EXHIBIT 10.6
INTERCREDITOR AND SUBORDINATION AGREEMENT
This INTERCREDITOR AND SUBORDINATION AGREEMENT dated as of February 3,
1997 (this "AGREEMENT"), is among EQUALNET HOLDING CORP., a Texas corporation
("BORROWER"), each of the lenders parties hereto (individually, a "LENDER" and,
collectively, the "LENDERS"), COMERICA BANK -TEXAS, a Texas banking association,
as agent for the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT"), and THE XXXXX GROUP, INC., a New Jersey corporation
("XXXXX").
R E C I T A L S:
WHEREAS, the Lenders and Borrower are parties to a $25,000,000 Loan
Facility Credit Agreement dated as of November 30, 1995 (as amended to date,
including the Fourth Amendment thereto dated as of even date herewith, the
"CREDIT AGREEMENT") pursuant to which, among other things, the Lenders have made
certain Loans to Borrower (the "BANK LOANS"); and
WHEREAS, terms defined in the Credit Agreement, and not otherwise defined
herein, are used herein with their meanings so defined; and
WHEREAS, the Loans and the other obligations of Borrower to the Lenders
under the Credit Agreement are secured by a first lien on substantially all of
Borrower's tangible and intangible real, personal or mixed Property now or
hereafter subject to the Security Documents, including all of the Collateral
described in the Credit Agreement (the "BANK LIENS"); and
WHEREAS, it is proposed that Borrower and the Current Guarantors enter
into a Note and Warrant Purchase Agreement of even date herewith (the "PURCHASE
AGREEMENT") with Xxxxx pursuant to which Xxxxx will purchase for an aggregate
purchase price of $3,000,000 certain notes (the "XXXXX NOTES") issued by
Borrower and the Current Guarantors, as co-makers, having an aggregate principal
amount of $3,000,000, bearing interest at 10% per annum, maturing December 31,
1998, and with detachable, transferable warrants ("WARRANTS") to purchase
1,500,000 shares of common stock of Borrower at an exercise price of $2.00 per
share attached thereto; and
WHEREAS, pursuant to the Purchase Agreement it is proposed that Borrower
grant to Xxxxx a junior security interest in Borrower's Accounts and General
Intangibles, whether now owned or hereafter acquired by Borrower (the "JUNIOR
LIENS") to secure the Indebtedness of Borrower to Xxxxx under the Purchase
Agreement and the Xxxxx Notes (the "XXXXX INDEBTEDNESS"); and
WHEREAS, Section 8.1 of the Credit Agreement prohibits the Xxxxx
Indebtedness unless it is subordinated to the prior payment in full of the
Obligations owed to the Lenders upon terms and conditions approved in writing by
the Agent and the Majority Lenders; and
WHEREAS, Section 8.2 of the Credit Agreement prohibits the creation of the
Junior Liens; and
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WHEREAS, the Lenders are willing to permit Borrower to issue the Xxxxx
Notes and Warrants and to create the Junior Liens on the condition that Borrower
and Xxxxx enter into this Agreement providing for, among other things:
(i) Subordination of the Xxxxx Indebtedness and the Junior Liens to the
Senior Indebtedness (hereinafter defined) and the Bank Liens, respectively;
(ii) The possible repayment by Borrower of a portion or all of the Bank
Loans with funds provided by Xxxxx;
(iii) The relationship between Xxxxx and the Lenders in the event that
Xxxxx does so provide funds to pay a portion of the Bank Loans and a requirement
that Xxxxx continue making revolving loans to Borrower after the acquisition of
a portion of the Bank Loans on the terms set forth in the Purchase Agreement;
and
(iv) The respective collateral positions of the Lenders and Xxxxx after
acquisition by Xxxxx of a portion of the Bank Loans;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS: In addition to the terms defined in the Credit
Agreement and/or otherwise defined herein, the following terms shall have the
following meanings (all definitions that are defined or referred to in this
Agreement in the singular have the same meanings when used in the plural and
VICE VERSA):
"COMPANY" shall mean Borrower and each of its Subsidiaries.
"XXXXX" shall mean The Xxxxx Group, Inc., a New Jersey corporation,
each of its Subsidiaries, if any, and any successor, assignee or transferee of
any of the Xxxxx Indebtedness.
"JUNIOR SECURITIES" means any capital stock of Borrower (including
rights, warrants and options to acquire capital stock of Borrower) and
Indebtedness of Borrower that is fully subordinated in right of payment to the
Senior Indebtedness to the same extent as the Xxxxx Indebtedness, does not
exceed the Xxxxx Indebtedness and has no scheduled installment of principal due,
by redemption, sinking fund payment or otherwise, on or prior to the stated
maturity of the Xxxxx Notes.
