Exhibit 10.41
-------------
CREDIT AND SECURITY AGREEMENT
Dated as of March __, 2001
ACT TELECONFERENCING SERVICES, INC., a Minnesota corporation
(the "Borrower"), and ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender"), hereby agree as follows:
ARTICLE I
Definitions
-----------
Section 1.1 Definitions. For all purposes of this Agreement, except
-----------
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising
out of the sale or lease of goods or rendition of services by the Borrower
on an open account or deferred payment basis.
"Advance" means a Revolving Advance.
"After-Tax Net Income" for a period means after-tax net income,
excluding extraordinary gains and losses, as determined for such period in
accordance with GAAP.
"Affiliate" or "Affiliates" means the Guarantor and any other Person
controlled by, controlling or under common control with the Borrower
or the Guarantor, including (without limitation) any Subsidiary of the
Borrower or the Guarantor. For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Credit and Security Agreement, as amended,
supplemented or restated from time to time.
"Availability" means the difference between (i) the Borrowing Base and
(ii) the outstanding principal balance of the Revolving Note.
"Banking Day" means a day other than a Saturday, Sunday or other day
on which banks are generally not open for business in Minneapolis,
Minnesota and Denver, Colorado.
"Book Net Worth" means the aggregate of the common and preferred
stockholders' or members' equity in the Borrower, determined in accordance
with GAAP.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 85% of Eligible Billed Accounts, plus
(ii) the lesser of (A) the Unbilled Account Cap and (B) 75% of
Eligible Unbilled Accounts.
"Capital Expenditures" for a period means any expenditure of money for
the lease, purchase or other acquisition of any capital asset, or for the
lease of any other asset whether payable currently or in the future, and
whether or not capitalized on the Borrower's balance sheet.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in any Collateral Account, and any items in any Lockbox; together
with (i) all substitutions and replacements for and products of any of the
foregoing; (ii) proceeds of any and all of the foregoing; (iii) in the case
of all tangible goods, all accessions; (iv) all accessories, attachments,
parts, equipment and repairs now or hereafter attached or affixed to or
used in connection with any tangible goods; and (v) all warehouse receipts,
bills of lading and other documents of title now or hereafter covering such
goods.
"Collateral Account" means the Lender Account, as such term is defined
in the Lockbox Agreement.
"Commitment" means the Lender's commitment to make Advances to or for
the Borrower's account pursuant to Article II.
"Concert Account Concentration Percentage" means 50%, provided,
--------
however, that on the first day of each month following the Funding Date
-------
such percentage shall be reduced by 1% until such time as this percentage
is equal to 40%.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender pursuant to Article II.
2
"Current Maturities of Long Term Debt" as of a given date means the
amount of the Borrower's long-term debt and capitalized leases which became
due during the measurement period ending on the designated date.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that
Person as at the date as of which Debt is to be determined. For purposes of
determining a Person's aggregate Debt at any time, "Debt" shall also
include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum of (A)
Funds from Operations and (B) Interest Expense minus (C) Capital
-----
Expenditures which are not financed with the proceeds of any Advances made
under the Credit Facility to (ii) the sum of (A) Current Maturities of Long
Term Debt and (B) Interest Expense.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day
of any month during which a Default or Event of Default has occurred and
ending on the date the Lender notifies the Borrower in writing that such
Default or Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to three percent (3%) over
the Revolving Floating Rate, which rate shall change when and as the
Revolving Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts unpaid 90 days or more after the
invoice date;
(ii) That portion of Accounts that is (A) disputed or (B)
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(iv) Accounts owed by any unit of government, whether foreign
or domestic (provided, however, that there shall be included in
Eligible Accounts
3
that portion of Accounts owed by such units of government for which
the Borrower has provided evidence satisfactory to the Lender that (A)
the Lender has a first priority perfected security interest and (B)
such Accounts may be enforced by the Lender directly against such unit
of government under all applicable laws);
(v) Accounts owed by an account debtor located outside the
United States and Canada which are not (A) backed by a bank letter of
credit naming the Lender as beneficiary or assigned to the Lender, in
the Lender's possession and acceptable to the Lender in all respects,
in its sole discretion, or (B) covered by a foreign receivables
insurance policy acceptable to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, member, Subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security interest
in the Lender's favor or which are subject to any lien, security
interest or claim in favor of any Person other than the Lender
including without limitation any payment or performance bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 10% or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i), (ii)(A) or
(ix) above;
(xii) That portion of the aggregate Accounts of a single
customer that exceeds 15% of all Accounts of the Borrower; provided,
--------
however, that (x) with respect to Accounts of Concert Global Networks
-------
Limited, such limit shall instead be equal to the Concert Account
Concentration Percentage (which limit shall be reviewed periodically
and may be reduced in the Lender's sole discretion) and (y) with
respect to Accounts of Ernst & Young, LLP, such limit shall instead be
equal to 35% (which limit shall be reviewed periodically and may be
reduced in the Lender's sole discretion); and
(xiii) Accounts, or portions thereof, otherwise deemed ineligible
by the Lender in its sole discretion.
4
"Eligible Billed Accounts" means all Eligible Accounts other
than Eligible Unbilled Accounts.
"Eligible Unbilled Accounts" means all Eligible Accounts (i) which are
fully earned by the Borrower by rendition of services (which services have
been accepted by the customer) and are immediately billable by the
Borrower, net of any credits, (ii) which have been properly documented by
the Borrower, and (iii) for which invoices have not yet been sent by the
Borrower to the customer; provided, however, that the following shall not
-------- -------
in any event be deemed Eligible Unbilled Accounts:
(i) Accounts which are not billed on or before the last day of
the month during which the underlying rendition of services were
extended; and
(ii) Accounts for which there is no underlying contract, task
order or equivalent writing satisfactory to Lender in its sole
discretion, and that portion of such Accounts in excess of the
contract price or amount set out in the underlying contract, task
order or equivalent writing for such amounts.
"Environmental Laws" has the meaning specified in
Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but
not limited to all present and future machinery, vehicles, furniture,
fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically (without
limitation) the goods described in any equipment schedule or list herewith
or hereafter furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Funding Date" has the meaning given in Section 2.1.
"Funds From Operations" for a given period means the sum of (i) Net
Income, (ii) depreciation and amortization, (iii) deferred income taxes,
and (iv) other non-cash items, each as determined for such period in
accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.5.
"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter
acquired, including (without limitation) all present and future patents,
patent applications, copyrights, trademarks, trade names, trade secrets,
customer or supplier lists and contracts, manuals, operating instructions,
permits, franchises, the right to use the Borrower's name, and the goodwill
of the Borrower's business.
5
"Guarantor" means ACT Teleconferencing, Inc., a Colorado corporation.
"Hazardous Substance" has the meaning given in Section 5.12.
"Interest Expense" means, for a fiscal year-to-date period, the
Borrower's total gross interest expense during such period (excluding
interest income), and shall in any event include, without limitation, (i)
interest expensed (whether or not paid) on all Debt, (ii) the amortization
of debt discounts, (iii) the amortization of all fees payable in connection
with the incurrence of Debt to the extent included in interest expense, and
(iv) the portion of any capitalized lease obligation allocable to interest
expense.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or
materials, whether acquired, held or furnished for sale, for lease or under
service contracts or for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment property,
as such term is defined in the UCC, whether now owned or hereafter
acquired, including but not limited to all securities, security
entitlements, securities accounts, commodity contracts, commodity accounts,
stocks, bonds, mutual fund shares, money market shares and U.S. Government
securities.
"Loan Documents" means this Agreement, the Note and the Security
Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox and Collection Account Agreement
by and among the Borrower, ▇▇▇▇▇ Fargo Bank, Regulus West, LLC and the
Lender, of even date herewith.
"Maturity Date" means March ____, 2004.
"Maximum Line" means $4,000,000, unless said amount is reduced
pursuant to Section 2.8, in which event it means the amount to which said
amount is reduced.
"Minimum Interest Charge" has the meaning given in Section 2.2(b).
"Net Income" for a period means before-tax net income, excluding
extraordinary gains and losses, as determined for such period in accordance
with GAAP.
"Note" means the Revolving Note.
"Obligations" means the Note and each and every other debt, liability
and obligation of every type and description which the Borrower may now or
at any time hereafter owe to the Lender, whether such debt, liability
or obligation now exists or is
6
hereafter created or incurred, whether it arises in a transaction involving
the Lender alone or in a transaction involving other creditors of the
Borrower, and whether it is direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated,
or sole, joint, several or joint and several, and including specifically,
but not limited to, all indebtedness of the Borrower arising under this
Agreement, the Note or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Permitted Intercompany Debt" means indebtedness of the Borrower owing
to a Sister Company which is represented on the books of the Borrower as an
accounts payable in favor of such Sister Company.
"Permitted Intercompany Advances" means loans or advances by the
Borrower to a Sister Company which are represented on the books of the
Borrower as accounts receivable owing to the Borrower by such Sister
Company.
"Permitted Intercompany Transfers" means the balance of (i) Permitted
Intercompany Debt after setoff by Borrower of any Permitted Intercompany
Advances or (ii) Permitted Intercompany Advances after setoff by Borrower
of any Permitted Intercompany Debt, as applicable; provided that the
--------
Borrower maintains, with the consent of the applicable Sister Company, the
right to setoff all applicable accounts receivable and accounts payable
relating to any such Permitted Intercompany Transfer.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including (without limitation) the
premises described in Exhibit D attached hereto.
"Prime Rate" means the rate of interest publicly announced from time
to time by ▇▇▇▇▇ Fargo Bank, N.A.-San Francisco as its "prime rate" or, if
such bank ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out
of a loan, out of the overpayment of taxes or other liabilities, or
otherwise arises under any contract or agreement, whether such right to
payment is created, generated or earned by the Borrower or by some other
person who
7
subsequently transfers such person's interest to the Borrower, whether such
right to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the Borrower
may at any time have by law or agreement against any account debtor or
other obligor obligated to make any such payment or against any property of
such account debtor or other obligor; all including but not limited to all
present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Credit Facility" means the revolving credit facility being
made available to the Borrower by the Lender pursuant to Section 2.1 and
Article II generally.
"Revolving Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus one-half of one percent (0.50%), which annual rate shall
change when and as the Prime Rate changes.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto and any note or notes issued in substitution therefor, as the same
may hereafter be amended, supplemented or restated from time to time.
"Security Documents" means this Agreement, the Lockbox Agreement, and
any other document delivered to the Lender from time to time to secure the
Obligations, as the same may hereafter be amended, supplemented or restated
from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Sister Company" means a Subsidiary of the Guarantor other than the
Borrower.
"Subordination Agreement" means the Subordination Agreement of even
date herewith, executed by the Guarantor in the Lender's favor and
acknowledged by the Borrower, and any other subordination agreement
accepted by the Lender from time to time, as the same may hereafter be
amended, supplemented or restated from time to time.
"Subsidiary" means any corporation or other entity of which more than
50% of the outstanding shares of capital stock or other ownership interests
having general voting power under ordinary circumstances to elect a
majority of the board of directors or other governing body of such entity,
irrespective of whether or not at the time stock or other equity interests
of any other class or classes shall have or might have voting power by
reason of the happening of any contingency, is at the time directly or
indirectly owned by
8
the Borrower, by the Borrower and one or more other Subsidiaries, or by one
or more other Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default
pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in Section 9.13 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion hereof.
"Unbilled Account Cap" means the lesser of (A) $750,000 and (B) 40%
of all Accounts.
"▇▇▇▇▇ Fargo Bank" means ▇▇▇▇▇ Fargo Bank West, National Association.
