Exhibit 10.1

 

Silicon Valley Bank

 

Loan and Security Agreement

 

Borrower:

ACT Teleconferencing, Inc.

Date:

November     , 2004

 

Address:

1526 Cole Boulevard,

 

 

 

 

Suite 300

 

 

 

 

Golden , CO 80401

 

 

 

and

 

 

 

 

 

ACT Teleconferencing Services, Inc.

 

 

and

 

 

 

 

 

ACT Videoconferencing, Inc.

 

 

and

 

 

 

 

 

ACT Proximity, Inc.

 

 

 

and

 

 

 

 

 

ACT Research Inc.

 

 

 

 

 

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK (“Silicon”), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower(s) named above (collectively and
jointly and severally, the “Borrower”), with ACT Teleconferencing, Inc. (herein
sometimes called the “Parent”), whose chief executive office is located at the
above address (“Borrower’s Address”), acting as the Borrower’s agent. The
Schedule to this Agreement (the “Schedule”) shall for all purposes be deemed to
be a part of this Agreement, and the same is an integral part of this
Agreement.  (Definitions of certain terms used in this Agreement are set forth
in Section 8 below.)

 

1.     LOANS.

 

1.1  Loans.  Silicon will make loans to Borrower (the “Loans”) up to the amounts
(the “Credit Limit”) shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of Reserves for
accrued interest and such other Reserves as Silicon deems proper from time to
time in its good faith business judgment.

 

1.2  Interest.  All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement.  Interest shall be payable monthly, on the last day
of the month.  Interest may, in Silicon’s discretion, be charged to Borrower’s
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans.  Silicon may, in its discretion, charge interest to Borrower’s
Deposit Accounts maintained with Silicon.  Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the “Minimum Monthly Interest”).

 

1.3  Overadvances.  If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an “Overadvance”), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand.  Without limiting Borrower’s obligation to
repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.

 

1.4  Fees.  Borrower shall pay Silicon the fees shown on the Schedule, which are
in addition to all interest and other sums payable to Silicon and are not
refundable.

 

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1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to Silicon by
facsimile or telephone. Loan requests received after 12:00 Noon (pacific
Standard Time) will not be considered by Silicon until the next Business Day.
Silicon may rely on any telephone request for a Loan given by a person whom
Silicon believes is an authorized representative of Borrower, and Borrower will
indemnify Silicon for any loss Silicon suffers as a result of that reliance.

 

1.6  Letters of Credit.  At the request of Borrower, Silicon may, in its good
faith business judgment, issue or arrange for the issuance of letters of credit
for the account of Borrower, in each case in form and substance satisfactory to
Silicon in its sole discretion (collectively, “Letters of Credit”).  The
aggregate face amount of all Letters of Credit from time to time outstanding
shall not exceed the amount shown on the Schedule (the “Letter of Credit
Sublimit”), and shall be reserved against Loans which would otherwise be
available hereunder, and in the event at any time there are insufficient Loans
available to Borrower for such reserve, Borrower shall deposit and maintain with
Silicon cash collateral in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon’s letter of
credit department shall charge in connection with the issuance of the Letters of
Credit.  Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made.  Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date.  Borrower hereby agrees to indemnify and hold Silicon harmless
from any loss, cost, expense, or liability, including payments made by Silicon,
expenses, and reasonable attorneys’ fees incurred by Silicon arising out of or
in connection with any Letters of Credit.  Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower’s account or by Silicon’s
interpretations of any Letter of Credit issued by Silicon for Borrower’s
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto.  Borrower understands
that Letters of Credit may require Silicon to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such
issuing bank.  Borrower hereby agrees to indemnify and hold Silicon harmless
with respect to any loss, cost, expense, or liability incurred by Silicon under
any Letter of Credit as a result of Silicon’s indemnification of any such
issuing bank.  The provisions of this Loan Agreement, as it pertains to Letters
of Credit, and any other Loan Documents relating to Letters of Credit are
cumulative.

 

2.  SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of the following (collectively, the “Collateral”):  all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all Inventory;
all Equipment; all Deposit Accounts; all General Intangibles (including without
limitation all Intellectual Property); all Investment Property; all Other
Property; and any and all claims, rights and interests in any of the above, and
all guaranties and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds  (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties) of, any and all of the
above, and all Borrower’s books relating to any and all of the above. 

 

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations have been paid and performed in
full:

 

3.1  Corporate Existence and Authority.  Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.  Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change.  The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors’ rights generally), and (iii) do not
violate Borrower’s articles or certificate of incorporation, or Borrower’s
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.

 

3.2  Name; Trade Names and Styles.  The name of Borrower set forth in the
heading to this Agreement is its correct name.  Listed in the Representations
are all prior names of Borrower and all of Borrower’s present and prior trade
names.  Borrower shall give Silicon 30 days’ prior written notice before
changing its name or doing business under any other name.  Borrower has
complied, and will in the future comply, in all material respects, with all laws
relating to the conduct of business under a

 

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fictitious business name, except where the failure to so comply would not
reasonably be expected to result in a Material Adverse Change.

 

3.3  Place of Business; Location of Collateral.  The address set forth in the
heading to this Agreement is Parent’s chief executive office.  In addition,
Borrower has places of business and Collateral is located only at the locations
set forth in the Representations.  Borrower will give Silicon at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower’s Address or one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the ordinary
course of business at which not more than a total of $10,000 fair market value
of Equipment is located.

 

3.4  Title to Collateral; Perfection; Permitted Liens.

 

(a)  Borrower is now, and will at all times in the future be, the sole owner of
all the Collateral, except for items of Equipment which are leased to Borrower. 
The Collateral now is and will remain free and clear of any and all liens,
charges, security interests, encumbrances and adverse claims, except for
Permitted Liens.  Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend Silicon and
the Collateral against all claims of others.

 

(b)  Borrower has set forth in the Representations all of Borrower’s Deposit
Accounts, and Borrower will give Silicon five Business Days advance written
notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon’s
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment.  Nothing herein limits any requirements
which may be set forth in the Schedule as to where Deposit Accounts will be
maintained.

 

(c)  In the event that Borrower shall at any time after the date hereof have any
commercial tort claims against others, which it is asserting or intends to
assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower’s attorney-client privilege).  Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.

 

(d)  None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture.  Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s
right to remove any Collateral from the leased premises.  Whenever any
Collateral is located upon premises in which any third party has an interest,
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify in its good
faith business judgment.  Borrower will keep in full force and effect, and will
comply with all material terms of, any lease of real property where any of the
Collateral now or in the future may be located.

 

3.5  Maintenance of Collateral.  Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use
the Collateral for any unlawful purpose.  Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.

 

3.6  Books and Records.  Borrower has maintained and will maintain at Borrower’s
Address complete and accurate books and records, comprising an accounting system
in accordance with GAAP.

 

3.7  Financial Condition, Statements and Reports.  All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP, at
the times and for the periods therein stated.  Between the last date covered by
any such statement provided to Silicon and the date hereof, there has been no
Material Adverse Change.

 

3.8  Tax Returns and Payments; Pension Contributions.  Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower.  Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower’s obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral.  Borrower is unaware of any claims or adjustments proposed for any
of Borrower’s prior tax years which could result in additional taxes becoming
due and payable by Borrower.  Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw from participation in, permit

 

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partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.