"LEC" shall mean any local exchange carrier providing billing
services on behalf of the Company through one or more local clearing houses.
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"SENIOR INDEBTEDNESS" shall mean all obligations of the Company to
pay the principal of and interest (including all interest accruing subsequent to
the commencement of any bankruptcy or similar proceeding, whether or not a claim
for post-petition interest is allowable as a claim in any such proceeding),
professional fees, expenses and other charges payable on or in connection with
any Obligations of the Company under the Credit Agreement, the Guaranties and
each of the other Loan Documents referred to in the Credit Agreement, whether
outstanding on the date of this Agreement or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company.
"SPRINT" shall mean Sprint Corp., a Delaware corporation, and its
affiliates and their respective successors and assigns.
2. CONSENT TO THE PURCHASE AGREEMENT, XXXXX NOTES, WARRANTS AND JUNIOR
LIENS. The Agent and the Lenders: (i) consent to the Purchase Agreement, the
Xxxxx Notes, the Warrants and the Junior Liens, subject to the terms and
conditions of this Agreement; and (ii) subject as aforesaid, acknowledge that
the existence of the Purchase Agreement, the Xxxxx Notes, the Warrants and the
Junior Liens does not and will not constitute an Event of Default under the
Credit Agreement.
3. SUBORDINATION OF THE XXXXX NOTES AND JUNIOR LIENS.
(a) XXXXX INDEBTEDNESS AND JUNIOR LIEN SUBORDINATED TO SENIOR
INDEBTEDNESS. The Xxxxx Indebtedness and Junior Liens will at all times, up to
(but not after, except as provided in (i) below) the consummation of the
Purchase Event and the related payment to the Lenders referred to in Section 4
below (such period, the "SUBORDINATION PERIOD"), whether before, after or during
the pendency of any proceeding under any state or federal bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or receivership law ("BANKRUPTCY PROCEEDING"), be junior, subject
and subordinate to the Senior Indebtedness and the Bank Liens, regardless of the
order of incurrence, filing or creation thereof as herein provided.
(b) NO PAYMENT ON XXXXX INDEBTEDNESS DURING SUBORDINATION PERIOD.
(i) No payment may be made by the Company on account of the
principal of, premium, if any, or interest on the Xxxxx Indebtedness or to
acquire any of the Xxxxx Indebtedness for cash or property (other than in
Junior Securities, including by exercising the Warrants in exchange for
Xxxxx Indebtedness in accordance with the terms and conditions of the
Purchase Agreement as in effect on the date hereof, but not otherwise) (i)
upon the maturity of any Senior Indebtedness of the Company by lapse of
time, acceleration (unless waived) or otherwise, unless and until all
principal of, premium, if any, and interest on such Senior Indebtedness
are first paid in full (or such payment is duly provided for), or (ii) in
the event of default in the payment of any principal of, premium, if any,
or interest on any Senior Indebtedness of the Company when it becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise (a "PAYMENT DEFAULT"), unless and until such
Payment Default has been cured or waived or otherwise has ceased to exist.
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(ii) Upon (A) the happening of an event of default (other than
a Payment Default) that permits, or would permit with the passage of time
or the giving of notice, or both, the holders of Senior Indebtedness or
their representative the right to accelerate its maturity (a "NON-PAYMENT
DEFAULT"), and (B) written notice of such Non-Payment Default given to the
Company and Xxxxx by the holders of Senior Indebtedness or their
representative (a "PAYMENT NOTICE"), then, unless and until such
Non-Payment Default has been cured or waived or otherwise has ceased to
exist, no payment (by set-off or otherwise) may be made by or on behalf of
the Company on account of the principal of, premium, if any, or interest
on the Xxxxx Indebtedness, or to acquire or repurchase any of the Xxxxx
Indebtedness for cash or property, in any such case other than payments
made with Junior Securities or by conversion of the Warrants as aforesaid.
Notwithstanding the foregoing, unless (A) the Senior Indebtedness in
respect of which such Non-Payment Default exists has been declared due and
payable in its entirety within 270 days after the Payment Notice is
delivered as set forth above (the "PAYMENT BLOCKAGE PERIOD"), and (ii)
such declaration has not been rescinded or waived, at the end of the
Payment Blockage Period, the Company shall be required to pay all sums not
paid to Xxxxx during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Xxxxx
Indebtedness. Not more than one Payment Notice may be given in any 365-day
period, irrespective of the number of defaults with respect to Senior
Indebtedness during such period.
