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Bank on which Borrower is liable.

 

9.8 Borrower
Liability. Either Borrower may, acting singly, request
Credit Extensions hereunder. Each Borrower hereby appoints the
other as agent for the other for all purposes hereunder, including
with respect to requesting Credit Extensions hereunder. Each
Borrower hereunder shall be jointly and severally obligated to
repay all Credit Extensions made hereunder, regardless of which
Borrower actually receives said Credit Extension, as if each
Borrower hereunder directly received all Credit Extensions. Each
Borrower waives (a) any suretyship defenses available to it under
the Code or any other applicable law, and (b) any right to require
Bank to: (i) proceed against any Borrower or any other person; (ii)
proceed against or exhaust any security; or (iii) pursue any other
remedy. Bank may exercise or not exercise any right or remedy it
has against any Borrower or any security it holds (including the
right to foreclose by judicial or non-judicial sale) without
affecting any Borrower’s liability. Notwithstanding any other
provision of this Agreement or other related document, each
Borrower irrevocably waives all rights that it may have at law or
in equity (including, without limitation, any law subrogating
Borrower to the rights of Bank under this Agreement) to seek
contribution, indemnification or any other form of reimbursement
from any other Borrower, or any other Person now or hereafter
primarily or secondarily liable for any of the Obligations, for any
payment made by Borrower with respect to the Obligations in
connection with this Agreement or otherwise and all rights that it
might have to benefit from, or to participate in, any security for
the Obligations as a result of any payment made by Borrower with
respect to the Obligations in connection with this Agreement or
otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this
Section 9.8 shall be null and void. If any payment is made to a
Borrower in contravention of this Section 9.8, such Borrower shall
hold such payment in trust for Bank and such payment shall be
promptly delivered to Bank for application to the Obligations,
whether matured or unmatured.

 

10 NOTICES

 

All
notices, consents, requests, approvals, demands, or other
communication by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail,
first class, registered or certified mail return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by
electronic mail or facsimile transmission; (c) one (1) Business Day
after deposit with a reputable overnight courier with all charges
prepaid; or (d) when delivered, if hand-delivered by messenger, all
of which shall be addressed to the party to be notified and sent to
the address, facsimile number, or email address indicated below.
Bank or Borrower may change its mailing or electronic mail address
or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Section
10.

 

If to
Borrower:                   
Zoom Telephonics, Inc.

                                           
Minim Inc.

848 Elm
Street, Suite 201

                                            Manchester,
New Hampshire 03104

Attn:           Sean
Doherty

Email:       
sean@minim.com

 

with a copy
to: 

Nixon Peabody
LLP

Exchange
Place

53
State Street

Boston,
Massachusetts 02109

Attn:
Philip B. Taub, Esq.

Email:
PTAUB@nixonpeabody.com

 

If to
Bank:                          
Silicon Valley Bank 275 Grove Street, Suite 2-200

Newton,
Massachusetts 02466 Attn: Megan Wood Email:
MWood@svb.com

 

with a copy
to:                   
Morrison
& Foerster LLP

200
Clarendon Street

Boston,
Massachusetts 02116

Attn:          
David A. Ephraim, Esquire

Email:       
DEphraim@mofo.com

 

 

 

 

11 CHOICE
OF LAW, VENUE, AND JURY TRIAL WAIVER

 

Except
as otherwise expressly provided in any of the Loan Documents,
Massachusetts law governs the Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to
the exclusive jurisdiction of the State and Federal courts in
Boston, Massachusetts; provided, however, that nothing in this
Agreement shall be deemed to operate to preclude Bank from bringing
suit or taking other legal action in any other jurisdiction to
realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor
of Bank. 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 that it 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, complaints, and
other process issued in such action or suit and agrees that service
of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address
set forth in, or subsequently provided by Borrower in accordance
with, Section 10 of this Agreement and that service so made shall
be deemed completed upon the earlier to occur of Borrower’s
actual receipt thereof or three (3) days after deposit in the U.S.
mails, proper postage prepaid.

 

TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK
EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT,
TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

This
Section 11 shall survive the termination of this
Agreement.

 

12 GENERAL
PROVISIONS

 

12.1 Termination
Prior to Maturity Date; Survival. All covenants,
representations and warranties made in this Agreement shall
continue in full force until this Agreement has terminated pursuant
to its terms and all Obligations have been satisfied. So long as
Borrower has satisfied the Obligations (other than inchoate
indemnity obligations, and any other obligations which, by their
terms, are to survive the termination of this Agreement, and any
Obligations under Bank Services Agreements that are cash
collateralized in accordance with Section 4.1 of this Agreement),
this Agreement may be terminated prior to the Revolving Line
Maturity Date by Borrower, effective three (3) Business Days after
written notice of termination is given to Bank. Those obligations
that are expressly specified in this Agreement as surviving this
Agreement’s termination shall continue to survive
notwithstanding this Agreement’s termination.

 

12.2 Successors
and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may
not assign this Agreement or any rights or obligations under it
without Bank’s prior written consent (which may be granted or
withheld in Bank’s discretion). Bank has the right, without
the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any
interest in, Bank’s obligations, rights, and benefits under
this Agreement and the other Loan Documents.

 

12.3 Indemnification.
Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other
Person affiliated with or representing Bank (each, an
“Indemnified
Person”) harmless against: (i) all obligations,
demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by
any other party in connection with the transactions contemplated by
the Loan Documents; and (ii) all losses or expenses (including Bank
Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential
to, or arising from transactions between Bank and Borrower
(including reasonable attorneys’ fees and expenses), except
for Claims and/or losses directly caused by such Indemnified
Person’s gross negligence or willful misconduct.

