WRITTEN WAIVER AND AMENDMENT NO. 5 TO CREDIT AND SECURITY AGREEMENT
WRITTEN
WAIVER AND AMENDMENT NO. 5
TO
THIS
WRITTEN WAIVER AND AMENDMENT NO. 5
(this
“Amendment”) is entered into as of November 14, 2006, by
and
among OBLIO TELECOM, INC., a Delaware corporation (“Oblio”), each of its direct
and indirect subsidiaries signatory hereto (Oblio and each such subsidiary
are
referred to, individually and collectively, jointly and severally as the
“Borrower”), the other Credit Parties signatory hereto and CAPITALSOURCE FINANCE
LLC, a Delaware limited liability company (the “Lender”).
BACKGROUND
Borrower
and
Lender entered into a Credit and Security Agreement dated as of August 12,
2005,
as amended by Waiver and Amendment No. 1 dated as of December 13, 2005, Waiver
and Amendment No. 2 dated as of March 8, 2006, Waiver and Amendment No. 3 dated
as of May 19, 2006 and Waiver and Amendment No. 4 dated as of August 7, 2006
(as
amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”) pursuant to which Lender provided Borrower with certain
financial accommodations.
The
Borrower has requested that Lender make
certain amendments to the Loan Agreement, and Lender is willing to do so on
the
terms and conditions hereafter set forth.
NOW,
THEREFORE,
in
consideration of any loan or advance or grant of credit heretofore or hereafter
made to or for the account of Borrower by Lender, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
All
capitalized terms not otherwise defined herein shall have the meanings given
to
them in the Loan Agreement.
2. Acknowledgement.
Each
Credit Party hereby affirms and acknowledges that (a) as of November 13, 2006,
there is presently due and owing to Lender the principal amounts of
$7,083,286.68 with respect to the Revolving Facility, $3,283,333.33 with respect
to Term Loan A and $2,666,670.00 with respect to Term Loan B, in each case
together with interest, costs, fees (including without limitation, the accrued
Non-Compliance Fee) and expenses (collectively, the “Amount”), (b) the Amount is
due and owing without defense, offset or counterclaim of any kind or nature
whatsoever, and (c) the Loan Documents are and shall continue to be legal,
valid
and binding obligations and agreements of such Credit Party enforceable in
accordance with their respective terms and secured by first priority perfected
Liens on the Collateral in favor of Lender.
3. Waiver.
From
time to time, Borrower and Lender have had discussions regarding certain Events
of Default (the “Designated Events of Default”) that have occurred under the
Loan Agreement which Lender may have orally waived. Borrower and Lender desire
to specify in writing the Designated Events of Default as (i) a breach of
Section 8.1(i) as a result of Borrower’s suspension or termination of its
prepaid phone card contract with AT&T over Borrower and AT&T’s dispute
over Borrower’s payment of FET and USF payments to AT&T, (ii) Credit
Parties’ noncompliance with Section 6.1(a)(ii) for the months of July, August
and September, 2006 due to open audit issues in seeking concurrence from
Borrower’s independent auditor related to the application of FET and USF tax
recoveries in compliance with generally accepted accounting principals, and
(iii) the failure of Borrower to accurately report Eligible Receivables due
to
Borrower’s unintentional understatement of ineligible Accounts prior to the date
of this Amendment; upon Lender advising Borrower of this reporting error,
Borrower promptly corrected its calculations. Subject to the provisions set
forth in this Amendment, Lender hereby provides written waiver of the Designated
Events of Default. This written waiver is limited to the Designated Events
of
Default and shall not constitute a written waiver of any other Event of Default.
Except for the foregoing written waiver and the amendments set forth below,
the
Loan Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed by Borrower.
4. Amendment
to Loan Agreement.
Subject
to the satisfaction of the conditions precedent set forth in Section 7 below,
the Loan Agreement is hereby amended as follows:
(a) The
definition of “Eligible Receivables” in Appendix A to the Loan Agreement is
hereby amended by amending clause (h) thereof in its entirety to read as
follows:
“(h)
with
respect to all Accounts owed by any particular Account Debtor and/or its
Affiliates, if such Accounts exceed 20% of the net collectible dollar value
of
all Eligible Receivables at any one time (which percentage may, in Lender’s sole
discretion, be increased or decreased); provided,
however,
from
the Amendment No. 1 Effective Date through and including November 30, 2006,
Accounts owed by Pacific Telecom shall not be deemed ineligible solely by virtue
of this clause (h) so long as the aggregate net collectible value of such
Accounts does not exceed $3,437,000;”
(b) Appendix
A to the Loan Agreement is hereby amended by inserting the following defined
terms in their appropriate alphabetical order to provide as
follows:
“Amendment
No. 5”
shall
mean Amendment No. 5 to Credit and Security Agreement dated as of November
14,
2006.
“Amendment
No. 5 Effective Date”
shall
mean November 14, 2006.
5. Additional
Covenants.