(iii) In furtherance of the provisions of this Section 3, in
the event that, notwithstanding the foregoing provisions of this Section
3, any payment or distribution of assets of the Company (other than Junior
Securities or common stock of Borrower issued in exchange for the
Warrants) shall be received by Xxxxx in respect of the Xxxxx Indebtedness
at a time when such payment or distribution is prohibited by the
provisions of this Section 3, then such payment or distribution shall be
received and held in trust by Xxxxx for the benefit of the holders of
Senior Indebtedness of the Company, and shall be paid or delivered by
Xxxxx to the holders of Senior Indebtedness of the Company remaining
unpaid or unprovided for or their representative or representatives,
ratably according to the aggregate amounts remaining unpaid on account of
the Senior Indebtedness of the Company held or represented by each, for
application to the payment of all Senior Indebtedness of the Company in
full after giving effect to any concurrent payment and distribution to the
holders of such Senior Indebtedness.
(c) XXXXX INDEBTEDNESS SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors or any
marshaling of assets or liabilities:
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(i) the holders of all Senior Indebtedness of the Company
shall first be entitled to receive payments in full (or have such payment
duly provided for) before Xxxxx is entitled to receive any payment on
account of the principal of, premium, if any, or interest on the Xxxxx
Indebtedness (other than Junior Securities);
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
Junior Securities) to which Xxxxx would be entitled (by set off or
otherwise), except for the provisions of this Section 3, shall be paid by
the liquidating trustee or agent or other Person making such payment or
distribution directly to the holders of Senior Indebtedness of the Company
or their representative to the extent necessary to make payment in full of
all such Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than Junior Securities),
shall be received by Xxxxx on account of the principal of or interest on
the Xxxxx Indebtedness before all Senior Indebtedness of the Company is
paid in full, such payment or distribution shall be received and held in
trust by Xxxxx for the benefit of the holders of such Senior Indebtedness,
or their representative, ratably according to the respective amounts of
such Senior Indebtedness held or represented by each, to the extent
necessary to make payment as provided herein of all such Senior
Indebtedness remaining unpaid after giving effect to all concurrent
payments and distributions and all provisions therefor to or for the
holders of such Senior Indebtedness.
(d) XXXXX TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness of the
Company as provided herein, Xxxxx shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company applicable to the Senior Indebtedness until all amounts owing on the
Xxxxx Indebtedness shall be paid in full, and for the purpose of such
subrogation no such payments or distributions to the holders of Senior
Indebtedness by the Company, or by or on behalf of Xxxxx by virtue of this
Section 3, which otherwise would have been made to Xxxxx shall, as between the
Company and Xxxxx, be deemed to be payment by the Company on account of Senior
Indebtedness, it being understood that the provisions of this Section 3 are and
are intended solely for the purpose of defining the relative rights of Xxxxx, on
the one hand, and the holders of Senior Indebtedness, on the other hand.
If any payment or distribution to which Xxxxx would otherwise have
been entitled but for the provisions of this Section 3 shall have been applied,
pursuant to the provisions of this Section 3, to the payment of amounts payable
under Senior Indebtedness of the Company, then Xxxxx shall be entitled to
receive from the holders of such Senior Indebtedness any payments or
distributions
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received by such holders of Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full.
(e) OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Section 3 or elsewhere in this Agreement
is intended to or shall impair as between the Company and Xxxxx, the obligation
of the Company, which is absolute and unconditional, to pay to Xxxxx the
principal of, premium, if any, and interest on the Xxxxx Indebtedness as and
when the same shall become due and payable in accordance with its terms, or is
intended to or shall affect the relative rights of Xxxxx and creditors of the
Company other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent Xxxxx from exercising all remedies otherwise permitted
by applicable law upon default under the Xxxxx Indebtedness, subject to the
rights, if any, under this Section 3, of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy. Notwithstanding anything to the contrary in this
Section 3 or elsewhere in this Agreement, upon any distribution of assets of the
Company referred to in this Section 3, Xxxxx shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the liquidating trustee or agent or other Person making any
distribution to Xxxxx for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 3 so long as such court has been apprised of the
provisions of, or the order, decree or certificate makes reference to, the
provisions of this Section 3.
(f) XXXXX ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE OF
NOTICE.
Xxxxx shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to Xxxxx
unless and until Xxxxx shall have received, no later than one Business Day prior
to such payment, written notice thereof from the Company or from one or more
holders of Senior Indebtedness or from any representative thereof and, prior to
the receipt of any such written notice, Xxxxx shall be entitled in all respects
conclusively to assume that no such fact exists.
(g) SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination provisions contained in this Section 3 shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this Agreement,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms
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of the Senior Indebtedness or any security therefor and release, sell or
exchange such security and otherwise deal freely with the Company, all without
affecting the liabilities and obligations of Xxxxx.