Section 1.2 Cross References. All references in this Agreement to
----------------
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
Amount and Terms of the Credit Facility
---------------------------------------
Section 2.1 Revolving Advances. The Lender agrees, on the terms and
-------------------
subject to the conditions herein set forth, to make advances to the Borrower
from time to time from the date all of the conditions set forth in Section 4.1
are satisfied or waived in writing by the Lender (the "Funding Date") to the
Termination Date (the "Revolving Advances"). The Lender shall have no obligation
to make a Revolving Advance if, after giving effect to such requested Revolving
Advance, the sum of the outstanding and unpaid Revolving Advances would exceed
the Borrowing Base. The Borrower's obligation to pay the Revolving Advances
shall be evidenced by the Revolving Note and shall be secured by the Collateral
as provided in Article III. Within the limits set forth in this Section 2.1,
the Borrower may borrow, prepay pursuant to Section 2.6 and reborrow. The
Borrower agrees to comply with the following procedures in requesting Revolving
Advances under this Section 2.1:
(a) The Borrower shall make each request for a Revolving Advance to
the Lender before 11:00 a.m. (Denver time) of the day of the requested
Revolving Advance. Requests may be made in writing or by telephone,
specifying the date of the requested Revolving Advance and the amount
thereof. Each request shall be by (i) any officer of the Borrower; or (ii)
any person designated as the Borrower's agent by any officer of the
Borrower in a writing delivered to the Lender; or (iii) any person whom the
Lender reasonably believes to be an officer of the Borrower or such a
designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the
9
same to the Borrower's demand deposit account maintained with ▇▇▇▇▇ Fargo
Bank unless the Lender and the Borrower shall agree in writing to another
manner of disbursement. Upon the Lender's request, the Borrower shall
promptly confirm each telephonic request for an Advance by executing and
delivering an appropriate confirmation certificate to the Lender. The
Borrower shall repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in fact
authorized to do so. Any request for an Advance, whether written or
telephonic, shall be deemed to be a representation by the Borrower that
the conditions set forth in Section 4.2 have been satisfied as of the time
of the request.
Section 2.2 Interest; Minimum Interest Charge; Default Interest; Usury.
----------------------------------------------------------
(a) Revolving Note. Except as set forth in Sections 2.4(c) and
2.4(e), the outstanding principal balance of the Revolving Note shall bear
interest at the Revolving Floating Rate. Interest accruing on the Revolving
Note shall be due and payable in arrears on the first day of each
month.
(b) Minimum Interest Charge. Notwithstanding the interest payable
pursuant to Sections 2.4(a), the Borrower shall pay to the Lender interest
on the Advances of not less than $10,000 per calendar month prorated for
periods shorter than one month (the "Minimum Interest Charge") during the
term of this Agreement, and the Borrower shall pay any deficiency between
the Minimum Interest Charge and the amount of interest otherwise calculated
under Sections 2.4(a) and 2.4(c) on the date and in the manner provided in
Section 2.4.
(c) Default Interest Rate. At any time during any Default Period, in
the Lender's sole discretion and without waiving any of its other rights
and remedies, the principal of the Advances outstanding from time to time
shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(d) Participations. If any Person shall acquire a participation in
the Advances under this Agreement, the Borrower shall be obligated to the
Lender to pay the full amount of all interest calculated under this
Agreement, along with all other fees, charges and other amounts due under
this Agreement, regardless if such Person elects to accept interest with
respect to its participation at a lower rate than the Revolving Floating
Rate, or otherwise elects to accept less than its prorata share of such
fees, charges and other amounts due under this Agreement.
(e) Usury. In any event no rate change shall be put into effect
which would result in a rate greater than the highest rate permitted by
law. Notwithstanding anything to the contrary contained in any Loan
Document, all agreements which either now are or which shall become
agreements between the Borrower and the Lender are hereby limited so that
in no contingency or event whatsoever shall the total liability for
payments in the nature of interest,additional interest and other charges
exceed the applicable limits imposed by any applicable usury laws.If any
payments in the nature of interest,
10
additional interest and other charges made under any Loan Document are held
to be in excess of the limits imposed by any applicable usury laws, it is
agreed that any such amount held to be in excess shall be considered
payment of principal hereunder, and the indebtedness evidenced hereby
shall be reduced by such amount so that the total liability for payments
in the nature of interest, additional interest and other charges shall not
exceed the applicable limits imposed by any applicable usury laws, in
compliance with the desires of the Borrower and the Lender. This
provision shall never be superseded or waived and shall control every
other provision of the Loan Documents and all agreements between the
Borrower and the Lender, or their successors and assigns.
Section 2.3 Fees.
----
(a) Origination Fee. The Borrower hereby agrees to pay the Lender a
fully earned and non-refundable origination fee of $10,000, due and
payable upon the execution of this Agreement. The Lender acknowledges
receipt of $14,000 toward payment of this fee and the fees, costs and
expenses described in Sections 2.3(d) and 9.6.
(b) Facility Fee. The Borrower hereby agrees to pay the Lender a
fully earned, non-refundable facility fee in an amount equal to one-half
of one percent (0.50%) of the Maximum Line, due and payable on the first
anniversary of this Agreement and on each anniversary thereafter, but not
on the Termination Date.
(c) Unused Line Fees.
(i) For the purposes of this Section 2.3(c)(i), "Unused
Amount" means the Maximum Line reduced by the aggregate amount of the
outstanding Revolving Advances. The Borrower agrees to pay to
the Lender an unused line fee on the Revolving Credit Facility at the
rate of one-quarter of one percent (0.25%) per annum on the average
daily Unused Amount from the date of this Agreement to and including
the Termination Date, due and payable monthly in arrears on the first
day of the month and on the Termination Date.
(d) Audit Fees. The Borrower hereby agrees to pay the Lender, on
demand, audit fees in connection with any audits or inspections conducted
by the Lender of any Collateral or the Borrower's operations or business
at the rates established from time to time by the Lender as its audit fees
(which fees are currently $80 per hour per auditor), together with all
actual out-of-pocket costs and expenses incurred in conducting any such
audit or inspection.
Section 2.4 Computation of Interest and Fees; When Interest Due and
-------------------------------------------------------
Payable. Interest accruing on the outstanding principal balance of the Advances
-------
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest on the
Revolving Advances shall be payable in arrears on the first day of each month
and on the Termination Date.
11
Section 2.5 Capital Adequacy. If any Related Lender determines at any
-----------------
time that its Return has been reduced as a result of any Rule Change, such
Related Lender may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Rule Change. For
purposes of this Section 2.5:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy, or
the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules requiring financial institutions to maintain total capital in
amounts based upon percentages of outstanding loans, binding loan
commitments and letters of credit.
(b) "Return," for any period, means the return as determined by such
Related Lender on the Advances based upon its total capital requirements
and a reasonable attribution formula that takes account of the Capital
Adequacy Rules then in effect. Return may be calculated for each calendar
quarter and for the shorter period between the end of a calendar quarter
and the date of termination in whole of this Agreement.
(c) "Rule Change" means any change in any Capital Adequacy Rule
occurring after the date of this Agreement, but the term does not include
any changes in applicable requirements that at the date of this Agreement
are scheduled to take place under the existing Capital Adequacy Rules or
any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a regulatory
authority's assessment of the financial condition of such Related Lender.
(d) "Related Lender" includes (but is not limited to) the Lender,
any parent corporation of the Lender and any assignee of any interest of
the Lender hereunder and any participant in the loans made hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Section 2.6 Voluntary Prepayment; Reduction of the Maximum Line;
----------------------------------------------------
Termination of the Credit Facility by the Borrower. Except as otherwise
--------------------------------------------------
provided herein, the Borrower may prepay the Revolving Advances in whole at
any time or from time to time in part. The Borrower may terminate the Credit
Facility or reduce the Maximum Line at any time if it (i) gives the Lender at
least 30 days' prior written notice and (ii) pays the Lender the prepayment,
termination or line reduction fees in accordance with Section 2.7. Any
reduction in the Maximum Line must be in an amount not less than $50,000 or an
integral multiple thereof. If the Borrower reduces the Maximum Line to zero,
all Obligations shall be immediately due and payable. Upon termination of the
Credit Facility and payment and performance of all Obligations, the Lender
shall release
12
or terminate the Security Interest and the Security Documents to
which the Borrower is entitled by law.
Section 2.7 Termination, Line Reduction and Prepayment Fees; Waiver
---------------------------------------------------------
of Termination, Prepayment and Line Reduction Fees.
----------------------------------------------------
(a) Termination and Line Reduction Fees. If the Credit Facility is
terminated for any reason as of a date other than the Maturity Date, or
the Borrower reduces the Maximum Line, the Borrower shall pay to the
Lender a fee in an amount equal to a percentage of the Maximum Line (or the
reduction, as the case may be) as follows:(i) three percent (3.0%) if
the termination or reduction occurs on or before the first anniversary of
the Funding Date; (ii) two percent (2.0%) if the termination or reduction
occurs after the first anniversary of the Funding Date but on or before
the second anniversary of the Funding Date; and (iii) one percent (1.0%)
if the termination or reduction occurs after the second anniversary of the
Funding Date.
(b) Waiver of Termination, Line Reduction and Prepayment Fees. The
Borrower will not be required to pay the termination, line reduction and
prepayment fees otherwise due under this Section 2.7 if such termination,
line reduction or prepayment is made because of refinancing of the Borrower
by an affiliate of the Lender.
Section 2.8 Mandatory Prepayment. Without notice or demand, if the
--------------------
outstanding principal balance of the Revolving Advances shall at any time
exceed the Borrowing Base, the Borrower shall immediately prepay the Revolving
Advances to the extent necessary to eliminate such excess. Any payment received
by the Lender under this Section 2.8 or under Section 2.6 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its
discretion, may from time to time determine.
Section 2.9 Payment. All payments to the Lender shall be made in
-------
immediately available funds and shall be applied to the Obligations one (1)
Banking Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) additional days before
applying them to the Obligations. Notwithstanding anything in Section 2.1, the
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, to make a Revolving Advance in an
amount equal to the portion of the Obligations from time to time due and
payable.
Section 2.10 Payment on Non-Banking Days. Whenever any payment to be
----------------------------
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
Section 2.11 Use of Proceeds. The Borrower shall use the proceeds of
----------------
all Revolving Advances (i) to refinance all existing indebtedness of Borrower
to Coast Business Credit and (ii) for ordinary working capital purposes.
13
Section 2.12 Liability Records. The Lender may maintain from time to
-----------------
time, at its discretion, liability records as to the Obligations. All entries
made on any such record shall be presumed correct until the Borrower
establishes the contrary. Upon the Lender's demand, the Borrower will admit and
certify in writing the exact principal balance of the Obligations that the
Borrower then asserts to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrower
unless the Borrower gives the Lender specific written notice of exception
within 30 days after receipt.
ARTICLE III
Security Interest; Occupancy; Setoff
------------------------------------
Section 3.1 Grant of Security Interest. The Borrower hereby pledges,
---------------------------
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other Obligors. The
---------------------------------------------------
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor or other person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and
shall be paid directly to the Lender; provided, however, that if no Default
-------- -------
Period then exists, the Lender agrees to provide two (2) Banking Days notice to
the Borrower of its intent to so notify account debtors or such others
obligors. The Borrower will join in giving such notice if the Lender so
requests. At any time after the Borrower or the Lender gives such notice to an
account debtor or other obligor, the Lender may, but need not, in the Lender's
name or in the Borrower's name, (a) demand, ▇▇▇ for, collect or receive any
money or property at any time payable or receivable on account of, or securing,
any such right to payment, or grant any extension to, make any compromise or
settlement with or otherwise agree to waive, modify, amend or change the
obligations (including collateral obligations) of any such account debtor or
other obligor; and (b) as the Borrower's agent and attorney-in-fact, notify the
United States Postal Service to change the address for delivery of the
Borrower's mail to any address designated by the Lender, otherwise intercept
the Borrower's mail, and receive, open and dispose of the Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for the Borrower's account or forwarding such mail to the Borrower's last
known address.
