EXHIBIT 10.5
FOURTH AMENDMENT TO
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and
entered into as of February 3, 1997, by and among EQUALNET HOLDING CORP., a
Texas corporation (the "BORROWER"), each of the lenders which is or may from
time to time become a party hereto (individually, a "LENDER" and, collectively,
the "LENDERS"), and COMERICA BANK-TEXAS, a Texas banking association, as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT").
RECITALS:
A. Borrower, Agent and Lenders entered into a Credit Agreement dated as of
November 30, 1995 (as the same may have heretofore been amended, restated,
modified or supplemented, the "CREDIT AGREEMENT").
B. Borrower has requested Agent and Lenders to (a) waive defaults under
certain covenants set forth in the Credit Agreement, (b) permanently reduce the
aggregate amount of the Commitments, (c) delete certain definitions and add
others, (d) modify the right of the Borrower to request the issuance of Letters
of Credit, (e) modify the rate at which interest on the Indebtedness evidenced
or governed by the Loan Documents accrues, (f) modify certain financial
covenants, and (g) make certain other changes to the Credit Agreement and the
other Loan Documents.
C. Borrower, Agent and Lenders now enter into this Amendment to evidence
their agreements as the matters described above, all of which is more fully
described hereinbelow, which such provisions contained below shall control over
any inconsistencies with the foregoing recitals.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. COMMITMENTS REDUCED. Each Lender's Commitment is hereby irrevocably
reduced to the amount and as of the dates set forth opposite such Lender's name
on the signature pages hereof.
2. APPLICABLE BORROWING BASE PERCENTAGE AMENDED. The definition of
Applicable Borrowing Base Percentage contained in Section 1.1 of the Credit
Agreement is hereby amended in its entirety to be and read as follows:
"APPLICABLE BORROWING BASE PERCENTAGE shall mean on any date of
determination (a) occurring prior to March 1, 1997, 72.5% or (b) occurring
on or after March 1, 1997,
1
69% LESS 1% per month for each calendar month which has commenced after
March 31, 1997 as of such date of determination."
3. ELIGIBLE ACCOUNTS AMENDED. The definition of Eligible Accounts
contained in Section 1.1 of the Credit Agreement is hereby amended in its
entirety to be and read as follows:
"ELIGIBLE ACCOUNTS shall mean, as at any date of determination thereof,
each Account of the Borrower or any of its Subsidiaries which is subject
to a Security Document and on which the Agent shall have a first-priority
perfected Lien, which Account is at said date payable to the Borrower or
any of its Subsidiaries and which complies with the following
requirements: (a) the subject goods have been sold to an account debtor on
an absolute sale basis on open account and not on consignment, on approval
or on a "sale or return" basis or subject to any other repurchase or
return agreement and no material part of the subject goods has been
returned, rejected, lost or damaged, the Account is stated to be payable
in Dollars and is not evidenced by chattel paper or an instrument of any
kind and said account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceedings of any kind; (b) the account debtor
must be located in the United States; (c) it is a valid obligation of the
account debtor thereunder and is not subject to any offset or other
defense on the part of such account debtor or to any claim on the part of
such account debtor denying liability thereunder; (d) it is subject to no
Lien whatsoever, except for the Liens created or permitted pursuant to the
Security Documents and/or the ▇▇▇▇▇ Security Documents; (e) it is
evidenced by an invoice submitted to the account debtor in a timely
fashion and in the normal course of business; (f) it has not remained
unpaid beyond 90 days after the date of the applicable invoice; (g) if
such date is on or after August 5, 1996, and if the applicable account
debtor is one which is no longer being serviced by the Borrower, the
applicable account debtor does not have any other Accounts owed to the
Borrower or any of its Subsidiaries which remain unpaid beyond 90 days
after the date of the applicable invoice; (h) not more than (1) 75% (if
such date is on or after July 5, 1996 but prior to August 5, 1996), (2)
50% (if such date is on or after August 5, 1996 but prior to September 5,
1996) or (3) 25% (if such date is on or after September 5, 1996), of the
other Accounts of the applicable account debtor or any of its Affiliates
owed in the aggregate to the Borrower or any of its Subsidiaries fail to
satisfy all of the requirements of an "Eligible Account"; (i) it does not
arise out of transactions with an employee, officer, agent, director or
stockholder of the Borrower or any of its Subsidiaries or any Affiliate of
the Borrower or any of its Subsidiaries, other than Accounts approved in
writing by the Agent; (j) the applicable account debtor is not one who the
Agent has, in the exercise of its sole discretion, determined to be (based
on such factors as the Agent deems appropriate), and has given notice of
such determination to the Borrower, an ineligible account debtor;
PROVIDED, HOWEVER, than any such notice shall not apply as to any Account
of such account debtor which has been included on a Borrowing Base
Certificate prior to the giving of such notice by Agent and which meets
each and every other requirement under this Agreement for the denomination
of such
2
Account as an "Eligible Account," and (k) each of the representations and
warranties set forth in the Security Documents executed by the Borrower
and its Subsidiaries with respect thereto is true and correct in all
material respects on such date. In the event of any dispute under the
foregoing criteria, about whether an Account is or has ceased to be an
Eligible Account, the decision of the Agent, made in good faith, shall be
conclusive and binding, absent manifest error."