 

3.9  Compliance with Law.  Borrower has, to the best of its knowledge, complied,
and will comply, in all material respects, with all provisions of all foreign,
federal, state and local laws and regulations applicable to Borrower, including,
but not limited to, those relating to Borrower’s ownership of real or personal
property, the conduct and licensing of Borrower’s business, and all
environmental matters.

 

3.10  Litigation.  There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower’s knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change.  Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower involving
any single claim of $50,000 or more, or involving $100,000  or more in the
aggregate.

 

3.11  Use of Proceeds.  All proceeds of all Loans shall be used solely for
lawful business purposes.  Borrower is not purchasing or carrying any “margin
stock” (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any “margin stock” or to extend credit to others for the purpose of
purchasing or carrying any “margin stock.”

 

4.  ACCOUNTS.

 

4.1  Representations Relating to Accounts.  Borrower represents and warrants to
Silicon as follows:  Each Account with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services, or the non-exclusive licensing of Intellectual Property, in the
ordinary course of Borrower’s business, and (ii) meet the Minimum Eligibility
Requirements set forth in Section 8 below.

 

4.2  Representations Relating to Documents and Legal Compliance.  Borrower
represents and warrants to Silicon as follows:  All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower’s books and records are and
shall be genuine and in all respects what they purport to be.  All sales and
other transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations.  To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.

 

4.3  Schedules and Documents relating to Accounts.  Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Silicon’s
security interest and other rights in all of Borrower’s Accounts, nor shall
Silicon’s failure to advance or lend against a specific Account affect or limit
Silicon’s security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon’s request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing. 
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
as provided in the Schedule.  In addition, Borrower shall deliver to Silicon, on
its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.

 

4.4  Collection of Accounts.  Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing.  Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such order as Silicon shall determine.  Silicon may, in its good
faith business judgment, require that all proceeds of Collateral be deposited by
Borrower into a lockbox account, or such other “blocked account” as Silicon may
specify, pursuant to a blocked account agreement in such form as Silicon may
specify in its good faith business judgment.

 

4.5.  Remittance of Proceeds.  All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred and is continuing, Borrower shall not be obligated to remit to Silicon
the proceeds of the sale of worn out or obsolete Equipment disposed of by
Borrower in good faith in an arm’s length transaction for an aggregate purchase

 

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price of $25,000 or less (for all such transactions in any fiscal year). 
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower’s other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Silicon. 
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.

 

4.6  Disputes.  Borrower shall notify Silicon promptly of all disputes or claims
relating to Accounts.  Borrower shall not forgive (completely or partially),
compromise or settle any Account for less than payment in full, or agree to do
any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm’s length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.

 

4.7  Returns.  Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount.  In the event any attempted return
occurs after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for Silicon, and immediately
notify Silicon of the return of the Inventory.

 

4.8  Verification.  Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

 

4.9  No Liability.  Silicon shall not be responsible or liable for any shortage
or discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Silicon be deemed to
be responsible for any of Borrower’s obligations under any contract or agreement
giving rise to an Account.  Nothing herein shall, however, relieve Silicon from
liability for its own gross negligence or willful misconduct.

 

5.  ADDITIONAL DUTIES OF BORROWER.

 

5.1  Financial and Other Covenants.  Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.

 

5.2  Insurance.  Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide
evidence of such insurance to Silicon.  All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon.  Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, Silicon shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid.  Silicon may require reasonable assurance that the insurance
proceeds so released will be so used.  If Borrower fails to provide or pay for
any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower’s expense.  Borrower shall promptly deliver to Silicon copies of all
material reports made to insurance companies.

 

5.3  Reports.  Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time specify in its good
faith business judgment.

 

5.4  Access to Collateral, Books and Records.  At reasonable times, and on one
Business Day’s notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower’s books and records. 
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its subsidiaries or affiliates in connection
with their business with Borrower and to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process.  The foregoing
inspections and audits shall be at Borrower’s expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon’s then current standard charge for the same), plus reasonable
out-of-pocket expenses. In the event Borrower and Silicon schedule an audit more
than 10 days in advance, and Borrower seeks to reschedules the audit with less
than 10 days written notice to Silicon, then (without limiting any of Silicon’s
rights or remedies), Borrower shall pay Silicon a cancellation fee of $1,000
plus any out-of-pocket expenses incurred by Silicon, to compensate Silicon for
the anticipated costs and expenses of the cancellation.

 

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5.5  Negative Covenants.  Except as may be permitted in the Schedule, Borrower
shall not, without Silicon’s prior written consent (which shall be a matter of
its good faith business judgment), do any of the following:  (i) merge or
consolidate with another corporation or entity; (ii) acquire any assets, except
in the ordinary course of business; (iii) enter into any other transaction
outside the ordinary course of business; (iv) sell or transfer any Collateral,
except for the sale of finished Inventory in the ordinary course of Borrower’s
business, and except for the sale of obsolete or unneeded Equipment in the
ordinary course of business; (v) store any Inventory or other Collateral with
any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets except that Borrower may make loans
or advances to foreign subsidiaries up to an aggregate of $600,000.00 per fiscal
quarter; (viii) incur any debts, outside the ordinary course of business, which
would result in a Material Adverse Change; (ix) guarantee or otherwise become
liable with respect to the obligations of another party or entity; (x) pay or
declare any dividends on Borrower’s stock (except for dividends payable solely
in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower’s stock; (xii) make any change in
Borrower’s capital structure which would result in a Material Adverse Change; or
(xiii) engage in any material line of business other than those lines of
business conducted by Borrower and its subsidiaries on the date hereof and any
business reasonably related, complementary or incidental thereto or reasonable
extensions thereof, provided that Borrower will not, without prior written
notice, change its state of incorporation; or (xiv) dissolve or elect to
dissolve.  Transactions permitted by the foregoing provisions of this Section
are only permitted if no Default or Event of Default would occur as a result of
such transaction.

 

5.6  Litigation Cooperation.  Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower’s books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.

 

5.7  Further Assurances.  Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon’s perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.

 

6.  TERM.

 

6.1  Maturity Date.  This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the “Maturity Date”), subject to Section 6.3
below.

 

6.2  Early Termination.  This Agreement may be terminated prior to the Maturity
Date as follows:  (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence and during the continuance of an Event of Default, without
notice, effective immediately.  If this Agreement is terminated by Borrower or
by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination
fee in an amount equal to the amount specified in the Schedule, provided that no
termination fee shall be charged if the credit facility hereunder is replaced
with a new facility from another division of Silicon Valley Bank.  The
termination fee shall be due and payable on the effective date of termination
and thereafter shall bear interest at a rate equal to the highest rate
applicable to any of the Obligations.

 

6.3  Payment of Obligations.  On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable.  Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith (as
estimated by Silicon in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon’s then
standard form cash pledge agreement.  Notwithstanding any termination of this
Agreement, all of Silicon’s security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided that
Silicon may, in its sole discretion, refuse to make any further Loans after
termination.  No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full.  Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly terminate its financing
statements with respect to the Borrower and deliver to Borrower such other
documents as may be required to fully terminate Silicon’s security interests.

 

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7.  EVENTS OF DEFAULT AND REMEDIES.

