EXECUTION COPY

Exhibit 10.6

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT is made this 30th day of June, 2006, among ACT
TELECONFERENCING, INC., a corporation organized under the laws of the State of
Colorado (the “Company”), DOLPHIN DIRECT EQUITY PARTNERS, LP (the “Subordinated
Creditor”), and SILICON VALLEY BANK, a national banking association (the
“Lender”).

RECITALS

A. The Company, together with ACT Proximity, Inc., a Colorado corporation, ACT
Teleconferencing Services, Inc., a Minnesota corporation, ACT Research, Inc., a
Colorado corporation and ACT Videoconferencing, Inc., a Minnesota corporation
(collectively, the “Borrower”), has entered into a Loan and Security Agreement
with the Lender dated November 12, 2004 (as amended, modified, restated,
substituted, extended and renewed through the date hereof, the “Financing
Agreement”) pursuant to which the Lender has agreed to provide certain credit
facilities to the Borrower (the “Loans”).

B. Under the terms of the Financing Agreement, the execution and delivery of
this Agreement is a condition precedent to the Lender’s obligation to continue
to make the Loans (as defined in the Financing Agreement).

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing and to induce the Lender from
time to time to make, extend or continue loans, credits or other financial
accommodations to the Borrower, the Subordinated Creditor and the Company
severally represent and agree with the Lender as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Specific Definitions.

As used in this Agreement, the terms defined in the preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:

“Bankruptcy Code” means Title 11 of the United States Code, as amended from time
to time, and any successor statute and all rules and regulations promulgated
thereunder.

“Blockage Notice” means a notice from the Lender to the Subordinated Creditor
stating that an Event of Default (as defined in the Financing Agreement) exists
under the Senior Indebtedness and specifying whether such Event of Default is a
default in the payment of principal or interest under the Senior Indebtedness or
not, and, in either case, giving the details of such Event of Default.

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the State are authorized or required to close.

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“Financing Documents” means the collective reference to each and every note,
instrument, security agreement, pledge agreement, guaranty agreement, mortgage,
deed of trust, indemnity deed of trust, loan agreement, hypothecation agreement,
indemnity agreement, letter of credit application, assignment, or any other
document (whether similar or dissimilar to any of the foregoing) previously,
simultaneously or hereafter executed and delivered by the Borrower or any other
Person, singly or jointly with another Person or Persons, in connection with any
of the Senior Indebtedness, including, without limitation, the “Loan Documents”
as defined in the Financing Agreement, all as amended, modified, restated,
substituted, extended and renewed at any time and from time to time.

“Insolvency Proceeding” means any receivership, conservatorship, general meeting
of creditors, insolvency or bankruptcy proceeding, assignment for the benefit of
creditors, or any proceeding or action by or against the Company for any relief
under any bankruptcy or insolvency law or other laws relating to the relief of
debtors, readjustment of indebtedness, reorganizations, dissolution,
liquidation, compositions or extensions, or the appointment of any receiver,
intervenor or conservator of, or trustee, or similar officer for, the Company or
any substantial part of its properties or assets, including, without limitation,
proceedings under the Bankruptcy Code, or under other similar federal, state or
local statute, laws, rules and regulations, all whether now or hereafter in
effect.

“Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge,
security interest, assignment, encumbrance, judgment, financing statement, lien
or charge of any kind, whether perfected or unperfected, avoidable or
unavoidable, consensual or non-consensual including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction.

“Person” means an individual, a corporation, a partnership, a joint venture, a
trust, an unincorporated association, a government or political subdivision or
agency thereof or any other entity.

“Pledge Agreement” means the Pledge Agreement dated the date hereof executed and
delivered by the Company and certain of its subsidiaries to the Subordinated
Creditor covering all the shares of capital stock or limited liability interests
of direct and indirect subsidiaries of the Company.

“Security” means the Security set forth in EXHIBIT A attached hereto and made a
part hereof.

“Security Agreement” means the Security Agreement dated the date hereof executed
and delivered by the Company and certain of its subsidiaries to the Subordinated
Creditor covering substantially all of the assets of the Company and such
subsidiaries.

“Senior Indebtedness” means all indebtedness, liabilities and obligations of the
Borrower to the Lender of every kind and nature whatsoever, whether now existing
or hereafter arising or created at any time, in each case pursuant to the
Financing Agreement and the other Loan Documents in effect on the date hereof.

