Exhibit 10.4
MODIFICATION AND
TERMINATION AGREEMENT
THIS MODIFICATION AND TERMINATION
AGREEMENT (the “Agreement”) is made this 27th day of
January, 2005 by and between TRINSIC COMMUNICATIONS, INC., a
Delaware corporation, formerly known as Z-Tel Communications, Inc.;
TRINSIC, INC, a Delaware corporation, formerly known as Z-Tel
Technologies, Inc.; Z-TEL, INC., a Nevada corporation; Z-TEL
BUSINESS NETWORKS, INC., a Delaware corporation; Z-TEL NETWORK
SERVICES, INC., a Delaware corporation; Z-TEL HOLDINGS, INC., a
Florida corporation; Z-TEL COMMUNICATIONS OF VIRGINIA, INC., a
Virginia corporation; Z-TEL INVESTMENTS, INC., a Delaware
corporation; TOUCH-1 COMMUNICATIONS, INC., an Alabama corporation;
DirecTEL, INC., an Alabama corporation; direcCONNECT, INC., an
Alabama corporation; and Z-TEL CONSUMER SERVICES, LLC, an Alabama
limited liability company (individually and/or collectively,
“Borrower”), and TEXTRON FINANCIAL CORPORATION, a
Delaware corporation (“Lender”).
R E C I T A L
S:
A. On or about April 22,
2004, Borrower and Lender entered into that certain Loan and
Security Agreement (the “Loan Agreement”) evidencing a
certain credit facility extended by Lender to Borrower in the
original aggregate principal amount of up to $25,000,000.00.
Capitalized terms not defined herein shall have the meaning
ascribed thereto in the Loan Agreement.
B. Borrower has failed to comply
with certain terms of the Loan Agreement and other Loan Documents
and have defaulted thereunder, as a consequence of which Lender is
entitled to exercise all rights and remedies available to it under
the Loan Agreement, certain other Loan Documents, and otherwise,
including without limitation the right to charge interest at the
Default Rate, to declare all Obligations to be immediately due and
payable, and/or to take possession of all or any portion of the
Collateral.
C. Borrower has changed the name
of Borrower “Z-Tel Technologies, Inc.” to
“Trinsic, Inc.” and the name of Borrower “Z-Tel
Communications, Inc.” to “Trinsic Communications,
Inc.”
D. Borrower has requested that
the Lender consent to the Borrower’s sale, for the sum of
$330,000.00 in cash, of approximately 36,000 currently delinquent
accounts that have been fully reserved on the Borrower’s
books and records as of the date hereof and which have an aggregate
face value, as stated by Borrower, of approximately $8,000,000.00
(the “Delinquent Accounts”).
E. Pursuant to the
Lender’s letter dated October 4, 2004 (the
“Default Notice”) the Lender notified the Borrower of
the occurrence of the Event of Default as a result of the breach of
the Fixed Charge Coverage Ratio covenant in Section 7.6(a) of
the Loan Agreement for the Fiscal Quarter ended June 30, 2004.
In connection therewith, and in accordance with Section 1.3(b)
of the Loan Agreement, Lender increased the rate of interest
charged Borrower to the Prime Rate plus 5.0% (the “Default
Rate”).
F. Borrower has requested that
Lender consent to the early termination of the Loan Agreement and
to grant certain accommodations to Borrower as set forth
herein.
G. Lender is willing to consent
to the early termination of the Loan Agreement subject to the terms
of this Agreement and to grant certain accommodations to Borrower
as set forth herein.
