AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this
"AMENDMENT") is entered into as of November 25, 1998, by and among USTEL, INC.,
a Minnesota corporation ("USTEL"), and ARCADA COMMUNICATIONS, INC., a Washington
corporation ("ARCADA"), on the one hand, and COAST BUSINESS CREDIT, a division
of Southern Pacific Bank, a California corporation ("AGENT"), and XXXXXXX XXXXX
CREDIT PARTNERS L.P., a Bermuda limited partnership ("XXXXXXX") (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "LENDER" and collectively as the
"LENDERS"), on the other hand, and constitutes an amendment to that certain Loan
and Security Agreement, dated as of June 25, 1998 (as amended, restated,
supplemented, or otherwise modified from time to time, the "LOAN AGREEMENT"), by
and among UStel, Arcada and Lenders (hereinafter, collectively, the "PARTIES").
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Loan Agreement, as amended hereby.
W I T N E S S E T H
WHEREAS, the Parties desire to amend the Loan Agreement, in accordance
with the amendment provisions of Section 16 thereof, as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree to amend the
Loan Agreement, effective immediately, as follows:
A. AMENDMENTS TO LOAN AGREEMENT.
1. SECTION 1.1 of the Loan Agreement hereby is amended by inserting each
of the following definitions in their entirety:
"AMENDED PET" means that certain Amended and Restated Program
Enrollment Terms entered into on or about November 1, 1996 by and between UStel
and Worldcom.
"AMENDMENT FEE" has the meaning set forth in Section 2.14(f).
"BUDGET" means that operating and financial budget for the period from
November 16, 1998, through January 31, 1999, in form and substance satisfactory
to Lenders, a true and correct copy of which is attached hereto as EXHIBIT B.
"FIRST AMENDMENT" means that certain Amendment Number One to Loan and
Security Agreement, dated as of November 25, 1998, by and among, Lenders and
Borrowers.
"FIRST AMENDMENT CLOSING DATE" means the later of (a) November 25,
1998, or (b) the date on which all conditions precedent to the First Amendment
are satisfied or waived by Lenders.
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"GUARANTY FEE" has the meaning set forth in SECTION 2.14(g).
"INVESTMENT BANKERS" has the meaning set forth in SECTION 6.19.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"RESTRUCTURE AGREEMENTS" has the meaning set forth in SECTION 6.22.
"SERVICE CHARGES" means those gross measured and per call Switched
Service charges provided for in paragraph 3(A) of the Amended PET.
"STRATEGIC ALTERNATIVES" has the meaning set forth in SECTION 6.19.
"WORLDCOM" means Worldcom Network Services, Inc.
"WORLDCOM GUARANTEED AMOUNT" means the amount of Lenders' contingent
obligations under the Worldcom guaranties set forth in Section 2.16(c).
"WORLDCOM GUARANTIES" means the Worldcom Note Guaranty and the
Worldcom Traffic Payables Guaranty.
"WORLDCOM NOTE" means that secured promissory note to be issued by
UStel in favor of Worldcom in the original principal amount of $818,356.21.
"WORLDCOM NOTE GUARANTY" means Lenders' guaranty of the amount
outstanding at any designated time under the Worldcom Note as described in
SECTION 2.16(a).
"WORLDCOM TRAFFIC PAYABLES" means those Service Charges owed by UStel
to Worldcom for the months of September, October and November 1998 under the
Amended PET.
"WORLDCOM TRAFFIC PAYABLES GUARANTY" means Lenders' guaranty of the
amount outstanding at any designated time under the Worldcom Traffic Payables as
described in SECTION 2.16(a).
"12% DEBENTURES" has the meaning set forth in SECTION 6.22.
"14.75% DEBENTURES" has the meaning set forth in SECTION 6.22.
2. SECTION 1.1 of the Loan Agreement hereby is amended by amending and
restating in their entirety, the following definitions:
"AVAILABILITY" means the amount of money that Borrower is entitled to
borrow as Advances under SECTION 2.1 hereof.
"LOAN DOCUMENTS" means this Agreement, the First Amendment, the
Disbursement Letter, the Letters of Credit, the Worldcom Note Guaranty, the
Worldcom Traffic Payables Guaranty, the Lockbox Agreements, the Stock Pledge
Agreement, the Guaranty, the Guarantor Security Agreement, the Amended and
Restated Warrants, the Side Letter Agreement, the Carrier Consent Agreements,
any note or notes executed by Borrower and payable to the Agent or the
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Lender Group, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"MAXIMUM AMOUNT" means $22,294,444.21, which comprises the Maximum
Revolving Amount (I.E., $5,643,920), the Term Loan (I.E., $15,000,000), the
Capital Expenditure Loans (I.E., $832,168), and the Worldcom Guaranty (I.E.,
$818,356.21).
"MAXIMUM REVOLVING AMOUNT" means $5,643,920, which comprises the sum
of the outstanding balance of the Revolving Advances as of November 23, 1998
(I.E., $2,543,920), PLUS $2,750,000, PLUS the Amendment Fee (I.E., $200,000)
PLUS the Guaranty Fee (I.E., $150,000).
"OBLIGATIONS" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), the Amendment Fee, the Guaranty Fee, the Worldcom
Guarantied Amount, contingent reimbursement obligations under any outstanding
Letters of Credit, premiums (including Applicable Prepayment Premiums or Early
Termination Premiums), liabilities (including all amounts charged to Borrower's
Loan Account pursuant hereto), obligations, fees, charges, costs, or Lender
Group Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties owing by each Borrower to the Lender Group of any kind and
description (whether pursuant to or evidenced by the Loan Documents or pursuant
to any other agreement between the Lender Group and any Borrower, and
irrespective of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from any Borrower to
others that the Lender Group may have obtained by assignment or otherwise, and
further including all interest not paid when due and all Lender Group Expenses
that any Borrower is required to pay or reimburse by the Loan Documents, by law,
or otherwise; PROVIDED, HOWEVER, that the Obligations shall not include that
certain note, in the original principal amount of $250,000 and dated June 30,
1998, executed by Borrower and payable to Coast in its individual capacity.