Section 3.3 Assignment of Insurance. As additional security for the
------------------------
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, any and all policies of insurance now
or at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks
14
and other instruments representing payment of such monies, and adjust,
litigate, compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
---------
(a) The Borrower hereby irrevocably grants to the Lender the right to
take possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose
of goods that are Collateral and for other purposes that the Lender may in
good ▇▇▇▇▇ ▇▇▇▇ to be related or incidental purposes.
(but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Obligations
and termination of the Commitment, and (ii) final sale or disposition of
all goods constituting Collateral and delivery of all such goods to
purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for any
rent or other compensation for the possession, occupancy or use of any of
the Premises, the Borrower shall reimburse the Lender promptly for the full
amount thereof. In addition, the Borrower will pay, or reimburse the Lender
for, all taxes, fees, duties, imposts, charges and expenses at any time
incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4.
Section 3.5 License. The Borrower hereby grants to the Lender a
-------
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
Section 3.6 Financing Statement. A carbon, photographic or other
-------------------
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtor:
ACT Teleconferencing Services, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
15
Name and address of Secured Party:
▇▇▇▇▇ Fargo Business Credit, Inc.
MAC C7300-300
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Section 3.7 Setoff. During any Default Period, the Borrower agrees
------
that the Lender may, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due, against any Obligation, whether or not due. In addition,
during such Default Period, each other Person holding a participating interest
in any Obligations shall have the right to appropriate or setoff any deposit or
other liability then owed by such Person to the Borrower, whether or not due,
and apply the same to the payment of said participating interest, as fully as
if such Person had lent directly to the Borrower the amount of such
participating interest.
ARTICLE IV
Conditions of Lending
---------------------
Section 4.1 Conditions Precedent to the Initial Revolving Advances.
------------------------------------------------------
The Lender's obligation to make the initial Revolving hereunder shall be
subject to the condition precedent that the Lender shall have received all of
the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Premises, together with a landlord's disclaimer
and consent with respect to each such lease.
(d) An acknowledgment and waiver of liens from each public
warehouse in which the Borrower is storing Inventory.
(e) An acknowledgment and agreement from each licensor in favor of
the Lender, together with a true, correct and complete copy of all license
agreements.
(f) The Lockbox Agreement, properly executed by the Borrower, ▇▇▇▇▇
Fargo Bank and Regulus West, LLC.
(g) The Subordination Agreement, properly executed by the Guarantor,
and acknowledged by the Borrower.
16
(h) Current searches of appropriate filing offices showing that (i)
no state or federal tax liens have been filed and remain in effect against
the Borrower, (ii) no financing statements or assignments of patents,
trademarks or copyrights have been filed and remain in effect against
the Borrower except those financing statements and assignments of
patents, trademarks or copyrights relating to Permitted Liens or to liens
held by Persons who have agreed in writing that upon receipt of proceeds of
the Advances, they will deliver UCC releases and/or terminations and
releases of such assignments of patents, trademarks or copyrights
satisfactory to the Lender, and (iii) the Lender has duly filed all
financing statements necessary to perfect the Security Interest, to the
extent the Security Interest is capable of being perfected by filing.
(i) A certificate of the Borrower's Secretary or Assistant Secretary
certifying as to (i) the resolutions of the Borrower's directors and, if
required, shareholders, authorizing the execution, delivery and performance
of the Loan Documents, (ii) the Borrower's articles of incorporation and
bylaws, and (iii) the signatures of the Borrower's officers or agents
authorized to execute and deliver the Loan Documents and other instruments,
agreements and certificates, including Advance requests, on the Borrower's
behalf.
(j) A current certificate issued by the Secretary of State of
Minnesota, certifying that the Borrower is in compliance with all
applicable organizational requirements of the State of Minnesota.
(k) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary.
(l) A certificate of an officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article
V.
(m) An opinion of counsel to the Borrower and the Guarantor,
addressed to the Lender.
(n) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in the Lender's
favor and with all liability insurance naming the Lender as an additional
insured.
(o) A guaranty, properly executed by the Guarantor, pursuant to which
the Guarantor unconditionally guarantees the full and prompt payment of
all Obligations.
(p) Evidence that the Borrower will have Availability of at least
$300,000 immediately following the Advances made on the Funding Date,
which Advances shall be in an amount sufficient to retire all of the
Borrower's indebtedness to Coast Business Credit.
17
(q) Receipt by Lender of a pay-off letter from Coast Business Credit
including, without limitation, acknowledgments that upon payment of the
outstanding indebtedness of the Borrower, (i) Coast Business Credit's
revolving line of credit shall be terminated and (ii) any financing
statements filed against the Borrower for the benefit of Coast Business
Credit shall be terminated.
(r) Receipt by Lender of a pay-off letter from Finova Mezzanine
Capital, Inc. including, without limitation, acknowledgments that upon
payment of the outstanding indebtedness of the Borrower, (i) the credit
facility provided by Finova Mezzanine Capital Inc. to Guarantor shall be
terminated and (ii) any financing statements filed against the Guarantor or
the Borrower for the benefit of Finova Mezzanine Capital Inc. shall be
terminated.
(s) Receipt by Lender of an intercreditor agreement by and between
the Lender and ▇▇▇▇▇ Fargo Bank, N.A., duly executed by the parties
thereto and in form and substance acceptable to the Lender.
(t) Receipt by Lender of a side letter executed by Equitas, L.P.,
in form and substance acceptable to the Lender, pursuant to which Equitas,
L.P. acknowledges that it has no security interest in the Borrower.
(u) Payment of the fees and commissions due through the date of the
initial Advance under Section 2.3 and expenses incurred by the Lender
through such date and required to be paid by the Borrower under Section
9.6, Including all legal expenses incurred through the date of this
Agreement.
(v) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 Conditions Precedent to All Advances. The Lender's
------------------------------------
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance as though made on and as of
such date, except to the extent that such representations and warranties
relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief Executive
----------------------------------------------------
Office; Inventory and Equipment Locations; Tax Identification Number. The
--------------------------------------------------------------------
Borrower is a corporation,
18
duly organized, validly existing and in good standing under the laws of the
State of Minnesota and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary. The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents. During
its existence, the Borrower has done business solely under the names set forth
in Schedule 5.1 hereto. The Borrower's chief executive office and principal
place of business is located at the address set forth in Schedule 5.1 hereto,
and all of the Borrower's records relating to its business or the Collateral are
kept at that location. All Inventory and Equipment is located at that location
or at one of the other locations set forth in Schedule 5.1 hereto. The
Borrower's tax identification number is correctly set forth in Section 3.6
hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law or
----------------------------------------------------
Agreements. The execution, delivery and performance by the Borrower of the Loan
----------
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate or other action and do not and will not
(i) require any consent or approval of the Borrower's stockholders or members;
(ii) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given prior
to the date hereof; (iii) violate any provision of any law, rule or regulation
(including, without limitation, Regulation X of the Board of Governors of the
Federal Reserve System) or of any order, writ, injunction or decree presently
in effect having applicability to the Borrower or of the Borrower's articles of
incorporation or bylaws; (iv) result in a breach of or constitute a default
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 it
or its properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
Section 5.3 Legal Agreements. This Agreement constitutes and, upon due
----------------
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
Section 5.4 Subsidiaries. Except as set forth in Schedule 5.4 hereto, the
------------
Borrower has no Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change. The Borrower has
--------------------------------------
heretofore furnished to the Lender its unaudited financial statements for the
fiscal years ended (i) December 31, 1997, (ii) December 31, 1998, and (iii)
December 31, 1999 and its unaudited financial statements for the period ending
November 30, 2000, and those statements fairly present the Borrower's financial
condition on the dates thereof and the results of its operations and cash flows
for the periods then ended and were prepared in accordance with generally
19
accepted accounting principles. Since the date of the most recent financial
statements, there has been no material adverse change in the Borrower's
business, properties or condition (financial or otherwise).
Section 5.6 Litigation. There are no actions, suits or proceedings
----------
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates.
Section 5.7 Regulation U. The Borrower is not engaged in the business
------------
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes. The Borrower and its Affiliates have paid or caused
-----
to be paid to the proper authorities when due all federal, state and local
taxes required to be withheld by each of them. The Borrower and its Affiliates
have filed all federal, state and local tax returns which to the knowledge of
the officers of the Borrower or any Affiliate, as the case may be, are required
to be filed, and the Borrower and its Affiliates have paid or caused to be paid
to the respective taxing authorities all taxes as shown on said returns or on
any assessment received by any of them to the extent such taxes have become due.
Section 5.9 Titles and Liens. The Borrower has good and absolute title
----------------
to all Collateral described in the collateral reports provided to the Lender
and all other Collateral, properties and assets reflected in the latest
financial statements referred to in Section 5.5 and all proceeds thereof, free
and clear of all mortgages, security interests, liens and encumbrances, except
for Permitted Liens. No financing statement naming the Borrower as debtor is on
file in any office except to perfect only Permitted Liens.
Section 5.10 Plans. Except as disclosed to the Lender in writing prior
-----
to the date hereof, neither the Borrower nor any of its Affiliates maintains or
has maintained any Plan. Neither the Borrower nor any Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified
status exists in connection with any Plan. Neither the Borrower nor any of its
Affiliates has:
(a) Any accumulated funding deficiency within the meaning of ERISA;
or
(b) Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which are or which
may become payable to participants or beneficiaries of any such Plan).
20
Section 5.11 Default. The Borrower is in compliance with all
-------
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.12 Environmental Matters.
---------------------
(a) Definitions. As used in this Agreement, the following
-----------
terms shall have the following meanings:
(i) "Environmental Law" means any federal,
state, local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not
present in, on or under the Premises any Hazardous Substances in such
form or quantity as to create any liability or obligation for either
the Borrower or the Lender under common law of any jurisdiction or
under any Environmental Law, and to the Borrower's best knowledge, no
Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such
a way as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Borrower and, to
the Borrower's best knowledge, the Premises, alleging liability
under, violation of, or noncompliance with any Environmental Law or
any license, permit or other authorization issued pursuant thereto.
To the Borrower's best knowledge, no such matter is threatened or
impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in
accordance with all Environmental Laws and all licenses, permits and
other authorizations required pursuant to any Environmental Law and
necessary for the lawful and efficient operation of such businesses
are in the Borrower's possession and are in full force and effect. To
the Borrower's best knowledge, no permit required under any
Environmental Law is scheduled to expire within 12 months and there
is no threat that any such permit will be withdrawn, terminated,
limited or materially changed.
21
(f) To the Borrower's best knowledge, the Premises are not
and never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Borrower's businesses or, to
the Borrower's best knowledge, the Premises.
Section 5.13 Submissions to Lender. All financial and other
---------------------
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.14 Financing Statements. The Borrower has provided
--------------------
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which
is capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in
effect with respect thereto.
Section 5.15 Rights to Payment. Each right to payment and each
-----------------
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be
when arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 Financial Solvency. Both before and after giving
------------------
effect to the transactions contemplated in the Loan Documents, none of the
Borrower or its Affiliates:
(a) was or will be insolvent, as that term is used and
defined in Section 101(32) of the United States Bankruptcy Code and
Section 2 of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or
about to engage in a business or a transaction for which any remaining
assets of the Borrower or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its
obligations under the Loan Documents or other documents to which it
is a party or by taking any action with respect
22
thereto, intends to, nor believes that it will, incur debts beyond
its ability to pay them as they mature;
(d) by executing, delivering or performing its
obligations under the Loan Documents or other documents to which it
is a party or by taking any action with respect thereto, intends to
hinder, delay or defraud either its present or future creditors; and
(e) at this time contemplates filing a petition in
bankruptcy or for an arrangement or reorganization or similar
proceeding under any law of any jurisdiction, or, to the best
knowledge of the Borrower, is the subject of any actual, pending or
threatened bankruptcy, insolvency or similar proceedings under any
law of any jurisdiction.