 

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“Standstill Period” shall mean (a) any period during which the Company is
subject to any Insolvency Proceeding and (b) a period commencing from the date
of a Blockage Notice from the Lender and continuing until the earlier of
(i) (a) 180 days (if an Event of Default in the payment of principal and
interest is specified in such Blockage Notice) or (b) 120 days (if any other
Event of Default is specified in such Blockage Notice), after the date of the
Blockage Notice, (ii) the date that the Senior Indebtedness is paid and
satisfied in full or (iii) the event of default giving rise to such Blockage
Notice is sooner cured within any applicable grace period or cured with the
permission of the Lender;

provided, however, that (i) only one Standstill Period may be commenced within
any period of 365 consecutive days (a “365 Day Period”), (ii) no Standstill
Period shall be in effect for more than 180 days during any 365 Day Period, and
(iii) there must be a consecutive 185-day period in any 365 Day Period during
which no Standstill Period is in effect.

“State” means the State of New York.

“Subordinated Indebtedness” means any and all existing and future indebtedness,
liabilities and obligations of the Company to the Subordinated Creditor solely
under the Subordinated Note.

“Subordinated Note” means the promissory note by the Company initially to the
Subordinated Creditor, as amended, modified, substituted, extended, and renewed
from time to time. If at any time there exists more than one such Note, each
such Note shall be referred to herein collectively as the “Subordinated Note.”

Section 1.2 Other Definitional Provisions.

Unless otherwise defined herein, all terms used herein that are defined by the
New York Uniform Commercial Code shall have the same meanings as assigned to
them by the New York Uniform Commercial Code unless and to the extent varied by
this Agreement. The words “hereof”, “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are references to sections or
subsections of, or schedules or exhibits to, as the case may be, this Agreement
unless otherwise specified. As used herein, the singular number shall include
the plural, the plural the singular and the use of the masculine, feminine or
neuter gender shall include all genders, as the context may require. Reference
to any one or more of the Financing Documents and any of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified. References
to this Agreement include all Exhibits hereto.

 

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ARTICLE II

SUBORDINATION

Section 2.1 Subordinated Indebtedness.

2.1.1 Subordination.

The Subordinated Creditor hereby subordinates and postpones the payment of all
of the Subordinated Indebtedness to and in favor of the indefeasible and full
payment of the Senior Indebtedness; provided, however, the Subordinated Creditor
shall have limited rights to receive payment of the Subordinated Indebtedness as
provided in Section 2.1.2 and Section 2.2.3 below.

2.1.2 Payments.

Until all of the Senior Indebtedness has been fully and indefeasibly paid, the
Subordinated Creditor shall not, without the prior written consent of the
Lender, except as permitted by the provisions of Section 2.2.3 and EXHIBIT B
attached hereto and made a part hereof, ask, demand, accelerate, declare a
default under, sue for, set off, accept or receive any payment of all or any
part of the Subordinated Indebtedness; provided, however, the Subordinated
Creditor may receive any payments described in EXHIBIT C attached hereto and
made a part hereof.

Section 2.2 Security.

2.2.1 Security for Subordinated Indebtedness.

The Subordinated Creditor and the Company agree, represent and warrant that the
Subordinated Indebtedness is secured by a subordinate security interest in the
Security and a first lien security interest in the collateral described in the
Pledge Agreement, the Security Agreement, and any UCC financing statement filed
in connection therewith.

2.2.2 Subordination of Liens.

The Subordinated Creditor hereby subordinates the lien and priority of the
Subordinated Creditor’s existing and future Liens and other interests, if any,
in and to the Security to the Lender’s existing interest in the Security.

2.2.3 No Action by Subordinated Creditor.

Except to the extent permitted by this Agreement, until the Senior Indebtedness
has been fully and indefeasibly paid, the Subordinated Creditor shall not,
without the prior written consent of the Lender, which shall not be unreasonably
withheld or delayed, ask, demand, assign, declare a default under, sue for,
liquidate, sell, foreclose, set off, collect, accept a surrender, receive any
proceeds, petition, commence or otherwise initiate any Insolvency Proceedings
(or join any other Person in so doing) against the Company or its assets,
commence any action or proceeding to contest the provisions of this Agreement,
or otherwise realize or seek to realize upon all or any part of the Security;
provided, however, that, upon the

 

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conclusion of a Standstill Period, and in all events subject to the other
provisions of this Agreement, the Subordinated Creditor may accelerate the
Subordinated Indebtedness and commence and pursue foreclosure proceedings under
applicable law against the real and personal property of the Company.