4. MATURITY DATE AMENDED. The definition of Maturity Date contained in
Section 1.1 of the Credit Agreement is hereby amended in its entirety to be and
read as follows:
"MATURITY DATE shall mean the maturity of the Notes, July 1, 1997, as the
same may hereafter be accelerated pursuant to the provisions of any of the
Loan Documents."
5. MAXIMUM LOAN AVAILABLE AMOUNT AMENDED. The definition of Maximum Loan
Available Amount contained in Section 1.1 of the Credit Agreement is hereby
amended in its entirety to be and read as follows:
"MAXIMUM LOAN AVAILABLE AMOUNT shall mean, at any date, an amount equal to
(A) the lesser of (i) the aggregate of the Commitments or (ii) the
Borrowing Base, MINUS (B) from and after February 6, 1997, the lesser of
(i) $500,000 or (ii) the total amount of the unpaid balance of assessment
shown on the Notice of Federal Tax Lien (the "Houston Notice of Federal
Tax Lien") filed against Equal Net Communications, Inc., bearing Serial
Number 749722134 recorded with the County Clerk of ▇▇▇▇▇▇ County, Houston,
Texas as Document No. 511 52-3591, as the same may be amended from time to
time."
6. PERMITTED LIENS AMENDED. The definition of Permitted Liens contained in
Section 1.1 of the Credit Agreement is hereby amended in its entirety to be and
read as follows:
"PERMITTED LIENS shall mean (a) Liens and encumbrances in favor of the
Agent; (b) Liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and not yet past due or being
contested in good faith by appropriate proceedings and, if requested by
the Agent, bonded in a manner satisfactory to the Agent provided that no
notice of federal tax lien is filed against the Borrower or any of its
Subsidiaries in connection with any such Liens other than the Houston
Notice of Tax Lien and and PROVIDED, FURTHER, that the Houston Notice of
Tax Lien shall not be a Permitted Lien after February 24, 1997, so that if
the Houston Notice of Tax Lien has not been terminated on or prior to such
date, the same shall violate Section 8.2 of this Agreement and constitute
an Event of Default under Section 9.1(e) and (k) of this Agreement; (c)
Liens not delinquent created by statute in connection with worker's
compensation, unemployment insurance, social security and similar
statutory obligations; (d) Liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law liens securing
obligations incurred in good faith in the ordinary course of business that
are not yet due and
3
payable; and (e) Encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real
property, none of which materially impairs the use of such property by the
Borrower or any of its Subsidiary in the operation of the business for
which it is used and none of which is violated in any material respect by
any existing or proposed structure or land use."
7. SECURITY AGREEMENTS AMENDED. The definition of Security Agreements
contained in Section 1.1 of the Credit Agreement is hereby amended in its
entirety to be and read as follows:
"SECURITY AGREEMENTS shall mean, collectively, (i) the Security Agreement
dated as of the Effective Date executed by the Borrower and the Agent
covering the Borrower's Accounts, Inventory and General Intangibles and
securing the Obligations, (ii) the Security Agreement dated as of the
Effective Date executed by the Current Guarantors and the Agent covering
their respective Accounts, Inventory and General Intangibles and securing
the Obligations arising under their respective Guaranties, (iii) the
Additional Security Agreement dated as of June 20, 1996 executed by
EqualNet Wholesale Services, Inc. ("WHOLESALE"), a Delaware corporation,
covering the Accounts, Inventory and General Intangibles of Wholesale, as
security for such Person's obligations under the Guaranties, and (iv) any
and all other security agreements now or hereafter executed by any Party
in favor of the Agent, as any of them may from time to time be amended,
modified, restated or supplemented."
8. DEFINITIONS ADDED. Section 1.1 of the Credit Agreement is hereby
amended by adding thereto the following definitions:
"AT&T shall mean AT&T Corp. or any Affiliate thereof."
"AT&T PAYMENT SCHEDULE shall mean that certain payment schedule delivered
by AT&T under its letter to EqualNet Corporation dated January 21, 1997,
establishing payment terms in favor of EqualNet Corporation."
"▇▇▇▇▇ shall mean The ▇▇▇▇▇ Group, Inc., a New Jersey corporation."
"▇▇▇▇▇ CHARGE-OFF shall have the meaning set forth in Section 10 of the
Fourth Amendment to this Agreement."
"▇▇▇▇▇ NOTES shall mean those certain convertible subordinated promissory
notes in the original aggregate principal sum of $3,000,000 executed by
Borrower and the Current Guarantors, as co-makers, payable to the order of
▇▇▇▇▇, dated as of February 3, 1997, with a final stated maturity of
December 31, 1998, unless earlier converted into common stock of the
Borrower."