 

This
Section 12.3 shall survive until all statutes of limitation with
respect to the Claims, losses, and expenses for which indemnity is
given shall have run.

 

12.4 Time
of Essence. Time is of the essence for the performance of
all Obligations in this Agreement.

 

12.5 Severability
of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any
provision.

 

12.6 [Intentionally
Omitted].

 

 

 

 

12.7 Amendments
in Writing; Waiver; Integration. No purported amendment or
modification of any Loan Document, or waiver, discharge or
termination of any obligation under any Loan Document, shall be
enforceable or admissible unless, and only to the extent, expressly
set forth in a writing signed by the party against which
enforcement or admission is sought. Without limiting the generality
of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of
conduct shall operate as, or evidence, an amendment, supplement or
waiver or have any other effect on any Loan Document. Any waiver
granted shall be limited to the specific circumstance expressly
described in it, and shall not apply to any subsequent or other
circumstance, whether similar or dissimilar, or give rise to, or
evidence, any obligation or commitment to grant any further waiver.
The Loan Documents represent the entire agreement about this
subject matter and supersede prior negotiations or agreements. All
prior agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of the
Loan Documents merge into the Loan Documents.

 

12.8 Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when
executed and delivered, is an original, and all taken together,
constitute one Agreement.

 

12.9 Confidentiality.
In handling any confidential information, Bank shall exercise the
same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to
Bank’s Subsidiaries or Affiliates (such Subsidiaries and
Affiliates, together with Bank, collectively, “Bank Entities”); (b) to
prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use its best efforts to
obtain any prospective transferee’s or purchaser’s
agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank’s
regulators or as otherwise required in connection with Bank’s
examination or audit; (e) as Bank considers appropriate in
exercising remedies under the Loan Documents; and (f) to
third-party service providers of Bank so long as such service
providers have executed a confidentiality agreement with Bank with
terms no less restrictive than those contained herein. Confidential
information does not include information that is either: (i) in the
public domain or in Bank’s possession when disclosed to Bank,
or becomes part of the public domain (other than as a result of its
disclosure by Bank in violation of this Agreement) after disclosure
to Bank; or (ii) disclosed to Bank by a third party, if Bank does
not know that the third party is prohibited from disclosing the
information.

 

Bank
Entities may use anonymous forms of confidential information for
aggregate datasets, for analyses or reporting, and for any other
uses not expressly prohibited in writing by Borrower. The
provisions of the immediately preceding sentence shall survive the
termination of this Agreement.

 

12.10 Electronic
Execution of Documents. The words “execution,”
“signed,” “signature” and words of like
import in any Loan Document shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of
which shall be of the same legal effect, validity and
enforceability as a manually executed signature or the use of a
paper-based recordkeeping systems, as the case may be, to the
extent and as provided for in any applicable law, including,
without limitation, any state law based on the Uniform Electronic
Transactions Act.

 

12.11 Right
of Setoff. Borrower hereby grants to Bank a Lien and a right
of setoff as security for all Obligations to Bank, whether now
existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity
under the control of Bank (including a subsidiary of Bank) or in
transit to any of them. At any time after the occurrence and during
the continuance of an Event of Default, without demand or notice,
Bank may setoff the same or any part thereof and apply the same to
any liability or Obligation of Borrower even though unmatured and
regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF
WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.

 

12.12 Captions.
The headings used in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.

 

12.13 Construction
of Agreement. The parties mutually acknowledge that they and
their attorneys have participated in the preparation and
negotiation of this Agreement. In cases of uncertainty this
Agreement shall be construed without regard to which of the parties
caused the uncertainty to exist.

 

12.14 Relationship.
The relationship of the parties to this Agreement is determined
solely by the provisions of this Agreement. The parties do not
intend to create any agency, partnership, joint venture, trust,
fiduciary or other relationship with duties or incidents different
from those of parties to an arm’s-length
contract.

 

12.15 Third
Parties. Nothing in this Agreement, whether express or
implied, is intended to: (a) confer any benefits, rights or
remedies under or by reason of this Agreement on any persons other
than the express parties to it and their respective permitted
successors and assigns; (b) relieve or discharge the obligation or
liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any
right of subrogation or action against any party to this
Agreement.

 

 

 

 

13 DEFINITIONS

 

13.1 Definitions.
As used in the Loan Documents, the word “shall” is
mandatory, the word “may” is permissive, the word
“or” is not exclusive, the words “includes”
and “including” are not limiting, the singular includes
the plural, and numbers denoting amounts that are set off in
brackets are negative. As used in this Agreement, the following
capitalized terms have the following meanings:

 

“Account” is, as to any Person, any
“account” of
such Person as “account” is defined in the Code with
such additions to such term as may hereafter be made, and includes,
without limitation, all accounts receivable and other sums owing to
such Person.

 

“Account Debtor” is any
“account debtor”
as defined in the Code with such additions to such term as may
hereafter be made.

 

“Adjusted Quick Ratio” is,
calculated on a consolidated basis with respect to Borrower and its
Subsidiaries, the ratio of (a) Quick Assets to (b) (i) Current
Liabilities minus (ii) the current portion of Deferred Revenue,
minus (iii) Customer Deposits.

 

 “Administrator”
is an individual that is named:

 

(a)           as
an “Administrator” in the “SVB Online
Services” form completed by Borrower with the authority to
determine who will be authorized to use SVB Online Services (as
defined in Bank’s Online Banking Agreement as in effect from
time to time) on behalf of Borrower; and

 

(b)           as
an Authorized Signer of Borrower in an approval by the
Board.

 

“Advance” or “Advances” means a revolving credit
loan (or revolving credit loans) under the Revolving
Line.

