EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and between
Kendall Square Teleconferencing, Inc.;
Conference Source International, Inc.;
Telephone Business Meetings, Inc.;
Call Points, Inc.;
American Conferencing Company, Inc.; and
Communication Development Corporation
and
COAST BUSINESS CREDIT(R),
a division of Southern Pacific Bank
Dated as of September 30, 1998
Coast
Loan and Security Agreement
Co-Borrower: Kendall Square Teleconferencing, Inc.,
a Massachusetts corporation
Address: 1 Kendall Square, Suite 328
Cambridge, Massachusetts 02139
Co-Borrower: Conference Source International, Inc.,
a Georgia corporation
Address: 100 Hartsfield Center Parkway, Suite 300
Atlanta, Georgia 30354
Co-Borrower: Telephone Business Meetings, Inc.,
a Delaware corporation
Address: 1861 Wiehle Avenue
Reston, Virginia 20190-5200
Co-Borrower: Call Points, Inc.,
a Delaware corporation
Address: 1500 Hunter Loop Road
Montgomery, Alabama 36108
Co-Borrower: American Conferencing Company, Inc.,
a Delaware corporation
Address: 690 Kinderkamack Road
Oradell, New Jersey 07649
Co-Borrower: Communication Development Corporation,
a Connecticut corporation
Address: 30 Main Street, Suite 400
Danbury, Connecticut 06810
Date: September 30, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
COAST BUSINESS CREDIT(R), a division of Southern Pacific Bank ("Coast"), a
California corporation, with offices at 12121 Wilshire Boulevard, Suite 1111,
Los Angeles, California 90025, and the borrowers named above (except where
expressly stated otherwise or unless the context requires a different meaning,
reference to Borrower in this Loan and Security Agreement, and all documents and
agreements related thereto, shall mean each of the above-referenced Borrowers,
jointly and severally). The chief executive offices for each of the respective
Borrowers is set forth at the above addresses ("Borrower's Address"). 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 1
below.)
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable or General Intangible.
"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.
"Audit" means to inspect, audit and copy Borrower's books and records and
the Collateral.
"Borrower" has the meaning set forth in the introduction to this
Agreement.
"Borrower's Address's" has the meaning set forth in the introduction to
this Agreement.
"Business Day" means a day on which Coast is open for business.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty percent
(20%) of the total voting power of all classes of stock or other ownership
interests then outstanding of any Borrower normally entitled to vote in the
election of directors or analogous governing body.
"Closing Date" means date of the initial funding under this Agreement.
"Coast" has the meaning set forth in the introduction to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 4 hereof.
"Credit Limit" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Dollars or $" means United States dollars.
"Early Termination Fee" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Coast, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Coast may from time to time deem appropriate. Eligible
Receivables shall not include the following:
(a) Receivables that the Account Debtor has failed to pay
within sixty (60) days past the due date of the invoice not to exceed ninety
(90) days past the invoice date;
(b) Receivables owed by an Account Debtor or its Affiliates
where twenty-five percent (25%) or more of all Receivables owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) Receivables with respect to which the Account Debtor is an
employee, Affiliate (including, without limitation, inter-company Receivables
among Borrowers), or agent of Borrower;
(d) Receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Receivables that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief executive
office in the United States, or (ii) is not organized under the laws of the
United States or any State thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof;
(f) Receivables with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Coast, with the Assignment of
Claims Act, 31 U.S.C. ' 3727), or (ii) any State of the United States
(exclusive, however, of Receivables owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Receivables with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Receivables;
(h) Receivables with respect to an Account Debtor whose total
obligations owing to any one Borrower exceed twenty percent (20%) of all
Eligible Receivables, to the extent of the obligations owing by such Account
Debtor in excess of such percentage. Notwithstanding the foregoing, Receivables
due Conference Source International, Inc. from VoiceCom and WorldCom shall not
be subject to the preceding percentage limitation provided that no more than ten
percent (10%) of the Receivables of each such Account Debtor shall be
outstanding for more than ninety (90) days past invoice date or sixty (60) days
past invoice due date;
(i) Receivables with respect to which the Account Debtor is
subject to any reorganization, bankruptcy, insolvency, arrangement, readjustment
of debt, dissolution or liquidation proceeding, or becomes insolvent, or goes
out of business;
(j) Receivables the collection of which Coast, in its
reasonable credit judgment, believes to be doubtful or uncertain by reason of
the Account Debtor's financial condition;
(k) Receivables with respect to which the goods giving rise to
such Receivable have not been shipped and billed to the Account Debtor, the
services giving rise to such Receivable have not been performed and accepted by
the Account Debtor, or the Receivable otherwise does not represent a final sale;
(l) Receivables with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement;
(m) Receivables that represent progress payments or other
advance billings that are due prior to the completion of performance by Borrower
of the subject contract for goods or services; and
(n) Receivables of customers or Account Debtors of either
American Conferencing Company, Inc. or Communication Development Corporation.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Equipment Acquisition Loans" means the Loans described in Section 2(c) of
the Schedule.
"Event of Default" means any of the events set forth in Section 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, investment property, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of the
business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit, and including without limitation all farm products), and all materials
and supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"Investment Property" has the meaning set forth in Section 9115 of the
Code as in effect as of the date
hereof.
"Loan Documents" means this Agreement, the agreements and documents listed
in the Schedule, and any other agreement, instrument or document now or
hereafter executed in connection herewith or therewith.
"Loans" has the meaning set forth in Section 2.1 hereof.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrower or any subsidiary of Borrower or any guarantor of any of the
Obligations, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (including, without
limitation, repayment of the Obligations as they come due) or (iii) the validity
or enforceability of this Agreement or any other agreement or document entered
into by any party in connection herewith, or the rights or remedies of Coast
hereunder or thereunder.
"Maturity Date" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"Maximum Dollar Amount" has the meaning set forth in Section 2 of the
Schedule.
"Minimum Monthly Interest" has the meaning set forth in Section 3 of the
Schedule.
"Minimum Net Worth" means consolidated Owner's equity of Borrower and
VIALOG, plus subordinated debt permitted hereunder. Subordinated debt permitted
hereunder shall include: (a) debts of Borrower and VIALOG which are subordinated
to Coast pursuant to written subordination agreements acceptable to Coast; and
(b) the total outstanding balance under the $75,000,000,000 12 3/4% Senior Notes
issued by VIALOG.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Coast, whether evidenced by this Agreement or any note
or other instrument or document, 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 Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), 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
present or future instrument or agreement between Borrower and Coast.