(h) SECTION 3 NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium,
if any, or interest on the Xxxxx Indebtedness by reason of any provision of this
Section 3 shall not be construed as preventing the occurrence of a default or an
event of default under the Xxxxx Indebtedness or in any way prevent Xxxxx from
exercising any right thereunder other than the right to receive payment on the
Xxxxx Indebtedness.
(i) SUBORDINATION OF JUNIOR LIENS TO BANK LIENS. Xxxxx does hereby
expressly subordinate and make second, junior and inferior any and all liens,
rights, powers, titles and interests of Xxxxx under, pursuant to or by virtue of
the Junior Liens to all liens, rights, titles and interests of the Lenders
under, pursuant to or by virtue of the Bank Liens, and Xxxxx agrees that all
liens, rights, titles and interests of the Lenders shall be unconditionally
first, prior and superior to any and all liens, rights, powers, titles and
interests of Xxxxx under, pursuant to or by virtue of the Junior Liens
regardless of the order of filing or other form of perfection of the Bank Liens
and the Junior Liens. Xxxxx further agrees that any and all liens, rights,
titles and interests of Xxxxx under, pursuant to or by virtue of the Junior
Liens shall be and remain expressly subject and subordinate to any renewal,
extension, refinancing, consolidation, modification or supplement of the liens,
rights, titles and interests of the Bank Liens, as well as any and all increases
thereof. Notwithstanding the foregoing, from and after a Purchase Event
(hereinafter defined), Xxxxx'x Xxxx on the Sprint and LEC Receivables
(hereinafter defined), but no other Collateral other than the Sprint and LEC
Receivables, shall no longer be subordinate to the Bank Liens and from and after
the effectiveness of a Purchase Event, the Lenders shall no longer have a Lien
on or against the Sprint and LEC Receivables. From and after a Purchase Event,
Xxxxx shall continue to have a second, junior and inferior Lien as provided
above on all of the Collateral other than the Sprint and LEC Receivables.
4. PURCHASE EVENT. Subject to any restrictions on the right of Xxxxx so to
do set forth in the Purchase Agreement, Xxxxx shall have the right at any time
after the date hereof and prior to the occurrence of a Bankruptcy Proceeding in
respect of Borrower or any of its Subsidiaries, upon 10 days prior written
notice to the Lenders and Borrower, to pre-pay on behalf of the Borrower
effective as of the last business day of the month (the "EFFECTIVE DATE") during
which such 10th day occurs a portion of the Bank Loans outstanding at such time
in an amount (the "PURCHASED PORTION") equal to 87.5% of the Eligible Accounts
of Borrower and its Subsidiaries arising with regard to services provided
through Sprint and/or billed through an LEC (a "PURCHASE EVENT") provided that:
(a) The amount of the Purchased Portion shall initially be based
upon the Borrowing Base Certificate delivered (or Borrowing Base determined by
the Agent in the absence of a current Borrowing Base Certificate) during the
month of the Effective Date, such amount to be adjusted (upwards or downwards
with an appropriate additional prepayment to be made by the Borrower - funded by
Xxxxx - or refunded by the Lenders - and repaid by the Borrower to Xxxxx)
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based upon the Borrowing Base as of the Effective Date as reported in the
Borrowing Base Certificate delivered (or Borrowing Base determined by the Agent)
with respect to the Borrowing Base as of the Effective Date in accordance with
Section 7.2 of the Credit Agreement;
(b) The Refinancing Note evidencing the pre-payment made by Xxxxx on
behalf of the Borrower and the Xxxxx Notes (collectively, the "XXXXX LOAN") will
be secured by a first lien on the Accounts and General Intangibles associated
with services provided by the Company through Sprint and/or billed through an
LEC (the "SPRINT AND LEC RECEIVABLES"), and by a Junior Lien on Borrower's other
Accounts and General Intangibles;
(c) The portion of the Bank Loans not prepaid by Xxxxx will continue
to be secured by the Bank Lien on all of the Collateral other than the Sprint
and LEC Receivables;
(d) Each of Borrower, its Subsidiaries, Xxxxx, the Agent and the
Lenders will execute and deliver any documents (including, without limitation,
changes to Dominion of Funds Loan Documents to transfer control over the
lockboxes and accounts used to collect the Sprint and LEC Receivables to Xxxxx)
reasonably required to establish and/or confirm such order of priority of Liens
on Borrower's assets;
(e) The commitment of the Lenders to make Bank Loans will be reduced
by an amount equal to the Purchased Portion pursuant to an amendment to the
Credit Agreement in form and substance satisfactory to the Lenders in their
absolute discretion;
(f) Xxxxx will be obligated to continue making revolving loans to
Borrower in respect of the Sprint and LEC Receivables pursuant to the Purchase
Agreement as in effect on the date hereof; and
(g) Upon consummation of the Purchase Event and payment on the
Effective Date of the purchase price to the Lenders equal to 100% of the
Purchased Portion and interest accrued thereon through the date of purchase
(subject to adjustment as provided in (a) above), the Subordination Period and
the subordination provisions of Section 3 hereof (other than subordination of
the Junior Liens to the Bank Liens in respect of all Collateral other than the
Sprint and LEC Receivables) shall terminate and no longer exist.
