Exhibit 10.4. Loan Modification Agreement by and between Zoom Telephonics, Inc.
and Fleet National Bank
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement ("this Agreement") is made as of November 13,
1997 between Zoom Telephonics, Inc., a Delaware corporation (the "Borrower") and
Fleet National Bank (the "Bank"). For good and valuable consideration, receipt
and sufficiency of which are hereby acknowledged, the Borrower and the Bank act
and agree as follows:
1. Reference is made to: (i) that certain letter agreement dated January 17,
1997 (the "Letter Agreement") between the Borrower and the Bank; (ii) that
certain $10,000,000 face principal amount promissory note dated January 17, 1997
(the "January Revolving Note") made by the Borrower and payable to the order of
the Bank; (iii) that certain Guaranty Agreement dated as of January 17, 1997
(the "FSC Guaranty") from Zoom Telephonics Foreign Sales Corporation ("FSC") to
the Bank; (iv) that certain Guaranty Agreement dated as of January 17, 1997 (the
"Tribe Guaranty") from Tribe Computer Works, Incorporated ("Tribe") to the Bank;
(v) that certain Inventory and Accounts Receivable Security Agreement of even
date herewith (the "Zoom Security Agreement") given by the Borrower to the Bank;
(vi) that certain Inventory and Accounts Receivable Security Agreement of even
date herewith (the "Tribe Security Agreement") given by Tribe to the Bank; (vii)
that certain Inventory and Accounts Receivable Security Agreement of even date
herewith (the "FSC Security Agreement") given by FSC to the Bank; and (viii)
that certain $5,000,000 face principal amount promissory note of even date
herewith (the "November Revolving Note") made by the Borrower and payable to the
order of the Bank. The Letter Agreement, The FSC Guaranty, the Tribe Guaranty,
the Zoom Security Agreement, the Tribe Security Agreement, the FSC Security
Agreement and the November Revolving Note hereinafter collectively referred to
as the "Financing Documents".
2. The Letter Agreement is hereby amended, effective as of the date hereof:
a. By deleting from the second sentence of Section 1.1 of the Letter
Agreement the amount "$10,000,000" and by substituting in its stead the
following:
"$5,000,000"
b. By deleting in its entirety the fourth sentence of Section 1.1 of the
Letter Agreement and by substituting in its stead the following:
"The Revolving Loans shall be evidenced by that certain
$5,000,000 face principal amount promissory note (the `Revolving
Note') dated November 13, 1997 made by the Borrower and payable
to the order of the Bank."
As a result, all references in the Letter Agreement to a "Revolving Note" will
be deemed to refer to the November Revolving Note.
c. By inserting into Section 1.1 of the Letter Agreement, immediately
following the fourth sentence of such Section, the following:
"The Revolving Loans are secured by that certain Inventory and
Accounts Receivable Security Agreement dated November 13, 1997
(the `Security Agreement') given by the Borrower to the Bank and
are guaranteed by Tribe pursuant to that certain Guaranty dated
as of January 17, 1997 (the `Tribe Guaranty') from Tribe to the
Bank and by FSC pursuant to that certain Guaranty dated as of
January 17, 1997 (the `FSC Guaranty') from FSC to the Bank. The
Tribe Guaranty is secured by that certain Inventory and Accounts
Receivable Security Agreement dated November 13, 1997 (the `Tribe
Security Agreement') given by Tribe to the Bank and the FSC
Guaranty is secured by that certain Inventory and Accounts
Receivable Security Agreement dated November 13, 1997 (the `FSC
Security Agreement') given by FSC to the Bank."
d. By deleting in their entireties Sections 1.2 and 1.3 of the
Letter Agreement and by substituting in their stead the following:
"1.2. Interest Rate. The Revolving Loans shall be evidenced by
the Revolving Note and interest thereon shall be payable at the
times and at the rate provided for in the Revolving Note. Overdue
principal of the Revolving Loans and, to the extent permitted by
law, overdue interest shall bear interest at a fluctuating rate
per annum which at all times shall be equal to the sum of (i)
four (4%) percent per annum plus (ii) the per annum rate
otherwise payable under the Revolving Note (but in no event in
excess of the maximum rate from time to time permitted by then
applicable law), compounded monthly and payable on demand.