 

7.1  Events of Default.  The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower’s officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to comply with any of the financial covenants set forth in the Schedule, or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit Silicon to conduct an inspection or
audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to perform
any other non-monetary Obligation, which failure is not cured within five
Business Days after the date due; or (f) if 20% or more of consolidated total
assets of Borrower is attached, seized, levied on, or comes into possession of a
trustee or receiver and the attachment, seizure or levy is not removed in 10
days, or if Borrower is enjoined, restrained, or prevented by court order from
conducting a material part of its business or if a judgment or other claim
becomes a Lien on a material portion of Borrower’s assets, or if a notice of
lien, levy, or assessment is filed against any of Borrower’s assets by any
government agency and not paid within 10 days after Borrower receives notice,
provided that these are not Events of Default if stayed or if a bond is posted
pending contest by Borrower; or (g) any default or event of default occurs under
any obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted Lien;
or (h) Borrower breaches any material contract or obligation, which has resulted
or may reasonably be expected to result in a Material Adverse Change; or (i)
dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) there shall be a Change in Control where
“Change in Control” is a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended), directly or indirectly, of
greater than 35% of the shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors, without the
prior written consent of Silicon; or (o) Borrower shall generally not pay its
debts as they become due, or Borrower shall conceal, remove or transfer any part
of its property, with intent to hinder, delay or defraud its creditors, or make
or suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse
Change shall occur.  Silicon may cease making any Loans hereunder during any of
the above cure periods, and thereafter if an Event of Default has occurred and
is continuing.

 

7.2  Remedies.  Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Silicon, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrower),
may do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrower under this Agreement or any other Loan Document;
(b) Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation; (c)
Take possession of any or all of the Collateral wherever it may be found, and
for that purpose Borrower hereby authorizes Silicon without judicial process to
enter onto any of Borrower’s premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the
premises or cause a custodian to remain on the premises in exclusive control
thereof, without charge for so long as Silicon deems it necessary, in its good
faith business judgment, in order to complete the enforcement of its rights
under this Agreement or any other agreement; provided, however, that should
Silicon seek to take possession of any of the Collateral by court process,
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession; (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and (iii) any requirement that
Silicon retain possession of, and not dispose of, any such Collateral until
after trial or final judgment; (d) Require Borrower to assemble any or all of
the Collateral and make it available to Silicon at places designated by Silicon
which are reasonably convenient to Silicon and Borrower, and to remove the
Collateral to such locations as Silicon

 

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may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower’s premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale.  Silicon shall have the right to
conduct such disposition on Borrower’s premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere and
the Collateral need not be located at the place of disposition.  Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition.  Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower’s name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon’s good faith
business judgment, to grant extensions of time to pay, compromise claims and
settle Accounts and the like for less than face value; (h) Offset against any
sums in any of Borrower’s general, special or other Deposit Accounts with
Silicon against any or all of the Obligations; and (i) Demand and receive
possession of any of Borrower’s federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto.  All
reasonable attorneys’ fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations. 
Without limiting any of Silicon’s rights and remedies, from and after the
occurrence and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional three percent
per annum (the “Default Rate”).

 

7.3  Standards for Determining Commercial Reasonableness.  Borrower and Silicon
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable:  (i) Notice of the sale is given to Borrower at least
ten days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least five days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Silicon, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; 
(v) Payment of the purchase price in cash or by cashier’s check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, Silicon may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same.  Silicon shall be
free to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.

 

7.4  Power of Attorney.  Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon’s other rights and remedies, Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest,
authorizing and permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower, and at Borrower’s expense, to do any or all of the
following, in Borrower’s name or otherwise, but Silicon agrees that if it
exercises any right hereunder, it will do so in good faith and in a commercially
reasonable manner:  (a) Execute on behalf of Borrower any documents that Silicon
may, in its good faith business judgment, deem advisable in order to perfect and
maintain Silicon’s security interest in the Collateral, or in order to exercise
a right of Borrower or Silicon, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents;
(b) Execute on behalf of Borrower, any invoices relating to any Account, any
draft against any Account Debtor and any notice to any Account Debtor, any proof
of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s
or other lien, or assignment or satisfaction of mechanic’s, materialman’s or
other lien; (c) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Silicon’s possession; (d) Endorse all checks and other forms of remittances
received by Silicon; (e) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any
judgment based thereon, or otherwise take any action to terminate or discharge
the same; (f) Grant extensions of time to pay, compromise claims and settle
Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower’s taxes or to secure the release of any liens therefor,
or both; (h) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (i) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (j) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other Loan Documents, including without limitation, the completion and delivery
of previously executed Assignments of trademarks and patents at or after any
sale

 

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under Section 7.2(f) above.  Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys’ fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations. 
In no event shall Silicon’s rights under the foregoing power of attorney or any
of Silicon’s other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.

 

7.5  Application of Proceeds.  All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion.  Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency.  If, Silicon, in its good faith
business judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Silicon
shall have the option, exercisable at any time, in its good faith business
judgment, of either reducing the Obligations by the principal amount of purchase
price or deferring the reduction of the Obligations until the actual receipt by
Silicon of the cash therefor.

 

7.6  Remedies Cumulative.  In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the Colorado Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive.  Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies.  The failure or delay of Silicon to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.

 

8.  DEFINITIONS.  AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS:

 

“Account Debtor” means the obligor on an Account.

 

“Accounts” means all present and future “accounts” as defined in the Colorado
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all accounts
receivable and other sums owing to Borrower.

 

 “Affiliate” means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

 

“Business Day” means a day on which Silicon is open for business.

 

“Code” means the Uniform Commercial Code as adopted and in effect in the State
of Colorado from time to time.

 

“Collateral” has the meaning set forth in Section 2 above.

 

“continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.

 

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 7.2 above.

 

“Deposit Accounts” means all present and future “deposit accounts” as defined in
the Colorado Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes, without
limitation, all general and special bank accounts, demand accounts, checking
accounts, savings accounts and certificates of deposit.

 

  “Eligible Accounts” means Accounts and General Intangibles arising in the
ordinary course of Borrower’s business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for
borrowing.  Without limiting the fact that the determination of which Accounts
are eligible for borrowing is a matter of Silicon’s good faith business
judgment, the following (the “Minimum Eligibility Requirements”) are the minimum
requirements for a Account to be an Eligible Account:  (i) the Account must not
be outstanding for more than 90 days from its invoice date (the “Eligibility
Period”), (ii) the Account must not represent progress billings, or be due under
a fulfillment or requirements contract with the Account Debtor, (iii) the
Account must not be subject to any contingencies (including Accounts arising
from sales on consignment, guaranteed sale or other terms pursuant to which
payment by the Account Debtor may be conditional), (iv) the Account must not be
owing from an Account Debtor with whom Borrower has any dispute (whether or not
relating to the particular Account), (v) the Account must not be

 

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owing from an Affiliate of Borrower or another Borrower, (vi) the Account must
not be owing from an Account Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to
Silicon, or which, fails or goes out of a material portion of its business,
(vii) the Account must not be owing from the United States or any department,
agency or instrumentality thereof (unless there has been compliance, to
Silicon’s satisfaction, with the United States Assignment of Claims Act), (viii)
the Account must not be owing from an Account Debtor located outside the United
States or Canada (unless pre-approved by Silicon in its discretion in writing,
or backed by a letter of credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), and (ix) the Account must not be owing from an Account
Debtor to whom Borrower is or may be liable for goods purchased from such
Account Debtor or otherwise (but, in such case, the Account will be deemed not
eligible only to the extent of any amounts owed by Borrower to such Account
Debtor) except for up to $1,200,000.00 of contra accounts of AT&T Corp. may be
included subject to receipt by Silicon of an acceptable non-offset letter from
AT&T Corp. Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 25% except 35% for AT&T Corp. of the total
Accounts outstanding.  In addition, if more than 50% of the Accounts owing from
an Account Debtor are outstanding for a period longer than their Eligibility
Period (without regard to unapplied credits) or are otherwise not eligible
Accounts, then all Accounts owing from that Account Debtor will be deemed
ineligible for borrowing.  Silicon may, from time to time, in its good faith
business judgment, revise the Minimum Eligibility Requirements, upon written
notice to Borrower.