5. STANDSTILL PERIOD; PURCHASE OF REMAINDER OF THE BANK LOANS. For a
period of 45 days after the Purchase Event, neither Xxxxx nor the Lenders will
declare a default under the Xxxxx Loan or the Bank Loans, respectively, or cease
making revolving credit loans to Borrower in accordance with the Purchase
Agreement and the Credit Agreement, respectively, except for a Default or an
Event of Default under the respective loan documentation first arising after the
Purchase Event by reason of a payment default, a Bankruptcy Proceeding filed by
Borrower or any of its Subsidiaries, the violation of any negative covenant set
forth in Section 8 of the Credit Agreement or a violation of Section 7 of the
Credit Agreement other than a default in respect of Sections 7.3 or 7.9 of the
Credit Agreement. At any time prior to the expiration of such 45-day period,
Xxxxx may acquire
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the Bank Loans and the rights of the Lenders under the Credit Agreement in
exchange for payment to the Banks in immediately available funds of the total
amount of the Obligations then outstanding, such transfer of Bank Loans to be
without recourse to the Lenders or the Agent and without representation or
warranty of any name or nature from the Lenders or the Agent to Xxxxx. After
such 45-day period (or upon purchase by Xxxxx as provided in the preceding
sentence), each of the Lenders and Xxxxx (or Xxxxx, in the event of such
purchase) will be free to exercise their remedies under the Loan Documents (in
the case of the Lenders) and the Xxxxx Notes, Purchase Agreement and any other
documentation evidencing the Xxxxx Loan (in the case of Xxxxx) without
consulting with or being required to seek the consent of the other party.
6. MIGRATION. From and after a Purchase Event, Borrower and Xxxxx agree
that they will take no affirmative action to cause or encourage any customer of
Borrower or its Subsidiaries that currently uses AT&T services provided and
billed through the Company to switch services from AT&T or take any affirmative
action to switch billing for such services through an LEC; PROVIDED, HOWEVER,
that Xxxxx may continue to solicit customers for its services in the ordinary
course of Xxxxx'x business consistent with its usual and customary past business
practices.
7. NOTICE OF INTENT TO SELL THE BANK LOANS.
(a) The Agent will give Xxxxx 10 days' advance notice of the Lenders
seeking actively to transfer all or any part of their interests in the Bank
Loans (other than to the other Lender) to a Person or Persons other than one of
the Lenders (and if a specific transferee has been identified and does not
object to such disclosure, shall advise Xxxxx of the identity of such transferee
provided that Xxxxx shall not communicate with any such transferee with respect
to such proposed transfer) and shall permit Xxxxx to acquire all or such part of
the Bank Loans and the rights of the Lenders under the Credit Agreement at any
time within such 10-day period in exchange for payment to the Lenders in
immediately available funds of the total amount of the Obligations or such
portion thereof then outstanding, such transfer of Bank Loans to be without
recourse to the Lenders or the Agent and without representation or warranty of
any name or nature from the Lenders or the Agent to Xxxxx; PROVIDED, that (i)
the Agent will represent to Xxxxx in such notice that it has identified at least
one proposed transferee that has indicated an interest to acquire all or a part
of the Bank Loans and who the Agent believes in the exercise of its reasonable
commercial judgment is capable of acquiring all or such part of the Bank Loans;
(ii) for a period of 30 days from the date hereof the Agent will not give such
notice (and will not make any such transfer) with respect to, or to, a
transferee (a "RESTRICTED TRANSFEREE") which is NOT a bank, a savings and loan
association, an insurance company, an investment company or fund or another
financial institution; and (iii) if any such transfer is to be made through a
broker and the transferee is not identified by the broker, it will be assumed
that such transferee is a Restricted Transferee; and PROVIDED, FURTHER, HOWEVER,
that if within such 10-day period Xxxxx: (i) notifies the Lenders that it
intends to acquire the Bank Loans but requires additional time to make
arrangements therefor; and (ii) pays to the Agent for the benefit of the Lenders
a nonrefundable deposit equal to 5% of the Lenders' commitment to make Bank
Loans then in effect, Xxxxx shall have up to an additional 15 days from the date
of such notice and payment to complete the acquisition of the Bank Loans as
aforesaid. In the event that Xxxxx fails to complete the
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acquisition within such 15-day period, the Lenders may retain such 5% deposit as
liquidated damages. If Xxxxx fails to acquire the Bank Loans in response to such
notice of intent to transfer, then the Lenders shall have sixty days from the
date of such notice within which to complete a transfer of the Bank Loans;
PROVIDED, HOWEVER, that if within such 60-day period the Lenders identify a
transferee different than the transferee referred to in the Agent's notice
giving rise to such 60-day period, and such transferee is a Restricted
Transferee (or presumed so to be in the case of a brokered transaction with an
unidentified transferee), the Agent will be required to give Xxxxx a new 10
days' advance notice and all of the provisions of the first sentence of this
Section 7(a) shall apply to a transfer to such Restricted Transferee, including,
without limitation, the right of Xxxxx to extend such new 10-day period for up
to 15 additional days by paying to the Lenders a nonrefundable 5% deposit. If
such transfer is not completed within such 60-day period, the provisions of this
Section 7 shall apply to any subsequent transfer.