 

“Affiliate” is, with respect to any
Person, each other Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by
or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and,
for any Person that is a limited liability company, that
Person’s managers and members. For purposes of the definition
of Eligible Accounts, Affiliate shall include a Specified
Affiliate.

 

“Agreement” is defined in the
preamble hereof.

 

“Authorized Signer” is any
individual listed in Borrower’s Borrowing Resolution who is
authorized to execute the Loan Documents, including making (and
executing if applicable) any Credit Extension request, on behalf of
Borrower.

 

“Availability Amount” is (a) the
lesser of (i) the Revolving Line or (ii) the amount available under
the Borrowing Base minus (b) the outstanding principal balance of
any Advances.

 

“Bank” is defined in the preamble
hereof.

 

“Bank Entities” is defined in
Section 12.9.

 

“Bank Expenses” are all audit fees
and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, amending,
negotiating, administering, defending and enforcing the Loan
Documents (including, without limitation, those incurred in
connection with appeals or Insolvency Proceedings) or otherwise
incurred with respect to Borrower or any Guarantor.

 

“Bank Services” are any products,
credit services, and/or financial accommodations previously, now,
or hereafter provided to Borrower or any of its Subsidiaries by
Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without
limitation, merchant services, direct deposit of payroll, business
credit cards, and check cashing services), interest rate swap
arrangements, and foreign exchange services as any such products or
services may be identified in Bank’s various agreements
related thereto (each, a “Bank Services
Agreement”).

 

“Bank Services Agreement” is
defined in the definition of Bank Services.

 

 

 

 

“Board” is Borrower’s board
of directors.

 

“Borrower” is defined in the
preamble hereof.

 

“Borrower’s Books” are all
Borrower’s books and records including ledgers, federal and
state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial
condition, and all computer programs or storage or any equipment
containing such information.

 

“Borrowing Base” is (a) eighty-five
percent (85.0)% of Eligible Accounts plus (b) the least of (i)
sixty percent (60.0%) of the value of Borrower’s Eligible
Inventory (valued at cost), (ii) eighty-five percent (85.0%) of the
Net Orderly Liquidation Value, and (iii) Four Million Eight Hundred
Thousand Dollars (4,800,000.00), in each case, as determined by
Bank from Borrower’s most recent Borrowing Base Statement
(and as may subsequently be updated by Bank based upon information
received by Bank including, without limitation, Accounts that are
paid and/or billed following the date of the Borrowing Base
Statement); provided, however, that Bank has the right to decrease
the foregoing percentages in its good faith business judgment to
mitigate the impact of events, conditions, contingencies, or risks
which may adversely affect the Collateral or its
value.

 

“Borrowing Base Statement” is that
certain report of the value of certain Collateral in the form
specified by Bank to Borrower from time to time.

 

“Borrowing Resolutions” are, with
respect to any Person, those resolutions adopted by such
Person’s board of directors (and, if required under the terms
of such Person’s Operating Documents, stockholders) and
delivered by such Person to Bank approving the Loan Documents to
which such Person is a party and the transactions contemplated
thereby, together with a certificate executed by its secretary on
behalf of such Person certifying (a) such Person has the authority
to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that set forth as a part
of or attached as an exhibit to such certificate is a true,
correct, and complete copy of the resolutions then in full force
and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a
party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents, including making (and executing if applicable) any
Credit Extension request, on behalf of such Person, together with a
sample of the true signature(s) of such Person(s), and (d) that
Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate
canceling or amending such prior certificate.

 

“Business Day” is any day that is
not a Saturday, Sunday or a day on which Bank is
closed.

 

“Cash Collateral Account” is
defined in Section 6.3(c).

 

“Cash Equivalents” means (a)
marketable direct obligations issued or unconditionally guaranteed
by the United States or any agency or any State thereof having
maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s
Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d)
money market funds at least ninety-five percent (95.0%) of the
assets of which constitute Cash Equivalents of the kinds described
in clauses (a) through (c) of this definition.

 

“Change in Control” means (a) at
any time, any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act)
shall become, or obtain rights (whether by means of warrants,
options or otherwise) to become, the “beneficial owner”
(as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of twenty-five percent (25.0%) or more of
the ordinary voting power for the election of directors of Borrower
(determined on a fully diluted basis) other than by the sale of
Borrower’s equity securities in a public offering or to
venture capital or private equity investors so long as Borrower
identifies to Bank the venture capital or private equity investors
at least seven (7) Business Days prior to the closing of the
transaction and provides to Bank a description of the material
terms of the transaction; (b) during any period of twelve (12)
consecutive months, a majority of the members of the board of
directors or other equivalent governing body of Borrower cease to
be composed of individuals (i) who were members of that board or
equivalent governing body on the first day of such period, (ii)
whose election or nomination to that board or equivalent governing
body was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body or (iii) whose
election or nomination to that board or other equivalent governing
body was approved by individuals referred to in clauses (i) and
(ii) above constituting at the time of such election or nomination
at least a majority of that board or equivalent governing body; or
(c) at any time, Borrower shall cease to own and control, of record
and beneficially, directly or indirectly, one hundred percent
(100.0%) of each class of outstanding capital stock of each
Subsidiary of Borrower free and clear of all Liens (except Liens
created by this Agreement).

 

“Claims” is defined in Section
12.3.

 

“Code” is the Uniform Commercial
Code, as the same may, from time to time, be enacted and in effect
in the Commonwealth of Massachusetts; provided, that, to the extent
that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles
or Divisions of the Code, the definition of such term contained in
Article or Division 9 shall govern; provided further, that in the
event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the
Commonwealth of Massachusetts, the term “Code” shall
mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and
for purposes of definitions relating to such
provisions.