ARTICLE VI
Borrower's Affirmative Covenants
--------------------------------
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrower will deliver,
----------------------
or cause to be delivered, to the Lender each of the following, which shall be
in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within
120 days after the end of each fiscal year of the Borrower, the
Borrower's audited financial statements with the unqualified opinion
of independent certified public accountants selected by the Borrower
and acceptable to the Lender, which annual financial statements shall
include the Borrower's balance sheet as at the end of such fiscal
year and the related statements of the Borrower's income, retained
earnings and cash flows for the fiscal year then ended, prepared, if
the Lender so requests, on a consolidating and consolidated basis to
include any Affiliates, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management
letters prepared by such accountants; (ii) a report signed by such
accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically
stated, of any Default or Event of Default hereunder and all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements
set forth in Sections 6.12, 6.13, 6.14, and 7.10; and (iii) a
certificate of the Borrower's chief financial officer stating that
such financial statements have been prepared in accordance with GAAP
and whether or not such officer has knowledge of the occurrence of
any Default or Event of Default hereunder and, if so, stating in
reasonable detail the facts with respect thereto;
(b) as soon as available and in any event within 20 days
after the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the
end of and for such month and for the year to date
23
period then ended, prepared, if the Lender so requests, on a
consolidating and consolidated basis to include any Affiliates, in
reasonable detail and stating in comparative form the figures for the
corresponding date and periods in the previous year, all prepared in
accordance with GAAP, subject to year-end audit adjustments; and
accompanied by a certificate of the Borrower's chief financial
officer, substantially in the form of Exhibit C hereto stating (i)
that such financial statements have been prepared in accordance with
GAAP, subject to year-end audit adjustments, (ii) whether or not such
officer has knowledge of the occurrence of any Default or Event of
Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto, and
(iii) all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with
the requirements set forth in Sections 6.12, 6.13, 6.14, and 7.10;
(c) within 20 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrower's
accounts receivable and its accounts payable, and a calculation of
the Borrower's Accounts and Eligible Accounts as at the end of such
month or shorter time period;
(d) daily, receivables schedules, collection reports,
deposit records, copies of invoices to account debtors in excess of
$100,000, and credit memos;
(e) monthly, or more frequently if the Lender so
requires, reports showing minutes used to support all Eligible
Unbilled Receivables;
(f) at least 30 days before the beginning of each fiscal
year of the Borrower, the projected balance sheets and income
statements for each month of such year, each in reasonable detail,
representing the Borrower's good faith projections and certified by
the Borrower's chief financial officer as being the most accurate
projections available and identical to the projections used by the
Borrower for internal planning purposes, together with such
supporting schedules and information as the Lender may in its
discretion require;
(g) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 5.12 or which seek a monetary recovery against
the Borrower in excess of $50,000;
(h) as promptly as practicable (but in any event not
later than five business days) after an officer of the Borrower
obtains knowledge of the occurrence of any breach, default or event
of default under any Security Document or any event which constitutes
a Default or Event of Default hereunder, notice of such occurrence,
together with a detailed statement by a responsible officer of the
Borrower of the steps being taken by the Borrower to cure the effect
of such breach, default or event;
(i) as soon as possible and in any event within 30 days
after the Borrower knows or has reason to know that any Reportable
Event with respect to any Plan has
24
occurred, the statement of the Borrower's chief financial officer
setting forth details as to such Reportable Event and the action
which the Borrower proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event to the Pension
Benefit Guaranty Corporation;
(j) as soon as possible, and in any event within 10 days
after the Borrower fails to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue
Code of 1986, as amended, the statement of the Borrower's chief
financial officer setting forth details as to such failure and the
action which the Borrower proposes to take with respect thereto,
together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(k) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding $30,000
individually or $60,000 in the aggregate during any fiscal year of
Borrower; (ii) any goods returned to or recovered by the Borrower;
and (iii) any change in the persons constituting the Borrower's
officers and directors or other governing body;
(l) promptly upon knowledge thereof, notice of any loss
of or material damage to any Collateral or other collateral covered
by the Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment
thereof;
(m) promptly upon their distribution, copies of all
financial statements, reports and proxy statements which the Borrower
shall have sent to its stockholders or other equity holders;
(n) promptly after the sending or filing thereof, copies
of all regular and periodic reports which the Borrower shall file
with the Securities and Exchange Commission or any national
securities exchange;
(o) as soon as possible, and in any event by not later
than April 30th of each year, an updated financial statement of the
Guarantor and copies of the state and federal tax returns and all
schedules thereto of each of the Borrower and the Guarantor;
(p) promptly upon knowledge thereof, notice of the
Borrower's violation of any law, rule or regulation, the
non-compliance with which could materially and adversely affect the
Borrower's business or its financial condition; and
(q) from time to time, with reasonable promptness,
equipment schedules, copies of invoices to account debtors, shipment
documents and delivery receipts for goods sold, and such other
material, reports, records or information as the Lender may request.
25
Section 6.2 Books and Records; Inspection and Examination. The
---------------------------------------------
Borrower will keep accurate books of record and account for itself pertaining
to the Collateral and pertaining to the Borrower's business and financial
condition and such other matters as the Lender may from time to time request in
which true and complete entries will be made in accordance with GAAP and, upon
the Lender's request, will permit any officer, employee, attorney or accountant
for the Lender to audit, review, make extracts from or copy any and all
corporate and financial books and records of the Borrower at all times during
ordinary business hours, to send and discuss with account debtors and other
obligors requests for verification of amounts owed to the Borrower, and to
discuss the Borrower's affairs with any of its directors, officers, employees,
agents, members or managers. The Borrower will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any
Collateral, other collateral covered by the Security Documents or any other
property of the Borrower at any time during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time
--------------------
and from time to time send or require the Borrower to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time contact account
debtors and other obligors by telephone or other means to verify accounts.
Section 6.4 Compliance with Laws.
--------------------
(a) Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial
condition and (ii) use and keep the Collateral, and require that
others use and keep the Collateral, only for lawful purposes, without
violation of any federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the
Borrower specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses
and similar approvals required by any Environmental Laws, and will
not generate, use, transport, treat, store or dispose of any
Hazardous Substances in such a manner as to create any liability or
obligation under the common law of any jurisdiction or any
Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrower
---------------------------------
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to it (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrower; provided, that the Borrower
shall not be required to pay any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made.
26
Section 6.6 Maintenance of Properties.
-------------------------
(a) The Borrower will keep and maintain the Collateral,
the other collateral covered by the Security Documents and all of its
other properties necessary or useful in its business in good
condition, repair and working order (normal wear and tear excepted)
and will from time to time replace or repair any worn, defective,
obsolete or broken parts; provided, however, that nothing in this
Section 6.6 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties if such
discontinuance is, in the Lender's judgment, desirable in the conduct
of the Borrower's business and not disadvantageous in any material
respect to the Lender.
(b) The Borrower will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other
collateral covered by the Security Documents free and clear of all
security interests, liens and encumbrances except Permitted Liens.
Section 6.7 Insurance. The Borrower will obtain and at all
---------
times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrower operates. Without limiting the generality of the foregoing, the
Borrower will at all times maintain business interruption insurance including
coverage for force majeure and keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall
name the Lender as an additional insured.
Section 6.8 Preservation of Existence. The Borrower will
-------------------------
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
----------------------------
Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly
endorsed or assigned by the Borrower.
Section 6.10 Lockbox; Collateral Account.
---------------------------
(a) The Borrower shall irrevocably direct all present and
future Account debtors and other Persons obligated to make payments
constituting Collateral to make such payments directly to the
Lockbox. All of the Borrower's invoices, account statements and other
written or oral communications directing, instructing, demanding or
27
requesting payment of any Account or any other amount constituting
Collateral shall conspicuously direct that all payments be made to
the Lockbox and shall include the Lockbox address. All payments
received in the Lockbox shall be processed to the Collateral Account.
(b) The Borrower agrees to deposit in the Collateral
Account or, at the Lender's option, to deliver to the Lender all
collections on Accounts, contract rights, chattel paper and other
rights to payment constituting Collateral, and all other cash
proceeds of Collateral, which the Borrower may receive directly
notwithstanding its direction to Account debtors and other obligors
to make payments to the Lockbox, immediately upon receipt thereof, in
the form received, except for the Borrower's endorsement when deemed
necessary. Until delivered to the Lender or deposited in a
Collateral Account, all proceeds or collections of Collateral shall
be held in trust by the Borrower for and as the property of the
Lender and shall not be commingled with any funds or property of the
Borrower.
(c) Amounts deposited in the Collateral Account shall not
bear interest and shall not be subject to withdrawal by the Borrower,
except after full payment and discharge of all Obligations.
(d) All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of
the Obligations. The Lender from time to time, shall, at the
Borrower's request, after allowing two Banking Day, apply deposited
funds in the Collateral Account to the payment of the Obligations, in
any order or manner of application satisfactory to the Lender, by
transferring such funds to the Lender's general account, and such
deposits shall be applied to the Obligations after allowing an
additional Banking Day for processing.
(e) All items deposited in the Collateral Account shall
be subject to final payment. If any such item is returned
uncollected, the Borrower will immediately pay the Lender, or, for
items deposited in the Collateral Account, the bank maintaining such
account, the amount of that item, or such bank at its discretion may
charge any uncollected item to the Borrower's commercial account or
other account. The Borrower shall be liable as an endorser on all
items deposited in the Collateral Account, whether or not in fact
endorsed by the Borrower.
Section 6.11 Performance by the Lender. If the Borrower at any
-------------------------
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.5, 6.7 and
6.10, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrower (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors
28
or other obligors, the procurement and maintenance of insurance, the execution
of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrower shall thereupon pay to the Lender
on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the
Lender in connection with or as a result of the performance or observance of
such agreements or the taking of such action by the Lender, together with
interest thereon from the date expended or incurred at the Revolving Floating
Rate. To facilitate the Lender's performance or observance of such covenants of
the Borrower, the Borrower hereby irrevocably appoints the Lender, or the
Lender's delegate, acting alone, as the Borrower's attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or file in
the name and on behalf of the Borrower any and all instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and other agreements and writings required to be obtained, executed,
delivered or endorsed by the Borrower under this Section 6.11.
Section 6.12 Minimum Book Net Worth. The Borrower will
----------------------
maintain, as of each date described below, its Book Net Worth, at an amount not
less than the amount set forth opposite such date:
Date Minimum Book Net Worth
---- ----------------------
January 31, 2001 $6,737,000
February 28, 2001 $6,836,000
March 31, 2001 $7,015,000
April 30, 2001 $7,141,000
May 31, 2001 $7,412,000
June 30, 2001 $7,659,000
July 31, 2001 $7,866,000
August 31, 2001 $8,135,000
September 30, 2001 $8,460,000
October 31, 2001 $8,905,000
November 30, 2001 $9,274,000
December 31, 2001 and the $9,569,000
last day of each month
thereafter
Section 6.13 Minimum Net Income. The Borrower will achieve as
------------------
of each date described below, fiscal year-to-date Net Income of not less than
the amount set forth opposite such date:
Period Minimum Net Income
------ ------------------
Three months ended
March 31, 2001 $444,000
Six months ended
June 30, 2001 $1,089,000
29
Period Minimum Net Income
------ ------------------
Nine months ended
September 30, 2001 $1,890,000
Twelve months ended
December 31, 2001 $2,999,000
Section 6.14 Minimum Debt Service Coverage Ratio. The Borrower
-----------------------------------
will maintain, as of the last day of each fiscal year of Borrower, a Debt
Service Coverage Ratio of not less than 2.75 to 1.00.