"Permitted Liens" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in writing
by Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially concurrently
with this Agreement;
(f) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (a) or (b) 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; or
(h) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods.
Coast will have the right to require, as a condition to its consent under
subparagraph (d) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Coast's then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of
Coast, 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, general partnership,
limited partnership, limited liability partnership, limited liability company,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Prime Rate" means the actual "Reference Rate" or the substitute therefor
of the Bank of America NT & SA whether or not that rate is the lowest interest
rate charged by said bank. If the Prime Rate, as defined, is unavailable, "Prime
Rate" shall mean the highest of the prime rates published in the Wall Street
Journal on the first business day of the applicable month, as the base rate on
corporate loans at large U.S. money center commercial banks.
"Receivable Loans" means the Loans described in Section 2(a) of the
Schedule.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Date" shall mean the Maturity Date if this Agreement is renewed
pursuant to Section 9.1 hereof, and each anniversary thereafter that this
Agreement is renewed pursuant to Section 9.1 hereof.
"Renewal Fee" means the fee that Borrower must pay Coast upon renewal of
this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"Senior Notes" means the $75,000,000 of 12 3/4% Series A and Series B note
due 2001 issued by VIALOG and guarantied by the Borrowers. The Senior Notes are
and will continue to be effectively subordinated to the Obligations of Borrower
and VIALOG to Coast to the extent that assets and interests of Borrower and
VIALOG are Collateral for the Obligations to Coast. Except for the effective
subordination to Coast, the Senior Notes and Obligations to Coast rank pari
passu in right of payment. able liability of such Person on its debts as they
become absolute and
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Term Loan" means the Loans described in Section 2(c) of the Schedule.
"VIALOG" means VIALOG Corporation, a Massachusetts corporation.
"Year 2000 Problem" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
"Other Terms." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. 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.
2. CREDIT FACILITIES.
2.1 Loans. Coast will make loans to Borrower (the "Loans"), in amounts and
in percentages to be determined by Coast in its good faith discretion, up to the
Credit Limit, provided no Default or Event of Default has occurred and is
continuing. In addition, Coast may create reserves against or reduce its advance
rates based upon Eligible Receivables or Eligible Inventory without declaring a
Default or an Event of Default if it determines that there has occurred a
Material Adverse Effect.
3. INTEREST AND FEES.
3.1 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 Coast's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Regardless of the amount of Obligations that may be outstanding
from time to time, Borrower shall pay Coast Minimum Monthly Interest during the
term of this Agreement with respect to the Receivable Loans and the Inventory
Loans in the amount set forth on the Schedule.
3.2 Fees. Borrower shall pay Coast the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Coast and are deemed
fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when due,
Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Inventory, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts,
and all money, and all property now or at any time in the future in Coast's
possession (including claims and credit balances), and all proceeds of any of
the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the satisfaction,
in the sole discretion of Coast, at or prior to the first advance of funds
hereunder, of each, every and all of the following conditions:
5.1 Status of Accounts at Closing. No accounts payable shall be due and
unpaid one hundred and twenty (120) days past its invoice date except for: (a)
such accounts payable being contested in good faith in appropriate proceedings
and for which adequate reserves have been provided; (b) account payable due and
owing to Compunetics by American Conferencing Company, Inc.
5.2 Minimum Availability. Borrower shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 Landlord Waiver. Coast shall have received duly executed landlord
waivers and access agreements in form and substance satisfactory to Coast, in
Coast's sole and absolute discretion, and, when deemed appropriate by Coast, in
form for recording in the appropriate recording office, with respect to all
leased locations where Borrower maintains any inventory or equipment.
5.4 Executed Agreement. Coast shall have received this Agreement duly
executed and in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.5. Opinion of Borrower's Counsel. Coast shall have received an opinion
of Borrower's counsel, in form and substance satisfactory to Coast in its sole
and absolute discretion.
5.6 Priority of Coast's Lien. Coast shall have received the results of "of
record" searches satisfactory to Coast in its sole and absolute discretion,
reflecting its Uniform Commercial Code filings against Borrower indicating that
Coast has a perfected, first priority lien in and upon all of the Collateral,
subject only to Permitted Liens.
5.7 Insurance. Coast shall have received copies of the insurance binders
or certificates evidencing Borrower's compliance with Section 8.2 hereof,
including lender's loss payee endorsements.
5.8 Borrower's Existence. Coast shall have received copies of Borrower's
articles or certificate of incorporation and all amendments thereto, and a
Certificate of Good Standing, each certified by the Secretary of State of the
state of Borrower's organization, and dated a recent date prior to the Closing
Date, and Coast shall have received Certificates of Foreign Qualification for
Borrower from the Secretary of State of each state wherein the failure to be so
qualified could have a Material Adverse Effect.
5.9 Organizational Documents. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing the
execution and delivery of this Agreement and the other documents contemplated
hereby, and authorizing the transactions contemplated hereunder and thereunder,
and authorizing specific officers of Borrower to execute the same on behalf of
Borrower, in each case certified by the Secretary or other acceptable officer of
Borrower as of the Closing Date.
5.10 Taxes. Coast shall have received evidence from Borrower that Borrower
has complied with all tax withholding and Internal Revenue Service regulations,
in form and substance satisfactory to Coast in its sole and absolute discretion.
5.11. Due Diligence. Coast shall have completed its due diligence with
respect to Borrower.
5.12 Other Documents and Agreements. Coast shall have received such other
agreements, instruments and documents as Coast may require in connection with
the transactions contemplated hereby, all in form and substance satisfactory to
Coast in Coast's sole and absolute discretion, and in form for filing in the
appropriate filing office, including, but not limited to, those documents listed
in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast 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:
6.1 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 organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a Material Adverse Effect. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (a) have
been duly and validly authorized, (b) 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 (c) 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 (d) do not constitute grounds for acceleration of any material
indebtedness or obligation under any material agreement or instrument which is
binding upon Borrower or its property.
6.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast thirty (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, with all laws relating to the conduct of business under a
fictitious business name.
6.3 Place of Business; Location of Collateral. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least thirty (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 on the Schedule.
6.4 Title to Collateral; Permitted Liens. 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 by 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. Coast 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 Coast and the Collateral against all claims of others. 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 (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Coast, use its best efforts to cause such third party to execute
and deliver to Coast, in form acceptable to Coast, such waivers and
subordinations as Coast shall specify, so as to ensure that Coast's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party. Borrower will keep in full force and effect, and will comply with
all the terms of, any lease of real property where any of the Collateral now or
in the future may be located.
