PROMISSORY NOTE

$10,000,000.00                                        Boston, Massachusetts
                                                           January 17, 1997

         FOR VALUE RECEIVED, the undersigned Zoom Telephonics,  Inc., a Delaware
corporation  (the  "Borrower")  hereby  promises  to pay to the  order  of FLEET
NATIONAL  BANK (the  "Bank")  the  principal  amount of Ten  Million  and 00/100
($10,000,000.00)  Dollars or such portion thereof as may be advanced by the Bank
pursuant  to ss.1.1  of that  certain  letter  agreement  of even date  herewith
between  the  Bank  and  the  Borrower  (the  "Letter  Agreement")  and  remains
outstanding  from time to time hereunder  ("Principal"),  with interest,  at the
rate hereinafter set forth, on the daily balance of all unpaid  Principal,  from
the date hereof until payment in full of all Principal and interest hereunder.

         Interest on all unpaid  Principal  shall be due and payable  monthly in
arrears, on the first day of each month, commencing on the first such date after
the  advance  of any  Principal  and  continuing  on the first day of each month
thereafter  and on the date of  payment of this note in full,  at a  fluctuating
rate per annum  (computed  on the basis of a year of three  hundred  sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the Prime Rate, as in effect from time to time (but in no event in excess of the
maximum rate permitted by then  applicable  law), with a change in the aforesaid
rate of interest to become  effective on the same day on which any change in the
Prime Rate is effective;  provided,  however, that if a Eurodollar Interest Rate
(as defined in the Letter  Agreement) shall have become applicable to all or any
portion of the outstanding  Principal for any Interest Period (as defined in the
Letter  Agreement),  then  interest on such  Principal or portion  thereof shall
accrue at said applicable  Eurodollar Interest Rate for such Interest Period and
shall be payable  on the  Interest  Payment  Date(s)  (as  defined in the Letter
Agreement)  applicable to such Interest  Period.  Overdue  Principal 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) two (2%)
percent per annum plus (ii) the per annum rate otherwise payable under this note
with respect to the Principal  which is overdue (or as to which such interest is
overdue)  (but in no event in  excess  of the  maximum  rate  permitted  by then
applicable law), payable on demand. As used herein, "Prime Rate" means that rate
of interest per annum announced by the Bank from time to time as its prime rate,
it being  understood  that such rate is merely a reference rate, not necessarily
the lowest, which serves as the basis upon which effective rates of interest are
calculated for obligations making reference thereto. If the entire amount of any
required  Principal  and/or  interest is not paid within ten (10) days after the
same is due, the Borrower shall pay to the Bank a late fee equal to five percent
(5%) of the required  payment,  provided  that such late fee shall be reduced to
three  percent (3%) of any  required  Principal  and  interest  that is not paid
within  fifteen  (15)  days of the date it is due if this note is  secured  by a
mortgage on an owner-occupied residence of 1-4 units.

         All outstanding Principal and all interest accrued thereon shall be due
and payable in full on the first to occur of: (i) an  acceleration  under ss.5.2
of the Letter  Agreement or (ii) August 31,  1997.  The Borrower may at any time
and from time to time  prepay  all or any  portion  of any  Revolving  Loans (as
defined in the Letter  Agreement),  but,  as to LIBOR  Loans (as  defined in the
Letter  Agreement),  only at the times and in the  manner,  and  (under  certain
circumstances)  with  the  additional  payments,  provided  for  in  the  Letter
Agreement.  Any  prepayment of Principal,  in whole or in part,  will be without
premium or penalty  (but,  in the case of LIBOR  Loans,  may require  payment of
additional  amounts,  as provided for in the Letter  Agreement).  Under  certain
circumstances set forth in the Letter Agreement, prepayments of Principal may be
required.

         Payments of both  Principal and interest  shall be made, in immediately
available  funds, at the office of the Bank located at 75 State Street,  Boston,
Massachusetts  02109, or at such other address as the Bank may from time to time
designate.

         The  undersigned  Borrower  irrevocably  authorizes the Bank to make or
cause to be made,  on a  schedule  attached  to this note or on the books of the
Bank, at or following  the time of making any Revolving  Loan (as defined in the
Letter  Agreement)  and of receiving  any payment of Principal,  an  appropriate
notation  reflecting such transaction  (including date, amount and maturity) and
the then aggregate unpaid balance of Principal.  Failure of the Bank to make any
such  notation  shall  not,  however,  affect  any  obligation  of the  Borrower
hereunder or under the Letter  Agreement.  The unpaid  Principal  amount of this
note,  as  recorded  by the Bank from time to time on such  schedule  or on such
books, shall, in the absence of manifest error,  constitute presumptive evidence
of the aggregate unpaid principal amount of the Revolving Loans.

         The  Borrower  hereby (a) waives  notice of and consents to any and all
advances,  settlements,  compromises, favors and indulgences (including, without
limitation,  any extension or postponement of the time for payment), any and all
receipts,  substitutions,  additions,  exchanges and releases of collateral, and
any and all  additions,  substitutions  and releases of any person  primarily or
secondarily  liable, (b) waives  presentment,  demand,  notice,  protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance,  default or  enforcement  of or under this note,  and (c) agrees to
pay, to the extent  permitted by law, all actual costs and expenses,  including,
without limitation,  reasonable attorneys' fees, incurred or paid by the Bank in
enforcing this note and any collateral or security therefor,  all whether or not
litigation is commenced.

         This note is the Revolving  Note  referred to in the Letter  Agreement.
This note is subject to  prepayment  as set forth in the Letter  Agreement.  The
maturity  of this note may be  accelerated  upon the  occurrence  of an Event of
Default, as provided in the Letter Agreement.

         Executed,  as an  instrument  under seal,  as of the day and year first
above written.

CORPORATE SEAL                                ZOOM TELEPHONICS, INC.

ATTEST:

____________________________                  By:__________________________
Secretary                                         Name:
                                                  Title:

                                              By:__________________________
                                                  Name:

                                                  Title:

<PAGE>

                             ZOOM TELEPHONICS, INC.
                                207 South Street
                                Boston, MA 02111


                                                            January 17, 1997


Fleet National Bank
75 State Street
Boston, MA  02109

Gentlemen:

         This letter  agreement  will set forth certain  understandings  between
Zoom  Telephonics,  Inc.,  a Delaware  corporation  (the  "Borrower")  and Fleet
National Bank (the "Bank") with respect to Revolving Loans (hereinafter defined)
to be made by the Bank to the  Borrower  and with  respect  to letters of credit
which may  hereafter be issued by the Bank for the account of the  Borrower.  In
consideration of the mutual promises contained herein and in the other documents
referred to below,  and for other good and valuable  consideration,  receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:

I.  AMOUNTS AND TERMS

        1.1. The Borrowing;  Revolving Note. Subject to the terms and conditions
hereinafter  set  forth,  the Bank will make  loans  ("Revolving  Loans") to the
Borrower, in such amounts as the Borrower may request, on any Business Day prior
to the  first  to  occur  of (i)  the  Expiration  Date,  or  (ii)  the  earlier
termination of the within-described revolving financing arrangements pursuant to
ss.5.2 or ss.6.6; provided,  however, that (1) the aggregate principal amount of
Revolving Loans outstanding shall at no time exceed the Maximum Revolving Amount
(hereinafter  defined)  and  (2) the  Aggregate  Bank  Liabilities  (hereinafter
defined)  shall at no time  exceed the  Borrowing  Base  (hereinafter  defined).
Without limitation of the foregoing,  no Revolving Loan will be made by the Bank
hereunder if, after giving effect to such  Revolving  Loan,  the Aggregate  Bank
Liabilities would exceed  $10,000,000.  Within the foregoing limits, and subject
to the terms and conditions  hereof,  the Borrower may obtain  Revolving  Loans,
repay Revolving Loans and obtain Revolving Loans again on one or more occasions.
The Revolving Loans shall be evidenced by that certain  $10,000,000  face amount
promissory  note  of even  date  herewith  (the  "Revolving  Note")  made by the
Borrower and payable to the order of the Bank. The Borrower  hereby  irrevocably
authorizes  the Bank to make or cause to be made, on a schedule  attached to the
Revolving  Note or on the books of the Bank,  at or following the time of making
each  Revolving  Loan and of receiving any payment of principal,  an appropriate
notation  reflecting such  transaction and the then aggregate  unpaid  principal
balance of the Revolving Loans. The amount so noted shall constitute presumptive
evidence as to the amount owed by the Borrower  with respect to principal of the
Revolving  Loans.  Failure  of the  Bank to make any such  notation  shall  not,
however,  affect  any  obligation  of the  Borrower  or any  right  of the  Bank
hereunder or under the Revolving Note.
<PAGE>

        1.2. Interest Rate. Except as provided below in this ss.1.2, interest on
the  Revolving  Loans  will be  payable  at a  fluctuating  rate per annum  (the
"Floating  Rate")  which  shall at all  times be equal to the  Prime  Rate as in
effect  from  time to time  (but in no  event  in  excess  of the  maximum  rate
permitted  by then  applicable  law),  with a change in such rate of interest to
become effective on each day when a change in the Prime Rate becomes  effective.
Subject to the  conditions  set forth  herein,  the  Borrower may elect that any
Revolving  Loan to be made  under  ss.1.1  will  be made as a LIBOR  Loan.  Such
election  shall  be  made  by the  Borrower  giving  to the  Bank a  written  or
telephonic notice received by the Bank within the time period and containing the
information  described in the next  following  sentence (a "Fixed Rate Borrowing
Notice").  The Fixed Rate Borrowing Notice must be received by the Bank no later
than 10:00 a.m.  (Boston  time) on that day which is two Business  Days prior to
the date of the proposed borrowing and must specify the amount of the LIBOR Loan
requested (which shall be $500,000 or an integral multiple thereof), whether the
Interest  Period is proposed to be one month,  two months,  three  months or six
months and the  proposed  commencement  date of the  relevant  Interest  Period.
Notwithstanding  anything  provided  elsewhere  in this  letter  agreement,  the
Borrower  may not select an  Interest  Period for any LIBOR Loan which would end
after the Expiration Date. Any Fixed Rate Borrowing  Notice shall,  upon receipt
by the Bank,  become  irrevocable and binding on the Borrower,  and the Borrower
shall,  upon  demand and receipt of a Bank  Certificate  with  respect  thereto,
forthwith  indemnify the Bank against any actual loss or expense incurred by the
Bank as a result of any failure by the Borrower to obtain (other than due to the
failure of the Bank to fund in  violation of the Bank's  obligations  under this
letter  agreement)  or maintain any  requested  LIBOR Loan,  including,  without
limitation,  any loss or  expense  incurred  by  reason  of the  liquidation  or
redeployment of deposits or other funds acquired by the Bank to fund or maintain
such  LIBOR  Loan.  Each  LIBOR  Loan  will be due and  payable  in full (if not
required to be repaid earlier pursuant to the terms of this letter agreement) on
the last day of the Interest Period applicable thereto.  The principal amount of
any such  LIBOR  Loan so repaid  may be  reborrowed  as a new LIBOR  Loan to the
extent and on the terms and  conditions  contained  in this letter  agreement by
delivery  to the Bank of a new Fixed Rate  Borrowing  Notice  conforming  to the
requirements  set forth  above in this  ss.1.2 (and any LIBOR Loan not so repaid
and not so reborrowed as a new LIBOR Loan will be deemed to have been reborrowed
as a Floating  Rate Loan).  Notwithstanding  any other  provision of this letter
agreement,  the Bank need not make any LIBOR Loan at any time when there  exists
any Event of  Default  (as  hereinafter  defined)  or any event or  circumstance
which, with the giving of notice or the passage of time or both, could become an
Event of Default.