4
"▇▇▇▇▇ PURCHASE AGREEMENT shall mean the Note and Warrant Purchase
Agreement among the Borrower, the Current Guarantors and ▇▇▇▇▇ dated as of
February 3, 1997."
"▇▇▇▇▇ SECURITY DOCUMENTS shall mean that certain Security Agreement dated
as of February 3, 1997, from the Borrower and the Current Guarantors, in
favor of ▇▇▇▇▇, securing the payment and performance of the ▇▇▇▇▇ Note."
"HOUSTON NOTICE OF FEDERAL TAX LIEN shall have the meaning set forth in
Section 5 of the Fourth Amendment to this Agreement."
"INTERCREDITOR AND SUBORDINATION AGREEMENT shall mean the InterCreditor
and Subordination Agreement dated February 3, 1997, among the Borrower,
the Current Guarantors, the Lenders and ▇▇▇▇▇."
"WRITE-OFF shall have the meaning set forth in Section 10 of the Fourth
Amendment to this Agreement."
9. INTEREST RATES AMENDED.
(a) The definition of Base Rate contained in the Interest Rate Annex
is hereby amended in its entirety to be and read as follows:
"BASE RATE means for any day a rate per annum (rounded upwards to the
nearest 1/16 of 1%) equal to the lesser of (a) the greater of (1) the
Prime Rate for that day and (2) the Federal Funds Rate for that day plus
1/2 of 1%, in each case, PLUS the Applicable Margin for such day or (b)
the Ceiling Rate. If for any reason the Agent shall have determined (which
determination shall be conclusive and binding, absent manifest error) that
it is unable to ascertain the Federal Funds Rate for any reason,
including, without limitation, the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Base
Rate shall, until the circumstances giving rise to such inability no
longer exist, be the lesser of (y) the Prime Rate plus the Applicable
Margin or (z) the Ceiling Rate."
(b) The Interest Rate Annex is hereby amended to add thereto a
definition of "Applicable Margin", which shall be and read as follows:
"APPLICABLE MARGIN means a rate per annum equal to (a) for any day
occurring on or after June 1, 1996 through and including February 28,
1997, three percent (3%), (b) for any day occurring on or after March 1,
1997 through and including March 31, 1997, four percent (4%), (c) for any
day occurring on or after April 1, 1997 through and including April 30,
1997, five percent (5%), and (d) for any day occurring on May 1, 1997 and
at any time thereafter, six percent (6%)."
5
10. LETTER OF CREDIT FACILITY AMENDED. Section 2.2(b) of the Credit
Agreement is hereby amended to provide that any and all Letters of Credit issued
by the Issuer (including any currently issued and outstanding) shall be fully
Covered or backed by a standby letter of credit in form and substance, and
issued by a Person, acceptable to the Agent in its sole discretion.
11. FINANCIAL STATEMENTS AND INFORMATION. Section 7.2 of the Credit
Agreement is hereby amended by eliminating the word "and" immediately preceding
clause (f) thereof, by changing the period at the end thereof to a semi-colon
and by inserting thereafter the following new clause (g) to be and read as
follows:
"(g) immediately upon the receipt of any notice from AT&T asserting any
right to, terminate providing services to the Borrower or any of its
Subsidiaries (or their respective customers as a whole), a written notice
signed by the President or the principal financial officer of the Borrower
specifying the nature thereof, and what action the Borrower is taking or
proposing to take with respect thereto, and, when known, any action taken
by AT&T with respect thereto."
12. FINANCIAL TESTS AMENDED. Section 7.3 of the Credit Agreement is hereby
amended in its entirety to be and read as set forth below. The charts headed
"With Write-Off" in clauses (a) and (b) below and in Section 9.1(a) of the
Credit Agreement (as amended hereby), are applicable in the event, and only in
the event, that the Borrower, upon the advice of its independent public
accountants, implements, effective as of December 31, 1996, a non-cash write-off
of no less than $4,750,000 and no more than $5,000,000 of acquisition costs (the
"WRITE-OFF"). In the event that the Borrower, upon the advice of its independent
public accountants, implements a non-cash charge to earnings of no more than
$2,000,000 because of events contemplated by the ▇▇▇▇▇ Notes and/or the ▇▇▇▇▇
Purchase Agreement (the "▇▇▇▇▇ CHARGE-OFF"), the ▇▇▇▇▇ Charge-Off shall be
excluded for purposes of the financial tests in this Section 7.3.