"WARRANTS" means those certain common stock purchase warrants issued
to the Lenders or their designees (in accordance with their Pro Rata Shares) by
Borrower, in form and substance identical to those Amended and Restated Warrants
attached hereto as EXHIBITS W-1 AND W-2.
3. SECTION 1.1 of the Loan Agreement hereby is amended by deleting the
following definitions in their entirety: Acquisition Loan; Borrowing Base;
Credit Reserve; Debt Service; Dilution; Dilution Reserve; Eligible Accounts;
Renewal Date; and Tangible Net Worth.
4. SECTION 2.1 of the Loan Agreement hereby is deleted and replaced with
the following:
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, each Lender agrees to make advances ("Advances") to
Borrower on a weekly basis (i) in an amount no greater than the amount projected
to be needed for such week in accordance with the Budget, provided, however,
that any amount not borrowed in any given
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week may be carried forward for use in any subsequent week, and (ii) in an
amount at any one time outstanding not to exceed such Lender's Pro Rata Share
of the Maximum Revolving Amount LESS the Letter of Credit Usage.
(b) The Lenders shall have no obligation to make Advances hereunder
to the extent they would cause the outstanding Facility Usage to exceed the
Maximum Amount.
(c) Amounts borrowed pursuant to this SECTION 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
5. SECTION 2.2(a) of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
2.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, Agent
agrees to issue letters of credit for the account of Borrower (each, an "L/C")
or to issue guarantees of payment (each such guaranty, an "L/C Guaranty") with
respect to letters of credit issued by an issuing bank for the account of
Borrower. Agent shall have no obligation to issue a Letter of Credit if the
Letter of Credit Usage would exceed the lower of: (x) the Maximum Revolving
Amount, LESS the amount of outstanding Advances; or (y) $500,000. Borrower
expressly understands and agrees that Agent shall have no obligation to arrange
for the issuance by issuing banks of the letters of credit that are to be the
subject of L/C Guarantees. Borrower and Agent acknowledge and agree that
certain of the letters of credit that are to be the subject of L/C Guarantees
may be outstanding on the Closing Date. Each Letter of Credit shall have an
expiry date no later than February 1, 1999, and all such Letters of Credit
shall be in form and substance acceptable to Agent in its sole discretion. If
Agent is obligated to advance funds under a Letter of Credit, Borrower
immediately shall reimburse such amount to Agent and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances under SECTION 2.9.
6. SECTION 2.4 of the Loan Agreement hereby is deleted and replaced with
the following:
2.4 CAPITAL EXPENDITURE LINE. As of the First Amendment Closing
Date, Lenders have made a series of term loans to Borrower (each, a "Capital
Expenditure Loan") in the aggregate amount of $832,168. Each Capital
Expenditure Loan is repayable in 48 equal monthly installments of principal,
such installments are payable on the last day of each month commencing with the
last day of the month during which the applicable Capital Expenditure Loan was
made and continuing thereafter on the last day of each succeeding month until
and including the date on which the unpaid balance of the Capital Expenditure
Loan is paid in full. The outstanding principal balance and all accrued and
unpaid interest under each Capital Expenditure Loan shall be due and payable
upon the termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. All amounts outstanding under the Capital
Expenditure Loans shall constitute Obligations.
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7. SECTION 2.5 of the Loan Agreement hereby is deleted in its entirety.
8. SECTION 2.9 of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
2.9 INTEREST, GUARANTY FEES, AND LETTER OF CREDIT FEES: RATES,
PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c) below, (i) all
Obligations (except for undrawn Letters of Credit, the contingent obligations of
Agent for the Worldcom Guaranteed Amount, the Term Loan and the Capital
Expenditure Loans) shall bear interest at a per annum rate equal to 4.0
percentage points above the Base Rate; (ii) the Term Loan shall bear interest at
a fixed per annum rate of 14.75 percent; and (iii) the Capital Expenditure Loans
shall bear interest at a fixed per annum rate of 14.75 percent.
(b) Letter of Credit and Guaranty Fee. Borrower shall pay Agent a
fee (in addition to the charges, commissions, fees and costs set forth in
SECTION 2.2 (e) and SECTION 2.16(d)) equal to 2.5% per annum times the aggregate
undrawn amount of all outstanding Letters of Credit and the outstanding amount
of the contingent obligations of Lenders for the Worldcom Guaranteed Amount.
(c) Default Rate. Upon the occurrence and during the continuation of
an Event of Default, (i) all Obligations (except for amounts undrawn under
Letters of Credit or Worldcom Guaranties) shall bear interest at a per annum
rate equal to 4.0 percentage points above the per annum rate otherwise
applicable thereto hereunder, and (ii) the Letter of Credit and Worldcom
Guaranty fee provided for above shall be increased by 4.0 percentage points
above the per annum rate otherwise applicable hereunder.
(d) Minimum Interest. In no event shall the rate of interest
chargeable under SECTION 2.9(a)(i) for any day be less than 9% per annum. To
the extent that interest accrued hereunder at the rate set forth in such section
would be less than the foregoing minimum daily rate, the interest rate
chargeable hereunder for such day automatically shall be deemed increased to the
minimum rate.
