FINOVA
FINANCIAL INNOVATORS
RONALD S. MONTGOMERY
VICE PRESIDENT
FINOVA CAPITAL CORPORATION
CORPORATE FINANCE
BUSINESS CREDIT
January 2, 2001
355 SOUTH GRAND AVENUE
SUITE 2400
LOS ANGELES, CA 90071
Mr. Dan Madero
Director Of Operations TEL 213 253 1606
TELCO BILLING, INC. FAX 213 625 2468
4840 East Jasmine Street, Suite 105 www.finova.com
Mesa, Az 85205
Re: Forbearance Letter Agreement re Events of Default under Loan and
Security Agreement dated August 31, 1999 (as amended from time to time, the
"Loan Agreement"; Capitalized terms used herein shall have the meanings
given in the Loan Agreement unless otherwise defined) between Telco
Billing, Inc. ("Borrower") and FINOVA Capital Corporation ("FINOVA") as
successor by merger to Fremont Financial Corporation
Dear Mr. Madero,
This Amendment to Forbearance Letter Agreement (this "Agreement") is being
entered into by and between FINOVA and Borrower with reference to the following:
A On or about August 31, 1999, Borrower and FIND VA entered into a
$3,000,000 credit facility (the "Credit Facility"), as evidenced by the Loan
Agreement, consisting of a revolving credit line up to a maximum amount of
$3,000,000. In connection with the Credit Facility, YP. Net, Inc., formerly
known as RIGL Corporation, ("Guarantor") executed a Continuing Guaranty
("Guaranty") dated August 31. 1999, in favor of FINOVA, guarantying all
Obligations.
B. The Loan Agreement, the Guaranty and all other Loan Documents are
collectively referred to herein as the 'Loan Documents".
C. Certain Events of Default occurred under the Loan Agreement and FINOVA
agreed to forbear from exercising its rights and remedies in exchange for
certain concessions from Borrower as more fully described in that certain Letter
Agreement dated August 4, 2000 between FIND VA and Borrower ("Forbearance
Agreement").
D. Pursuant to the Forbearance Agreement, FINOVA agreed to forbear from
exercising its rights and remedies, subject to the conditions set forth in the
Forbearance Agreement, until October 3, 2000. Such forbearance period was
subsequently amended by various letter amendments until January 4, 2001.
E. Borrower has requested FINOVA to further extend the forbearance period
for an additional period of time to allow Borrower additional time to obtain
financing sufficient to fully repay the Obligations. FINOVA is willing to extend
the forbearance period under the terms of this Agreement.
<PAGE>
TELCO BILLING, INC.
1/2/01
Page 2
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, FINOVA and Borrower agree as follows:
1. Acknowledgement of Factual Recitals. The parties acknowledge the truth,
-------------------------------------
accuracy and validity of the foregoing factual recitals and incorporate the
same into this Agreement.
2. Acknowledgment of Validity and Enforceability of Loan
-----------------------------------------------------------
Documents and Obligations. Borrower acknowledges and agrees that the Loan
Agreement and other Loan Documents are valid and enforceable according to
their terms. As of January 2, 2001 the total amount of the outstanding
principal balance of the Revolving Advances is approximately $l.214.106.42
-------------
plus all accrued but unpaid interest, fees and charges.
3. Acknowledgment of Validity of Security interest. Borrower acknowledges the
-----------------------------------------------
validity of FINOVA's security interest in the Collateral and acknowledges
that the Collateral continues to secure all of the Obligations.
4. Acknowledgement of Defaults. Borrower acknowledges that Events of Default
---------------------------
exist under the Loan Documents and that, but for this Agreement, FIND VA
could exercise all of its rights available thereunder or at law or in
equity.
5. No Defenses. Borrower acknowledges that it has no valid offset or defense
-----------
to the Obligations now or hereafter owing under the Loan Agreement, nor
does Borrower have any valid claim against FIND VA and, therefore, admits
and confirms that it does not have any legal right or theory on which to
invoke or obtain any legal or equitable relief to abate, postpone or
terminate FINOVA's enforcement of its rights to repayment of obligations
now or hereafter owing under the Loan Agreement and specifically waives and
relinquishes any such right to legal or equitable relief to cause any
abatement, postponement or termination of any enforcement proceedings
commenced by FINOVA.
6. Reaffirmation of Loan Documents. Borrower and, where applicable,
----------------------------------
Guarantor, each reaffirms and ratifies the terms of the Loan Documents in
all respects. Except as specifically provided herein, Borrower acknowledges
that nothing in this Agreement shall (a) be construct to limit or restrict
FIND VA from exercising its rights and remedies under the Loan Documents
with respect to any other defaults thereunder or with respect to any
default by Borrower in the performance of its obligations hereunder, or (b)
relieve or release Borrower from any of the obligations, covenants or
provisions required to be performed or observed under the Loan Documents or
hereunder.
7. Forbearance.
-----------
(a) Forbearance Period. Provided Borrower performs all terms arid
--------------------
conditions in this Agreement, and no Events of Default other than
those referenced in the Default Letters (as defined in the Forbearance
Agreement) shall have occurred under the Loan Agreement. FINOVA shall
forbear from exercising its rights and remedies under the Loan
Documents until February 7, 2001 (the "Forbearance Termination Date").