Section 6.15 New Covenants. On or before December 31, 2001,
-------------
the Borrower and the Lender shall agree on new covenant levels for Sections
6.12, 6.13, 6.14 and 7.10 for periods after such date. The new covenant levels
will be based on the Borrower's projections for such periods and shall be no
less stringent than the present levels, but if the Borrower and the Lender do
not agree, the Lender may designate the required amounts in its sole discretion
and the failure by the Borrower to maintain the designated amounts shall
constitute an Event of Default.
ARTICLE VII
Negative Covenants
------------------
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 Liens. The Borrower will not create, incur or
-----
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the operation of
--------- -------
the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which
is not Collateral or other collateral described in the Security
Documents, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with the
Borrower's business or operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed
in Schedule 7.1 hereto, securing indebtedness for borrowed money
permitted under Section 7.2;
(c) the Security Interest and liens and security
interests created by the Security Documents; and
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding
the lesser of cost or fair market value thereof and so long as no
Default Period is then in existence and none would exist immediately
after such acquisition.
30
Section 7.2 Indebtedness. The Borrower will not incur, create,
------------
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto;
(c) indebtedness relating to liens permitted in
accordance with Section 7.1;
(d) management fees permitted in accordance with Section
7.19; and
(e) Permitted Intercompany Transfers; provided, that such
--------
Permitted Intercompany Transfers do not exceed $250,000 in the
aggregate in any fiscal year of Borrower.
Section 7.3 Guaranties. The Borrower will not assume,
----------
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the
Borrower for deposit or collection or similar transactions in the
ordinary course of business; and
(b) guaranties, endorsements and other direct or
contingent liabilities in connection with the obligations of other
Persons, in existence on the date hereof and listed in Schedule 7.2
hereto.
Section 7.4 Investments and Subsidiaries.
----------------------------
(a) The Borrower will not purchase or hold beneficially
any stock or other securities or evidences of indebtedness of, make
or permit to exist any loans or advances to, or make any investment
or acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the
United States of America or any agency or instrumentality
thereof whose obligations constitute full faith and credit
obligations of the United States of America having a
maturity of one year or less, commercial paper issued by
U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by ▇▇▇▇▇'▇ Investors Service
or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of
$100,000,000 (which certificates of deposit or bankers'
acceptances are fully insured by the Federal Deposit
Insurance Corporation);
31
(ii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of $30,000;
(iii) advances in the form of progress
payments, prepaid rent not exceeding two (2) months or
security deposits;
(iv) Permitted Intercompany Transfers;
provided, that such Permitted Intercompany Transfers do not
--------
exceed $250,000 in the aggregate in any fiscal year of
Borrower; and
(v) advances or loans to the Guarantor;
provided, that (A) such advances or loans do not exceed at any
--------
time an aggregate amount equal to (x) fifty percent (50%) of
the Borrower's After-Tax Net Income for the Borrower's current
fiscal year-to-date period minus (y) the amount of dividends
-----
or other distributions made by the Borrower to the Guarantor
during such current fiscal year-to-date period and (B) no
Default Period exists or would exist as a result of such
advance or loan.
(b) The Borrower will not create or permit to exist any
Subsidiary, other than any Subsidiary in existence on the date hereof
and listed in Schedule 5.4.
Section 7.5 Dividends. Except as set forth below, the Borrower
---------
will not declare or pay any dividends (other than dividends payable solely in
stock or other equity interests of the Borrower) on any class of its stock or
other equity interests or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or other equity
interests or make any distribution in respect thereof, either directly or
indirectly. Notwithstanding the foregoing, so long as no Default Period exists
or would exist as a result thereof, the Borrower shall be permitted to declare
and/or pay dividends or other distributions to the Guarantor; provided, that
--------
such distributions shall at no time exceed in the aggregate an amount equal to
(i) fifty percent (50%) of the Borrower's After-Tax Net Income for the
Borrower's current fiscal year-to-date period minus (ii) the amount of advances
-----
or loans outstanding from the Borrower to the Guarantor,
Section 7.6 Sale or Transfer of Assets; Suspension of Business
--------------------------------------------------
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
----------
dispose of (i) the stock of or other equity interest in any Subsidiary, (ii)
all or a substantial part of its assets, or (iii) any Collateral or any
interest therein (whether in one transaction or in a series of transactions) to
any other Person other than the sale of Inventory in the ordinary course of
business and will not liquidate, dissolve or suspend business operations. The
Borrower will not in any manner transfer any property without prior or present
receipt of full and adequate consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions. The
--------------------------------------------
Borrower will not consolidate with or merge into any Person, or permit any
other Person to merge into it, or acquire (in a transaction analogous in
purpose or effect to a consolidation or merger) all or substantially all the
assets of any other Person.
32
Section 7.8 Sale and Leaseback. The Borrower will not enter
------------------
into any arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee
such property or any part thereof or any other property which the Borrower
intends to use for substantially the same purpose or purposes as the property
being sold or transferred.
Section 7.9 Restrictions on Nature of Business. The Borrower
----------------------------------
will not engage in any line of business materially different from that
presently engaged in by the Borrower and will not purchase, lease or otherwise
acquire assets not related to its business.
Section 7.10 Capital Expenditures. The Borrower will not incur
--------------------
or contract to incur Capital Expenditures of more than $3,500,000 in the
aggregate during its fiscal year ending December 31, 2001.
Section 7.11 Accounting. The Borrower will not adopt any
----------
material change in accounting principles other than as required by GAAP. The
Borrower will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 Discounts, etc. The Borrower will not, after
--------------
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrower or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the Borrower.
Section 7.13 Defined Benefit Pension Plans. The Borrower will
-----------------------------
not adopt, create, assume or become a party to any defined benefit pension
plan, unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 Other Defaults. The Borrower will not permit any
--------------
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15 Place of Business; Name. The Borrower will not
-----------------------
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not permit any
tangible Collateral or any records pertaining to the Collateral to be located
in any state or area in which, in the event of such location, a financing
statement covering such Collateral would be required to be, but has not in fact
been, filed in order to perfect the Security Interest. The Borrower will not
change its name.
Section 7.16 Organizational Documents; S Corporation Status.
----------------------------------------------
The Borrower will not amend its certificate of incorporation, articles of
incorporation or other analogous organizational document, or its bylaws,
operating agreement, or other analogous operational document. The Borrower will
not become an S Corporation within the meaning of the Internal Revenue Code of
1986, as amended.
33
Section 7.17 Salaries. The Borrower will not pay excessive or
--------
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation. The Borrower will not increase the salary, bonus, commissions,
consultant fees or other compensation of any director, officer or consultant,
or any member of their families, by more than 15% in any one year, either
individually or for all such persons in the aggregate, or pay any such increase
from any source other than profits earned in the year of payment. For the
purposes of this Section 7.17 the term "officers" shall only include (i) ▇▇▇▇▇
▇▇▇▇▇▇▇, as Vice-Chairman, Chief Financial Officer, Treasurer and Secretary;
(ii) ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, as Chairman and Chief Executive Officer; and (iii)
▇▇▇▇ ▇▇▇▇▇▇, as Chief Operating Officer.
Section 7.18 Change in Ownership. The Borrower will not issue
-------------------
or sell any equity interest of the Borrower so as to change the percentage of
voting and non-voting equity interest owned by each of the Borrower's equity
holders, and the Borrower will not permit or suffer to occur the sale,
transfer, assignment, pledge or other disposition of any or all of the issued
and outstanding equity interests of the Borrower.
Section 7.19 Management Fees. The Borrower will not pay
---------------
management fees or similar fees to any Person except that the Borrower may pay
management fees to the Guarantor in an amount not to exceed three percent (3%)
of the Borrower's annual revenues in the aggregate during any fiscal year of
the Borrower, so long as no Default Period exists or would exist immediately
after or as a result of any such payment.
ARTICLE VIII
Events of Default, Rights and Remedies
--------------------------------------
Section 8.1 Events of Default. "Event of Default", wherever
-----------------
used herein, means any one of the following events:
(a) Default in the payment of the Obligations when they
become due and payable;
(b) Default in the payment of any fees, commissions,
costs or expenses required to be paid by the Borrower under this
Agreement;
(c) Default in the performance, or breach, of any
covenant or agreement of the Borrower contained in this Agreement;
(d) The Borrower or the Guarantor shall be or become
insolvent, or admit in writing its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors; or the
Borrower or the Guarantor shall apply for or consent to the
appointment of any receiver, trustee, or similar officer for it or
for all or any substantial part of its property; or such receiver,
trustee or similar officer shall be appointed without the application
or consent of the Borrower or the Guarantor, as the case may be; or
the Borrower or the Guarantor shall institute (by petition,
application, answer, consent or
34
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or
otherwise) against the Borrower or the Guarantor; or any judgment,
writ, warrant of attachment or execution or similar process shall be
issued or levied against a substantial part of the property of the
Borrower or the Guarantor;
(e) A petition shall be filed by or against the Borrower
or the Guarantor under the United States Bankruptcy Code naming the
Borrower or the Guarantor as debtor;
(f) Any representation or warranty made by the Borrower
in this Agreement, by the Guarantor in any guaranty delivered to the
Lender, or by the Borrower (or any of its officers) or the Guarantor
in any agreement, certificate, instrument or financial statement or
other statement contemplated by or made or delivered pursuant to or
in connection with this Agreement or any such guaranty shall prove to
have been incorrect in any material respect when deemed to be
effective;
(g) The rendering against the Borrower of a final
judgment, decree or order for the payment of money in excess of
$75,000 and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 30 consecutive days
without a stay of execution;
(h) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower owed to any Person other
than the Lender, or under any indenture or other instrument under
which any such evidence of indebtedness has been issued or by which
it is governed, or under any lease of any of the Premises, and the
expiration of the applicable period of grace, if any, specified in
such evidence of indebtedness, indenture, other instrument or lease;
(i) Any Reportable Event, which the Lender
determines in good faith might constitute grounds for the termination
of any Plan or for the appointment by the appropriate United States
District Court of a trustee to administer any Plan, shall have
occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Lender; or a
trustee shall have been appointed by an appropriate United States
District Court to administer any Plan; or the Pension Benefit
Guaranty Corporation shall have instituted proceedings to terminate
any Plan or to appoint a trustee to administer any Plan; or the
Borrower shall have filed for a distress termination of any Plan
under Title IV of ERISA; or the Borrower shall have failed to make
any quarterly contribution required with respect to any Plan under
Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
the Borrower's assets in favor of the Plan;
35
(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrower hereunder or under any note;
(k) The Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(l) The Borrower shall fail to pay, withhold, collect or
remit any tax or tax deficiency when assessed or due (other than any
tax deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books
adequate reserves therefor) or notice of any state or federal tax
liens shall be filed or issued;
(m) Default in the payment of any amount owed by the
Borrower to the Lender other than any indebtedness arising hereunder;
(n) The Guarantor shall repudiate, purport to revoke or
fail to perform any of its obligations under the guaranty in favor of
the Lender or the Guarantor shall cease to exist;
(o) The Borrower shall take or participate in any action
which would be prohibited under the provisions of any Subordination
Agreement or make any payment on the Subordinated Fees (as defined in
the Subordination Agreement) or any Subordinated Indebtedness (as
such term may be defined in any Subordination Agreement) that any
Person was not entitled to receive under the provisions of the
Subordination Agreement.
(p) Any event or circumstance with respect to the
Borrower shall occur such that the Lender shall believe in good faith
that the prospect of payment of all or any part of the Obligations or
the performance by the Borrower under the Loan Documents is impaired
or any material adverse change in the business or financial condition
of the Borrower shall occur.
(q) There shall occur any breach, default or event
of default by or attributable to any Affiliate under any agreement
between such Affiliate and the Lender.
(r) ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ shall cease to be the Chief
Executive Officer of the Borrower, and the Borrower shall fail to
employ a replacement acceptable to the Lender in its sole discretion;
provided, however, that such acceptance by the Lender shall not be
-------- -------
unreasonably withheld.