1.3. Repayment; Renewal of Revolving Loan Facility. The Borrower
shall repay in full all Revolving Loans and all interest thereon
upon the first to occur of: (i) the Expiration Date, or (ii) an
acceleration under ss.5.2(a) following an Event of Default. The
Borrower may prepay at any time, without penalty or premium, the
whole or any portion of any Revolving Loan. In addition, if at
any time the Borrowing Base is in an amount which is less than
the then outstanding Aggregate Bank Liabilities, the Borrower
will forthwith prepay so much of the Revolving Loans as may be
required (or arrange for termination of such letters of credit as
may be required) so that the Aggregate Bank Liabilities will not
exceed the Borrowing Base. The Bank may, at its sole discretion,
renew the revolving financing arrangements described in this
letter agreement by extending the Expiration Date in a writing
signed by the Bank and accepted by the Borrower. Neither the
inclusion in this letter agreement or elsewhere of covenants
relating to periods of time after the Expiration Date, nor any
other provision hereof, nor any action (except a written
extension pursuant to the immediately preceding sentence),
non-action or course of dealing on the part of the Bank will be
deemed an extension of, or agreement on the part of the Bank to
extend, the Expiration Date."
e. By deleting in their entireties Sections 1.4, 1.5 and 1.6
of the Letter Agreement and by substituting in their stead the following:
"1.4. Reserved.
1.5. Reserved.
1.6. Reserved."
f. By deleting in its entirety paragraph (i) of Section 1.7
of the Letter Agreement.
g. By deleting from paragraph (ii) of Section 1.7 of the Letter
Agreement the words "(whether or not then subject to any Eurodollar Interest
Rate)".
h. By deleting in its entirety Section 1.8 of the Letter Agreement.
i. By deleting from the second sentence of the third paragraph of
Section 1.9 of the Letter Agreement the word "Impositions" and by substituting
in its stead the following:
"impositions"
j. By inserting into the third sentence of the third paragraph of
Section 1.9 of the Letter Agreement, immediately after the words "immediately
available funds", the following:
"in lawful currency of the United States"
k. By deleting from the first sentence of Section 1.10 of the Letter
Agreement the amount "$10,000,000" (in each place where it appears) and by
substituting in its stead the following:
"$5,000,000"
l. By inserting into Article I of the Letter Agreement, at the end
thereof, the following:
"1.12. Foreign Exchange. The Bank is also providing to the
Borrower (on terms agreed to or to be agreed to outside of this
letter agreement) a facility (the `F/X Facility') for forward
foreign exchange contracts (`Foreign Exchange Contracts') between
the Bank and the Borrower. The F/X Facility will have an expiry
date of September 30, 1998 and will permit Foreign Exchange
Contracts in a maximum aggregate notional amount of $1,000,000
outstanding at any one time and a $500,000 daily settlement
limit."
m. By deleting the period at the end of the second sentence of
Subsection 2.1(a) of the Letter Agreement and by substituting in its stead the
following:
"and to grant the security interests contemplated by the Security
Agreement."
n. By inserting into clause (i) of Subsection 2.1(c) of the Letter
Agreement, immediately after the words "any filing", the following:
"(other than filings under the Uniform Commercial Code or
other relevant record indexing laws)"
o. By adding to Subsection 2.1(j) of the Letter Agreement, at the
end thereof, the following:
"All of the books and records of the Borrower relating to
Receivables and/or inventory are located at said address. The
principal place of business and chief executive offices of each
of FSC and Tribe are as follows: FSC - 000 Xxxxx Xxxxxx, Xxxxxx,
XX; and Tribe - 000 Xxxxx Xxxxxx, Xxxxxx, XX. All of the books
and records of FSC and Tribe relating to Receivables and/or
inventory are located at the respective addresses described
above. Except as described on item 2.1(j) of the attached
Disclosure Schedule, none of the inventory of the Borrower, FSC
or Tribe is located at any location other than at the respective
chief executive offices of the Borrower, FSC and Tribe described
above."
