Exhibit 10.10. Second Loan Modification by and between Zoom Telephonics,
INC, and Fleet National Bank
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement ("this Agreement") is made as
of November 17, 1998 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 between the Borrower and the Bank, as amended by Loan
Modification Agreement dated as of November 13, 1997 (as so amended, the "Letter
Agreement"); (ii) that certain $5,000,000 face principal amount promissory note
dated November 13, 1997 (the "1997 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 dated November 13, 1997 (the "Zoom Security
Agreement") given by the Borrower to the Bank; (vi) that certain Inventory and
Accounts Receivable Security Agreement dated November 13, 1997 (the "Tribe
Security Agreement") given by Tribe to the Bank; (vii) that certain Inventory
and Accounts Receivable Security Agreement dated November 13, 1997 (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
"1998 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 1998 Revolving Note hereinafter collectively referred to as the "Financing
Documents". The aforesaid November 13, 1997 Loan Modification Agreement is
hereinafter referred to as the "First Modification".
2. The Letter Agreement is hereby amended, effective as of the date
hereof:
a. By inserting into the first grammatical paragraph of the Letter
Agreement, immediately after the first sentence thereof, the following:
"This letter agreement provides for (1) a $5,000,000 facility
for Revolving Loans on the terms and conditions set forth
below, plus (2) a $500,000 facility for letters of credit on
the terms and conditions set forth below, plus (3) a $500,000
facility for Foreign Exchange Contracts on the terms and
conditions set forth below."
b. By deleting from the second sentence of Section 1.1 of the Letter
Agreement the words "Aggregate Bank Liabilities" and by substituting in their
stead the following:
"total principal amounts of the Revolving Loans outstanding"
c. 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 17, 1998 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 1998
Revolving Note.
d. By inserting into the first sentence of the second paragraph of
Section 1.9 of the Letter Agreement, immediately after the words "any letter of
credit", the following:
"and/or with respect to any of the other Obligations"
e. By deleting the period at the end of the second sentence of the
second paragraph of Section 1.9 of the Letter Agreement and by substituting in
its stead the following:
"or with respect to any of the other Obligations."
f. By inserting into each of the first and second sentences of the
third paragraph of Section 1.9 of the Letter Agreement, immediately after the
words "any letter of credit", in each place where same appear, the following:
"and/or with respect to any of the other Obligations"
g. By inserting into the third sentence of the third paragraph of
Section 1.9 of the Letter Agreement, immediately after the words "the Revolving
Note", the following:
"and/or with respect to any letter of credit or any of
the other Obligations"
h. By deleting from the third sentence of the third paragraph of
Section 1.9 of the Letter Agreement the words "75 Xxxxx Xxxxxx, Xxxxxx, XX
00000" and by substituting in their stead the following:
"One Xxxxxxx Xxxxxx, Xxxxxx, XX 00000"
i. By deleting in its entirety the fifth sentence of the third
paragraph of Section 1.9 of the Letter Agreement and by substituting in its
stead the following:
"All monies received by the Bank shall be applied first to
fees, charges and expenses payable to the Bank under this
letter agreement, any Note and/or any of the other Loan
Documents and/or with respect to any letter of credit and/or
with respect to any other Obligation, next to interest then
accrued on account of any Loans or letter of credit
reimbursement obligations or any of the other Obligations and
only thereafter to principal of the Loans and letter of credit
reimbursement obligations and other Obligations, being applied
against the Loans, such reimbursement obligations and/or such
other Obligations in such order as the Borrower may designate
(and, failing such designation, being applied first against
the letter of credit reimbursement obligations and such other
Obligations, and thereafter against the Revolving Loans)."
j. By inserting into the last sentence of Section 1.9, immediately
after the words "the Revolving Note", the following:
"and/or with respect to any of the other Obligations"
k. By deleting in its entirety the proviso appearing in the first
sentence of Section 1.10 of the Letter Agreement and by substituting in its
stead the following:
"; provided that at the time of each such issuance and after
giving effect thereto (A) the total Letter of Credit
Liabilities will not exceed $500,000 and (B) the Aggregate
Bank Liabilities will not exceed the then effective Borrowing
Base."