 

“Equipment” means all present and future “equipment” as defined in the Colorado
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all machinery,
fixtures, goods, vehicles (including motor vehicles and trailers), and any
interest in any of the foregoing.

 

“Event of Default” means any of the events set forth in Section 7.1 of this
Agreement.

 

“GAAP” means generally accepted accounting principles consistently applied.

 

“General Intangibles” means all present and future “general intangibles” as
defined in the Colorado Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all Intellectual Property, payment intangibles, royalties, contract
rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income tax refunds, security and
other deposits, options to purchase or sell real or personal property, rights in
all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

 

“good faith business judgment” means honesty in fact and good faith (as defined
in Section 1201 of the Code) in the exercise of Silicon’s business judgment.

 

“including” means including (but not limited to).

 

“Intellectual Property” means all present and future (a) copyrights, copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative work thereof, whether published or
unpublished, (b) trade secret rights, including all rights to unpatented
inventions and know-how, and confidential information; (c) mask work or similar
rights available for the protection of semiconductor chips; (d) patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h) technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above; (j)
all licenses or other rights to use any property or rights of a type described
above.

 

“Inventory” means all present and future “inventory” as defined in the Colorado
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products, including without limitation such inventory as is
temporarily out of Borrower’s custody or possession or in transit and including
any returned goods and any documents of title representing any of the above.

 

“Investment Property” means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.

 

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“Loan Documents” means, collectively, this Agreement, the Representations, and
all other present and future documents, instruments and agreements between
Silicon and Borrower, including, but not limited to those relating to this
Agreement, and all amendments and modifications thereto and replacements
therefor.

 

“Material Adverse Change” means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon’s security interests in the Collateral.

 

“Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to Silicon, whether evidenced by this Agreement or any note or other
instrument or document, or otherwise, whether arising from an extension of
credit, opening of a letter of credit, banker’s acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower’s debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney’s
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other Loan Documents.

 

“Other Property” means the following as defined in the Colorado Uniform
Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and future
“commercial tort claims” (including without limitation any commercial tort
claims identified in the Representations), “documents”, “instruments”,
“promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit
rights”, “fixtures”, “farm products” and “money”; and all other goods and
personal property of every kind, tangible and intangible, whether or not
governed by the Colorado Uniform Commercial Code.

 

“Payment” means all checks, wire transfers and other items of payment received
by Silicon (including proceeds of Accounts and payment of the Obligations in
full) for credit to Borrower’s outstanding Loans or, if the balance of the Loans
have been reduced to zero, for credit to its Deposit Accounts.

 

“Permitted Liens” means the following:  (i) purchase money security interests in
specific items of Equipment; (ii) leases of specific items of Equipment; (iii)
liens for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Silicon, which consent may be withheld in its good
faith business judgment; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; and (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods; and as otherwise
provided in the Schedule.  Silicon will have the right to require, as a
condition to its consent under subparagraph (iv) above, that the holder of the
additional security interest or lien sign an intercreditor agreement on
Silicon’s then standard form, acknowledge that the security interest is
subordinate to the security interest in favor of Silicon, and agree not to take
any action to enforce its subordinate security interest so long as any
Obligations remain outstanding, and that Borrower agree that any uncured default
in any obligation secured by the subordinate security interest shall also
constitute an Event of Default under this Agreement.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

 

“Representations” means the written Representations and Warranties provided by
Borrower to Silicon referred to in the Schedule.

 

“Reserves” means, as of any date of determination, such amounts as Silicon may
from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule:  (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business
or prospects of Borrower or any Guarantor, or (iii) the security interests and
other rights of Silicon in the Collateral (including the enforceability,
perfection and priority thereof); or (b) to reflect Silicon’s good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate
or misleading in any material respect; or (c) in respect of any state of facts
which Silicon determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.

 

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“Subordinated Debt” means debt incurred by Borrower subordinated to Borrower’s
indebtedness owed to Silicon and which is reflected in a written agreement in a
manner and form acceptable to Silicon in its sole discretion and approved by
Silicon in writing.

 

Other Terms.  All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied.  All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

 

9.  GENERAL PROVISIONS.

 

9.1  Interest Computation; Float Charge.  In computing interest on the
Obligations, all Payments received after 12:00 Noon (Pacific Standard Time) on
any day shall be deemed received on the next Business Day. In addition, Silicon
shall be entitled to charge Borrower a “float” charge in an amount equal to
three Business Days interest, at the interest rate applicable to the Loans, on
all Payments received by Silicon.  Said float charge is not included in interest
for purposes of computing Minimum Monthly Interest (if any) under this
Agreement.  The float charge for each month shall be payable on the last day of
the month.  Silicon shall not, however, be required to credit Borrower’s account
for the amount of any item of payment, which is unsatisfactory to Silicon in its
good faith business judgment, and Silicon may charge Borrower’s loan account for
the amount of any item of payment which is returned to Silicon unpaid.

 

9.2  Application of Payments.  All payments with respect to the Obligations may
be applied, and in Silicon’s good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its good faith business judgment.

 

9.3  Charges to Accounts.  Silicon may, in its discretion, require that Borrower
pay monetary Obligations in cash to Silicon, or charge them to Borrower’s Loan
account, in which event they will bear interest at the same rate applicable to
the Loans.  Silicon may also, in its discretion, charge any monetary Obligations
to Borrower’s Deposit Accounts maintained with Silicon.

 

9.4  Monthly Accountings.  Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement.  Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions.

 

9.5  Notices.  All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party.  Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager.  All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.

 

9.6  Severability.  Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.

 

9.7  Integration.  This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement.  There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

 

9.8  Waivers; Indemnity.  The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Document shall not waive or diminish any right of Silicon later to
demand and receive strict compliance therewith.  Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar.  None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Silicon
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Silicon and delivered to Borrower.  Borrower waives the
benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by Silicon on which Borrower is or may in any way be liable,
and notice of any action taken by Silicon, unless expressly required by this
Agreement. Borrower hereby agrees to indemnify Silicon and its affiliates,
subsidiaries, parent,

 

12

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directors, officers, employees, agents, and attorneys, and to hold them harmless
from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including reasonable
attorneys’ fees), of every kind, which they may sustain or incur based upon or
arising out of any of the Obligations, or any relationship or agreement between
Silicon and Borrower, or any other matter, relating to Borrower or the
Obligations; provided that this indemnity shall not extend to damages
proximately caused by the indemnitee’s own gross negligence or willful
misconduct.  Notwithstanding any provision in this Agreement to the contrary,
the indemnity agreement set forth in this Section shall survive any termination
of this Agreement and shall for all purposes continue in full force and effect.