p. By inserting into the introductory clause to Article III of the
Letter Agreement, immediately after the words "letter of credit issued hereunder
shall be outstanding", the following:
"or the F/X Facility shall be in effect or any Foreign
Exchange Contract shall be outstanding"
q. By adding to each of clause (i) and clause (ii) of Section 3.6 of the
Letter Agreement, at the end of each such clause, the following:
"Financial statements delivered under this clause shall include a
certification by the chief financial officer of the Borrower to
the effect that as at the date of such financial statements the
Tangible Net Worth of the Borrower alone (exclusive of its
investment in Subsidiaries and any debt owed by any Subsidiary to
the Borrower) will not be less than 90% of the Consolidated
Tangible Net Worth of the Borrower and Subsidiaries."
r. By deleting from the last sentence of clause (iii) of Section 3.6 of
the Letter Agreement the words "compliance with ss.ss.3.7-3.10" and by
substituting in their stead the following:
"compliance with each of ss.ss.3.7, 3.8 and 3.10"
s. By deleting from clause (vi) of Section 3.6 of the Letter Agreement
the words "Sections 3.7, 3.8, 3.9 and/or 3.10" and by substituting in their
stead the following:
"Sections 3.7, 3.8 and/or 3.10"
t. By deleting in its entirety Section 3.8 of the Letter Agreement and
by substituting in its stead the following:
"3.8. Capital Base. The Borrower will maintain as at the end of
each fiscal quarter (commencing with its results as at December
31, 1997) a consolidated Capital Base of not less than the
then-effective Capital Base Requirement. As used herein, the
`Capital Base Requirement' will be deemed to have been
$35,000,000 for September 30, 1997; and as at the last day of
each fiscal quarter thereafter (commencing with December 31,
1997) (each, a `Determination Date'), the Capital Base
Requirement will be deemed to become an amount equal to the sum
of: (i) that Capital Base Requirement which was in effect at the
last day of the immediately preceding fiscal quarter, plus (ii)
50% of the consolidated Net Income of the Borrower and
Subsidiaries during the fiscal quarter ending at such
Determination Date (but without giving effect to any Net Income
which is less than zero for any fiscal quarter)."
u. By deleting in its entirety Section 3.9 of the Letter Agreement.
v. By inserting into the introductory clause to Article IV of the Letter
Agreement, immediately after the words "letter of credit issued hereunder shall
be outstanding", the following:
"or the F/X Facility shall be in effect or any Foreign
Exchange Contract shall be outstanding"
w. By inserting into clause (i) of Section 4.1 of the Letter Agreement,
immediately after the words "issued by the Bank", the following:
"and any Indebtedness in respect of Foreign Exchange Contracts
issued by the Bank"
x. By renumbering clauses (ix) and (x) of Section 4.1 of the Letter
Agreement so that same will be known as clauses "(x)" and "(xi)", respectively.
y. By inserting into Section 4.1 of the Letter Agreement, immediately
after clause (viii) thereof, the following:
"(ix) any Indebtedness which represents mortgage debt secured by
the Borrower's premises at 201 and 000 Xxxxx Xxxxxx, Xxxxxx, XX;"
z. By renumbering clause (vi) of Section 4.2 of the Letter Agreement so
that same will be known as clause "(vii)".
aa By inserting into Section 4.2 of the Letter Agreement,
immediately after clause (v) thereof, the following:
"(vi) any mortgage which may hereafter be granted by the Borrower
encumbering its premises at 201 and 000 Xxxxx Xxxxxx, Xxxxxx, XX;
or"
bb. By inserting into the final unnumbered paragraph of Section 4.2 of
the Letter Agreement, immediately after the words "on its assets", the
following:
"(other than its real property at 000 Xxxxx Xxxxxx and 000
Xxxxx Xxxxxx, Xxxxxx, XX)"
cc. By deleting the period at the end of Section 4.3 of the Letter
Agreement and by substituting in its stead the following:
", and (iv) any guaranties in favor of the Bank."