(e) Payments. Interest, Guaranty fees and Letter of Credit fees
payable hereunder shall be due and payable, in arrears, on the last day of
each month during the term hereof. Borrower hereby authorizes Agent, at its
option, without prior notice to Borrower, to charge such interest, Guaranty
fees and Letter of Credit fees, all Lender Group Expenses (as and when
incurred), the charges, commissions, fees, and costs provided for in SECTION
2.2(e) AND 2.16(d) (as and when accrued or incurred), the fees and charges
provided for in SECTION 2.14 (as and when accrued or incurred), and all
installations or other payments due under the Worldcom Guaranties, Term Loan,
the Capital Expenditure Loans, or any Loan Document to Borrower's Loan
Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable
to Advances hereunder.
(f) Computation. The Base Rate as of the date of this Agreement is
7.75 % per annum. In the event the Base Rate is changed from time to time
hereafter, the rates of
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interest hereunder automatically and immediately shall be increased or
decreased by an amount equal to such change in the Base Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis
of a 360 day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering
this Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; PROVIDED, HOWEVER, that, anything contained
herein to the contrary notwithstanding, if said rate or rates of interest or
manner of payment exceeds the maximum allowable under applicable law, then, IPSO
FACTO as of the date of this Agreement, Borrower is and shall be liable only for
the payment of such maximum as allowed by law, and payment received from
Borrower in excess of such legal maximum, whenever received, shall be applied to
reduce the principal balance of the Obligations to the extent of such excess.
9. SECTION 2.14 of the Loan Agreement hereby is amended by adding the
following sections:
(f) AMENDMENT FEE. On the First Amendment Closing Date, a fee
of $200,000, which shall be added to the principal amount of the
Obligations.
(g) GUARANTY FEE. On the First Amendment Closing Date, a fee of
$150,000, which shall be added to the principal amount of the Obligations.
10. New SECTION 2.16 hereby is added to the Loan Agreement:
2.16 WORLDCOM GUARANTEED AMOUNT.
(a) Subject to the terms and conditions of this Agreement, and
subject to the execution and delivery by Worldcom, Borrowers, and Agent of a
settlement agreement (the "Worldcom Settlement Agreement") in form and substance
satisfactory to the Lenders in their sole discretion, Agent agrees to issue in
favor of Worldcom guarantees of payment with respect to Borrower's obligations
under the Worldcom Note (the "Worldcom Note Guaranty") and the Worldcom Traffic
Payables (the "Worldcom Traffic Payables Guaranty"), both of which shall be in
form and substance identical to those guaranties attached hereto as EXHIBITS G-1
AND G-2, respectively (the Worldcom Note Guaranty and the Worldcom Traffic
Payables Guaranty are collectively referred to as the "Worldcom Guaranties").
Borrower expressly understands and agrees that the Worldcom Guarantees are not a
primary source for repayment of the Worldcom Note and the Worldcom Traffic
Payables, and Borrower shall make all required payments under the Worldcom Note
and Worldcom Traffic Payables when due.
(b) Each Lender agrees to fund its Pro Rata Share of any amount
required to be paid under the Worldcom Guaranties set forth in SECTION 2.16(a).
The obligation of each Lender to deliver to Agent an amount equal to its
respective Pro Rata Share pursuant to the preceding sentence shall be absolute
and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
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satisfy any condition set forth in SECTION 3.2. If any Lender fails to make
available to Agent the amount of such Lender's Pro Rata Share of any payments
made by Agent in respect of such Worldcom Guaranties as provided in this SECTION
2.16(b), Agent shall be entitled to recover such amount on demand from such
Lender together with interest at the Base Rate.
(c) Borrower hereby agrees to indemnify, save, defend, and hold Agent
harmless from any loss, cost, expense, or liability, including payments made by
Agent, expenses, and reasonable attorneys fees incurred by Agent arising out of
or in connection with any Worldcom Guaranties (the "Worldcom Guaranteed
Amount"). Borrower hereby agrees that all such amounts owed in connection with
the Worldcom Guaranteed Amount shall constitute Obligations that are payable to
Agent upon the earlier of demand therefor or upon termination of this Agreement,
whether by its terms, by prepayment, by acceleration or otherwise. Borrower
may, at its option and subject to availability under SECTION 2.1(a), repay all
or any portion of the Worldcom Guaranteed Amount with Advances set forth in
SECTION 2.1.
(d) Any and all charges, commissions, fees, and costs incurred by
Agent relating to the Worldcom Guaranties shall be considered Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Agent.
(e) Immediately upon the termination of this Agreement, Borrower
agrees either (i) to provide cash collateral to be held by Agent in an amount
equal to 105% of the Worldcom Guaranteed Amount, or (ii) cause to be delivered
to Agent releases of all of Agent's obligations under the Worldcom Guaranties.
At Agent's discretion, any proceeds of Collateral received by Agent after the
occurrence and during the continuation of an Event of Default may be held as the
cash collateral required by this SECTION 2.16(e).
11. SECTION 3.4 of the Loan Agreement is amended by deleting it in its
entirety and replacing it with the following:
3.4 TERM.
(a) This Agreement shall become effective upon the execution and
delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending on February 1, 1999 ("Maturity Date");
PROVIDED, HOWEVER, if UStel has failed to enter into definitive restructuring
agreements with the holders of UStel's 12% Debentures and 14.75% Debentures by
no later than December 30, 1998, the Maturity Date shall be December 30, 1998;
and, PROVIDED, FURTHER, if Borrower (i) has entered into by no later than
February 1, 1999, a letter of intent to sell Borrower's businesses on terms and
conditions satisfactory to Lenders that would result in payment in full in cash
of all Obligations due Lenders, and (ii) has submitted to the Lender Group an
operating and financial budget for the period from February 1 through March 30,
1999, in form and substance satisfactory to Lenders, Lenders shall extend the
Maturity Date to April 1, 1999.