 

 

 

 

“Collateral” is any and all
properties, rights and assets of Borrower described on Exhibit
A.

 

“Collateral Account” is any Deposit
Account, Securities Account, or Commodity Account.

 

“Commodity Account” is any
“commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Compliance Statement” is that
certain certificate in the form attached hereto as Exhibit B.

 

“Contingent Obligation” is, for any
Person, any direct or indirect liability, contingent or not, of
that Person for (a) any indebtedness, lease, dividend, letter of
credit or other obligation of another such as an obligation, in
each case, directly or indirectly guaranteed, endorsed, co made,
discounted or sold with recourse by that Person, or for which that
Person is directly or indirectly liable; (b) any obligations for
undrawn letters of credit for the account of that Person; and (c)
all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity
prices; but “Contingent Obligation” does not include
endorsements in the ordinary course of business. The amount of a
Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or,
if not determinable, the maximum reasonably anticipated liability
for it determined by the Person in good faith; but the amount may
not exceed the maximum of the obligations under any guarantee or
other support arrangement.

 

“Control Agreement” is any control
agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary
or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to
which Bank obtains control (within the meaning of the Code) over
such Deposit Account, Securities Account, or Commodity
Account.

 

“Copyrights” are any and all
copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work
thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret.

 

“Credit Extension” is any Advance,
any Overadvance, or any other extension of credit by Bank for
Borrower’s benefit.

 

“Currency” is coined money and such
other banknotes or other paper money as are authorized by law and
circulate as a medium of exchange.

 

“Current Liabilities” are (a) all
obligations and liabilities of Borrower and its Subsidiaries to
Bank, plus (b) without duplication of (a), the aggregate amount of
Borrower’s and its Subsidiaries’ Total Liabilities that
mature within one (1) year.

 

“Customer Deposits” means funds of
customers held by the Borrower, as payment for goods and services
to be rendered by Borrower.

 

“Default Rate” is defined in
Section 2.4(b).

 

“Deferred Revenue” is all amounts
received or invoiced in advance of performance under contracts and
not yet recognized as revenue.

 

“Deposit Account” is any
“deposit
account” as defined in the Code with such additions to
such term as may hereafter be made.

 

“Designated Deposit
Account” is (i) with
respect to Zoom, the account number ending 679 (last three digits)
maintained by Zoom with Bank, and (ii) with respect to Minim, the
account number ending 845 (last three digits) maintained by Minim
with Bank, provided, however, in each case, if no such account
number is included, then the Designated Deposit Account shall be
any deposit account of Borrower maintained with Bank as chosen by
Bank.

 

“Division” means, in reference to
any Person which is an entity, the division of such Person into two
(2) or more separate Persons, with the dividing Person either
continuing or terminating its existence as part of such division,
including, without limitation, as contemplated under Section 18-217
of the Delaware Limited Liability Company Act for limited liability
companies formed under Delaware law, or any analogous action taken
pursuant to any other applicable law with respect to any
corporation, limited liability company, partnership or other
entity.

 

“Dollars,” “dollars” or use of the sign
“$” means only lawful money of the United States and
not any other currency, regardless of whether that currency uses
the “$” sign to denote its currency or may be readily
converted into lawful money of the United States.

 

 

 

 

“Dollar Equivalent” is, at any
time, (a) with respect to any amount denominated in Dollars, such
amount, and (b) with respect to any amount denominated in a Foreign
Currency, the equivalent amount therefor in Dollars as determined
by Bank at such time on the basis of the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign
Currency for transfer to the country issuing such Foreign
Currency.

 

“Effective Date” is defined in the
preamble hereof.

 

“Eligible Accounts” means Accounts
owing to Borrower which arise in the ordinary course of
Borrower’s business that meet all Borrower’s
representations and warranties in Section 5.3, that have been, at
the option of Bank, confirmed in accordance with Section 6.3(f) of
this Agreement, and are due and owing from Account Debtors deemed
creditworthy by Bank in its sole discretion. Bank reserves the
right, at any time after the Effective Date, upon notice to and
consultation with Borrower, in its sole discretion in each
instance, to either (i) adjust any of the criteria set forth below
and to establish new criteria or (ii) deem any Accounts owing from
a particular Account Debtor or Account Debtors to not meet the
criteria to be Eligible Accounts. Unless Bank otherwise agrees in
writing, Eligible Accounts shall not include:

 

(a) Accounts (i) for
which the Account Debtor is Borrower’s Affiliate, officer,
employee, investor, or agent, or (ii) that are intercompany
Accounts;

 

(b) Accounts that the
Account Debtor has not paid within ninety (90) days of invoice date
regardless of invoice payment period terms;

 

(c) Accounts with
credit balances over ninety (90) days from invoice
date;

 

(d) Accounts owing from
an Account Debtor if fifty percent (50%) or more of the Accounts
owing from such Account Debtor have not been paid within ninety
(90) days of invoice date;

 

(e) Accounts owing from
an Account Debtor (i) which does not have its principal place of
business in the United States or (ii) whose billing address (as set
forth in the applicable invoice for such Account) is not in the
United States, unless in the case of both (i) and (ii), such
Accounts are otherwise approved by Bank in writing;

 

(f) Accounts billed
from and/or payable to Borrower outside of the United States
(sometimes called foreign invoiced accounts);

 

(g) Accounts in which
Bank does not have a first priority, perfected security interest
under all applicable laws;

 

(h) Accounts billed
and/or payable in a Currency other than Dollars;

 

(i) Accounts owing from
an Account Debtor to the extent that Borrower is indebted or
obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise - sometimes called “contra”
accounts, accounts payable, customer deposits or credit
accounts);