6.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 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.
6.7 Financial Condition, Statements and Reports. All financial statements
now or in the future delivered to Coast have been, and will be, prepared in
conformity with GAAP (except, in the case of unaudited financial statements, for
the absence of footnotes and subject to normal year-end adjustments) and now and
in the future will fairly reflect the financial condition of Borrower, at the
times and for the periods therein stated. Between the last date covered by any
such statement provided to Coast and the date hereof, there has been no Material
Adverse Effect. Borrower is now and will continue to be Solvent.
6.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, 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 Coast 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. As of the date hereof, 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 partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency. Without
limiting any of Coast's other rights and remedies under this Agreement, upon the
occurrence of an Event of Default, Borrower shall utilize the services of an
outside payroll service providing for the automatic deposit of all payroll taxes
payable by Borrower.
6.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, the Fair Labor Standards Act, and those relating to Borrower's ownership of
real or personal property, the conduct and licensing of Borrower's business, and
environmental matters.
6.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in a Material Adverse Effect.
Borrower will promptly inform Coast in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
Borrower involving an amount set forth on the Schedule.
6.11 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 G 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."
6.12 Year 2000 Compliance. Borrower represents and warrants that with
respect to the computer systems, software and applications of Borrower and its
material suppliers, vendors and customers, the Year 2000 Problem will not result
in a Material Adverse Effect.
7. RECEIVABLES.
7.1 Representations Relating to Receivables. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
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 in the ordinary course of Borrower's business.
7.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables 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 Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
7.3 Schedules and Documents relating to Receivables. Borrower shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may request, transaction reports and
loan requests, schedules of Receivables, and schedules of collections, all on
Coast's standard forms; provided, however, that Borrower's failure to execute
and deliver the same shall not affect or limit Coast's security interest and
other rights in all of Borrower's Receivables, nor shall Coast's failure to
advance or lend against a specific Receivable affect or limit Coast's security
interest and other rights therein. Loan requests received after 10:30 A.M. Los
Angeles, California time, will not be considered by Coast until the next
Business Day. Together with each such schedule, or later if requested by Coast,
Borrower shall furnish Coast with copies (or, at Coast's request, originals) of
all contracts, orders, invoices, and other similar documents, and all original
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
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Coast an aged accounts receivable trial balance
in such form and at such intervals as Coast shall request. In addition, Borrower
shall deliver to Coast the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, upon receipt thereof and in the same form as received, with all
necessary endorsements, all of which shall be with recourse. Borrower shall also
provide Coast with copies of all credit memos as and when requested by Coast.
7.4 Collection of Receivables. Borrower shall have the right to collect
all Receivables, unless and until an Event of Default has occurred. Borrower
shall hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within one (1)
Business Day after receipt by Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine.
Notwithstanding the foregoing, if an exceptional circumstance arises which
precludes Borrower from delivering to Coast a particular item of payment or
proceed of a Receivable within one (1) Business Day after receipt by Borrower,
Borrower shall deliver such payment and proceed to Coast as soon as practicable,
but in no event later than three (3) Business Days after receipt by Borrower.
Coast may, in its discretion, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
Coast may specify, pursuant to a blocked account agreement in such form as Coast
may specify. Coast or its designee may, at any time, notify Account Debtors that
Coast has been granted a security interest in the Receivables.
7.5 Remittance of Proceeds. All proceeds arising from the disposition of
any Collateral shall be delivered to Coast within one (1) Business Day after
receipt by Borrower, in their original form, duly endorsed to Coast, to be
applied to the Obligations in such order as Coast shall determine.
Notwithstanding the foregoing, if an exceptional circumstance arises which
precludes Borrower from delivering to Coast proceeds obtained from the
disposition of any item of Collateral within one (1) Business Day after receipt
by Borrower, Borrower shall deliver such proceeds to Coast as soon as
practicable, but in no event later than three (3) Business Days after receipt by
Borrower. 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 Coast.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
7.6 Disputes. Borrower shall notify Coast promptly of all material
disputes or claims relating to material Receivables. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that: (a) 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 Coast on the regular reports provided to
Coast; (b) no Default or Event of Default has occurred and is continuing; and
(c) taking into account all such discounts settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit. Coast may, at any time
after an Event of Default has occurred and is continuing, settle or adjust
disputes or claims directly with Account Debtors for amounts and upon terms
which Coast considers advisable in its reasonable credit judgment and, in all
cases, Coast shall credit Borrower's Loan account with only the net amounts
received by Coast in payment of any Receivables.
7.7 Returns. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, 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 of any
Event of Default, Borrower shall (a) hold the returned Inventory in trust for
Coast, (b) segregate all returned Inventory from all of Borrower's other
property, (c) conspicuously label the returned Inventory as subject to Coast's
security interest, and (d) immediately notify Coast of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Coast's request deliver such returned Inventory
to Coast.
7.8 Verification. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Coast or such other name as Coast may choose.
7.9 No Liability. Coast shall not under any circumstances 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 a
Receivable, or for any error, act, omission or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for its
own gross negligence or willful misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 Financial and Other. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.
8.2 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 Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lender's loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than the amount set forth in Section 8 of the
Schedule, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Coast may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Coast may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.
8.3 Reports. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other written
reports with respect to Borrower (including budgets, sales projections,
operating plans and other financial documentation), as Coast shall from time to
time reasonably specify.
8.4 Access to Collateral, Books and Records. At reasonable times but under
ordinary circumstances not more frequently than quarterly and on one (1)
Business Day's notice, Coast, or its agents, shall have the right to perform
Audits. Coast may conduct more frequent Audits if Coast, in its good faith
discretion, deems the same to be necessary or appropriate. Coast shall take
reasonable steps to keep confidential all confidential information obtained in
any Audit, but Coast shall have the right to disclose any such information to
its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena
or other legal process. The Audits shall be at Borrower's expense and the charge
for the Audits shall be Seven Hundred Fifty Dollars ($750) per person per day
(or such higher amount as shall represent Coast's then current standard charge
for the same), plus reasonable out-of-pocket expenses. Borrower will not enter
into any agreement with any accounting firm, service bureau or third party to
store Borrower's books or records at any location other than Borrower's Address,
without first notifying Coast of the same and obtaining the written agreement
from such accounting firm, service bureau or other third party to give Coast the
same rights with respect to access to books and records and related rights as
Coast has under this Loan Agreement. Borrower shall also take all necessary
steps to assure that its material accounting and software, systems and
applications, and those of its accounting firm, service bureau or any other
third party vendor or supplier, will, on a timely basis, adequately and
completely address the Year 2000 Problem in all material aspects.