"7.3 FINANCIAL TESTS. Have and maintain on a consolidated basis (in each
case treating the Indebtedness evidenced by the ▇▇▇▇▇ Note as equity):
"(a) MINIMUM TANGIBLE NET WORTH; MAINTAIN DEBT TO TANGIBLE NET WORTH
RATIO. Prior to February, 1997 maintain Tangible Net Worth and for
February, 1997, and thereafter, maintain a ratio of Indebtedness
(including all Obligations) to Tangible Net Worth of not more than the
amounts indicated in the chart below for the periods indicated:
WITHOUT WRITE-OFF WITH WRITE-OFF
----------------------------------------- ----------------------------------
FOR THE MONTH OF AMOUNT FOR THE MONTH OF AMOUNT
--------------------------- ----------- -------------------- -----------
December 1996 $ 0.00 December 1996 ($ 500,000)
January 1997 ($ 250,000) January 1997 ($1,000,000)
6
WITHOUT WRITE-OFF WITH WRITE-OFF
----------------------------------------- ----------------------------------
FOR THE MONTH OF AMOUNT FOR THE MONTH OF AMOUNT
--------------------------- ----------- -------------------- -----------
February 1997 7.50 February 1997 10.00
March 1997 9.25 March 1997 13.25
April 1997 3.55 April 1997 4.20
May 1997 4.10 May 1997 5.10
June 1997 4.75 June 1997 6.40
"(b) MAINTAIN DEBT TO NET WORTH RATIO. A ratio of Indebtedness
(including all Obligations) to Net Worth of not more than the amounts
indicated in the chart below for the periods indicated:
WITHOUT WRITE-OFF WITH WRITE-OFF
----------------------------------------- ----------------------------------
FOR THE MONTH OF AMOUNT FOR THE MONTH OF AMOUNT
--------------------------- ----------- -------------------- -----------
December 1996 2.50 December 1996 15.50
January 1997 2.75 January 1997 6.25
February 1997 1.90 February 1997 5.50
March 1997 2.10 March 1997 6.75
April 1997 1.50 April 1997 3.15
May 1997 1.70 May 1997 3.80
June 1997 1.90 June 1997 4.75
"(c) MAINTAIN CURRENT RATIO. A Current Ratio of not less than 1.10
to 1.00 at all times; PROVIDED, HOWEVER, such ratio may not be less than
0.90 to 1.00 for the months of December, 1996 and January, 1997. For
purposes of calculating the Current Ratio, the Obligations shall not be
included as Current Liabilities.
13. ACCOUNTS AUDITS REQUIREMENTS AMENDED. Section 7.14 of the Credit
Agreement is hereby amended in its entirety to be and read as follows:
"7.14 ACCOUNTS AUDITS. Permit the Agent or its designee to, from time to
time, conduct (but, so long as no Default has occurred which is still
continuing, no more often than four times during any fiscal year) an audit
of the Accounts of the Borrower and its Subsidiaries. Such audits shall be
at the expense of the Borrower. The Borrower further covenants and agrees
that it will cooperate, and will cause its
7
Subsidiaries to cooperate, with the Agent or such designee and provide the
Agent or such designee access to all records, books and other information
reasonably requested by Bank in connection with the Borrower and its
Subsidiaries' Accounts."
14. REDEMPTION, DIVIDENDS AND DISTRIBUTIONS. Section 8.5 of the Credit
Agreement is hereby amended in its entirety to be and read as follows:
"8.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS At any time: (a) redeem,
retire or otherwise acquire, directly or indirectly, any shares of its
capital stock; (b) pay any dividend or (c) make any other distribution of
any Property or cash to stockholders as such; PROVIDED, HOWEVER, that
nothing in this Section shall prohibit Borrower from (i) accepting shares
of its stock as payment of the purchase price of shares of Common Stock
with respect to which options granted under the EqualNet Holding Corp.
Employee Stock Option and Restricted Stock Plan ("Stock Plan") are
exercised, (ii) acquiring shares of Common Stock that have been awarded to
employees ("Restricted Stock") pursuant to the Stock Plan but which have
been forfeited by such employees pursuant to the terms of the Stock Plan,
(iii) acquiring shares of Restricted Stock to meet Borrower's tax
withholding obligation under the United States Internal Revenue Code of
1986, as amended, upon vesting of such Restricted Stock or (iv)
contributing an amount to the EqualNet Holding Corp. Employee Stock
Purchase Plan in an amount equal to 15% of each employee participant's
payroll deduction up to a maximum of $750 for each employee participant
per calendar year."
15. NO LOSS DEFAULT AMENDED. Section 9.1(o) of the Credit Agreement is
hereby amended in its entirety to be and read as follows:
"(o) NO LOSS - the Borrower and its Subsidiaries on a consolidated basis
shall have a pre-tax loss (determined in accordance with GAAP but
excluding the ▇▇▇▇▇ Charge- Off) from operations for the periods indicated
below in excess of the amounts indicated:
WITHOUT WRITE-OFF WITH WRITE-OFF
----------------------------------------- --------------------------------------
FOR THE MONTH OF MAXIMUM LOSS FOR THE MONTH OF MAXIMUM LOSS
---------------------------- ---------- ------------------------- ----------
December 1996 $ 950,000 December 1996 $ 800,000*
January 1997 $ 860,000 January 1997 $ 860,000
February 1997 $ 830,000 February 1997 $ 710,000
March 1997 $ 820,000 March 1997 $ 780,000
April 1997 $ 860,000 April 1997 $ 795,000
May 1997 $1,030,000 May 1997 $ 850,000
8
FOR THE MONTH OF MAXIMUM LOSS FOR THE MONTH OF MAXIMUM LOSS
---------------------------- ---------- ------------------------- ----------
June 1997 $1,040,000 June 1997 $ 845,000
* In the event that the Write-Off is implemented, this amount will be
increased by the amount of the Write-Off.