(s) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall cease to be the Chief
Financial Officer of the Borrower, and the Borrower shall fail to
employ a replacement acceptable to the Lender in its sole discretion;
provided, however, that such acceptance by the Lender shall not be
-------- -------
unreasonably withheld.
36
Section 8.2 Rights and Remedies. During any Default
-------------------
Period, the Lender may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare
the Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrower, declare
the Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be forthwith due and payable, without
presentment, notice of dishonor, protest or further notice of any
kind, all of which the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and
without further action, apply any and all money owing by the Lender
to the Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all
rights and remedies available upon default to a secured party under
the UCC, including, without limitation, the right to take possession
of Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral,
and, in connection therewith, the Borrower will on demand assemble
the Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 Certain Notices. If notice to the Borrower of any
---------------
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
-------------
Section 9.1 No Waiver; Cumulative Remedies. No failure or
------------------------------
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver
37
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy under the Loan Documents. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
Section 9.2 Amendments, Etc. No amendment, modification,
---------------
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances.
Section 9.3 Addresses for Notices, Etc. Except as otherwise
--------------------------
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to the Borrower:
ACT Teleconferencing Services, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Lender:
▇▇▇▇▇ Fargo Business Credit, Inc.
MAC C7300-300
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party 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 to have been given
on (a) the date received if personally delivered, (b) when deposited in the
mail if delivered by mail, (c) the date sent if sent by overnight courier, or
(d) the date of transmission if delivered by telecopy, except that notices or
requests to the Lender pursuant to any of the provisions of Article II shall
not be effective until received by the Lender.
38
Section 9.4 Further Documents. The Borrower will from time to
-----------------
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's
rights under the Loan Documents (but any failure to request or assure that the
Borrower executes, delivers or endorses any such item shall not affect or
impair the validity, sufficiency or enforceability of the Loan Documents and
the Security Interest, regardless of whether any such item was or was not
executed, delivered or endorsed in a similar context or on a prior occasion).
Section 9.5 Collateral. This Agreement does not contemplate a
----------
sale of accounts, contract rights or chattel paper, and, as provided by law,
the Borrower is entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral. The Lender shall not be obligated to preserve any rights the
Borrower may have against prior parties, to realize on the Collateral at all or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Section 9.6 Costs and Expenses. The Borrower agrees to pay on
------------------
demand all costs and expenses, including (without limitation) attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement, the
Loan Documents, and any other document or agreement related hereto or thereto,
and the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 9.7 Indemnity. In addition to the payment of expenses
---------
pursuant to Section 9.6, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(a) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason
of the execution and delivery of the Loan Documents or the making of
the Advances;
(b) any claims, loss or damage to which any Indemnitee
may be subjected if any representation or warranty contained in
Section 5.12 proves to be incorrect in any respect or as a result of
any violation of the covenant contained in Section 6.4(b); and
(c) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind
or nature whatsoever (including, without
39
limitation, the reasonable fees and disbursements of counsel) in
connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such
Indemnitee shall be designated a party thereto, which may be imposed
on, incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the making
of the Advances and the Loan Documents or the use or intended use of
the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's
request, the Borrower, or counsel designated by the Borrower and satisfactory
to the Indemnitee, will resist and defend such action, suit or proceeding to
the extent and in the manner directed by the Indemnitee, at the Borrower's sole
costs and expense. Each Indemnitee will use its best efforts to cooperate in
the defense of any such action, suit or proceeding. If the foregoing
undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
The Borrower's obligation under this Section 9.79.7 shall survive the
termination of this Agreement and the discharge of the Borrower's other
obligations hereunder.
Section 9.8 Participants. The Lender and its participants, if
------------
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.9 Execution in Counterparts. This Agreement and
-------------------------
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.10 Binding Effect; Assignment; Complete Agreement;
-----------------------------------------------
Exchanging Information. The Loan Documents shall be binding upon and inure to
----------------------
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, ▇▇▇▇▇ Fargo & Company, and all direct and indirect
subsidiaries of ▇▇▇▇▇ Fargo & Company, may exchange any and all information
they may have in their possession regarding the Borrower and its Affiliates,
and the Borrower waives any right of confidentiality it may have with respect
to such exchange of such information.
Section 9.11 Severability of Provisions. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
40
Section 9.12 Headings. Article and Section headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.13 Governing Law; Jurisdiction, Venue; Waiver of
---------------------------------------------
Jury Trial. The Loan Documents shall be governed by and construed in accordance
----------
with the substantive laws (other than conflict laws) of the State of Colorado.
This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court for the City and County
of Denver, Colorado, or the United States District Court, District of Colorado;
and (iv) agree that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS
AGREEMENT.
41
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
▇▇▇▇▇ FARGO BUSINESS CREDIT, INC. ACT TELECONFERENCING SERVICES, INC.
By:_________________________________ By:_________________________________
Name: Name:
Title: Title:
42
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Note
Exhibit B Compliance Certificate
Exhibit C Premises
-------------------
Schedule 2.12 Sources and Uses of Funds
Schedule 5.1 Trade Names, Chief Executive Office, Principal Place
of Business, and Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
REVOLVING NOTE
$4,000,000 Denver, Colorado
March __, 2001
For value received, the undersigned, ACT TELECONFERENCING
SERVICES, INC., a Minnesota corporation (the "Borrower"), hereby promises to pay
on the Termination Date under the Credit Agreement (defined below), to the order
of ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of FOUR MILLION AND NO/1OO
DOLLARS ($4,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to the Borrower under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and Security
Agreement of even date herewith (as the same may hereafter be amended,
supplemented or restated from time to time, the "Credit Agreement") by and
between the Lender and the Borrower. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This Note
may be prepaid only in accordance with the Credit Agreement. All capitalized
terms used but not otherwise defined herein have the meanings given to them in
the Credit Agreement
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Revolving Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one or more
other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
ACT TELECONFERENCING SERVICES, INC.
By: _______________________________
Name:
Title:
Exhibit B to Credit and Security Agreement
COMPLIANCE CERTIFICATE
-----------------------
To: _____________________________________
▇▇▇▇▇ Fargo Business Credit, Inc.
Date: __________________, _____
Subject: ACT Teleconferencing Services, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as
of March __, 2001(the "Credit Agreement"), attached are the financial statements
of ACT Teleconferencing Services, Inc. (the "Borrower") as of and for
________________, _____ (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrower's financial condition and the results of its operations as of the
date thereof.
Events of Default. (Check one):
-----------------
[_] The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under the
Credit Agreement.
[_] The undersigned has knowledge of the occurrence of a
Default or Event of Default under the Credit
Agreement and attached hereto is a statement of the
facts with respect to thereto.
I hereby certify to the Lender as follows:
[_] The Reporting Date does not ▇▇▇▇ the end of one of
the Borrower's fiscal quarters, hence I am completing
only paragraph __ below.
[_] The Reporting Date marks the end of one of the
Borrower's fiscal quarters, hence I am completing all
paragraphs below except paragraph __.
Financial Covenants. I further hereby certify as follows:
-------------------
1. Minimum Book Net Worth. Pursuant to Section 6.12 of the
----------------------
Credit Agreement, as of the Reporting Date, the Borrower's Book Net
Worth was $____________, which [ ] satisfies [ ] does not satisfy the
requirement that such amount be not less than $_____________ on the
Reporting Date as set forth in table below:
Date Minimum Book Net Worth
---- ----------------------
January 31, 2001 $6,737,000
February 28, 2001 $6,836,000
March 31, 2001 $7,015,000
April 30, 2001 $7,141,000
May 31, 2001 $7,412,000
June 30, 2001 $7,659,000
July 31, 2001 $7,866,000
August 31, 2001 $8,135,000
September 30, 2001 $8,460,000
October 31, 2001 $8,905,000
November 30, 2001 $9,274,000
December 31, 2001 and $9,569,000
the last day of
each month thereafter
2. Minimum Net Income. Pursuant to Section 6.13 of the Credit
------------------
Agreement, the Borrower's Net Income for the period ending on the
Reporting Date was $____________, which [ ] satisfies [ ] does not
satisfy the requirement that such amount be not less than
$_____________ during such period as set forth in table below:
Period Minimum Net Income
------ --------------------
Three months ended
March 31, 2001 $444,000
Six months ended
June 30, 2001 $1,089,000
Nine months ended
September 30, 2001 $1,890,000
Twelve months ended
December 31, 2001 $2,999,000
3. Minimum Debt Service Coverage Ratio. Pursuant to Section
-----------------------------------
6.14 of the Credit Agreement, as of the Reporting Date, the Borrower's
Debt Service Coverage Ratio was _____ to 1.00 which [ ] satisfies [ ]
does not satisfy the requirement that such ratio be no less than 2.75
to 1.00 on the Reporting Date.
4. Capital Expenditures. Pursuant to Section 7.10 of the
--------------------
Credit Agreement, for the year-to-date period ending on the Reporting
Date, the Borrower has expended or
contracted to expend during the fiscal year ended December 31, _____,
for Capital Expenditures, $__________________, which [ ] satisfies [ ]
does not satisfy the requirement that such expenditures not exceed
$__________ during such year.
5. Salaries. As of the Reporting Date, the Borrower [ ] is [ ]
--------
is not in compliance with Section 7.17 of the Credit Agreement
concerning salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
ACT TELECONFERENCING SERVICES, INC.
By:________________________________
Name:
Title: Chief Financial Officer
Exhibit C to Credit and Security Agreement
PREMISES
--------
The Premises referred to in the Credit and Security Agreement
are described as follows:
1. Denver Gas & Electric Building, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
2. Denver West Office Park, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
3. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ and Union Avenue, Holmdel,
New Jersey
Schedule 2.12 to Credit and Security Agreement
SOURCES AND USES OF FUNDS
-------------------------
USES
Coast Business Credit Payoff $ 115,707.34
Finovan Payoff (through distribution to ACT
Teleconferencing, Inc.) $1,612,415.00
Working Capital $1,705,477,66
----------------
$3,433,600.00
SOURCES/RLOC $3,433,600.00
Schedule 5.1 to Credit and Security Agreement
TRADE NAMES, CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS,
-----------------------------------------------------------------
AND LOCATIONS OF COLLATERAL
---------------------------
Trade Names
-----------
Action Call
Ready Connect
Chief Executive Office/Principal Place of Business
--------------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Other Inventory and Equipment Locations
---------------------------------------
1. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Schedule 5.4 to Credit and Security Agreement
SUBSIDIARIES
------------
NONE
Schedule 7.1 to Credit and Security Agreement
PERMITTED LIENS
---------------
Creditor Collateral Jurisdiction Filing Date Filing No.
-------- ---------- ------------ ----------- ----------
▇▇▇▇▇ Fargo Equipment Colorado
Bank, N.A.