dd. By deleting in its entirety the first sentence of Section 4.10
of the Letter Agreement and by substituting in its stead the following:
"The Borrower will not change its name or legal structure (nor
permit Tribe and/or FSC to do so), nor will the Borrower move its
chief executive offices or principal place of business from the
premises described in Subsection 2.1(j) above (nor permit Tribe
and/or FSC to do so), nor will the Borrower remove any books or
records relating to Collateral from such premises (nor permit
Tribe and/or FSC to do so), nor will the Borrower keep any
Collateral at any location other than at such premises or other
premises shown on item 2.1(j) of the attached Disclosure Schedule
(nor permit Tribe and/or FSC to do so) without, in each instance,
giving the Bank at least 30 days' prior written notice and
providing all such financing statements, certificates and other
documentation as the Bank may request in order to maintain the
perfection and priority of the security interests granted or
intended to be granted pursuant to the Security Agreement."
ee. By deleting from clause (c) of Section 5.1 of the Letter
Agreement the reference to Section 3.9.
ff. By renumbering clause (n) of Section 5.1 of the Letter Agreement
so that same will be known as clause "(p)".
gg. By inserting into Section 5.1 of the Letter Agreement,
immediately following clause (m) thereof, the following:
"(n) the Security Agreement, the Tribe Security Agreement, the
FSC Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured
or evidenced thereby or due to discharge in writing by the Bank)
not remain in full force and effect; or (o) the security
interests and liens of the Bank in and on any of the Collateral
covered or intended to be covered by the Security Agreement, the
FSC security Agreement and/or the Tribe Security Agreement and as
to which perfection may be had under Article 9 of the Uniform
Commercial Code shall for any reason (other than due to written
release by the Bank or due to failure by the Bank to file or take
other appropriate steps to perfect a security interest in
Collateral the location of which has been disclosed to the Bank)
not be fully perfected liens and security interests; or"
hh. By deleting the period at the end of clause (b) of Section 5.2
of the Letter Agreement and by substituting in its stead the following:
"and terminate the F/X Facility."
ii. By inserting into clause (c) of Section 5.2 of the Letter Agreement,
immediately after the words "the Revolving Note", the following:
", under the Security Agreement, under the FSC Guaranty, under
the FSC Security Agreement, under the Tribe Guaranty, under the
Tribe Security Agreement,"
jj. By adding to Section 5.3 of the Letter Agreement, at the end
thereof, the following:
"ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY
OF THE OBLIGATIONS PRIOR TO THE EXERCISE BY THE BANK OF ITS RIGHT
OF SET-OFF UNDER THIS SECTION ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED."
kk. By inserting into Section 6.1 of the Letter Agreement, immediately
after the words "the Revolving Note", in each place where same appear, the
following:
", the Security Agreement, the FSC Security Agreement, the
Tribe Security Agreement"
ll. By inserting into Section 6.2 of the Letter Agreement,
immediately after the words "0.20% per annum", the following:
"(0.5% per annum for all periods on or after November 13, 1997)"
mm. By inserting into Section 6.2 of the Letter Agreement, immediately
after the amount "$10,000,000", in both places where same appears, the
following:
"($5,000,000 for all periods on or after November 13, 1997)"
nn. By deleting from Section 6.5 of the Loan Agreement the words "Xxxxxx
X. Xxxxx, Chief Financial Officer" and by substituting in their stead the
following:
"Xxxxxx Xxxxx, Chief Financial Officer"
oo. By inserting into Article VI of the Letter Agreement, at the end
thereof, the following:
"6.9. Replacement Note. Upon receipt of an affidavit of an
officer of the Bank as to the loss, theft, destruction or
mutilation of the Revolving Note or of any other Loan Document
which is not of public record and, in the case of any such
mutilation, upon surrender and cancellation of the Revolving Note
or other Loan Document, the Borrower will issue, in lieu thereof,
a replacement Revolving Note or other Loan Document in the same
principal amount (as to the Revolving Note) and in any event of
like tenor.