        1.3. Repayment;  Renewal. 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. 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 Borrower may prepay, at
any time, without penalty or premium,  the whole or any portion of any Revolving
Loan which is a Floating  Rate Loan.  The  Borrower  may prepay the whole or any
portion of any  Revolving  Loan  which is a LIBOR  Loan;  provided  that (i) the
Borrower  gives  the Bank not less than two (2)  Business  Days'  prior  written

<PAGE>

notice of its intent so to prepay,  (ii) the  Borrower  pays all interest on the
LIBOR  Loan  (or  portion  thereof)  so  prepaid  accrued  to the  date  of such
prepayment,  (iii) any voluntary  prepayment  shall be in a principal  amount of
$1,000,000  or an integral  multiple  thereof and (iv) if the  Borrower  for any
reason  makes  any  prepayment  of a LIBOR  Loan  prior  to the  last day of the
Interest Period applicable thereto, the Borrower shall forthwith pay all amounts
owing to the Bank  pursuant to the  provisions  of ss.1.6  with  respect to such
LIBOR  Loan.  The  Bank  may,  at  its  sole  discretion,  renew  the  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.

        1.4. Interest Payments.  The Borrower will pay interest on the principal
amount of the  Revolving  Loans  outstanding  from  time to time,  from the date
hereof until payment of the Revolving  Loans and the Revolving  Note in full and
the termination of this letter  agreement.  Interest on Floating Rate Loans will
be payable  monthly in arrears on the first day of each month.  Interest on each
LIBOR Loan will be paid in arrears on the  applicable  Interest  Payment Date or
Dates.  In any event,  interest shall also be paid on the date of payment of the
Revolving Loans in full. Interest on Floating Rate Loans shall be payable at the
Floating  Rate.  The rate of  interest  payable  on any  LIBOR  Loan will be the
Eurodollar Interest Rate applicable thereto. In any event,  overdue principal of
any Revolving Loan and, to the extent  permitted by law, overdue interest on any
Revolving  Loan shall bear interest at a rate per annum which at all times shall
be  equal  to the sum of (i) two  (2%)  percent  per  annum  plus  (ii) the rate
otherwise applicable to such overdue principal (or to the principal amount as to
which such interest is overdue) under the Revolving Note, payable on demand. All
interest payable hereunder and/or under the Revolving Note will be calculated on
the basis of a 360-day year for the actual number of days elapsed.

        1.5.      Rate Determination Protection.  In the event that:

                  (i) the Bank shall determine that, by reason of  circumstances
                  affecting the London interbank  market or otherwise,  adequate
                  and  reasonable  methods  do not  exist for  ascertaining  the
                  Eurodollar  Interest Rate which would  otherwise be applicable
                  during any Interest Period, or

                  (ii)     the Bank shall determine that:

                           (A) the making or  continuation of any LIBOR Loan has
                           been  made  impracticable  or  unlawful  by  (1)  the
                           occurrence of any  contingency  that  materially  and
                           adversely  affects the London interbank market or (2)
                           compliance  by  the  Bank  in  good  faith  with  any
                           applicable law or governmental regulation,  guideline
                           or order or  interpretation  or change thereof by any
                           governmental     authority     charged    with    the
                           interpretation or administration  thereof or with any
                           request  or  directive   of  any  such   governmental
                           authority  (whether or not  having the force of law);
                           or
<PAGE>

                  (B)      LIBOR will not, in the  reasonable  determination  of
                           the Bank,  adequately  and fairly reflect the cost to
                           the Bank of funding the LIBOR Loans for such Interest
                           Period

                  then  the  Bank   shall   forthwith   give   notice   of  such
                  determination  (which shall be  conclusive  and binding on the
                  Borrower) to the Borrower.  In such event the  obligations  of
                  the Bank to make LIBOR Loans shall be suspended until the Bank
                  determines  that  the   circumstances   giving  rise  to  such
                  suspension  no longer  exist,  whereupon the Bank shall notify
                  the Borrower.

        1.6. Prepayment of LIBOR Loans. The following  provisions of this ss.1.6
shall be effective only with respect to LIBOR Loans:  If, due to acceleration of
the  Revolving  Note or due to voluntary  prepayment or due to any other reason,
the Bank receives  payment of any principal of a LIBOR Loan on any date prior to
the last day of the relevant  Interest Period,  the Borrower shall,  upon demand
and  receipt  of a Bank  Certificate  from the Bank with  respect  thereto,  pay
forthwith to the Bank all amounts  required to  compensate  the Bank for losses,
costs or expenses which it may have reasonably incurred and may reasonably incur
as a result of such payment, including,  without limitation, any loss or expense
incurred by reason of the  liquidation or  redeployment of funds acquired by the
Bank to fund or maintain such LIBOR Loan.  This provision  shall apply,  without
limitation, to any prepayment required under the second sentence of ss.1.3.

        1.7.      Increased Costs; Capital Adequacy.

                  (i) If the adoption, effectiveness or phase-in, after the date
                  hereof,  of any  applicable  law, rule or  regulation,  or any
                  change  therein,  or  any  change  in  the  interpretation  or
                  administration thereof by any governmental authority,  central
                  bank or comparable  agency charged with the  interpretation or
                  administration  thereof,  or  compliance  by the Bank with any
                  request or directive  (whether or not having the force of law)
                  of any such authority, central bank or comparable agency:

                           (A) shall subject the Bank to any Imposition or other
                           charge with respect to any LIBOR Loan,  the Revolving
                           Note or the Bank's  agreement to make LIBOR Loans, or
                           shall change the basis of taxation of payments to the
                           Bank of the  principal  of or  interest  on any LIBOR
                           Loan or any  other  amounts  due  under  this  letter
                           agreement in respect of the LIBOR Loans or the Bank's
                           agreement to make LIBOR Loans  (except for changes in
                           the rate of tax on the  over-all  net  income  of the
                           Bank); or

                           (B)  shall  impose,  modify  or deem  applicable  any
                           reserve,   special  deposit,   deposit  insurance  or
                           similar requirement  (including,  without limitation,
                           any  such   requirement   imposed  by  the  Board  of
                           Governors  of  the  Federal   Reserve   System,   but
                           excluding,  with respect to any LIBOR Loan,  any such
                           requirement   already   included  in  the  applicable

<PAGE>

                           Reserve Rate) against assets of, deposits with or for
                           the  account of, or credit  extended  by, the Bank or
                           shall  impose on the Bank or on the London  interbank
                           market any other condition affecting any LIBOR Loans,
                           the  Revolving  Note or the Bank's  agreement to make
                           LIBOR Loans

                  and the result of any of the foregoing is to increase the cost
                  to the Bank of making  or  maintaining  any  LIBOR  Loan or to
                  reduce the amount of any sum  received  or  receivable  by the
                  Bank under this letter  agreement or under the Revolving  Note
                  with respect to any LIBOR Loan by an amount deemed by the Bank
                  to be material, then, upon demand by the Bank and receipt of a
                  Bank  Certificate  from the Bank  with  respect  thereto,  the
                  Borrower  shall  pay to the Bank  such  additional  amount  or
                  amounts as the Bank  certifies to be  necessary to  compensate
                  the  Bank for  such  increased  cost or  reduction  in  amount
                  received or receivable.

                  (ii) If the Bank shall have  determined in good faith that the
                  adoption,  effectiveness  or phase-in after the date hereof of
                  any  applicable  law,  rule or  regulation  regarding  capital
                  requirements  for  banks  or bank  holding  companies,  or any
                  change therein after the date hereof,  or any change after the
                  date hereof in the interpretation or administration thereof by
                  any governmental authority,  central bank or comparable agency
                  charged with the interpretation or administration  thereof, or
                  compliance  by the Bank with any request or  directive of such
                  entity regarding  capital adequacy  (whether or not having the
                  force of law) has or would  have the  effect of  reducing  the
                  return on the Bank's  capital  with  respect to its  agreement
                  hereunder  to make  Revolving  Loans  or with  respect  to any
                  Revolving  Loan (whether or not then subject to any Eurodollar
                  Interest Rate) to a level below that which the Bank could have
                  achieved (taking into  consideration  the Bank's policies with
                  respect to capital adequacy  immediately before such adoption,
                  effectiveness,  phase-in,  change or  compliance  and assuming
                  that the Bank's capital was then fully utilized) by any amount
                  deemed by the Bank in good faith to be material:  (A) the Bank
                  shall promptly after its determination of such occurrence give
                  notice thereof to the Borrower; and (B) the Borrower shall pay
                  to the Bank as an  additional  fee from time to time on demand
                  such amount as the Bank  certifies  to be the amount that will
                  compensate it for such  reduction.  A Bank  Certificate of the
                  Bank  claiming   compensation   under  this  ss.1.7  shall  be
                  presumptively  conclusive  in the absence of  manifest  error.
                  Such certificate  shall set forth the nature of the occurrence
                  giving rise to such  compensation,  the  additional  amount or
                  amounts  to be paid to the Bank  hereunder  and the  method by
                  which such amounts are  determined.  In  determining  any such
                  amount,  the  Bank  may  use  any  reasonable   averaging  and
                  attribution methods.

                  (iii)  No   failure   on  the  part  of  the  Bank  to  demand
                  compensation on any one occasion shall  constitute a waiver of
                  its right to demand such  compensation  on any other  occasion
                  and no  failure  on the part of the Bank to  deliver  any Bank
                  Certificate  in a timely  manner  shall in any way  reduce any
                  obligation of the Borrower to the Bank under this ss.1.7.
<PAGE>

        1.8. Illegality or Impossibility. Notwithstanding any other provision of
this  letter  agreement,  if  the  introduction  of or any  change  in or in the
interpretation or administration of any law or regulation applicable to the Bank
or the Bank's good faith activities in the London interbank market shall make it
unlawful,   or  any  central  bank  or  other   governmental   authority  having
jurisdiction  over the Bank or the Bank's  good faith  activities  in the London
interbank  market  shall  assert  that  it is  unlawful,  or  otherwise  make it
impossible,  for the Bank to perform  its  obligations  hereunder  to make LIBOR
Loans or to continue to fund or maintain LIBOR Loans, then on notice thereof and
demand therefor by the Bank in good faith to the Borrower, (i) the obligation of
the Bank to fund LIBOR Loans shall  terminate and (ii) the Borrower shall prepay
in full all affected LIBOR Loans on or prior to the last day on which such LIBOR
Loans may legally remain outstanding.

        1.9. Advances and Payments.   The proceeds of all Revolving Loans shall
be credited by the Bank to a general deposit account maintained by  the Borrower
with the Bank.  The proceeds of each Revolving Loan will be used by the Borrower
solely for working capital purposes.

         The Bank may charge any general  deposit account of the Borrower at the
Bank with the amount of all payments of interest,  principal and other sums due,
from time to time,  under this letter agreement and/or the Revolving Note and/or
with respect to any letter of credit; and will thereafter notify the Borrower of
the amount so  charged.  The  failure of the Bank so to charge any account or to
give any such  notice  shall not affect the  obligation  of the  Borrower to pay
interest, principal or other sums as provided herein or in the Revolving Note or
with respect to any letter of credit.