8.5 Negative Covenants. Borrower shall not, without Coast's prior written
consent, do any of the following:
(a) merge or consolidate with another entity, except in a
transaction in which (i) the owners of the Borrower hold at least fifty percent
(50%) of the ownership interest in the surviving entity immediately after such
merger or consolidation, and (ii) the Borrower is the surviving entity;
(b) acquire any assets, except (i) in the ordinary course of
business, or (ii) in a transaction or a series of transactions not involving the
payment of an aggregate amount in excess of the amount set forth in Section 8 of
the Schedule;
(c) enter into any other transaction outside the ordinary course of
business;
(d) 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;
(e) store any Inventory or other Collateral with any warehouseman or
other third party;
(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i) advances
to customers or suppliers in the ordinary course of business, (ii) travel
advances, employee relocation loans and other employee loans and advances in the
ordinary course of business, and (iii) loans to employees, officers and
directors for the purpose of purchasing equity securities of the Borrower;
(h) incur any debts, except to VIALOG, outside the ordinary course
of business, which would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
(j) pay or declare any dividends or distributions on the ownership
interests in Borrower except for (i) dividends or distributions payable solely
in stock form of ownership interests in Borrower and (ii) dividends to VIALOG
if, when and to the extent required by VIALOG in order to make
regularly-scheduled payments of principal and interest on the $75,000,000.00, 12
3/4% Senior Notes issued by VIALOG, provided such dividends or payments on the
12 3/4% Senior Notes would not result in a Default or Event of Default by
Borrower or VIALOG with respect to any of their respective obligations to Coast.
Borrower may make loans, advances and transfers to VIALOG provided (i) the
Borrower is and will continue to be able to generally pay its obligations as and
when due; and (ii) VIALOG owns all of the outstanding ownership interests in
Borrower as of the time of the loan, advance or transfer. Neither Borrower nor
VIALOG shall, without the prior written consent of Coast, which consent may be
granted or withheld by Coast in its sole and absolute discretion, redeem,
purchase or retire all or any portion of the Senior Notes prior to November 15,
2001, unless such redemption, purchase or retirement is (i) funded by the
proceeds of an equity offering or (ii) the proceeds of a debt offering where the
debt offering is subordinated in all respects to Coast including, but not
limited to Coast`s claims, Coast's rights to payment, and Coast's Collateral.
(k) make any change in Borrower's capital structure which would have
a Material Adverse Effect; or
(l) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are
only permitted if no Default or Event of Default is continuing or would occur as
a result of such transaction.
8.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
8.7 Further Assurances. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
9. TERM.
9.1 Maturity Date. This Agreement shall continue in effect until the
Maturity Date; provided that the Maturity Date shall automatically be extended,
and this Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one party gives written notice to the
other, not less than ninety (90) days prior to the Maturity Date or the next
Renewal Date, that such party elects to terminate this Agreement effective on
the Maturity Date or such next Renewal Date. If this Agreement is renewed under
this Section 9.1, Borrower shall pay to Coast a Renewal Fee in the amount shown
in Section 3 of the Schedule. The Renewal Fee shall be due and payable on the
Renewal Date and thereafter shall bear interest at a rate equal to the rate
applicable to the Receivable Loans.
9.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under this
Section 9.2, Borrower shall pay to Coast an Early Termination Fee in the amount
shown in Section 3 of the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
9.3 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.
Notwithstanding any termination of this Agreement, all of Coast'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, without limiting the fact that
Loans are subject to the discretion of Coast, Coast 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 Coast, nor shall any such
termination relieve Borrower of any Obligation to Coast, 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, Coast shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Coast's security
interests.
9.4 Revivor. Notwithstanding Section 9.3 or any other provision contained
in any of the Loan Documents to the contrary, if any claim is ever made upon
Coast by any claimant (except for lender liability or like claims by VIALOG
and/or the Borrower), for repayment or recovery of any amount or amounts
received by Coast in payment of or on account of any of the Indebtedness or
because of any claim that any such payment constituted a preferential transfer
or fraudulent conveyance, or for any other claim of any kind, and Coast repays
all or part of said amount by reason of any judgment, decree or order of any
court or administrative body having jurisdiction over Coast or any of its
property, or by reason of any settlement or compromise of any such claim
effected by Coast with any such claimant, then and in any such event, Borrower
agrees that any such judgment, decree, order, settlement or compromise shall be
binding upon Borrower, notwithstanding any prior release of Borrower or any
Guarantor or the cancellation of any note or other instrument evidencing any of
the Indebtedness, or any release of any of the Indebtedness, and Borrower shall
be and remain liable to Coast hereunder for the amount so repaid or recovered,
to the same extent as if such amount had never originally been received by Coast
(the Revived Obligations"). The Revived Obligations of Borrower hereunder shall
be immediately due and payable, shall bear interest at the rate herein provided
and secured by the Collateral.
10. EVENTS OF DEFAULT AND REMEDIES.
10.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or certificate
made or delivered to Coast by Borrower or any of Borrower's officers, employees
or agents, now or in the future, shall be untrue or misleading and results in a
Material Adverse Effect; 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 deliver the proceeds of Collateral to
Coast as provided in Section 7.5 above, or shall fail to give Coast access to
its books and records or Collateral as provided in Section 8.4 above, or shall
breach any negative covenant set forth in Section 8.5 above; or
(e) Borrower shall fail to comply with the financial covenants (if
any) set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within ten (10) Business Days after the
date due; or
(g) Any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral which
is not cured within fifteen (15) days after the occurrence of the same; or
(h) 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
(i) Borrower breaches any material contract or obligation including,
but not limited to, the Senior Notes, which has or may reasonably be expected to
have a Material Adverse Effect; or
(j) Dissolution, termination of existence, insolvency or business
failure of Borrower or any guarantor of any of the Obligations; 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 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; or
(k) 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 (i) not
timely controverted, or (ii) not cured by the dismissal thereof within
forty-five (45) days after the date commenced; or within any applicable grace
period; or
(l) 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
(m) 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
(n) Borrower or any guarantor of any of the Obligations 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
(o) Except as permitted under Section 8.5(a), Borrower shall suffer
or experience any Change of Control without Coast's prior written consent, which
consent shall be in the discretion of Coast in the exercise of its reasonable
business judgment; or
(p) 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
(q) there shall be any Material Adverse Effect. Coast may cease
making any Loans or extending any credit hereunder during any of the above cure
periods.
