Exhibit 10.20.1
FORBEARANCE AND
AMENDMENT
TO
LOAN AND SECURITY
AGREEMENT
This FORBEARANCE AND AMENDMENT to
Loan and Security Agreement (this “ Amendment
”) is entered into this 31st day of May , 2005, by and
among Silicon Valley Bank (“ Bank ” or “
Silicon ”) and each of the following named
corporations: ACT Teleconferencing, Inc., ACT Teleconferencing
Services, Inc., ACT Videoconferencing, Inc., ACT Proximity, Inc.,
and ACT Research, Inc. (collectively and jointly and severally, the
“ Borrowers ” and separately, a “
Borrower ”), with ACT Teleconferencing, Inc., whose
chief executive office is located at 1526 Cole Boulevard, Suite
300, Golden, CO 80401, acting as the Borrowers’
agent.
R ECITALS
A. Bank and Borrowers have entered into that
certain Loan and Security Agreement dated as of November 12,
2004 (as the same may from time to time be amended, modified,
supplemented or restated, the “ Loan Agreement
”). Bank has extended credit to Borrowers for the purposes
permitted in the Loan Agreement.
B. Borrowers acknowledge that events of default
have occurred under the Loan Agreement (collectively, the “
Existing Defaults ”) and that Borrowers are currently
in default of the Loan Agreement as a result of Borrowers’
failure to comply with Section 5.3 (Schedule Section 6,
subsections 5, 6 and 8) and Section 5.1 (Schedule
Section 5) of the Loan Agreement, which require Borrowers to
take the following actions, respectively:
(a) to provide (1) Monthly
unaudited consolidated and consolidating financial statements, as
soon as available, and in any event within 30 days after the end of
each month; and (2) 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; and (3) 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; and
(b) to maintain Minimum Tangible Net
Worth of not less than the following sum: (i) $6,000,000.00;
plus (ii) 50% of all consideration received after 11/12/04 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 11/12/04, commencing with the quarter ending
12/31/04.
C. Borrowers have requested that Bank
(1) forbear from exercising its rights and remedies against
Borrowers through and including 06/30/05 to allow Borrowers time to
raise additional equity, refinance existing subordinated debt,
continue restructuring, and implement their strategic plan.
Although Bank is under no obligation to do so, Bank is willing to
forbear from exercising its rights and remedies against Borrowers
through and including 06/30/05 on the terms and conditions set
forth in this Amendment, so long as Borrowers comply with the
terms, covenants and conditions set forth in this Amendment in a
timely manner.
D. In consideration of such forbearance, Borrowers
have agreed to amend the Loan Agreement as set forth in this
Amendment. Bank has agreed to so amend certain provisions of the
Loan Agreement, but only to the extent, in accordance with the
terms, subject to the conditions and in reliance upon the
representations and warranties set forth below.
A GREEMENT
Now, T HEREFORE , in
consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
1. Definitions.
Capitalized terms used but not
defined in this Amendment shall have the meanings given to them in
the Loan Agreement.
2. Forbearance.
2.1 Forbearance Period. So
long as no Event of Default, other than the Existing Defaults,
occurs, subject to the terms and conditions set forth herein, Bank
shall forbear from filing any legal action or instituting or
enforcing any rights and remedies it may have against Borrowers
through and including 06/30/05 (the “ Forbearance
Period ”). Except as expressly provided herein, this
Amendment does not constitute a waiver or release by Bank of any
Existing Defaults or of any Obligations or of any Event of Default
which may arise in the future after the date of execution of this
Amendment. If Borrowers do not comply with the terms of this
Amendment, Bank shall have no further obligations under this
Amendment and shall be permitted to exercise at such time any
rights and remedies against Borrowers as it deems appropriate in
its sole and absolute discretion. Borrowers understand that Bank
has made no commitment and is under no obligation whatsoever to
grant any waiver or additional extensions of time at the end of the
Forbearance Period.
2.2 Forbearance Terms.
Repayment and performance of all obligations of Borrowers to Bank
under the Loan Agreement and this Amendment shall be and shall
continue to be secured by the Collateral. Every 30 days Borrowers
and Bank shall conduct a monthly progress review so that Borrowers
may demonstrate Borrowers’ progress in arranging refinancing,
raising equity or selling all or parts of Borrowers’ assets
or businesses, and Bank shall determine whether Borrowers are
making satisfactory progress with such efforts, in Bank’s
reasonable discretion. Borrowers shall permit the next Collateral
audit conducted by or on behalf of Bank, as contemplated by
Section 5.4 of the Loan Agreement, to begin no later than
05/15/05.
3. Amendments to Loan
Agreement. The Schedule
to the Loan Agreement is amended as follows:
3.1 In Section 1 entitled
“CREDIT LIMIT (Section 1.1)”, subsection B entitled
“For Term Loans”, including subparts (i) through
(v) thereof, shall be deleted and intentionally left
blank.
3.2 In Section 2 entitled
“INTEREST”, the first sentence under the heading
“Interest Rate (Section 1.2)” shall be changed to read
“A rate equal to the “Prime Rate” in effect from
time to time, plus 2.50% per annum.” This change shall
be effective as of April 1, 2005.
3.3 Section 5 entitled
“FINANCIAL COVENANTS (Section 5.1)” shall be amended
entirely to read as follows:
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 Cash Income:
Borrower shall maintain a minimum
Cash Income of not less than (a) $1.00 for the month ending
04/30/05, (b) $100,000 for the combined months of April and
May ending 05/31/05, and (c) $100,000 for the combined months
of April, May and June ending 06/30/05
Definitions. For purposes of the
foregoing financial covenants, the following terms shall have the
following meanings:
“Cash Income” is
Borrower’s consolidated net income (or loss) plus
depreciation, plus amortization of intangible assets plus other
non-cash charges made to Borrower’s income minus all
principal debt service and minus un-financed capital expenditures,
determined in accordance with GAAP.
3.4 Section 6 entitled
“REPORTING (Section 5.3)” shall be amended by changing
subsections 1 through 6 thereof to read as follows:
1. Weekly cash budgets and weekly
transaction reports and schedules of collections, on
Silicon’s standard form.
2. Monthly accounts receivable
agings, aged by invoice date, wit