(b) The foregoing notwithstanding, the Lender Group shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
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12. SECTION 6 of the Loan Agreement hereby is amended by adding the
following affirmative covenants:
6.20 RETENTION OF INVESTMENT BANKER. Subject to the terms and
conditions of this Amendment, Borrowers agree that, no later than November 30,
1998 (the failure to do so automatically constituting an Event of Default), they
shall retain an investment banking firm ("Investment Bankers") reasonably
acceptable to Lenders to do the following:
(a) SCOPE OF SERVICES. Borrowers agree to retain the Investment
Bankers to evaluate and to assist Borrowers in pursuing all financial options
available to them whether in the form of an infusion of equity, a merger and/or
sale of Borrowers' businesses ("Strategic Alternatives") on terms reasonably
acceptable to Lenders.
(b) REPORTS TO LENDERS. Borrowers agree to provide Lenders with the
following reports and information produced by the Investment Bankers:
(i) at the time of the engagement of such Investment Bankers,
a copy of the agreement retaining the Investment Bankers, a written summary of
the Strategic Alternatives being considered by such Investment Bankers, the
steps to be taken in evaluating such Strategic Alternatives, including relevant
milestones, and the target dates for such milestones;
(ii) on a weekly basis from the date of engagement of the
Investment Bankers forward, a verbal and written report from the Investment
Bankers regarding their progress in evaluating and pursuing the Strategic
Alternatives;
(iii) within 7 calendar days after the retention of the
Investment Bankers, a time-line for marketing the Borrower's businesses and
meeting with potential investors in connection with pursuing the Strategic
Alternatives, in form and substance satisfactory to Lenders; and
(iv) by no later than December 15, 1998, the marketing
materials, such as an offering memorandum or reasonably equivalent document
which details the Borrower's businesses and the Strategic Alternatives, in form
and substance satisfactory to Lenders.
6.21 IMPLEMENTATION OF STRATEGIC ALTERNATIVES. Borrowers agree: (a)
to enter into a letter of intent by no later than February 1, 1999, to effect an
infusion of equity, a merger and/or sale of Borrower's businesses on terms and
conditions satisfactory to Lenders that would result in payment in full in cash
of all Obligations due Lenders; and (b) to use Borrower's best efforts to
consummate such infusion of equity, merger or sale by no later than April 1,
1999.
6.22 SALE OF NON-CORE BUSINESSES. Immediately after the First
Amendment Closing Date, Borrower agrees to take all steps necessary to sell
Borrower's wireless operations, including, without limitation, those operations
conducted through the entity known as Pacific Cellular. Borrower agrees to
enter into a definitive purchase and sale agreement for Pacific Cellular by no
later than December 31, 1998, for an amount that is equal to or exceeds
$2,000,000, and agrees to use best efforts to consummate such sale by no later
than January 31, 1999. Borrower agrees to deposit all proceeds from such sales
of Borrower's wireless operations
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into the Agent Account, and to apply such proceeds to reduce the Obligations
and the Maximum Revolving Amount.
6.23 RESTRUCTURE OF BONDHOLDERS DEBT.. By no later than December 30,
1998, UStel agrees to restructure its obligations to each of its holders of its
12% Convertible Subordinated Debentures (due December 31, 1998) which were
issued on or about January 28, 1994 ("12% Debentures"), and to each of its
holders of its 14.75% Convertible Subordinated Debentures, which were issued on
or about June 25, 1998 ("14.75% Debentures"), on terms and conditions acceptable
to Lenders ("Restructure Agreements").
6.24 RESTRUCTURE OF OTHER PAYABLES. By no later than December 15,
1998, Borrower agrees to exercise Borrower's best efforts to negotiate favorable
payment terms for Borrower's past-due payables (other than those to Worldcom and
the holders of the 12% Debentures and 14.75% Debentures), including, without
limitation, those owed to carriers, trade creditors, and any other notes payable
by UStel and/or Arcada (including, without limitation, that certain Promissory
Note dated July 1, 1998, payable to Xxxxx Xxxxxxxxxx in the original principal
amount of $520,388.40).
6.25 XXXXXXXX RECOMMENDATIONS. The board of directors of Borrower
agrees to give due consideration to the recommendations of Borrower's advisors,
including, without limitation, the recommendations of the consulting team from
Xxxxxxxx Consulting Services, Inc. delivered at the board meeting that took
place on October 23, 1998, and, after such due consideration, to take
appropriate action in furtherance of such recommendations.
6.26 EMPLOYMENT OF CONTROLLER. As soon as would be practicable, but
in no event later than 30 days after the First Amendment Closing Date, Borrower
agrees either to employ a controller or to engage the services of a nationally
recognized accounting firm with the appropriate staff to discharge the duties of
such controller, either of whom must be reasonably acceptable to Lenders.
6.27 REPORTS. Borrowers agree to provide Lenders with the following
reports:
(a) by 5:00 p.m. (New York Time) on the third business day of
each week, a report that sets forth the variance between Borrowers' actual and
projected collections, operating cash flow, non-operating cash flow and total
cash flow for the immediately preceding calendar week;
(b) by 5:00 p.m. (New York Time) on the third business day of
each week, a report that sets forth the variance between Borrowers' actual and
projected retail long distance minute traffic for the immediately preceding
calendar week;
(c) by the twenty-fifth day of each month, Borrowers'
financial statement for the immediately preceding month;
(d) by the fifteenth day of each month, a report showing
Borrowers' actual retail long distance minute traffic for the immediately
preceding month;
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(e) by the fifth day of each month, a report showing the
actual Pacific Cellular subscribers for the immediately preceding month; and
(f) by the fifteenth day of each month, a report showing
Borrowers' actual rate of Churn for the immediately preceding month.