16. AT&T DEFAULT ADDED. The Credit Agreement is hereby amended to add
thereto a new Section 9.1(p) which shall be and read as follows:
"(p) AT&T DEFAULT - AT&T shall be entitled to terminate providing services
to the Borrower or any of its Subsidiaries (or their respective customers
as a whole) pursuant to any Carrier Agreement, Contract Tariff or other
agreement now or hereafter in effect and any notice has been given and the
passage of any time required as a condition to such termination has
occurred."
17. ▇▇▇▇▇ DEFAULT ADDED. The Credit Agreement is hereby amended to add
thereto a new Section 9.1(q) which shall be and read as follows:
"(p) ▇▇▇▇▇ DEFAULT - any default or event of default shall occur under any
of the ▇▇▇▇▇ Note, the ▇▇▇▇▇ Purchase Agreement or the InterCreditor and
Subordination Agreement.
18. ASSIGNMENT CLAUSES AMENDED. Section 11.6(b) of the Credit Agreement is
hereby amended in its entirety to be and read as follows:
"(b) Each Lender may assign to one or more Lenders or any other Person all
or a portion of its interests, rights and obligations under this
Agreement; PROVIDED, HOWEVER, that (i) other than in the case of an
assignment to another Lender (that is, at the time of the assignment, a
party hereto) or to an Affiliate of such Lender or to a Federal Reserve
Bank, the Agent must give its prior written consent, which consents shall
not be unreasonably withheld, and (iii) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance an
Assignment and Acceptance in the form of EXHIBIT F hereto (each an
"ASSIGNMENT AND ACCEPTANCE") with blanks appropriately completed, together
with any Note or the Notes subject to such assignment. Upon such
execution, delivery and acceptance, from and after the effective date
specified in each Assignment and Acceptance, (A) the assignee thereunder
shall be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (B)
the Lender thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto). Notwithstanding
anything contained in this Agreement
9
to the contrary, any Lender may at any time assign all or any portion of
its rights under this Agreement and the Notes issued to it as collateral
to a Federal Reserve Bank; provided that no such assignment shall release
such Lender from any of its obligations hereunder."
19. ASSIGNMENT AND ACCEPTANCE AMENDED. The Credit Agreement is hereby
amended by deleting therefrom Exhibit F (erroneously referred to as "Exhibit G"
in the Credit Agreement) to the Credit Agreement and substituting therefor a new
Exhibit F, which shall be in the form set forth on EXHIBIT A attached hereto and
incorporated herein by reference for all purposes.
20. WAIVER OF CERTAIN DEFAULTS. The Agent and the Lenders hereby waive the
occurrence of any Default or Event of Default which has occurred through
February 3, 1997 (but not thereafter) and of which the Agent and the Lenders
have received written notice from the Borrower.
21. RESTRUCTURE FEES. In consideration, among other consideration, for the
Agent and the Lenders entering into this Amendment, the Borrower hereby agrees
to pay to the Agent for distribution to the Lenders a restructure fee in the
amount of $25,000, which shall be due and payable on the date hereof. Upon
receipt of said restructure fee, the Agent shall distribute the same to Lenders
in accordance with their respective Commitment Percentages. In addition, Section
2.4 of the Credit Agreement is hereby amended to add thereto a new Subsection
"(c)" which shall be and read as follows:
"(c) In the event that all outstanding Letters of Credit, all Letter of
Credit Liabilities, all Loans, all Dominion of Funds Loans and all
Commitments have not been irrevocably fully terminated, paid and satisfied
(or back-up letters of credit delivered, in the case of outstanding
Letters of Credit, in form and substance, and issued by a Person,
acceptable to the Agent in its sole discretion) prior to May 1, 1997, the
Borrower shall pay to the Agent for the account of each Lender a
restructure fee in the aggregate amount of $25,000."
22. NO OTHER DEFAULT. Borrower hereby warrants and represents to Agent and
Lenders that no Default or Event of Default has occurred and is continuing which
has not been disclosed in writing to the Agent and the Lenders and waived
pursuant hereto.