         Whenever  any  payment  to be made to the Bank  hereunder  or under the
Revolving Note or with respect to any letter of credit shall be stated to be due
on a day  which is not a  Business  Day,  such  payment  may be made on the next
succeeding  Business  Day, and interest  payable on each such date shall include
the amount  thereof  which shall accrue  during the period of such  extension of
time. All payments by the Borrower  hereunder and/or in respect of the Revolving
Note  and/or  with  respect  to any  letter of  credit  shall be made net of any
Impositions   or  taxes  and  without   deduction,   set-off  or   counterclaim,
notwithstanding  any claim which the Borrower  may now or at any time  hereafter
have against the Bank.  All payments of  interest,  principal  and any other sum
payable  hereunder and/or under the Revolving Note shall be made to the Bank, in
immediately available funds, at its office at 75 State Street,  Boston, MA 02109
or to such other address as the Bank may from time to time direct.  All payments
received by the Bank after 2:00 p.m.  on any day shall be deemed  received as of
the next  succeeding  Business  Day.  All monies  received  by the Bank shall be
applied  first to fees,  charges,  costs and expenses  payable to the Bank under
this  letter  agreement,  the  Revolving  Note  and/or  any  of the  other  Loan
Documents,  next to interest then accrued on account of any  Revolving  Loans or
letter of credit  reimbursement  obligations and only thereafter to principal of
the Revolving Loans and letter of credit reimbursement obligations. All interest
and fees payable  hereunder  and/or under the Revolving Note shall be calculated
on the basis of a 360-day year for the actual number of days elapsed.
<PAGE>

        1.10. Letters of Credit. At the Borrower's  request,  the Bank may, from
time to time,  in its  discretion,  issue one or more  letters of credit for the
account of the  Borrower;  provided  that at the time of such issuance and after
giving effect thereto the Aggregate Bank Liabilities will in no event exceed the
lesser of (i)  $10,000,000 or (ii) the then effective  Borrowing  Base. Any such
letter of credit will be issued for such fee and upon such terms and  conditions
as may be agreed to by the Bank and the  Borrower at the time of  issuance.  The
Borrower hereby authorizes the Bank,  without further request from the Borrower,
to cause the Borrower's  liability to the Bank for  reimbursement of funds drawn
under any such  letter of credit to be repaid  from the  proceeds of a Revolving
Loan to be made hereunder.  The Borrower hereby  irrevocably  requests that such
Revolving Loans be made.

        1.11.  Conditions  to  Advance.  Prior  to the  making  of  the  initial
Revolving Loan or the issuance of any letter of credit  hereunder,  the Borrower
shall deliver to the Bank duly  executed  copies of this letter  agreement,  the
Revolving  Note and the documents  and other items listed on the Closing  Agenda
delivered  herewith by the Bank to the  Borrower,  all of which,  as well as all
legal  matters  incident  to the  transactions  contemplated  hereby,  shall  be
satisfactory in form and substance to the Bank and its counsel in good faith.

         Without limiting the foregoing,  any Revolving Loan or letter of credit
issuance  (including the initial Revolving Loan or letter of credit issuance) is
subject  to the  further  conditions  precedent  that on the date on which  such
Revolving  Loan is made or such  letter of credit is issued  (and  after  giving
effect thereto):

         (a) All statements, representations and warranties of the Borrower made
in this letter agreement  and/or in the Security  Agreement shall continue to be
correct in all material  respects as of the date of such  Revolving  Loan or the
date of issuance of such  letter of credit,  as the case may be,  other than any
such statements,  representations and warranties which by their terms refer only
to the date of this letter agreement.

         (b) All  covenants  and  agreements  of the Borrower  contained  herein
and/or in any of the other Loan  Documents  shall have been complied with in all
material  respects on and as of the date of such  Revolving  Loan or the date of
issuance of such letter of credit, as the case may be.

         (c) No event which  constitutes,  or which with notice or lapse of time
or both  could  constitute,  an Event of  Default  shall  have  occurred  and be
continuing.

         (d) No material  adverse  change shall have  occurred in the  financial
condition of the Borrower from that disclosed in the financial  statements  then
most recently furnished to the Bank.

         Each request by the Borrower for any Revolving Loan or for the issuance
of any letter of credit,  and each acceptance by the Borrower of the proceeds of
any  Revolving  Loan or  delivery  of a  letter  of  credit,  will be  deemed  a
representation  and warranty by the Borrower that at the date of such  Revolving
Loan or the date of issuance  of such letter of credit,  as the case may be, and
after giving  effect  thereto all of the  conditions  set forth in the foregoing
clauses (a)-(d) of this ss.1.11 will be satisfied.  Each request for a Revolving

<PAGE>

Loan or  letter of credit  issuance  will be  accompanied  by a  borrowing  base
certificate on a form satisfactory to the Bank,  executed by the chief financial
officer of the Borrower,  unless such a certificate  shall have been  previously
furnished  setting forth the  Borrowing  Base as at a date not more than 30 days
prior to the date of the requested  borrowing or the requested  letter of credit
issuance, as the case may be.

II.  REPRESENTATIONS AND WARRANTIES

        2.1.Representations and Warranties. In order to induce the Bank to enter
into this letter  agreement and to make Revolving Loans  hereunder  and/or issue
letters of credit hereunder, the Borrower warrants and represents to the Bank as
follows:

         (a) The Borrower is a corporation duly organized,  validly existing and
in good  standing  under the laws of Delaware.  The Borrower has full  corporate
power to own its  property  and conduct its  business  as now  conducted  and as
proposed to be conducted and to enter into and perform this letter agreement and
the other Loan  Documents.  The Borrower is duly qualified to do business and in
good standing in Massachusetts  and is also duly qualified to do business and in
good standing in each other  jurisdiction  where the failure so to qualify could
(singly  or in the  aggregate  with all other  such  failures)  have a  material
adverse  effect  on  the  financial  condition,  business  or  prospects  of the
Borrower,  all such  jurisdictions  being  listed on item 2.1(a) of the attached
Disclosure  Schedule.  At the date hereof,  the  Borrower  has no  Subsidiaries,
except as shown on said item 2.1(a) of the  attached  Disclosure  Schedule.  The
Borrower is not a member of any partnership or joint venture.  Each of FSC, Zoom
UK  and  Tribe  is a  wholly-owned  Subsidiary  of  the  Borrower  which  has no
Indebtedness  for  borrowed  money  (except to the  Borrower)  and  conducts  no
business other than acting as a distributor of the Borrower's products.

         (b) At the  date  of  this  letter  agreement,  all of the  outstanding
capital  stock of the  Borrower  is owned,  of record and  beneficially,  by the
Parent.

         (c) The  execution,  delivery and  performance  by the Borrower of this
letter  agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate and other action and do not and will not:

                 (i) violate any provision of, or require as a  prerequisite  to
         effectiveness any filing, registration,  consent or approval under, any
         law, rule,  regulation,  order,  writ,  judgment,  injunction,  decree,
         determination or award presently in effect having  applicability to the
         Borrower;

                 (ii)  violate  any  provision  of the charter or by-laws of the
         Borrower,  or result in a breach of or  constitute a default or require
         any waiver or consent under any  indenture or loan or credit  agreement
         or any  other  material  agreement,  lease or  instrument  to which the
         Borrower is a party or by which the  Borrower or any of its  properties
         may be bound or affected or require any other consent of any Person; or
<PAGE>

                 (iii) result in, or require,  the creation or imposition of any
         lien,  security interest or other  encumbrance  (other than in favor of
         the Bank),  upon or with respect to any of the  properties now owned or
         hereafter acquired by the Borrower.

         (d)  This  letter  agreement  and  each  of the  other  Loan  Documents
delivered herewith has been duly executed and delivered by the Borrower and each
is a legal,  valid and binding obligation of the Borrower,  enforceable  against
the Borrower in accordance with its respective terms.

         (e)  Except as  described  on item  2.1(e) of the  attached  Disclosure
Schedule,  there  are no  actions,  suits  or  proceedings  pending  or,  to the
knowledge  of  the  Borrower,  threatened  by or  against  the  Borrower  or any
Subsidiary  (nor,  to the  knowledge  of the  Borrower,  is there any pending or
threatened  investigation of the Borrower or any Subsidiary) before any court or
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic or  foreign,  which could  hinder or prevent  the  consummation  of the
transactions  contemplated  hereby or call into  question  the  validity of this
letter agreement or any of the other Loan Documents or any action taken or to be
taken in  connection  with the  transactions  contemplated  hereby or thereby or
which in any  single  case or in the  aggregate  is  reasonably  likely  to have
resulted in or is reasonably  expected to result in any material  adverse change
in the business, prospects,  condition, affairs or operations of the Borrower or
any Subsidiary.

         (f) The  Borrower  is not in  violation  of any term of its  charter or
by-laws  as now in  effect.  Neither  the  Borrower  nor any  Subsidiary  of the
Borrower is in material  violation  of any term of any  mortgage,  indenture  or
judgment,  decree  or order,  or any  other  material  instrument,  contract  or
agreement to which it is a party or by which any of its property is bound.

         (g) The Borrower has filed (and has caused each of its  Subsidiaries to
file) all federal,  foreign, state and local tax returns,  reports and estimates
required to be filed by the  Borrower  and/or by any such  Subsidiary.  All such
filed returns, reports and estimates are proper and accurate and the Borrower or
the relevant Subsidiary has paid all taxes, assessments,  impositions,  fees and
other governmental charges required to be paid in respect of the periods covered
by such returns,  reports or estimates.  No deficiencies for any tax, assessment
or governmental charge have been asserted or assessed, and the Borrower knows of
no material tax liability or basis therefor.

         (h) The Borrower is in compliance  (and each Subsidiary of the Borrower
is in compliance)  with all  requirements of law,  federal,  foreign,  state and
local,  and all  requirements  of all  governmental  bodies or  agencies  having
jurisdiction over it, the conduct of its business, the use of its properties and
assets,  and all  premises  occupied by it,  failure to comply with any of which
could (singly or in the aggregate  with all other such failures) have a material
adverse effect upon the assets,  business,  financial  condition or prospects of
the  Borrower  or any such  Subsidiary.  Without  limiting  the  foregoing,  the
Borrower  has  all  the  material   franchises,   licenses,   leases,   permits,
certificates and  authorizations  needed for the conduct of its business and the
use of its properties and all premises  occupied by it, as now conducted,  owned
and used and as proposed to be conducted, owned and used.
<PAGE>

         (i) The audited consolidated financial statements of the Parent and the
Parent's  Subsidiaries  as at  December  31,  1995 and the  management-generated
statements of the Parent and the Parent's Subsidiaries as at September 30, 1996,
each  heretofore  delivered  to the Bank,  are  complete and accurate and fairly
present the financial  condition of the Parent and the Parent's  Subsidiaries as
at the respective dates thereof and for the periods covered thereby, except that
the  management-generated  statements  do not  have  footnotes  and  thus do not
present the  information  which would  normally be contained in the footnotes to
financial statements and subject to normal year-end adjustments, which shall not
be  material.  Neither the Parent nor any of the Parent's  Subsidiaries  has any
liability,  contingent  or otherwise,  not disclosed in the aforesaid  financial
statements  or in any notes thereto that could  materially  affect the financial
condition of the Parent and the Parent's Subsidiaries.  Since December 31, 1995,
there has been no material  adverse  development  in the business,  condition or
prospects  of the Parent and the Parent's  Subsidiaries,  and neither the Parent
nor any of the Parent's  Subsidiaries has entered into any material  transaction
other than in the ordinary course.

         (j) The principal place of business and chief executive  offices of the
Borrower are located at 207 South Street, Boston, MA 02111.

         (k) To the best  knowledge of the Borrower,  the Borrower owns or has a
valid right to use all of the material patents, copyrights, trademarks and trade
names now being used to  conduct  its  business.  To the best  knowledge  of the
Borrower,  the  conduct of the  Borrower's  business  as now  operated  does not
conflict with valid patents, copyrights,  trademarks or trade names of others in
any manner  that could  materially  adversely  affect the  business,  prospects,
assets or condition, financial or otherwise, of the Borrower.

         (l) To the  best  knowledge  of the  Borrower,  none  of the  executive
officers or key  employees of the Borrower is subject to any  agreement in favor
of anyone  other than the Borrower  which  materially  limits or restricts  that
person's right to engage in the type of business activity  conducted or proposed
to be  conducted  by the  Borrower  or which  grants  to anyone  other  than the
Borrower  any  rights in any  inventions  or other  ideas  susceptible  to legal
protection developed or conceived by any such officer or key employee.

         (m) The Borrower is not a party to any contract or agreement  which now
has or, as far as can be foreseen by the Borrower at the date hereof, may have a
material  adverse  effect on the  financial  condition,  business,  prospects or
properties of the Borrower.

