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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended June 30, 1998
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _______________ to
________________.
Commission file number 0-27560
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ACT Teleconferencing, Inc.
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(Name of small business issuer as specified in its charter)
Colorado 84-1132665
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1658 Cole Blvd., Suite 130, Golden, Colorado 80401
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(Address of principle executive offices) (Zip Code)
(303) 233-3500 (303) 238-0096
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(Issuer's telephone number, including (Issuer's facsimile number, including
area code) area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
As of July 31, 1998, 3,640,301 shares of the issuer's common stock were
outstanding.
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THE PURPOSE OF THIS AMENDMENT IS TO ADD AN ELECTRONIC COPY OF AN EXHIBIT
PREVIOUSLY FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10QSB
Exhibit Index
10.22/1/ Loan and Security Agreement dated March 31, 1998 with Sirrom Capital
Corporation and Equitas L.P. and Stock Purchase Warrants
10.23/1/ Loan Agreement with Key Bank
/1/Filed previously in paper format under cover of Form SE.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACT TELECONFERENCING, INC.
DATE: August 24, 1998 By: /s/ Gavin J. Thomson
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Gavin J. Thomson,
Chief Financial Officer
(Duly authorized officer and
Principal Financial Officer)
Page 2
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EXHIBIT INDEX
10.22 Loan and Security Agreement dated March 31, 1998 with Sirrom Capital
Corporation and Equitas L.P. and Stock Purchase Warrants
10.23 Loan Agreement with Key Bank
Page 3
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EXHIBIT 10.22
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 31st day of
March, 1998, is made and entered into on the terms and conditions hereinafter
set forth, by and between ACT TELECONFERENCING, INC., a Colorado corporation
("ACT" or "Borrower"), SIRROM CAPITAL CORPORATION, a Tennessee corporation, and
EQUITAS, L.P., a Tennessee limited partnership ("Equitas") (individually, a
"Lender" and collectively, the "Lenders"), and SIRROM CAPITAL CORPORATION, a
Tennessee corporation, as agent for itself and the other Lenders ("Sirrom" or
"Agent").
RECITALS:
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WHEREAS, Borrower has requested that Lenders make available to Borrower a
loan in the aggregate original principal amount of up to Two Million Five
Hundred Thousand Dollars ($2,500,000.00) (the "Loan") on the terms and
conditions hereinafter set forth, and for the purpose(s) hereinafter set forth;
and
WHEREAS, in order to induce Lenders to make the Loan to Borrower, Borrower
has made certain representations to Lenders; and
WHEREAS, Lenders, in reliance upon the representations and inducements of
Borrower, have agreed to make the Loan upon the terms and conditions hereinafter
set forth.
AGREEMENT:
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NOW, THEREFORE, in consideration of the agreement of Lenders to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower, Agent and Lenders hereby agree as follows:
ARTICLE 1
THE LOAN
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1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms and
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conditions contained herein, on the Closing Date (as hereinafter defined),
Lenders agree to collectively loan to Borrower the aggregate sum of Two Million
Five Hundred Thousand Dollars ($2,500,000.00). Each Lender's portion of the
Loan shall be in the amount set forth opposite each Lender's name on Exhibit A
attached hereto. The Loan shall be evidenced by two secured promissory notes
dated as of the date hereof and executed by Borrower in the principal amount of
each Lender's portion of the Loan (individually, a "Note" and collectively, the
"Notes"). The Loan shall be payable in accordance with the terms of the Notes.
The Notes, this Agreement and any other instruments and documents executed by
Borrower, any guarantor of Borrower, or any
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shareholder, subsidiary or affiliate of Borrower ("Affiliates"), now or
hereafter evidencing, securing or in any way relating to the indebtednesses
evidenced by the Notes are herein individually referred to as a "Loan Document"
and collectively referred to as the "Loan Documents." The term "Obligations" as
used herein shall refer to (a) the Loan to be made concurrently or in connection
with this Agreement, as evidenced by the Notes, and any renewals or extensions
thereof, (b) the full and prompt payment and performance of any and all other
indebtednesses and other obligations of Borrower to Lenders, direct or
contingent (including but not limited to obligations incurred as indorser,
guarantor or surety), however evidenced or denominated, and however and whenever
incurred, including but not limited to indebtednesses incurred pursuant to any
present or future commitment of Lenders to Borrower and (c) all future advances
made by Lenders and/or Agent for taxes, levies, insurance and preservation of
the Collateral and all attorneys' fees, court costs and expenses of whatever
kind incident to the collection of any of said indebtedness or other obligations
and the enforcement and protection of the security interest created hereby or by
the other Loan Documents.
1.2 Processing Fee. Borrower shall pay Lenders an aggregate processing
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fee of Fifty-Six Thousand Two Hundred and Fifty Dollars ($56,250.00), Ten
Thousand Dollars ($10,000.00) of which has previously been paid to Equitas.
Forty-Six Thousand Two Hundred and Fifty Dollars ($46,250.00) of the balance
shall be paid to Lenders at the Closing, Thirty Six Thousand Two Hundred and
Twenty-Five Dollars ($36,225.00) of which shall be paid to Sirrom and Ten
Thousand and Twenty-Five Dollars ($10,025.00) of which shall be paid to Equitas.
1.3 Prepayment. The indebtedness evidenced by the Notes may be prepaid in
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whole or in the increments set forth in each Note pursuant to the terms of the
Note, at any time and from time to time, without penalty or premium; provided
that any prepayment shall be made on a pro rata basis among Lenders.
1.4 Purposes of Loan and Use of Proceeds. The purpose of the Loan shall
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be to provide additional working capital to Borrower.
1.5 Disbursement of Loan. (a) Advances. The Loan shall be made in two
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disbursements upon the request of Borrower and in accordance with the terms and
conditions contained herein. The first disbursement shall be made at the
Closing and be in the amount of Two Million and No/100ths Dollars ($2,000,000).
Subject to the conditions set forth herein, the balance of the Loan shall be
made in one disbursement within six months of the date hereof at Borrower's
request.
(b) Conditions. The obligation of Lenders to make the first disbursement
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of the Loan shall be subject to the satisfaction of the conditions set forth in
Article 4 hereof. The obligation of Sirrom to make the second disbursement of
the Loan shall be subject to the satisfaction of the following conditions:
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(i) Borrower shall give Agent three (3) business days prior written
notice of its request for the second disbursement.
(ii) The following statements shall be true, and Agent shall have
received a certificate signed by a duly authorized officer of the Borrower
dated the date of the second disbursement and stating that:
(1) The representations and warranties contained in Article 3
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hereof are correct on and as of the date of such disbursement as
though made on and as of such date; and
(2) No default or Event of Default has occurred and is
continuing, or would result from such disbursement;
(c) Additional Documentation. Agent shall have received such other
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approvals and documents as Agent reasonably may request.
ARTICLE 2
SECURITY
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2.1 Grant of Security Interest. For as long as the Obligations are
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outstanding, Borrower hereby grants to Agent, for the benefit of itself and each
Lender, a security interest in the following described property (collectively,
the "Collateral"):
(a) presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Borrower arising out of
the sale or lease of goods or the rendition of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any
of the foregoing (collectively, "Accounts");
(b) present and future general intangibles and other personal property
(including chooses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, monies due under any royalty or licensing agreements, infringement
claims, computer programs, computer discs, computer tapes, literature,
reports, catalogs deposit accounts, insurance premium rebates, tax refunds,
and tax refund claims) other than goods and Accounts, and Borrower's Books
relating to any of the foregoing (collectively, "General Intangibles");
(c) present and future letters of credit, notes, drafts, instruments,
certificated and uncertificated securities, documents, leases, and chattel
paper, and Borrower's Books
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relating to any of the foregoing (collectively, "Negotiable Collateral");
provided, however, that the parties acknowledge that for the Borrower to
pledge the shares representing its 60% interest in ACT Teleconferencing,
Ltd., the consent of the minority shareholder must be obtained and Borrower
agrees to obtain such consent within 15 days of the date hereof;
(d) present and future inventory in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials, work in
process, finished goods, and packing and shipping materials, wherever
located, and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing (collectively,
"Inventory");
(e) present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, dies, jigs, goods (other than
consumer goods or farm products), and any interest in any of the foregoing,
and all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever located
(collectively, "Equipment");
(f) books and records including: ledgers; records indicating,
summarizing, or evidencing Borrower's assets or liabilities, or the
collateral; all information relating to Borrower's business operations or
financial condition; and all computer programs, disc or tape files,
printouts, funds or other computer prepared information, and the equipment
containing such information (collectively, "Borrower's Books");
(g) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing, including, but not limited to,
proceeds of insurance covering any of the foregoing, or any portion
thereof, and any and all Accounts, General Intangibles, Negotiables,
Collateral, Inventory, Equipment, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other
disposition of the accounts, general Intangibles, Negotiable Collateral,
Inventory, Equipment, or any portion thereof or interest therein and the
proceeds thereof.
2.2 Secured Indebtedness. The security interest granted hereby shall
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secure the prompt payment of the Obligations and the prompt performance of each
of the covenants and duties under this Agreement and the other Loan Documents.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
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3.1 Borrower's Representations. Borrower hereby represents and warrants
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to Lenders as follows:
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(a) Corporate Status. Borrower is a corporation duly organized,
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validly existing and in good standing under the laws of the State of
Colorado; and has the corporate power to own and operate its properties, to
carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and the other Loan Documents to which it
is a party. Borrower is duly qualified to do business and in good standing
in each state in which a failure to be so qualified would have a material
adverse effect on Borrower's financial condition or its ability to conduct
its business in the manner now conducted.
(b) Subsidiaries. Schedule 2.1(b) hereto is a complete list of each
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corporation, partnership, joint venture or other business organization (the
"Subsidiary" or, with respect to all such organizations, the
"Subsidiaries") in which Borrower or any Subsidiary owns, directly or
indirectly, any capital stock or other equity interest, or with respect to
which Borrower or any Subsidiary, alone or in combination with others, is
in a control position, which list shows the jurisdiction of incorporation
or other organization and the percentage of stock or other equity interest
of each Subsidiary owned by such Borrower. Each Subsidiary which is a
corporation is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and is duly qualified to
transact business as a foreign corporation and is in good standing in the
jurisdictions listed in Schedule 2.1(b), which are the only jurisdictions
where the properties owned or leased or the business transacted by it makes
such licensing or qualification to do business as a foreign corporation
necessary, and no other jurisdiction has demanded, requested or otherwise
indicated that (or inquired whether) it is required so to qualify. The
outstanding capital stock of each Subsidiary which is a corporation is
validly issued, fully paid and nonassessable. Borrower and its
Subsidiaries have good and valid title to the equity interests in the
Subsidiaries shown as owned by each of them on Schedule 2.1(b), free and
clear of all liens, claims, charges, restrictions, security interests,
equities, proxies, pledges or encumbrances of any kind. Except where
otherwise indicated herein or unless the context otherwise requires, any
reference to Borrower herein shall include Borrower and all of its
Subsidiaries. The term "Credit Party" or "Credit Parties" as used herein
shall included Borrowers and all of their subsidiaries whether now existing
or herein after created.
(c) Authorization. Borrower has full legal right, power and authority
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to conduct its business and affairs. Borrower has full legal right, power
and authority to enter into and perform its obligations under the Loan
Documents, without the consent or approval of any other person, firm,
governmental agency or other legal entity. The execution and delivery of
this Agreement, the borrowing hereunder, the execution and delivery of each
Loan Document to which Borrower is a party, and the performance by Borrower
of its obligations thereunder are within the corporate powers of Borrower
and have been duly authorized by all necessary corporate action properly
taken and Borrower has received all necessary governmental approvals, if
any, that are required. The officer(s)
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executing this Agreement, the Notes and all of the other Loan Documents to
which Borrower is a party are duly authorized to act on behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and the other Loan
---------------------------
Documents are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) Capitalization. As of the date hereof, the authorized capital
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stock of ACT consists solely of 10,000,000 shares of common stock, no par
value per share ("Common Stock"), of which 3,612,758 shares are issued and
outstanding (the "Shares") and 331,267 shares are reserved for issuance
upon exercise of the Stock Purchase Warrants dated as of the date hereof
and issued to Lenders (the "Warrants"); provided, however, that the number
of shares reserved for issuance upon exercise of the Warrants may be
increased from time to time in accordance with the term of the Warrants.
Attached hereto as Schedule 3.1(e) is a table showing the capitalization,
as of the date hereof, on a fully diluted basis. As of the date hereof, ACT
does not have outstanding any stock or securities convertible or
exchangeable for any shares of its Common Stock or containing any profit
participation features, and does not have outstanding any rights or options
to subscribe for or to purchase its Common Stock or any stock appreciation
rights or phantom stock plans, except as set forth on Schedule 3.1(e) and
the Warrants. Schedule 3.1(e) accurately sets forth the following with
respect to all outstanding options and rights to acquire the ACT's Common
Stock: (i) the total number of shares issuable upon exercise of all
outstanding options; (ii) the range of exercise prices for all such
outstanding options; (iii) the number of shares issuable, the exercise
price and the expiration date for each such outstanding option; and (iv)
with respect to all outstanding options, warrants and rights to acquire
ACT's capital stock other than the Warrants, the holder, the number of
shares covered, the exercise price and the expiration date. As of the date
hereof, ACT is not subject to any obligation (contingent or otherwise) to
repurchase, redeem, retire or otherwise acquire any shares of its capital
stock or any warrants, options or other rights to acquire its capital
stock, except as set forth in the Warrants or on Schedule 3.1(e). As of
the date hereof, all of the outstanding shares of ACT's capital stock are
validly issued, fully paid and nonassessable. Except as set forth on
Schedule 3.1(e), there are no statutory or contractual preemptive rights,
rights of first refusal, anti-dilution rights or any similar rights, held
by stockholders or option holders of ACT, with respect to the issuance of
the Warrants or the issuance of the Common Stock upon exercise of the
Warrants and all such rights have been effectively waived with regard to
the issuance of the Warrants, the exercise of the Warrants and the issuance
of the Common Stock upon exercise of the Warrants. ACT's has not violated
any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale
and issuance of the Warrants hereunder do not require registration under
the Securities Act of 1933, as amended, or any applicable state securities
laws. To the best of ACT's knowledge, there are no agreements
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among ACT's shareholders with respect to any other aspect of ACT's affairs,
except as set forth on Schedule 3.1(e). ACT owns all of the issued and
outstanding shares of capital stock of its subsidiaries as set forth on
Schedule 3.1(b).
(f) Trademarks, Patents, Etc. Schedule 3.1(f) is an accurate and
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complete list of all patents, trademarks, tradenames, trademark
registrations, service names, service marks, copyrights, licenses, formulas
and applications therefor owned by Borrower or used or required by Borrower
in the operation of its business, title to each of which is, except as set
forth in Schedule 3.1(f) hereto, held by such Borrower free and clear of
all adverse claims, liens, security agreements, restrictions or other
encumbrances. Except as set forth in Schedule 3.1(f), Borrower owns or
possesses adequate (and will use its best efforts to obtain as expediently
as possible any additional) licenses or other rights to use all patents,
trademarks, trade names, service marks, trade secrets or other intangible
property rights and know-how necessary to entitle such Borrower to conduct
its business as presently being conducted. There is no infringement
action, lawsuit, claim or complaint which asserts that any Borrower's
operations violate or infringe the rights or the trade names, trademarks,
trademark registrations, service names, service marks or copyrights of
others with respect to any apparatus or method of such Borrower or any
adversely held trademarks, trade names, trademark registrations, service
names, service marks or copyrights, and no Borrower is in any way making
use of any confidential information or trade secrets of any person, except
with the consent of such person. Except as set forth in Schedule 3.1(f),
Borrower has taken reasonable steps to protect its proprietary information
(except disclosure of source codes pursuant to licensing agreements) and is
the lawful owner of the proprietary information free and clear of any
claim, right, trademark, patent or copyright protection of any third party.
As used herein, "proprietary information" includes without limitation, (i)
any computer programming language, software, hardware, firmware or related
documentation, inventions, technical and nontechnical data related thereto,
and (ii) other documentation, inventions and data related to patterns,
plans, methods, techniques, drawings, finances, customer lists, suppliers,
products, special pricing and cost information, designs, processes,
procedures, formulas, research data owned or used by such Borrower or
marketing studies conducted by such Borrower, all of which such Borrower
considers to be commercially important and competitively sensitive and
which generally has not been disclosed to third parties.
(g) No Conflicts. Consummation of the transactions contemplated
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hereby and the performance of the obligations of Borrower under and by
virtue of the Loan Documents do not conflict with, and will not result in
any breach of, or constitute a default or trigger a lien under, any
mortgage, security deed or agreement, deed of trust, lease, bank loan or
credit agreement, corporate charter or bylaws, agreement or certificate of
limited partnership, partnership agreement, license, franchise or any other
instrument or agreement to which any Borrower is a party or by which any
Borrower or its respective properties may be bound or affected or to which
Borrower has not obtained an effective waiver.
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(h) Litigation. There are no actions, suits, arbitrations,
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administrative hearings or other proceedings pending, or, to the knowledge
of Borrower threatened, against or affecting any Borrower or any of
Borrower's property or involving the validity or enforceability of any of
the Loan Documents at law or in equity, or before any governmental or
administrative agency. To Borrower's knowledge, Borrower is not subject to
any order, writ, injunction, decree or demand of any court or any
governmental authority.
(i) Financial Statements. The financial statements of Borrower dated
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December 31, 1997, which are attached hereto as Schedule 3.1(i)(A), are
true and correct in all material respects, have been prepared on the basis
of generally accepted accounting principles consistently applied, and
fairly present the financial condition of the Credit Parties as of the
date(s) thereof and the statements of income and retained earnings and
statements of cash flows present fairly the results of operations and cash
flows of the Credit Parties for the periods set forth therein. No material
adverse change has occurred in the financial condition of any Credit Party
since the date(s) thereof, and no additional borrowings have been made by
any Credit Party since the date(s) thereof other than as set forth on
Schedule 3.1(i)(B) and 3.1(n).