(b) In the event that the Lenders transfer all or any portion of their
interests in the Bank Loans and the Bank Liens in accordance with this Section 7
to Persons other than Xxxxx, Xxxxx and such Persons will be required as a
condition to such transfer to execute and deliver any documents reasonably
required to establish and/or confirm the order of priority of the Xxxxx
Indebtedness and the Senior Indebtedness acquired by such Persons and the order
of priority of the Bank Liens and the Junior Liens as the same exists
immediately prior to such transfer and Xxxxx'x rights under this Section 7 shall
not apply to the Bank Loans or the portion thereof acquired by the transferee;
PROVIDED, HOWEVER, that Xxxxx'x rights under Section 4 hereof shall survive such
transfer.
8. NO OTHER DEFAULT. Borrower hereby warrants and represents to the Agent,
the Lenders and Xxxxx that no Default or Event of Default has occurred and is
continuing which has not been disclosed in writing to the Agent, the Lenders and
Xxxxx.
9. CONDITIONS. No part of this Agreement shall become effective until
Borrower and Xxxxx, as appropriate, shall have delivered (or shall have caused
to be delivered) to the Agent each of the following, in Proper Form:
(a) the Fourth Amendment to the Credit Agreement;
(b) certificates of the Secretary or any Assistant Secretary of
Borrower, each of the Guarantors and Xxxxx with respect to the charter documents
of such parties, as to the incumbencies and signatures of their officers and as
to actions taken to authorize the execution, delivery and performance of this
Agreement;
(c) certificates issued by the appropriate governmental authorities
from the States of Delaware, New Jersey and Texas as to the existence, good
standing and qualification to do business of Borrower, the Guarantors and Xxxxx;
(d) a Borrowing Base Certificate and each document or agreement
required by the Forbearance Agreement dated as of January 31, 1997, among
Borrower and the Lenders;
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(e) opinions of counsel for each of Borrower and Xxxxx with respect
to such matters as the Agent may reasonably require, including, in the case of
Xxxxx'x counsel, the matters represented by Xxxxx in Section 12 hereof;
(f) the Lenders' restructuring fee in the amount of $25,000;
(g) evidence of the payment of any and all legal fees and expenses
incurred by the Agent and the Lenders in connection with this Agreement
(including, without limitation, the negotiation and preparation of this
Agreement and the related Loan Documents); and
(h) documentation establishing a deposit account into which the
proceeds of the Xxxxx Notes and Warrants (and no other funds at any time) will
be deposited (and evidence of such deposit), which account and proceeds (but no
other accounts or funds of Borrower or any of its Subsidiaries) shall NOT be
subject to offset or setoff by the Agent or the Lenders or the creation of any
restriction on Borrower's access thereto.
10. EXPENSES; INDEMNIFICATION. Borrower will pay all costs and expenses
and reimburse the Agent and the 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,
documentation, recording, closing, renewal, revision, modification, increase,
review, restructuring or enforcement of this Agreement.
11. LIEN CONTINUATION. The Liens are hereby ratified and confirmed as
securing and continuing to secure the payment of the Obligations existing on the
date hereof as if they 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. 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.