l. By inserting into the second grammatical paragraph of Section 1.11
of the Letter Agreement, immediately after the word "Loan", in each place where
same appears (whether in the introductory clause of said paragraph or in either
of clause (a) or clause (b) thereof), the following:
"(including, without limitation, issuance of any Foreign
Exchange Contract)"
m. By inserting into the first sentence of the last paragraph of
Section 1.11 of the Letter Agreement, immediately after the word "Loan", in each
place where same appears, the following:
"(or the issuance of any Foreign Exchange Contract)"
n. By deleting in its entirety Section 1.12 of the Letter Agreement
(said Section having been inserted by the First Modification) and by
substituting in its stead, the following:
"1.12. Foreign Exchange. The Bank is also providing to the
Borrower 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 October 1, 1999 and will permit Foreign Exchange
Contracts in a maximum aggregate notional amount of $500,000
outstanding at any one time; provided that (i) each such
Foreign Exchange Contract will be at such pricing as the Bank
and the Borrower may agree at the time of execution of such
Foreign Exchange Contract, (ii) the documentation for each
such Foreign Exchange Contract will be in such form as is then
customarily used by the Bank for transactions of this type,
(iii) the Foreign Exchange Contracts will be used by the
Borrower to minimize its exposure to the fluctuation of the
value of those foreign currencies in which payments are
expected to be made to the Borrower by customers or in which
the Borrower is required to make payments to suppliers, and
(iv) the F/X Exposure will at no time exceed $500,000. As used
herein, the `F/X Exposure' as determined at any date means the
sum of (i) all amounts then owed by the Borrower to the Bank
in connection with settlement of any Foreign Exchange
Contract, plus (ii) the maximum two-day settlement amount for
all then outstanding Foreign Exchange Contracts."
o. By inserting into the introductory clause of Section 2.1 of the
Letter Agreement, immediately after the words "letters of credit hereunder", the
following:
"and/or issue Foreign Exchange Contracts"
p. By deleting in their entireties Sections
3.7 - 3.10, inclusive,
of the Letter Agreement and by
substituting in their stead the following:
"3.7. Debt to Capital Base. The Borrower will maintain as at
the end of each fiscal quarter of the Borrower (commencing
with its results as at September 30, 1998) on a consolidated
basis a Leverage Ratio which shall be equal to or less than
1.0 to 1. As used herein, `Leverage Ratio' means, as at any
date when same is to be determined, the ratio of (x) the
consolidated Indebtedness of the Borrower and/or its
Subsidiaries then outstanding to (y) the then consolidated
Capital Base of the Borrower and its Subsidiaries.
3.8. Capital Base. The Borrower will maintain as at the end of
each fiscal quarter of the Borrower (commencing with its
results as at September 30, 1998) a consolidated Capital Base
which shall be equal to or greater than $32,800,000.
3.9. Reserved.
3.10. Liquidity. The Borrower will maintain as at the end of
each fiscal quarter of the Borrower (commencing with its
results as at September 30, 1998) a Quick Ratio equal to or
greater than 2.0 to 1. As used herein, the `Quick Ratio', as
determined at any date, is the ratio of (x) Net Quick Assets
at such date to (y) Current Liabilities outstanding as such
date."
q. By deleting the word "and" appearing at the end
of clause (ix) of Section 4.1 of the Letter
Agreement.
r. By deleting the period at the end of Section 4.1 of the
Letter Agreement and by substituting in
its stead the following:
"; and (xi) with the prior written consent of the Bank (such
consent not to be unreasonably withheld so long as there does
not then exist and would not result therefrom any Event of
Default or event or circumstance which, with the passage of
time or the giving of notice or both, could become an Event of
Default (with compliance with each of ss.ss.3.7, 3.8 and 3.10
being measured for this purpose both as at the then most
recent fiscal quarter-end and, on a pro forma basis, as at the
date of incurrence of the relevant Indebtedness)),
Indebtedness which the Borrower may incur from time to time by
financing and/or refinancing its real estate; provided that
such Indebtedness is secured only by a mortgage of such real
estate and the aggregate amount outstanding at any time does
not exceed the fair market value of such real estate."
s. By deleting the word "or" appearing at the end of clause
(v) of Section 4.2 of the Letter
Agreement.
t. By deleting the period at the en
d of clause (vi) of Section 4.2 of the Letter Agreement and by
substituting in its stead the following:
"; or (vii) with the Bank's prior written consent (such
consent not to be unreasonably withheld), mortgages on the
Borrower's real estate securing Indebtedness specifically
permitted by clause (xi) of ss.4.1; provided that no property
of the Borrower other than such real estate is encumbered."
u. By deleting the period at the end of the last grammatical paragraph
of Section 4.2 of the Letter Agreement and by substituting in its stead the
following:
", except that the mortgages described in clause (vii)
above may prohibit junior
encumbrances."
v. By inserting into clause (a) of Section 5.1 of the Letter Agreement,
immediately after the words "issued by the Bank", the following:
"or with respect to any Foreign Exchange Contract"
w. By inserting into clause (b) of Section 5.1 of the Letter Agreement,
immediately after the words "letter of credit", the following:
"or any Foreign Exchange Contract"
x. By adding to Section 5.4 of the Letter Agreement, at the end
of such Section, the following:
"Upon the occurrence of any event described in clause (i) or
clause (ii) of the immediately preceding sentence, the Bank
may also require the Borrower to cash collateralize the
outstanding F/X Exposure."