(j) Other Agreements; No Defaults. Borrower is not a party to any
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indenture, loan or credit agreement, lease or other agreement or
instrument, or subject to any charter or corporate restriction, that could
have a material adverse effect on the business, properties, assets,
operations or conditions, financial or otherwise, of such Borrower, or the
ability of such Borrower to carry out its obligations under the Loan
Documents to which it is a party. Borrower is not in default in any
respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party, including but
not limited to this Agreement and the other Loan Documents, and no other
default or event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of default
under any of same.
(k) Compliance With Law. Borrower has obtained all necessary
-------------------
licenses, permits and approvals and authorizations necessary or required in
order to conduct its business and affairs as heretofore conducted and as
hereafter intended to be conducted. Borrower is in compliance with all
laws, regulations, decrees and orders applicable to it (including but not
limited to laws, regulations, decrees and orders relating to environmental,
occupational and health standards and controls, antitrust, monopoly,
restraint of trade or unfair competition), except to the extent that any
noncompliance, in the aggregate, cannot reasonably be expected to have a
material adverse effect on its business, operations, property or financial
condition and will not materially adversely affect each Borrower's ability
to perform its obligations under the Loan Documents.
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(l) Debt. Schedule 3.1(l) is a complete and correct list of all
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credit agreements, indentures, purchase agreements, promissory notes and
other evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which Borrower or any of its properties is in any manner
directly or contingently obligated and the maximum principal or face
amounts of the credit in question that are outstanding and that can be
outstanding are correctly stated, and all liens of any nature given or
agreed to be given as security therefor are correctly described or
indicated in such Schedule 3.1(l).
(m) Taxes. Borrower has filed or caused to be filed all tax returns
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that are required to be filed (except for returns that have been
appropriately extended), and has paid, or will pay when due, all taxes
shown to be due and payable on said returns and all other taxes,
impositions, assessments, fees or other charges imposed on it by any
governmental authority, agency or instrumentality, prior to any delinquency
with respect thereto (other than taxes, impositions, assessments, fees and
charges currently being contested in good faith by appropriate proceedings,
for which appropriate amounts have been reserved in accordance with
generally accepted accounting principles). No tax liens have been filed
against Borrower or any of its property.
(n) Certain Transactions. Except as set forth on Schedule 3.1(n)
--------------------
hereto, Borrower is not indebted, directly or indirectly, to any of its
shareholders, officers or directors or to their respective spouses or
children, in any amount whatsoever, and none of said shareholders, officers
or directors or any members of their immediate families, are indebted to
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or any firm or
corporation which competes with Borrower, except that shareholders,
officers and/or directors of Borrower may own no more than 4.9% of
outstanding stock of publicly traded companies which may compete with
Borrower. No shareholder, officer or director or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm, corporation or other legal entity.
(o) Statements Not False or Misleading. No representation or warranty
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given as of the date hereof by Borrower contained in this Agreement or any
schedule attached hereto or any statement in any document, certificate or
other instrument furnished or to be furnished by Borrower to Lenders
pursuant hereto, taken as a whole, contains or will (as of the time so
furnished) contain any untrue statement of a material fact, or omits or
will (as of the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein not misleading.
(p) Margin Regulations. Borrower is not engaged in the business of
------------------
extending credit for the purpose of purchasing or carrying margin stock.
No proceeds received
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pursuant to this Agreement will be used to purchase or carry any equity
security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
(q) Significant Contracts. Schedule 3.1(q) is a complete and correct
---------------------
list of all contracts, agreements and other documents pursuant to which
Borrower receives revenues in excess of $100,000 per fiscal year or has
committed to make expenditures in excess of $100,000 per fiscal year. Each
such contract, agreement and other document is in full force and effect as
of the date hereof and Borrower knows of any reason why such contracts,
agreements and other documents would not remain in full force and effect
pursuant to the terms thereof.
(r) Environment. Borrower has duly complied with, and its business,
-----------
operations, assets, equipment, property, leaseholds or other facilities are
in compliance with, the provisions of all federal, state and local
environmental, health, and safety laws, codes and ordinances, and all rules
and regulations promulgated thereunder. Borrower has been issued and will
maintain all required federal, state and local permits, licenses,
certificates and approvals relating to (i) air emissions; (ii) discharges
to surface water or groundwater; (iii) noise emissions; (iv) solid or
liquid waste disposal; (v) the use, generation, storage, transportation or
disposal of toxic or hazardous substances or wastes (which shall include
any and all such materials listed in any federal, state or local law, code
or ordinance and all rules and regulations promulgated thereunder as
hazardous or potentially hazardous); or (vi) other environmental, health or
safety matters. Borrower has not received notice of, or knows of, or
suspects facts which might constitute any violations of any federal, state
or local environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder with respect to its businesses,
operations, assets, equipment, property, leaseholds, or other facilities.
Except in accordance with a valid governmental permit, license, certificate
or approval, there has been no emission, spill, release or discharge into
or upon (i) the air; (ii) soils, or any improvements located thereon; (iii)
surface water or groundwater; or (iv) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises, of any toxic
or hazardous substances or wastes at or from the premises; and accordingly
the premises of Borrower is free of all such toxic or hazardous substances
or wastes. There has been no complaint, order, directive, claim, citation
or notice by any governmental authority or any person or entity with
respect to (i) air emissions; (ii) spills, releases or discharges to soils
or improvements located thereon, surface water, groundwater or the sewer,
septic system or waste treatment, storage or disposal systems servicing the
premises; (iii) noise emissions; (iv) solid or liquid waste disposal; (v)
the use, generation, storage, transportation or disposal of toxic or
hazardous substances or waste; or (vi) other environmental, health or
safety matters affecting Borrower or its business, operations, assets,
equipment, property, leaseholds or other facilities. Borrower has no
indebtedness, obligation or liability (absolute or contingent, matured or
not matured), with respect to the storage, treatment, cleanup or disposal
of any solid wastes, hazardous wastes or other toxic or hazardous
10
<PAGE>
substances (including without limitation any such indebtedness, obligation,
or liability with respect to any current regulation, law or statute
regarding such storage, treatment, cleanup or disposal).
(s) Fees/Commissions. Borrower has not agreed to pay any finder's
----------------
fee, commission, origination fee (except for the processing and commitment
fees due pursuant to Section 1.2 hereof and a commission payable to Stern,
Agee & Leach in the amount of $120,000.00) or other fee or charge to any
person or entity with respect to the Loan and investment transactions
contemplated hereunder.
(t) ERISA. Borrower is in compliance in all material respects
-----
with all applicable provisions of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406,
September 2, 1974, 88 Stat. 829, 29 U.S.C.A. (S) 1001 et
--
seq. (1975), as amended from time to time ("ERISA"). Neither
---
a reportable event nor a prohibited transaction (as defined
in ERISA) has occurred and is continuing with respect to any
pension plan is subject to the requirements of ERISA (a
"Plan"); no notice of intent to terminate a Plan has been
filed nor has any Plan been terminated; no circumstances
exist which constitute grounds entitling the Pension Benefit
Guaranty Corporation (together with any entity succeeding to
or all of its functions, the "PBGC") to institute
proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such
proceedings; neither Borrower nor any commonly controlled
entity (as defined in ERISA) has completely or partially
withdrawn from a multiemployer plan (as defined in ERISA);
Borrower and each commonly controlled entity has met its
minimum funding requirements under ERISA with respect to all
of its Plans and the present fair market value of all Plan
property exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation
date of the Plan and in accordance with the provisions of
ERISA and the regulations thereunder for calculating the
potential liability of Borrower or any commonly controlled
entity to the PBGC or the Plan under Title IV or ERISA; and
neither Borrower nor any commonly controlled entity has
incurred any liability to the PBGC under ERISA.
(u) Title to Properties. Borrower has good, indefeasible and
-------------------
insurable title to, or valid leasehold interests in, all its real
properties and good title to its other assets, free and clear of all liens
other than Permitted Liens (as defined in Section 4.15 hereof).
(v) Limited Offering of Note and Warrant. Neither Borrower nor anyone
------------------------------------
acting on its behalf has offered the Notes, the Warrants or any similar
securities for sale
11
<PAGE>
to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof, with, any person other than
Lenders and not more than 35 other institutional investors. Neither
Borrower nor anyone acting on its behalf has taken, or will take, any
action which would subject the issuance or sale of the Notes and Warrants
to Section 5 of the Securities Act of 1933, as amended, or the registration
or qualification provisions of the blue sky laws of any state.
(w) Registration Rights. Except as described in the Warrants and per
-------------------
schedule 3.1(w), Borrower is not under any obligation to register under the
Securities Act of 1933, as amended, or the Trust Indenture Act of 1939, as
amended, any of its presently outstanding securities or any of its
securities that may subsequently be issued.
(x) Employees. Borrower has no current labor problems or disputes
---------
which have resulted or such Borrower reasonably believes could be expected
to have a material adverse effect on the operations, properties or
financial condition of such Borrower, or Borrower's ability to perform its
obligations hereunder.
(y) Issuance Taxes. All taxes imposed on Borrower in connection with
--------------
the issuance, sale and delivery of the Notes, the Warrants and the capital
stock issuable upon exercise of the Warrants have been or will be fully
paid, and all laws imposing such taxes have been or will be fully satisfied
by Borrower.
(z) Solvency. As of the date hereof and giving effect to the making
--------
of the Loan, Borrower (i) has capital sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage and is able to pay its debts as they mature, (ii) owns property
having a value, both at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable liabilities (including
contingencies), and (iii) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as they
mature.
(aa) Collateral; Location of Property. Borrower is the lawful owner
--------------------------------
and holder of the Collateral and has the full authority to grant a security
interest in the Collateral hereunder free and clear of any lien, charge,
encumbrance or security interest whatsoever, except for the Permitted Liens
(as defined in Section 4.15 hereof). The only jurisdictions in which
Borrower maintains any tangible personal property or carries on business
are as listed in Schedule 3.1(aa) hereto. All billings for the supply of
goods and services by Borrower are made from, and require payment to be
made to, the chief executive office of Borrower.
(bb) Interrelatedness of Borrower. The business operations of
----------------------------
Borrower are interrelated and complement one another, and such entities
have a common business purpose, with intercompany bookkeeping and
accounting adjustments used to separate their respective properties,
liabilities, and transactions. To permit their uninterrupted and
12
<PAGE>
continuous operations, such entities now require and will from time to time
hereafter require funds and credit accommodations for general business
purposes. The proceeds of the Loan will directly or indirectly benefit
Borrower hereunder, severally and jointly, regardless of which Borrower
requests or receives part or all of the proceeds of such advances.
(cc) Year 2000 Compatibility. Borrower has reviewed its financial
-----------------------
accounting systems and other computer systems for year 2000 compatibility
and has not identified any issue that could have a material adverse effect
on such Borrower's business, operations, property or financial condition.
ARTICLE 4
COVENANTS AND AGREEMENTS
------------------------
Borrower covenants and agrees that during the term of this Agreement:
4.1 Payment of Obligations. Borrower shall pay the indebtedness evidenced
----------------------
by the Notes according to the terms thereof, and shall timely pay or perform, as
the case may be, all of the other obligations of Borrower to Lenders, direct or
contingent, however evidenced or denominated, and however and whenever incurred,
including but not limited to indebtedness incurred pursuant to any present or
future commitment of Lenders to Borrower, together with interest thereon, and
any extensions, modifications, consolidations and/or renewals thereof and any
notes given in payment thereof.
4.2 Financial Statements and Reports. ACT shall furnish to each of the
--------------------------------
Lenders (a) as soon as practicable and in any event within one hundred twenty
(120) days after the end of each fiscal year of ACT, an audited consolidated and
consolidating balance sheet of the Credit Parties as of the close of such fiscal
year, an audited consolidated and consolidating statement of operations of the
Credit Parties as of the close of such fiscal year and an audited consolidated
and consolidating statement of cash flows for the Credit Parties for such fiscal
year, prepared in accordance with generally accepted accounting principles
consistently applied and certified by an officer of ACT and accompanied by a
certificate of the Chief Financial Officer of ACT, stating that to the best of
the knowledge of such officer, the Credit Parties have kept, observed, performed
and fulfilled each covenant, term and condition of this Agreement and the other
Loan Documents during the preceding fiscal year and that no Event of Default has
occurred and is continuing (or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action Borrower proposes to take in connection therewith), (b) within thirty
(30) days of the end of each calendar month, a status report indicating the
financial performance of the Credit Parties during such month and the financial
position of the Credit Parties as of the end of such month in the format
required by Lenders (which format will be delivered to Borrower on a diskette),
(c) within thirty (30) days of the end of each quarter, a consolidated balance
sheet of the Credit Parties as of the close of such quarter and a consolidated
13
<PAGE>
statement of operations of the Credit Parties as of the close of such quarter,
all in reasonable detail, and prepared substantially in accordance with
generally accepted accounting principles consistently applied (except for the
absence of footnotes and subject to year-end adjustments), and (d) with
reasonable promptness, such other financial data, including without limitation,
accounts receivable agings, as Lenders may reasonably request. Without
Lender's prior written consent, Borrower shall not, and shall cause each Credit
Party not to, modify or change any accounting policies or procedures, including
the Credit Parties' fiscal year, in effect on the date hereof.
4.3 Maintenance of Books and Records; Inspection. Borrower shall, and
--------------------------------------------
shall cause each Credit Party to, maintain its books, accounts and records in
accordance with generally accepted accounting principles consistently applied,
and after reasonable notice from Lenders, permit Lenders, their officers and
employees and any professionals designated by Lenders in writing, at such
Borrower's expense, to visit and inspect any of its properties, corporate books
and financial records, and to discuss its accounts, affairs and finances with
such Credit Party or the principal officers of such Credit Party during
reasonable business hours, all at such times as Lenders may reasonably request;
provided that no such inspection shall materially interfere with the conduct of
such Credit Party's business.
4.4 Insurance. Without limiting any of the requirements of any of the
---------
other Loan Documents, Borrower shall, and shall cause each Credit Party to,
maintain, in amounts customary for entities engaged in comparable business
activities, (a) to the extent required by applicable law, worker's compensation
insurance (or maintain a legally sufficient amount of self insurance against
worker's compensation liabilities, with adequate reserves, under a plan approved
by Lenders, such approval not to be unreasonably withheld or delayed), and (b)
fire and "all risk" casualty insurance on its properties against such hazards
and in at least such amounts as are customary in Credit Party's business. If
determined appropriate by the Agent, Borrower will make reasonable efforts to
obtain and maintain public liability insurance in an amount, and at a cost,
deemed reasonable to the Borrower's Boards of Directors. At the request of
Agent, Borrower will deliver forthwith a certificate specifying the details of
such insurance in effect.
4.5 Taxes and Assessments. Borrower shall, and shall cause each Credit
---------------------
Party to, (a) file all tax returns and appropriate schedules thereto that are
required to be filed under applicable law, prior to the date of delinquency, (b)
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon such Credit Party upon its income and profits or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and (c) pay all taxes, assessments and governmental charges or levies that, if
unpaid, might become a lien or charge upon any of its properties; provided,
however, that any Credit Party in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves in accordance with generally accepted
accounting principles are maintained with respect thereto.
4.6 Corporate Existence. Borrower shall, and shall cause each Credit
-------------------
Party to, maintain its corporate existence and good standing in the state of its
incorporation, and its
14
<PAGE>
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law.
4.7 Compliance with Law and Other Agreements. Except where the failure to
----------------------------------------
do so would not materially adversely affect a Credit Party's operations,
properties, financial condition or its ability to fulfill its obligations under
the Loan Documents, Borrower shall, and shall cause each Credit Party to,
maintain its business operations and property owned or used in connection
therewith in compliance with (a) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (b) all agreements, licenses, franchises,
indentures and mortgages to which any Credit Party is a party or by which any
Credit Party or any of its properties is bound. Without limiting the foregoing,
Borrower shall, and shall cause each Credit Party to, pay all of its
indebtedness promptly in accordance with the terms thereof.
4.8 Notice of Default; Perceived Breach. Borrower shall, and shall cause
-----------------------------------
each Credit Party to, give written notice to Lenders of the occurrence of any
default, event of default or Event of Default under this Agreement or any other
Loan Document promptly upon the occurrence thereof.
4.9 Notice of Litigation. Borrower shall, and shall cause each Credit
--------------------
Party to, give notice, in writing, to Lenders of (a) any actions, suits or
proceedings, instituted by any persons whomsoever against a Credit Party or
affecting any of the assets of the Credit Parties wherein the amount at issue is
in excess of One Hundred Thousand and No/100ths Dollars ($100,000.00) and (b)
any dispute, not resolved within sixty (60) days of the commencement thereof,
between a Credit Party on the one hand and any governmental regulatory body on
the other hand, which dispute might materially interfere with the normal
operations of a Credit Party.
4.10 Conduct of Business. The Credit Parties will continue to engage in a
-------------------
business of the same general type and manner as conducted by it on the date of
this Agreement.
4.11 ERISA Plan. If any Credit Party has in effect, or hereafter
----------
institutes, a Plan that is subject to the requirements of ERISA, then the
following warranty and covenants shall be applicable during such period as any
such Plan shall be in effect: (a) Borrower hereby warrants that, to Borrower's
knowledge, no fact that might constitute grounds for the involuntary termination
of the Plan, or for the appointment by the appropriate United States District
Court of a trustee to administer the Plan, exists at the time of execution of
this Agreement; (b) Borrower hereby covenants that throughout the existence of
the Plan, such Credit Party's contributions under the Plan will meet the minimum
funding standards required by ERISA and such Credit Party will not institute a
distress termination of the Plan; and (c) Borrower covenants that it will send
to Lenders a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the PBGC, at the time
that such notice is so filed.