6.28 WORLDCOM PAYMENTS. Borrowers agree to make all required payments
under the Worldcom Note and the Worldcom Traffic Payables when due. If
Borrowers receive from Euronet International Communications or any other party
all or any portion of the $522,455 in total call charges alleged to be
fraudulent, Borrowers agree immediately to forward such funds to Worldcom to
reduce the outstanding amount of the Worldcom Note. Borrowers agree that the
receipt of a notice of termination of telephony services by Worldcom or the
actual termination of such services (in whole or in part) by Worldcom
automatically will constitute an Event of Default.
6.29 SALE OF ASSETS. Borrowers agree to deposit all proceeds from the
sale of their assets into the Agent Account, and to apply such proceeds to
reduce the Obligations and the Maximum Revolving Amount.
6.30 BANKRUPTCY COVENANTS. In the event Borrowers commence a
bankruptcy proceeding under Title 11 of the United States Code, Borrowers agree
that:
(a) Borrowers shall not oppose any motion of Lenders for
relief from the automatic stay; and
(b) Borrowers shall attempt to obtain Bankruptcy Court
approval for the sale of their businesses within 90 days of the commencement of
their bankruptcy proceedings.
6.29 Borrowers covenant that they shall provide Agent with opinions of
counsel, in form and substance satisfactory to Agent and each of the Lenders, by
no later than December 1, 1998 (the failure to do so automatically constituting
an Event of Default).
13. SECTION 7.21 of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
7.21 FINANCIAL COVENANTS.
(a) Fail to achieve the following cumulative percentages of
Borrowers' projected collections, operating cash flow, non-operating cash flow
and total cash flow as set forth on the Budget as of the dates indicated:
(i) 80% for the period from November 16 through November 20,
1998.
(ii) 80% for the period from November 16 through November 30,
1998.
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(iii) 90% for the period from November 16 through December 4,
1998.
(iv) 90% for the period from November 16 through December 11,
1998.
(v) 90% for each period thereafter measured on the third
business day of each week on a trailing rolling four week basis ending on the
applicable date set forth in the Budget.
(b) Fail to achieve 90% of Borrowers' projected weekly retail long
distance minute traffic as set forth in the Budget, which shall be measured on a
weekly basis.
(c) Fail to maintain:
(i) Net Revenues. Achieve Net Revenues of not less than the
amount shown below for the period corresponding thereto:
Minimum Net Revenue
-------------------
For the Month Ending UStel/Arcada Pacific Cellular
-------------------- ------------ ----------------
November 30, 1998 $2,250,000 $550,000
December 31, 1998 $2,450,000 $550,000
January 31, 1999 $2,350,000 $600,000
February 28, 1999 $2,250,000 $600,000
March 31, 1999 $2,700,000 $625,000
(ii) Gross Profit. Achieve gross profits, determined in
accordance with GAAP on a consolidated basis consistent with past practice, of
not less than the amount shown below for the period corresponding thereto:
Minimum Net Revenue
-------------------
For the Month Ending UStel/Arcada Pacific Cellular
-------------------- ------------ ----------------
November 30, 1998 $725,000 $225,000
December 31, 1998 $850,000 $225,000
January 31, 1999 $925,000 $250,000
February 28, 1999 $850,000 $250,000
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March 31, 1999 $1,000,000 $250,000
(iii) Profitability. Achieve EBITDA of not less than the
amount shown below for the period corresponding thereto:
Minimum EBITDA
---------------
For the Month Ending Ustel/Arcada Pacific Cellular
-------------------- ------------ ----------------
November 30, 1998 ($425,000) $25,000
December 31, 1998 ($200,000) $50,000
January 31, 1999 ($100,000) $50,000
February 28, 1999 ($100,000) $50,000
March 31, 1999 $100,000 $50,000
(iv) Churn. Borrower's Churn as calculated on a monthly basis
shall not exceed the amount shown below:
For the Month Ending UStel/Arcada Pacific Cellular
-------------------- ------------ ----------------
November 30, 1998 8.0% 5.0%
December 31, 1998 7.0% 5.0%
January 31, 1999 6.0% 5.0%
February 28, 1999 5.0% 5.0%
March 31, 1999 5.0% 5.0%
(v) Minimum Retail Long Distance Minutes. Achieve minimum
retail long distance minutes not less than the amounts shown below:
Month Ending UStel/Arcada
------------ ------------
November 30, 1998 14,000,000
December 31, 1998 15,250,000
January 31, 1999 14,750,000
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February 28, 1999 14,000,000
March 31, 1999 17,250,000
(vi) Minimum Pacific Cellular Subscribers. Maintain the
following minimum number of Pacific Cellular subscribers:
Month Ending Pacific Cellular
------------ ----------------
November 30, 1998 7,250
December 31, 1998 7,250
January 31, 1999 7,500
February 28, 1999 7,750
March 31, 1999 8,000
B. CONDITIONS PRECEDENT TO AMENDMENT.
The satisfaction of each of the following unless waived or deferred by
Lenders in their sole discretion, shall constitute conditions precedent to the
effectiveness of this Amendment and each and every provision hereof:
1. UStel shall have executed and delivered to Lenders the Amended and
Restated Warrants.
2. Borrowers shall have appointed from amongst their existing officers
and advisors a management team, or such other management team as Borrowers may
select, either of which must be reasonably acceptable to Lenders, that would be
committed to remain with Borrowers through the time period necessary to guide
Borrowers through a restructuring or sale of Borrowers' businesses.
3. The representations and warranties in this Amendment, the Loan
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date).
4. No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against the Borrowers or Lenders.
5. Lenders shall have received the reaffirmation and consent of the
Guarantor attached hereto as EXHIBIT A, duly executed and delivered by an
authorized officer of the Guarantor.
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6. After giving effect hereto, no Event of Default or event which with
the giving of notice or passage of time would constitute an Event of Default
shall have occurred and be continuing on the date hereof, nor shall result from
the consummation of the transactions contemplated herein.