23. CONDITIONS. No part of this Amendment shall become effective until the
Borrower shall have delivered (or shall have caused to be delivered) to the
Agent each of the following, in Proper Form:
(a) evidence of the satisfaction of the conditions set forth in that
certain Forbearance Agreement dated as of January 31, 1997, among
the Borrower, the Agent and the Lenders;
(b) certificates dated as of the date hereof of the Secretary or any
Assistant Secretary of the Borrower and each of the Guarantors
(including, without limitation, Wholesale)
10
as of the date hereof, authorizing the execution, delivery and
performance of this Amendment, and such other related documents and
information as the Lenders may request;
(c) certificates issued by the appropriate governmental authorities from
the States of Delaware and Texas as to the existence, good standing
and qualification to do business in Texas of the Borrower and the
Guarantors;
(d) a copy of the AT&T Payment Schedule;
(e) an original copy of the InterCreditor and Subordination Agreement
and the ▇▇▇▇▇ Purchase Agreement;
(f) a Certificate of the Secretary or Assistant Secretary of ▇▇▇▇▇ as to
the corporate resolutions of such Person authorizing the execution
of said InterCreditor and Subordination Agreement and as to the
incumbency of the Person executing said InterCreditor and
Subordination Agreement on behalf of ▇▇▇▇▇;
(g) an opinion letter of legal counsel to ▇▇▇▇▇ in favor of the Agent
and the Lenders;
(h) a listing and aging of accounts receivable of the Borrower and the
Guarantors as of the date of this Amendment;
(i) a Notice of Entire Agreement executed by the Company and each of the
Guarantors as of the date hereof;
(j) the Lenders' restructuring fee in the amount of $25,000; and
(k) evidence of the payment of any and all reasonable legal fees and
expenses incurred to date by the Agent and the Lenders in connection
with this Amendment (including, without limitation, the negotiation
and preparation of this Amendment and the related Loan Documents).
24. CERTAIN DEFINITIONS AND REFERENCES. Terms used herein but not defined
herein which are defined in the Credit Agreement (as amended hereby) or in the
other Loan Documents shall have the meanings herein ascribed to them therein.
The term "Agreement" as used in the Credit Agreement and the term "Credit
Agreement," as used in the other Loan Documents or any other instrument,
document or writing furnished to Agent or any Lender by Borrower shall mean the
Credit Agreement as hereby amended.
25. EXPENSES; INDEMNIFICATION. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW, BORROWER WILL PAY ALL REASONABLE COSTS AND EXPENSES AND REIMBURSE AGENT AND
LENDERS FOR ANY AND ALL EXPENDITURES OF EVERY CHARACTER INCURRED OR EXPENDED
FROM TIME TO TIME, REGARDLESS OF WHETHER A DEFAULT HAS OCCURRED, IN CONNECTION
WITH THE PREPARATION, NEGOTIATION,
11
DOCUMENTATION, RECORDING, CLOSING, RENEWAL, REVISION, MODIFICATION, INCREASE,
REVIEW OR RESTRUCTURING OF THIS AMENDMENT.
26. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in the Credit Agreement as amended by this Amendment, the
Notes or any of the other Loan Documents, it is expressly provided that in no
case or event shall the aggregate of (i) all interest on the unpaid balance of
the Notes, accrued or paid from the date hereof and (ii) the aggregate of any
other amounts accrued or paid pursuant to the Notes or any of the other Loan
Documents, which under applicable laws are or may be deemed to constitute
interest upon the indebtedness evidenced by the Notes ever exceed the Ceiling
Rate. In this connection, the parties hereto expressly stipulate and agree that
it is their common and overriding intent to contract in strict compliance with
the applicable usury laws. In furtherance thereof, none of the terms of the
Notes or any of the other Loan Documents shall ever be construed to create a
contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Ceiling Rate. Borrower or other
parties now or hereafter becoming liable for payment of the indebtedness
evidenced by the Notes shall never be liable for interest in excess of the
Ceiling Rate. If, for any reason whatever, the interest paid or received on any
Note during its full term produces a rate which exceeds the Ceiling Rate, the
holder of such Note shall credit against the principal of such Note (or, if such
indebtedness shall have been paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be necessary to cause the
interest paid on such Note to produce a rate equal to the Ceiling Rate. All sums
paid or agreed to be paid to the holder of any Note for the use, forbearance or
detention of the indebtedness evidenced thereby shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of such Note, so that the interest rate is uniform
throughout the full term of such Note. The provisions of this paragraph shall
control all agreements, whether now or hereafter existing and whether written or
oral, among Borrower and Agent and Lenders.
27. BUSINESS LOANS. Borrower warrants and represents to Agent and Lenders
and all other holders of the Notes that all loans evidenced by the Notes are and
will be for business, commercial, investment or other similar purpose and not
primarily for personal, family, household or agricultural use, as such terms are
used in Chapter One.
28. LIFTING OF AUTOMATIC STAY. In the event that the Borrower, any
Guarantor or any other person or entity now or hereafter primary or secondarily
obligated to pay all or any part of the Obligations is the subject of any
insolvency, bankruptcy, receivership, dissolution, reorganization or similar
proceeding, federal or state, voluntary or involuntary, under any present or
future law or act, the Agent and the Lenders are entitled to the automatic and
absolute lifting of any automatic stay as to the enforcement of their respective
remedies under the Loan Documents against the security for such indebtedness,
including specifically the stay imposed by Section 362 of the United States
Federal Bankruptcy Code, as amended. The Borrower and the Guarantors (by joinder
in the execution of this Amendment) hereby consent to the immediate lifting of
any such automatic stay, and will not contest any motion by the Agent or any
Lender to lift such stay.