15
<PAGE>
4.12 Dividends, Distributions, etc. Without the prior written consent of
------------------------------
the holders of a majority of the principal amount of the Loan outstanding at
such time (the "Majority Lenders"), no Borrower shall declare or pay any
dividend of any kind (other than stock dividends payable to all holders of any
class of capital stock), in cash or in property, on any class of the capital
stock of Borrower, or purchase, redeem, retire or otherwise acquire for value
any shares of such stock, nor make any distribution of any kind in cash or
property in respect thereof, nor make any return of capital of shareholders, nor
make any payments to any Shareholder or employee in cash or property pursuant to
the terms of any stock options, stock bonus or similar plan.
4.13 Guaranties; Loans; Payment of Debt. Without prior written consent of
----------------------------------
the Majority Lenders, Borrower shall not, and shall cause each Credit Party not
to, guarantee nor be liable in any manner, whether directly or indirectly, or
become contingently liable after the date of this Agreement in connection with
the obligations or indebtedness of any person or entity whatsoever, except for
the endorsement of negotiable instruments payable to a Credit Party for deposit
or collection in the ordinary course of business or guarantees on behalf of its
Subsidiaries in the ordinary course of business the underlying obligation is
permitted under Section 4.14. Without the prior written consent of the Majority
Lenders, Borrower shall not, and shall cause each Credit Party not to, (a)
make any loan, advance or extension of credit to any person other than in the
ordinary course of business, or (b) make any payment on any debt, other than to
the Senior Lender, the Obligations, or trades payable or leases, incurred in
the ordinary course of business.
4.14 Debt. Without the prior written consent of the Majority Lenders,
----
Borrower shall not, and shall cause each Credit Party not to, create, incur,
assume or suffer to exist indebtedness of any description whatsoever, excluding:
(a) the indebtedness evidenced by the Notes;
(b) the endorsement of negotiable instruments payable to a Credit Party
for deposit or collection in the ordinary course of business;
(c) trade payables incurred in the ordinary course of business of a Credit
Party (each of which, individually, and expressed monthly does not
exceed $150,000);
(d) the indebtedness listed on Schedule 3.1(l) hereto;
(e) indebtedness secured by its Accounts Receivable in an amount not to
exceed
$1,500,000, including amounts
owed to Senior Lender;
(f) Capital leases and purchase money debt, each of which, individually,
does not exceed $200,000 and $1,000,000 in the aggregate on an annual
basis.
4.15 No Liens. Without the consent of the Majority Lenders, Borrower
--------
shall not, and shall cause each Credit Party not to, create, incur, assume or
suffer to exist any lien, security interest, security title, mortgage, deed of
trust or other encumbrance upon or with respect to any of its assets, now owned
or hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
16
<PAGE>
(a) liens in favor of Agent and/or Lenders relating to the Obligations;
(b) liens for taxes or assessments or other governmental charges or levies
if not yet due and payable;
(c) liens on leased equipment granted in connection with the leasing of
such equipment in favor of the lessor of such equipment or purchase
money security interests securing the indebtedness permitted by
Section 4.14(f);
(d) liens described on Schedule 3.1(l) hereto.
4.16 Mergers, Consolidations, Acquisitions and Sales. Without the prior
-----------------------------------------------
written consent of the Majority Lenders, which shall not be unreasonably
withheld, Borrower shall not , and shall cause each Credit Party not to, (a) be
a party to any merger, consolidation or corporate reorganization, nor (b)
purchase or otherwise acquire all or substantially all of the assets or stock
of, or any partnership or joint venture interest in, any other person, firm or
entity, nor (c) sell, transfer, convey, or lease all or any substantial part of
its assets, nor (d) create any Subsidiaries nor convey any of its assets to any
Subsidiary.
4.17 Transactions With Affiliates. Borrower shall, and shall cause each
----------------------------
Credit Party not to, enter into any transaction, including, without limitation,
the purchase, sale or exchange of property or the rendering of any service, with
any affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of such Credit Parties' business and upon fair and reasonable terms
no less favorable to such Credit Party than such Credit Party would obtain in a
comparable arm's length transaction with a person not an affiliate. For the
purposes of this Section 4.17, "affiliate" shall mean a person, corporation,
partnership or other entity controlling, controlled by or under common control
with such Credit Party.
4.18 Employment Contracts. Without the prior written consent of the
--------------------
Majority Lenders, Borrower shall not, and shall cause each Credit Party not to,
(a) enter into any employment agreement or other written compensation agreement
that have a term of greater than three year with any of such Borrower's
executive officers or (b) increase total cash salary compensation paid to the
executive officers of Borrower by more than twenty percent (20%) per year as
compared to the compensation plan approved by the Compensation Sub Committee of
the Board each year.
4.19 Environment. Borrower shall, and shall cause each Credit Party to,
-----------
be and remain in compliance with the provisions of all federal, state, and local
environmental, health, and safety laws, codes and ordinances, and all rules and
regulations issued thereunder; notify each Lender immediately of any notice of a
hazardous discharge or environmental complaint received from any governmental
agency or any other party; notify each Lender immediately of any hazardous
discharge from or affecting its premises; immediately contain and remove the
same, in compliance with all applicable laws; promptly pay any fine or penalty
assessed in connection therewith; permit any Lender to inspect the premises, to
conduct tests thereon, and to inspect all books, correspondence, and records
pertaining thereto; and at such Lender's request, and at such Credit Party's
expense, provide a report of a qualified environmental engineer, satisfactory in
scope,
17
<PAGE>
form, and content to such Lender, and such other and further assurances
reasonably satisfactory to such Lender that the condition has been corrected.
4.20 Additional Agreements With Respect to the Collateral.
----------------------------------------------------
(a) Borrower will not permit any of the Collateral to be removed from
the location specified herein, except for temporary periods in the normal
and customary use thereof, without the prior written consent of the
Majority Lenders.
(b) Borrower shall, and shall cause each Credit Party to, notify Agent
in writing of any change in the location of such Borrower's principal place
of business or the location of any tangible Collateral or the place(s)
where the records concerning all intangible Collateral and kept or
maintained.
(c) Borrower will keep the Collateral in good condition and repair and
will pay and discharge all taxes, levies and other impositions levied
thereon as well as the cost of repairs to or maintenance of same, and will
not permit anything to be done that may impair the value of any of the
Collateral. If Borrower fails to pay such sums, Agent or Lenders may do so
for such Borrower's account and add the amount thereof to the Obligations.
(d) Until the occurrence of an Event of Default, Borrower shall be
entitled to possession of the Collateral and to use the same in any lawful
manner, provided that such use does not cause excessive wear and tear to
the Collateral, cause it to decline in value at an excessive rate, or
violate the terms of any policy of insurance thereon.
(e) Borrower will not allow the Collateral to be attached to real
estate in such manner as to become a fixture or a part of any real estate.
(f) Borrower will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein without the prior written
consent of the Majority Lenders. The security interest granted hereunder
shall attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by any
instruments, chattel paper or documents of title, then such instruments,
chattel paper or documents of title shall be promptly delivered to Agent
and subject to the security interest granted hereby. If at any time
Borrower's inventory is represented by any document of title, such document
of title will be delivered promptly to Agent and subject to the security
interest granted hereby.
(g) Borrower will at all times keep the Collateral insured against all
insurable hazards in amounts equal to the full cash value of the
Collateral. Such insurance shall be in such companies as may be acceptable
to the Majority Lenders, with provisions satisfactory to the Majority
Lenders. At Agent's request, Borrower shall deposit the policies with
Agent. Any money received by Agent or Lenders under said policies may
18
<PAGE>
be applied to the payment of the Obligations, whether or not due and
payable, or at the Majority Lenders' option may be delivered by Agent or
Lenders to such Borrower for the purpose of repairing or restoring the
Collateral. Borrower assigns to Agent for the ratable benefit of Agent and
Lenders all right to receive proceeds of insurance not exceeding the
amounts secured hereby, directs any insurer to pay all proceeds directly to
Agent, and appoints Agent such Borrower's attorney-in-fact to endorse any
draft or check made payable to such Borrower in order to collect the
benefits of such insurance. If Borrower fails to keep the Collateral
insured as required by the Majority Lenders, the Majority Lenders shall
have the right to obtain such insurance or direct Agent to obtain insurance
at such Borrower's expense and add the cost thereof to the Obligations.
4.21 Power of Attorney. Upon the request of Agent, Borrower shall execute
-----------------
any and all financing statements and other documents which are deemed by Agent
from time to time to be necessary or desirable in perfecting the security
interests granted herein or otherwise effectuating the transactions contemplated
herein. Borrower hereby constitutes Agent or its designee, as Borrower's
attorney-in-fact with power, upon the occurrence and during the continuance of
an Event of Default, to endorse Borrower's name upon any notes, acceptances,
checks, drafts, money orders, or other evidences of payment or Collateral that
may come into either its or the Lenders' possession; to sign the name of
Borrower on any invoice or bill of lading relating to any of the accounts
receivable, drafts against customers, assignments and verifications of accounts
receivable and notices to customers; to send verifications of accounts
receivable; to notify the Post Office authorities to change the address for
delivery of mail addressed to such Borrower to such address as the Agent may
designate; to execute any of the documents in order to perfect and/or maintain
the security interests and liens granted herein by such Borrower to Agent or
Lenders; to do all other acts and things necessary to carry out the purposes of
and remedies provided under this Agreement. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of commission or omission (other than acts of gross
negligence or willful misconduct), nor for any error of judgment or mistake of
fact or law. This power being coupled with an interest is irrevocable until all
of the Obligations are paid in full and any and all promissory notes executed in
connection therewith are terminated and satisfied.
ARTICLE 5
CONDITIONS TO CLOSING
---------------------
5.1 Closing of the Loan. The obligation of each Lender to fund its
-------------------
portion of the Loan on the date hereof (the "Closing Date") is subject to the
fulfillment, on or prior to the Closing Date, of each of the following
conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
19
<PAGE>
(b) Lenders shall have received an opinion of the Borrower's counsel,
Faegre & Benson, dated the Closing Date, in form and substance satisfactory
to Lenders counsel, Caldwell & Caldwell, P.C.
(c) Borrower shall have delivered to Lenders the Notes executed by
Borrower, in form and substance satisfactory to Lenders.
(d) Borrower shall have delivered to each of the Lenders a Stock
Purchase Warrant executed by ACT, Inc., in form and substance satisfactory
to Lenders, and the related Warrant Valuation Letter executed by Borrower.
(e) Borrower shall have delivered to Lenders a Pledge and Security
Agreement, along with stock powers and proxies, executed by Borrower, in
form and substance satisfactory to Lenders.
(f) Borrower shall have delivered to Lenders an Intellectual Property
Security Agreement executed by Borrower, in form and substance satisfactory
to Lenders.
(g) Borrower shall have delivered to Lenders an Authorization
Agreement for Pre-Authorized Payments (Debit) executed by Borrower, in form
and substance satisfactory to Lenders.
(h) Borrower shall have delivered to Lenders an Intercreditor
Agreement executed by Key Bank (the "Senior Lender"), in form and substance
satisfactory to Lenders.
(i) Borrower shall have delivered to Lenders copies of the corporate
charter and other publicly filed organizational documents of Borrower,
certified by the Secretary of State or other appropriate public official in
the jurisdiction in which Borrower is incorporated.
(j) Borrower shall have delivered to Lenders certified (as of the date
of this Agreement) copies of all corporate action taken by Borrower,
including resolutions of its Board of Directors, authorizing the execution,
delivery and performance of the Loan Documents.
(k) Borrower shall have delivered to Lenders a certificate as to the
legal existence and good standing of Borrower, issued by the Secretary of
State or other appropriate public official in the jurisdiction in which
Borrower is incorporated.
(l) Borrower shall have delivered to Lenders certificates of the
Secretaries of State or other appropriate public officials as to each
Borrower's qualification to do business and good standing in each
jurisdiction in which a failure to be so qualified would have a
20
<PAGE>
material adverse effect on its financial condition or its ability to
conduct its business in the manner now conducted and as hereafter intended
to be conducted.
ARTICLE 6
DEFAULT AND REMEDIES
--------------------
6.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an Event of Default hereunder:
(a) Default in the payment of the principal of or interest on the
indebtednesses evidenced by the Notes in accordance with the terms of the
Notes, which default is not cured within five (5) days;
(b) Any misrepresentation by Borrower, any guarantor of the Loan, or
any Affiliate as to any material matter hereunder or under any of the other
Loan Documents, or delivery by Borrower of any schedule, statement,
resolution, report, certificate, notice or writing to Lenders that is
untrue in any material respect on the date as of which the facts set forth
therein are stated or certified;
(c) Failure of Borrower or any Credit Party, any guarantor of the
Loan, or any Affiliate to perform any of its obligations, covenants or
agreements under this Agreement, the Notes or any of the other Loan
Documents;
(d) If any Credit Party (i) shall generally not pay or shall be unable
to pay its debts as such debts become due, or (ii) shall make an assignment
for the benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets, or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect, or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it that is not dismissed within
thirty (30) days, or (v) shall indicate, by any act or intentional and
purposeful omission, its consent to, approval of or acquiescence in any
such petition, application, proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets, or (vi) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of sixty
(60) days or more;
(e) Any Credit Party shall be liquidated, dissolved, partitioned or
terminated, or the charter thereof shall expire or be revoked;
21
<PAGE>
(f) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of
default shall not be cured within the applicable cure period;
(g) Borrower shall default in the timely payment or performance of any
obligation now or hereafter owed to Lenders in connection with any other
indebtedness of Borrower now or hereafter owed to Lenders;
(h) Any Credit Party shall have defaulted and continue to be in
default in the timely payment of or performance of any covenant relating to
any other indebtedness or obligation, which in the aggregate exceeds
Twenty-Five Thousand and No/100ths Dollars ($25,000.00) or materially
adversely affects such Borrower's operations, properties or financial
condition, including the indebtedness owed to Senior Lender
(i) Gerald Van Eeckhout shall no longer serve on the executive staff
or management of Borrower; or
With respect to any Event of Default described above that is capable
of being cured and that does not already provide its own cure procedure (a
"Curable Default"), the occurrence of such Curable Default shall not
constitute an Event of Default hereunder if such Curable Default is fully
cured and/or corrected within thirty (30) days (ten (10) days, if such
Curable Default may be cured by payment of a sum of money) of notice
thereof to Borrower given in accordance with the provisions hereof;
provided, however, that this provision shall not require notice to Borrower
and an opportunity to cure any Curable Default of which Borrower have had
actual knowledge for the requisite number of days set forth above.
6.2 Acceleration of Maturity; Remedies.
----------------------------------
(a) Upon the occurrence of any Event of Default described in
subsection 7.1(d), the indebtedness evidenced by the Notes as well as any
and all other indebtednesses of Borrower to Lenders shall be immediately
due and payable in full; and upon the occurrence of any other Event of
Default described above, Agent, upon the direction or consent of the
Majority Lenders, at any time thereafter may accelerate the maturity of the
indebtednesses evidenced by the Notes as well as any and all other
indebtedness of Borrower to Lenders; all without notice of any kind. Upon
the occurrence of any such Event of Default and the acceleration of the
maturity of the indebtednesses evidenced by the Notes, and upon written
direction of the Majority Lenders, Agent may pursue any or all of the
following remedies, without any notice to Borrower except as required
below:
(i) Agent may give written notice of default to Borrower,
following which such Borrower shall not dispose of, conceal, transfer,
sell or encumber any of the Collateral (including, but not limited to,
cash proceeds) without the Majority
22
<PAGE>
Lenders' prior written consent, even if such disposition is otherwise
permitted hereunder in the ordinary course of business. Any such
disposition, concealment, transfer or sale after the giving of such
notice shall constitute a wrongful conversion of the Collateral. Agent
may obtain a temporary restraining order or other equitable relief to
enforce such Borrower's obligation to refrain from so impairing the
Collateral.
(ii) Agent may take possession of any or all of the Collateral.
Borrower hereby consents to Agent's entry into any of Borrower's
premises to repossess Collateral, and specifically consents to Agent's
forcible entry thereto as long as Agent causes no significant damage
to the premises in the process of entry (frilling of locks, cutting of
chains and the like do not in themselves cause "significant" damage
for the purposes hereof) and provided that Agent accomplishes such
entry without a breach of the peace.
(iii) Agent may dispose of the Collateral at private or public
sale. Any required notice of sale shall be deemed commercially
reasonable if given at least five (5) days prior to sale. Agent may
adjourn any public or private sale to a different time or place
without notice or publication of such adjournment, and may adjourn any
sale either before or after offers are received. The Collateral may
be sold in such lots as Agent may elect, in its sole discretion.
Agent may take such action as it may deem necessary to repair,
protect, or maintain the Collateral pending its disposition.
(iv) Agent may recover any of all proceeds of accounts from any
bank or other custodian who may have possession thereof. Borrower
hereby authorizes and direct all custodians of Borrower's assets to
comply with any demand for payment made by Agent pursuant to this
Agreement, without the need of confirmation from Borrower and without
making any inquiry as to the existence of an Event of Default or any
other matter. Agent may engage a collection agent to collect accounts
for a reasonable percentage commission or for any other reasonable
compensation arrangement.
(v) Agent may notify any or all account debtors of Borrower
that subsequent payments must be made directly to Agent or its
designated agent. Such notice may be made over Agent's signature or
over such Borrower's name with no signature or both, in Agent's
discretion. Borrower hereby authorizes and directs all existing or
future account debtors of Borrower to comply with any such notice
given by Agent, without the need of confirmation from Borrower and
without making any inquiry as to the existence of an Event of Default
or as to any other matter.
23
<PAGE>
(vi) Agent may, but shall not be obligated to, take such
measures as Agent may deem necessary in order to collect any or all of
the accounts. Without limiting the foregoing, Agent may institute any
administrative or judicial action that it may deem necessary in the
course of collecting and enforcing any or all of the accounts. Any
administrative or judicial action or other action taken by Agent in
the course of collecting the accounts may be taken by Agent in its own
name or in any Borrower's name. Agent may compromise any disputed
claims and may otherwise enter into settlements with account debtors
or obligors under the accounts, which compromises or settlements shall
be binding upon such Borrower. Agent shall have no duty to pursue
collection of any account, and may abandon efforts to collect any
account after such efforts are initiated.