6.10. Usury. All agreements between the Borrower and the Bank are
hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the
Revolving Note or otherwise, shall the amount paid or agreed to
be paid to the Bank for the use or the forbearance of the
Indebtedness represented by the Revolving Note exceed the maximum
permissible under applicable law. In this regard, it is expressly
agreed that it is the intent of the Borrower and the Bank, in the
execution, delivery and acceptance of the Revolving Note, to
contract in strict compliance with the laws of The Commonwealth
of Massachusetts. If, under any circumstances whatsoever,
performance or fulfillment of any provision of the Revolving Note
or any of the other Loan Documents at the time such provision is
to be performed or fulfilled shall involve exceeding the limit of
validity prescribed by applicable law, then the obligation so to
be performed or fulfilled shall be reduced automatically to the
limits of such validity, and if under any circumstances
whatsoever the Bank should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of
the principal balance evidenced by the Revolving Note and not to
the payment of interest. The provisions of this Section 6.10
shall control every other provision of this letter agreement and
of the Revolving Note.
6.11. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS LETTER AGREEMENT, THE
REVOLVING NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE BANK TO ENTER INTO THIS LETTER
AGREEMENT AND TO MAKE REVOLVING LOANS AS CONTEMPLATED HEREIN."
pp. By deleting in their entireties the following definitions appearing
in Section 7.1 of the Letter Agreement: "Eurocurrency Liabilities", "Eurodollar
Interest Rate", "Eurodollar Rate Increment", "Floating Rate", "Floating Rate
Loan", "Impositions", "Interest Payment Date", "Interest Period", "LIBOR",
"LIBOR Loan", "London", "Other Acceptable Foreign Receivables" and "Reserve
Rate".
qq. By deleting from the definition of "Bank Certificate" appearing in
Section 7.1 of the Letter Agreement the references to Sections 1.2 and 1.6.
rr. By deleting in its entirety the definition of "Borrowing Base"
appearing in Section 7.1 of the Letter Agreement and by substituting in its
stead the following:
"`Borrowing Base' - As determined at any date, the sum of (i) 70%
of the aggregate principal amount of the Qualified Domestic
Receivables of the Borrower then outstanding plus (ii) 70% of the
aggregate principal amount of the Qualified Insured Foreign
Receivables of the Borrower then outstanding."
ss. By deleting in its entirety the proviso clause in the definition
of "Business Day" appearing in Section 7.1 of the Letter Agreement.
tt. By inserting into Section 7.1 of the Letter Agreement,
immediately after the definition of "Capital Base", the following:
"`Collateral' - All property now or hereafter owned by the
Borrower, FSC and/or Tribe or in which the Borrower, FSC and/or
Tribe has any interest, but only to the extent that same is
described as `Collateral' in the Security Agreement, the FSC
Security Agreement and/or the Tribe Security Agreement or in
Subsection 7.2(b) below."
uu. By deleting from the definition of "Expiration Date" appearing in
Section 7.1 of the Letter Agreement the date "August 31, 1997" and by
substituting in its stead the following:
"September 30, 1998"
As a result, from and after the date hereof, for the purposes of the Letter
Agreement and the other Financing Documents, the "Expiration Date" will be
deemed to be September 30, 1998.
vv. By inserting into Section 7.1 of the Letter Agreement,
immediately after the definition of "Expiration Date", the following:
"`Foreign Exchange Contracts' - As defined in ss.1.12 above.
`FSC Guaranty' - As defined in ss.1.1 above.
`FSC Security Agreement' - As defined in ss.1.1 above.