7. No material adverse change shall have occurred in the financial
condition of Borrowers or in the value of the Collateral that has not been
disclosed to Lenders.
8. Lenders shall have received this duly executed Amendment, which shall
be in full force and effect.
9. Agent shall have received a certificate from the Secretary of each
Person composing Borrower attesting to the resolutions of each such Person's
Board of Directors authorizing its execution, delivery, and performance of this
Amendment and the other Loan Documents to which each such Person is a party and
authorizing specific officers of such Person to execute the same.
10. Agent shall have received copies of the Governing Documents of each
Person composing Borrower, as amended, modified, or supplemented to the First
Amendment Closing Date, certified by the Secretary of each such Person composing
Borrower.
11. Agent shall have received a certificate of status with respect to each
Person Composing Borrower, dated within 10 days of the First Amendment Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of each such Person, which certificate shall
indicate that such Person is in good standing in such jurisdiction.
12. Agent shall have received a certificate of status from Guarantor,
dated within 10 days of the First Amendment Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
Guarantor, which certificate shall indicate that Guarantor is in good standing
in such jurisdiction.
13. Agent shall have received a certificate of status with respect to each
Person composing Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which such Person's failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that such Person is
in good standing in such jurisdictions.
14. Agent shall have received verification, in form and substance
satisfactory to Agent, that all insurance premiums for the insurance required in
SECTION 6.10 have been paid and that all insurance required under such section
has been acquired and is otherwise current and enforceable.
15. Agent shall have received an opinion of each of Borrowers' counsel, in
form and substance satisfactory to Agent and each of the Lenders in their sole
discretion.
16. Agent shall have received a certificate from the president, chief
executive officer, or general counsel of Borrower that all tax returns required
to be filed by Borrower have been timely filed and all taxes upon Borrower or
its properties, assets, income, and franchises
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(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest.
17. Agent shall have received satisfactory evidence that there are no
outstanding complaints against any Borrower made to any public utilities
commission in any jurisdiction in which any Borrower operates, except such
complaints that have been fully disclosed to the Lenders and are satisfactory to
Agent and the Lenders.
18. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Lenders
and their counsel.
C. WAIVERS OF EXISTING EVENTS OF DEFAULT.
1. ACKNOWLEDGEMENT OF DEFAULTS. Borrowers acknowledge that breaches of
the provisions of the Loan Agreement have occurred and are continuing, and that
such breaches constitute material Events of Default (each such breach as to
which the Lenders have actual knowledge is referred to as a "Known Event of
Default") under the Loan Agreement.
2. CONSEQUENCE OF DEFAULTS. Borrowers acknowledge and agree that
pursuant to section 9 of the Loan Agreement, and as a result of the existence of
the Known Events of Default, Lenders have the right to, among other things,
declare all Obligations immediately due and payable and terminate the Loan
Agreement.
3. WAIVER. Upon the effectiveness of this Amendment, Lenders hereby
waive each of the Known Events of Default. Such waiver is specific in time and
in intent and does not constitute, nor should it be construed as constituting,
except to the extent expressly set forth herein, a waiver or modification of any
term of, or right, power, or privilege under, the Loan Agreement, the other Loan
Documents, or any agreement, contract, indenture, document, or instrument
mentioned therein. Except as, and to the extent, set forth herein: (a) Lenders
hereby reserve all remedies, powers, rights, and privileges that Lenders may
have under the Loan Agreement, this Amendment or the other Loan Documents, at
law (including under the Code), in equity, or otherwise; and (b) all terms,
conditions, and provisions of the Loan Agreement, this Amendment and the other
Loan Documents are and shall remain in full force and effect and nothing herein
shall operate as a consent to or a waiver, amendment, or forbearance in respect
of any other or further matter (including any Event of Default other than the
Known Events of Default) or any other right, power, or remedy of Lenders under
the Loan Agreement, this Amendment and the other Loan Documents.
D. RELEASE OF LENDERS.
Borrowers acknowledge and agree that in connection with this
Amendment, the Loan Agreement or any and all documents executed in connection
therewith: (i) Borrowers do not have any claims or causes of action against
Lenders; (ii) Borrowers do not have any offsets or defenses against any of their
respective obligations, indebtedness or contracts in favor of Lenders; and
(iii) Lenders have heretofore properly performed and satisfied in a timely
manner all of their obligations to and contracts with Borrowers. Borrowers, for
themselves and on behalf of their parent, subsidiaries and affiliate
corporations, if any, as well as each of their respective
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directors, officers, agents, employees, servants, shareholders,
representatives, attorneys, assigns, predecessors and successors in interest,
and each of them, release and waive: (I) any and all liabilities,
obligations, or indebtedness of Lenders and each of their parents,
subsidiaries and affiliates, as well as each of their respective directors,
officers, agents, employees, servants, shareholders, representatives,
attorneys, assigns, predecessors and successors in interest, and each of them
(hereinafter, the "Lender Released Parties"), to Borrowers which may have
existed at any time prior to the execution and delivery of this Amendment;
(II) any and all claims, causes of action or defenses of any kind whatsoever
(if any), whether known or unknown, which Borrowers might otherwise have
against the Lender Released Parties on account of any condition, act,
omission, event, contract, liability, obligation, indebtedness, claim, cause
of action, circumstance or matter of any kind whatsoever which existed, arose
or occurred at any time prior to the execution and delivery of this Amendment
by the Parties hereto. Borrowers hereby covenant and agree that they shall
not institute or prosecute (or, to the extent required by law, in any way
assist, cooperate with the institution or prosecution of) any action, suit,
hearing, or other proceeding of any kind, nature or character, at law or in
equity, against any Lender Released Party in order to collect, enforce,
declare, assert, establish or otherwise raise any defense, claim, cause of
action, contract, liability, indebtedness or obligation which is within the
scope of those released in this Amendment or which arises out of any fact,
contract, condition, claim, cause of action, indebtedness or obligation which
is released hereunder.