 

9.9  No Liability for Ordinary Negligence.  Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.

 

9.10  Amendment.  The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.

 

9.11  Time of Essence.  Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.

 

9.12  Attorneys Fees and Costs.  Borrower shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys’ fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend actions
by, Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower’s books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce Silicon’s security interest in, the Collateral; and
otherwise represent Silicon in any litigation relating to Borrower.  In
satisfying Borrower’s obligation hereunder to reimburse Silicon for attorneys
fees, Borrower may, for convenience, issue checks directly to Silicon’s
attorneys, but Borrower acknowledges and agrees that Silicon’s attorneys are
representing only Silicon and not Borrower in connection with this Agreement. 
If either Silicon or Borrower files any lawsuit against the other predicated on
a breach of this Agreement, the prevailing party in such action shall be
entitled to recover its reasonable costs and attorneys’ fees, including (but not
limited to) reasonable attorneys’ fees and costs incurred in the enforcement of,
execution upon or defense of any order, decree, award or judgment.  All
attorneys’ fees and costs to which Silicon may be entitled pursuant to this
Paragraph shall immediately become part of Borrower’s Obligations, shall be due
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.

 

9.13  Benefit of Agreement.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void.  No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.

 

9.14  Joint and Several Liability.  If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

 

9.15  Limitation of Actions.  Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, occurred,
done, omitted or suffered to be done by Silicon, its directors, officers,
employees, agents, accountants or attorneys, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter.  Borrower agrees that such one-year
period is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action.  The one-year period provided herein
shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion.  This provision shall survive any termination of
this Loan Agreement or any other Loan Document.

 

13

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9.16  Paragraph Headings; Construction.  Paragraph headings are only used in
this Agreement for convenience.  Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.

 

9.17  Governing Law; Jurisdiction; Venue.  This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of Colorado.  As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon’s option, be litigated in courts located within
Colorado, and that the exclusive venue therefor shall be the City and County of
Denver, Colorado; (ii) consents to the jurisdiction and venue of any such court
and consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Borrower may have to object to the jurisdiction of any such court, or to
transfer or change the venue of any such action or proceeding.

 

9.18 Borrower Liability.  Each Borrower except the Parent hereby appoints the
Parent as agent for such Borrower for all purposes hereunder, including with
respect to requesting Loans hereunder. Each Borrower hereunder shall be jointly
and severally obligated to repay all Loans made hereunder, regardless of which
Borrower actually receives the proceeds of said Loan, as if each Borrower
hereunder directly received all Loans.  Notwithstanding any other provision of
this Agreement or other related document, each Borrower irrevocably waives all
rights that it may have at law or in equity (including, without limitation, any
law subrogating Borrower to the rights of Silicon under this Agreement) to seek
contribution, indemnification or any other form of reimbursement from any other
Borrower, or any other Person now or hereafter primarily or secondarily liable
for any of the Obligations, for any payment made by Borrower with respect to the
Obligations in connection with this Agreement or otherwise and all rights that
it might have to benefit from, or to participate in, any security for the
Obligations as a result of any payment made by Borrower with respect to the
Obligations in connection with this Agreement or otherwise.  Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void.  If any payment is made to a Borrower
in contravention of this Section, such Borrower shall hold such payment in trust
for Silicon and such payment shall be promptly delivered to Silicon for
application to the Obligations, whether matured or unmatured.

 

14

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9.18  Mutual Waiver of Jury Trial.  BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

Borrower:

 

Silicon:

 

 

 

ACT TELECONFERENCING, INC.

SILICON VALLEY BANK

 

 

 

 

 

 

By

 

 

By

 

 

 

President or Vice President

 

Title

 

 

 

 

 

By

 

 

 

 

Secretary or Ass’t Secretary

 

 

 

 

 

 

 

Borrower:

Borrower:

 

 

ACT TELECONFERENCING SERVICES, INC.

ACT PROXIMITY, INC.

 

 

 

 

By

 

 

By

 

 

 

President or Vice President

 

 

President or Vice President

 

 

 

 

 

 

 

By

 

 

By

 

 

 

Secretary or Ass’t Secretary

 

 

Secretary or Ass’t Secretary

 

 

 

 

 

 

 

 

 

Borrower:

Borrower:

 

 

ACT VIDEOCONFERENCING, INC.

ACT RESEARCH INC.

 

 

 

 

By

 

 

By

 

 

 

President or Vice President

 

 

President or Vice President

 

 

 

 

 

 

 

By

 

 

By

 

 

 

Secretary or Ass’t Secretary

 

 

Secretary or Ass’t Secretary

 

 

15

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Silicon Valley Bank

 

Schedule to

 

Loan and Security Agreement

 

Borrower:

ACT Teleconferencing, Inc.

Date:

November     , 2004

 

and

 

 

 

 

 

ACT Teleconferencing Services, Inc.

 

 

and

 

 

 

 

 

ACT Videoconferencing, Inc.

 

 

and

 

 

 

 

 

ACT Proximity, Inc.

 

 

 

and

 

 

 

 

 

ACT Research Inc.

 

 

 

 

 

This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-named borrowers of even date, which borrowers
are jointly and severally liable for all Obligations.

 

1.   CREDIT LIMIT

(Section 1.1):

 

A.  For Revolving Loans:

An amount not to exceed the lesser of:  (i) $3,500,000.00 at any one time
outstanding (the “Maximum Credit Limit”); or (ii) the sum of (a) and (b) below:

(a)  80% (an “Advance Rate”) of the amount of Borrower’s Eligible Accounts (as
defined in Section 8 above) owing from an Account Debtor located in the United
States, plus

(b)  60% (an “Advance Rate”) of Borrower’s “earned unbilled” Accounts that are
otherwise Eligible Accounts owing from an Account Debtor located in the United
States, provided that Loans made against such earned unbilled Accounts may not
exceed $600,000.00 at any time;

 

minus the aggregate amount of all Letters of Credit (including drawn but
unreimbursed Letters of Credit) outstanding from time to time plus obligations
for Cash Management Services plus 10% of the total of FX Forward Contracts, all
as defined below, outstanding from time to time, plus Reserves.

 

Silicon may, from time to time, modify the Advance Rates, in its good faith
business judgment, upon notice to the Borrower, based on changes in collection
experience with respect to Accounts, its evaluation of other issues or factors
relating to the Accounts or other Collateral.  In addition, Silicon may, in its
sole discretion, reserve against Loans which would

 

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otherwise be available hereunder such sums as Silicon shall determine in its
good faith business judgment.