12
29. LIEN CONTINUATION; MISCELLANEOUS. The Liens are hereby ratified and
confirmed as securing and continuing to secure the payment of the Notes, as if
it were originally described as "Indebtedness" (as defined in and) under each of
the Security Agreements. Nothing herein shall in any manner diminish, impair or
extinguish the Notes, any of the other Loan Documents or the Liens. The Liens
are not waived. To the extent of any conflict between the Notes or any of the
other Loan Documents (or any earlier modification of any of them) and this
Amendment, this Amendment shall control. Except as hereby expressly modified,
all terms of the Notes and the other Loan Documents (as any of them may have
been previously modified by any written agreement) remain in full force and
effect. This Amendment (a) shall bind and benefit Borrower and, except as herein
expressly limited, Agent and Lenders, and their respective receivers, trustees,
successors and assigns (PROVIDED, that Borrower may not assign its rights
hereunder without the prior written consent of Agent and Lenders); (b) may be
modified or amended only by a writing signed by each party; (c) SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF
TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT; (d) may be
executed in several counterparts, and by the parties hereto in separate
counterparts, and each counterpart, when executed and delivered, shall
constitute an original agreement enforceable against all who signed it without
production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (e) embodies the entire
agreement and understanding between the parties with respect to modifications of
instruments provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Borrower acknowledges and agrees that there are no oral agreements among
any of them with respect to the transactions contemplated by the Loan Documents
which have not been incorporated in this Amendment or in the Loan Documents. If
any provision of this Amendment should be determined by any court of competent
jurisdiction to be illegal, invalid or unenforceable under present or future
laws, the legality, validity and enforceability of the remaining provisions of
this Amendment shall not be affected thereby. Each waiver in this Amendment is
subject to the overriding and controlling rule that it shall be effective only
if and to the extent that (a) it is not prohibited by applicable law and (b)
applicable law neither provides for nor allows any material sanctions to be
imposed against Agent and Lenders for having bargained for and obtained it.
Wherever the term "including" or a similar term is used in this Amendment, it
shall be read as if it were "including by way of example only and without in any
way limiting the generality of the clause or concept referred to." Any exhibits,
appendices and annexes described in this Amendment as being attached to it are
hereby incorporated into it. The headings in this Amendment shall be accorded no
significance in interpreting it.
30. RELEASE. EACH OF BORROWER AND GUARANTORS, BY THEIR JOINDER HEREIN,
HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER AGENT AND LENDERS AND ITS
OFFICERS, DIRECTORS, TRUSTEES, AGENTS, EMPLOYEES AND COUNSEL (IN EACH CASE,
PAST, PRESENT AND FUTURE) FROM ANY AND ALL CLAIMS EXISTING AS OF THE DATE HEREOF
(OR THE DATE OF ACTUAL EXECUTION HEREOF BY THE APPLICABLE PERSON OR ENTITY, IF
LATER). AS USED HEREIN, THE TERM "CLAIM" SHALL MEAN ANY AND ALL LIABILITIES,
CLAIMS, DEFENSES, DEMANDS, ACTIONS, CAUSES OF ACTION, JUDGMENTS, DEFICIENCIES,
INTEREST, LIENS, COSTS OR EXPENSES (INCLUDING BUT NOT LIMITED TO COURT COSTS,
PENALTIES, ATTORNEYS' FEES AND DISBURSEMENTS, AND AMOUNTS PAID IN SETTLEMENT) OF
ANY KIND AND CHARACTER WHATSOEVER, INCLUDING BUT NOT
13
LIMITED TO CLAIMS FOR USURY, BREACH OF CONTRACT, BREACH OF COMMITMENT, NEGLIGENT
MISREPRESENTATION OR FAILURE TO ACT IN GOOD FAITH, IN EACH CASE WHETHER NOW
KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED OR PRIMARY OR
CONTINGENT, AND WHETHER ARISING OUT OF WRITTEN DOCUMENTS, UNWRITTEN
UNDERTAKINGS, COURSE OF CONDUCT, TORT, VIOLATIONS OF LAWS OR REGULATIONS OR
OTHERWISE.
31. WAIVER OF JURY TRIAL. THE BORROWER, THE GUARANTORS AND THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY AND ALL ACTIONS OR PROCEEDINGS AT ANY TIME IN WHICH BORROWER AND THE LENDERS
ARE PARTIES ARISING OUT OF THIS AGREEMENT.
14
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EQUALNET HOLDING CORP., a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: C.O.O.