This Amendment shall constitute a complete defense to any claim, cause
of action, contract, liability, indebtedness or obligation released hereunder.
Nothing in this Amendment shall be construed as an admission (or shall be
admissible in any legal action or proceeding as an admission by any Lender
Released Party) that any defense, indebtedness, obligation, liability, contract,
claim or cause of action exists which is within the scope of those released
within this Amendment since Lender Released Parties deny that any such matters
exist and regard this release as unnecessary except to confirm their
understanding of the positions of the Parties.
Borrowers acknowledge that Section 1542 of the Civil Code of
California provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing a release, which if known by him must
have materially affected his settlement with the debtor."
Borrowers have been advised by counsel with respect to the release contained
herein. Borrowers also acknowledge that Borrowers may hereafter discover facts
in addition to or different from those which Borrowers know or believe to be
true with respect to the subject matter of the release given hereby, but that it
is Borrowers' intention to, and Borrowers do hereby, fully, finally and forever
waive any and all rights and defenses as set forth hereinabove. Upon advice of
such counsel, and in furtherance of such intention, Borrowers waive all rights
granted to Borrowers by Section 1542 of the Civil Code of California, and any
similar provision under the laws of the state of New York or any other state,
and acknowledge that the release as to the matters released herein,
notwithstanding the subsequent discovery or existence of any such additional or
different facts.
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E. LIMITED RELEASE OF BOARD OF DIRECTORS.
Lenders acknowledge and agree that in connection with this Amendment,
the Loan Agreement or any and all documents executed in connection therewith:
(i) Lenders do not have any claims or causes of action against any member of the
board of directors of UStel ("Board") who served from and after the Closing Date
up to the date of this Amendment if and to the extent that each such member
carried out his or her duties as a director in a manner consistent with the
so-called "business judgment rule," as that rule has been interpreted under the
laws of the state of Delaware (it being understood that UStel is a Minnesota
corporation and that Delaware corporate law is not applicable to the duties of
the directors of UStel, but that the Parties hereto have agreed, as amongst
themselves, that the business judgment rule, as interpreted by the Delaware
courts as of the date hereof (and irrespective of whether such courts would
apply such rule to the directors of a corporation that is insolvent or in the
zone of insolvency) is to be the applicable standard that is to govern the
limited release contained in this Section. Lenders, for themselves and on
behalf of their parents, subsidiaries and affiliate corporations, if any, as
well as each of their respective directors, officers, agents, employees,
servants, shareholders, representatives, attorneys, assigns, predecessors and
successors in interest, and each of them, release and waive: (I) any and all
liabilities, obligations, or indebtedness of the Board and each of them
(hereinafter, the "Board Released Parties"), to Lenders which may have existed
at any time prior to the execution and delivery of this Amendment arising out of
the Board's failure to conduct itself in a manner consistent with the exercise
of the so-called Business Judgment Rule, as that rule has been interpreted under
the laws of the state of Delaware; (II) any and all claims, causes of action or
defenses of any kind whatsoever (if any), whether known or unknown, which
Lenders might otherwise have against the Board Released Parties on account of
any condition, act, omission, event, contract, liability, obligation,
indebtedness, claim, cause of action, circumstance or matter of any kind
whatsoever which existed, arose or occurred at any time prior to the execution
and delivery of this Amendment by the Parties hereto arising out of the Board's
failure to conduct itself in a manner consistent with the exercise of the
so-called Business Judgment Rule, as that rule has been interpreted under the
laws of the state of Delaware. Lenders hereby covenant and agree that they
shall not institute or prosecute (or, to the extent required by law, in any way
assist, cooperate with the institution or prosecution of) any action, suit,
hearing, or other proceeding of any kind, nature or character, at law or in
equity, against any Board Released Party in order to collect, enforce, declare,
assert, establish or otherwise raise any defense, claim, cause of action,
contract, liability, indebtedness or obligation which is within the scope of
those released in this Amendment or which arises out of any fact, contract,
condition, claim, cause of action, indebtedness or obligation which is released
hereunder.
This Amendment shall constitute a complete defense to any claim, cause
of action, contract, liability, indebtedness or obligation released hereunder.
Nothing in this Amendment shall be construed as an admission (or shall be
admissible in any legal action or proceeding as an admission by any Board
Released Party) that any defense, indebtedness, obligation, liability, contract,
claim or cause of action exists which is within the scope of those released
within this Amendment since Board Released Parties deny that any such matters
exist and regard this release as unnecessary except to confirm their
understanding of the positions of the Parties.
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Lenders acknowledge that Section 1542 of the Civil Code of California
provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing a release, which if known by him must
have materially affected his settlement with the debtor."
Lenders have been advised by counsel with respect to the release
contained herein. Lenders also acknowledge that Lenders may hereafter discover
facts in addition to or different from those which Lenders know or believe to be
true with respect to the subject matter of the release given hereby, but that it
is Lenders' intention to, and Lender so hereby, fully, finally and forever waive
any and all rights and defenses as set forth hereinabove. Upon advice of such
counsel, and in furtherance of such intention, Lenders waive all rights granted
to Lenders by Section 1542 of the Civil Code of California, and any similar
provision under the law of the state of New York or any other state, and
acknowledge that the release as to the matters released herein, notwithstanding
the subsequent discovery or existence of any such additional or different facts.