2.2.4 Exercise of Remedies.

The Lender shall have the exclusive right to exercise and enforce all of its
privileges and rights with respect to the Security according to the Lender’s
reasonable discretion and the exercise of the Lender’s reasonable business
judgment, including, without limitation, the right to take or retake control or
possession of such Security and to hold, prepare for sale, process, sell, lease,
dispose of, or liquidate such Security.

Section 2.3 Further Representations and Warranties.

The Company represents and warrants to the Lender that true, correct and
complete copies of all documents relating to the Subordinated Indebtedness in
effect as of the date hereof have been furnished to the Lender.

Section 2.4 Further Documents.

The Subordinated Creditor and the Company agree they shall promptly execute such
further documents and acknowledgements (including, without limitation,
amendments to and releases of financing statements and other documents of
record) as the Lender may reasonably require to confirm or evidence their
respective obligations and the Lender’s rights under this Agreement.

ARTICLE III

DISTRIBUTIONS AND RECEIPTS

Section 3.1 Distributions, Etc.

3.1.1 Application of Proceeds.

In the event of any distribution, division or application, partial or complete,
voluntary or involuntary, by operation of law or otherwise, of all or any part
of the assets of the Company or the proceeds thereof to creditors of the Company
or to the holders of any indebtedness, liabilities and obligations of the
Company, by reason of the liquidation, dissolution or other winding up of the
Company or the Company’s business, or in the event of any sale or Insolvency
Proceedings with respect to the Company or its assets, then in any such event,
any payment, distribution or benefit of any kind whatsoever or character, either
in cash, securities or other property, whether or not on account of the
Security, which shall be payable, deliverable or receivable upon or with respect
to all or any part of the Subordinated Indebtedness shall be paid or delivered
directly to the Lender for application to the Senior Indebtedness (whether due
or not due and in such order and manner as the Lender may elect and including,
without limitation any interest accruing subsequent to the commencement of any
such event or Insolvency Proceedings) until the Senior Indebtedness shall have
been fully and indefeasibly paid and satisfied.

 

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3.1.2 Insolvency Proceedings.

In connection with any Insolvency Proceedings, the Subordinated Creditor hereby
irrevocably authorizes and empowers the Lender, and irrevocably appoints the
Lender the Subordinated Creditor’s attorney-in-fact to, with respect to the
Subordinated Indebtedness, (a) demand, sue for, collect and receive every
payment or distribution and give acquittance therefor, (b) enforce claims
comprising Subordinated Indebtedness in the name of the Lender, or the name of
the Subordinated Creditor, by proof of debt, proof of claim, suit or otherwise;
(c) collect any assets of the Company distributed, dividended or applied by way
of dividend or payment, or any such securities issued, on account of
Subordinated Indebtedness and apply the same, or the proceeds of any realization
upon the same, to Senior Indebtedness (whether due or not due in such order and
manner as the Lender may elect) until all Senior Indebtedness shall have been
indefeasibly paid in full; (d) vote claims compromising Subordinated
Indebtedness to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension, provided, however, that
the foregoing shall not preclude the Subordinated Creditor from exercising any
rights it may have under Section 1111(b) of the Bankruptcy Code; (e) take
generally any action which the Subordinated Creditor might otherwise take; and
(f) take such other actions in the Lender’s own name or in the name of the
Subordinated Creditor or otherwise, as the Lender may deem necessary or
advisable to carry out the provisions of this Agreement.

3.1.3 Execution of Additional Documents.

The Subordinated Creditor hereby agrees to execute and deliver to the Lender
such other documents or other instruments as may be reasonably requested by the
Lender to confirm the obligations of the Subordinated Creditor under this
Agreement.

Section 3.2 Receipts by Subordinated Creditor.