Borrower, jointly and severally, covenants and agrees that, until full
performance and satisfaction, and indefeasible payment in full in cash, of
all
the Obligations and termination of the Loan Agreement, it shall satisfy and
comply with each of the following covenants and agreements, and Borrower
acknowledges and agrees that the failure to so comply as and when required
herein shall result in an Event of Default:
2
(a) Equity
Raise.
By not
later than December 31, 2006, Borrower shall have raised and received additional
cash equity (either via a cash equity contribution from Parent or otherwise)
or
subordinated debt, subordinated to the Obligations by written agreement in
form
and substance and subject to subordination or intercreditor terms acceptable
to
Lender, in an aggregate amount of not less than Five Million Dollars
($5,000,000) (the “Raise”). Borrower acknowledges and agrees that the Raise is
consistent with the sound exercise of Borrower’s fiduciary duties based upon
Borrower’s current business operations and financial condition, and in
furtherance thereof, Borrower agrees to obtain Lender’s prior written consent
with respect to the Borrower’s use of such Raise.
(b) Budget;
Consultant; Variances.
(i) Borrower
acknowledges and agrees that Lender may engage a management consultant
acceptable to Lender (the “Consultant”),
for
the purpose of analyzing Borrower’s finances and operations and providing advise
and consultation to Lender. The Consultant shall be engaged at Borrower’s sole
cost and expense. Borrower shall give the Consultant access to such books and
records of Borrower and members of management of Borrower as the Consultant
may
reasonably request in order to enable the Consultant to analyze the financial
and operational information of the Borrower.
(ii) Lender
has received a thirteen week cash budget and business plan attached hereto
as
Exhibit
A
(the
“Budget”), which Budget was prepared by management of Borrower and was
accompanied by a certificate signed by the President or Chief Financial Officer
of Borrower to the effect that such Budget has been prepared on a basis
consistent with past budgets and financial statements and that such officer
has
no reason to question the reasonableness of any material assumptions on which
such projections were prepared. On the first day of each calendar month,
Borrower shall provide Lender with a revised Budget acceptable to Lender for
the
ensuing thirteen (13) week period which must be approved in writing by Lender.
A
failure of Borrower to comply with the Budget for any weekly period shall
constitute an Event of Default under the Loan Agreement.
(iii) Borrower
shall provide to Lender by 12:00 p.m. EST on Wednesday of each week (commencing
with November 8, 2006) with a written report (“Variance Report”), in form and
substance satisfactory to Lender, analyzing the variances between the actual
results of Borrower for the immediately preceding week and the cumulative weekly
periods then ended to the applicable amounts set forth in the
Budget.
(iv) Borrower
shall provide Lender the monthly financial statements and Compliance Certificate
required by Section 6.1(a)(ii) of the Loan Agreement (x) by November 15, 2006
for the months of July and August, 2006, and (y) by November 30, 2006, for
the
months of September and October, 2006.
(c) Reporting.
Borrower shall diligently comply with each of the reporting requirements set
forth in Section 6.1 of the Loan Agreement, including delivering a Borrowing
Certificate prepared and delivered in accordance with Section 2.4 of the Loan
Agreement.
3
(d) Lockbox
Notices.
By not
later than (i) November 15, 2006, Borrower shall have sent written notifications
to each of its ten (10) largest Account Debtors directing them to make all
payments directly to a Lockbox Account and (ii) November 30, 2006, Borrower
shall have sent written notifications to all other Account Debtors directing
them to make all payments directly to a Lockbox Account, in each case as
required pursuant to Section 2.5 of the Loan Agreement. Borrower shall provide
Lender copies of each such notice and such other evidence as Lender may require
to confirm the delivery thereof to the Account Debtors.
6. Waiver
of Minimum Termination Fee.
Notwithstanding Section 11.1(b) of the Loan Agreement or any other provision
of
the Loan Agreement, in the event the Obligations are indefeasibly repaid in
full
in cash by December 31, 2006, Lender shall waive payment of the applicable
Minimum Termination Fee. If the Obligations are not repaid as provided above,
then Borrower shall pay the Minimum Termination Fee as and when required in
the
Loan Agreement.
7. Conditions
of Effectiveness.
This
Amendment shall become effective upon Lender’s receipt of the following items in
form and substance satisfactory to Lender and its counsel:
(a) four
(4)
copies of this Amendment duly executed by Borrower;
(b) executed
joint and several guaranties from Xxxxx Xxxxxxxx and Xxxxx Xxxxx in form
acceptable to Lender, including a representation by each of them as to their
combined minimum net worth at the time of execution of the guaranties being
at
least $5,000,000;
(c) Borrower
shall pay all costs, fees and expenses of Lender (including the reasonable
costs, fees and expenses of Lender’s in-house and outside counsel) incurred by
Lender in connection with the negotiation, preparation and closing of this
Amendment; and
(d) such
other certificates, instruments, documents and agreements as may be required
by
Lender or its counsel.
Upon
the
satisfaction of the foregoing conditions Lender will release the collateral
pledge of the securities of Xxxxxxx Equity Partners, LLC.