`F/X Facility' - As defined in ss.1.12 above."
ww. By inserting into the definition of "Loan Documents" appearing in
Section 7.1 of the Letter Agreement, immediately after the words "Revolving
Note", the following:
", the Security Agreement, the Tribe Guaranty, the Tribe
Security Agreement, the FSC Guaranty, the FSC Security Agreement"
xx. By deleting from the definition of "Maximum Revolving Amount"
appearing in Section 7.1 of the Letter Agreement the amount "$10,000,000" and by
inserting in its stead the following:
"$5,000,000"
yy. By deleting the period at the end of the definition of
"Obligations" appearing in Section 7.1 of the Letter Agreement and by
substituting in its stead the following:
", including, without limitation, the Revolving Loans and any
obligations now or hereafter arising with respect to Foreign
Exchange Contracts."
zz. By deleting in its entirety clause (i) of the second sentence of the
definition of "Qualified Domestic Receivables" appearing in Section 7.1 of the
Letter Agreement and by substituting in its stead the following:
"(i) (A) if the Bank does not have a fully perfected first
priority security interest in such Receivable or (B) if such
Receivable is not free and clear of all adverse interests in
favor of any Person other than the Borrower and the Bank;"
aaa. By renumbering clause (viii) of the second sentence of the
definition of "Qualified Domestic Receivables" appearing in Section 7.1 of the
Letter Agreement so that it will be known as clause (ix) thereof.
bbb. By inserting into the second sentence of the definition of
"Qualified Domestic Receivables" appearing in Section 7.1 of the Letter
Agreement, immediately following clause (vii) thereof, the following:
"(viii) if such Receivable is owed by the United States
government or any agency or department thereof (unless assigned
to the Bank under the Federal Assignment of Claims Act);"
ccc. By deleting in its entirety the last sentence of the definition of
"Qualified Domestic Receivables" appearing in Section 7.1 of the Letter
Agreement and by substituting in its stead the following:
"In addition, so long as the Tribe Guaranty and the Tribe
Security Agreement are in full force and effect and the Bank has
a fully perfected first priority security interest in all of
Tribe's Receivables, term `Qualified Domestic Receivables' will
be deemed to include such Receivables (the `Tribe Intercompany
Receivables') as are now or hereafter owed by Tribe to the
Borrower (even though such Tribe Intercompany Receivables would
otherwise be excluded as being amounts owed to the Borrower by a
related entity) to the extent, but only to the extent, that such
Tribe Intercompany Receivables arise out of sales of the
Borrower's products made by Tribe to unrelated customers and that
the Receivables of Tribe (the `Matching Tribe Receivables')
generated by such sales satisfy all of the requirements set forth
in the immediately preceding two sentences to be Qualified
Domestic Receivables, except that such Matching Tribe Receivable
will not be owned by the Borrower."
ddd. By deleting in its entirety the definition of "Qualified Foreign
Receivables" appearing in Section 7.1 of the Letter Agreement and by
substituting in its stead the following:
"`Qualified Insured Foreign Receivables' - Those Receivables of
the Borrower which satisfy all of the criteria set forth above to
be Qualified Domestic Receivables other than the requirement that
the relevant customer be located in the United States; provided
that each such Qualified Insured Foreign Receivable is supported
by credit insurance issued by an insurer satisfactory to the Bank
and containing terms and conditions satisfactory to the Bank. In
addition, so long as the FSC Guaranty and the FSC Security
Agreement are in full force and effect and the Bank has a fully
perfected first priority security interest in all of FSC's
Receivables, the term `Qualified Insured Foreign Receivables'
will be deemed to include such Receivables (the `FSC Intercompany
Receivables') as are now or hereafter owed by FSC to the Borrower
(even though such FSC Intercompany Receivables are not themselves
insured and would otherwise be excluded as being amounts owed to
the Borrower by a related entity) to the extent, but only to the
extent, that the FSC Intercompany Receivables arise out of sales
of the Borrower's products made by FSC to unrelated customers and
that the Receivables of FSC (the `Matching FSC Receivables')
generated by such sales are insured with credit insurance
satisfactory to the Bank and satisfy all of the other
requirements set forth above to be Qualified Insured Foreign
Receivables, except that such Matching FSC Receivables will not
be owned by the Borrower. Amounts included in Qualified Insured
Foreign Receivables will in no event be `double counted' with any
amounts includable in Qualified Domestic Receivables."
eee. By inserting into Section 7.1 of the Letter Agreement
immediately after the definition of "Tribe", the following:
"`Tribe Guaranty' - As defined in ss.1.1 above.