 

(j) Accounts with or in
respect of accruals for marketing allowances, incentive rebates,
price protection, cooperative advertising and other similar
marketing credits, unless otherwise approved by Bank in
writing;

 

(k) Accounts owing from
an Account Debtor which is a United States government entity or any
department, agency, or instrumentality thereof unless Borrower has
assigned its payment rights to Bank and the assignment has been
acknowledged under the Federal Assignment of Claims Act of 1940, as
amended;

 

(l) Accounts with
customer deposits and/or with respect to which Borrower has
received an upfront payment, to the extent of such customer deposit
and/or upfront payment;

 

(m) Accounts for
demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale
or return”, “sale on approval”, or other terms if
Account Debtor’s payment may be conditional;

 

(n) Accounts owing from
an Account Debtor where goods or services have not yet been
rendered to the Account Debtor (sometimes called memo billings or
pre-billings);

 

(o) Accounts subject to
contractual arrangements between Borrower and an Account Debtor
where payments shall be scheduled or due according to completion or
fulfillment requirements (sometimes called contracts accounts
receivable, progress billings, milestone billings, or fulfillment
contracts);

 

 

 

 

(p) Accounts owing from
an Account Debtor the amount of which may be subject to withholding
based on the Account Debtor’s satisfaction of
Borrower’s complete performance (but only to the extent of
the amount withheld; sometimes called retainage
billings);

 

(q) Accounts subject to
trust provisions, subrogation rights of a bonding company, or a
statutory trust;

 

(r) Accounts owing from
an Account Debtor that has been invoiced for goods that have not
been shipped to the Account Debtor unless Bank, Borrower, and the
Account Debtor have entered into an agreement acceptable to Bank
wherein the Account Debtor acknowledges that (i) it has title to
and has ownership of the goods wherever located, (ii) a bona fide
sale of the goods has occurred, and (iii) it owes payment for such
goods in accordance with invoices from Borrower (sometimes called
“bill and hold” accounts);

 

(s) Accounts for which
the Account Debtor has not been invoiced;

 

(t) Accounts that
represent non-trade receivables or that are derived by means other
than in the ordinary course of Borrower’s
business;

 

(u) Accounts for which
Borrower has permitted Account Debtor’s payment to extend
beyond ninety (90) days (including Accounts with a due date that is
more than ninety (90) days from invoice date);

 

(v) Accounts arising
from chargebacks, debit memos or other payment deductions taken by
an Account Debtor;

 

(w) Accounts arising
from product returns and/or exchanges (sometimes called
“warranty” or “RMA” accounts);

 

(x) Accounts in which
the Account Debtor disputes liability or makes any claim (but only
up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding (whether voluntary or
involuntary), or becomes insolvent, or goes out of
business;

 

(y) Accounts owing from
an Account Debtor, whose total obligations to Borrower exceed
twenty-five percent (25.0%) of all Accounts, except for Best Buy
and Amazon, for which such percentage is fifty percent (50.0%), for
the amounts that exceed that percentage, unless Bank approves in
writing;

 

(z) Accounts for which
Bank in its good faith business judgment determines collection to
be doubtful, including, without limitation, accounts represented by
“refreshed” or “recycled”
invoices.

 

“Eligible Inventory” means
Inventory that meets all of Borrower’s representations and
warranties in Section 5.3(c) and is otherwise acceptable to Bank in
all respects in its good faith business discretion (for the
avoidance of doubt, Inventory in transit shall not be considered
Eligible Inventory).

 

“Equipment” is all
“equipment” as
defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery,
fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement
Income Security Act of 1974, and its regulations.

 

“Event of Default” is defined in
Section 8.

 

“Exchange Act” is the Securities
Exchange Act of 1934, as amended.

 

“Field Exam” is defined in Section
6.6.

 

 

 

 

“Financial Statement Repository” is
GroupBostonConsumerHardwareReporting@svb.com or such other means of
collecting information approved and designated by Bank after
providing notice thereof to Borrower from time to
time.

 

“Foreign Currency” means lawful
money of a country other than the United States.

 

“Funding Date” is any date on which
a Credit Extension is made to or for the account of Borrower which
shall be a Business Day.

 

“FX Contract” is any foreign
exchange contract by and between Borrower and Bank under which
Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

 

“GAAP” is generally accepted
accounting principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other
statements by such other Person as may be approved by a significant
segment of the accounting profession, which are applicable to the
circumstances as of the date of determination.

 

“General Intangibles” is all
“general intangibles” as defined in the Code in effect
on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation, all
Intellectual Property, claims, income and other tax refunds,
security and other deposits, payment intangibles, contract rights,
options to purchase or sell real or personal property, rights in
all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any
kind.

 

“Governmental Approval” is any
consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.

 

“Governmental Authority” is any
nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange
and any self-regulatory organization.

 

“Guarantor” is any Person providing
a Guaranty in favor of Bank.

 

“Guaranty” is any guarantee of all
or any part of the Obligations, as the same may from time to time
be amended, restated, modified or otherwise
supplemented.

 

“Indebtedness” is (a) indebtedness
for borrowed money or the deferred price of property or services,
such as reimbursement and other obligations for surety bonds and
letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations,
and (d) Contingent Obligations.

 

“Indemnified Person” is defined in
Section 12.3.

 

 “Insolvency
Proceeding” is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors,
compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other
relief.