Upon the earliest to occur of (i) the Forbearance Termination Date,
(ii) the occurrence of an Event of Default or (iii) a breach by
Borrower of the terms and conditions of this Agreement, all
Obligations shall be immediately due and payable and FIND VA may
<PAGE>
TELCO BILLING, INC.
1/2101
Page 3
resort to all rights and remedies available under the Loan Documents,
at law and/or in equity.
(b) Forbearance Terms. During the period this Agreement is in effect, the
-----------------
following terms shall apply:
(i) Section 2. 1A of the Loan Agreement shall he deleted in its
entirety and replaced with the following:
A. REVOLVING ADVANCES. Upon request of' Borrower made
at any time during the term hereof and so long as no Event
of Default exists, FIND VA shall, at its sole discretion,
make advances (Revolving Advances) to Borrower in an amount
equal to (a) fifty percent (50%) of the aggregate
outstanding amount of Eligible Accounts; provided, however,
that in no event shall the aggregate amount of the
outstanding Revolving Advances be greater than the sum of
One Million Dollars ($1,000,000) (the Revolving Advance
Limit). FINOVA may reduce its advance rates on Eligible
Accounts, reduce the Revolving Advance Limit, or establish
reserves with respect to borrowing availability if FINOVA
determines, in its sole discretion, that there has occurred,
or is likely to occur, an impairment of the prospect of
repayment of all or any portion of the Obligations, the
value of the Collateral or the validity or priority of
FINOVA's security interests in the Collateral.
(ii) No less than one week before the beginning of each month,
Borrower shall provide FINOVA with a monthly budget for the next month
setting forth in detail, on a week by week basis, all of the expenses
to be paid by Borrower during the next month and such other
information as FIND VA shall request Revolving Advances will only he
made by FINOVA to Borrower to the extent necessary to fund the items
on such budgets which are permitted to be paid pursuant to the Loan
Agreement and which FINOVA is satisfied are necessary for Borrower to
conduct its daily operations.
(iii) Interest on the outstanding Obligations shall continue to
accrue at the default rate as provided in Section 2.5A of the Loan
Agreement.
8. Conditions Precedent. FINOVA's agreement to enter into this Agreement and
--------------------
grant the forbearance provided herein is expressly conditioned on Borrower
executing and delivering this Agreement to FIND VA and causing Guarantor to
execute and deliver an acknowledgment and reaffirmation of the Guaranty and
the release provided herein, on or before 5:00 p.m. California time on
January 5,2001.
9. Default. Failure by Borrower to comply with all terms and conditions of
-------
this Agreement shall constitute a default hereunder, following which FINOVA
may, without notice to Borrower, resort to all rights and remedies
available under the Loan Documents, at law and/or in equity, including
without limitation the liquidation of all Collateral. Borrower agrees that,
upon such event of default, Borrower shall cooperate with FINOVA in orderly
liquidating the Collateral and in the exercise of all of FINOVA's rights as
a secured lender.
<PAGE>
TELCO BILLING, INC.
1/2/02
Page 4
10. No Further Forbearance Borrower acknowledges FINOVA is not obligated to
----------------------
grant further extensions beyond the Forbearance Termination Date and that
no such commitment has been communicated.
11. RELEASE. BORROWER AND GUARANTOR, AND THEIR RESPECTIVE OFFICERS,
-------
DIRECTORS, REPRESENTATIVES, EMPLOYEES, PREDECESSORS, SUCCESSORS, AGENTS AND
ASSIGNS (COLLECTIVELY, "RELEASING PARTIES") EACH HEREBY RELEASE, REMISE AND
FOREVER DISCHARGE FINOVA, AND ITS OFFICERS, DIRECTORS, EMPLOYEES,
PREDECESSORS, SUCCESSORS, AGENTS AND ASSIGNS (COLLECTIVELY "RELEASED
PARTIES"), FROM ANY AND ALL CLAIMS, DEMANDS, ACTIONS, CAUSE OR CAUSES OF
ACTION HERETOFORE ARISING OUT OF, OR CONNECTED WITH OR INCIDENTAL TO THE
LOAN AGREEMENT OR ANY LOAN DOCUMENTS. THIS GENERAL RELEASE IS INTENDED TO
BE A FULL AND COMPLETE RELEASE OF ANY SUCH CLAIMS, DEMANDS, ACTIONS, CAUSE
OR CAUSES OF ACTION CONNECTED IN ANY WAY TO THE LOAN AGREEMENT AND WHICH
HAVE HERETOFORE ARISEN.