F. ACKNOWLEDGEMENT OF BORROWERS.
1. Borrowers acknowledge and agree that Lenders, and each of them, have
not (i) exercised control over Borrowers and their businesses; (ii) told
Borrowers what creditors they should and should not pay; (iii) interfered with
Borrowers' corporate governance; (iv) interfered with Borrowers' contractual
relationships and/or prospective economic advantages; (v) entered into a
partnership or joint venture with Borrowers; (vi) established an agency
relationship with Borrowers; (vii) become a fiduciary of Borrowers;
(viii) provided Borrowers with false or misleading information; and/or
(ix) disclosed confidential information of Borrowers. Borrowers also
acknowledge and agree that any statements they may have made that are
inconsistent with the foregoing acknowledgment were and are incorrect and
improper.
2. Borrowers acknowledge and agree that Lenders have observed and acted
consistent with their obligation, if any, to deal with Borrowers in good faith
and with fair dealing.
3. Borrowers acknowledge and agree that any and all costs, expenses and
fees (including without limitation, attorneys fees) incurred by Lenders in
connection with this Amendment and the Worldcom Settlement Agreement shall
constitute Lender Expenses.
G. REPRESENTATIONS AND WARRANTIES.
Borrowers hereby represent and warrant to Lenders that (a) the
execution, delivery, and performance of this Amendment, are within their
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) the Loan Agreement, as amended by this
Amendment, constitutes Borrowers' legal, valid, and binding obligation,
enforceable against Borrowers in accordance with its terms.
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H. FURTHER ASSURANCES.
Borrowers agree to investigate and to disclose to Lenders any and all
actual and potential actions for damages that Borrowers hold against third
parties, and shall execute and deliver all financing statements, agreements,
documents, and instruments, in form and substance satisfactory to Lenders, and
take all actions as Lenders may reasonably request from time to time, to perfect
and maintain the perfection and priority of Agent's security interests in the
Collateral, and to fully consummate the transactions contemplated under the Loan
Agreement and this Amendment.
I. EFFECT ON LOAN DOCUMENTS.
The Loan Agreement, as amended hereby, and the other Loan Documents
shall be and remain in full force and effect in accordance with their respective
terms and each hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of or as an amendment of any right,
power, or remedy of Lenders under the Loan Agreement, as in effect prior to the
date hereof. This Amendment shall be deemed a part of and hereby is
incorporated into the Loan Agreement.
J. MISCELLANEOUS.
1. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to its conflicts-of-laws
principles (other than any provisions thereof validating the choice of the laws
of the State of New York as the governing law).
2. This Amendment, and the terms and provisions hereof, constitute the
entire agreement among the Parties pertaining to the subject matter hereof and
supersedes any and all prior or contemporaneous amendments relating to the
subject matter hereof. Except as expressly amended hereby, the Loan Agreement
and other Loan Documents shall remain unchanged and in full force and effect.
To the extent any terms or provisions of this Amendment conflict with those of
the Loan Agreement or other Loan Documents, the terms and provisions of this
Amendment shall control. This Amendment shall be deemed part of and is hereby
incorporated into the Loan Agreement.
3. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment by signing any such counterpart.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any Party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment, but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
4. This Amendment cannot be altered, amended, changed or modified in any
respect or particular unless each such alteration, amendment, change or
modification shall have been
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agreed to by each of the Parties and reduced to writing in its entirety and
signed and delivered by each Party.
5. Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.
6. Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words
of like import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
and delivered as of the date first written above.
USTEL, INC., a Minnesota corporation
By: /s/ Xxxxx X. Xxxx
-----------------------------------------
Name: Xxxxx X. Xxxx
----------------------------------
Title: General Counsel and Secretary
---------------------------------
ARCADA COMMUNICATIONS, INC.,
a Washington corporation
By: /s/ Xxxxx X. Xxxx
-----------------------------------------
Name: Xxxxx X. Xxxx
----------------------------------
Title: Secretary
---------------------------------
COAST BUSINESS CREDIT, a division of Southern
Pacific Bank, a California corporation
By: /s/ R. Xxxxxxx Xxxxxxx
-----------------------------------------
Name: R. Xxxxxxx Xxxxxxx
----------------------------------
Title: Vice President
---------------------------------
XXXXXXX XXXXX CREDIT PARTNERS L.P.,
a Bermuda limited partnership
By: /s/ Xxxx Xxxxx
-----------------------------------------
Name: Xxxx Xxxxx
----------------------------------
Title: Managing Director
---------------------------------
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EXHIBIT A
REAFFIRMATION AND CONSENT
All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in that certain Amendment Number One to
Loan and Security Agreement, dated as of November 25, 1998 (the "AMENDMENT").
The undersigned hereby (a) represent and warrant to Agent that the execution,
delivery, and performance of this Reaffirmation and Consent are within its
corporate or organizational powers, have been duly authorized by all necessary
corporate or other organizational action, and are not in contravention of any
law, rule, or regulation, or any order, judgment, decree, writ, injunction, or
award of any arbitrator, court, or governmental authority, or of the terms of
its charter or bylaws, or of any contract or undertaking to which it is a party
or by which any of its properties may be bound or affected; (b) consents to the
amendment of the Loan Agreement by the Amendment; (c) acknowledges and reaffirms
its obligations owing to Agent under the Guaranty and each of the other Loan
Documents to which it is party; and (d) agrees that its Guaranty and the other
Loan Documents to which they are parties is and shall remain in full force and
effect. Although the undersigned has been informed of the matters set forth
herein and has acknowledged and agreed to same, it understands that Agent has no
obligation to inform the undersigned of such matters in the future or to seek
its acknowledgement or agreement to future amendments, and nothing herein shall
create such a duty.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned has executed and delivered this
Reaffirmation and Consent as of the date first written above.
CONSORTIUM 2000, INC., a California
corporation
By___________________________________
Its Authorized Signatory
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