Item 2.03
Creation
of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On
February 4, 2021, Zoom Telephonics, Inc. (the
“Company”) entered into an amendment (the
“Amendment”) to that certain Financing Agreement, dated
as of December 18, 2012 (the “Financing Agreement”),
with Rosenthal & Rosenthal, Inc.
The
Financing Agreement, as amended by the Amendment, increases the
maximum revolving credit line to $5.0 million from its prior limit
of $4.0 million. As of February 4, 2021, the Company had
approximately $2.5 million of borrowings outstanding under the
Financing Agreement. Advances under the revolving credit line are
subject to a borrowing base formula and other terms and conditions
as specified in the Financing Agreement. The Company anticipates
that it will use the additional borrowing capacity provided by the
increase in the maximum credit line as it deems appropriate to fund
its working capital requirements. Borrowings are secured by all of
the Company assets. The effective rate of interest under the
Financing Agreement is 1.25% plus an amount equal to the higher of
the prime rate or 3.25%.
The
Financing Agreement contains certain covenants, including a
requirement that the Company maintain tangible net worth of not
less than $2.0 million and working capital of not less than $1.75
million. In addition, the Company is restricted from declaring any
dividends, redeeming or repurchasing any stock, or making any other
distributions in respect of its stock so long as any obligations
remain outstanding. All advances made by lender are due and payable
at lender’s demand upon at least sixty (60) days prior
written notice to the Company. In addition, all obligations shall
be immediately due and payable upon the termination of the
Financing Agreement or upon the occurrence of any events of default
relating to failure to make timely payments under the credit
facility; breaches of representations, warranties or covenants;
lender’s belief, reasonably exercised, that obligations under
the credit facility are insecure or insufficient under
circumstances where the Company is unable to provide other
collateral satisfactory to the lender; bankruptcy and insolvency
events and other customary matters. The lender has the right to
terminate the Financing Agreement at any time by giving the Company
sixty (60) days’ prior written notice. The Financing
Agreement automatically renews from year to year, unless terminated
by either party as specified in the Financing Agreement. The
Company is required to pay a facility fee of 0.75% of the maximum
credit facility each year.
The
foregoing summary is subject to, and qualified in its entirety by,
the full text of the Amendment, a copy of which is filed as Exhibit
10.1 to this Current Report on Form 8-K and is incorporated herein
by reference.