RELEASING PARTIES EACH ACKNOWLEDGE AND AGREE THAT THEY ARE AWARE THAT THEY
MAY HEREAFTER DISCOVER CLAIMS PRESENTLY UNKNOWN OR UNSUSPECTED, OR FACTS IN
ADDITION TO OR DIFFERENT FROM THOSE WHICH THEY NOW KNOW OR BELIEVE TO BE
TRUE. NEVERTHELESS, IT IS THE INTENTION OF THE RELEASING PARTIES, AND EACH
OF THEM, THROUGH THIS AGREEMENT, TO FULLY, FINALLY AND FOREVER RELEASE ALL
SUCH MATTERS AND CLAIMS RELATIVE THERETO, WHICH DO NOW EXIST, MAY EXIST, OR
HERETOFORE HAVE EXISTED. IN THIS REGARD, RELEASING PARTIES SPECIFICALLY
WAIVE THE BENEFIT OF THE PROVISIONS OF SECTION 1542 OF THE CIVIL CODE OF
THE STATE OF CALIFORNIA, WHICH 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 THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE UNILATERALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.",
/s/ DM, DOO /s/ AK, Chairman
-------------------- ---------------------
Borrower's Initials Guarantor's Initials
<PAGE>
TELCO BILLING, INC.
1/2101
Page 5
12. Fee. In consideration of the extension to the forbearance period granted
---
hereby, Borrower shall pay to FINOVA a fee of Ten Thousand Dollars
($10,000), which shall be fully earned and due and payable on the date
hereof.
13. Representations and Warranties of Borrower and Guarantor. To induce
-------------------------------------------------------------
FINOVA to execute and deliver this Agreement, each of Borrower and
Guarantor represent and warrant that:
(a) The execution, delivery and performance by Borrower and Guarantor, as
the case may be, of this Agreement, and all documents and instruments
delivered in connection herewith and therewith have been duly
authorized; and
(b) Neither the execution, delivery or performance of this Agreement or
any of the documents or instruments delivered in connection herewith
or therewith nor the consummation of the transactions contemplated
hereby or thereby does or shall contravene, result in a breach of, or
violate (i) any provision of Borrower's or Guarantor's corporate
charter or bylaws or other governing documents, (ii) any law or
regulation or any order or decree of any court or any governmental
instrumentality or (iii) any indenture, mortgage, deed of trust, lease
agreement or other instrument to which Borrower or Guarantor is a
party or by which any of their property is bound.
14. Miscellaneous.
-------------
(a) This Agreement, the Forbearance Agreement and the Loan Documents
constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supercedes any prior oral or written
agreements concerning the same. Except as expressly amended hereby,
and of the terms of the Loan Agreement, the Forbearance Agreement and
other Loan Documents remain in full force and effect.
(b) In the event any Legal action is commenced to enforce or interpret any
provision of this Agreement, the prevailing party in such legal
action, as determined by a court of competent jurisdiction, shall be
entitled to receive from the other party the prevailing party's
reasonable attorneys' fees and court costs.
(c) This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which, when taken together, shall
constitute one and the same document.
(d) The parties have retained, or have had the opportunity to retain,
counsel to represent them in the transactions contemplated in this
Agreement, have read and understand this Agreement and, therefore, the
principle of construction against draftsmen shall have no application
in the interpretation of this Agreement.
(e) GOVERNING LAW WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT LIMITATION
----------------------
ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF
THE STATE OF CALIFORNIA GOVERNING CONTRACTS TO BE. PERFORMED ENTIRELY
WITHIN SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT
<PAGE>
TELCO BILLING. INC
1/2/01
Page 6
LOCATED WITHIN THE COUNTY OF LOS ANGELES IN The STATE OF CALIFORNIA
OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN Which FINOVA
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER WAIVES
ANY OBJECTION OF FORUM NON CONVENES AND VENUE. BORROWER FURTHER WAIVES
ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT
ENTERED AGAINST IT.
(f) MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
---------------------------------------
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS
AGREEMENT; (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT
BETWEEN FINOVA AND BORROWER; OR (III) ANY CONDUCT, ACTS OR OMISSIONS
OF FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH FINOVA OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
(g) The invalidity, illegality, or unenforceability of any provision in or
obligation under this Agreement in any jurisdiction shall not affect
or impair the validity, legality, or enforceability of the remaining
provisions or obligations under this Agreement or of such provision or
obligation in any other jurisdiction.
(h) Each of the Borrower and Guarantor agrees to take all further actions
and execute all further documents as FINOVA may from time to time
reasonably request to carry out the transactions contemplated by this
Agreement.
WHEREFORE, the parties have entered into this Agreement on the date first
written above.
TELCO Billing, INC.
By: /s/ Daniel Madero DOO
------------------------
Name: Daniel Madero
Title:, Director of Operations
FINOVA CAPITAL CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
TELCO BILLING, INC.
1/2/01
Page 7
Guarantor's Acknowledgment
--------------------------
The undersigned Guarantor consents and agrees to the terms of this Agreement and
reaffirms and restates in all respects the Continuing Guaranty executed in
connection with the Loan Agreement and agrees that it remains unconditionally
liable for the prompt payment and performance of all of the Liabilities (as
defined in such Continuing Guaranty), without defense, claim, counterclaim or
setoff of any nature.
YP.NET INC.
By: /s/ Angello Tullo Chairman
-----------------------------
Name: Angello Tullo
Title: Chairman
<PAGE>