 

“Intellectual Property” means, with
respect to any Person, all of such Person’s right, title, and
interest in and to the following:

 

(a) its Copyrights,
Trademarks and Patents;

 

(b) any and all trade
secrets and trade secret rights, including, without limitation, any
rights to unpatented inventions, know-how and operating
manuals;

 

(c) any and all source
code;

 

(d) any and all design
rights which may be available to such Person;

 

 

 

 

(e) any and all claims
for damages by way of past, present and future infringement of any
of the foregoing, with the right, but not the obligation, to sue
for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

 

(f) all amendments,
renewals and extensions of any of the Copyrights, Trademarks or
Patents.

 

“Inventory” is all
“inventory” as
defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished
products, including without limitation such inventory as is
temporarily out of Borrower’s custody or possession or in
transit and including any returned goods and any documents of title
representing any of the above.

 

 “Investment”
is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan,
advance or capital contribution to any Person.

 

“Inventory Appraisal” is defined in
Section 6.6.

 

“Initial Audit” is the completion
of an Field Exam and Inventory Appraisal, in each case, with
results satisfactory to Bank in its sole and absolute
discretion.

 

“Key Person” is each of
Borrower’s (a) Chief Executive Officer, who is Graham
Chynoweth as of the Effective Date and (b) Chief Financial Officer,
who is Sean Doherty as of the Effective Date.

 

“Letter of Credit” is a standby or
commercial letter of credit issued by Bank upon request of Borrower
based upon an application, guarantee, indemnity, or similar
agreement.

 

“Lien” is a claim, mortgage, deed
of trust, levy, charge, pledge, security interest or other
encumbrance of any kind, whether voluntarily incurred or arising by
operation of law or otherwise against any property.

 

“Loan Documents” are, collectively,
this Agreement and any schedules, exhibits, certificates, notices,
and any other documents related to this Agreement, the Perfection
Certificate, any Control Agreement, any Bank Services Agreement,
any subordination agreement, any note, or notes or guaranties
executed by Borrower or any Guarantor, and any other present or
future agreement by Borrower and/or any Guarantor with or for the
benefit of Bank, all as amended, restated, or otherwise
modified.

 

“Material Adverse Change” is (a) a
material impairment in the perfection or priority of Bank’s
Lien in the Collateral or in the value of such Collateral; (b) a
material adverse change in the business, operations, or financial
condition of Borrower; or (c) a material impairment of the prospect
of repayment of any portion of the Obligations.

 

 “Minim” is defined in the preamble
hereof.

 

“Minimum Interest” is defined in
Section 2.4(d).

 

“Minimum Interest Period” is
defined in Section 2.4(d).

 

“Monthly Financial Statements” is
defined in Section 6.2(c).

 

“Net Orderly Liquidation Value ” is
the net orderly liquidation value of Borrower’s Eligible
Inventory as set forth in the most recent Inventory
Appraisal.

 

“Obligations” are Borrower’s
obligations to pay when due any debts, principal, interest, fees,
Bank Expenses, the Termination Fee, and other amounts Borrower owes
Bank now or later, whether under this Agreement, the other Loan
Documents, including, without limitation, all obligations relating
to Bank Services and interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned
to Bank, and to perform Borrower’s duties under the Loan
Documents.

 

 

 

 

“Operating Documents” are, for any
Person, such Person’s formation documents, as certified by
the Secretary of State (or equivalent agency) of such
Person’s jurisdiction of organization on a date that is no
earlier than thirty (30) days prior to the Effective Date, and, (a)
if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability
company agreement (or similar agreement), and (c) if such Person is
a partnership, its partnership agreement (or similar agreement),
each of the foregoing with all current amendments or modifications
thereto.

 

“Overadvance” is defined in Section
2.3.

 

“Patents” means all patents, patent
applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

 “Payment
Date” is the last calendar day of each
month.

 

 “Perfection
Certificate” is defined in Section 5.1.

 

“Permitted Indebtedness”
is:

 

(a) Borrower’s
Indebtedness to Bank under this Agreement and the other Loan
Documents;

 

(b) Indebtedness
existing on the Effective Date which is shown on the Perfection
Certificate;

 

(c) Subordinated
Debt;

 

(d) unsecured
Indebtedness to trade creditors incurred in the ordinary course of
business;

 

(e) Indebtedness
incurred as a result of endorsing negotiable instruments received
in the ordinary course of business;

 

(f) Indebtedness
secured by Liens permitted under clauses (a) and (c) of the
definition of “Permitted Liens” hereunder;
and

 

(g) extensions,
refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (f) above, provided
that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.

 

“Permitted Investments”
are:

 

(a) Investments
(including, without limitation, Subsidiaries) existing on the
Effective Date which are shown on the Perfection Certificate;
and

 

(b)  Investments
consisting of Cash Equivalents.

 

“Permitted Liens” are:

 

(a) Liens existing on
the Effective Date which are shown on the Perfection Certificate or
arising under this Agreement and the other Loan
Documents;

 

(b) Liens for taxes,
fees, assessments or other government charges or levies, either (i)
not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on its Books, provided
that no notice of any such Lien has been filed or recorded under
the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations adopted thereunder;

 

 

 

 

(c) purchase money
Liens (i) on Equipment acquired or held by Borrower incurred for
financing the acquisition of the Equipment securing no more than
Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate
amount outstanding, or (ii) existing on Equipment when acquired, if
the Lien is confined to the property and improvements and the
proceeds of the Equipment; and

 

(d) Liens incurred in
the extension, renewal or refinancing of the Indebtedness secured
by Liens described in (a) through (c), but any extension, renewal
or replacement Lien must be limited to the property encumbered by
the existing Lien and the principal amount of the indebtedness may
not increase.