NOW, THEREFORE, in consideration of
the foregoing premises, which are hereby incorporated into and made
a part of this Agreement, the covenants and agreements hereinafter
set forth, the sum of TEN and NO/100 DOLLARS ($10.00) cash in hand
paid, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the
undersigned, intending to be
Exhibit 10.4
legally bound, does hereby
agree as follows:
1. Acknowledgments of
Borrower. Borrower hereby acknowledges and agrees that:
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(a) |
The recital of facts set forth in this Agreement is true and
correct in all material respects. |
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(b) |
Lender has a valid and perfected security interest in and to
the Collateral. |
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(c) |
Borrower has failed or refused to comply with certain terms,
conditions, and provisions of the Loan Agreement and has failed or
refused to cure the same as permitted in the Loan Agreement, each
of which has resulted in the occurrence of an Event of Default
pursuant to Section 9.1(c) of the Loan Agreement (collectively
and individually referred to as the “Existing Events of
Default”), such Existing Events of Default including without
limitation the following: |
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(1) |
Borrower’s breach of the Fixed Charge Coverage Ratio
covenant in Section 7.6(a) of the Loan Agreement for the
Fiscal Quarters ended on June 30, 2004 and September 30,
2004; and |
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(2) |
Borrower’s sale of Collateral to SipStorm in violation of
Section 7.2 of the Loan Agreement |
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(d) |
Borrower Z-Tel Communications, Inc. is a defendant in a certain
lawsuit, styled as Beneficial Management Corporation of America
v. Z-Tel Communications, Inc., in the Circuit Court for the 13
th
Judicial Circuit of Hillsborough County, Florida, Civil Division,
Case No. 0410441, filed November 19, 2004 (the
“Lease Litigation”), which contains allegations of
Borrower’s default, event of default, or breach with respect
to its real property lease as to one of Borrower’s business
locations. Borrower is defending the Lease Litigation and has
denied the allegations contained therein. |
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(e) |
The recitation of specific events or occurrences of default
described herein shall not constitute a waiver of any events or
occurrences of default not specifically described herein. |
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(f) |
As a consequence of the aforementioned defaults, Lender is
entitled to exercise all rights and remedies available to it under
the Loan Agreement, certain other Loan Documents, and otherwise,
including without limitation the right to charge interest at the
Default Rate, to declare all Obligations to be immediately due and
payable, and/or to take possession of all or any portion of the
Collateral. |
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(g) |
Lender has not waived, does not hereby waive, and may never
waive the events of default enumerated herein and/or any other
defaults that may have existed, may presently exist, or may exist
in the future. |
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(h) |
All notices required under the Loan Agreement have been given
by Lender or validly waived, including without limitation all
notices of default, and all rights and/or opportunities to cure
related thereto have expired or lapsed. |
Exhibit 10.4
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(i) |
Except as expressly provided herein, Lender’s agreement
to perform, and to permit Borrower to perform, as provided herein
shall not invalidate, impair, negate, or otherwise affect
Lender’s ability to exercise its rights and remedies under
the Loan Agreement and otherwise. |
2. Acknowledgement and
Consent as to Name Changes . Subject to satisfaction of the
Accommodation Conditions set forth in Section 5 below, and
without waiving any Existing Events of Default, and only to the
extent that the name changes described herein become legally
effective, Lender hereby acknowledges and consents to the change of
the name “Z-Tel Technologies, Inc.” to “Trinsic,
Inc.” and to the change of the name “Z-Tel
Communications, Inc.” to “Trinsic Communications,
Inc.” From and after the date the name changes described
herein become legally effective, all references in the Loan
Agreement and the Loan Documents to “Z-Tel Technologies,
Inc.” shall be deemed to be a reference to “Trinsic,
Inc.” and all references to “Z-Tel Communications,
Inc.” shall be deemed to be a reference to “Trinsic
Communications, Inc.”
3. Acknowledgment and
Consent as to Sale of Accounts . Subject to satisfaction of the
Accommodation Conditions set forth in Section 5 below, and
without waiving any Existing Events of Default, and without
acknowledging or agreeing to the values ascribed to the Delinquent
Accounts or the adequacy of the consideration paid therefor, Lender
hereby acknowledges and consents to the Borrower’s sale, for
the sum of $330,000.00 in cash to be delivered to Lender promptly
upon consummation thereof, of the Delinquent Accounts.
4. Early Termination;
Default Rate; Agreement Regarding Waiver of Defaults. Absent a
default under the terms of this Agreement, and if and for so long
as each of the Accommodation Conditions is satisfied, Lender shall
forbear from exercising its default rights and remedies under the
Loan Agreement for the period from the date hereof through 5:00
p.m. local time in Atlanta, Georgia on May 31, 2005 (such date
being hereby defined as the “Early Termination Date”),
at which time all Obligations shall be immediately due and payable
in full. Interest shall accrue and be payable at the Default Rate
through and including the date all Obligations shall have been
irrevocably paid in full.
Notwithstanding other provisions of
this Agreement to the contrary, to the extent that the commencement
of the Lease Litigation does, may, or might constitute an Event of
Default, Lender hereby waives same; however, Lender hereby
expressly reserves the right to evaluate any determination or
resolution of the Lease Litigation in the context of the Loan
Agreement and this Agreement, and this waiver shall not in any way
be a waiver of Lender’s rights and remedies with respect to
declaring a default based on a determination or resolution in the
Lease Litigation adverse Borrower’s interests.