12. XXXXX'X REPRESENTATIONS AND WARRANTIES. Xxxxx represents and warrants
to the Agent and the Lenders that:
(a) Xxxxx is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey;
(b) Xxxxx has the corporate power and authority to own its
properties and assets and to carry out its business as now being conducted and
is qualified to do business and in good standing in each state where the nature
of its assets or business requires it to be so qualified;
(c) Xxxxx has the corporate power and authority to execute and
perform this Agreement in accordance with its terms, and to do all other things
required of it hereunder;
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(d) the execution, delivery and performance of this Agreement, (i)
have been duly authorized by all requisite corporate action by Xxxxx, (ii) do
not require registration with or consent or approval of, or other action by, any
federal, state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to the Agent or will be completed or obtained concurrently
with the execution and delivery of this Agreement, (iii) will not violate any
provision of law, any order of any court or other agency of government, the
organization documents of Xxxxx, any provision of any indenture, agreement or
other instrument to which Xxxxx is a party, or by which it or any of its
properties or assets are bound, (iv) will not be in conflict with, result in a
breach of or constitute (with or without notice or passage of time) a default
under any such indenture, agreement or other instrument, and (v) will not result
in the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of any Person except as
contemplated hereby;
(e) this Agreement is the valid and binding obligation of Xxxxx,
enforceable in accordance with its terms except for bankruptcy laws and
equitable principles affecting the enforcement of creditors' rights generally.
(f) No part of the Xxxxx Indebtedness or any instrument evidencing
or securing the same has been heretofore transferred or assigned, and Xxxxx will
not transfer or assign any part of the Xxxxx Indebtedness nor any instrument
evidencing the same while the Obligations remain unpaid; provided, however,
Xxxxx may transfer its interest in the Xxxxx Notes, the Refinancing Notes and/or
the Warrants to any of its Affiliates; provided, further, however, that any such
transfer will not relieve Xxxxx from any of its obligations to make revolving
loans to Borrower after a Purchase Event as required by the Purchase Agreement
as in effect on the date hereof. Any instrument evidencing the Xxxxx
Indebtedness will contain provisions referring specifically to this Agreement.
13. MISCELLANEOUS.
(a) In the event of a breach by any party hereto of any of the
provision of this Agreement, or in the event any representation or warranty
contained herein or furnished to the Lenders by any party hereto shall prove to
have been false when made, the Lenders shall have all rights provided to it
under law or equity, including without limitation the right to xxx the breaching
party or parties to recover damages suffered by the Lenders as a result of such
breach, and the right to obtain injunctive relief.
(b) Xxxxx and Borrower shall give, execute and deliver any notice,
statement, instrument, document, agreement or other papers, and shall permit the
Lenders, upon request, to make any notation or endorsement upon any promissory
note or other instrument or documents evidencing or securing the Xxxxx
Indebtedness, that may be necessary or desirable, or that the Agent or the
Lenders may reasonably request, in order to create, preserve or validate the
rights of the Agent or the Lenders hereunder, to enable the Agent or the Lenders
to exercise or enforce its rights hereunder, or otherwise to effect the purposes
of this Agreement.
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(c) This Agreement may be modified or amended only by a written
consent signed by each party hereto except that any modification or amendment to
Sections 3, 4, 5 or 7 hereof shall not require the consent of Borrower. The
provisions of the Purchase Agreement obligating Xxxxx to continue making
revolving loans to Borrower may not be amended, altered, waived or otherwise
modified without the prior written consent of the Lenders; PROVIDED, HOWEVER,
that in the event that the Lenders and Borrower amend the Credit Agreement after
the date hereof in any manner that affects the obligations of the Lenders to
make Loans to Borrower, Xxxxx and Borrower may amend such provisions of the
Purchase Agreement in the same manner and proportionally to the same extent
(e.g. if the Lenders reduce their advance rate by 20%, Xxxxx may reduce its
advance rate by 20%).
(d) Xxxxx and Borrower agree that, if at any time all or any part of
any payment previously applied by the Agent or the Lenders to the Obligations is
or must be returned by the Agent or the Lenders - or recovered from the Agent or
the Lenders - for any reason (including the order of any bankruptcy court), this
Agreement shall automatically be reinstated to the same effect, as if the prior
application had not been made, and, in addition, Borrower hereby agrees to
indemnify the Agent and the Lenders against, and to save and hold the Agent and
the Lenders harmless from any required return by the Agent or the Lenders - or
recovery from the Agent or the Lenders - of any such payments because of its
being deemed preferential under applicable bankruptcy, receivership or
insolvency laws, or for any other reason.
(e) Xxxxx acknowledges that it has received a copy and is familiar
with the terms of and conditions of the Credit Agreement and the other Loan
Documents.