`Tribe Security Agreement' - As defined in ss.1.1 above."
fff. By adding to Article VII of the Letter Agreement, at the end
thereof, the following:
"7.2. Security Agreement. (a) Each of the Borrower, FSC and Tribe
acknowledges and agrees that the `Obligations' described in and
secured by the Security Agreement, the FSC Security Agreement and
the Tribe Security Agreement include, without limitation, all of
the obligations of the Borrower under the Revolving Note and/or
this letter agreement and/or with respect to any Foreign Exchange
Contracts.
(b) Each of the Security Agreement, the FSC Security
Agreement and the Tribe Security Agreement is hereby modified to
provide as follows:
(i) That the `Collateral' subject thereto includes,
without limitation and in addition to the Collateral described
therein, all of the Borrower's, FSC's and Tribe's (as the case
may be) files, books and records (including, without limitation,
all electronically recorded data) all whether now owned or
existing or hereafter acquired, created or arising. Each of the
Borrower, FSC and Tribe hereby grants to the Bank a security
interest in all such Collateral in order to secure the full and
prompt payment and performance of all of the Obligations.
(ii) That, upon the occurrence of any Event of Default (as
defined in ss.5.1 of this letter agreement), the Bank may, at any
time, without further notice to the Borrower, FSC or Tribe,
notify account debtors that the Collateral has been assigned to
the Bank and that payments by such account debtors shall be made
directly to the Bank. At any time after the occurrence of an
Event of Default, the Bank may collect the Borrowers', FSC's and
Tribe's Receivables, or any of same, directly from account
debtors and may charge the collection costs and expenses to the
Borrower."
ggg. By adding to the Letter Agreement, as an exhibit thereto, Item
2.1(j) in the form attached to this Agreement.
3. Each of Tribe and FSC hereby joins in the Letter Agreement for the
purposes described in Paragraph 2fff above and each of Tribe and FSC hereby
grants to the Bank, in order to secure the Obligations (as described in said
Paragraph 2fff above), a security interest in and to all of the Collateral (as
described in said Paragraph 2fff above).
4. Wherever in any Financing Document, or in any certificate or opinion
to be delivered in connection therewith, reference is made to a "letter
agreement" or to the "Letter Agreement", from and after the date hereof same
will be deemed to refer to the Letter Agreement, as hereby amended.
5. Simultaneously with the execution and delivery of this Agreement, the
Borrower is executing and delivering to the Bank the November Revolving Note, in
substitution for the January Revolving Note. The November Revolving Note is a
$5,000,000 promissory note of the Borrower, substantially in the form attached
hereto as Exhibit 1. Wherever in any of the Financing Documents or in any
certificate or opinion to be delivered in connection therewith, reference is
made to a "Revolving Note", from and after the date hereof same will be deemed
to refer to the November Revolving Note.
6. Each of Tribe and FSC confirms that each of the Tribe Guaranty and
the FSC Guaranty, respectively, remains in full force and effect and guarantees,
inter alia, payment and performance of the Letter Agreement (as hereby amended)
and the November Revolving Note.