 

PLUS

B. For Term Loans:

(i)            Silicon will make two Term Loans to Borrower (each a “Term Loan “
and, collectively, “Term Loans”) not exceeding the aggregate amount of
$1,000,000.00 (a “Credit Limit”).  The number of Term Loans is limited to two
(2).  The first Term Loan in the amount of $500,000.00 shall be made at such
time as Borrower has provided evidence to Silicon that Borrower has maintained a
Fixed Charge Coverage Ratio (as defined in Section 5 of this Schedule) of at
least 1.15 to 1.00 for three consecutive months.  So long as no Event of Default
has occurred and is continuing, the second Term Loan shall be made not sooner
than the first Term Loan may be made and not later than the first anniversary of
this Agreement and only upon the receipt by Silicon of a Forced Liquidation
Value Equipment Appraisal acceptable to Silicon supporting the amount of the
second Term Loan requested, up to but not exceeding $500,000.00.

 

(ii)           Each Term Loan shall immediately amortize and be payable in 36
equal payments of principal plus interest accrued thereon beginning the first
day of the month following the date such Term Loan is made and continuing on the
first day of each month thereafter.  The final payment is due on the date 36
months after each Term Loan is made and shall include all outstanding principal
and all accrued unpaid interest.  When repaid, Term Loans may not be reborrowed.

 

(iii)          Term Loans accrue interest on the outstanding principal balance
at a per annum rate equal to the sum of (a) the U.S. Treasury note yield to
maturity for a term equal of 36 months as quoted in The Wall Street Journal on
the day of the Term Loan, plus (b) five percent (5.00%).

 

(iv)          Borrower shall pay Silicon a first Term Loan Fee of $5,000.00
payable at the time the first Term Loan is made and a second Term Loan Fee in an
amount equal to one percent (1.00%) of the amount of the second Term Loan
requested, payable at the time the second Term Loan is made.

 

(v)           Nothing in this part is intended to contravene the other terms and
conditions of this Agreement which relate to or may be limited to the Loans made
as revolving Loans.

 

Letter of Credit Sublimit

(Section 1.6):                               A face principal amount outstanding
of up to $500,000.00, provided that the aggregate of all Letters of Credit
outstanding from time to time plus obligations for Cash Management Services
defined below plus 10% of the total of FX Forward Contracts defined below
outstanding from time to time shall not, at any time, exceed $500,000.00.

 

Cash Management

Sublimit:                                     $500,000.00, provided that the
aggregate of all Letters of Credit outstanding from time to time plus
obligations for Cash Management Services defined below plus 10% of the total of
FX Forward Contracts defined below outstanding from time to time shall not, at
any time, exceed $500,000.00.

 

2

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Cash Management

Services and Reserves:            Borrower may use Loans available hereunder, up
to the Cash Management Sublimit set forth above, for Silicon’s Cash Management
Services (as defined below), including, merchant services, business credit card,
ACH and other services identified in the cash management services agreement
related to such service (the “Cash Management Services”).  Silicon may, in its
sole discretion, reserve against Loans which would otherwise be available
hereunder such sums as Silicon shall determine in its good faith business
judgment in connection with the Cash Management Services, and Silicon may charge
to Borrower’s Loan account, any amounts that may become due or owing to Silicon
in connection with the Cash Management Services.  Borrower agrees to execute and
deliver to Silicon all standard form applications and agreements of Silicon in
connection with the Cash Management Services, and, without limiting any of the
terms of such applications and agreements, Borrower will pay all standard fees
and charges of Silicon in connection with the Cash Management Services.  The
Cash Management Services shall terminate on the Maturity Date.

 

Foreign Exchange

Contract Sublimit:                    $50,000.00, provided that the aggregate of
all Letters of Credit outstanding from time to time plus obligations for Cash
Management Services plus 10% of the total of FX Forward Contracts defined below
outstanding from time to time shall not, at any time, exceed $50,000.00.

 

FX Forward Contracts:                            Borrower may enter into foreign
exchange forward contracts with Silicon, on its standard forms, under which
Borrower commits to purchase from or sell to Silicon a set amount of foreign
currency more than one business day after the contract date (the “FX Forward
Contracts”); provided that (1) at the time the FX Forward Contract is entered
into Borrower has Loans available to it under this Agreement in an amount at
least equal to 10% of the amount of the FX Forward Contract; (2) the total FX
Forward Contracts at any one time outstanding may not exceed 10 times the amount
of the Foreign Exchange Contract Sublimit set forth above. Silicon shall have
the right to withhold, from the Loans otherwise available to Borrower under this
Agreement, a reserve (which shall be in addition to all other reserves) in an
amount equal to 10% of the total FX Forward Contracts from time to time
outstanding, and in the event at any time there are insufficient Loans available
to Borrower for such reserve, Borrower shall deposit and maintain with Silicon
cash collateral in an amount at all times equal to such deficiency, which shall
be held as Collateral for all purposes of this Agreement. Silicon may, in its
discretion, terminate the FX Forward Contracts at any time that an Event of
Default occurs and is continuing. Borrower shall execute all standard form
applications and agreements of Silicon in connection with the FX Forward
Contracts, and without limiting any of the terms of such

 

3

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applications and agreements, Borrower shall pay all standard fees and charges of
Silicon in connection with the FX Forward Contracts.

 

2.  INTEREST.

 

Interest Rate (Section 1.2):

 

A rate equal to the “Prime Rate” in effect from time to time, plus 1.50% per
annum.  Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.  “Prime Rate” means the rate announced from time
to time by Silicon as its “prime rate;” it is a base rate upon which other rates
charged by Silicon are based, and it is not necessarily the best rate available
at Silicon.  The interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate. The interest rate is subject to
the potential increases described in Section 5 below.

 

Minimum Monthly Interest:

 

In the event that the aggregate amount of interest earned by Bank in any month
is less than $10,000.00 (the “Minimum Monthly Interest”), Borrower shall pay to
Bank additional interest equal to (i) the Minimum Monthly Interest minus (ii)
the aggregate amount of all interest earned by Bank in such month.  Such
additional interest shall be payable on the first day of the next month.

 

3.  FEES (Section 1.4):

 

Loan Fee:                              $30,000.00, payable concurrently
herewith.

 

Collateral Handling Fee: $1,000.00, payable monthly.

 

4.  MATURITY DATE

(Section 6.1):                                   The date 364 days from the date
of this Agreement.

 

5.  FINANCIAL COVENANTS

(Section 5.1):

 

Borrower shall comply with each of the following covenants.  Compliance shall be
determined as of the end of each month, except as otherwise specifically
provided below:

 

Minimum Tangible Net Worth:

Borrower shall maintain a minimum Tangible Net Worth of not less than the
following sum: (i) $6,000,000.00; plus (ii) 50% of all consideration received
after the dated hereof for equity securities of ACT Teleconferencing, Inc. plus
(iii) 50% of Borrower’s consolidated positive net income (giving no effect to
any losses) in respect of each fiscal quarter ending after the date hereof,
commencing

 

4

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with the quarter ending 12/31/04 and continuing to 12/31/05 and thereafter
unless Silicon amends such requirement.

 

Minimum Fixed Charge Coverage Ratio:

 

Borrower will maintain a minimum ratio of (i) EBITDA for the specified period to
(ii) the sum of the current maturities of long term debt and capitalized leases
paid, cash paid interest, cash paid taxes, cash paid dividends, and unfunded
capital expenditures for such period (the “Fixed Charge Coverage Ratio”),
measured monthly on a rolling three-month basis, (a) of at least 1.15 to 1.00
from and after the time the first Term Loan is made under Section 1B of this
Schedule, tested initially the first month after such first Term Loan is made,
until September 30, 2005; and (b) on and after September 30, 2005, of at least
1.25 to 1.00. As examples only, assuming the first Term Loan was made the date
of this Agreement, for the month ending December 31, 2004, Borrower shall
maintain said fixed charge coverage ratio of 1.15 to 1.00 for the three-month
period consisting of October, November and December of 2004; and for the month
ending October 31, 2005, Borrower shall maintain said fixed charge coverage
ratio of 1.25 to 1.00 for the three-month period consisting of August, September
and October of 2005.