Should any payment or distribution not permitted by the provisions of this
Agreement, or property or proceeds thereof, be received by the Subordinated
Creditor upon or with respect to all or any part of the Subordinated
Indebtedness and/or the Security prior to the full payment and satisfaction of
the Senior Indebtedness, the Subordinated Creditor will promptly deliver the
same to the Lender in precisely the form received (except for the endorsement or
assignment of the Subordinated Creditor when the Lender deems appropriate), for
application to the Senior Indebtedness (whether due or not due and in such order
and manner as the Lender may elect), and, until so delivered, the same shall be
held in trust by the Subordinated Creditor as property of the Lender.

ARTICLE IV

ADDITIONAL AGREEMENTS

Section 4.1 Consents, Waivers, Etc.

Subordinated Creditor hereby consents that at any time and from time to time and
with or without consideration, the Lender may, without further consent of or
notice to the Subordinated Creditor and without in any manner affecting,
impairing, lessening or releasing any of the provisions of this Agreement,
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payment of, sell, exchange, release, substitute, surrender, realize upon,
modify, waive, grant indulgences with respect to and otherwise deal with in any
manner: (a) all or any part of the Senior Indebtedness, provided, however, that
the Lender may not increase the principal amount of the Senior Indebtedness
without the Subordinated Creditor’s written consent; (b) all or any of the
Financing Documents to which it is a party; (c) all or any part of any property
at any time included within the Security; and (d) any Person at any time
primarily or secondarily liable for all or any part of the Senior Indebtedness
and/or any collateral and Security therefor, all as if this Subordination
Agreement and any interest which the Subordinated Creditor has in the Security
did not exist. Subordinated Creditor hereby waives, with respect to the Lender,
demand, presentment for payment, protest, notice of dishonor and of protest with
respect to the Senior Indebtedness, the Subordinated Indebtedness and/or the
Security, notice of acceptance of this Agreement, notice of the making of any of
the Senior Indebtedness and notice of default under any of the Financing
Documents.

Section 4.2 Continuing Agreement.

This is a continuing Subordination Agreement until all of the Senior
Indebtedness has been fully and indefeasibly paid and until all of the Senior
Indebtedness and all of the Subordinated Creditor’s obligations to the Lender
have been performed and satisfied. Without implying any limitation on the
foregoing, if at any time any payment or assets distributed or paid over, or
portion thereof, made by, or for the account of, the Company, by any
Subordinated Creditor or otherwise on account of any of the Senior Indebtedness
is set aside by any court or trustee having jurisdiction as a voidable
preference or fraudulent conveyance or must otherwise be restored or returned by
the Lender to the Company or any other Person under any Insolvency Proceedings
or otherwise, the Subordinated Creditor and the Company hereby agree that this
Agreement shall continue and remain in full force and effect or be reinstated,
as the case may be, all as though any such payment had not been made and this
Agreement had at all times remained in effect.

Section 4.3 No Third Party Beneficiaries.

The provisions of this Agreement are solely for the benefit of the Lender and
the Subordinated Creditor, and their respective successors and assigns, and to
any other Person which, with the Lender’s concurrence, replaces financing
provided by the Lender in full and to the satisfaction of Lender; and there are
no other parties or Persons whatsoever (including, without limitation, the
Company and its successors and assigns, except with respect to Sections 5.6.5
and 5.6.6) who are intended to be benefited in any manner whatsoever by this
Agreement.

Section 4.4 Transfer or Assignment of the Senior Indebtedness.

If any of the Senior Indebtedness should be transferred or assigned by the
Lender, this Agreement will inure to the benefit of the Lender’s transferee or
assignee to the extent of such transfer or assignment, provided that the Lender
shall continue to have the unimpaired right to enforce this Agreement as to any
of the Senior Indebtedness not so transferred or assigned.

 

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ARTICLE V

MISCELLANEOUS

Section 5.1 Notices.

All notices, requests and demands to or upon the parties to this Agreement shall
be in writing and shall be deemed to have been given or made when delivered by
hand on a Business Day, or two (2) days after the date when deposited in the
mail, postage prepaid by registered or certified mail, return receipt requested,
or when sent by overnight courier, on the Business Day next following the day on
which the notice is delivered to such overnight courier, addressed as follows:

 

Company:

   ACT Teleconferencing, Inc.    1526 Cole Boulevard    Suite 300    Golden,
Colorado 80401    Facsimile: (303) 235-4399    Attention: Gene Warren, CEO   

Lender:

   Silicon Valley Bank    3003 Tasman Drive    Santa Clara, California 95054   
Facsimile: (972) 387-0782    Attention: Benjie Polnick   

Subordinated Creditor:

   Dolphin Direct Equity Partners, LP    c/o Dolphin Asset Management Corp.   
129 East 17th Street    New York, NY 10003    Attention: Carlos Salas       With
a copy to:       Hughes Hubbard & Reed LLP    One Battery Park Plaza    New
York, NY 10004    Attention: Gary J. Simon

By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.