 

“Person” is any individual, sole
proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

 “Prime
Rate” is the rate of interest per annum from time to
time published in the money rates section of The Wall Street
Journal or any successor publication thereto as the “prime
rate” then in effect; provided that, in the event such rate
of interest is less than zero, such rate shall be deemed to be zero
for purposes of this Agreement; and provided further that if such
rate of interest, as set forth from time to time in the money rates
section of The Wall Street Journal, becomes unavailable for any
reason as determined by Bank, the “Prime Rate” shall
mean the rate of interest per annum announced by Bank as its prime
rate in effect at its principal office in the State of California
(such Bank announced Prime Rate not being intended to be the lowest
rate of interest charged by Bank in connection with extensions of
credit to debtors); provided that, in the event such rate of
interest is less than zero, such rate shall be deemed to be zero
for purposes of this Agreement.

 

“Quick Assets” is, on any date,
calculated on a consolidated basis with respect to Borrower and its
Subsidiaries, unrestricted and unencumbered cash and Cash
Equivalents maintained with Bank or Bank’s Affiliates, plus
net billed accounts receivable plus Eligible Inventory, determined
according to GAAP.

 

“Registered Organization” is any
“registered organization” as defined in the Code with
such additions to such term as may hereafter be made.

 

“Requirement of Law” is as to any
Person, the organizational or governing documents of such Person,
and any law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its
property is subject.

 

“Reserves” means, as of any date of
determination, such amounts as Bank may from time to time establish
and revise in its good faith business judgment, reducing the amount
of Advances and other financial accommodations which would
otherwise be available to Borrower (a) to reflect events,
conditions, contingencies or risks which, as determined by Bank in
its good faith business judgment, do or may adversely affect (i)
the Collateral or any other property which is security for the
Obligations or its value (including without limitation any increase
in delinquencies of Accounts), (ii) the assets, business or
prospects of Borrower or any Guarantor, or (iii) the security
interests and other rights of Bank in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect
Bank's reasonable belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Guarantor
to Bank is or may have been incomplete, inaccurate or misleading in
any material respect; or (c) in respect of any state of facts
which Bank determines constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of
Default.

 

“Responsible Officer” is any of the
Chief Executive Officer, President, Chief Financial Officer and
Controller of Borrower.

 

“Restricted License” is any
material license or other agreement with respect to which Borrower
is the licensee (a) that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower’s interest in
such license or agreement or any other property, or (b) for which a
default under or termination of could interfere with Bank’s
right to sell any Collateral.

 

 “Revolving
Line” is an aggregate principal amount equal to Twelve
Million Dollars ($12,000,000.00).

 

“Revolving Line Maturity Date” is
March 12, 2023.

 

“SEC” shall mean the Securities and
Exchange Commission, any successor thereto, and any analogous
Governmental Authority.

 

“Securities Account” is any
“securities
account” as defined in the Code with such additions to
such term as may hereafter be made.

 

“Specified Affiliate” is any Person
(a) more than ten percent (10.0%) of whose aggregate issued and
outstanding equity or ownership securities or interests, voting,
non-voting or both, are owned or held directly or indirectly,
beneficially or of record, by Borrower, and/or (b) whose equity or
ownership securities or interests representing more than ten
percent (10.0%) of such Person’s total outstanding combined
voting power are owned or held directly or indirectly, beneficially
or of record, by Borrower.

 

 

 

 

“Streamline Period” is, on and
after the Effective Date, provided no Event of Default has occurred
and is continuing, the period (a) commencing on the first
(1st) day
of the month following the day that Borrower provides to Bank a
written report that Borrower has, at all times during the
immediately preceding calendar month maintained an Adjusted Quick
Ratio, as determined by Bank in its good faith business discretion,
of equal to or greater than 1.25 to 1.0 (the “Threshold Ratio”); and (b)
terminating on the earlier to occur of (i) the occurrence of an
Event of Default, or (ii) the first (1st) day thereafter in
which Borrower fails to maintain the Threshold Ratio, as determined
by Bank in its good faith business discretion. Upon the termination
of a Streamline Period, Borrower must maintain the Threshold Ratio
each consecutive day for two (2) months as determined by Bank in
its good faith business discretion, prior to entering into a
subsequent Streamline Period. Borrower shall give Bank prior
written notice of Borrower’s election to enter into any such
Streamline Period, and each such Streamline Period shall commence
on the first (1st) day of the monthly
period following the date Bank determines, in its good faith
business discretion, that the Threshold Ratio has been
achieved.

 

“Stripe Account” is defined in
Section 6.8(a).

 

“Subordinated Debt” is indebtedness
incurred by Borrower subordinated to all of Borrower’s now or
hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other
creditor), on terms acceptable to Bank.

 

“Subsidiary” is, as to any Person,
a corporation, partnership, limited liability company or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at
the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both,
by such Person. Unless the context otherwise requires, each
reference to a Subsidiary herein shall be a reference to a
Subsidiary of Borrower or Guarantor.

 

 “Threshold
Ratio” is defined in the definition of Streamline
Period.

 

“Total Liabilities” is, on any day,
obligations that should, under GAAP, be classified as liabilities
on Borrower’s and its Subsidiaries’ consolidated
balance sheet, including all Indebtedness.

 

“Trademarks” means any trademark
and servicemark rights, whether registered or not, applications to
register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and
symbolized by such trademarks.

 

“Transfer” is defined in Section
7.1.

 

“Zoom” is defined in the preamble
hereof.

 

 

 

 [Signature
page follows.]

 

 

 

IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the
Effective Date.

 

BORROWER:

 

ZOOM
TELEPHONICS, INC.

 

 

By:            

/s/ Sean Doherty

 

Name:
Sean Doherty

 

Title:
Chief Financial Officer

 

 

MINIM
INC.