(vii) Agent may, with respect to any account involving
uncompleted performance by Borrower, and with respect to any general
intangible or other Collateral whose value may be preserved by
additional performance on such Borrower's part, take such action as
Agent may deem appropriate including, but not limited, to performing
or causing the performance of any obligation of such Borrower
thereunder, the making of payments to prevent defaults thereunder, and
the granting of adequate assurances to other parties thereto with
respect to future performance. Agent's action with respect to any
such accounts or general intangibles shall not render Agent liable for
further performance thereunder unless Agent so agrees in writing.
(viii) Agent and Lenders may exercise the lien upon and right of
setoff against any monies, items, credits, deposits or instruments
that Agent or Lenders may have in their possession and that belong to
Borrower or to any other person or entity liable for the payment of
any or all of the Obligations.
(ix) Agent may exercise any right that it may have under any
other document evidencing or securing the Obligations or otherwise
available to Agent at law or equity.
(x) In exercising any right or remedy that Agent may have with
respect to the Collateral, Agent shall act for the benefit of each of
the Lenders. Upon any foreclosure sale or disposition of the
Collateral, Agent shall be entitled to enter a bid that is for ratable
credit upon each of the Notes. Agent shall not be required to enter a
cash bid unless all of the Lenders have contributed a ratable portion
of such cash to Agent. In the event that Agent acquires title to any
of the Collateral, it shall do so on behalf of all of the Lenders.
(xi) All proceeds from the liquidation, foreclosure,
repossession, or public or private sale of the Collateral, or
enforcement of Agent's security interest in the Collateral, or Agent's
exercise of any rights or remedies pursuant to this
24
<PAGE>
Section 6.2 or otherwise shall be, regardless of how each Lender may
treat the payments for the purpose of its own accounting, for the
purposes of computing Borrower's Obligations hereunder and calculating
distributions under this subsection (xi), applied first, to the costs
-----
and expenses incurred by the Agent, acting as Agent, as set forth
above, second, to the expenses of curing the default that has occurred
------
in the event that Agent elects to cure the default that has occurred,
third, to the ratable payment of accrued and unpaid interest on the
-----
Notes (in the same proportion that the then unpaid interest under each
Note bears to the aggregate of the then unpaid interest under all of
the Notes), fourth to the ratable payment of the unpaid principal of
------
the Notes (in the same proportion that the then unpaid principal under
each Note bears to the aggregate of the then unpaid principal under
all of the Notes) fifth, to the payment of all other amounts then
-----
owing to the Agent or the Lenders under the Loan Documents, and sixth,
-----
the remainder, if any, to Borrower or any other person legally
entitled thereto. No application of the payments will cure any Event
of Default or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents or prevent the exercise, or
continued exercise, of rights or remedies of the Lenders hereunder or
under applicable law. To the extent that any Lender receives any
payment in excess of that which it is entitled to receive hereunder,
it shall promptly repay such amount to Agent to be distributed to the
party or parties entitled thereto.
(xii) No disbursements shall be made by the Agent pursuant to
Section 6.2 unless and until the Agent has first determined (based
upon written notices provided by each Lender) the ratio that the
principal and interest evidenced by each Lender's Note bears to the
aggregate of all principal and interest evidenced by all of the Notes.
As used herein, the term "proceeds" of the Collateral shall mean cash,
securities and other property realized in respect of, and
distributions in kind of, the Collateral.
(xiii) If the Agent is required at any time to return to
Borrower or to a trustee, receiver, liquidator, custodian or similar
official any portion of any payment or distribution made by Agent to
any of the Lenders pursuant to this Section 6.2 or otherwise, then
such Lender(s) shall, upon demand, immediately return to Agent any
such payments made or transferred to such Lender(s), but without
interest or penalty (unless Agent is required to pay interest or
penalty on such amounts to the person recovering such payments). If,
however, any such Lender(s) shall fail to make such payment within ten
(10) days of Agent's demand, then the amount of such payment shall
bear interest at the prime rate of interest plus one percent.
6.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
------------------------------
upon or reserved to Lenders and/or Agent by this Agreement or any of the other
Loan Documents is intended to be exclusive of any other right, power or remedy,
but each and every such right,
25
<PAGE>
power and remedy shall be cumulative and concurrent and shall be in addition to
any other right, power and remedy given hereunder, under any of the other Loan
Documents or now or hereafter existing at law, in equity or by statute. No delay
or omission by Lenders or Agent to exercise any right, power or remedy accruing
upon the occurrence of any Event of Default shall exhaust or impair any such
right, power or remedy or shall be construed to be a waiver of any such Event of
Default or an acquiescence therein, and every right, power and remedy given by
this Agreement and the other Loan Documents to Lenders may be exercised from
time to time and as often as may be deemed expedient by Lenders or Agent.
ARTICLE 7
AGENCY PROVISIONS
-----------------
7.1 Authorization and Action. Each Lender hereby irrevocably appoints and
------------------------
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. The duties of
Agent shall be mechanical and administrative in nature and Agent shall not by
reason of this Agreement be a trustee or fiduciary for any Lender. Agent shall
have no duties or responsibilities except those expressly set forth herein. As
to any matters not expressly provided for by this Agreement (including, without
limitation, enforcement of Agent's security interest in the Collateral), Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or so refraining from acting) upon the instructions of the Majority
Lenders, and such instructions shall be binding upon all Lenders and all holders
of Notes; provided, however, that Agent shall not be required to take any action
which exposes the Agent to personal liability or which is contrary to this
Agreement or applicable law; and provided further, and notwithstanding any other
provision hereof, that the Majority Lenders shall provide notice to, and shall
consult with, the other Lenders before instructing the Agent to take action
which requires the consent of the Majority Lenders.
7.2 Liability of Agent. Neither the Agent nor any of its partners,
------------------
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement in the absence
of its or their own gross negligence or willful misconduct. Without limitation
of the generality of the foregoing, Agent (a) may treat the payee of any Note as
the holder thereof until Agent receives written notice of the assignment or
transfer thereof signed by such payee, which notice must be in form satisfactory
to Agent; (b) may consult with legal counsel (including counsel for Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts; (c) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties, or representations made in or in
connection with this Agreement; (d) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of Borrower, or to inspect the property
(including the books and records) of Borrower; (e) shall not be responsible to
any Lender
26
<PAGE>
for the due execution, legality, validity, enforceability, genuineness,
perfection, sufficiency, or value of this Agreement or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of this Agreement by acting upon any notice, consent, certificate,
monthly billing statement or other instrument or writing (which may be sent by
telegram, telex, or facsimile transmission) believed by it to be genuine and
signed or sent by the proper party or parties.
7.3 Rights of Agent as a Lender. With respect to the Loan made by it and
---------------------------
the Note issued to it, Agent shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
Agent, and the term "Lender" shall, unless otherwise expressly indicated,
include Agent in its individual capacity. Agent and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with, Borrower and any person who may do business
with or own securities of such Borrower or any Subsidiary, all as if Agent were
not Agent and without any duty to account therefor to the Lenders.
7.4 Independent Credit and Collateral Decisions. Each Lender acknowledges
-------------------------------------------
that it has, independently and without reliance upon Agent or any other Lender
and based on such documents and information as it has deemed appropriate, made
its own credit and collateral analysis (including an analysis of the nature and
value of the Collateral, the enforceability of Agent's security interest therein
and the perfection of such security interest) and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Except
for notices, reports and other documents and information expressly required to
be furnished to the Lenders by Agent hereunder, Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of Borrower or any of
their subsidiaries (or any of their affiliates) which may come into the
possession of Agent or any of its affiliates. Agent makes no express or implied
warranty concerning the value of the Collateral or the perfection or
enforceability of its security interest therein. Except for the filing of
continuation statements with respect to the UCC-1 Financing Statement(s)
executed on the date hereof by Borrower when required by applicable law, Agent
shall have no duty to protect the Collateral or the security interest granted
therein.
7.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
---------------
reimbursed by Borrower), ratably according to the respective amounts of their
portion of the Loan, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by Agent under this Agreement, provided
that no Lender shall be liable for any portion of any of the foregoing resulting
from Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse Agent (to the extent not reimbursed
by Borrower) promptly upon demand for its ratable share of any reasonable
27
<PAGE>
out-of-pocket expenses (including reasonable attorneys' fees) incurred by Agent
in connection with the preparation, administration, or enforcement of, or legal
advice in respect of rights or responsibilities under, this Agreement.
7.6 Successor Agent. Agent may resign at any time by giving at least
---------------
sixty (60) days prior notice thereof to the Lenders and Borrower and the
Majority Lenders may remove Agent at any time, with or without cause. Upon any
such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. In the case of a retiring Agent, if no successor
Agent shall have been so appointed by the Majority Lenders and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of
Lenders, appoint a successor Agent. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the Agent, and the retiring or removed Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article 7
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. Any Agent may be removed by a majority
of the remaining Lenders in the event Agent is convicted of a crime, engages in
any act of moral turpitude that has an adverse effect upon Borrower or its
business reputation, or fails to perform its duties as required by this
Agreement.
7.7 Sharing of Payments, Etc. If any Lender shall obtain any payment
------------------------
(whether voluntary, involuntary, through the exercise of any right or setoff, or
otherwise) on account of the Note held by it in excess of its ratable share of
payments on account of the Notes obtained by all Lenders, such Lender shall
purchase from the other Lenders such participations in the Notes held by them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of the other Lenders, provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and each Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (a) the amount of such Lender's required repayment to (b) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 7.7 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
setoff) with respect to such participation as fully as if such Lender were the
direct creditor of Borrower in the amount of such participation. Each Lender
shall give Agent written notice within five (5) days of any payments or other
recoveries described above.
7.8 Enforcement by Agent. All rights of action under this Agreement, the
--------------------
Notes and the other Loan Documents shall be instituted, maintained, pursued
and/or enforced by Agent. Any suit or proceeding instituted by Agent in
furtherance of such enforcement shall be brought in Agent's name without the
necessity of joining any of the other Lenders. In any event, the
28
<PAGE>
recovery of any judgment by Agent shall be for the ratable benefit of all
Lenders, subject to the reimbursement of expenses and costs of Agent.
7.9 Actions. When acting pursuant to consent of the Majority Lenders,
-------
Agent shall provide notice of any such action to any Lenders whose consent was
not sought within three (3) business days after such action.
ARTICLE 8
TERMINATION
-----------
8.1 Termination of this Agreement. This Agreement shall remain in full
-----------------------------
force and effect until the payment in full by Borrower of the Obligations, at
which time Lenders shall cancel the Notes and deliver them to Borrower;
provided, however, that the indemnity provided in Section 9.17 shall survive the
termination of this Agreement.
ARTICLE 9
MISCELLANEOUS
-------------
9.1 Performance By Agent. If Borrower defaults in the payment,
--------------------
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Agent may, at
the option of the Majority Lenders, pay, perform or observe the same, and all
payments made or costs or expenses incurred by Lenders and/or Agent in
connection therewith (including but not limited to reasonable attorneys' fees),
with interest thereon at the highest default rate provided in the Notes, shall
be immediately repaid to Lenders and/or Agent by such Borrower and shall
constitute a part of the Obligations. The Majority Lenders shall be the sole
judge of the necessity for any such actions and of the amounts to be paid.
9.2 Successors and Assigns Included in Parties. Whenever in this
------------------------------------------
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lenders or Agent shall bind
and inure to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
9.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
------------------
expenses incurred by any Lender in connection with the making of the Loan,
including but not limited to filing fees, recording taxes and reasonable
attorneys' fees, promptly upon demand of such Lender. Borrower further agrees
to pay all premiums for insurance required to be maintained by Borrower pursuant
to the terms of the Loan Documents and all of the out-of-pocket costs and
expenses incurred by any Lender and/or Agent in connection with the collection
of the Loan, amendment
29
<PAGE>
to the Loan Documents, or prepayment of the Loan, including but not limited to
reasonable attorneys' fees, promptly upon demand of such Lender and/or Agent.
9.4 Assignment. The Notes, this Agreement and the other Loan Documents
----------
may be endorsed, assigned and/or transferred in whole or in part by Lenders.
Any such holder and/or assignee of the same shall succeed to and be possessed of
the rights and powers of Lenders under all of the same to the extent transferred
and assigned. Lenders may grant participations in all or any portion of its
interest in the indebtedness evidenced by the Notes, and in such event Borrower
shall continue to make payments due under the Loan Documents to Lenders and
Lenders shall have the sole responsibility of allocating and forwarding such
payments in the appropriate manner and amounts. Borrower shall not, and shall
cause each Credit Party not to, assign any of its rights nor delegate any of its
duties hereunder or under any of the other Loan Documents without the prior
written consent of the Majority Lenders.
9.5 Time of the Essence. Time is of the essence with respect to each and
-------------------
every covenant, agreement and obligation of Borrower hereunder and under all of
the other Loan Documents.
9.6 Severability. If any provision(s) of this Agreement or the
------------
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
9.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
--------------------------------------------------------------
Anything in this Agreement, the Notes or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and other charges agreed to
be paid to Lenders for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Notes shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
----------
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lenders that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Notes and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Notes exceed the maximum amounts permitted from
time to time by applicable law.
9.8 Article and Section Headings; Defined Terms. Numbered and titled
-------------------------------------------
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
30
<PAGE>
9.9 Notices. Any and all notices, elections or demands permitted or
-------
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery,
telecopy or telex or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Agreement:
The Address of Agent is: Sirrom Capital Corporation
500 Church Street, Suite 200
Nashville, TN 37219
Attention: Burton Harvey
Telecopy No.: 615/726-1208
with a copy to: Caldwell & Caldwell, P.C.
500 Church Street, Suite 200
Nashville, TN 37219
Attention: Philip S. Clark, Esq.
Telecopy No.: 615/256-9958
The Address of Equitas is: Equitas, L.P.
2000 Glen Echo Road
Nashville, TN 37215
Attn: Shannon LeRoy
Telecopy No.: 615/383-8693
The Address of Borrower is: ACT Teleconferencing, Inc.
1658 Cole Blvd., Suite 130
Golden, CO 80401
Attention: Gavin Thompson
Telecopy No.: 303/233-0895
with copy to: Faegre & Benson, LLP
370 Seventeenth Street
2500 Republic Plaza
Denver, CO 80202
Attn: Bill Campbell
Telecopy No.: 303/820-0600
The Address of Lenders: As set forth on Exhibit A hereto
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<PAGE>
9.10 Entire Agreement. This Agreement and the other written agreements
----------------
between Borrower, Agent and Lenders represent the entire agreement between the
parties concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by
Borrower were not based upon any fact or material provided by Lenders, nor was
Borrower induced or influenced to enter into this Agreement or the other Loan
Documents by any representation, statement, analysis or promise by Lenders.
9.11 Governing Law and Amendments. This Agreement shall be construed and
----------------------------
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment, modification, termination or
waiver of any provision of any Loan Document to which Borrower is a party, nor
consent to any departure by Borrower from any Loan Document to which it is a
party, shall in any event be effective unless the same shall be in writing and
signed by the Majority Lenders. It is understood, however, until there is an
event of default by Borrower, the terms of the Notes may only be modified by the
unanimous written consent of Lenders.
9.12 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained herein or in any of the Loan Documents made by or furnished
on behalf of Borrower in connection herewith or in any Loan Documents shall
survive the execution and delivery of this Agreement and the other Loan
Documents.
9.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
9.14 Construction and Interpretation. Should any provision of this
-------------------------------
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lenders and their respective agents have participated in the
preparation hereof.
9.15 General Indemnification. Borrower agrees to indemnify Lenders,
-----------------------
Agent, their officers, directors, employees and agents (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties") and each of
them and agrees to hold each of them harmless from and against any and all
losses, liabilities, damages, costs, expenses and claims of any and every kind
whatsoever (except those arising solely by reason of the gross negligence or
wilful misconduct of an Indemnified Party) which may be imposed on, incurred by,
or asserted against the Indemnified Parties or any of them arising by reason of
any action or inaction or omission to any act legally
32
<PAGE>
required of Borrower (including as required pursuant hereto or pursuant to any
other Loan Document).
9.16 Standard of Care; Limitation of Damages. Lenders shall be liable to
---------------------------------------
Borrower only for matters arising from this Agreement or otherwise related to
the Obligations resulting from Lenders' gross negligence or wilful misconduct,
and liability for all other matters is hereby waived. Lenders shall not in any
event be liable to Borrower for special or consequential damages arising from
this Agreement or otherwise related to the Obligations.
9.17 Consent to Jurisdiction; Exclusive Venue. Borrower hereby
----------------------------------------
irrevocably consents to the jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts sitting in
Davidson County, Tennessee, for the purpose of any litigation to which Lenders
may be a party and which concerns this Agreement or the Obligations. It is
further agreed that venue for any such action shall lie exclusively with courts
sitting in Davidson County, Tennessee, unless the Majority Lenders agree to the
contrary in writing.