III.  AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS

         Without  limitation  of any other  covenants and  agreements  contained
herein  or  elsewhere,  the  Borrower  agrees  that  so  long  as the  financing
arrangements  contemplated  hereby are in effect or any Revolving Loan or any of
the other  Obligations  shall be  outstanding  or any  letter  of credit  issued
hereunder shall be outstanding:
<PAGE>

        3.1.  Legal  Existence;  Qualification;  Compliance.  The Borrower  will
maintain  (and will cause each  Subsidiary  of the  Borrower  to  maintain)  its
corporate  existence and good standing in the jurisdiction of its incorporation.
The  Borrower  will  remain  qualified  to do business  and in good  standing in
Massachusetts  and the  Borrower  will  qualify to do  business  and will remain
qualified and in good  standing (and the Borrower will cause each  Subsidiary of
the Borrower to qualify and remain qualified and in good standing) in each other
jurisdiction  where the failure so to qualify  could (singly or in the aggregate
with all other such  failures)  have a material  adverse effect on the financial
condition,  business or prospects of the  Borrower or any such  Subsidiary.  The
Borrower will comply (and will cause each  Subsidiary of the Borrower to comply)
with its charter documents and by-laws.  The Borrower will comply with (and will
cause each Subsidiary of the Borrower to comply with) all applicable laws, rules
and  regulations  (including,  without  limitation,  ERISA and those relating to
environmental protection) other than (i) laws, rules or regulations the validity
or applicability of which the Borrower or such Subsidiary shall be contesting in
good faith by proceedings which serve as a matter of law to stay the enforcement
thereof and (ii) those laws,  rules and  regulations  the failure to comply with
any of which  could not  (singly or in the  aggregate)  have a material  adverse
effect on the financial condition,  business or prospects of the Borrower or any
such Subsidiary.

        3.2. Maintenance of Property;  Insurance. The Borrower will maintain and
preserve  (and will  cause each  Subsidiary  of the  Borrower  to  maintain  and
preserve) all of its fixed assets used in its business in good working order and
condition,  making all necessary repairs thereto and replacements  thereof.  The
Borrower will maintain, with financially sound and reputable insurers, insurance
with respect to its property and business against such  liabilities,  casualties
and  contingencies  and of such types and in such amounts as shall be reasonably
satisfactory  to the Bank from time to time and in any event all such  insurance
as may from  time to time be  customary  for  companies  conducting  a  business
similar to that of the Borrower in similar locales.

        3.3.  Payment of Taxes and Charges.  The Borrower will pay and discharge
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments  and  governmental  charges  or levies  imposed  upon it or upon its
income or property, including, without limitation,  taxes, assessments,  charges
or  levies  relating  to  real  and  personal  property,   franchises,   income,
unemployment, old age benefits,  withholding, or sales or use, prior to the date
on which penalties would attach thereto,  and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid,  might give rise to a lien upon
any property of the Borrower or any such Subsidiary, except any of the foregoing
which is being  contested  in good faith and by  appropriate  proceedings  which
serve as a matter  of law to stay the  enforcement  thereof  and for  which  the
Borrower has established and is maintaining adequate reserves. The Borrower will
pay, and will cause each of its  Subsidiaries  to pay, in a timely  manner,  all
material  lease  obligations,  material  trade  debt,  material  purchase  money
obligations and material equipment lease obligations.  The Borrower will perform
and fulfill all material  covenants and agreements  under any material leases of
real  estate,  material  agreements  relating to purchase  money debt,  material
equipment  leases and other  material  contracts.  The Borrower will maintain in
full force and effect, and comply with the terms and conditions of, all material
permits, permissions and licenses necessary or desirable for its business.
<PAGE>

        3.4.  Accounts.  The Borrower will maintain its principal depository and
operating accounts with the Bank.

        3.5.  Conduct of Business.  The Borrower will  conduct,  in the ordinary
course,  the business in which it is presently  engaged.  The Borrower will not,
without  the  prior  written  consent  of  the  Bank  (such  consent  not  to be
unreasonably   withheld),   directly  or  indirectly   (itself  or  through  any
Subsidiary)  enter into any other  unrelated  lines of business,  businesses  or
ventures.

        3.6. Reporting Requirements.   The Borrower will furnish to the Bank (or
cause to be furnished to the Bank):

                  (i)  Within 90 days after the end of each  fiscal  year of the
         Parent, a copy of the consolidated  annual audit report for such fiscal
         year for the Parent and the Parent's  Subsidiaries,  including  therein
         consolidated  and  consolidating  balance  sheets of the Parent and the
         Parent's  Subsidiaries  as at the end of such  fiscal  year and related
         consolidated  and  consolidating  statements  of income,  stockholders'
         equity and cash flow for the fiscal year then ended. Said consolidating
         statements will include  schedules showing the financial results of the
         Borrower  separately,  certified  as accurate by the  Borrower's  chief
         financial officer.  The annual consolidated  financial statements shall
         be certified by independent public  accountants  selected by the Parent
         and reasonably acceptable to the Bank, such certification to be in such
         form as is generally  recognized  as  "unqualified".  The Borrower will
         also  deliver to the Bank,  within 90 days after the end of each fiscal
         year, projections of sales, income and expenses of the Borrower for the
         succeeding  fiscal year,  prepared by the Borrower's  management,  such
         projections to be in such detail as is reasonably  satisfactory  to the
         Bank.

                  (ii)  Within 45 days after the end of each  fiscal  quarter of
         the  Borrower,  a copy  of the  Parent  and the  Parent's  Subsidiaries
         consolidated   Quarterly  Report  on  Form  10-Q,  as  filed  with  the
         Securities and Exchange  Commission  ("SEC").  If, for any reason,  the
         Parent is not required to file such Quarterly  Report on Form 10-Q with
         the SEC within 45 days after the end of any fiscal quarter, then within
         such 45-day  period  after the end of such fiscal  quarter the Borrower
         will deliver (or cause to be  delivered) to the Bank  consolidated  and
         consolidating   balance   sheets  of  the  Parent   and  the   Parent's
         Subsidiaries and related  consolidated and consolidating  statements of
         income and cash flow,  unaudited but complete and accurate (except with
         regard to year-end FSC-related  adjustments) and prepared in accordance
         with generally  accepted  accounting  principles  consistently  applied
         fairly  presenting  the  financial  condition  of the  Parent  and  the
         Parent's  Subsidiaries  as at the  dates  thereof  and for the  periods
         covered thereby (except that such quarterly statements need not contain
         footnotes)  and  certified as accurate  (except with regard to year-end
         FSC-related  adjustments) by the chief financial officer of the Parent,
         such balance sheets to be as at the end of such fiscal quarter and such
         statements  of income and cash flow to be for such  fiscal  quarter and
         for the year to date. The above-described  Form 10-Q or other quarterly
         financial  statements  will  include  or be  accompanied  by  schedules
         showing the financial results of the Borrower separately,  certified as
         accurate by the Borrower's chief financial  officer.  In any event, the

<PAGE>

         Borrower will also deliver to the Bank on a quarterly basis,  within 45
         days after the end of each fiscal quarter, an accounts receivable aging
         report in such form and in such detail as is reasonably satisfactory to
         the Bank, which report shall include, without limitation,  detail as to
         foreign  Receivables  and a  summary  list  of the  Borrower's  top ten
         customers.

                  (iii) At the time of  delivery  of each  annual  or  quarterly
         report  or   financial   statement  of  the  Parent  and  the  Parent's
         Subsidiaries  or of the Borrower,  a certificate  executed by the chief
         financial  officer of the Borrower  stating that he or she has reviewed
         this letter agreement and the other Loan Documents and has no knowledge
         of any default by the Borrower in the  performance or observance of any
         of the provisions of this letter  agreement or of any of the other Loan
         Documents  or, if he or she has such  knowledge,  specifying  each such
         default and the nature  thereof.  Each financial  statement given as at
         the end of any fiscal  quarter of the Borrower  will also set forth the
         calculations necessary to evidence compliance with ss.ss.3.7-3.10.

                  (iv) Monthly,  within 20 days after the end of each month, (A)
         an  aging  report  in  form  satisfactory  to  the  Bank  covering  all
         Receivables  of the Borrower  outstanding  as at the end of such month,
         and (B) a certificate  of the chief  financial  officer of the Borrower
         setting  forth the Borrowing  Base as at the end of such month,  all in
         form reasonably satisfactory to the Bank.

                  (v) Promptly  after  receipt,  a copy of all audits or reports
         submitted  to the Parent  and/or any of the  Parent's  Subsidiaries  by
         independent public  accountants in connection with any annual,  special
         or interim audits of the books of the Parent and/or any of the Parent's
         Subsidiaries and any letter of comments directed by such accountants to
         the management of the Parent and/or any of the Parent's Subsidiaries.

                  (vi) As soon as  possible  and in any event  within  five days
         after the  occurrence of any Event of Default or any event which,  with
         the giving of notice or passage of time or both,  would  constitute  an
         Event of Default,  the statement of the Borrower  setting forth details
         of each  such  Event of  Default  or event  and the  action  which  the
         Borrower proposes to take with respect thereto, provided, however, that
         the  Borrower  need not furnish  such  statements  with  respect to the
         covenants  contained in any of Sections 3.7, 3.8, 3.9 and/or 3.10 as to
         any  fiscal  period  until  the  earlier  of  (i)  the  closing  of the
         Borrower's  fiscal books for the relevant fiscal period or (ii) 20 days
         after the end of the relevant fiscal period.

                  (vii) Promptly after the commencement  thereof,  notice of all
         actions,  suits  and  proceedings  before  any  court  or  governmental
         department,  commission,  board,  bureau,  agency  or  instrumentality,
         domestic or foreign,  to which the  Borrower or any  Subsidiary  of the
         Borrower is a party.

                  (viii)  As  long  as the  Parent  and/or  any of the  Parent's
         Subsidiaries has a class of securities which is publicly traded, a copy

<PAGE>

         of each  periodic  or current  report of the  Parent  and/or any of the
         Parent's  Subsidiaries  filed with the SEC or any successor  agency and
         each annual report, proxy statement and other communication sent by the
         Parent and/or any of the Parent's Subsidiaries to shareholders or other
         securityholders  generally,  such  copy  to be  provided  to  the  Bank
         promptly  upon  such  filing  with the SEC or such  communication  with
         shareholders or securityholders, as the case may be.

                  (ix)  Promptly  after  the  Borrower  has  knowledge  thereof,
         written notice of any development or circumstance  which may reasonably
         be expected to have a material  adverse  effect on the  Borrower or its
         business,  properties,  assets, Subsidiaries or condition, financial or
         otherwise.

                  (x) Promptly upon request,  such other information  respecting
         the financial condition, operations,  Receivables, inventory, machinery
         or  equipment of the  Borrower or any  Subsidiary  as the Bank may from
         time to time reasonably request.

        3.7.  Debt to Worth.  The Borrower  will  maintain as at the end of each
fiscal  quarter  (commencing  with its results as at  September  30,  1996) on a
consolidated  basis a Leverage  Ratio of not more 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  total  consolidated   Senior  Debt  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  (commencing  with  its  results  as at  September  30,  1996) 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  $40,000,000  for June 30, 1996; and as at the last day of each fiscal
quarter thereafter  (commencing with September 30, 1996) (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).

         3.9.  Profitability.   The  Borrower  will  not  incur  a  consolidated
quarterly Net Loss of $2,500,000 or more in any fiscal quarter  (commencing with
its results for the fiscal quarter ended  September 30, 1996).  Further,  if the
Borrower  incurs  any  consolidated  quarterly  Net Loss in any  fiscal  quarter
(commencing  with its results for the fiscal quarter ending September 30, 1996),
then the Borrower will achieve a  consolidated  quarterly Net Income of at least
$1.00 for the immediately following fiscal quarter.