 

 

By:            

/s/ Sean Doherty

 

Name:
Sean Doherty

 

Title:
Chief Financial Officer

 

 

BANK:

 

SILICON
VALLEY BANK

 

 

By:            

/s/ Megan Wood

 

Name:
Megan Wood

 

Title:
Vice President

 

Signature
Page to Loan and Security Agreement

 

 

 

EXHIBIT A - COLLATERAL DESCRIPTION

 

The
Collateral consists of all of Borrower’s right, title and
interest in and to the following personal property:

 

All
goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases,
license agreements, franchise agreements, General Intangibles
(except as provided below), commercial tort claims, documents,
instruments (including any promissory notes), chattel paper
(whether tangible or electronic), cash, deposit accounts,
certificates of deposit, fixtures, letters of credit rights
(whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting
obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and

 

all
Borrower’s Books relating to the foregoing, and any and all
claims, rights and interests in any of the above and all
substitutions for, additions, attachments, accessories, accessions
and improvements to and replacements, products, proceeds and
insurance proceeds of any or all of the foregoing.

 

Notwithstanding the
foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all
Accounts and all proceeds of
Intellectual Property. If a judicial authority (including a
U.S. Bankruptcy Court) would hold that a security interest in the
underlying Intellectual Property is necessary to have a security
interest in such Accounts and such property that are proceeds of
Intellectual Property, then the Collateral shall automatically, and
effective as of the Effective Date, include the Intellectual
Property to the extent necessary to permit perfection of
Bank’s security interest in such Accounts and such other
property of Borrower that are proceeds of the Intellectual
Property.

 

Pursuant to the
terms of a certain negative pledge arrangement with Bank, Borrower
has agreed not to encumber any of its Intellectual Property without
Bank’s prior written consent.

 

 

 

EXHIBIT B

COMPLIANCE STATEMENT

 

	
TO:                  
SILICON VALLEY BANK

	
 Date:____________________________

                                            

FROM:                  

ZOOM
TELEPHONICS, INC. and MINIM INC. (individually and collectively,
the “ Borrower” )

 

Under the terms and
conditions of the Loan and Security Agreement between Borrower and
Bank (the “Agreement”), (1) Borrower is in
complete compliance for the period ending _______________ with all
required covenants except as noted below. Attached are the required
documents evidencing such compliance, setting forth
calculations
 prepared in accordance with GAAP
consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. Capitalized terms
used but not otherwise defined herein shall have the meanings given
them in the Agreement.

 

	
Please
indicate compliance status by circling Yes/No under
“Complies” column.

	
 

	
       Reporting
Covenants

	
       Required

	
      Complies

	
 

	
 

	
 

	

Monthly
financial statements with Compliance Statement

	

Monthly
within 30 days

	

Yes
No

	

Annual
financial statements (CPA Audited)

	

FYE
within 180 days

	

Yes
No

	

10-Q,
10-K and 8-K

	

Within
5 days after filing with

SEC

	

Yes
No

	

A/R,
A/P Agings, Inventory Report &

Sell
Through Report

	

Monthly
within 30 days

	

Yes
No

	

Deferred Revenue
report

	

Monthly
within 30 days

	

Yes
No

	

Borrowing Base
Statements

	

Monthly
within 7 days

 

	

Yes
No

	

Board
approved projections

	

Within
60 days after the last day of

each
fiscal year of Borrower

	

Yes
No

	
 

 

 

	
Streamline
Period

	
Required

	
Actual

	
Complies

	

Maintain:

	
 

	
 

	
 

	

Adjusted
Quick Ratio

	

 > 
1.25 : 1.0

	

_____ :
1.0

	

Yes
No

 

The
following financial covenant analyses and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of
this Statement.

 

The
following are the exceptions with respect to the statements above:
(If no exceptions exist, state “No exceptions to
note.”)

 

-------------------------------------------------------------------------------------------------------------------------------------------ex_232086.htm

EXHIBIT 4.1

 

DESCRIPTION OF COMMON STOCK

 

First Capital is authorized to issue 7,500,000 shares of common stock having a par value of $.01 per share. Each share of First Capital's common stock has the same relative rights as, and is identical in all respects with, each other share of common stock.

 

Dividends.    First Capital can pay dividends out of statutory surplus or from certain net profits if, as and when declared by its board of directors. The payment of dividends by First Capital is subject to limitations that are imposed by law and applicable regulation. The holders of common stock of First Capital are entitled to receive and share equally in any dividends as may be declared by the board of directors of First Capital out of funds legally available for the payment of dividends. If First Capital issues preferred stock, the holders of the preferred stock may have a priority over the holders of the common stock with respect to dividends.

 

Voting Rights.    The holders of common stock of First Capital possess exclusive voting rights in First Capital. They elect First Capital's board of directors and act on any other matters as are required to be presented to them under applicable law or as are otherwise presented to them by the board of directors. Each holder of common stock is entitled to one vote per share and does not have any right to cumulate votes in the election of directors. First Capital's articles of incorporation, however, provide that a holder of First Capital common stock who owns, together with certain affiliates or persons acting in concert, in excess of 10% of the then-outstanding shares of common stock cannot vote any shares in excess of 10% unless permitted by the board of directors of First Capital. If First Capital issues preferred stock, holders of preferred stock may also possess voting rights. Certain matters require the vote of 80% of the outstanding shares entitled to vote thereon.

 

Liquidation.    In the event of liquidation, dissolution or winding up of First Capital, the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of First Capital available for distribution. If First Capital issues preferred stock, the holders of the preferred stock may have a priority over the holders of the common stock in the event of liquidation or dissolution.

 

Preemptive Rights.    Holders of the common stock of First Capital are not entitled to preemptive rights with respect to any shares that may be issued. The common stock is not subject to redemption.

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