9.18 Waiver of Trial by Jury. LENDERS AND BORROWER HEREBY KNOWINGLY AND
-----------------------
VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE,
AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR
THE LOAN DOCUMENTS.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
AGENT:
-----
SIRROM CAPITAL CORPORATION,
a Tennessee corporation, as Agent
By: /s/ Christy S. Tedrow
-----------------------------------
Title: AVP
--------------------------------
BORROWER:
--------
ACT TELECONFERENCING, INC.
a Colorado corporation
By: /s/ Gavin J. Thomson
-----------------------------------
Title: Chief Financial Officer
--------------------------------
32
<PAGE>
LENDERS:
-------
SIRROM CAPITAL CORPORATION, a Tennessee
corporation
By: /s/ Christy S. Tedrow
-------------------------------------
Title: AVP
----------------------------------
EQUITAS, L.P., a Tennessee limited partnership
By: /s/ Shannon LeRoy
-------------------------------------
Title: President
----------------------------------
35
<PAGE>
EXHIBIT A
---------
LIST OF LENDERS
Name and Address
Amount of Loan
- ---------------------------------- --------------------
Sirrom Capital Corporation $ 1,610,000
500 Church Street
Suite 200
Nashville, TN 37219
Equitas, L.P. $ 890,000
2000 Glen Echo Road
Nashville, TN 37215
--------------------
$ 2,500,000.00
<PAGE>
INDEX OF SCHEDULES
------------------
Schedule 3.1(b) - Subsidiaries
Schedule 3.1(e) - Capitalization Table
Schedule 3.1(f) - Intellectual Property
Schedule 3.1(i)(A) and (B) - Financial Statements
Schedule 3.1(l) - Debt and Liens
Schedule 3.1(n) - Shareholder Loans
Schedule 3.1(q) - Significant Contracts
Schedule 3.1(w) - Registration Rights
Schedule 3.1(aa) - Location of Properties and Place of Business
<PAGE>
SCHEDULE 3.1 (B)
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
LOCATION OF
PRINCIPAL
Name STATE/COUNTRY ACTIVITIES %
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ACT Teleconferencing, Inc. Colorado Denver -
ACT Teleconferencing Services, Inc. Minnesota Denver 100
ACT Videoconferencing, Inc. Minnesota Denver 100
ACT Research, Inc. Colorado Denver 100
(dormant)
ACT Teleconferencing, B.V. Netherlands Amsterdam 100
ACT Teleconferencing, Limited United Kingdom London 60
ACT Teleconferencing (Pty.), Limited Australia Sydney 80
Multimedia and Teleconferencing United Kingdom Bracknell, UK 80
Solutions, Ltd. (MaTS) (Berkshire
county)
ACT Teleconferencing France S.A. France Paris 100
</TABLE>
<PAGE>
SCHEDULE 3.1 (E)
CAPITALIZATION TABLE
Issued shares outstanding (per 12/31/97 10KSB) 3,612,758
Shares per Stock Option Plan (12/31/97 10KSB) 730,400
Broker units (1 warrant plus 1 common, 12/31/97) 71,250
71,250
IPO warrants (see prospectus and below) 712,497
---------
5,198,155
Less IPO warrants already exercised and included in
3,612,758 shares (per 12/31/97 10KSB) (13,300)
1998 warrants (not exercised as of 12/31/97 and per 12/31/97 10KSB) 5,000
---------
Fully diluted position at 3/31/98 5,189,855
<PAGE>
SCHEDULE 3.1(F)
SCHEDULE OF TRADEMARKS
Trademark Jurisdiction/County
- --------- -------------------
Confercall United Kingdom
ACT United Kingdom
ActionCall United Kingdom
ACT Teleconferencing Benelux countries
(Belgium, Netherlands, Luxembourg)
<PAGE>
SCHEDULE 3.1(I)(A)
FINANCIAL STATEMENTS
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
CONTENTS
Report of Independent Auditors................... 20
Consolidated Balance Sheets...................... 21
Consolidated Statements of Operations............ 22
Consolidated Statements of Shareholders' Equity.. 23
Consolidated Statements of Cash Flows............ 24
Notes to Consolidated Financial Statements....... 25-35
Page 19
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
ACT Teleconferencing, Inc.
We have audited the accompanying consolidated balance sheets of ACT
Teleconferencing, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACT
Teleconferencing, Inc. at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
February 20, 1998
Page 20
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-----------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 451,434 $ 621,742
Accounts receivable (net of allowances for doubtful 2,885,125 1,356,471
accounts of $18,992 and $255,494 for 1997 and 1996,
respectively)
Prepaid expenses and other 203,673 55,994
Inventory 136,116 125,850
Available for sale marketable securities 50,000 50,000
-----------------------------------------
TOTAL CURRENT ASSETS 3,726,348 2,210,057
Telecommunications equipment 2,651,395 1,664,697
Office equipment 1,910,606 702,019
Less: accumulated depreciation (1,094,938) (736,556)
----------------------------------------
TOTAL EQUIPMENTNET 3,467,063 1,630,160
Goodwill 736,300 245,052
---------------------------------------
TOTAL ASSETS $ 7,929,711 $ 4,085,269
=======================================
LIABILITIES
Notes payable $ 540,014 $ 74,784
Accounts payable 1,349,337 764,520
Accrued liabilities 777,526 339,299
Current portion of long term debt 253,251 177,312
Income taxes payable 293,238 156,991
----------------------------------------
TOTAL CURRENT LIABILITIES 3,213,366 1,512,906
Long-term debt 613,714 395,960
Deferred income taxes 117,454 41,042
Minority interest 607,244 367,404
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized - none issued
Common stock, no par value, 10,000,000 shares authorized
3,612,758 and 2,939,930 shares issued and outstanding in
1997 and 1996, respectively 6,158,584 4,022,671
Accumulated deficit (2,729,069) (2,292,261)
Currency translation adjustment (51,582) 37,547
------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 3,377,933 1,767,957
------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,929,711 $ 4,085,269
==========================================
</TABLE>
See notes to consolidated financial statements.
Page 21
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
-------------------------------------
<S> <C> <C>
Net revenues $ 10,234,403 $ 6,219,946
Costs and expenses:
Cost of teleconferencing services 4,727,236 3,604,729
Marketing, general and administration 5,408,940 3,538,866
Total costs and expenses 10,136,176 7,143,595
Income (loss) before income taxes and minority interest 98,227 (923,649)
Income taxes (332,566) (164,591)
Minority interest in earnings of consolidated subsidiary (202,469) (119,867)
-------------------------------------
Net (loss) $ (436,808) $ (1,208,107)
=====================================
(Loss) per common share $(0.14) $(0.41)
=====================================
Weighted average shares outstanding 3,204,747 2,911,187
</TABLE>
See notes to consolidated financial statements.
Page 22
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Currency
Accumulated Translation
Shares Amount Deficit Adjustment Total
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 2,318,000 $2,157,940 $ (1,084,154) $ - $ 1,073,786
Shares issued for cash 712,497 1,987,531 - - 1,987,531
Expiration of put issued in connection
with prior year acquisition - 125,000 - - 125,000
Reduction of purchase price related
to acquisition (100,000) (250,000) - - (250,000)
Cashless exercise of employee stock options 8,333 - - - -
Exercise of employee stock options 1,100 2,200 - - 2,200
Currency translation adjustment - - - 37,547 37,547
Net (Loss) - - (1,208,107) - (1,208,107)
----------------------------------------------------------------------------------
Balance December 31, 1996 2,939,930 4,022,671 (2,292,261) 37,547 1,767,957
Exercise of employee stock options 43,500 52,000 52,000
Exercise of 1994 private placement warrants 514,950 1,520,834 1,520,834
Issuance of shares as fee to warrant
placement agent 33,000 115,500 115,500
Shares issued in connection with the
acquisition of MaTS Ltd. 81,378 447,579 447,579
Currency translation adjustment (89,129) (89,129)
Net (Loss) (436,808) (436,808)
-----------------------------------------------------------------------------------------
Balance December 31, 1997 3,612,758 $6,158,584 $(2,729,069) $ (51,852) $ 3,377,933
=========================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 23
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) $ (436,808) $ (1,208,107)
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation 358,382 288,670
Amortization of goodwill 18,054 38,463
Deferred income tax 76,416 22,491
Minority interest 202,469 119,867
------------------------------------------
Cashflows before changes in operating assets and 218,513 (738,616)
liabilities
Changes in operating assets and liabilities (Net of
effect of business combinations):
Accounts receivable (1,310,000) (676,021)
Inventory 73,276 (14,376)
Prepaid expenses and other assets (124,612) (25,774)
Accounts payable 424,460 162,867
Accrued liabilities 356,356 175,214
------------------------------------------
Net cash used for operating activities (362,007) (1,116,706)
INVESTING ACTIVITIES
Property and equipment purchases (1,618,359) (759,337)
Short Term Notes (26,739)
Investment in marketable security (50,000)
Cash paid for MaTS acquisition net of cash acquired (101,257)
==========================================
Net cash used for investing activities (1,746,355) (809,337)
FINANCING ACTIVITIES
Net proceeds from issuance (repayment) of debt 258,985 142,840
Net proceeds from issuance of common stock 1,688,334 2,115,473
------------------------------------------
Net cash provided by financing activities 1,947,319 2,258,313
Effect of exchange rate changes on cash (9,265) 1,127
------------------------------------------
Net (decrease) increase in cash and cash equivalents (170,308) 333,397
Cash and cash equivalents, beginning of year 621,742 288,345
------------------------------------------
Cash and cash equivalents, end of year $ 451,434 $ 621,742
==========================================
</TABLE>
See notes to consolidated financial statements.
SUPPLEMENTAL CASH FLOW INFORMATION AND NON CASH INVESTING AND FINANCING
ACTIVITIES
1997 1996
Capital asset and lease additions 432,127 208,805
Page 24
<PAGE>
ACT Teleconferencing, Inc.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
ACT Teleconferencing, Inc. (the Company) is engaged in the business of providing
high quality audio, video and data conferencing products and services to
business clients. The Company operates principally in the United States, the
United Kingdom, the Netherlands, Belgium, and Australia, and France.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ACT
Teleconferencing, Inc., its wholly-owned domestic subsidiaries ACT
Teleconferencing Services, Inc., ACT VideoConferencing, Inc., ACT Research,
Inc., its 60% owned United Kingdom subsidiary, ACT Teleconferencing, Limited,
its 100% owned Dutch subsidiary, ACT Teleconferencing, B.V., and its 80% owned
Australian subsidiary, ACT Teleconferencing, (Pty) Limited. The Company has
accounted for its 80% acquisition of Multimedia and Teleconferencing Solutions,
Limited (MaTS) as of December 31, 1997 and no results of operations are
consolidated for 1997. All material inter-company transactions and balances have
been eliminated.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market, on a first-in, first-out
("FIFO") basis. Finished goods are priced using specific unit costs consisting
of materials, labor and related manufacturing overhead, but exclusive of
research and development, selling and general and administrative expenses, which
are charged to operations as incurred. Inventories consist primarily of raw
materials and finished goods.
AVAILABLE FOR SALE MARKETABLE SECURITIES
The fair value of the Company's marketable securities at December 31, 1997
approximates the carrying value. The fair value was determined using market
quotes.
Page 25
<PAGE>
EQUIPMENT AND DEPRECIATION
Equipment is stated at cost. Depreciation is calculated on a straight-line basis
over the estimated useful lives of five years for furniture and five or ten
years for equipment. Depreciation expense includes capital lease amortization
charges.
GOODWILL
Goodwill represents the excess of purchase price over tangible assets acquired
less liabilities assumed arising from acquisitions and is being amortized on a
straight-line basis over the estimated useful life of fifteen (15) years.
Goodwill is reviewed for impairment when events indicate that the carrying
amount may not be recoverable. If such events are noted, the Company estimates
the future free cash flows to be generated by the business associated with those
assets. In the event that the sum of the cash flows is less than the carrying
amount of those assets, the assets would be written down to fair value, which is
normally measured by discounting the estimated future cash flows.
FOREIGN CURRENCY CONVERSION
The financial statements of the Company's foreign subsidiaries have been
translated into United States dollars at the average exchange rate during the
year for the statement of operations and year-end rate for the balance sheet.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents.
LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share." Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. As all of the Company's common stock equivalents are anti-
dilutive, only basic earnings per share is presented in the Consolidated
Statements of Operations.
For 1997 and 1996, net loss per common share was computed based on the weighted
average number of common shares outstanding.
ADVERTISING COSTS
The company expenses advertising costs as incurred. Total advertising expenses
were $151,941 and $185,519 for the years ended December 31, 1997 and 1996
respectively.
RECENTLY ISSUED ACCOUNTING STANDARDS
On June 30, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement requires companies to classify items of other
Page 26
<PAGE>
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position, and is effective for the Company's fiscal year ending
December 31, 1998. Management intends to comply with the disclosure requirements
of this statement.
On June 30, 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." This statement establishes additional
standards for segment reporting in the financial statements and is effective for
the Company's fiscal year ending December 31, 1998. Management intends to comply
with the disclosure requirements of this statement and does not anticipate a
material impact on the results of operations of each segment.
RECLASSIFICATIONS
Certain reclassifications of the 1996 balances have been made in order to
conform to the 1997 presentation.
2. LONG AND SHORT TERM DEBT (INCLUDING CAPITALIZED LEASES)
SHORT TERM LINE OF CREDIT
The Company has a line of credit secured by the accounts receivable of its
United States operations (namely ACT Teleconferencing Services, Inc.) bearing
interest at 0.5% over prime rate (9% at December 31, 1997). This line of credit
contains certain covenants which include the maintenance of certain financial
ratios. The Company is in compliance with these ratios and covenants. The line
of credit has a borrowing base restricted to qualified accounts receivable up to
$500,000. As of December 31, 1997, the outstanding balance under this line of
credit was $455,677.
At December 31, 1997, the Company had a short term note payable to a
telecommunications vendor for $77,577, bearing interest at 10%. This note is
collateralized by a second lien over the accounts receivable of ACT
Teleconferencing Services and also by a corporate guarantee from ACT
Teleconferencing, Inc. This note matures on April 30, 1998 and requires monthly
interest and principal payments until that date.
SHORT TERM NOTE PAYABLE TO RELATED PARTIES
At December 31, 1997, the Company had a 6% note payable to the 20% minority
shareholder in ACT Australia (Pty) Limited for $6,762. This loan is expected to
be converted to a long term note payable.
Page 27
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------------------------------------
<S> <C> <C>
Long term debt is summarized as follows:
Bank note payable, 1.5% over prime, (9.75% at December,
1996) due in monthly principal amounts of $834 plus
interest, due August 31, 1999. The loan agreement
contains certain covenants, the most restrictive of which
includes maintenance of certain financial ratios and a
defined borrowing base; additionally, the agreement
limits payment of dividends and repurchase or retirement
of the Company's stock. - 25,814
Bank note payable, 10% (3.5% over bank's base rate at
December 31, 1997) due in monthly installments of $990
plus interest, due December 31, 1998. $ 21,790 $ 28,037
Bank note payable, 14.205%, due in quarterly installments
of $20,424 plus interest, due August 31, 1999. 136,158 228,867
Notes payable to vendors bearing interest at rates from
16.125% to 18.102% due in monthly repayments of $3,413
and due July and August, 2002. These notes are
collateralized by certain bridging equipment held by ACT
Teleconferencing Services, Inc. 133,044 0
Capitalized leases, at interest rates from 5% to 14%, due
at various periods through 2002. 321,568 119,340
Capitalized leases, at interest rates from 17% to 24%, due
at various periods through 2002. 231,540 140,029
Capitalized lease, at 29%, due December, 1999. 22,865 31,185
----------------------------------------
Subtotal 866,965 573,272
----------------------------------------
Less, current portion of long term debt (253,251) (177,312)
----------------------------------------
Long term debt including capitalized leases $ 613,714 $395,960
========================================
</TABLE>
Total interest paid on notes and capitalized leases for the year ended December
31, 1997 and 1996 amounted to $99,496 and $36,253 respectively.
Page 28
<PAGE>
3. COMMITMENTS - OPERATING AND CAPITALIZED LEASES
OPERATING LEASES
The company leases office space in the United States, United Kingdom, the
Netherlands, Australia and France. These leases expire November, 2002,
September, 1998, June, 2000, December, 2000 and October, 1998, respectively.
Total rent expense charged to operations was $301,316 and $229,141 for the years
ended December 31, 1997 and 1996.
During 1997, the Company entered into several operating leases for computer and
office equipment. Total rent expense charged under these leases was $51,715 for
the year ended December 1997.
CAPITALIZED LEASES
The Company leases telecommunication equipment, office equipment, computers and
furniture under long-term leases classified as capital leases. For several of
these leases, the Company has the option to purchase the equipment for a nominal
cost at the termination of the lease. The assets classified as capital leases
are amortized over the shorter of the estimated useful life of the property or
the lease term.
Amortization related to these assets is included in depreciation for financial
reporting purposes.
The following property is secured under capital leases:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-----------------------------------------
<S> <C> <C>
Telecommunications and office equipment, computers and
furniture $ 797,310 $385,368
Less accumulated depreciation (142,387) (55,497)
-----------------------------------------
$ 654,928 $329,871
=========================================
</TABLE>
The aggregate minimum annual rental commitments as of December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
-----------------------------------------
<S> <C> <C>
1998 $ 648,717 $ 235,778
1999 479,092 216,735
2000 410,840 132,503
2001 275,742 115,641
2002 and thereafter 250,017 55,964
-----------------------------------------
Total minimum lease payments $2,064,408 $ 756,621
==================
Less amounts representing interest (180,648)
-----------------
Present value of net minimum capital
leases payments $ 575,973
=================
</TABLE>
During 1997, the Company incurred capital lease obligations of $432,127 in
connection with lease agreements to acquire equipment, as compared to $208,805
in 1996.
29
<PAGE>
4. SHAREHOLDERS' EQUITY
INITIAL PUBLIC OFFERING - COMMON STOCK AND WARRANTS
On March 5, 1996, the Company issued 712,497 units (common stock plus warrants)
in an initial public offering raising cash proceeds (net of expenses) of
$1,987,531.
Each of the above warrants entitles the holder to purchase one share of common
stock during a three-year period commencing February 2, 1996 at an exercise
price of $5.00 per share, subject to adjustment in certain events. The Company
may at any time redeem the warrants at $.10 per warrant on 30 days written
notice, provided that the average closing bid price per share of common stock
has been at least 120% of the exercise price of the warrant (i.e., an average
closing bid price of $6.00), for ten consecutive trading days prior to the
notice of redemption. Holders of these warrants will forfeit all other rights
upon such redemption except the right to receive the $.10 redemption price per
warrant and the right to exercise the warrants during the 30 days following
written notice.
Also in connection with the initial public offering, the Company granted a Unit
Purchase Option to Tuschner & Co., the underwriter of the offering. The Unit
Purchase Option grants the holder the right to purchase 71,250 units (each
consisting of one share of common stock and one warrant to purchase common
stock) for a nominal total price of $100, and must be exercised on or before
February 2, 2001. Each of the warrants underlying the Unit Purchase Option
allows the holder to purchase one share of common stock for $5.00, and may be
exercised at any time up to three years from the date the Unit Purchase Option
is exercised.