         3.10. Liquidity. The Borrower will maintain as at the end of eachfiscal
quarter  of  Borrower (commencing with  its results as at  September 30, 1996) a
ratio of Net Quick Assets to  Current Liabilities, which ratio shall be not less
than 1.5 to 1.
<PAGE>

         3.11. Books and Records. The Borrower will maintain (and will cause the
Parent and the Parent's Subsidiaries and each of the Borrower's  Subsidiaries to
maintain)  complete and accurate  books,  records and accounts which will at all
times  accurately and fairly reflect all of its  transactions in accordance with
generally accepted  accounting  principles  consistently  applied.  The Borrower
will, at any reasonable  time and from time to time upon  reasonable  notice and
during  normal  business  hours (and at any time and without any  necessity  for
notice  following the  occurrence of an Event of Default),  permit the Bank, and
any agents or  representatives  thereof,  to examine and make copies of and take
abstracts  from the records and books of account of, and visit the properties of
the Borrower and any of its Subsidiaries,  and to discuss its affairs,  finances
and accounts with its officers, directors and/or independent accountants, all of
whom are hereby  authorized  and directed to cooperate with the Bank in carrying
out the  intent  of this  ss.3.11.  Each  financial  statement  of the  Borrower
hereafter  delivered  pursuant to this  letter  agreement  will be complete  and
accurate and will fairly  present the financial  condition of the Borrower as at
the date  thereof and for the periods  covered  thereby,  subject (as to interim
financial statements) to normal year-end audit adjustments.

IV.  NEGATIVE COVENANTS

         Without  limitation  of any other  covenants and  agreements  contained
herein  or  elsewhere,  the  Borrower  agrees  that  so  long  as the  financing
arrangements  contemplated  hereby are in effect or any Revolving Loan or any of
the other  Obligations  shall be  outstanding  or any  letter  of credit  issued
hereunder shall be outstanding:

         4.1. Indebtedness.    The  Borrower will not  create,  incur, assume or
suffer to exist any Indebtedness (nor allow  any of its  Subsidiaries to create,
incur, assume or suffer to exist any Indebtedness), except for:

              (i)  Indebtedness  owed to the Bank (or its  assigns),  including,
         without limitation,  the Indebtedness represented by the Revolving Note
         and any  Indebtedness  in respect  of  letters of credit  issued by the
         Bank;

              (ii) Subject always to the  satisfaction  of the  requirements  of
         clause (vi) of ss.4.6 below,  (A)  Indebtedness  of Subsidiaries of the
         Borrower owed to the Borrower, (B) Indebtedness of the Borrower owed to
         any Subsidiary of the Borrower and (C)  Indebtedness  of any Subsidiary
         of the Borrower owed to any other Subsidiary of the Borrower;

              (iii)    Indebtedness of the Borrower or any Subsidiary for taxes,
         assessments and governmental charges or levies not yet due and payable;

              (iv)  Indebtedness  under  or  in  respect  of  currency  exchange
         contracts  or  interest  rate  protection  obligations  incurred in the
         ordinary  course  of  business;  provided  that  the  aggregate  of the
         notional  amounts of all such contracts and obligations will not exceed
         $1,000,000;
<PAGE>

              (v) Indebtedness in connection with  performance  bonds or letters
         of credit  obtained  and  issued in the  ordinary  course of  business;
         including letters of credit related to insurance associated with claims
         for work-related injuries;

              (vi) Subordinated Debt;  provided  that the Bank  has consented to
         the economic  terms, amount and  subordination  provisions  of all such
         Subordinated Debt;

              (vii)  unsecured  current  liabilities  of  the  Borrower  or  any
         Subsidiary  (other  than  for  money  borrowed  or for  purchase  money
         Indebtedness  with respect to fixed  assets)  incurred  upon  customary
         terms in the ordinary course of business;

              (viii) purchase money Indebtedness (including, without limitation,
         Indebtedness  in  respect  of  capitalized  equipment  leases)  owed to
         equipment  vendors and/or lessors for equipment  purchased or leased by
         the  Borrower for use in the  Borrower's  business,  provided  that the
         total  of   Indebtedness   permitted  under  this  clause  (viii)  plus
         presently-existing  equipment  financing permitted under clause (ix) of
         this ss.4.1 will not exceed $2,000,000 in the aggregate  outstanding at
         any one time;

              (ix)  other   Indebtedness   (not  described  in  any  of  clauses
         (i)-(viii)  above) existing at the date hereof,  but only to the extent
         set forth on item 4.1 of the attached Disclosure Schedule; and

              (x)   any  guaranties  or other contingent  liabilities  expressly
         permitted pursuant to ss.4.3.

        4.2.  Liens.  The Borrower will not create,  incur,  assume or suffer to
exist (nor allow any of its Subsidiaries to create,  incur,  assume or suffer to
exist) any mortgage,  deed of trust, pledge,  lien, security interest,  or other
charge  or  encumbrance  (including  the lien or  retained  security  title of a
conditional vendor) of any nature (collectively,  "Liens"), upon or with respect
to any of its property or assets, now owned or hereafter  acquired,  except that
the foregoing restrictions shall not apply to:

              (i) Liens for taxes, assessments or governmental charges or levies
         on property  of the  Borrower  or any of its  Subsidiaries  if the same
         shall not at the time be delinquent  or thereafter  can be paid without
         interest  or  penalty  or are  being  contested  in good  faith  and by
         appropriate  proceedings  which  serve as a  matter  of law to stay any
         enforcement thereof and as to which adequate reserves are maintained;

              (ii) Liens imposed by law, such as carriers',  warehousemen's  and
         mechanics' liens and other similar Liens arising in the ordinary course
         of business  for sums not yet due or which are being  contested in good
         faith and by appropriate  proceedings which serve as a matter of law to
         stay the  enforcement  thereof and as to which  adequate  reserves  are
         maintained;
<PAGE>

              (iii)      pledges or  deposits under workmen's compensation laws,
         unemployment insurance, social security, retirement benefits or similar
         legislation;

              (iv)       Liens in favor of the Bank;

              (v) Liens in favor of equipment  vendors and/or  lessors  securing
         purchase money Indebtedness to the extent permitted by clause (viii) of
         ss.4.1;  provided  that no such Lien will extend to any property of the
         Borrower other than the specific items of equipment financed; or

              (vi) other  Liens  existing  at the date  hereof,  but only to the
         extent and with the  relative  priorities  set forth on item 4.2 of the
         attached Disclosure Schedule.

         Without limitation of the foregoing,  the Borrower covenants and agrees
that it will not enter into (and  represents  and warrants  that it is not now a
party to or subject to) any  agreement  or  understanding  with any Person other
than the Bank which  could  prohibit  or restrict in any manner the right of the
Borrower to grant Liens on its assets to the Bank.

        4.3.  Guaranties.  The  Borrower  will not,  without  the prior  written
consent of the Bank, assume, guarantee,  endorse or otherwise become directly or
contingently liable (including,  without limitation, liable by way of agreement,
contingent or otherwise,  to purchase,  to provide funds for payment,  to supply
funds to or  otherwise  invest in any debtor or otherwise to assure any creditor
against  loss)  (and  will not  permit  any of its  Subsidiaries  so to  assume,
guaranty  or become  directly or  contingently  liable) in  connection  with any
indebtedness  of any other  Person,  except (i)  guaranties by  endorsement  for
deposit or collection in the ordinary course of business, (ii) guaranties in the
ordinary course  connected with the sale of the products or services,  and (iii)
guaranties existing at the date hereof and described on item 4.3 of the attached
Disclosure Schedule.

        4.4. Dividends. The Borrower will not, without the prior written consent
of the Bank,  make any  distributions  to its  shareholders,  pay any  dividends
(other  than  dividends  payable  solely in capital  stock of the  Borrower)  or
redeem, purchase or otherwise acquire, directly or indirectly any of its capital
stock.

        4.5. Loans and Advances. The Borrower will not make (and will not permit
any Subsidiary to make) any loans or advances to any Person, including,  without
limitation, the Borrower's directors, officers and employees, except advances to
such directors,  officers or employees with respect to expenses incurred by them
in the ordinary course of their duties and advances against salary, all of which
loans and advances will not exceed,  in the aggregate,  $500,000  outstanding at
any one time.

        4.6.  Investments.  The  Borrower  will not,  without  the Bank's  prior
written consent (which consent shall not be unreasonably  withheld),  invest in,
hold or purchase  any stock or  securities  of any Person (nor will the Borrower
permit any of its  Subsidiaries to invest in, purchase or hold any such stock or
securities) except: (i) readily marketable direct obligations of, or obligations

<PAGE>

guarantied  by, the United States of America or any agency  thereof;  (ii) other
investment  grade debt  securities;  (iii) mutual funds, the assets of which are
primarily  invested in items of the kind described in the foregoing  clauses (i)
and (ii) of this ss.4.6; (iv) deposits with or certificates of deposit issued by
the  Bank  and any  other  obligations  of the Bank or the  Bank's  parent;  (v)
deposits in any other bank  organized  in the United  States  having  capital in
excess of $100,000,000; and (vi) investments in any Subsidiaries now existing or
hereafter created by the Borrower pursuant to ss.4.7 below; provided that in any
event 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.

        4.7.     Subsidiaries; Acquisitions.  The Borrower will not, without the
prior written consent of  the Bank,  form or  acquire any Subsidiary or make any
other acquisition  of the stock  of any other  Person or of all or substantially
all of the assets of any other  Person.  The Borrower will  not become a partner
in any partnership.

        4.8. Merger. The Borrower will not, without the prior written consent of
the Bank,  merge or consolidate  with any Person,  or sell,  lease,  transfer or
otherwise  dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course.

        4.9.  Affiliate  Transactions.  The  Borrower  will not,  without  prior
written  consent of the Bank,  enter into any  transaction,  including,  without
limitation,  the purchase,  sale or exchange of any property or the rendering of
any service,  with any affiliate of the Borrower,  except in the ordinary course
of and pursuant to the reasonable  requirements  of the Borrower's  business and
upon fair and  reasonable  terms no less favorable to the Borrower than would be
obtained  in a  comparable  arms'-length  transaction  with  any  Person  not an
affiliate;  provided that nothing in this ss.4.9 shall be deemed to restrict the
payment of salary or other  similar  payments  to any officer or director of the
Borrower, nor to restrict the hiring of additional officers. For the purposes of
this  letter  agreement,   "affiliate"  means  any  Person  which,  directly  or
indirectly,  controls or is  controlled  by or is under common  control with the
Borrower; any officer or director or former officer or director of the Borrower;
any Person owning of record or beneficially,  directly or indirectly, 5% or more
of any  class of  capital  stock of the  Borrower  or 5% or more of any class of
capital  stock or other equity  interest  having  voting  power (under  ordinary
circumstances)  of any of the other Persons  described  above; and any member of
the  immediate  family  of any of the  foregoing.  "Control"  means  possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management  or policies  of any  Person,  whether  through  ownership  of voting
equity, by contract or otherwise.

         4.10.  Change  of  Address,  etc.  The  Borrower  will not  change  its
corporate  name,  nor will the Borrower  change its chief  executive  offices or
principal  place of business  from the address  described  in  ss.2.1(j)  above,
unless the Borrower gives prompt written notice to the Bank of each such change.
The Borrower  will not change its fiscal year or methods of financial  reporting
unless,  in each  instance,  prior written notice of such change is given to the
Bank and prior to such change the Borrower enters into amendments to this letter

<PAGE>

agreement in form and substance reasonably  satisfactory to the Bank in order to
preserve  unimpaired the rights of the Bank and the  obligations of the Borrower
hereunder.

         4.11.  Hazardous Waste. Except as provided below, the Borrower will not
dispose  of or suffer or permit to exist any  hazardous  material  or oil on any
site or vessel owned,  occupied or operated by the Borrower or any Subsidiary of
the Borrower,  nor shall the Borrower  store (or permit any Subsidiary to store)
on any site or vessel  owned,  occupied or operated by the  Borrower or any such
Subsidiary,  or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material",  "oil", "site" and "vessel",  respectively,
being used herein with the meanings  given those terms in Mass.  Gen.  Laws, Ch.
21E or any  comparable  terms in any  comparable  statute in effect in any other
relevant jurisdiction).  The Borrower shall provide the Bank with written notice
of (i) the intended storage or transport of any hazardous material or oil by the
Borrower or any  Subsidiary  of the  Borrower,  (ii) any known  release or known
threat of release of any hazardous material or oil at or from any site or vessel
owned,  occupied or operated by the Borrower or any  Subsidiary of the Borrower,
and  (iii)  any  incurrence  of  any  expense  or  loss  by  any  government  or
governmental authority in connection with the assessment, containment or removal
of any  hazardous  material or oil for which expense or loss the Borrower or any
Subsidiary of the Borrower may be liable.  Notwithstanding  the  foregoing,  the
Borrower and its Subsidiaries may use, store and transport,  and need not notify
the  Bank of the  use,  storage  or  transportation  of,  (x) oil in  reasonable
quantities,  as fuel for heating of their respective  facilities or for vehicles
or machinery used in the ordinary course of their respective  businesses and (y)
hazardous  materials that are solvents,  cleaning agents or other materials used
in the ordinary course of the respective business operations of the Borrower and
its Subsidiaries,  in reasonable quantities, as long as in any case the Borrower
or the  Subsidiary  concerned (as the case may be) has obtained and maintains in
effect any necessary governmental permits, licenses and approvals, complies with
all  requirements  of applicable  federal,  state and local law relating to such
use,  storage or  transportation,  follows the protective and safety  procedures
that a prudent  businessperson  conducting  a business the same as or similar to
that of the Borrower or such  Subsidiary (as the case may be) would follow,  and
disposes of such  materials  (not consumed in the ordinary  course) only through
licensed providers of hazardous waste removal services.

         4.12.     No Margin Stock.   No proceeds of any Revolving Loan shall be
used directly or indirectly to purchase or carry any margin security.

         4.13.  Subordinated  Debt. The Borrower will not directly or indirectly
make any optional or voluntary  prepayment or purchase of  Subordinated  Debt or
modify,  alter or add any  provisions  with  respect to payment of  Subordinated
Debt.  In any event,  the Borrower will not make any payment of any principal of
or interest on any Subordinated  Debt at any time when there exists, or if there
would result therefrom, any Event of Default hereunder.

V.  DEFAULT AND REMEDIES

        5.1.       Events of Default. The occurrence of any one of the following
events shall constitute an Event of Default hereunder:
<PAGE>

         (a) The  Borrower  shall fail to make any  payment of  principal  of or
interest on the  Revolving  Note on or before the date when due; or the Borrower
shall fail to pay when due any amount  owed to the Bank in respect of any letter
of credit now or hereafter issued by the Bank; or

         (b) Any  representation  or warranty of the Borrower  contained  herein
shall at any time prove to have been incorrect in any material respect when made
or any  representation  or warranty made by the Borrower in connection  with any
Revolving  Loan or  letter  of  credit  shall  at any time  prove  to have  been
incorrect in any material respect when made; or

         (c)      The Borrower shall default in the performance or observance of
any agreement  or  obligation  under  any of ss.ss.3.6, 3.7, 3.8, 3.9 or 3.10 or
Article IV; or

         (d) The Borrower shall default in the  performance or observance of any
agreement or  obligation  under either  ss.3.1 or ss.3.3 and such default  shall
continue  unremedied  for 30 days  after the  Borrower  knows of, or  reasonably
should have known of, the facts or circumstances constituting such default; or

         (e) The Borrower  shall default in the  performance  of any other term,
covenant or agreement  contained in this letter agreement and such default shall
continue  unremedied  for 30 days after notice  thereof shall have been given to
the Borrower; or

         (f) Any default on the part of the  Borrower or any  Subsidiary  of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any  applicable  notice  and/or  grace  period,  under  any  other  contract,
agreement or undertaking now existing or hereafter  entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or

         (g) Any default shall exist and remain unwaived or uncured with respect
to any  Subordinated  Debt of the  Borrower  or with  respect to any  instrument
evidencing, guaranteeing or otherwise relating to any such Subordinated Debt, or
any such  Subordinated  Debt  shall not have been  paid  when  due,  whether  by
acceleration  or  otherwise,  or shall have been  declared to be due and payable
prior to its stated  maturity,  or any event or  circumstance  shall occur which
permits, or with the lapse of time or the giving of notice or both would permit,
the  acceleration  of the  maturity  of any  Subordinated  Debt by the holder or
holders thereof; or

         (h) Any default shall exist and remain unwaived or uncured with respect
to any other  Indebtedness  for borrowed money of the Borrower or any Subsidiary
of the  Borrower  in excess of $500,000 in  aggregate  principal  amount or with
respect  to any  instrument  evidencing,  guaranteeing,  securing  or  otherwise
relating to any such  Indebtedness for borrowed money, or any such  Indebtedness
in excess of $500,000 in  aggregate  principal  amount  shall not have been paid
when due,  whether by acceleration or otherwise,  or shall have been declared to
be due and payable prior to its stated  maturity,  or any event or  circumstance
shall occur which permits,  or with the lapse of time or the giving of notice or
both would permit,  the acceleration of the maturity of any such Indebtedness by
the holder of holders thereof; or
<PAGE>

         (i) The Borrower shall be dissolved,  or the Borrower or any Subsidiary
of the  Borrower  shall  become  insolvent or bankrupt or shall cease paying its
debts as they mature or shall make an  assignment  for the benefit of creditors,
or a trustee,  receiver or liquidator shall be appointed for the Borrower or any
Subsidiary  of the  Borrower or for a  substantial  part of the  property of the
Borrower or any such  Subsidiary,  or bankruptcy,  reorganization,  arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any  such  Subsidiary  under  the  laws of any  jurisdiction  (except  for an
involuntary  proceeding  filed  against the  Borrower or any  Subsidiary  of the
Borrower which is dismissed  within 60 days following the institution  thereof);
or

         (j) Any  attachment,  execution or similar  process  shall be issued or
levied  against  any  material  item  of the  property  of the  Borrower  or any
Subsidiary and such attachment,  execution or similar process shall not be paid,
stayed,  released,  vacated  or fully  bonded  within 10 days after its issue or
levy; or

         (k) Any final uninsured judgment in excess of $500,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction  and shall  remain  unpaid and unstayed for more than 30 days after
the date of such entry; or

         (l) The Borrower or any  Subsidiary of the Borrower  shall fail to meet
its  minimum  funding  requirements  under  ERISA with  respect to any  employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or  involuntary)  and there shall  result from such  termination  proceedings  a
liability of the Borrower or any  Subsidiary  of the Borrower to the PBGC which,
in each case, in the reasonable  opinion of the Bank may have a material adverse
effect upon the financial condition of the Borrower or any such Subsidiary; or

         (m) At any time, the Borrower shall not be a wholly-owned subsidiary of
the Parent; or

         (n)  There  shall  occur  any  other  material  adverse  change  in the
condition (financial or otherwise),  operations, properties, assets, liabilities
or earnings of the Borrower.

        5.2.  Rights and Remedies on Default.   Upon the occurrence of any Event
of Default, in addition to any other rights  and remedies  available to the Bank
hereunder or otherwise,  the Bank may exercise any one or more of the  following
rights and remedies (all of which shall be cumulative):

         (a) Declare the entire unpaid  principal  amount of the Revolving  Note
then outstanding,  all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement,  and all other Indebtedness of the Borrower
to the Bank,  to be forthwith  due and payable,  whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
<PAGE>

         (b) Terminate the revolving financing arrangements provided for by this
letter agreement.

         (c)  Exercise all rights and remedies  hereunder,  under the  Revolving
Note and under each and any other  agreement  with the Bank;  and  exercise  all
other rights and remedies which the Bank may have under applicable law.

        5.3.  Set-off.  In addition to any rights now or hereafter granted under
applicable  law  and not by way of  limitation  of any  such  rights,  upon  the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment,  demand,  protest or other notice of any
kind to the Borrower or to any other Person,  all of which are hereby  expressly
waived,  to set off and to  appropriate  and apply any and all  deposits and any
other  Indebtedness  at any time  held or  owing  by the  Bank or any  affiliate
thereof  to or for the  credit or the  account of the  Borrower  against  and on
account of the  obligations  and  liabilities  of the Borrower to the Bank under
this letter  agreement  or  otherwise,  irrespective  of whether or not the Bank
shall have made any demand hereunder and although said obligations,  liabilities
or claims,  or any of them,  may then be  contingent  or  unmatured  and without
regard for the availability or adequacy of other collateral. As security for the
Obligations, the Borrower grants to the Bank a security interest with respect to
all its deposits and all  securities or other  property in the possession of the
Bank or any affiliate of the Bank from time to time, and, upon the occurrence of
any Event of Default, the Bank may exercise all rights and remedies of a secured
party under the Uniform Commercial Code.

        5.4. Letters of Credit.  Without limitation of any other right or remedy
of the Bank,  (i) if an Event of Default  shall have occurred and the Bank shall
have accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving  financing  arrangements  described herein shall have expired or shall
have been earlier  terminated by either the Bank or the Borrower for any reason,
the  Borrower  will  forthwith  deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.

VI.  MISCELLANEOUS

        6.1.  Costs and  Expenses.  The  Borrower  agrees to pay,  on demand and
delivery of a Bank  Certificate  therefor,  all costs and  expenses  (including,
without  limitation,  reasonable  legal fees) of the Bank in connection with the
preparation, execution and delivery of this letter agreement, the Revolving Note
and all other  instruments  and documents to be delivered in connection with any
Revolving  Loan or any letter of credit issued  hereunder and any  amendments or
modifications  of any of the  foregoing,  as  well  as the  costs  and  expenses
(including,  without  limitation,  the  reasonable  fees and  expenses  of legal
counsel)  incurred  by the Bank in  connection  with  preserving,  enforcing  or
exercising,  upon default,  any rights or remedies under this letter  agreement,
the Revolving Note and all other  instruments  and documents  delivered or to be
delivered hereunder or in connection  herewith,  all whether or not legal action
is instituted.  In addition,  the Borrower shall be obligated to pay any and all
stamp and other taxes payable or determined to be payable in connection with the

<PAGE>

execution  and delivery of this letter  agreement,  the  Revolving  Note and all
other  instruments  and  documents  to  be  delivered  in  connection  with  any
Obligation.  Any fees,  expenses or other  charges which the Bank is entitled to
receive from the Borrower  under this Section  shall bear interest from the date
of any demand  therefor until the date when paid at a rate per annum equal to 2%
per annum the highest per annum rate otherwise  payable under the Revolving Note
(but in no event in excess of the  maximum  rate  permitted  by then  applicable
law).

        6.2.  Facility  Fees. The Borrower will pay to the Bank, on the last day
of each calendar quarter  (commencing with March 31, 1997) and on the Expiration
Date, a facility fee equal to 0.20% per annum  (appropriately  pro-rated for any
partial calendar  quarter) based on the average daily Unused Portion during such
calendar  quarter.  As used herein,  the "Unused  Portion" on any day means that
amount by which (x)  $10,000,000  exceeds  (y) the  Aggregate  Bank  Liabilities
outstanding  on that day,  whether  such  excess  results  from a failure by the
Borrower  to borrow (or obtain  letters of credit) up to  $10,000,000  or from a
repayment  of  Revolving  Loans or  reduction  of  outstanding  letter of credit
liabilities  or due to any other reason.  In addition,  if the  within-described
revolving  financing  arrangements are terminated by the Borrower for any reason
or by the Bank as the  result of the  Borrower's  default,  the  Borrower  shall
forthwith  upon  such  termination  pay to the  Bank a sum  equal  to all of the
facility fees which would have become due (absent such termination)  pursuant to
the  immediately  preceding  sentence  during the  period  from the date of such
termination  through the  Expiration  Date,  assuming  for this  purpose that no
Aggregate Bank Liabilities would have been outstanding  during such period.  The
fees described in this Section are in addition to any balances and fees required
by the Bank or any of its  affiliates in connection  with any other services now
or hereafter made available to the Borrower.

        6.3. Other  Agreements.  The provisions of this letter agreement are not
in derogation or limitation  of any  obligations,  liabilities  or duties of the
Borrower  under any of the other Loan  Documents or any other  agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise  derogate from
the express  terms of each such default  provision.  No  covenant,  agreement or
obligation of the Borrower contained herein, nor any right or remedy of the Bank
contained herein,  shall in any respect be limited by or be deemed in limitation
of any inconsistent or additional  provisions contained in any of the other Loan
Documents or any such other agreement.

        6.4. Governing Law.   This letter agreement and the Revolving Note shall
be governed by, and construed and enforced in  accordance  with, the laws of The
Commonwealth of Massachusetts.

        6.5.  Addresses  for Notices,  etc. All notices,  requests,  demands and
other  communications  provided for  hereunder  shall be in writing and shall be
mailed or delivered to the applicable party at the address indicated below:
<PAGE>

                   If to the Borrower:

                   Zoom Telephonics, Inc.
                   207 South Street
                   Boston, MA  02111
                   Attention:  Steven T. Shedd, Chief Financial Officer

                   with a copy to:

                   Brown, Rudnick, Freed & Gesmer, P.C.
                   One Financial Center
                   Boston, MA 02111
                   Attention:  Lawrence M. Levy, Esq.

                   If to the Bank:

                   Fleet National Bank
                   High Technology Group
                   75 State Street
                   Boston, MA  02109
                   Attention:  Kimberly Martone, Vice President

or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the  terms of this  Section.  All such  notices,  requests,  demands  and  other
communications shall be deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery,  refusal or  non-delivery  indicated on the return
receipt if deposited in the United States mails, sent postage prepaid, certified
or registered mail, return receipt requested, addressed as aforesaid.

        6.6.  Binding Effect;  Assignment;  Termination.  This letter  agreement
shall be binding upon the Borrower,  its  successors and assigns and shall inure
to the  benefit  of the  Borrower  and the Bank and their  respective  permitted
successors and assigns. The Borrower may not assign this letter agreement or any
rights hereunder  without the express written consent of the Bank. The Bank may,
in accordance  with applicable law and with prior written notice to the Borrower
(except that, in the case of an assignment to a Federal Reserve Bank as security
for a borrowing by the Bank,  such notice shall not be  required),  from time to
time assign or grant  participation  in this  letter  agreement,  the  Revolving
Loans,  the Revolving  Note and/or the letters of credit issued  hereunder.  The
Borrower may terminate this letter agreement and the financing arrangements made
herein by giving  written  notice of such  termination to the Bank together with
payment of the sum described in the second sentence of ss.6.2;  provided that no
such  termination  will release or waive any of the Bank's rights or remedies or
any of the  Borrower's  obligations  under this letter  agreement  or any of the
other  Loan  Documents  unless  and  until  the  Borrower  has  paid in full the
Revolving  Loans and all  interest  thereon and all fees and charges  payable in
connection  therewith  and all  letters  of credit  issued  hereunder  have been
terminated.
<PAGE>

        6.7. Consent to Jurisdiction.  The Borrower  irrevocably  submits to the
non-exclusive  jurisdiction  of any  Massachusetts  court or any  federal  court
sitting  within  The  Commonwealth  of  Massachusetts  over any suit,  action or
proceeding  arising  out of or  relating  to this  letter  agreement  and/or the
Revolving Note. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection  which it may now or hereafter have to the laying of venue
of any such  suit,  action or  proceeding  brought in such a court and any claim
that any such suit,  action or  proceeding  has been brought in an  inconvenient
forum.  The  Borrower  agrees that final  judgment  in any such suit,  action or
proceeding  brought  in such a court  shall be  enforced  in any court of proper
jurisdiction  by a suit upon such judgment,  provided that service of process in
such action,  suit or  proceeding  shall have been effected upon the Borrower in
one of the manners  specified  in the  following  paragraph of this ss.6.7 or as
otherwise permitted by law.

         The  Borrower  hereby  consents  to process  being  served in any suit,
action or  proceeding of the nature  referred to in the  preceding  paragraph of
this ss.6.7  either (i) by mailing a copy  thereof by  registered  or  certified
mail, postage prepaid,  return receipt requested, to it at its address set forth
in ss.6.5 (as such  address  may be changed  from time to time  pursuant to said
ss.6.5) or (ii) by serving a copy  thereof  upon it at its  address set forth in
ss.6.5  (as such  address  may be  changed  from time to time  pursuant  to said
ss.6.5).

        6.8.  Severability.  In the  event  that any  provision  of this  letter
agreement or the application  thereof to any Person,  property or  circumstances
shall be held to any extent to be invalid or  unenforceable,  the  remainder  of
this  letter  agreement,  and the  application  of such  provision  to  Persons,
properties  or  circumstances  other  than  those as to  which it has been  held
invalid and unenforceable,  shall not be affected thereby, and each provision of
this  letter  agreement  shall be  valid  and  enforced  to the  fullest  extent
permitted by law.

VII.  DEFINED TERMS

        7.1. Definitions.  In addition to terms defined elsewhere in this letter
agreement, as  used in  this letter  agreement, the  following  terms  have  the
following respective meanings:

         "Aggregate  Bank  Liabilities"  - At any  time,  the  sum  of  (i)  the
principal  amount of all Revolving  Loans then  outstanding,  plus (ii) all then
undrawn  amounts of letters of credit  issued by the Bank for the account of the
Borrower,  plus (iii) 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.

         "Bank  Certificate"  - A  certificate  signed by an officer of the Bank
setting forth any additional  amount  required to be paid by the Borrower to the
Bank  pursuant to ss.1.2,  ss.1.6,  ss.1.7 or ss.6.1 of this  letter  agreement,
which  certificate  shall be submitted by the Bank to the Borrower in connection
with each demand made at any time by the Bank upon the Borrower  with respect to
any such additional  amount,  and each such certificate shall, save for manifest
error,  constitute  presumptive evidence of the additional amount required to be
paid by the Borrower to the Bank upon each  demand.  A claim by the Bank for all
or any part of any additional  amount required to be paid by the Borrower may be
made  before  and/or  after the end of the  Interest  Period to which such claim
relates or during  which such  claim has  arisen  and  before  and/or  after any

<PAGE>

payment  hereunder to which such claim relates.  Each Bank Certificate shall set
forth in  reasonable  detail the basis for and the  calculation  of the claim to
which it relates.

         "Borrowing Base" - As determined at any date, the sum of (i) 80% of the
aggregate principal amount of the Qualified Domestic Receivables of the Borrower
then  outstanding,  plus  (ii)  80% of the  aggregate  principal  amount  of the
Qualified Foreign  Receivables of the Borrower then outstanding,  plus (iii) 50%
of the aggregate principal amount of the Other Acceptable Foreign Receivables of
the Borrower then outstanding;  provided,  however,  that the total amount which
may be  contributed to Borrowing Base by Other  Acceptable  Foreign  Receivables
pursuant  to  this  clause  (iii)  will  not  at  any  time  exceed  10%  of the
then-effective total Borrowing Base.

         "Business  Day" - Any day which is not a  Saturday,  nor a Sunday nor a
public  holiday  under  the  laws  of  the  United  States  of  America  or  The
Commonwealth of  Massachusetts  applicable to a national bank;  provided however
that  if the  applicable  provision  relates  to a LIBOR  Loan,  then  the  term
"Business Day" shall not include any day on which dealings are not carried on in
the  London  interbank  market or on which  banks are not open for  business  in
London.

         "Capital Base" - At any time, the sum of (i) the consolidated  Tangible
Net  Worth  of the  Borrower  and  Subsidiaries  then  existing,  plus  (ii) the
principal amount of Subordinated Debt of the Borrower then outstanding  (nothing
contained   herein  being  deemed  to  authorize  the  incurrence  of  any  such
Subordinated Debt).

         "Current  Liabilities"  - All  liabilities  of the Borrower  and/or any
Subsidiary of the Borrower which are properly shown as current  liabilities on a
consolidated balance sheet of the Borrower prepared in accordance with generally
accepted  accounting   principles   consistently  applied.   Further,   "Current
Liabilities" will in any event be deemed to include the Revolving Loans.

         "ERISA" - The  Employee  Retirement  Income  Security  Act of 1974,  as
amended.

         "Eurocurrency  Liabilities" - Has the meaning  assigned to that term in
Regulation  D of the Board of Governors  of the Federal  Reserve  System (or any
successor),  as in effect  from  time to time,  or in any  successor  regulation
relating to the liabilities described in said Regulation D.
<PAGE>

         "Eurodollar  Interest Rate" - For any Interest Period, an interest rate
per annum,  expressed as a  percentage,  determined  by the Bank pursuant to the
following formula:

                           *EIR  =           LIBOR     +   ERI
                                            [1.00  -  RR]

                             Where EIR        =        Eurodollar Interest Rate
                             LIBOR   =        See definition of LIBOR
                             RR               =        Reserve Rate
                             ERI              =        Eurodollar Rate Increment

               *EIR and each component thereof to be rounded upwards to the next
                higher 1/16th of 1%

        "Eurodollar Rate Increment" - One and one-half percent (1.5%) per annum.

         "Expiration Date" - August 31, 1997, unless extended by the Bank, which
extension may be given or withheld by the Bank in its sole discretion.

         "Floating Rate"  -  As defined in ss.1.2.

         "Floating  Rate Loan" - Any Revolving  Loan which bears interest at the
Floating Rate.

         "FSC" -   Zoom Telephonics  Foreign  Sales Corporation,  a U.S.  Virgin
Islands corporation which is a wholly-owned Subsidiary of the Borrower.

         "Impositions"  -  All  present  and  future  taxes,   levies,   duties,
impositions,  deductions,  charges and withholdings  applicable to the Bank with
respect to any LIBOR Loan, excluding, however, any taxes imposed directly on the
Bank's income and any franchise  taxes imposed on it by the  jurisdiction  under
the laws of which the Bank is organized or any political subdivision thereof.

         "Indebtedness"  - All  obligations  of a  Person,  whether  current  or
long-term,  senior or subordinated,  which in accordance with generally accepted
accounting  principles  would be  included  as  liabilities  upon such  Person's
balance sheet at the date as of which  Indebtedness,  is to be  determined,  and
shall also include  guaranties,  endorsements  (other than for collection in the
ordinary course of business) or other  arrangements  whereby  responsibility  is
assumed  for the  obligations  of others,  whether by  agreement  to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or  otherwise,  to furnish  funds  through the  purchase  of goods,  supplies or
services for the purpose of payment of the obligations of others.

         "Interest  Payment  Date" - As to each  LIBOR  Loan,  the  last  day of
Interest  Period  applicable  to such LIBOR Loan;  provided that if any Interest
Period is in excess of three  months,  there will be two Interest  Payment Dates
applicable  thereto - the first being three months from the commencement date of
such Interest Period and the second being the last day of such Interest Period.
<PAGE>

         "Interest  Period" - As to each LIBOR Loan, the period  commencing with
the date of the making of such LIBOR Loan and ending  one,  two or three  months
thereafter,  as the Borrower  may select;  provided  that (A) any such  Interest
Period which would  otherwise  end on a day which is not a Business Day shall be
extended to the next succeeding  Business Day unless such Business Day occurs in
a new  calendar  month,  in which  case such  Interest  Period  shall end on the
immediately preceding Business Day, (B) any such Interest Period which begins on
a day for which there is no numerically  corresponding day in the calendar month
during which such  Interest  Period is to end shall end on the last Business Day
of such calendar  month,  and (C) no Interest Period may be selected which would
end after the Expiration Date.

         "LIBOR" - With respect to each Interest  Period for a LIBOR Loan,  that
rate per annum  (rounded  upward,  if  necessary,  to the nearest 1/16 of 1%) at
which deposits in United States Dollars are offered to the Bank, for delivery on
the first day of the applicable  Interest Period, in the London interbank market
at 10:00  a.m.  London  time two  Business  Days  prior to the  first day of the
applicable  Interest  Period  for a term  equal  to the term of the  LIBOR  Loan
requested for such Interest Period and in an amount  substantially  equal to the
principal  amount of the relevant  LIBOR Loan. The Bank shall give prompt notice
to the Borrower of LIBOR as determined for each LIBOR Loan and such notice shall
be conclusive and binding, absent manifest error.

         "LIBOR Loan" - Any Revolving  Loan which bears interest at a Eurodollar
Interest Rate.

         "Loan  Documents" - Each of this letter  agreement,  the Revolving Note
and  each  other  instrument,   document  or  agreement  evidencing,   securing,
guaranteeing  or relating in any way to any of the Revolving Loans or any of the
letters of credit  issued  hereunder,  all  whether now  existing  or  hereafter
arising or entered into.

         "London"  -  The City of London in England.

         "Maximum  Revolving  Amount"  - At any date as of  which  same is to be
determined,  the amount by which (x) $10,000,000  exceeds (y) the sum of (i) all
then undrawn  amounts of 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  (by
virtue of the making of a Revolving Loan or otherwise).

         "Net  Income"  (or "Net Loss") - The book net income (or book net loss,
as the case may be) of a Person for any period, after all taxes actually paid or
accrued  and all  expenses  and other  charges  determined  in  accordance  with
generally accepted accounting principles consistently applied.

         "Net Quick Assets" - Such current  assets of the Borrower as consist of
cash, cash-equivalents,  readily-marketable  securities and Receivables (less an
allowance for bad debt consistent with the Borrower's prior experience).
<PAGE>

         "Obligations" - All Indebtedness,  covenants,  agreements,  liabilities
and obligations, now existing or hereafter arising, made by the Borrower with or
for the benefit of the Bank or owed by the Borrower to the Bank in any capacity.

         "Other  Acceptable  Foreign  Receivables"  - Those  Receivables  of the
Borrower  which are not  Qualified  Foreign  Receivables  (because  they are not
supported  by  acceptable  credit  enhancement)  but  which  satisfy  all of the
criteria set forth below to be  Qualified  Domestic  Receivables  other than the
requirement that the relevant customer be located in the United States; provided
that in each  case  the  Bank  has  approved  the  relevant  customer  as  being
satisfactory for this purpose. The approval of the Bank of any customer for this
purpose may be given or withheld by the Bank, and any approval  previously given
may at any time be withdrawn by the Bank, all at the Bank's sole discretion.  In
addition, if FSC and/or Zoom UK executes and delivers to the Bank (together with
such corporate  documentation as the Bank may reasonably require) and thereafter
maintains in effect a guaranty of the Borrower's  Obligations  (such guaranty to
be  satisfactory  in form and  substance  to the Bank),  then "Other  Acceptable
Foreign  Receivables"  will be  deemed to  include  such  amounts  as are now or
hereafter  owed to the Borrower by FSC and/or Zoom UK, as applicable  (exclusive
of  any  such  amounts  includable  in the  definition  of  "Qualified  Domestic
Receivables" or "Qualified Foreign  Receivables"),  even though such amounts are
owed to the Borrower by an entity  related to the Borrower,  to the extent,  but
only to the  extent,  that such  amounts  arise  out of sales of the  Borrower's
products made by FSC and/or Zoom UK, as the case may be, to unrelated  customers
and that the Receivables of FSC and/or Zoom UK, as the case may be, generated by
such  sales  satisfy  all of  the  requirements  set  forth  in the  immediately
preceding two sentences to be "Other Acceptable Foreign Receivables", other than
the requirement that such Receivables be owned by the Borrower.

         "Parent" - Zoom  Telephonics,  Inc., a Canadian  corporation which owns
100% of the outstanding capital stock of the Borrower.

         "Parent's  Subsidiaries" - Any corporation or other entity of which the
Parent and/or any of the other  Parent's  Subsidiaries,  directly or indirectly,
owns,  or has the right to control or direct the voting of, fifty (50%)  percent
or more of the  outstanding  capital stock or other  ownership  interest  having
general voting power (under ordinary circumstances).

         "PBGC"  -   The Pension Benefit Guaranty Corporation  or any  successor
thereto.

         "Person" - An individual,  corporation,  partnership, limited liability
company, joint venture, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.

         "Qualified  Domestic  Receivables"  -  Only  those  Receivables  of the
Borrower  which arise out of bona fide sales made to  customers  of the Borrower
(which  customers  are  located in the United  States and are  unrelated  to the
Borrower) in the  ordinary  course of the  Borrower's  business and which remain
unpaid  no  more  than  90  days  past  the  respective  invoice  dates  of such

<PAGE>

Receivables, the payment of which is not in dispute. Unless the Bank in its sole
discretion  otherwise  determines with respect to any  Receivable,  a Receivable
which would otherwise be a Qualified Domestic  Receivable shall be deemed not to
be a Qualified Domestic  Receivable (i) if such Receivable is not free and clear
of all adverse interests in favor of any Person other than the Borrower; (ii) if
such  Receivable  is  subject  to  any  deduction,   off-set,   contra  account,
counterclaim or condition;  (iii) if a field  examination made by the Bank fails
to confirm that such  Receivable  exists and  satisfies  all of the criteria set
forth herein to be a Qualified Domestic  Receivable;  (iv) if such Receivable is
not properly invoiced at the date of sale; (v) if the customer or account debtor
has disputed  liability or made any claim with respect to the  Receivable or the
merchandise  covered thereby (provided,  however,  that if such dispute or claim
relates to less than 15% of the  principal  amount of the  relevant  Receivable,
then only the disputed  amount and not the entire amount of such Receivable will
be deemed excluded pursuant to this clause (v)); (vi) if the customer or account
debtor is subject to a petition  for  bankruptcy  or any other  application  for
relief under the Bankruptcy Code (whether or not such petition was filed by said
customer or account  debtor) or is subject to an  assignment  for the benefit of
creditors,  or if said customer's or account debtor's business is suspended,  or
if the  customer or account  debtor is  insolvent  or is not paying its debts as
they become due, or if a receiver or trustee is appointed  for any of its assets
or  affairs;  (vii) if the  customer  or account  debtor has failed to pay other
Receivables  so that an aggregate of 25% of the total  Receivables  owing to the
Borrower by such customer or account debtor has been  outstanding  for more than
90 days past  their  respective  due  dates;  or  (viii) if the Bank  reasonably
believes that  collection  of such  Receivable is insecure or that it may not be
paid  by  reason  of  financial  inability  to pay or  otherwise  or  that  such
Receivable  is not for any  reason  suitable  for use as a basis  for  borrowing
hereunder.  In addition,  if Tribe  executes and delivers to the Bank  (together
with  such  corporate  documentation  as the Bank may  reasonably  require)  and
thereafter  maintains in effect a guaranty of the Borrower's  Obligations  (such
guaranty to be satisfactory in form and substance to the Bank),  then "Qualified
Domestic  Receivables"  will be deemed to  include  such  amounts  as are now or
hereafter  owed by Tribe to the  Borrower  (even though such amounts are owed to
the Borrower by an entity  related to the  Borrower) to the extent,  but only to
the extent, that such amounts arise out of sales of the Borrower's products made
by Tribe to unrelated  customers and that the  Receivables of Tribe generated by
such  sales  satisfy  all of  the  requirements  set  forth  in the  immediately
preceding two  sentences to be Qualified  Domestic  Receivables,  other than the
requirement that such Receivables be owned by the Borrower.

         "Qualified  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  Foreign  Receivable is
supported by credit  insurance  or a letter of credit,  in each case issued by a
credit enhancer  satisfactory to the Bank and in each case containing  terms and
conditions satisfactory to the Bank. In addition, if FSC and/or Zoom UK executes
and delivers to the Bank (together with such corporate documentation as the Bank
may  reasonably  require) and  thereafter  maintains in effect a guaranty of the
Borrower's  Obligations  (such guaranty to be satisfactory in form and substance
to the Bank),  then "Qualified  Foreign  Receivables"  will be deemed to include
such amounts as are now or hereafter owed to the Borrower by FSC and/or Zoom UK,
as  applicable  (even  though such amounts are owed to the Borrower by an entity

<PAGE>

related  to the  Borrower)  to the  extent,  but only to the  extent,  that such
amounts  arise out of sales of the  Borrower's  products made by FSC and/or Zoom
UK, as the case may be, to unrelated  customers and that the  Receivables of FSC
and/or Zoom UK, as the case may be,  generated by such sales  satisfy all of the
requirements  set forth in the  immediately  preceding  sentence to be Qualified
Foreign  Receivables,  other than the requirement that such Receivables be owned
by the Borrower. Amounts included in "Qualified Foreign Receivables" pursuant to
the  immediately  preceding  sentence  are not to be "double  counted"  with any
amounts  includable in "Qualified  Domestic  Receivables"  or "Other  Acceptable
Foreign Receivables".

         "Receivables"  - As to any  Person,  all of such  Person's  present and
future accounts receivable for goods sold or for services rendered.

         "Reserve Rate" - The aggregate rate,  expressed as a decimal,  at which
the Bank would be required to maintain  reserves under Regulation D of the Board
of  Governors  of the  Federal  Reserve  System  (or any  successor  or  similar
regulation  relating  to  such  reserve   requirements)   against   Eurocurrency
Liabilities,  as well as any other reserve  required of the Bank with respect to
the LIBOR Loans. The Eurodollar Interest Rate shall be adjusted automatically on
and as of the effective date of any change in the Reserve Rate.

         "Senior  Debt"  -  All   Indebtedness   of  the  Borrower   and/or  its
Subsidiaries which does not constitute Subordinated Debt.

         "Subordinated  Debt"  - Any  Indebtedness  of  the  Borrower  which  is
expressly  subordinated,  pursuant  to a  subordination  agreement  in form  and
substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by
the Borrower to the Bank.

         "Subsidiary"  - Any  corporation  or other entity of which the Borrower
and/or any of its Subsidiaries,  directly or indirectly,  owns, or has the right
to  control  or  direct  the  voting  of,  fifty  (50%)  percent  or more of the
outstanding  capital stock or other  ownership  interest  having  general voting
power (under ordinary circumstances).

         "Tangible  Net  Worth" - An  amount  equal to the  total  assets of any
Person  (excluding  (i) the total  intangible  assets of such  Person,  (ii) any
minority interests in Subsidiaries and (iii) any assets representing amounts due
from any  officer or  employee  of such  Person or from any  Subsidiary  of such
Person) minus the total  liabilities  of such Person.  Total  intangible  assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book  value  of  acquired  businesses  accounted  for  by the  purchase  method,
formulae,  trademarks, trade names, patents, patent rights and deferred expenses
(including,   but  not  limited  to,  unamortized  debt  discount  and  expense,
organizational   expense,   capitalized  software  costs  and  experimental  and
development expenses).

         "Tribe" - Tribe Computer  Works  Incorporated,  a Delaware  corporation
which is a wholly-owned Subsidiary of the Borrower.
<PAGE>

         "Zoom UK" - Zoom Telephonics,  Ltd., a United Kingdom corporation which
is a wholly-owned Subsidiary of the Borrower.

         Any defined term used in the plural  preceded by the  definite  article
shall be taken to encompass all members of the relevant class.  Any defined term
used in the singular  preceded by "any" shall be taken to indicate any number of
the members of the relevant class.




<PAGE>


         This letter  agreement is executed,  as an instrument under seal, as of
the day and year first above written.

                                                 Very truly yours,

                                                 ZOOM TELEPHONICS, INC.


                                                 By___________________
                                                 Name:
                                                 Title:


                                                 By____________________
                                                 Name:
                                                 Title:


Accepted and agreed:

FLEET NATIONAL BANK


By__________________
    Its


By__________________
    Its



<PAGE>





                               DISCLOSURE SCHEDULE



Item 2.1(a)           Jurisdictions in which Borrower is qualified; Subsidiaries

Item 2.1(e)           Litigation

Item 4.1              Existing Indebtedness

Item 4.2              Existing Liens

Item 4.3              Existing Guaranties