[to be completed by Borrower]
Schedule 7.2 to Credit and Security Agreement
PERMITTED INDEBTEDNESS AND GUARANTIES
-------------------------------------
Indebtedness
------------
-----------------------------------------------------------------------------------------------------------
Creditor Original Principal Bal as Maturity Collateral
-------- -------- ---------------- -------- ----------
Amount of 12/31/00
------ -----------
-----------------------------------------------------------------------------------------------------------
Colonial Pacific $ 75,000.00 $ 20,401.96 Dec-01 Compunetix
-----------------------------------------------------------------------------------------------------------
BSB/First Sierra $ 75,000.00 $ 24,677.14 Feb-02 Bridge F
-----------------------------------------------------------------------------------------------------------
Granite/GF Funding $ 56,933.50 $ 23,247.16 May-02 Telephone Equipment
-----------------------------------------------------------------------------------------------------------
LINC Capital/RCC $311,856.23 $153,711.18 Aug-02 Bridge (concert)
-----------------------------------------------------------------------------------------------------------
USA Leasing-2 $139,961.00 $ 64,487.98 Sep-02 120 Mini Contex
-----------------------------------------------------------------------------------------------------------
USA Leasing $ 36,051.00 $ 17,277.39 Sep-02 MUX (phone)
-----------------------------------------------------------------------------------------------------------
Spinnaker/GE Capital $ 88,933.04 $ 47,111.24 Oct-02 Equipment
-----------------------------------------------------------------------------------------------------------
American Leasing $ 17,999.00 $ 9,148.12 Feb-03 Telephone Equipment
-----------------------------------------------------------------------------------------------------------
Granite 2/GF Funding $ 81,116.55 $ 46,013.11 May-03 Telephone Equipment
-----------------------------------------------------------------------------------------------------------
United Capital $ 83,659.20 $ 51,941.56 May-03 Equipment
-----------------------------------------------------------------------------------------------------------
Avaya $173,321.09 $168,575.92 Oct-05 Lucent PBX
-----------------------------------------------------------------------------------------------------------
Phoenix 1 $ 17,064.96 Jul-02 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 2 $ 17,134.96 Jul-02 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 3 $ 24,695.07 Sep-02 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 4 $ 79,112.75 Jan-03 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 5 $ 75,646.60 Feb-03 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 6 $ 21,015.00 Mar-03 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 7 $ 17,672.69 Apr-02 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Phoenix 8 $ 28,896.69 Apr-03 Furniture and Equipment
-----------------------------------------------------------------------------------------------------------
Guaranties
----------
Primary Obligor Amount and Description of Beneficiary of Guaranty
--------------- ------------------------- -----------------------
Obligation Guaranteed
---------------------
ACT Teleconferencing, Inc. $900,000 Equitas, L.P.
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This First Amendment is made and effective as of March __, 2001 by and
between ACT TELECONFERENCING SERVICES, INC., a Minnesota corporation (the
"Borrower") and ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC, a Minnesota corporation (the
"Lender").
RECITALS
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of March __, 2001 (the "Credit Agreement").
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto agree as follows:
Defined Terms. Capitalized terms used in this Amendment which are defined in the
-------------
Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is
amended by adding or amending, as the case may be, the following definitions:
"Unbilled Account Cap" means the lessor of (A) the Unbilled
Limit and (B) 40% of all Accounts.
"Unbilled Limit" means an amount equal to $1,000,000;
provided, however that beginning on May 1, 2001 and on the first day of
-------- -------
each calendar month thereafter, such limit shall be reduced by $50,000
until such time as the "Unbilled Limit" is equal in amount to $750,000.
Consent by Lender to Actions. Notwithstanding the prohibitions of Section 7.4
----------------------------
and 7.5 of the Credit Agreement and subject to the conditions set forth in this
Amendment, the Lender hereby consents to a one-time upstream transfer or advance
by the Borrower to the Guarantor in an aggregate amount not to exceed $850,000;
provided that such funds shall be used solely for the repayment by Guarantor of
indebtedness outstanding and owing to Finova Mezzanine Capital Inc. as of the
_____________, 2001. The Lender hereby waives any Default or Event of Default
which would otherwise arise pursuant to Sections 7.4 or 7.5 of the Credit
Agreement in connection with such distribution. This consent and waiver shall be
effective only in this specific instance and for the specific purpose for which
it is given, and this consent and waiver shall not entitle the Borrower to any
other or further waiver in any similar or other circumstances.
No Other Changes. Except as explicitly amended by this Amendment, all of the
----------------
terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance or letter of credit thereunder.
Conditions Precedent. This Amendment shall be effective when the Lender shall
--------------------
have received an executed original hereof, together with each of the following,
each in substance and form acceptable to the Lender in its sole discretion:
(a) The Acknowledgment and Agreement of Guarantor set
forth at the end of this Amendment, duly executed by
the Guarantor.
(b) Such other matters as the Lender may require.
No Waiver. Except as explicitly set forth in paragraph 2 hereof, the execution
---------
of this Amendment and any documents related hereto shall not be deemed to be a
waiver of any Default or Event of Default under the Credit Agreement or breach,
default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing on
the date of this Amendment.
Release. The Borrower and the Guarantor by signing the Acknowledgment and
-------
Agreement of Guarantor set forth below, each hereby absolutely and
unconditionally releases and forever discharges the Lender, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower has had, now has or has made claim to have against any such person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Amendment, whether
such claims, demands and causes of action are matured or unmatured or known or
unknown.
Miscellaneous. This Amendment may be executed in any number of counterparts,
-------------
each of which when so executed and delivered shall be deemed an original and all
of which counterparts, taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
ACT TELECONFERENCING SERVICES, INC.
By: ______________________________
Name:
Title:
▇▇▇▇▇ FARGO BUSINESS CREDIT, INC.
By: ______________________________
Name:
Title:
SECOND AMENDMENT TO
CREDIT AND SECURITY AGREEMENT
This Second Amendment, dated as of March __, 2002, is made by and
between ACT TELECONFERENCING SERVICES, INC., a Minnesota corporation (the
"Borrower"), and ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the
"Lender").
RECITALS
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of March 30, 2001 (as amended to the date hereof and as the
same may be further amended, restated or otherwise modified, the "Credit
Agreement").
The Borrower has requested that the Lender waive violations of certain
covenants and amend certain terms of the Credit Agreement, which the Lender is
willing to do pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto agree as follows:
ARTICLE X
Defined Terms. Capitalized terms used in this Amendment which are defined in the
-------------
Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is
amended by adding or amending, as the case may be, the following definitions:
"Accounts" means all of the Borrower's accounts, as such term is defined in the
UCC, including each and every right of the Borrower to the payment of money,
whether such right to payment now exists or hereafter arises, whether such right
to payment arises out of a sale, lease or other disposition of goods or other
property, out of a rendering of services, out of a loan, out of the overpayment
of taxes or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or earned by the
Borrower or by some other person who subsequently transfers such person's
interest to the Borrower, whether such right to payment is or is not already
earned by performance, and howsoever such right to payment may be evidenced,
together with all other rights and interests (including all Liens) which the
Borrower may at any time have by law or agreement against any account debtor or
other obligor obligated to make any such payment or against any property of such
account debtor or other obligor; all including but not limited to all present
and future accounts, contract rights, loans and obligations receivable, chattel
papers, bonds, notes and other debt instruments, tax refunds and rights to
payment in the nature of general intangibles.
"Aggregate Permitted Transfers" means the sum of (i) all Permitted Intercompany
Transfers, (ii) all loans, advances, dividends or other distributions to the
Guarantor, and (iii) all unfinanced Capital Expenditures.
"Borrowing Base" means, at any time, the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's
sole discretion, the sum of:
(i) 85% of Eligible Billed Accounts, plus
----
(ii) the lesser of (A) the Unbilled Account Cap
and (B) 70% of Eligible Unbilled Accounts;
minus
-----
(iii) the Dilution Reserve.
"Cash Flow" means, for any fiscal year-to-date period, an amount equal to (i)
Net Income, plus (ii) depreciation and amortization expense for such period,
----
minus (iii) Current Maturities of Long Term Debt, and minus (iv) twenty-five
----- ------
(25%) of any increase in all billed and Unbilled Accounts during such period.
"Collateral" means all of the Borrower's Accounts, chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods, instruments,
Inventory, Investment Property, letter-of-credit rights, letters of credit, and
all sums on deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products of any of
the foregoing; (ii) in the case of all goods, all accessions; (iii) all
accessories, attachments, parts, equipment and repairs now or hereafter attached
or affixed to or used in connection with any goods; (iv) all warehouse receipts,
bills of lading and other documents of title now or hereafter covering such
goods; (v) all collateral subject to the Lien of any Security Document; (vi) any
money, or other assets of the Borrower that now or hereafter come into the
possession, custody, or control of the Lender; and (vii) proceeds of any and all
of the foregoing.
"Dilution Reserve" means a reserve based upon excessively high dilution
percentages in relation to advance rates in an amount to be set by Lender from
time to time in its sole discretion.
"Lien" means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.
"Net Income" means fiscal year-to-date after-tax net income, as determined in
accordance with GAAP, excluding any and all extraordinary gains or losses.
"Permitted Intercompany Transfers" means, during any period, (i) the net
decrease in Permitted Intercompany Debt after setoff by Borrower of any
Permitted Intercompany Advances, plus (ii) the net increase in Permitted
-----
Intercompany Advances after setoff by Borrower of any Permitted Intercompany
Debt, as applicable; provided that the Borrower maintains, with the consent of
--------
the applicable Sister Company, the right to setoff all applicable accounts
receivable and accounts payable relating to any such Permitted Intercompany
Transfer.
ARTICLE XI
Rules of Interpretation. Section 1.2 of the Credit Agreement is amended to read
-----------------------
as follows:
"Section 1.2 Other Definitional Terms; Rules of Interpretation. The words
-------------------------------------------------
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP. All terms defined in
the UCC and not otherwise defined herein have the meanings assigned to them in
the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and
the like, are to Articles, Sections and subsections of, or Exhibits or Schedules
attached to, this Agreement unless otherwise expressly provided. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". Unless the context in which used herein otherwise
clearly requires, "or" has the inclusive meaning represented by the phrase
"and/or". Defined terms include in the singular number the plural and in the
plural number the singular. Reference to any agreement (including the Loan
Documents), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof (and, if applicable, in accordance with the terms hereof and the
other Loan Documents), except where otherwise explicitly provided, and reference
to any promissory note includes any promissory note which is an extension or
renewal thereof or a substitute or replacement therefor. Reference to any law,
rule, regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect on the determination date, including rules and
regulations promulgated thereunder."
ARTICLE XII
Financing Statements. Section 3.6 of the Credit Agreement is amended by adding
---------------------
the following new sentence before the first sentence of that Section:
"The Borrower authorizes the Lender to file from time to time where permitted by
law, such financing statements against collateral described as "all personal
property" as the Lender deems necessary or useful to perfect the Security
Interest."
ARTICLE XIII
Minimum Book Net Worth. Section 6.12 of the Credit Agreement is hereby amended
----------------------
to read in its entirety as follows:
"Section 6.12 Minimum Book Net Worth. The Borrower will maintain, as of each
----------------------
date described below, its Book Net Worth at an amount not less than the amount
set forth opposite
such date:
Date Minimum Book Net Worth
---- ----------------------
January 31, 2002 $13,789,000
February 28, 2002 $13,869,000
March 31, 2002 $13,973,000
April 30, 2002 $14,058,000
May 31, 2002 $14,187,000
June 30, 2002 $14,316,000
July 31, 2002 $14,469,000
August 31, 2002 $14,643,000
September 30, 2002 $14,815,000
October 31, 2002 $15,040,000
November 30, 2002 $15,199,000
December 31, 2002 and the last day of
each month thereafter $15,358,000"
ARTICLE XIV
Minimum Net Income. Section 6.13 of the Credit Agreement is hereby amended to
------------------
read in its entirety as follows:
"Section 6.13 Minimum Net Income. The Borrower will achieve, during each period
------------------
described below, Net Income of not less than the amount set forth opposite such
date:
Date Minimum Net Income
---- -------------------
Three months ending
March 31, 2002 $ 273,000
Six months ending
June 30, 2002 $ 616,000
Nine months ending
September 30, 2002 $1,115,000
Twelve months ending
December 31, 2002 $1,658,000"
ARTICLE XV
New Covenants. Section 6.15 of the Credit Agreement is hereby amended to read
-------------
in its entirety as follows:
"Section 6.15 New Covenants. On or before December 31, 2002, the Borrower and
-------------
the Lender shall agree on new covenant levels for Sections 6.12, 6.13, 6.14,
and 7.10 for periods after such date. The new covenant levels will be based on
the Borrower's projections for such periods and shall be no less stringent than
the present levels, but if the Borrower and the Lender do not agree, the Lender
may designate the required amounts in its sole discretion and the failure by
the Borrower to maintain the designated amounts shall constitute an Event of
Default."