15
COMERICA BANK-TEXAS, a Texas banking
association, as Agent and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
Commitment prior to March 1, 1997:
$5,760,000
Commitment on and after March 1, 1997:
$5,400,000
16
▇▇▇▇▇ FARGO BANK (TEXAS),
N. A., a national banking association
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Commitment prior to March 1, 1997:
$2,240,000
Commitment on and after March 1, 1997:
$2,100,000
17
GUARANTORS' CONSENTS
Guarantors hereby join in this Amendment to evidence Guarantors' consent to
execution by Borrower and the Agent and Lenders of this Amendment, to confirm
that the Guaranties apply and shall continue to apply to the Credit Agreement
(as amended hereby), and the other Loan Documents and to acknowledge that
without such consent and confirmation, Agent and Lenders would not execute this
Amendment or otherwise consent to the amendments set forth herein.
EXECUTED effective as of the date first set forth above.
EQUALNET CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
TELESOURCE, INC., a Texas corporation
By: /s/ ▇▇▇▇ ▇▇▇ ▇▇▇▇
Name: ▇▇▇▇ ▇▇▇ ▇▇▇▇
Title: President
EQUALNET WHOLESALE SERVICES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
18
EXHIBIT A TO FOURTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------------------------------------------------
ASSIGNMENT AND ACCEPTANCE
Dated: __________________ , 199___
Reference is made to the Credit Agreement dated as of November 30, 1995
(as restated, amended, modified, supplemented and in effect from time to time,
the "CREDIT AGREEMENT"), among EqualNet Holding Corp., an Texas corporation (the
"BORROWER"), the Lenders named therein, and Comerica Bank-Texas, as Agent (the
"AGENT"). Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Credit Agreement. This Assignment and
Acceptance, between the Assignor (as defined and set forth on SCHEDULE I hereto
and made a part hereof) and the Assignee (as defined and set forth on SCHEDULE I
hereto and made a part hereof) is dated as of the Effective Date (as set forth
on SCHEDULE I hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "ASSIGNED INTEREST") in and to all
the Assignor's rights and obligations under the Credit Agreement respecting the
credit facility contained in the Credit Agreement as are set forth on SCHEDULE I
(the "ASSIGNED FACILITY"), in a principal amount for the Assigned Facility as
set forth on SCHEDULE I.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement, any other Loan Document or any other instrument
or document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or its Subsidiaries or the performance or observance by the
Borrower or its Subsidiaries of any of its respective obligations under the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto; and (iii) attaches the Note held by it evidencing
the Assigned Facility, and requests that the Agent exchange such Note for a new
Note payable to the Assignor (if the Assignor has retained any interest in the
Assigned Facility) and a new Note payable to the Assignee in the respective
amounts which reflect the assignment being made hereby (and after giving effect
to any other assignments which have become effective on the Effective Date).
EXHIBIT F
to Credit Agreement
Page 1
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the financial statements
referred to in SECTION 6.2 thereof, or if later, the most recent financial
statements delivered pursuant to SECTION 7.2 thereof, and such other documents
and information as it has deemed appropriate to make its own credit analysis;
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agree ment; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) agrees that it will be bound by the provisions of the Credit Agreement and
will perform in accordance with its terms all the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Lender; (vi) if
the Assignee is organized under the laws of a jurisdiction outside the United
States, attaches the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Credit Agreement or such other documents as are necessary to indicate that
all such payments are subject to such tax at a rate reduced by an applicable tax
treaty, and (vii) has supplied the information requested on the administrative
questionnaire submitted by the Agent.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance by it and the Borrower and recording by
the Agent pursuant to SECTION 11.6 of the Credit Agreement, effective as of the
Effective Date (which Effective Date shall, unless otherwise agreed to by the
Agent, be at least five Business Days after the execution of this Assignment and
Acceptance).
5. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignee,
whether such amounts have accrued prior to the Effective Date or accrue
subsequent to the Effective Date. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to the Effective Date by
the Agent or with respect to the making of this assignment directly between
themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder, and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
EXHIBIT F
to Credit Agreement
Page 2
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Acceptance to be executed by their respective duly authorized officers on
Schedule I hereto.
EXHIBIT F
to Credit Agreement
Page 3
SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE
Legal Name of Assignor: ____________________________________________________
Legal Name of Assignee: ____________________________________________________
Effective Date of Assignment: __________________, 199___
Percentage Assigned of Each
Facility (to at least 8
Principal decimals) (Shown as a
Amount (or, percentage of aggregate
with respect original principal amount
to Letters [or, with respect to Letters
Assigned of Credit, face Credit, face amount]
Facilities Amount) Assigned of All Lenders)
---------- ---------------- ---------------
Loans: $______________ ______%
Letter of Credit
participation interests $______________ ______%
Total $______________
Accepted:
COMERICA BANK-TEXAS, as Agent ________________________________
as Assignor
By: _________________________ By: _________________________
Name: _______________________ Name: _______________________
Title: ______________________ Title: ______________________
EXHIBIT F
to Credit Agreement
Page 1
EQUALNET HOLDING CORP., _____________________________
an Texas corporation as Assignee
By: _________________________ By: _________________________
Name: _______________________ Name: _______________________
Title: ______________________ Title: ______________________
EXHIBIT F
to Credit Agreement
Page 2