10.2 Remedies. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, 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 document or agreement;
(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 Coast 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 Coast deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; provided, however, that should Coast 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 Coast 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 Coast at places designated by Coast which are reasonably
convenient to Coast and Borrower, and to remove the Collateral to such locations
as Coast 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, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge. Coast is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Coast's
benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral, in
its condition at the time Coast 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. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast 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 Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast 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 Coast's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Receivables and the like for less than face value;
(h) 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; and
(i) Require all payments representing Coast's Collateral and the
proceeds therefrom, be paid to Coast and not to the Senior Notes.
All reasonable attorneys' fees, expenses, costs, liabilities and
obligations incurred by Coast (including reasonable attorneys' fees and expenses
incurred in connection with bankruptcy) with respect to the foregoing shall be
due from the Borrower to Coast on demand. Coast may charge the same to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as is applicable to the Receivable Loans. Without limiting any of Coast'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.
10.3 Standards for Determining Commercial Reasonableness. Borrower and
Coast to the maximum extent permitted by law 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:
(a) Notice of the sale is given to Borrower at least seven (7) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least seven (7) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with or
without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00 p.m.
Los Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's check or
wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 Power of Attorney. Borrower grants to Coast an irrevocable power of
attorney coupled with an interest, authorizing and permitting Coast (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
Coast agrees to exercise the following powers in a commercially reasonable
manner:
(a) Execute on behalf of Borrower any documents that Coast may, in
its sole discretion, deem advisable in order to perfect and maintain Coast's
security interest in the Collateral, or in order to exercise a right of Borrower
or Coast, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements;
(b) Upon the occurrence, and during the continuance of any Event of
Default, execute on behalf of Borrower any document exercising, transferring or
assigning any option to purchase, sell or otherwise dispose of or to lease (as
lessor or lessee) any real or personal property which is part of Coast's
Collateral or in which Coast has an interest;
(c) Upon the occurrence, and during the continuance of any Event of
Default, execute on behalf of Borrower, any invoices relating to any Receivable;
(d) Execute on behalf of Borrower, 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;
(e) 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
Coast's possession;
(f) Endorse all checks and other forms of remittances received by
Coast;
(g) 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;
(h) Upon the occurrence, and during the continuance, of any Event of
Default, grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith;
(i) Pay any sums required on account of Borrower's taxes or to
secure the release of any liens therefor, or both, which Coast, in the exercise
of its good faith discretion and judgment deems necessary or appropriate to
protect its rights, interests, or priorities;
(j) Settle and adjust, and give releases of, any insurance claim
that relates to any of the Collateral and obtain payment therefor;
(k) Instruct any third party having custody or control of any books
or records belonging to, or relating to, Borrower to give Coast the same rights
of access and other rights with respect thereto as Coast has under this
Agreement; and
(l) Take any action or pay any sum required of Borrower pursuant to
this Agreement and any other present or future agreements.
Any and all sums paid and any and all reasonable costs, expenses,
liabilities, obligations and reasonable attorneys' fees incurred by Coast
(including reasonable attorneys' fees and expenses incurred pursuant to
bankruptcy) with respect to the foregoing shall be added to and become part of
the Obligations, and shall be payable on demand. Coast may charge the foregoing
to Borrower's loan account and the foregoing shall thereafter bear interest at
the same rate applicable to the Receivable Loans. In no event shall Coast's
rights under the foregoing power of attorney or any of Coast's other rights
under this Agreement be deemed to indicate that Coast is in control of the
business, management or properties of Borrower. Borrower shall pay, indemnify,
defend, and hold Coast and each of its officers, directors, employees, counsel,
agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings, and damages, and all attorneys fees
and disbursements and other costs and expenses actually incurred in connection
therewith (as and when they are incurred and irrespective of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of them
in connection with or as a result of or related to the execution, delivery,
enforcement, performance, and administration of this Agreement and any other
Loan Documents or the transactions contemplated herein, and with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no
obligation to any Indemnified Person hereunder with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
10.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Coast first to the reasonable costs,
expenses, liabilities, obligations and reasonable attorneys' fees incurred by
Coast 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 Coast shall determine in its sole discretion. Any surplus shall
be paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Coast for any deficiency. If, Coast, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Coast shall have the
option, exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of purchase price or deferring the reduction
of the Obligations until the actual receipt by Coast of the cash therefor.
10.6 Remedies Cumulative. In addition to the rights and remedies set forth
in this Agreement, Coast shall have all the other rights and remedies accorded a
secured party in equity, under the Code, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Coast and Borrower, and all of such rights and remedies are cumulative
and none is exclusive. Exercise or partial exercise by Coast of one or more of
its rights or remedies shall not be deemed an election, nor bar Coast from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Coast 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 indefeasibly paid and
performed.
11. GENERAL PROVISIONS.
11.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Coast on account of the Obligations three (3) Business Days after
receipt by Coast of immediately available funds, and, for purposes of the
foregoing, any such funds received after 10:30 AM Los Angeles, California time,
on any day shall be deemed received on the next Business Day. Coast shall be
entitled to charge Borrower's account for such three (3) Business Days of
"clearance" or "float" at the rate(s) set forth in Section 3 of the Schedule on
all checks, wire transfers and other items received by Coast, regardless of
whether such three (3) Business Days of "clearance" or "float" actually occur,
and shall be deemed to be the equivalent of charging three (3) Business Days of
interest on such collections. This across-the-board three (3) Business Day
clearance or float charge on all collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Coast's financing of Borrower.
Except for cash payments, Coast shall not, however, be required to credit
Borrower's account for the amount of any item or form of payment which is
unsatisfactory to Coast in its sole discretion, and Coast may charge Borrower's
loan account for the amount of any item of payment which is returned to Coast
unpaid.
11.2 Application of Payments. Subject to Section 7.5 hereof, all payments
with respect to the Obligations may be applied, and in Coast's sole discretion
reversed and re-applied, to the Obligations, in such order and manner as Coast
shall determine in its sole discretion.
11.3 Charges to Accounts. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to Borrower's
Loan account, in which event they will bear interest from the date due to the
date paid at the same rate applicable to the Loans.
11.4 Monthly Accountings. Coast 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 Coast), unless Borrower
notifies Coast in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.
11.5 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, facsimile or certified mail return
receipt requested, addressed to Coast at the addresses shown in the heading to
this Agreement, or to Borrower c/o VIALOG, 35 New England Business Center, Suite
160, Hanover, MA 01810, or at any other address designated in writing by one
party to the other party. Notices to Coast 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, faxed (at time of confirmation of
transmission), or at the expiration of one (1) Business Day following delivery
to the private delivery service, or two (2) Business Days following the deposit
thereof in the United States mail, with postage prepaid.