8. Representations
and Warranties.
Each
Credit Party hereby jointly and severally represents, warrants and covenants
to
Lender that:
(a) This
Amendment and the Loan Agreement, as amended hereby, constitute legal, valid
and
binding obligations of such Credit Party and are enforceable against such Credit
Party in accordance with their respective terms.
(b) Upon
the
effectiveness of this Amendment, it hereby reaffirms all covenants,
representations and warranties made in the Loan Agreement and the other Loan
Documents to which it is a party to the extent the same are not amended hereby
and agree that all such covenants, representations and warranties shall be
deemed to have been remade as of the effective date of this
Amendment.
4
(c) No
Event
of Default or Default has occurred and is continuing or would exist after giving
effect to the waiver provided in this Amendment.
(d) it
has no
defense, counterclaim or offset with respect to the Loan Agreement or any other
Loan Document to which it is a party.
9. Effect
on the Loan Agreement.
(a) Upon
the
effectiveness of this Amendment, each reference in the Loan Agreement or any
other Loan Document to “this Agreement,” “hereunder,” “hereof,” “herein” or
words of like import shall mean and be a reference to the Loan Agreement or
the
applicable Loan Documents as amended hereby.
(b) Except
as
set forth in Section 3 of this Amendment, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of Lender, nor constitute a waiver of any provision of the
Loan
Agreement, or any other Loan Documents.
10. Release.
Each
Credit Party, both individually and on behalf of its Affiliates, hereby
releases, remises, acquits and forever discharges Lender and its employees,
agents, representatives, consultants, attorneys, fiduciaries, servants,
officers, directors, partners, predecessors, successors and assigns, subsidiary
corporations, parent corporations, Affiliates and related corporate divisions
(all of the foregoing hereinafter called the “Released Parties”), from any and
all actions and causes of action, judgments, executions, suits, debts, claims,
counterclaims, demands, obligations, damages and expenses of any and every
character, known or unknown, direct and/or indirect, at law or in equity, of
whatsoever kind or nature, for or because of any matter or things done, omitted
or suffered to be done by any of the Released Parties prior to and including
the
date of execution hereof, and in any way directly or indirectly arising out
of
or in any way connected to the Loan Agreement, this Amendment and the other
Loan
Documents (all of the foregoing hereinafter called the “Released Matters”). Each
Credit Party, both individually and on behalf of its Affiliates, acknowledges
that the agreements in this Section are intended to be in full satisfaction
of
all or any alleged injuries or damages arising in connection with the Released
Matters. Each Credit Party agrees to indemnify and hold harmless the Released
Parties with respect to any action brought on behalf of any of its Affiliates
with respect to any of the Released Matters.
11. Governing
Law.
This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of Maryland without giving effect to its choice of law
provisions. Any judicial proceeding against Borrower with respect to the
Obligations, any Loan Document (including this Amendment) or any related
agreement may be brought in any federal or state court of competent jurisdiction
located in the State of Maryland. Any judicial proceedings against Lender
involving, directly or indirectly, the Obligations, any Loan Document or any
related agreement shall be brought only in a federal or state court located
in
the State of Maryland. All parties acknowledge that they participated in the
negotiation and drafting of this Agreement with the assistance of counsel and
that, accordingly, no party shall move or petition a court construing this
Agreement to construe it more stringently against one party than against any
other.
5
12. Headings.
Section
headings in this Amendment are included herein for convenience of reference
only
and shall not constitute a part of this Amendment for any other
purpose.
13. Counterparts;
Facsimile.
This
Amendment may be executed by the parties hereto in one or more counterparts,
each of which shall be deemed an original and all of which when taken together
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature
hereto.
[SIGNATURE
PAGE FOLLOWS]
60522064_2
6
IN
WITNESS WHEREOF, each of the parties has duly executed this Amendment No. 5
as
of the date first written above.
CAPITALSOURCE FINANCE LLC | ||
|
|
|
By: | /s/ XXXX XXXXX | |
Name:
Xxxx Xxxxx
Its:
Portfolio Manager
|
||
Title |
OBLIO TELECOM, INC. | ||
|
|
|
By: | /s/ XXXX XXXXXX | |
Name:
Xxxx Xxxxxx
Its:
President and CEO
|
||
PINLESS, INC. | ||
|
|
|
By: | /s/ XXXX XXXXXX | |
Name:
Xxxx Xxxxxx
Its:
President and CEO
|
||
ACKNOWLEDGED
AND AGREED:
|
|||
|
|
|
|
By: | /s/ XXXXX CHANCE | ||
Name:
Xxxxx Chance
Title:
President
|
XXXXXXX
EQUITY PARTNERS, LLC
|
|||
By: | /s/ XXXXX XXXXX | ||
Name:
Xxxxx Xxxxx
Its:
Managing Member
|
|||
|
|||
/s/ XXXXX XXXXXXXX | |||
Xxxxx
Xxxxxxxx
|
|||
/s/ XXXXX XXXXX | |||
Xxxxx Xxxxx |