Section 5.2 Additional Senior Indebtedness.

Nothing herein contained shall obligate the Lender to grant credit to, or
continue financing arrangements with, the Company.

 

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Section 5.3 Delay in Enforcement, etc.

No delay or failure on the part of the Lender to exercise any of its rights or
remedies hereunder or now or hereafter existing at law or in equity or by
statute or otherwise, or any partial or single exercise thereof, shall
constitute a waiver thereof. All such rights and remedies are cumulative and may
be exercised singly or concurrently and the exercise of any one or more of them
will not be a waiver of any other. No modification to or waiver of any of the
Lender’s rights and remedies under this Agreement or otherwise, and no
modification or amendment of this Agreement, shall be deemed to be made by the
Lender unless the same shall be in writing, duly signed on behalf of the Lender,
and each such waiver, if any, shall apply only with respect to the specific
instance involved and shall in no way impair the rights and remedies of the
Lender hereunder in any other respect at any other time. Without limiting the
generality of the foregoing, the Lender may proceed against the Company with or
without proceeding against any guarantor, surety, indemnitor or any other Person
who may be liable for all or any part of the Obligations, may proceed against
all or any part of the Security, or may refrain taking all or any such action
without affecting the agreements and obligations of the parties to this
Agreement.

Section 5.4 Successors and Assigns.

This Agreement shall be binding upon the Subordinated Creditor and the Company
and the Subordinated Creditor’s and the Company’s successors and assigns and
shall inure to the benefit of the Lender and the Lender’s successors and
assigns, and other holders of or obligees under the Senior Indebtedness and any
Person which, with the Lender’s concurrence replaces financing provided by the
Lender.

Section 5.5 Headings.

The paragraph headings of this Agreement are for convenience only, and shall not
limit or otherwise affect any of the terms hereof.

Section 5.6 Applicable Law; Jurisdiction.

5.6.1 Applicable Law.

The parties to this Agreement acknowledge and agree that this Agreement shall be
governed by the laws of the State, as if this Agreement had been executed,
delivered, administered and performed solely within the State even though for
the convenience and at the request of the Subordinated Creditor or the Company,
this Agreement may be executed elsewhere.

5.6.2 Submission to Jurisdiction.

The parties to this Agreement irrevocably submit to the jurisdiction of any
state or federal court sitting in the State over any suit, action or proceeding
arising out of or relating to this Agreement or any of the other Financing
Documents. The parties to this Agreement irrevocably waive, to the fullest
extent permitted by law, any objection that either of them may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in any

 

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such court has been brought in an inconvenient forum. Final judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding and may be enforced in any court in which the applicable party is
subject to jurisdiction, by a suit upon such judgment, provided that service of
process is effected upon the applicable party in one of the manners specified in
this Section or as otherwise permitted by applicable laws.

5.6.3 Service of Process.

The parties to this Agreement hereby consent to process being served in any
suit, action or proceeding of the nature referred to in this Section by the
mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, at the address designated in or pursuant to
Section 5.1 (Notices). The parties to this Agreement irrevocably agree that such
service (y) shall be deemed in every respect effective service of process in any
such suit, action or proceeding, and (z) shall, to the fullest extent permitted
by law, be taken and held to be valid personal service. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring proceedings
against the Subordinated Creditor or the Company, as the case may be, in the
courts of any jurisdiction or jurisdictions.

5.6.4 No Credit on Subordinated Indebtedness.

Notwithstanding anything to the contrary contained herein, if any payment is
made to the Lender that, but for this Agreement, would have been made to or
retained by the Subordinated Creditor, such payment shall not, as between the
Company and the Subordinated Creditor, be deemed to reduce in any manner the
amount of the Subordinated Indebtedness owed to the Subordinated Creditor by the
Company.