11.6 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.
11.7 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 Coast 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.
11.8 Waivers. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast 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 agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. 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 Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
11.9 No Liability for Ordinary Negligence. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast 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 Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for its own gross negligence or willful misconduct.
11.10 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 Coast.
11.11 Time of Essence.. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 Attorneys Fees, Costs and Charges. Borrower shall reimburse Coast
for all reasonable attorneys' fees (including reasonable attorneys' fees and
expenses incurred pursuant to bankruptcy) and all filing, recording, search,
title insurance, appraisal, audit, and other reasonable costs incurred by Coast,
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 (including reasonable attorneys' fees and expenses
incurred pursuant to bankruptcy) Coast incurs in order to do the following:
prepare and negotiate this Agreement and the 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 Coast's security interest in, the Collateral;
and otherwise represent Coast in any litigation relating to Borrower. If either
Coast 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 reasonable attorneys' fees
and expenses incurred pursuant to bankruptcy), 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. Borrower shall also pay
Coast's standard charges for returned checks and for wire transfers, in effect
from time to time. All reasonable attorneys' fees, costs and charges (including
reasonable attorneys' fees and expenses incurred pursuant to bankruptcy) and
other fees, costs and charges to which Coast may be entitled pursuant to this
Agreement may be charged by Coast to Borrower's loan account and shall
thereafter bear interest at the same rate as the Receivable Loans.
11.13 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 Coast; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations. Coast may assign its rights and
delegate its duties hereunder without the consent of Borrower. Coast reserves
the right to syndicate all or a portion of the transaction created herein or
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Coast's rights and benefits hereunder. In connection with
such syndication, assignment or participation, Coast may disclose all documents
and information which Coast now or hereafter may have relating to Borrower or
Borrower's business, subject to Coast taking reasonable steps to cause such
potential assignees, participants or syndication parties to keep confidential
all confidential information relating to Borrower or its business. To the extent
that Coast assigns its rights and obligations hereunder to a third Person, Coast
thereafter shall be released from such assigned obligations to Borrower.
11.14 Paragraph Headings; Construction. Paragraph headings are only used
in this Agreement for convenience. Borrower and Coast 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. The term
"including", whenever used in this Agreement, shall mean "including but not
limited to." 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 Coast or Borrower under any rule
of construction or otherwise.
11.15 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the internal laws of the State of California, without
regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California, and
that the exclusive venue therefor shall be Los Angeles County; (b) 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 (c) 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.
11.16 Mutual Waiver of Jury Trial. BORROWER AND COAST 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 COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
KENDALL SQUARE TELECONFERENCING, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Courtney P. Snyder
---------------------
Title President
CONFERENCE SOURCE INTERNATIONAL
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title President
TELEPHONE BUSINESS MEETINGS, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title Vice President
CALL POINTS, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title President
AMERICAN CONFERENCING COMPANY, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title President
COMMUNICATION DEVELOPMENT CORPORATION
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title Vice President
COAST:
COAST BUSINESS CREDIT(R),
a division of Southern Pacific Bank
By /s/Robert D. Peters
-------------------
Title: Vice President
Coast
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
Co-Borrower: Kendall Square Teleconferencing, Inc.,
a Massachusetts corporation
Address: 1 Kendall Square, Suite 328
Cambridge, Massachusetts 02139
Co-Borrower: Conference Source International, Inc.,
a Georgia corporation
Address: 100 Hartsfield Center Parkway, Suite 300
Atlanta, Georgia 30354
Co-Borrower: Telephone Business Meetings, Inc.,
a Delaware corporation
Address: 1861 Wiehle Avenue
Reston, Virginia 20190-5200
Co-Borrower: Call Points, Inc.
Address: 1500 Hunter Loop Road
Montgomery, Alabama 36108
Co-Borrower: American Conferencing Company, Inc.,
a Delaware corporation
Address: 690 Kinderkamack Road
Oradell, New Jersey 07649
Co-Borrower: Communication Development Corporation,
a Connecticut corporation
Address: 30 Main Street, Suite 400
Danbury, Connecticut 06810
Date: September 30, 1998
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit(R), a division of Southern Pacific Bank, and the
above-borrower of even date.
SECTION 2 - CREDIT FACILITIES
Section 2.1 - Credit Limit: Loans in a total amount at any time
outstanding not to exceed the lesser of
a total of Fifteen Million Dollars
($15,000,000.00) at any one time
outstanding (the Maximum Dollar Amount),
or the sum of (a), (b) and (c) below:
(a) Receivable Loans up to eighty
percent (80%) of the amount of
Borrower's Eligible Receivables (as
defined in Section 1 of the Agreement).
The advance rate on the Receivable Loans
may be increased, in Coast's sole and
absolute discretion, to an amount not to
exceed eighty-five percent (85%) of
Borrower's Eligible Receivables if
Coast, in it sole and absolute
discretion, determines that dilution of
Receivables has been and is, in Coast's
opinion, likely to continue at a rate
that is five percent (5%) or less; plus
(b) Term Loan (the "Term Loan") in a
principal amount of One Million Five
Hundred Dollars ($1,500,000).
The principal of the Term Loan shall be
repaid in equal monthly installments
based on a thirty-six (36) month
amortization period, commencing on
October 31, 1998 and continuing on the
last day of each month thereafter. The
unpaid principal balance together with
accrued interest and other charges shall
be fully due and payable on the earlier
of (I) the Maturity Date as provided in
Section 9.1 of the Loan Agreement or
(ii) the effective date of termination
as provided in Section 9.2 of the Loan
Agreement.
(c) Equipment Acquisition Loans in a
total amount not to exceed the lesser
of:
(1) Eighty percent (80%) of the purchase
price of new and used Equipment, less
installation charges and taxes (subject
to confirmation by appraisers selected
by or otherwise acceptable to Coast that
the advance rate for the particular used
item(s) of Equipment being acquired is
reasonable); in addition, equipment that
was purchased after December 1997 to the
date of Closing will be considered
eligible for advances at initial funding
provided such equipment was new when
purchased and such consideration will be
on a case by case basis; or
(2) Four Million Dollars
($4,000,000.00).