 

Definitions.           For purposes of the foregoing financial covenants, the
following term shall have the following meaning:

 

“EBITDA” is Borrower’s consolidated earnings before interest expense, income
taxes, depreciation, amortization of intangible assets and other non-cash
charges made to Borrower’s income, determined in accordance with GAAP.

 

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus (i) any amounts attributable to (a) goodwill, (b)
intangible items including unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) reserves not already deducted from assets,
minus (ii) Total Liabilities.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all indebtedness.

 

6.  REPORTING.

(Section 5.3):

 

Borrower shall provide Silicon with the following:

 

1.       Weekly transaction reports and schedules of collections, on Silicon’s
standard form.

 

2.       Monthly accounts receivable agings, aged by invoice date, together with
a borrowing base certificate in such form as Silicon shall specify, signed by
the Chief Financial Officer of Borrower, within 20 days after the end of each
month.

 

5

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3.       Monthly accounts payable agings, aged by invoice date, and outstanding
or held check registers, if any, within 20 days after the end of each month.

 

4.       Monthly reconciliations of accounts receivable agings (aged by invoice
date), transaction reports, and general ledger, within 20 days after the end of
each month.

 

5.       Monthly unaudited consolidated and consolidating financial statements,
as soon as available, and in any event within 30 days after the end of each
month.

 

6.       Monthly Compliance Certificates, within 30 days after the end of each
month, in such form as Silicon shall reasonably specify, signed by the Chief
Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Silicon
shall reasonably request, including, without limitation, a statement that at the
end of such month there were no held checks.

 

7.       Quarterly schedules of cash transfers to foreign subsidiaries, as soon
as available, and in any event within 20 days after the end of each fiscal
quarter of Borrower.

 

8.       Quarterly unaudited consolidated and consolidating financial
statements, as soon as available, and in any event within 45 days after the end
of each fiscal quarter of Borrower, together with Borrower’s report to the SEC
on 10-Q for such fiscal quarter.

 

9.       Annual operating budgets (including income statements, balance sheets
and cash flow statements, by month) for the upcoming fiscal year of Borrower
within 30 days prior to the end of each fiscal year of Borrower.

 

10.     Annual consolidated and consolidating financial statements, as soon as
available, and in any event within 90 days following the end of Borrower’s
fiscal year, audited by, and with an unqualified opinion of, independent
certified public accountants acceptable to Silicon, together with Borrower’s
report to the SEC on 10-K for such fiscal year.

 

Borrower’s 10K and 10Q reports required to be delivered pursuant to Subsections
8 and 11 above shall be deemed to have been delivered on the date on which
Borrower posts such report or provides a link thereto on Borrower’s website on
the Internet; provided, that Borrower shall provide paper copies to Bank of the
Compliance Certificates and all other reporting required by Section 5.3.

 

6

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7.  NEGATIVE COVENANTS - EXCEPTIONS

(Section 5.5)

 

Notwithstanding the provisions of Section 5.5 (viii), Borrower may, without
Silicon’s prior written consent, take the following actions:

 

Borrower may incur the following types of debt: (a) Borrower’s indebtedness to
Bank under this Agreement or any other Loan Document; (b) indebtedness up to the
amount shown on Annex 7 attached hereto which is existing on the date hereof and
owing to the creditor(s) named on such Annex 7; (c) indebtedness to trade
creditors and with respect to surety bonds and similar obligations; (d)
Guaranties of permitted indebtedness; (e) indebtedness consisting of interest
rate, currency, or commodity swap agreements, interest rate cap or collar
agreements or arrangements designated to protect a Person against fluctuations
in interest rates, currency exchange rates, or commodity prices; (f)
indebtedness between Borrower and any of its subsidiaries, or among any of
Borrower’s subsidiaries; (g) indebtedness with respect to documentary letters of
credit; (h) Capitalized leases and purchase money indebtedness secured by
Permitted Liens; (i) indebtedness of entities acquired in any permitted merger
or acquisition transaction; (j) Subordinated Debt and (k) refinanced
indebtedness permitted above, provided that the amount of such indebtedness is
not increased except by an amount equal to a reasonable premium or other
reasonable amount paid in connection with such refinancing and by an amount
equal to any existing, but unutilized, commitment thereunder.

 

8.  EARLY TERMINATION

(Section 6.2)

 

Borrower shall pay an amount equal to (a) 3.00% of the aggregate of the Maximum
Credit Limit plus the amount of the Term Loans disbursed if termination occurs
on the anniversary of the date of this Agreement or within the first 12 months
following the date of this Agreement; (b) 2.00% of the aggregate amount of the
Term Loans disbursed if termination occurs on the second anniversary of the date
of this Agreement or within the 12 months following the first anniversary of the
date of this Agreement; and (c) 1.00% of the aggregate amount of the Term Loans
disbursed if termination occurs within the 12 months following the second
anniversary of the date of this Agreement

 

9.  DEFINITIONS                “Permitted Liens” shall also mean:

 

(a)  Liens existing on the date hereof which are identified on and in favor of
the respective lienholders named on Annex 9 attached hereto and Liens arising
under this Agreement or other Loan Documents;

(b)  Liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for which Borrower
maintains adequate reserves on its Books, if they have no priority over any of
Bank’s security interests;

(c)  Liens (including with respect to capital leases) (i) on property (including
accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds

 

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thereof) acquired or held by Borrower or its subsidiaries incurred for financing
such property (including accessions, additions, parts, replacements, fixtures,
improvements and attachments thereto, and the proceeds thereof), or (ii)
existing on property (and accessions, additions, parts, replacements, fixtures,
improvements and attachments thereto, and the proceeds thereof) when acquired,
if the Lien is confined to such property (including accessions, additions,
parts, replacements, fixtures, improvements and attachments thereto, and the
proceeds thereof);

(d)  Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c) and (e) through (p), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness it
secures may not increase;

(e)  Licenses or sublicenses granted in the ordinary course of Borrower’s
business and any interest or title of a licensor or under any license or
sublicense, if the licenses and sublicenses permit granting Bank a security
interest;

(f)  Leases or subleases granted in the ordinary course of Borrower’s business,
including in connection with Borrower’s leased premises or leased property;

(g)  Liens in favor of custom and revenue authorities arising as a matter of law
to secure the payment of custom duties in connection with the importation of
goods;

(h)  Liens on insurance proceeds securing the payment of financed insurance
premiums;

(i)  Customary Liens granted in favor of a trustee to secure fees and other
amounts owing to such trustee under an indenture or other similar agreement;

(j)  Liens on assets acquired in mergers and acquisitions not prohibited by the
covenant limiting mergers and acquisitions;

(k)  Liens consisting of pledges of cash, cash equivalents or government
securities to secure swap or foreign exchange contracts or letters of credit;

(l)  Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default;

(m)  Carriers’, warehousemen’s, mechanics’, material men’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not overdue for
a period of more than 30 days or which are being contested in good faith and by
appropriate proceeding if adequate reserves with respect thereto are maintained
on the books of the applicable Person;

(n)  Pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation;

(o)  Deposits to secure the performance of bids, trade contracts (other than for
borrowed money), contracts for the purchase of property, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature, in each case, incurred in the ordinary course of business and not
representing an obligation for borrowed money; and

(p)  Easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the applicable Person; and

(q)  Liens on any capital stock of Borrower’s foreign subsidiaries, which are
superior to Silicon’s security interest pursuant to a written subordination
agreement in such form as Silicon shall specify.