Holders of the above warrants are not entitled to vote, receive dividends, or
exercise any of the rights of shareholders of Common Stock for any purpose until
the warrants have been duly exercised.
WARRANT CONVERSION 1994, 1995 PRIVATE PLACEMENT AND CERTAIN IPO WARRANTS
In connection with loans obtained from private investors, during 1994, the
Company had issued warrants to purchase 8,750 shares of the Company stock at
$4.00 per share expiring December 31, 1998. During 1997, 3750 warrants were
exercised and are included in the analysis below.
In connection with a 1995 private offering, the Company issued 435,700 warrants
exercisable at $3.50 per share expiring August 31, 1997. The Company also issued
42,570 units of one share of common stock plus two additional warrants for
conversion of the Company's stock exercisable at $3.25 per share. These warrants
expired August 31, 1997.
During 1997 a total of 514,950 warrants (including 13,300 warrants arising from
the initial public offering and 3,750 warrants from the 1994 private placement)
were converted at an average price of $3.30 realizing gross proceeds of
$1,698,375. In connection with these conversions, the Company incurred costs of
$177,541 which were offset against the related proceeds for net proceeds of
$1,520,834. As a warrant placement fee 33,000 shares at $3.50 were also issued
to the warrant placement agent.
Page 30
<PAGE>
5. STOCK OPTION PLAN
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires the use of complex option
valuation models which were not developed for use in valuing the Company's
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is required to be recognized.
The Company's 1991 Stock Option Plan authorized the grant of options to
officers, key employees, and consultants for up to 400,000 shares of the
Company's common stock. The Company has also granted options under the Stock
Option Plan of 1996. The 1996 Stock Option Plan, has authorized the grant of an
additional 400,000 options to officers, key employees, and consultants of the
Company for a total of 800,000. Options granted under both Plans generally have
10 year terms and vest 25% each year following the date of grant.
Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model. The following are weighted-average assumptions for 1996
and 1997, respectively: risk-free interest rates of 6.5% and 6.0%; a dividend
yield of 0%; volatility factors of the expected market price of the Company's
common stock of .60 and .80; and a weighted-average expected life of the option
of 7 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Pro forma net (loss) $(714,230) $(1,279,660)
Pro forma (loss) per share $ (.22) $ (.44)
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1999.
Page 31
<PAGE>
A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
Weighted-Avg. Weighted-Avg.
Options Exercise Price Options Exercise Price
-------------- --------------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding-beginning of year 454,300 $2.53 221,000 $1.75
Granted 325,100 5.62 410,800 2.98
Exercised (43,500) 1.20 (26,100) 2.00
Forfeited (5,500) 2.00 (151,400) 2.71
----------- ---------
Outstanding-end of year 730,400 $4.02 454,300 $2.53
=========== =========
Exercisable at end of year 186,350 $5.62 109,500 $1.50
Weighted-average fair value of
options granted during the
year $3.74 $1.93
</TABLE>
Weighted average exercise prices for options outstanding as of December 31, 1997
were 151,500 shares at $2.12, 378,800 shares at $3.01, and 200,100 shares at
$5.75.
7. INCOME TAXES
The Company accounts for income taxes in conformity with FASB Statement No. 109,
Accounting for Income Taxes ("Statement 109"). Under the provisions of Statement
109, a deferred tax liability or asset (net of valuation allowance) is provided
in the financial statements by applying the provisions of applicable tax laws to
measure the deferred tax consequences of temporary differences. This will result
in net taxable or deductible amounts in future years as a result of events
recognized in the financial statements in the current or preceding years.
Income tax expense and the related current and deferred tax liabilities for all
periods presented relate solely to the Company's U.K. operations and therefore
have no relation to the U.S. Statutory rates.
The provision for income taxes for the years ended December 31, is comprised of
the following:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------
<S> <C> <C>
Current $256,154 $142,100
Deferred 76,412 22,491
--------------------------------------
$332,566 $164,591
=====================================
</TABLE>
Page 32
<PAGE>
(INCOME TAXES CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------
Deferred Tax Liabilities-Domestic
<S> <C> <C>
Tax depreciation in excess of book depreciation $ (100,267) $ (20,697)
Deferred Tax Assets-Domestic
Net operating loss carry-forward 926,714 716,081
Reserves for doubtful accounts 3,850 94,230
Other 12,381 9,951
--------------------------------------
942,945 820,262
Valuation allowance for deferred tax assets (842,678) (799,565)
--------------------------------------
Net deferred tax-Domestic $ 0 $ 0
======================================
Deferred Tax Liabilities-International
Tax depreciation in excess of book depreciation $ (117,454) $ (41,042)
Deferred Tax Assets-International
Net operating loss carry-forward 335,088 177,724
Other 3,234 1,069
Valuation allowance for deferred tax assets (338,322) (178,793)
Net deferred tax liability-International $ (117,454) $ (41,042)
======================================
</TABLE>
Taxes of $118,989 and $132,126 were paid during 1997 and 1996, respectively. The
domestic net operating loss carry forwards of approximately $2,484,000 will
begin to expire in the year 2005. The Company has not provided for any taxes on
undistributed foreign earnings as the Company intends to permanently reinvest
these earnings in the future growth of the business.
8. BUSINESS SEGMENT ANALYSIS
The Company owns a 60% interest in ACT Teleconferencing, Limited which operates
in the United Kingdom; ACT Teleconferencing, B.V., a wholly owned subsidiary
which operates in the Netherlands and Belgium; an 80% interest in ACT Australia
(Pty) Limited; and an 80% interest in Multimedia and Teleconferencing Solutions,
(MaTS) which operates in the United Kingdom.
Presented below is certain segment information regarding the Company's United
States and international operations:
Page 33
<PAGE>
For the year ended December 31, 1997:
<TABLE>
<CAPTION>
INTERNATIONAL UNITED STATES UNITED STATES
OPERATIONS OPERATIONS CORPORATE TOTAL
<S> <C> <C> <C> <C>
Net revenues $ 5,527,846 $ 4,706,557 $ $ 10,234,403
Income (loss) before income
taxes and minority interest $ 526,531 $ 175,624 $ (603,928) $ 98,227
Net Income (Loss) $ (41,093) $ 175,624 $ (571,339) $ (436,808)
Total assets $ 4,483,424 $ 3,050,274 $ 396,013 $ 7,929,711
</TABLE>
For the year ended December 31, 1996:
<TABLE>
<CAPTION>
INTERNATIONAL UNITED STATES United States
OPERATIONS OPERATIONS Corporate Total
<S> <C> <C> <C> <C>
Net revenues $ 3,157,515 $ 3,062,431 $ $ 6,219,946
Income (loss) before income
taxes and minority interest $ 113,128 $ (703,644) $ (333,133) $ (923,649)
Net income (loss) $ (51,463) $ 703,644) $ (453,000) $ (1,208,107)
Total assets $ 2,027,236 $ 1,658,682 $ 399,351 $ 4,085,269
</TABLE>
One customer accounted for approximately 24% and 11% of consolidated revenues
for the years ended December 31, 1997 and 1996, respectively.
9. MULTIMEDIA AND TELECONFERENCING SOLUTIONS, LIMITED ACQUISITION (MATS)
In December 1997 the Company acquired 80% of the outstanding shares of
Multimedia and Teleconferencing Solutions, Limited, a United Kingdom
corporation. The consideration paid for the acquisition was 81,378 shares of the
Company's common stock at a price of $5.50 per share, and $155,474 in cash for a
total consideration of $603,053. In addition to the consideration described
above, the Company agreed to a deferred consideration of a further $540,000 to
be issued in shares of common stock to the seller if the acquired business
attains certain pre-tax revenue and profit targets. A reduced number of shares
will be issued if the acquired company does not achieve the specified targets
but achieves certain targets prorata. If such targets are achieved and the
shares are issued, the value of the shares issued will increase both goodwill
and shareholders' equity.
Page 34
<PAGE>
The acquisition was accounted for as a purchase as follows:
Consideration paid:
Cash $ 155,474
81,378 shares of common stock at $5.50 447,579
Acquisition costs 31,822
-----------
$ 634,875
===========
Fair value of assets acquired:
Fair value of equipment and other tangible assets $ 125,575
Goodwill 509,300
-----------
$ 634,875
===========
If this acquisition had occurred on January 1, 1997, consolidated revenues, net
loss and loss per share would have been $12,278,940, $(222,031) and $(0.07),
respectively.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, temporary
investments, medium term investments, long term investments, accounts
receivable, accounts payable, long-term debt and capitalized lease obligations.
Because accounts receivable and accounts payable are short-term instruments that
are settled at face value, the Company considers the carrying amounts to be
equal to the fair values.
Long-term debt consists of notes and capitalized lease obligations that bear
interest at adjustable rates. The Company also considers the carrying amount
(face value) of all instruments to be equal to the fair value.
11. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution 401(k) plan which allows eligible
employees to contribute a percentage of their compensation and provides for
certain discretionary employer matching contributions. For the years ended
December 31, 1997 and 1996, the Company contributed $15,355.32 and $3,722.81,
respectively.
Page 35
<PAGE>
SCHEDULE 3.1(i)(B)
SHAREHOLDER LOAN
Unsecured loan by Gerald and Carolyn Van Eeckhout in the amount of $200,000.
This loan bears interest at prime minus 1%.
No specific repayment date has been set for this loan.
<PAGE>
SCHEDULE 3.1(l)
DEBT AND LIENS
<PAGE>
LONG AND SHORT TERM DEBT (INCLUDING CAPITALIZED LEASES)
SHORT TERM LINE OF CREDIT
The Company has a line of credit secured by the accounts receivable of its
United States operations (namely ACT Teleconferencing Services, Inc.) bearing
interest at 0.5% over prime rate (9% at December 31, 1997). This line of credit
contains certain covenants which include the maintenance of certain financial
ratios. The Company is in compliance with these ratios and covenants. The line
of credit has a borrowing base restricted to qualified accounts receivable up to
$500,000. As of December 31, 1997, the outstanding balance under this line of
credit was $455,677.
At December 31, 1997, the Company had a short term note payable to a
telecommunications vendor for $77,577, bearing interest at 10%. This note is
collateralized by a second lien over the accounts receivable of ACT
Teleconferencing Services and also by a corporate guarantee from ACT
Teleconferencing, Inc. This note matures on April 30, 1998 and requires monthly
interest and principal payments until that date.
SHORT TERM NOTE PAYABLE TO RELATED PARTIES
At December 31, 1997, the Company had a 6% note payable to the 20% minority
shareholder in ACT Australia (Pty) Limited for $6,762. This loan is expected to
be converted to a long term note payable.
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------------------------------------
<S> <C> <C>
Long term debt is summarized as follows:
Bank note payable, 1.5% over prime, (9.75% at December,
1996) due in monthly principal amounts of $834 plus
interest, due August 31, 1999. The loan agreement
contains certain covenants, the most restrictive of which
includes maintenance of certain financial ratios and a
defined borrowing base; additionally, the agreement
limits payment of dividends and repurchase or retirement
of the Company's stock. - 25,814
Bank note payable, 10% (3.5% over bank's base rate at
December 31, 1997) due in monthly installments of $990
plus interest, due December 31, 1998. $ 21,790 $ 28,037
Bank note payable, 14.205%, due in quarterly installments
of $20,424 plus interest, due August 31, 1999. 136,158 228,867
Notes payable to vendors bearing interest at rates from
16.125% to 18.102% due in monthly repayments of $3,413
and due July and August, 2002. These notes are
collateralized by certain bridging equipment held by ACT
Teleconferencing Services, Inc. 133,044 0
Capitalized leases, at interest rates from 5% to 14%, due
at various periods through 2002. 321,568 119,340
Capitalized leases, at interest rates from 17% to 24%, due
at various periods through 2002. 231,540 140,029
Capitalized lease, at 29%, due December, 1999. 22,865 31,185
----------------------------------------
Subtotal 866,965 573,272
----------------------------------------
Less, current portion of long term debt (253,251) (177,312)
----------------------------------------
Long term debt including capitalized leases $ 613,714 $ 395,960
========================================
</TABLE>
Total interest paid on notes and capitalized leases for the year ended December
31, 1997 and 1996 amounted to $99,496 and $36,253 respectively.
<PAGE>
SCHEDULE 3.1(n)
SHAREHOLDER LOAN
Unsecured loan by Gerald and Carolyn Van Eeckhout in the amount of $200,000.
This loan bears interest at prime minus 1%.
No specific repayment date has been set for this loan.
<PAGE>
SCHEDULE 3.1(Q)
Pursuant to oral agreements and understandings, the Borrowers and its
subsidiaries earn revenues in excess of $100,000 annually from the following
customers:
Customer Principal country of activity
- -------- -----------------------------
Ernst & Young, LLP USA
Symantec Corporation USA
Verifone USA
Taylor Rafferty USA
AT&T USA
C.S. First Boston UK
Bank Paribas UK
Societe Generale UK
Royal Dutch Shell Netherlands
Pursuant to oral agreements and understandings and in certain instances pursuant
to purchase orders, the Borrower incurs expenses of $100,000 or more annually to
the following vendors:
VENDOR
- ------
WorldCom, Inc.
AT&T
British Telecom
U.S. West
Compunetix, Inc.
Note: Customers and vendors may change over time and amounts will vary depending
upon the period reviewed.
<PAGE>
SCHEDULE 3.1(W)
Broker warrants John M. Tuschner (Minneapolis broker) 71,250
Tuschner & Company
One Financial Plaza
120 South Sixth Street
Suite 800
Minneapolis, MN 55402
These carry "piggy back" registration rights
Refer to Schedules 3.1(e) and 3.1(i)(A)
<PAGE>
SCHEDULE 3.1 (AA)
ACT OFFICES WORLDWIDE
UNITED STATES
ACT Teleconferencing, Inc., 1658 Cole Boulevard, Suite 130, Golden, Colorado
80401.
ACT Teleconferencing Services, Inc., 1526 Cole Boulevard, Suite 300, Golden,
Colorado 80401
ACT Teleconferencing Services, Inc., 2139 Route 35, First Floor, Holmdel, New
Jersey 07733
UNITED KINGDOM
ACT Teleconferencing, Limited, Howard House, The Runway, South Ruislip,
Middlesex HA46SE United Kingdom
Multimedia and Teleconferencing Solutions (M.a.T.S.), Apex House, London Road,
Bracknell, Berkshire, RG12 1HX United Kingdom
NETHERLANDS
ACT Teleconferencing, BV, Strawinskylaan, 425 Tower 4B, 1077XX Amsterdam,
Netherlands
BELGIUM
ACT Teleconferencing, BV, Rue des Drapiers 40, B-1050 Brussels, Belgium
AUSTRALIA
ACT Teleconferencing, P/L, Level 4, 115 Pitt Street, Sydney, NSW, 2000
FRANCE
ACT Teleconferencing France, SA, Le Clemenceau 2, 215 Avenue Georges Clemenceau,
92000 Nanterre, France
<PAGE>
STOCK PURCHASE WARRANT
----------------------
This STOCK PURCHASE WARRANT ("Warrant") is issued this 31st day of March,
1998, by ACT TELECONFERENCING, INC., a Colorado corporation (the "Company"), to
SIRROM CAPITAL CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION
and any subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM CAPITAL
-------------------------
CORPORATION making a loan to the Company in an amount of One Million Six Hundred
Ten Thousand and no/100ths Dollars ($1,610,000.00) pursuant to the terms of a
secured promissory note of even date herewith (the "Note") and related loan
agreement of even date herewith (the "Loan Agreement"), and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 183,853
shares (the "Base Amount") of the Company's common stock (the "Common Stock"),
which the Company represents to equal 3.33% of the shares of capital stock
outstanding on the date hereof, calculated on a fully diluted basis and assuming
exercise of this Warrant, provided that in the event that any portion of the
indebtedness evidenced by the Note is outstanding on the following dates, the
Base Amount shall be increased to the corresponding number set forth below:
<TABLE>
<CAPTION>
DATE
BASE AMOUNT
- ----------------------------------------------------------------------------------
<C> <S>
March 31, 2000 216,802 shares, which the Company
represents to equal 3.885% of the shares
of the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
- ----------------------------------------------------------------------------------
March 31, 2001 269,702 shares, which the Company
represents to equal 4.94% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
- ----------------------------------------------------------------------------------
March 31, 2002 360,495 shares, which the Company
represents to equal 6.495% of the shares
of the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time from the date hereof until April 30, 2003 (the
"Expiration Date").
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
--------------
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be Seven Dollars & no/100ths ($7.00).