Each advance of principal hereunder
shall be repaid in equal monthly
installments based on a thirty-six (36)
month amortization period, commencing on
the last day of the first full calendar
month following such advance and
continuing on the last day of each month
thereafter. Each advance shall be added
to the aggregate principal balance and
the aggregate monthly principal payments
shall be increased by the monthly
principal amortization payment relating
to each additional advance.
The unpaid principal balance together
with accrued interest and other charges
shall be fully due and payable on the
earlier of (I) the Maturity Date as
provided in Section 9.1 of the Loan
Agreement or (ii) the effective date of
termination as provided in Section 9.2
of the Loan Agreement.
SECTION 3 - INTEREST AND FEES
Section 3.1 - Interest Rate: A rate equal to the Prime Rate plus 1.5
% per annum, calculated on the basis of
a 360-day year for the actual number of
days elapsed. The interest rate
applicable to all Loans shall be
adjusted monthly as of the first day of
each month, and the interest to be
charged for each month shall be based on
the highest Prime Rate in effect during
the prior month, but in no event shall
the rate of interest charged on any
Loans in any month be less than seven
percent (7%) per annum.
Section 3.1 - Minimum Monthly
Interest: Based on minimum daily outstanding
principal loan balance of the greater of
(a) Five Million ($5,000,000.00) or (b)
thirty-three percent (33%) of the Credit
Limit in effect from time to time.
Section 3.2 - Loan Fee: One Hundred and Fifty Thousand Dollars
($150,000.00) fully earned on the
Closing Date. The Loan Fee shall be
payable in equal quarterly installments
of Eighteen Thousand Seven Hundred and
Fifty Dollars ($18,750) each, commencing
on the Closing Date and thereafter, on
the end of each calendar quarter (i.e.,
March 31, June 30, September 30, and
December 31). Any unpaid Loan Fee at the
Maturity Date shall be due and payable
in full.
Section 3.2 - Facility Fee: $500.00 per month for each entity being
monitored.
Section 9.1 - Renewal Fee: 0.5% of the Maximum Dollar Amount per
year for each renewal subsequent to the
initial Maturity Date.
Section 9.2 - Early Termination
Fee: An amount equal to three percent (3%) of
the Maximum Dollar Amount (as defined in
the Schedule), if termination occurs on
or before the first anniversary of the
effective date of this Agreement; and
two percent (2%) of the Maximum Dollar
Amount, if termination occurs after the
first anniversary and before the
Maturity Date (including any extensions
of the Maturity Date pursuant to Section
9.1 or otherwise).
SECTION 5 - CONDITIONS PRECEDENT
Section 5.2 - Minimum
Availability: Borrower and VIALOG shall have
unencumbered cash and minimum borrowing
availability at funding totaling an
amount of not less than Five Million
Dollars ($5,000,000).
Section 5.12 - Other Documents
and Agreements: At or prior to Closing, Borrower shall
provide or Coast shall have received, in
form and content acceptable to Coast,
such other and further Loan Documents,
agreements and other papers and such
other and further actions shall be taken
as specified by Coast to carry out the
intent and purposes of this Agreement
and to grant, perfect and protect the
rights and interests of Coast as
contemplated herein.
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.2 - Prior Names of
Borrower:
Kendall Square Teleconferencing, Inc.:
1. Teleconversant, Ltd.; The
Conference Center
Conference Source International, Inc.:
1. CSI
Telephone Business Meetings, Inc.:
1. Access Teleconferencing
International
Call Points, Inc.:
1. Call Points Acquisition
Corporation
American Conferencing Company, Inc.:
1.
Communication Development Corporation:
1. None
Section 6.2 - Prior Trade Names
of Borrower:
Kendall Square Teleconferencing, Inc.:
1. Teleconversant, Ltd.
Conference Source International, Inc.:
1. None.
Telephone Business Meetings, Inc.:
1. Access Conference Call Service
Call Points, Inc.:
1. Call Points
American Conferencing Company, Inc.:
1.
Communication Development Corporation:
1. None
Section 6.2 - Existing Trade Names
of Borrower:
Kendall Square Teleconferencing, Inc.:
1. The Conference Center
Conference Source International, Inc.:
1. CSI
Telephone Business Meetings, Inc. :
1. Access Teleconferencing
International;
2. Access Conference Call Service
Call Points, Inc.:
1. None.
American Conferencing Company, Inc.:
1.
Communication Development Corporation:
1. None
Section 6.3 - Other Locations and
Addresses:
Kendall Square Teleconferencing, Inc.:
1. None.
Conference Source International, Inc.:
1. None.
Telephone Business Meetings, Inc. :
1. None.
Call Points, Inc.:
1. 3613 Eastern Boulevard,
Montgomery, Alabama 36116
2. 202 East Hardaway, Union
Springs, Alabama 36089
American Conferencing Company, Inc.:
1.
Communication Development Corporation:
1. None.
Section 6.10 - Material Adverse
Litigation:
Kendall Square Teleconferencing, Inc.:
1. None.
Conference Source International, Inc.:
1. None.
Telephone Business Meetings, Inc. :
1. None.
Call Points, Inc.:
1. None.
American Conferencing Company, Inc.:
1. None.
Communication Development Corporation:
1. None.
Section 6.10 - Future Claims and
Litigation: Borrower will promptly inform
Coast in writing of any claim,
proceeding, litigation or
investigation in the future
threatened or instituted by or
against Borrower involving any
single claim of Fifty Thousand
Dollars ($50,000.00) or more, or
involving One Hundred Thousand
Dollars ($100,000.00) or more in
the aggregate.
As of closing, Borrower
represents that the only future
claim is as follows: A former
employee of Conference Source
International, Inc. ("CSI") has
claimed that he may be entitled
to 5% of the stock of CSI based
on an unsigned paper outlining
possible employment terms. CSI's
position is that the only
agreements with such employee
were set forth in two successive
executed employment agreements,
each of which had a specific
provision that such agreement was
inclusive as to the terms of
employment. CSI believes that
such claim is without merit.
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
Section 8.1 - Other Provisions: 1. With the exception of: (a) an
existing account payable of
American Conferencing Company,
Inc. to Compunetics; and (b) any
other accounts payable hereafter
approved in writing by Coast, no
accounts payable shall be over
one hundred and twenty (120) days
past invoice date at funding.
2. All applicable taxes shall be
current at funding and on an
going forward basis.
3. Coast shall, at all times,
have a perfected security
interest in all presently-owned
and after-acquired tangible and
intangible assets and interests
of Borrower, wherever located.
Except for Permitted Liens,
Coast's security interests shall
be senior in priority to all
other liens and security
interests.