 

8

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10.          BORROWER INFORMATION:

 

Borrower represents and warrants that the information set forth in the
Representations and Warranties of the Borrower dated November 4, 2004,
previously submitted to Silicon (the “Representations”) is true and correct as
of the date hereof.

 

11.          ADDITIONAL PROVISIONS

 

(1)           Banking Relationship.  Borrower shall at all times maintain its
primary banking relationship with Silicon.  Without limiting the generality of
the foregoing, Borrower shall, at all times, after 90 days from the date of this
Agreement, maintain on deposit with Silicon not less than 85% of its total
consolidated cash, cash equivalents, and investments held at financial
institutions within the United States. As to any deposit accounts maintained
with other financial institutions, within 90 days from the date of this
Agreement, Borrower shall cause such other financial institutions to enter into
an account control agreement in form acceptable to Silicon in its good faith
business judgment in order to perfect Silicon’s first-priority security interest
in said deposit accounts.  As to any investment accounts maintained with SVB
Securities, Borrower shall cause SVB Securities to enter into a control
agreement in form acceptable to Silicon in its good faith business judgment in
order to perfect Silicon’s first-priority security interest in said investment
accounts.

 

(2)           Subordination of Debt.  All present and future indebtedness of
Borrower for borrowed money which is secured by any assets of Borrower shall, at
all times, be subordinated to the Obligations pursuant to a subordination
agreement on Silicon’s standard form or otherwise satisfactory to Silicon in its
sole discretion.  Borrower represents and warrants that there is no secured debt
for borrowed money presently outstanding, except for that described on Annex
11–(2) attached hereto.  Prior to incurring any such debt in the future,
Borrower shall obtain Silicon’s prior written consent and cause the person to
whom such debt will be owed to execute and deliver to Silicon a subordination
agreement on Silicon’s standard form.

 

(3)           Conditions Precedent.  The making of the first Loan hereunder is
subject to the following conditions precedent:  Silicon shall have received: (a)
an opinion of Borrower’s counsel in form reasonably satisfactory to Silicon; (b)
a UCC search with respect to each Borrower in the Office of the Secretary of
State of the state of incorporation of each respective Borrower, showing the
respective UCC-1 Financing Statement in favor of Silicon to be of record and
showing no other filings (other than those with respect to Permitted Liens or
otherwise permitted by Silicon); (c) an Intellectual Property Security Agreement
on Silicon’s standard form executed by each Borrower, together with related
Assignments in blank of copyrights, patents or trademarks, as the case may be;
(e) certificates of resolutions authorizing the execution and delivery of this
Agreement and the Intellectual Property Security Agreement by each Borrower; (f)
an initial borrowing base certificate indicating the amount of credit available
under the Credit Limit specified above in Section 1 of this Schedule; (g) the
Loan Fee specified above in Section 3 of this Schedule, (h) evidence
satisfactory to Silicon (by way of a payoff letter from such bank

 

9

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and a payment of proceeds instruction letter from Borrower to Silicon) to assure
Silicon that the proceeds of the first Loan hereunder shall be used only to pay
Borrower’s existing indebtedness owing to Vectra Bank Colorado, National
Association and that any and all liens on Borrower’s assets such bank may have
shall promptly be terminated and released, (i) such number of Consents to
Removal of Personal Property (or other landlord waivers) in form acceptable to
Silicon relating to the real property leased or rented by each Borrower as
Silicon requires, (j) such Intercreditor Agreements and Subordination Agreements
as are contemplated above in Section 11(2) of this Schedule, and (k) a letter
from AT&T Corp agreeing not to offset against accounts receivable in a form
acceptable to Silicon.

 

(4)           Conditions Subsequent.  Within 30 days after the date Borrower’s
current lease of space at 910 15th Street, Denver, Co 80202 expires in May,
2005, Borrower shall deliver to Silicon a Consent to Removal of Personal
Property (or other landlord waiver) in form acceptable to Silicon relating to
the real property leased or rented at such Denver location or at such other
location to which Borrower may have decided to relocate the operations conducted
at such Denver location.  In the event Borrower is unable to deliver such
Consent to Removal of Personal Property (or other landlord waiver) in form
acceptable to Silicon within the time required, it shall be an Event of Default
under this Agreement at such time.

 

(5)           Intellectual Property. Borrower shall provide written notice to
Bank of any new application filed by Borrower in the United States Patent and
Trademark Office for a patent or to register a trademark or service mark within
30 days of any such filing.  Borrower shall not register any Intellectual
Property with the United States Copyright Office unless it: (i) has given at
least fifteen (15) days’ prior notice to Bank of its intent to register such
Intellectual Property and has provided Bank with a copy of the application it
intends to file with the United States Copyright Office (excluding exhibits
thereto); (ii) executes a security agreement or such other documents as Bank may
reasonably request in order to maintain the perfection and priority of Bank’s
security interest in the Intellectual Property proposed to be registered with
the United States Copyright Office; and (iii) records such security documents
with the United States Copyright Office contemporaneously with filing the
application(s) with the United States Copyright Office.  Borrower shall promptly
provide to Bank a copy of the application(s) filed with the United States
Copyright Office, together with evidence of the recording of the security
documents necessary for Bank to maintain the perfection and priority of its
security interest in such Intellectual Property.

 

10

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Borrower:

 

Silicon:

 

 

 

ACT TELECONFERENCING, INC.

SILICON VALLEY BANK

 

 

 

 

 

 

By

 

 

By

 

 

 

President or Vice President

 

Title

 

 

 

 

 

 

 

 

By

 

 

 

 

Secretary or Ass’t Secretary

 

 

 

 

 

 

 

Borrower:

Borrower:

 

 

ACT TELECONFERENCING SERVICES, INC.

ACT PROXIMITY, INC.

 

 

 

 

By

 

 

By

 

 

 

President or Vice President

 

 

President or Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

By

 

 

By

 

 

 

Secretary or Ass’t Secretary

 

 

Secretary or Ass’t Secretary

 

 

 

 

 

 

 

 

 

Borrower:

Borrower:

 

 

ACT VIDEOCONFERENCING, INC.

ACT RESEARCH INC.

 

 

 

 

By

 

 

By

 

 

 

President or Vice President

 

 

President or Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

By

 

 

By

 

 

 

Secretary or Ass’t Secretary

 

 

Secretary or Ass’t Secretary

 

 

11

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ANNEX 7

Amount of Existing Debt and Names of Creditors

 

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ANNEX 9

Description of Existing Liens and Related Lienholders

 

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ANNEX 11-(2)

Description of Existing Secured Debt

(Debt of Borrower to be subordinated)

 

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