y. By inserting into the first sentence of Section 6.1 of the Letter
Agreement, immediately after the words "letter of credit issued hereunder", the
following:
"and/or any of the other Obligations"
z. By inserting into the first sentence of Section 6.1 of the Letter
Agreement, immediately after the words "in connection herewith", the following:
"or in connection with any of the other Obligations"
aa. By changing the notice address of the Bank, pursuant to
Section 6.5 of the Letter Agreement, to
the following:
"Fleet National Bank
High Technology Division
Mail Code: MA OF D07A
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Vice President"
bb. By inserting into Section 6.6 of the Letter Agreement,
immediately after the third sentence of
such Section, the following:
"Without limitation of the foregoing generality,
(i) The Bank may at any time pledge all or any portion of its
rights under the Loan Documents (including any portion of the
Revolving Note) to any of the 12 Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof
shall release the Bank from its obligations under any of the
Loan Documents.
(ii) The Bank shall have the unrestricted right at any time
and from time to time, and without the consent of or notice to
the Borrower, to grant to one or more banks or other financial
institutions (each, a `Participant') participating interests
in the Bank's obligation to lend hereunder and/or any or all
of the Loans held by the Bank hereunder. In the event of any
such grant by the Bank of a participating interest to a
participant, whether or not upon notice to the Borrower, the
Bank shall remain responsible for the performance of its
obligations hereunder and the Borrower shall continue to deal
solely and directly with the Bank in connection with the
Bank's rights and obligations hereunder. The Bank may furnish
any information concerning the Borrower in its possession from
time to time to prospective assignees and Participants;
provided that the Bank shall require any such prospective
assignee or Participant to agree in writing to maintain the
confidentiality of such information to the same extent as the
Bank would be required to maintain such confidentiality."
cc. By deleting in its entirety the definition of "Expiration
Date" appearing in Section 7.1 of the
Letter Agreement and by substituting in its stead the following:
"`Expiration Date' - October 1, 1999, unless extended by the
Bank, which extension may be given or withheld by the Bank in
its sole discretion."
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 October 1, 1999.
dd. By inserting into Section 7.1 of the Letter Agreement, immediately
before the definition of "F/X Facility" (said definition having been inserted by
the First Modification), the following:
"`F/X Exposure' - As defined in ss.1.12 above."
ee. By inserting into Section 7.1 of the Letter Agreement,
immediately before the definition of
"Loan Documents", the following:
"`Letter of Credit Liabilities' - At any time, the sum of (i)
the then undrawn amounts of all letters of credit issued by
the Bank for the account of the Borrower, plus (ii) all
amounts then drawn on any such letter of credit which at said
date shall not have been reimbursed to the Bank by the
Borrower.
`Loan' - Any Revolving Loan or any other
extension of credit
by the Bank to or for the
benefit of the Borrower."
ff. By inserting into the definition of "Loan Documents" appearing in
Section 7.1 of the Letter Agreement, immediately after the words "issued
hereunder", the following:
"or to any Foreign Exchange Contract"
gg. By deleting in its entirety the definition of "Maximum
Revolving Amount" appearing in Section
7.1 of the Letter Agreement and by substituting in its stead the following:
"`Maximum Revolving Amount' - $5,000,000."
3. 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.
4. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank the 1998 Revolving Note, in
substitution for the 1997 Revolving Note. The 1998 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 1998 Revolving Note.
5. Each of Tribe and FSC confirms that the Tribe Guaranty and Tribe
Security Agreement and the FSC Guaranty and FSC Security Agreement,
respectively, remain in full force and effect and that same guarantee and
secure, inter alia, payment and performance of the Letter Agreement (as hereby
amended) and the 1998 Revolving Note. The Borrower confirms that the Zoom
Security Agreement remains in full force and effect and secures, inter alia,
payment and performance of the Letter Agreement (as amended hereby) and the 1998
Revolving Note.
6. 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 and the
1998 Revolving Note 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 have been duly authorized by each of FSC and 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 FSC or 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 FSC or Tribe.
b. The Borrower has duly executed and delivered each of this Agreement
and the 1998 Revolving Note. Each of FSC and Tribe has duly executed and
delivered this Agreement.
c. Each of this Agreement and the 1998 Revolving Note is the legal,
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its respective terms. This Agreement is the legal, valid and
binding obligation of each of FSC and Tribe, enforceable against each of FSC and
Tribe in accordance with its 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. 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 September 30, 1998, heretofore furnished to the Bank.
7. Except as expressly affected hereby, the Letter Agreement and each
of the other Financing Documents remains in full force and effect as heretofore.
8. 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.
BORROWER:
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
GUARANTORS:
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
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Vice President
SUPPLEMENTAL DISCLOSURE SCHEDULE
[To be provided by Borrower.]