4. Borrower may not purchase
assets outside the ordinary
course of business for purchase
price of or in excess of Fifty
Thousand Dollars ($50,000.00)
without consent of Coast.
5. Borrower and VIALOG shall
maintain ongoing Minimum Net
Worth of not less than Fifty
Million Dollars ($50,000,000.00).
The computation of Minimum Net
Worth shall be defined as
shareholders equity plus the sum
of (a) subordinated debt and (b)
the total outstanding balance
under the $75,000,000 12 3/4%
Senior Notes issued by VIALOG.
Subordinated debt shall include
debts of Borrower which are
subordinated to Coast pursuant to
written subordination agreements
acceptable to Coast.
6. Coast shall obtain pro-forma
consolidated and consolidating
balance sheet of Borrower, for
VIALOG and all Borrowers as of
December 31, 1997 reflecting the
acquisition of all Borrowers by
VIALOG, and the same must be
satisfactory to Coast.
7. Coast shall perform credit
searches of Borrower and the same
must be satisfactory to Coast.
8. A Landlord's Waiver and
similar agreements in form and
content specified or approved by
Coast shall be obtained with
respect to any facility
designated by Coast including,
without limitation, the
Borrower's leased facilities
located at:
(a) 1 Kendall Square, Suite
328, Cambridge, Massachusetts
02139;
(b) 100 Hartsfield Center
Parkway, Atlanta, Georgia
30354;
(c) 1861 Wiehle Avenue,
Reston, Virginia 20190;
(d) 1500 Hunter Loop Road,
Montgomery, Alabama 36108;
(e) 3613 Eastern Boulevard,
Montgomery, Alabama 36116;
(f) 202 East Hardaway, Union
Springs, Alabama 36089;
(g) 690 Kinderkamack Road,
Oradell, New Jersey 07649;
and
(h) 30 Main Street, Suite
400, Danbury, Connecticut
06810.
9. Borrower's Receivables shall
be collected by a lockbox account
and directed to a blocked
concentration account or similar
arrangement acceptable to Coast,
which accounts shall be
controlled by Coast. Each
Borrower represents that VIALOG
will be managing the advances
made by Coast hereunder for the
benefit of Borrower. In order to
avoid conflicting instructions
and requests, Borrower hereby
designates VIALOG as the sole and
exclusive representative of
Borrower to make requests for
advances from Coast, to receive
such advances for Borrower, to
disburse such advances and to
otherwise participate in the
administration of the credit
facilities as VIALOG and Borrower
deem appropriate. Coast shall not
be obligated to honor any advance
request or other instruction from
Borrower without the express
written consent from VIALOG.
Coast shall have no liability and
shall have no responsibility for
any claims, loss or damage that
any Borrower may have arising out
of or relating to the acts and
omissions of VIALOG in the
administration of the credit
facilities for and on behalf of
Borrower. Borrower, for itself
and on behalf of its officers,
directors, employees,
shareholders, representatives and
agents, hereby agrees, at
Borrower's sole cost and expense,
to defend (with counsel of
Coast's choice) and hold Coast
harmless from and against all
claims of every kind and nature
arising out of or relating to
VIALOG's administration of the
credit facilities for and on
behalf of Borrower.
10. At all times during the term
of this loan, Borrower shall
maintain a Debt Service Coverage
ratio of not less than 1.2:1 on a
monthly basis. "Debt Service
Coverage" shall be defined as
monthly EBITDA of the prior month
and the cash balance as of the
end of the prior month, less cash
expenditures for capital assets
and taxes owed in the current
month divided by all monthly
obligations to be paid in the
current month for principal and
interest payments (excluding
trade accounts payable and other
accruals incurred in the ordinary
course of the Borrower's
business) and capital lease
payments, based on the loan and
capital lease balances as of the
beginning of the current month.
11. Borrower shall provide Coast
with internally prepared annual
financial statement, balance
sheets, income statements, and
cash flows for the year ended
December 31, 1997, which
statements and information shall
be satisfactory to Coast.
Section 8.2 - Insurance: Subject to the limitations set
forth in Section 8.2 of the
Agreement, Coast shall release to
Borrower insurance proceeds with
respect to Equipment totaling
less than One Hundred Thousand
Dollars ($100,000.00).
Section 8.3 - Reporting: Borrower shall provide Coast with
the following:
1. Monthly Receivable agings,
aged by invoice date,
within ten (10) business
days after the end of each
month.
2. Monthly accounts payable
agings, aged by invoice
date, and outstanding or
held check registers,
within ten (10) days after
the end of each month.
3. Monthly internally prepared
financial statements, as
soon as available, and in
any event within thirty
(30) days after the end of
each month.
4. Quarterly internally
prepared financial
statements, as soon as
available, and in any event
within forty-five (45) days
after the end of each
fiscal quarter of Borrower.
5. Quarterly customer lists,
including customer name,
address, and phone number.
6. Annual financial
statements, as soon as
available, and in any event
within ninety (90) days
following the end of
Borrower's fiscal year,
containing the unqualified
opinion of, and certified
by, an independent
certified public accountant
acceptable to Coast.
7. Copies of all filings made
by Borrower or VIALOG with
the Securities Exchange
Commission as and when
filed.
8. Monthly representation from
an officer of VIALOG
representing that (a)
VIALOG and the Borrowers
are in compliance with the
Senior Notes and (b)
neither VIALOG or the
Borrowers have violated any
obligations or restrictions
hereunder respecting the
Senior Notes.
SECTION 9 - TERM
Section 9.1 - Maturity Date: Two (2) years from the Closing
Date, subject to automatic renewal
as provided in Section 9.1 of the
Agreement, and early termination as
provided in Section 9.2 of the
Agreement.
BORROWER:
KENDALL SQUARE TELECONFERENCING, INC.
By /s/John J. Dion
----------------
Title Vice President - Finance
By /s/Courtney P. Snyder
---------------------
Title President
CONFERENCE SOURCE INTERNATIONAL
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title Vice President
TELEPHONE BUSINESS MEETINGS, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title Vice President
[SIGNATURES CONTINUED ON THE NEXT PAGE]
CALL POINTS, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title President
AMERICAN CONFERENCING COMPANY, INC.
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title President
COMMUNICATION DEVELOPMENT CORPORATION
By /s/John J. Dion
---------------
Title Vice President - Finance
By /s/Glenn D. Bolduc
------------------
Title Vice President
COAST:
COAST BUSINESS CREDIT(R),
a division of Southern Pacific Bank
By /s/Robert D. Peters
-------------------
Title: Vice President