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but only
--------
on the conditions hereinafter set forth) in whole or in part, upon delivery of
written notice of intent to exercise to the Company in the manner at the address
of the Company set forth in Section 14 hereof, together with this Warrant and
payment to the Company of the aggregate Exercise Price of the Shares so
purchased. The Exercise Price shall be payable, at the option of the Holder,
(i) by certified or bank check, (ii) by the surrender of the Note or portion
thereof having an outstanding principal balance equal to the aggregate Exercise
Price or (iii) by the surrender of a portion of this Warrant where the Shares
subject to the portion of this Warrant that is surrendered have a fair market
value equal to the aggregate Exercise Price. In the absence of an established
public market for the Common Stock, fair market value shall be established by
the Company's board of directors in a commercially reasonable manner. Upon
exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to this Warrant. The Company covenants and agrees
that it will pay when due any and all state and federal issue taxes which may be
payable in respect of the issuance of this Warrant or the issuance of any Shares
upon exercise of this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
------------------------
following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933, as amended ("Securities Act"), or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be sold or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable
Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company and its counsel, that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws (the Company hereby acknowledges that Caldwell &
Caldwell, P.C. is acceptable counsel). Transfer of the Shares shall be
restricted in the same manner and to the same extent as the Warrant and the
certificates representing such Shares shall bear substantially the
following legend:
2
<PAGE>
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS AND SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of this Warrant and any shares of Common
Stock issued upon exercise hereof with applicable federal and state
securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights,
if any, with respect thereto or to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the exercise of
this Warrant such number of authorized but unissued shares of Common Stock
as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell any shares
of the Company's capital stock at a price per share below the fair market
value of such shares, without the prior written consent of the Holder
hereof (provided that the Company may issue Stock Options and Warrants in
connection with Equity Financings which shall not exceed fifteen percent
(15%) of the shares of common stock outstanding on the date hereof). In
the event that the Company sells shares of Common Stock at a price per
share below the fair market value of such shares (a "Below Market
Transaction"), without the prior written consent of the Holder hereof, the
Company covenants and agrees that the number of shares issuable upon
exercise of this Warrant shall be equal to the product obtained by
multiplying the number of shares issuable pursuant to this Warrant prior to
the Below Market Transaction by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to
consummation of the Below Market Transaction plus the number of shares of
Common Stock issued in the Below Market Transaction, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the Below Market Transaction plus the number of shares of Common
Stock that the aggregate consideration received by the Company in the Below
Market Transaction would purchase at fair market value. For purposes of
this subsection, Common Stock shall be deemed to include that number of
3
<PAGE>
shares of Common Stock that would be obtained assuming (i) the conversion
of any securities of the Company which, by their terms, are convertible
into or exchangeable for Common Stock, and (ii) the exercise of all options
to purchase or rights to subscribe four Common Stock or securities which,
by their terms, are convertible into or exchangeable for Common Stock. In
the absence of an established public market for the securities sold by the
Company in a Below Market Transaction, fair market value shall be
established by the Company's board of directors in a commercially
reasonable manner.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
-------------------
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
------------------------------------------------------------------
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive notice of
------------------
and be entitled to attend or may send a representative to attend all meetings of
the Company's Board of Directors in a non-voting observation capacity and shall
receive a copy of all correspondence and information delivered to the Company's
Board of Directors, from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full. It is noted and agreed that the
Company's Board may from time to time conduct informal Board meetings by
teleconference in addition to normal quarterly meetings. Borrower will at all
times keep Lenders informed of all important business decided upon at such Board
meetings which in any event would be ratified in minutes of formal Board
meetings.
8. ADJUSTMENT UPON CHANGES IN STOCK.
--------------------------------
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate Exercise Price, the aggregate number and class
of shares which such Holder would have received if this Warrant had been
exercised immediately prior to such stock split, stock dividend,
recapitalization, combination of shares, or other similar event. If any
adjustment under this Section 8(a), would create a fractional share of
Common Stock or a right to acquire a fractional share of Common
4
<PAGE>
Stock, such fractional share shall be disregarded and the number of shares
subject to this Warrant shall be the next higher number of shares, rounding
all fractions upward. Whenever there shall be an adjustment pursuant to
this Section 8(a), the Company shall forthwith notify the Holder or Holders
of this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event,
occurring after the date hereof, as a result of which shares of Common
Stock shall be changed into the same or a different number of shares of the
same or another class or classes of securities of the Company or another
entity, or the holders of Common Stock are entitled to receive cash or
other property, then the Holder exercising this Warrant shall receive, for
the aggregate Exercise Price, the aggregate number and class of shares,
cash or other property which such Holder would have received if this
Warrant had been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or other
similar event. If any adjustment under this Section 8(b) would create a
fractional share of Common Stock or a right to acquire a fractional share
of Common Stock, such fractional share shall be disregarded and the number
of shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an
adjustment pursuant to this Section 8(b), the Company shall forthwith
notify the Holder or Holders of this Warrant of such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
9. PUT AGREEMENT.
-------------
(a) Subject to the restrictions of Subparagraph (d) below, the Company
hereby irrevocably grants and issues to Holder the right and option to sell
to the Company (the "Put") this Warrant for a period of thirty (30) days
immediately prior to the Expiration Date, at a purchase price (the "Put
Price") equal to the Fair Market Value (as hereinafter defined) of the
shares of Common Stock issuable to Holder upon exercise of this Warrant.
(b) Holder may exercise the Put by delivery of written notice (the
"Put Notice") of such exercise to the Company in the manner and at the
address of the Company set forth in Section 14 hereof. The Company shall
pay to Holder, in cash or by wire transfer of immediately available funds,
the Put Price within thirty (30) days of the receipt of the Put Notice.
(c) For purposes of this Section 9, the Fair Market Value of the
shares of Common Stock of the Company issuable pursuant to this Warrant
shall be determined as follows:
5
<PAGE>
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a recognized
professional association of business appraisers. The two appraisers
shall determine the value of the shares of Common Stock which would be
issued upon the exercise of the Warrant, assuming that the sale would
be between a willing buyer and a willing seller, both of whom have
full knowledge of the financial and other affairs of the Company, and
neither of whom is under any compulsion to sell or to buy.
(ii) If the higher of the two appraisals is not ten percent
(10%) greater than the lower of the appraisals, the Fair Market Value
shall be the average of the two appraisals. If the higher of the two
appraisals is equal to or greater than ten percent (10%) more than the
lower of the two appraisals, then a third appraiser shall be appointed
by the two appraisers, and if they cannot agree on a third appraiser,
the American Arbitration Association shall appoint the third
appraiser. The third appraiser, regardless of who appoints him or her,
shall have the same qualifications as the first two appraisers.
(iii) The Fair Market Value after the appointment of the third
appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid one-
half by the Company and one-half by the Holder.
(d) The provisions of this Section 9(a) - (c) shall not be effective
as long as the Company is a reporting company under the Securities Exchange
Act of 1934 and its Common Stock is traded on The Nasdaq Stock Market or a
national securities exchange.
10. REGISTRATION.
------------
(a) The Company and the holders of the Shares agree that if at any
time after the date hereof the Company shall propose to file a registration
statement with respect to any of its Common Stock on a form suitable for a
secondary offering (including its initial public offering), it will give
notice in writing to such effect to the registered holder(s) of the Shares
at least thirty (30) days prior to such filing, and, at the written request
of any such registered holder, made within ten (10) days after the receipt
of such notice, will include therein at the Company's cost and expense
(including the fees and expenses of counsel to such holder(s), but
excluding underwriting discounts, commissions and filing fees attributable
to the Shares included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered by the
Company is underwritten and if the representative of the underwriters
certifies in writing that the inclusion therein of the Shares would
materially and adversely affect the sale of the securities to be sold by
the Company thereunder, then the Company shall be required to include in
the offering only that number of securities, including the Shares, which
the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro
rata among all selling
6
<PAGE>
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder, but in no event shall
the total amount of Shares included in the offering be less than the number
of securities included in the offering by any other single selling
shareholder unless all of the Shares are included in the offering).
(b) Whenever the Company undertakes to effect the registration of any
of the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement covering such
Shares and use its best efforts to cause such registration statement
to be declared effective by the Commission as expeditiously as
possible and to keep such registration effective until the earlier of
(A) the date when all Shares covered by the registration statement
have been sold or (B) one hundred eighty (180) days from the effective
date of the registration statement; provided, that before filing a
registration statement or prospectus or any amendment or supplements
thereto, the Company will furnish to each Holder of Shares covered by
such registration statement and the underwriters, if any, copies of
all such documents proposed to be filed (excluding exhibits, unless
any such person shall specifically request exhibits), which documents
will be subject to the review of such Holders and underwriters, and
the Company will not file such registration statement or any amendment
thereto or any prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the Commission if
(A) the underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or prospectus
concerning a particular selling Holder has changed and such Holder or
the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the
period referred to in Section 10(b)(i) and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement, and cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to
Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of
such registration statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as they
may reasonably request in order to facilitate the disposition of the
Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and
things which may be reasonably
7
<PAGE>
necessary or advisable to enable such selling Holder to consummate the
disposition of the Shares owned by such Holder, in such jurisdictions;
provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to transact
business or to file a general consent to service of process in any
such states or jurisdictions.
(v) Promptly notify each selling Holder of the happening of
any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such
Shares not later than the effective date of such registration
statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and
take all such other actions as the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Shares (including, without limitation, effecting a stock split or a
combination of shares).
(viii) Make available for inspection by any selling Holder or
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the officers, directors, employees and independent
accountants of the Company to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if requested by any
such person) confirm such notification in writing: (A) the filing of
the prospectus or any prospectus supplement and the registration
statement and any amendment or post-effective amendment thereto and,
with respect to the registration statement or any post-effective
amendment thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information, (C) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose and (D) the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any
8
<PAGE>
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such
order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold and not
bearing any restrictive legends, and enable such Shares to be in such
lots and registered in such names as the underwriters may request at
least two (2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than
the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) and the underwriters, if any, with respect to
the Shares and the registration statement as are customarily made by
issuers in primary underwritten offerings; (B) use its best efforts to
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the selling
Holders and the underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with primary
underwritten offerings; (C) deliver such documents and certificates as
may be reasonably requested (1) by the holders of a majority of the
Shares being sold, and (2) by the underwriters, if any, to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company; and (D) obtain opinions of counsel to the Company
and updates thereof (which counsel and which opinions shall be
reasonably satisfactory to the underwriters, if any), covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by the
selling Holders and underwriters or their counsel. Such counsel shall
also state that no facts have come to the attention of such counsel
which cause them to believe that such registration statement, the
prospectus contained therein, or any amendment or supplement thereto,
as of their respective effective or issue dates, contains any untrue
statement of any material fact or omits to state any material fact
necessary to make the statements therein not misleading (except that
no statement need be made with respect to any financial statements,
notes thereto or other financial data or other expertized material
contained therein). If for any reason the Company's counsel is unable
to give such opinion, the Company shall so notify the Holders of the
Shares and shall use its best efforts to remove expeditiously all
impediments to the rendering of such opinion.
9
<PAGE>
(xiv) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which the Shares are sold to
underwriters in a firm or best efforts underwritten offering, or (B)
if not sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company commencing
after the effective date of the registration statement, which
statements shall cover such twelve-month periods.
(c) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holders pursuant to this Warrant
without the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with respect
to each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement. If
any registration statement including any of the Shares is filed, then the
Company shall indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter within the
meaning of the Securities Act) from any loss, claim, damage or liability
arising out of, based upon or in any way relating to any untrue statement
of a material fact contained in such registration statement or any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such registration
statement; and such holder shall indemnify the Company (and each of its
officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for the Company and each person, if
any, who controls such underwriter within the meaning of the Securities
Act) and each other such holder against any loss, claim, damage or
liability arising from any such statement or omission which was made in
reliance upon information furnished in writing to the Company by such
holder of the Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed
to be issued and outstanding.
10
<PAGE>
11. CERTAIN NOTICES. In case at any time the Company shall propose to:
---------------
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of the
affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or securities
convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least twenty
(20) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place. Any notice
required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
12. RIGHTS OF CO-SALE. (Reserved)
-----------------
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and section
----------------------------
headings are for convenience only and shall not be construed as amplifying or
limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
------
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address
11
<PAGE>
set forth below, or at such other address as may be supplied in writing and of
which receipt has been acknowledged in writing. The date of personal delivery or
telecopy or two (2) business days after the date of mailing (or the next
business day after delivery to such courier service), as the case may be, shall
be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Burton Harvey
Telecopy No. 615/726-1208
with a copy to: Caldwell & Caldwell, P.C.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Philip S. Clark, Esq.
Telecopy No. 615/256-9958
The Address of Company is: ACT Teleconferencing, Inc.
1658 Cole Blvd., Suite 130
Golden, CO 80401
Attention: Gavin Thompson
Telecopy No.: 303/238-0096
with copy to: Faegre & Benson, LLP
370 Seventeenth Street
2500 Republic Plaza
Denver, CO 80202
Attn: Bill Campbell
Telecopy No.: 303/820-0600
15. SEVERABILITY. If any provisions(s) of this Warrant or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
----------------
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
----------------------------
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed
12
<PAGE>
in such State. No amendment or modification hereof shall be effective except in
a writing executed by each of the parties hereto.
18. COUNTERPARTS. This Warrant may be executed in any number of
------------
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
19. CONSENT TO JURISDICTION; EXCLUSIVE VENUE. The Company hereby
----------------------------------------
irrevocably consents to the jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts sitting in
Davidson County, Tennessee, for the purpose of any litigation to which Holder
may be a party and which concerns this Warrant. It is further agreed that venue
for any such action shall lie exclusively with courts sitting in Davidson
County, Tennessee, unless Holder agrees to the contrary in writing.
20. WAIVER OF TRIAL BY JURY. HOLDER AND THE COMPANY HEREBY KNOWINGLY AND
-----------------------
VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE,
AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS WARRANT.
21. EQUITY PARTICIPATION. This Warrant is issued in connection with the
--------------------
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. (S)47-24-101, et seq. and that equity
------
participation be permitted under said statutes and not constitute interest on
the Note. If under any circumstances whatsoever, fulfillment of any obligation
of this Warrant, the Loan Agreement, or any other agreement or document executed
in connection with the Loan Agreement, shall violate the lawful limit of any
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled shall be
reduced to such lawful limit, such that in no event shall there occur, under
this Warrant, the Loan Agreement, or any other document or instrument executed
in connection with the Loan Agreement, any violation of such lawful limit, but
such obligation shall be fulfilled to the lawful limit. If any sum is collected
in excess of the lawful limit, such excess shall be applied to reduce the
principal amount of the Note.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
COMPANY:
-------
ACT TELECONFERENCING, INC.,
a Colorado corporation
By: /s/ Gavin J. Thomson
---------------------------------
Title: Chief Financial Officer
------------------------------
HOLDER:
------
SIRROM CAPITAL CORPORATION,
a Tennessee corporation
By: /s/ Christy S. Tedrow
--------------------------------
Title: AVP
-----------------------------
14
<PAGE>
STOCK PURCHASE WARRANT
----------------------
This STOCK PURCHASE WARRANT ("Warrant") is issued this 31st day of March,
1998, by ACT TELECONFERENCING, INC., a Colorado corporation (the "Company"), to
EQUITAS, L.P., a Tennessee limited partnership (EQUITAS, L.P. and any subsequent
assignee or transferee hereof are hereinafter referred to collectively as
"Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of EQUITAS, L.P.
-------------------------
making a loan to the Company in an amount of Eight Hundred Ninety Thousand and
no/100ths Dollars ($890,000.00) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related loan agreement of even date
herewith (the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 147,114 shares (the "Base Amount") of the
Company's common stock (the "Common Stock"), which the Company represents to
equal 2.67% of the shares of capital stock outstanding on the date hereof,
calculated on a fully diluted basis and assuming exercise of this Warrant,
provided that in the event that any portion of the indebtedness evidenced by the
Note is outstanding on the following dates, the Base Amount shall be increased
to the corresponding number set forth below:
DATE BASE AMOUNT
--------------------- --------------------------------------------
March 31, 2000 173,832 shares, which the Company
represents to equal 3.115% of the shares
of the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
---------------------- --------------------------------------------
March 31, 2001 200,825 shares, which the Company
represents to equal 3.56% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
---------------------- --------------------------------------------
March 31, 2002 228,410 shares, which the Company
represents to equal 4.005% of the shares
of the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time from the date hereof until April 30, 2003 (the
"Expiration Date").
<PAGE>
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
--------------
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be Seven Dollars & no/100ths ($7.00).
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but only
--------
on the conditions hereinafter set forth) in whole or in part, upon delivery of
written notice of intent to exercise to the Company in the manner at the address
of the Company set forth in Section 14 hereof, together with this Warrant and
payment to the Company of the aggregate Exercise Price of the Shares so
purchased. The Exercise Price shall be payable, at the option of the Holder,
(i) by certified or bank check, (ii) by the surrender of the Note or portion
thereof having an outstanding principal balance equal to the aggregate Exercise
Price or (iii) by the surrender of a portion of this Warrant where the Shares
subject to the portion of this Warrant that is surrendered have a fair market
value equal to the aggregate Exercise Price. In the absence of an established
public market for the Common Stock, fair market value shall be established by
the Company's board of directors in a commercially reasonable manner. Upon
exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to this Warrant. The Company covenants and agrees
that it will pay when due any and all state and federal issue taxes which may be
payable in respect of the issuance of this Warrant or the issuance of any Shares
upon exercise of this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
------------------------
following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933, as amended ("Securities Act"), or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be sold or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable
Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company and its counsel, that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws (the Company hereby acknowledges that Caldwell &
Caldwell, P.C. is acceptable counsel). Transfer of the Shares shall be
restricted in the same manner and to the same extent as the Warrant and the
certificates representing such Shares shall bear substantially the
following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNTIL (I)A
2
<PAGE>
REGISTRATION STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS
AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of this Warrant and any shares of Common
Stock issued upon exercise hereof with applicable federal and state
securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights,
if any, with respect thereto or to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the exercise of
this Warrant such number of authorized but unissued shares of Common Stock
as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell any shares
of the Company's capital stock at a price per share below the fair market
value of such shares, without the prior written consent of the Holder
hereof (provided that the Company may issue Stock Options and Warrants in
connection with Equity Financings which shall not exceed fifteen percent
(15%) of the shares of common stock outstanding on the date hereof). In
the event that the Company sells shares of Common Stock at a price per
share below the fair market value of such shares (a "Below Market
Transaction"), without the prior written consent of the Holder hereof, the
Company covenants and agrees that the number of shares issuable upon
exercise of this Warrant shall be equal to the product obtained by
multiplying the number of shares issuable pursuant to this Warrant prior to
the Below Market Transaction by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to
consummation of the Below Market Transaction plus the number of shares of
Common Stock issued in the Below Market Transaction, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the Below Market Transaction plus the number of shares of Common
Stock that the aggregate consideration received by the Company in the Below
Market Transaction would purchase at fair market value. For purposes of
this subsection, Common Stock shall be deemed to include that number of
shares of Common Stock that would be obtained assuming (i) the conversion
of any securities of the Company which, by their terms, are convertible
into or exchangeable for Common Stock, and (ii) the exercise of all options
to purchase or rights to subscribe four Common Stock or securities which,
by their terms, are convertible into or exchangeable for Common Stock. In
the absence of an established public market for the securities sold
3
<PAGE>
by the Company in a Below Market Transaction, fair market value shall be
established by the Company's board of directors in a commercially
reasonable manner.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
-------------------
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
------------------------------------------------------------------
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive notice of
------------------
and be entitled to attend or may send a representative to attend all meetings of
the Company's Board of Directors in a non-voting observation capacity and shall
receive a copy of all correspondence and information delivered to the Company's
Board of Directors, from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full. It is noted and agreed that the
Company's Board may from time to time conduct informal Board meetings by
teleconference in addition to normal quarterly meetings. Borrower will at all
times keep Lenders informed of all important business decided upon at such Board
meetings which in any event would be ratified in minutes of formal Board
meetings.