5.6.5 Consent to Loan Documents.

Notwithstanding any provision of any Financing Document, the Lender hereby
consents to the execution, delivery and performance by the Borrowers of the Loan
Documents (as defined in the Loan Agreement between the Company and the
Subordinated Creditor dated June 30, 2006) and agrees that such execution,
delivery and performance, including the payment or deemed payment of money,
shall not (subject to the terms of this Agreement) constitute a default or an
event of default under, or otherwise be restricted by, any Financing Document
(however defined therein).

5.6.6 Release of Liens by Lender.

Lender hereby agrees that, upon the indefeasible payment in full of (i) the
Loans, (ii) all interest then due and owing thereon, and (iii) any unpaid costs
or expenses, including attorneys fees, owing to Lender under the Financing
Agreement by the Company or the Subordinated Creditor, the Lender will release
all of its liens on and security interests in any of the assets or other
property of the Company and the Company shall automatically be released from all
of its obligations under the Financing Documents, and this Agreement shall
automatically terminate.

 

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IN WITNESS THEREOF, the signatures of the Subordinated Creditor and of the
Company are subscribed to this Agreement as of the date first written above.

 

DOLPHIN DIRECT EQUITY PARTNERS, LP

By:  

Dolphin Advisors, LLC

 

its managing general partner

By:  

Dolphin Management Inc.

 

its managing member

By:       

Name:

 

Title:

ACT TELECONFERENCING, INC.

By:       

Name:

 

Title:

SILICON VALLEY BANK

By:       

Name:

 

Title:

 

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EXHIBIT A

SECURITY DEFINITION

“Security” means any security agreement, pledge, pledge agreement, guaranty
agreement, mortgage, deed of trust, deed to secure debt, trust deed, land trust,
indenture, indemnity deed of trust, indemnification agreement, proceeding in
rem, reimbursement agreement, financing statement, purchase agreement,
conditional sales contract, installment sales contract, collateral agreement,
financing lease, letter of credit, bond, loan agreement, hypothecation
agreement, deposit, financing statement or assignment, and also means any
agreement, document, security device or arrangement, document, statutory lien,
lien arising by operation of law, judgment or other lien, right of setoff,
encumbrance, proceeding or other document or right, in whatever form or however
arising, whether similar or dissimilar to the foregoing which directly or
indirectly secures or enforces payment or performance of any Person against, or
otherwise encumbers or gives notice of an encumbrance upon, the real property,
personal property, rights or assets of any Person.

Notwithstanding the above definition and the provisions of the Financing
Agreement, Security shall not include the Pledge Agreement, the lien thereof or
the property encumbered thereby, and Lender shall have no rights under this
Agreement or otherwise in respect of the existing and future interest of
Subordinated Creditor under the Pledge Agreement, the lien thereof, or the
property encumbered thereby.

 

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EXHIBIT B

PERMITTED ACTIONS

Notwithstanding the provisions of the Agreement:

If any Event of Default (as defined in the Subordinated Note) exists and is
continuing, whether or not a Blockage Notice has been delivered by Lender, the
Subordinated Creditor may, at its option, to the extent permitted by the terms
of the Subordinated Note, after prior notice to Lender (A) declare all or any
part of the unpaid principal amount of the Subordinated Note and all interest
accrued and unpaid thereon, and all fees, costs, expenses, indemnities and other
obligations payable under the Subordinated Note, to be immediately due and
payable, without presentment, demand, notice, protest or other formalities of
any kind, and (B) only after all of the Senior Indebtedness has been fully and
indefeasibly paid, foreclose the lien of the Pledge Agreement and exercise any
of the other rights and remedies available to the Subordinated Creditor under
the Pledge Agreement following the occurrence of such an Event of Default.

 

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EXHIBIT C

PERMITTED PAYMENTS

Until delivery of a Blockage Notice by Lender, the Subordinated Creditor may
receive payments of principal and interest under the Subordinated Note in
accordance with its terms.

There shall be no prepayment of the Subordinated Indebtedness.

Notwithstanding anything to the contrary anywhere contained, the Company may
make or apply and the Subordinated Creditor may receive payments of amounts or
value under the Securities Purchase Agreement made as of the 30th day of June
2005 (the “Securities Purchase Agreement”) between the Company and the
Subordinated Creditor) and any other Transaction Document (as defined in the
Securities Purchase Agreement), other than as contemplated solely by the
Subordinated Note.

 

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