Neither this Agreement, nor
Lender’s agreement to perform and to permit Borrower to
perform, as provided herein, nor Lender’s enumeration of
specific events of default to the exclusion of other possible
events of default, shall be deemed to constitute a waiver of, or
consent to, any events of default which have occurred, may have
occurred, or may occur in the future, nor shall any of the
foregoing be construed or deemed a reinstatement of the Credit
Facility prior to the full, faithful, and timely performance
hereunder. Nothing in this Agreement shall be implied or construed
to obligate Lender to extend this Agreement or the Early
Termination Date beyond the terms hereof. Nothing in this Agreement
shall preclude Lender from exercising fully its rights and remedies
under the Loan Agreement and otherwise, in the event of a default
hereunder or a further default under the Loan Agreement.
5. Conditions to
Lender’s Accommodations to Borrower; Waiver of Early
Termination Fee. Each of the following conditions shall
constitute an Accommodation Condition and each shall be satisfied
as a condition to Lender’s agreement to perform, and to
permit Borrower to perform, pursuant to Paragraph 4
hereof:
Exhibit 10.4
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(a) |
Borrower shall fully and duly execute this Agreement and
deliver an original of the same to Lender. |
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(b) |
Simultaneously with the execution and delivery of this
Agreement by Borrower to Lender, Borrower shall pay to Lender a fee
in the amount of $150,000.00 (the “Modification Fee”)
in consideration for Lender’s agreements as provided herein,
which Modification Fee shall be non-refundable and fully earned as
of the date of payment thereof. |
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(c) |
As of the later to occur of (i) the date of execution and
delivery of this Agreement by Borrower to Lender or (ii) the
third Business Day after each such name change becomes effective,
Borrower shall deliver to Lender true and correct copies of all
Amendments to the Certificates of Incorporation of each of Borrower
Z-Tel Technologies, Inc. and Z-Tel Communications, Inc. filed with
the Delaware Secretary of State and evidencing the name changes as
described herein. |
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(d) |
Immediately upon consummation of the sale of the Delinquent
Accounts, Borrower shall deposit into the Lockbox, all proceeds
from the sale of the Delinquent Accounts. |
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(e) |
Borrower shall fully, faithfully and timely comply with all of
the obligations, covenants, terms, and provisions of this Agreement
and the Loan Documents, including without limitation the payment of
the Annual Facility Fee as required under the Loan Agreement as
modified herein, and excepting any obligations, covenants, terms,
and/or conditions which Lender has expressly waived or agreed to
forbear. |
Upon Borrower’s irrevocable
payment to Lender in full of all Obligations on or before the Early
Termination Date as provided herein, Lender shall waive any and all
right to charge and collect the Early Termination Fee.
6. Modification of Annual
Facility Fee Payment Schedule . As set forth in the Loan
Agreement, an Annual Facility Fee in an amount equal to one and
one-half percent (1.5%) of the Maximum Credit, in the amount of
$375,000.00, shall be fully earned by Lender and non-refundable as
of the anniversary of the Closing, which anniversary shall next
occur on April 22, 2005 (the “First Anniversary
Date”). The payment terms of such Annual Facility Fee are
hereby modified to provide that one-half of the Annual Facility Fee
shall be due and payable on April 22, 2005 and the remaining
one-half of the Annual Facility Fee shall be due and payable on
May 31, 2005; provided, however, that (i) in the event
Borrower shall irrevocably pay in full all Obligations prior to the
First Anniversary Date, no Annual Facility Fee shall be due; and
(ii) in the event Borrower shall irrevocably pay in full all
Obligations after the First Anniversary Date but prior to
May 31, 2005, Lender shall waive the second half of the Annual
Facility Fee.
7. Reduction of Reserves
. Upon Borrower’s satisfaction of the Accommodation
Conditions described in subparagraphs (a) and (b) of
Paragraph 5 hereof, Lender shall reduce its then-existing
Reserves by $600,000.00.
8. Termination of
Lender’s Accommodations to Borrower. Lender’s
agreement to perform, and to permit Borrower to perform, as
provided herein shall terminate on the earliest to occur of:
Exhibit 10.4
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(a) |
Borrower’s failure or refusal to pay to Lender the
Obligations in full on or before the Early Termination Date as
provided herein; |
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(b) |
The failure by Borrower to observe, satisfy, or continue any of
the A |
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