8. ADJUSTMENT UPON CHANGES IN STOCK.
--------------------------------
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate Exercise Price, the aggregate number and class
of shares which such Holder would have received if this Warrant had been
exercised immediately prior to such stock split, stock dividend,
recapitalization, combination of shares, or other similar event. If any
adjustment under this Section 8(a), would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares subject to
this Warrant shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant to this
Section 8(a), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in
4
<PAGE>
reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event,
occurring after the date hereof, as a result of which shares of Common
Stock shall be changed into the same or a different number of shares of the
same or another class or classes of securities of the Company or another
entity, or the holders of Common Stock are entitled to receive cash or
other property, then the Holder exercising this Warrant shall receive, for
the aggregate Exercise Price, the aggregate number and class of shares,
cash or other property which such Holder would have received if this
Warrant had been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or other
similar event. If any adjustment under this Section 8(b) would create a
fractional share of Common Stock or a right to acquire a fractional share
of Common Stock, such fractional share shall be disregarded and the number
of shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an
adjustment pursuant to this Section 8(b), the Company shall forthwith
notify the Holder or Holders of this Warrant of such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
9. PUT AGREEMENT.
-------------
(a) Subject to the restrictions of Subparagraph (d) below, the Company
hereby irrevocably grants and issues to Holder the right and option to sell
to the Company (the "Put") this Warrant for a period of thirty (30) days
immediately prior to the Expiration Date, at a purchase price (the "Put
Price") equal to the Fair Market Value (as hereinafter defined) of the
shares of Common Stock issuable to Holder upon exercise of this Warrant.
(b) Holder may exercise the Put by delivery of written notice (the
"Put Notice") of such exercise to the Company in the manner and at the
address of the Company set forth in Section 14 hereof. The Company shall
pay to Holder, in cash or by wire transfer of immediately available funds,
the Put Price within thirty (30) days of the receipt of the Put Notice.
(c) For purposes of this Section 9, the Fair Market Value of the
shares of Common Stock of the Company issuable pursuant to this Warrant
shall be determined as follows:
(i) The Company and the Holder shall each appoint an independent,
experienced appraiser who is a member of a recognized professional
association of business appraisers. The two appraisers shall
determine the value of the shares of Common Stock which would be
issued upon the exercise of the Warrant, assuming that the sale would
be between a willing buyer and a willing seller, both
5
<PAGE>
of whom have full knowledge of the financial and other affairs of the
Company, and neither of whom is under any compulsion to sell or to
buy.
(ii) If the higher of the two appraisals is not ten percent
(10%) greater than the lower of the appraisals, the Fair Market Value
shall be the average of the two appraisals. If the higher of the two
appraisals is equal to or greater than ten percent (10%) more than the
lower of the two appraisals, then a third appraiser shall be appointed
by the two appraisers, and if they cannot agree on a third appraiser,
the American Arbitration Association shall appoint the third
appraiser. The third appraiser, regardless of who appoints him or her,
shall have the same qualifications as the first two appraisers.
(iii) The Fair Market Value after the appointment of the third
appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid one-
half by the Company and one-half by the Holder.
(d) The provisions of this Section 9(a) - (c) shall not be effective
as long as the Company is a reporting company under the Securities Exchange Act
of 1934 and its Common Stock is traded on The Nasdaq Stock Market or a national
securities exchange.
10. REGISTRATION.
------------
(a) The Company and the holders of the Shares agree that if at any
time after the date hereof the Company shall propose to file a registration
statement with respect to any of its Common Stock on a form suitable for a
secondary offering (including its initial public offering), it will give notice
in writing to such effect to the registered holder(s) of the Shares at least
thirty (30) days prior to such filing, and, at the written request of any such
registered holder, made within ten (10) days after the receipt of such notice,
will include therein at the Company's cost and expense (including the fees and
expenses of counsel to such holder(s), but excluding underwriting discounts,
commissions and filing fees attributable to the Shares included therein) such of
the Shares as such holder(s) shall request; provided, however, that if the
offering being registered by the Company is underwritten and if the
representative of the underwriters certifies in writing that the inclusion
therein of the Shares would materially and adversely affect the sale of the
securities to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities, including
the Shares, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among all selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder, but in no event shall the total amount of Shares included in the
offering be less than the number of securities included in the offering by any
other single selling shareholder unless all of the Shares are included in the
offering).
6
<PAGE>
(b) Whenever the Company undertakes to effect the registration of any
of the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement covering such
Shares and use its best efforts to cause such registration statement
to be declared effective by the Commission as expeditiously as
possible and to keep such registration effective until the earlier of
(A) the date when all Shares covered by the registration statement
have been sold or (B) one hundred eighty (180) days from the effective
date of the registration statement; provided, that before filing a
registration statement or prospectus or any amendment or supplements
thereto, the Company will furnish to each Holder of Shares covered by
such registration statement and the underwriters, if any, copies of
all such documents proposed to be filed (excluding exhibits, unless
any such person shall specifically request exhibits), which documents
will be subject to the review of such Holders and underwriters, and
the Company will not file such registration statement or any amendment
thereto or any prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the Commission if
(A) the underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or prospectus
concerning a particular selling Holder has changed and such Holder or
the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the
period referred to in Section 10(b)(i) and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement, and cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to
Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of
such registration statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as they
may reasonably request in order to facilitate the disposition of the
Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Shares owned by
such Holder, in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a general
consent to service of process in any such states or jurisdictions.
7
<PAGE>
(v) Promptly notify each selling Holder of the happening of
any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such
Shares not later than the effective date of such registration
statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and
take all such other actions as the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Shares (including, without limitation, effecting a stock split or a
combination of shares).
(viii) Make available for inspection by any selling Holder or
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the officers, directors, employees and independent
accountants of the Company to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if requested by any
such person) confirm such notification in writing: (A) the filing of
the prospectus or any prospectus supplement and the registration
statement and any amendment or post-effective amendment thereto and,
with respect to the registration statement or any post-effective
amendment thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information, (C) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose and (D) the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such
order, if entered.
8
<PAGE>
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold and not
bearing any restrictive legends, and enable such Shares to be in such
lots and registered in such names as the underwriters may request at
least two (2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than
the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) and the underwriters, if any, with respect to
the Shares and the registration statement as are customarily made by
issuers in primary underwritten offerings; (B) use its best efforts to
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the selling
Holders and the underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with primary
underwritten offerings; (C) deliver such documents and certificates as
may be reasonably requested (1) by the holders of a majority of the
Shares being sold, and (2) by the underwriters, if any, to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company; and (D) obtain opinions of counsel to the Company
and updates thereof (which counsel and which opinions shall be
reasonably satisfactory to the underwriters, if any), covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by the
selling Holders and underwriters or their counsel. Such counsel shall
also state that no facts have come to the attention of such counsel
which cause them to believe that such registration statement, the
prospectus contained therein, or any amendment or supplement thereto,
as of their respective effective or issue dates, contains any untrue
statement of any material fact or omits to state any material fact
necessary to make the statements therein not misleading (except that
no statement need be made with respect to any financial statements,
notes thereto or other financial data or other expertized material
contained therein). If for any reason the Company's counsel is unable
to give such opinion, the Company shall so notify the Holders of the
Shares and shall use its best efforts to remove expeditiously all
impediments to the rendering of such opinion.
(xiv) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which the Shares are sold to
underwriters in a firm or
9
<PAGE>
best efforts underwritten offering, or (B) if not sold to underwriters
in such an offering, beginning with the first month of the first
fiscal quarter of the Company commencing after the effective date of
the registration statement, which statements shall cover such twelve-
month periods.
(c) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holders pursuant to this Warrant
without the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with respect
to each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement. If
any registration statement including any of the Shares is filed, then the
Company shall indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter within the
meaning of the Securities Act) from any loss, claim, damage or liability
arising out of, based upon or in any way relating to any untrue statement
of a material fact contained in such registration statement or any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such registration
statement; and such holder shall indemnify the Company (and each of its
officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for the Company and each person, if
any, who controls such underwriter within the meaning of the Securities
Act) and each other such holder against any loss, claim, damage or
liability arising from any such statement or omission which was made in
reliance upon information furnished in writing to the Company by such
holder of the Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed
to be issued and outstanding.
11. CERTAIN NOTICES. In case at any time the Company shall propose to:
---------------
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
10
<PAGE>
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of the
affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or securities
convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least twenty
(20) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place. Any notice
required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
12. RIGHTS OF CO-SALE. (Reserved)
-----------------
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and section
----------------------------
headings are for convenience only and shall not be construed as amplifying or
limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
------
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery or
telecopy or two (2) business days after the date of mailing (or the next
business day after delivery to such courier service), as the case may be, shall
be the date of such notice, election or demand. For the purposes of this
Warrant:
11
<PAGE>
The Address of Holder is: Equitas, L.P.
2000 Glen Echo Road
Nashville, TN 37219
Attention: William Nutter
Telecopy No. 615/383-8693
with a copy to: Stokes & Bartholemew
424 Church Street, Suite 2800
Nashville, TN 37219
Attention: Bo Campbell, Esq.
Telecopy No. 615/259-1470
The Address of Company is: ACT Teleconferencing, Inc.
1658 Cole Blvd., Suite 130
Golden, CO 80401
Attention: Gavin Thompson
Telecopy No.: 303/238-0096
with copy to: Faegre & Benson, LLP
370 Seventeenth Street
2500 Republic Plaza
Denver, CO 80202
Attn: Bill Campbell
Telecopy No.: 303/820-0600
15. SEVERABILITY. If any provisions(s) of this Warrant or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
----------------
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
----------------------------
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
18. COUNTERPARTS. This Warrant may be executed in any number of
------------
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
12
<PAGE>
BUSINESS LOAN AGREEMENT EXHIBIT 10.23
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
$500,000.00 11-07-1997 05-01-1998 1000009501 321 1804902011 KXM1L /S/ KM
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area for Lender's use only and do not limited the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Borrower: ACT TELECONFERENCING, INC. LENDER: KEYBANK NATIONAL ASSOCIATION
1658 COLE BOULEVARD, SUITE 162 CORPORATE LENDING CENTER
GOLDEN, CO 80401 600 SOUTH CHERRY
DENVER, CO 80222
</TABLE>
================================================================================
THIS BUSINESS LOAN AGREEMENT between ACT TELECONFERENCING, INC. ("Borrower") and
KEYBANK NATIONAL ASSOCIATION ("Lender") is made and executed on the following
terms and conditions. Borrower has received prior commercial loans from Lender
or has applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of November 7, 1997, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means ACT TELECONFERENCING, INC. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA. The world "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the indebtedness, including without limitation all Borrowers
granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated, whether Borrower may be
liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surety, or otherwise; whether recovery upon such
Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means KEYBANK NATIONAL ASSOCIATION, its
successors and assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreement, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
<PAGE>
11-07-1997 BUSINESS LOAN AGREEMENT Page 2
Loan No 1000009501 (Continued)
===============================================================================
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Restated Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence
of insurance as required below; and (e) any other documents required under
this Agreement or by Lender or its counsel, including without limitation
any guaranties described below and any subordinations described below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may
require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Colorado and
is validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the business in which it is presently engaged or
presently proposes to engage. Borrower also is duly qualified as a foreign
corporation and is in good standing in all states in which the failure to
so qualify would have a material adverse effect on its businesses or
financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (c) any law,
governmental regulation, court decree, or other applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," hazardous substance,"
disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants that:
(a) During the period of Borrower's ownership of the properties, there has
been no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any hazardous waste or substance by any person on,
under, about or from any of the properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release
of any hazardous waste or substance on, under, about or from the properties
by any prior owners or occupants of any of the properties, or (ii) any
actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither borrower nor any tenant, contractor,
agent or other authorized user of any of the properties shall use,
generate, manufacture, store, treat, dispose of, or release any hazardous
waste or substance on, under, about or from any of the properties; and any
such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties and
make such inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are
based on Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby (a) releases and
waives any future claims against Lender for indemnity or contribution in
the event Borrower becomes liable for cleanup or other costs under any such
laws, and (b) agrees to indemnify and hold harmless Lender against any and
all claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a breach
of this section of the Agreement or as a consequence of any use,
generation, manufacture,
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11-07-1997 BUSINESS LOAN AGREEMENT Page 3
Loan No 1000009501 (Continued)
================================================================================
storage, disposal, release or threatened release occurring prior to
Borrower's ownership or interest in the properties, whether or not the same
was or should have been known to Borrower. The provisions of this section
of the Agreement, including the obligation to indemnify, shall survive the
payment of the indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition of any interest
in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable Event
nor Prohibited Transaction (as defined in ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 1658 COLE BOULEVARD, SUITE 162, GOLDEN, CO
80401. Unless Borrower has designated otherwise in writing this location
is also the office or offices where Borrower keeps its records concerning
the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force
and effect until such time as Borrower's indebtedness shall be paid in
full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which cold
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
prepared by Borrower, and, as soon as available, but in no event later than
sixty (60) days after the end of each fiscal quarter, Borrower's balance
sheet and profit and loss statement for the period ended, prepared and
certified as correct to the best knowledge and belief by Borrower's chief
financial officer or other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be
prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true and
correct.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios:
NET WORTH RATIO. Maintain a ratio of Total Liabilities to Tangible
Net Worth of less than 1.50 to 1.00.
QUICK RATIO. Maintain a ratio of Liquid Assets to Current Liabilities
in excess of 1.30 to 1.00. Except as provided above, all computations
made to determine compliance with the requirements contained in this
paragraph shall be made in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified
by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with
respect to Borrower's properties and operations, in form, amounts,
coverages and with insurance companies reasonably acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Borrower or
any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the Loans,
Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantors
named below, on Lender's forms, and in the amounts and under the conditions
spelled out in those guaranties.
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11-07-1997 BUSINESS LOAN AGREEMENT Page 4
Loan No 1000009501 (Continued)
================================================================================
GUARANTORS AMOUNTS
---------- -------
ACT TELECONFERENCING SERVICES, INC. Unlimited
ACT VIDEO CONFERENCING, INC. Unlimited
SUBORDINATION. Prior to disbursement of any Loan proceeds, deliver to
Lender subordination agreements on Lender's forms, executed by Borrower's
creditors named below, subordinating all of Borrower's indebtedness to such
creditors, or such lesser amounts as may be agreed to by Lender in writing,
and any security interests in collateral securing that indebtedness to the
Loans and security interests of Lender.
NAME OF CREDITORS AMOUNTS
----------------- -------
RIVERSIDE BANK $
LDDS WORLDCOM, INC. $
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided, however, Borrower will not be required to
pay and discharge any such assessment, tax, charge, levy, lien or claim so
long as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,,
income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part or
on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under
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11-07-1997 BUSINESS LOAN AGREEMENT Page 5
Loan No 1000009501 (Continued)
================================================================================
the terms of this Agreement or any of the Related Documents or any other
agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any
Guarantor becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (d) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender.
ADDITIONAL PROVISIONS: a) BORROWER AGREES TO PROVIDE QUARTERLY ACCOUNTS
RECEIVABLE AGING AND ACCOUNTS PAYABLE AGING REPORTS WITHIN 60 DAYS OF EACH
QUARTER-END.
b) BORROWER AGREES TO PROVIDE QUARTERLY COMPANY-PREPARED FINANCIAL STATEMENTS
WITHIN 60 DAYS OF EACH QUARTER-END
c) BORROWER AGREES TO PROVIDE FORMS 10-Q WITHIN 60 DAYS OF EACH QUARTER-END
d) BORROWER AGREES TO PROVIDE AUDITED FINANCIAL STATEMENTS FOR EACH FISCAL YEAR
END WITHIN 120 DAYS OF EACH FISCAL YEAR-END
e) BORROWER AGREES TO PROVIDE FORMS 10-K WITHIN 120 DAYS OF EACH FISCAL YEAR-
END.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
good business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceedings, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on
or of any of Borrower's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness of any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State of Colorado. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of DENVER
County, the State of Colorado. Lender and Borrower hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Colorado.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consent to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
related to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interest in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such participation interests and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loans irrespective of the failure or insolvency of any
holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, without limitation attorneys' fees, incurred in connection with
the preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loans made
<PAGE>
11-07-1997 BUSINESS LOAN AGREEMENT Page 6
Loan No 1000009501 (Continued)
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pursuant to this Agreement. Lender may pay someone else to help collect the
Loans and to enforce this Agreement, and Borrower will pay that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceeds (including
efforts to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. Borrower also will pay
any court costs, in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be send by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law,
if there is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest herein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. This is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of the Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a waiver
of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, or between Lender and any Grantor,
shall constitute a waiver of any of Lender's rights or of any obligations
of Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing consent
in subsequent instances where such consent is required, and in all cases
such consent may be granted or withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL OF THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
NOVEMBER 7, 1997.
BORROWER:
ACT TELECONFERENCING, INC.
BY: /s/ GAVIN J. THOMSON
-----------------------------------------
GAVIN J. THOMSON, CHIEF FINANCIAL OFFICER
LENDER:
KEYBANK NATIONAL ASSOCIATION
BY: /s/ [SIGNATURE ILLEGIBLE]
-------------------------
AUTHORIZED OFFICER
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