ARTICLE XVI
Indebtedness. Subsection (e) of Section 7.2 of the Credit Agreement is
------------
hereby amended to read in its entirety as follows:
"(e) Permitted Intercompany Advances; provided, that (i) for all period ending
--------
on or prior to December 31, 2001, such Permitted Intercompany Transfers do not
exceed $250,000 in the aggregate and (ii) during any month from January 1, 2002
and thereafter, the amount of Aggregate Permitted Transfers for the current
fiscal year-to-date period does not exceed the Borrower's Cash Flow for such
current fiscal year-to-date period."
ARTICLE XVII
Investments and Subsidiaries. Romanettes (iv) and (v) of subsection (a)
----------------------------
of Section 7.4 of the Credit Agreement are hereby amended to read in their
entirety as follows:
"(iv) Permitted Intercompany Transfers; provided, that (A) for all periods
--------
ending on or prior to December 31, 2001, such Permitted Intercompany Transfers
do not exceed $250,000 in the aggregate and (B) during any month from January
1, 2002 and thereafter, the amount of Aggregate Permitted Transfers for the
current fiscal year-to-date period does not exceed the Borrower's Cash Flow for
such current fiscal year-to-date period; and
(v) advances or loans to the Guarantor; provided, that (A) for all periods
--------
ending on or prior to December 31, 2001, such advances or loans do not exceed at
any time an aggregate amount equal to (x) fifty percent (50%) of the Borrower's
After-Tax Net Income for the Borrower's current fiscal year-to-date period minus
-----
(y) the amount of dividends or other distributions made by the Borrower to the
Guarantor during such current fiscal year-to-date period; (B) during any month
from January 1, 2002 and thereafter, the amount of Aggregate Permitted Transfers
for the current fiscal year-to-date period does not exceed the Borrower's Cash
Flow for such current fiscal year-to-date period; and (C) no Default Period
exists or would exist as a result of such advance or loan."
ARTICLE XVIII
Dividends. Section 7.5 of the Credit Agreement is hereby amended to read
---------
in its entirety as follows:
"Section 7.5 Dividends. Except as set forth below, the Borrower will not
---------
declare or pay any dividends (other than dividends payable solely in stock or
other equity interests of the Borrower) on any class of its stock or other
equity interests or make any payment on account of the purchase, redemption or
other retirement of any shares of such stock or other equity interests or make
any distribution in respect thereof, either directly or indirectly.
Notwithstanding the foregoing, so long as no Default Period exists or would
exist as a result thereof, the Borrower shall be permitted to declare and/or
pay dividends or other distributions to the Guarantor; provided, that (A) for
--------
all periods ending on or prior to December 31, 2001, such distributions shall
at no time exceed in the aggregate an amount equal to (i) fifty percent (50%)
of the Borrower's After-Tax Net Income for the Borrower's current fiscal
year-to-date period minus (ii) the amount of advances or loans outstanding from
-----
the Borrower to the Guarantor and (B) during any month from January 1, 2002 and
thereafter, the amount of Aggregate Permitted Transfers for the current fiscal
year-to-date period does not exceed the Borrower's Cash Flow for such current
fiscal year-to-date period"
ARTICLE XVIII
Capital Expenditures. Section 7.10 of the Credit Agreement is hereby amended to
--------------------
read in its entirety as follows:
"Section 7.10 Capital Expenditures. The Borrower will not incur or contract to
--------------------
incur unfinanced Capital Expenditures of more than $2,300,000 in the aggregate
during its fiscal year ending December 31, 2002."
ARTICLE XIX
No Other Changes. Except as explicitly amended by this Amendment, all of the
----------------
terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance thereunder.
ARTICLE XX
Waiver of Defaults. The Borrower is in default of the following provisions of
------------------
the Credit Agreement (collectively, the "Defaults"):
Section 20.1 Section 7.2(e) of the Credit Agreement, as the
result of the Borrower's failure to limit Permitted Intercompany
Transfers to $250,000 in the aggregate for the Borrower's fiscal year
ending December 31, 2001.
Section 20.2 Section 7.4(a)(iv) of the Credit Agreement, as the
result of the Borrower's failure to limit Permitted Intercompany
Transfers to $250,000 in the aggregate for the Borrower's fiscal year
ending December 31, 2001.
Section 20.3 Section 7.4(a)(v) of the Credit Agreement, as the
result of the Borrower's failure to limit advances or loans to the
Guarantor as required by such subsection for all periods ending on or
prior to December 31, 2001.
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Defaults which waiver shall be retroactively effective
to January 1, 2002. The foregoing waivers shall be effective only in this
specific instance and for the specific purpose for which they are given, and
these waivers shall not entitle the Borrower to any other or further consent or
waiver in any similar or other circumstances.
ARTICLE XXI Amendment Fee. The Borrower shall pay the Lender as of the date
-------------
hereof a fully earned, non-refundable fee in the amount of $15,000 in
consideration of the Lender's execution and delivery of this Amendment and the
resulting waiver of defaults.
ARTICLE XXII Conditions Precedent. This Amendment, and the waiver set forth in
--------------------
paragraph 12 hereof, shall be effective when the Lender shall have received an
executed original hereof, together with each of the following, each in
substance and form acceptable to the Lender in its sole discretion:
Section 22.1 The Acknowledgment and Agreement of Guarantor set
forth at the end of this Amendment, duly executed by the Guarantor.
Section 22.2 The Acknowledgment and Agreement of Subordinated
Creditors set forth at the end of this Amendment, duly executed by each
Subordinated Creditor.
Section 22.3 A Certificate of the Secretary of the Borrower
certifying as to (i) the resolutions of the board of directors of the Borrower
approving the execution and delivery of this Amendment, (ii) the fact that the
articles of incorporation and bylaws of the Borrower, which were certified and
delivered to the Lender pursuant to the Certificate of Authority of the
Borrower's secretary or assistant secretary dated as of April 3, 2001 continue
in full force and effect and have not been amended or otherwise modified except
as set forth in the Certificate to be delivered, and (iii) certifying that the
officers and agents of the Borrower who have been certified to the Lender,
pursuant to the Certificate of Authority of the Borrower's secretary or
assistant secretary dated as of April 3, 2001 as being authorized to sign and
to act on behalf of the Borrower continue to be so authorized or setting forth
the sample signatures of each of the officers and agents of the Borrower
authorized to execute and deliver this Amendment and all other documents,
agreements and certificates on behalf of the Borrower.
Section 22.4 Payment of the fee described in paragraph 13.
Section 22.5 Such other matters as the Lender may require.
ARTICLE XXIII Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Lender as follows:
Section 23.1 The Borrower has all requisite power and authority
to execute this Amendment and to perform all of its obligations hereunder, and
this Amendment has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
Section 23.2 The execution, delivery and performance by the
Borrower of this Amendment have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) violate any provision of any law, rule or regulation
or of any order, writ, injunction or decree presently in effect, having
applicability to the Borrower, or the articles of incorporation or by-laws of
the Borrower, or (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its properties
may be bound or affected.
Section 23.3 All of the representations and warranties contained
in Article V of the Credit Agreement are correct on and as of the date hereof
as though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
ARTICLE XXIV References. All references in the Credit Agreement to "this
----------------------- Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
ARTICLE XXV No Other Waiver. Except as set forth in paragraph 12 hereof, the
---------------
execution of this Amendment and acceptance of any documents related hereto
shall not be deemed to be a waiver of any Default or Event of Default under
the Credit Agreement or breach, default or event of default under any
Security Document or other document held by the Lender, whether or not known
to the Lender and whether or not existing on the date of this Amendment.
ARTICLE XXVI Release. The Borrower, the Guarantor, by signing the Acknowledgment
-------
and Agreement of Guarantor set forth below, and each Subordinated Creditor,
by signing the Acknowledgement and Agreement of Subordinated Creditors set
forth below, each hereby absolutely and unconditionally releases and forever
discharges the Lender, and any and all participants, parent corporations,
subsidiary corporations, affiliated corporations, insurers, indemnitors,
successors and assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing, from any
and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or
under any state or federal law or otherwise, which the Borrower, the
Guarantor or any Subordinated Creditor has had, now has or has made claim to
have against any such person for or by reason of any act, omission, matter,
cause or thing whatsoever arising from the beginning of time to and including
the date of this Amendment, whether such claims, demands and causes of action
are matured or unmatured or known or unknown.
ARTICLE XXVII Costs and Expenses. The Borrower hereby reaffirms its agreement
------------------
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Loan
Documents, including without limitation all reasonable fees and disbursements
of legal counsel. Without limiting the generality of the foregoing, the
Borrower specifically agrees to pay all fees and disbursements of counsel to
the Lender for the services performed by such counsel in connection with the
preparation of this Amendment and the documents and instruments incidental
hereto. The Borrower hereby agrees that the Lender may, at any time or from
time to time in its sole discretion and without further authorization by the
Borrower, make a loan to the Borrower under the Credit Agreement, or apply the
proceeds of any loan, for the purpose of paying any such fees, disbursements,
costs and expenses and the fee required under paragraph 13 hereof.
ARTICLE XXVIII Miscellaneous. This Amendment, the Acknowledgment and Agreement
-------------
of Guarantor, and the Acknowledgement and Agreement of Subordinated Creditors
may be executed in any number of counterparts, each of which when so executed
and delivered shall be deemed an original and all of which counterparts, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
ACT TELECONFERENCING SERVICES, INC.
By: ______________________________
Name:
Title:
▇▇▇▇▇ FARGO BUSINESS CREDIT, INC.
By: ______________________________
Name:
Title:
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of ACT
Teleconferencing Services, Inc. (the "Borrower") to ▇▇▇▇▇ Fargo Business
Credit, Inc. (the "Lender") pursuant to a Guaranty dated as of March 30, 2001
(the "Guaranty"), hereby (i) acknowledges receipt of the foregoing Amendment;
(ii) consents to the terms (including without limitation the release set forth
in paragraph 18 of the Amendment) and execution thereof; (iii) reaffirms its
obligations to the Lender pursuant to the terms of the Guaranty; and (iv)
acknowledges that the Lender may amend, restate, extend, renew or otherwise
modify the Credit Agreement and any indebtedness or agreement of the Borrower,
or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the liability of the undersigned under the Guaranty for
all of the Borrower's present and future indebtedness to the Lender.
ACT TELECONFERENCING, INC.
By: ______________________________
Name:
Title:
ACKNOWLEDGMENT AND AGREEMENT OF SUBORDINATED
CREDITORS
The undersigned, each a subordinated creditor of ACT
Teleconferencing Services, Inc. (the "Borrower") to ▇▇▇▇▇ Fargo Business
Credit, Inc. (the "Lender") pursuant to (x) for ▇▇▇▇▇ Fargo Bank, National
Association, an Intercreditor Agreement dated as March 30, 20001 and (y) for
ACT Teleconferencing, Inc., a Subordination Agreement dated as March 30, 2001
(each, a "Subordination Agreements"), hereby (i) acknowledges receipt of the
foregoing Amendment; (ii) consents to the terms (including without limitation
the release set forth in paragraph 18 of the Amendment) and execution thereof;
(iii) reaffirms its obligations to the Lender pursuant to the terms of the
respective Subordination Agreement; and (iv) acknowledges that the Lender may
amend, restate, extend, renew or otherwise modify the Loan Documents and any
indebtedness or agreement of the Borrower, or enter into any agreement or
extend additional or other credit accommodations, without notifying or
obtaining the consent of the undersigned and without impairing the obligations
of the undersigned under the respective Subordination Agreement.
▇▇▇▇▇ FARGO BANK, NATIONAL
ASSOCIATION
By: ______________________________
Name:
Title:
ACT TELECONFERENCING, INC.
By: ______________________________
Name:
Title: