This is an old problem, which pops up every few months somewhere in the world, without any apparent explanation. So I finally decided to document the solution.

The problem is that you launch ZTERM and it pops up a dialog saying something like "cannot find hardlock" and then doesn't allow you to connect.

What the message indicates is that you've somehow set the ZTERM licensing flag which tells it to verify the license with a licensing server (i.e. a machine that has a hardware dongle, or "hardlock" attached to it for assigning licenses dynamically). The most likely way this can happen (in fact the only way that we know of, short of directly editing the Registry), is if you check the option "Verify License With Server" when entering the license.

But, usually when this problem happens, the user maintains that ZTERM has been running for quite some time, and all of a sudden, for no reason, it starts doing this.

No one has ever come up with an explanation for that, but here's how you can reset the flag directly in the Registry. (Standard warning: no one should ever edit the Registry directly unless they are very careful, have a good backup or registry restore point, and are willing to take full responsibility for any of the horrible things that can happen to your system if you should sneeze while editing the Registry. If unsure about that, call a professional who is will to take that responsibility.) That said, here's the procedure:

1. Close ZTERM

2. Make sure you have Administrator privileges (log in as administrator if necessary)

3. Run the Registry editor:
Start | Run | regedit

4. Scroll down to highlight the following key:

HKEY_LOCAL_MACHINE\SOFTWARE\COOL.STF\ZTERM for Windows\Product

5. In the right pane, double click on "LicenseServerMode"

6. In the dialog that pops up, change the Value Data from 1 to 0. Click OK

7. Close the Registry Editor