7. In order to induce the Bank to enter into this Agreement, the
Borrower further represents and warrants as follows:
a. The execution, delivery and performance of this Agreement, the
November Revolving Note and the Zoom Security Agreement have been duly
authorized by the Borrower by all necessary corporate and other action, will not
require the consent of any third party and will not conflict with, violate the
provisions of, or cause a default or constitute an event which, with the passage
of time or the giving of notice or both, could cause a default on the part of
the Borrower under its charter documents or by-laws or under any contract,
agreement, law, rule, order, ordinance, franchise, instrument or other document,
or result in the imposition of any lien or encumbrance (except in favor of the
Bank) on any property or assets of the Borrower. The execution, delivery and
performance of this Agreement and the FSC Security Agreement have been duly
authorized by FSC by all necessary corporate and other action, will not require
the consent of any third party and will not conflict with, violate the
provisions of, or cause a default or constitute an event which, with the passage
of time or the giving of notice or both, could cause a default on the part of
FSC under its charter documents or by-laws or under any contract, agreement,
law, rule, order, ordinance, franchise, instrument or other document, or result
in the imposition of any lien or encumbrance (except in favor of the Bank) on
any property or assets of FSC. The execution, delivery and performance of this
Agreement and the Tribe Security Agreement have been duly authorized by Tribe by
all necessary corporate and other action, will not require the consent of any
third party and will not conflict with, violate the provisions of, or cause a
default or constitute an event which, with the passage of time or the giving of
notice or both, could cause a default on the part of Tribe under its charter
documents or by-laws or under any contract, agreement, law, rule, order,
ordinance, franchise, instrument or other document, or result in the imposition
of any lien or encumbrance (except in favor of the Bank) on any property or
assets of Tribe.
b. The Borrower has duly executed and delivered each of this Agreement,
the November Revolving Note and the Zoom Security Agreement. FSC has duly
executed and delivered each of this Agreement and the FSC Security Agreement.
Tribe has duly executed and delivered each of this Agreement and the Tribe
Security Agreement.
c. Each of this Agreement, the November Revolving Note and the Zoom
Security Agreement is the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its respective terms. Each
of this Agreement and the FSC Security Agreement is the legal, valid and binding
obligation of FSC, enforceable against FSC in accordance with its respective
terms. Each of this Agreement and the Tribe Security Agreement is the legal,
valid and binding obligation of Tribe, enforceable against Tribe in accordance
with its respective terms.
d. The statements, representations and warranties made in the Letter
Agreement, in the Tribe Guaranty and/or in the FSC Guaranty continue to be
correct as of the date hereof; except as amended, updated and/or supplemented by
the attached Supplemental Disclosure Schedule.
e. Giving effect to the foregoing amendments, the covenants and
agreements of the Borrower, FSC and/or Tribe contained in the Letter Agreement,
in the Zoom Security Agreement, in the FSC Security Agreement, in the Tribe
Security Agreement, in the FSC Guaranty and/or in the Tribe Guaranty have been
complied with on and as of the date hereof.
f. Giving effect to the foregoing amendments, no event which constitutes
or which, with notice or lapse of time, or both, could constitute, an Event of
Default (as defined in the Letter Agreement) has occurred and is continuing.
g. Except for certain losses heretofore disclosed in writing to the
Bank, no material adverse change has occurred in the financial condition of the
Borrower from that disclosed in the quarterly financial statements of the
Borrower dated June 30, 1997, heretofore furnished to the Bank.
8. As a further inducement to the Bank to enter into this Agreement, on
or about the date hereof the Borrower is paying to the Bank a non-refundable
amendment fee of $5,000. This fee is in addition to, and is not to be reduced by
nor applied against, any other fees, interest or other payments now, heretofore
or hereafter paid or payable by the Borrower to the Bank under the January
Revolving Note, the November Revolving Note, the Letter Agreement or any other
Financing Documents.
9. Except as expressly affected hereby, the Letter Agreement and each of
the other Financing Documents remains in full force and effect as heretofore.
10. Nothing contained herein will be deemed to constitute a waiver or a
release of any provision of any of the Financing Documents. Nothing contained
herein will in any event be deemed to constitute an agreement to give a waiver
or release or to agree to any amendment or modification of any provision of any
of the Financing Documents on any other or future occasion.
Executed, as an instrument under seal, as of the day and year first
above written.
ZOOM TELEPHONICS, INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: V.P. Finance & CFO
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President & CEO
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ Xxxxxxxx Xxxxxxx
Name: Xxxxxxxx Xxxxxxx
Title: Vice President
Agreed (as to Sections 3 and 6 above):
ZOOM TELEPHONICS FOREIGN
SALES CORPORATION
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President & CEO
TRIBE COMPUTER WORKS, INCORPORATED
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President & CEO