(f) Any notice, request or other communication required or permitted
to be given hereunder shall be given in writing by delivery against receipt for
it, by depositing it with an overnight delivery service or by depositing it in a
receptacle maintained by the United States Postal Service, postage prepaid,
registered or certified mail, return receipt requested, addressed to the
respective parties at the following addresses (and if so given, shall be deemed
given when mailed:
If to Xxxxx: The Xxxxx Group, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
with a copy to: Xxxxxx, Xxxxx & Xxxxxxx, LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
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If to Borrower: EqualNet Holding Corp.
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx Xxxxxx
with a copy to: Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
If to Agent or the Lenders: Comerica Bank - Texas
0000 X. Xxxxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx
with a copy to: Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx, P.C.
0000 Xxxxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Borrower's address for notice may be changed at any time and from time to time,
but only after thirty days' advance written notice to the other parties and
shall be the most recent such address furnished in writing by Borrower to the
other parties. Xxxxx and the Agent and the Lenders' respective addresses for
notice may be changed at any time and from time to time, but only after ten
days' advance written notice to Borrower and the other creditor and each such
party's address for notice shall be the most recent such address furnished in
writing by such party to Borrower and the other creditor. Actual notice, however
and from whomever given or received, shall always be effective when received.
(g) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this Agreement shall not be
affected thereby, and this Agreement shall be liberally construed so as to carry
out the intent of the parties to it.
(h) This Agreement (i) shall be binding upon the parties hereto and
their respective successors and assigns; and (ii) may be executed in several
counterparts, and by the parties hereto on separate counterparts and each
counterpart when so executed and delivered shall constitute an original
Agreement, and all such separate counterparts shall constitute but one and the
same Agreement.
(i) This Agreement is performable in Dallas County, Texas, which
shall be a proper place of venue for suit on or in respect of this Agreement.
Xxxxx and Borrower each
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irrevocably agrees that any legal proceeding in respect of this Agreement shall
be brought in the district courts of Dallas County, Texas or the United States
District Court for the Northern District of Texas, Dallas Division
(collectively, the "SPECIFIED COURTS"). Xxxxx and Borrower each hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts of the State of Texas. Xxxxx and Borrower each hereby irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement brought in any Specified Court, and hereby
further irrevocably waives any claims that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Xxxxx and
Borrower each further irrevocably consents to the service of process out of any
of the Specified Courts in any such suit, action or proceeding by the mailing of
copies thereof by certified mail, return receipt requested, postage prepaid, to
Xxxxx or Borrower, as the case may be, at its address as provided in this
Agreement or as otherwise provided by Texas law. Nothing herein shall affect the
right of the Agent or the Lenders to commence legal proceedings or otherwise
proceed against Xxxxx or Borrower, as the case may be, in any jurisdiction or to
serve process in any manner permitted by applicable law. Xxxxx and Borrower each
agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. THIS AGREEMENT 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.
14. RELEASE. EACH OF BORROWER AND GUARANTORS, BY THEIR JOINDER HEREIN,
HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER THE AGENT AND THE LENDERS AND
THEIR RESPECTIVE 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 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.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AGREEMENT CONSTITUTES A WRITTEN 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.
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EXECUTED as of the date first above written.
BORROWER:
EQUALNET HOLDING CORP.,
a Texas corporation
By: /s/ XXXXXXX X. XXXXXX
Name: Xxxxxxx X. Xxxxxx
Title: COO
AGENT AND LENDER:
COMERICA BANK - TEXAS,
a Texas banking corporation
By: /s/ XXXXXX X. XXXXXXXX
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President
LENDER:
XXXXX FARGO (TEXAS), N.A.,
a Texas banking corporation
By: /s/ XXXXX XXXXXXX
Name: Xxxxx Xxxxxxx
Title: Vice President
XXXXX:
THE XXXXX GROUP, INC.,
a New Jersey corporation
By: /s/ XXXXXXX X. XXXXXX
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President
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GUARANTORS' CONSENTS
Guarantors hereby join in this Agreement to evidence Guarantors' consent to
execution by Borrower and the Agent and the Lenders of this Agreement, to
confirm that the Guaranties apply and shall continue to apply to the Credit
Agreement, and the other Loan Documents and to acknowledge that without such
consent and confirmation, the Agent and the Lenders would not execute this
Agreement.
EXECUTED effective as of the date first set forth above.
EQUALNET CORPORATION,
a Delaware corporation
By: /s/ XXXX XXXXXXX
Name: Xxxx Xxxxxxx
Title: CEO
TELESOURCE, INC.,
a Texas corporation
By: /s/ XXXX XXX XXXX
Name: Xxxx Xxx Xxxx
Title: President
EQUALNET WHOLESALE SERVICES, INC.
By: /s/ XXXX XXXXXXX
Name: Xxxx Xxxxxxx
Title: CEO
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