WRITTEN WAIVER AND AMENDMENT NO. 5
 
TO
 
CREDIT AND SECURITY AGREEMENT
 
THIS WRITTEN WAIVER AND AMENDMENT NO. 5 (this “Amendment”) is entered into as of
November 14, 2006, by and among OBLIO TELECOM, INC., a Delaware corporation
(“Oblio”), each of its direct and indirect subsidiaries signatory hereto (Oblio
and each such subsidiary are referred to, individually and collectively, jointly
and severally as the “Borrower”), the other Credit Parties signatory hereto and
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (the “Lender”).
 
BACKGROUND
 
Borrower and Lender entered into a Credit and Security Agreement dated as of
August 12, 2005, as amended by Waiver and Amendment No. 1 dated as of December
13, 2005, Waiver and Amendment No. 2 dated as of March 8, 2006, Waiver and
Amendment No. 3 dated as of May 19, 2006 and Waiver and Amendment No. 4 dated as
of August 7, 2006 (as amended, restated, supplemented or otherwise modified from
time to time, the “Loan Agreement”) pursuant to which Lender provided Borrower
with certain financial accommodations.
 
The Borrower has requested that Lender make certain amendments to the Loan
Agreement, and Lender is willing to do so on the terms and conditions hereafter
set forth.
 
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrower by Lender, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
 
1.  Definitions. All capitalized terms not otherwise defined herein shall have
the meanings given to them in the Loan Agreement.
 
2.  Acknowledgement. Each Credit Party hereby affirms and acknowledges that (a)
as of November 13, 2006, there is presently due and owing to Lender the
principal amounts of $7,083,286.68 with respect to the Revolving Facility,
$3,283,333.33 with respect to Term Loan A and $2,666,670.00 with respect to Term
Loan B, in each case together with interest, costs, fees (including without
limitation, the accrued Non-Compliance Fee) and expenses (collectively, the
“Amount”), (b) the Amount is due and owing without defense, offset or
counterclaim of any kind or nature whatsoever, and (c) the Loan Documents are
and shall continue to be legal, valid and binding obligations and agreements of
such Credit Party enforceable in accordance with their respective terms and
secured by first priority perfected Liens on the Collateral in favor of Lender.
 
3.  Waiver. From time to time, Borrower and Lender have had discussions
regarding certain Events of Default (the “Designated Events of Default”) that
have occurred under the Loan Agreement which Lender may have orally waived.
Borrower and Lender desire to specify in writing the Designated Events of
Default as (i) a breach of Section 8.1(i) as a result of Borrower’s suspension
or termination of its prepaid phone card contract with AT&T over Borrower and
AT&T’s dispute over Borrower’s payment of FET and USF payments to AT&T, (ii)
Credit Parties’ noncompliance with Section 6.1(a)(ii) for the months of July,
August and September, 2006 due to open audit issues in seeking concurrence from
Borrower’s independent auditor related to the application of FET and USF tax
recoveries in compliance with generally accepted accounting principals, and
(iii) the failure of Borrower to accurately report Eligible Receivables due to
Borrower’s unintentional understatement of ineligible Accounts prior to the date
of this Amendment; upon Lender advising Borrower of this reporting error,
Borrower promptly corrected its calculations. Subject to the provisions set
forth in this Amendment, Lender hereby provides written waiver of the Designated
Events of Default. This written waiver is limited to the Designated Events of
Default and shall not constitute a written waiver of any other Event of Default.
Except for the foregoing written waiver and the amendments set forth below, the
Loan Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed by Borrower.
 
 
 

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4.  Amendment to Loan Agreement.
 
Subject to the satisfaction of the conditions precedent set forth in Section 7
below, the Loan Agreement is hereby amended as follows:
 

(a)  The definition of “Eligible Receivables” in Appendix A to the Loan
Agreement is hereby amended by amending clause (h) thereof in its entirety to
read as follows:
 
“(h) with respect to all Accounts owed by any particular Account Debtor and/or
its Affiliates, if such Accounts exceed 20% of the net collectible dollar value
of all Eligible Receivables at any one time (which percentage may, in Lender’s
sole discretion, be increased or decreased); provided, however, from the
Amendment No. 1 Effective Date through and including November 30, 2006, Accounts
owed by Pacific Telecom shall not be deemed ineligible solely by virtue of this
clause (h) so long as the aggregate net collectible value of such Accounts does
not exceed $3,437,000;”

(b)  Appendix A to the Loan Agreement is hereby amended by inserting the
following defined terms in their appropriate alphabetical order to provide as
follows:
 
“Amendment No. 5” shall mean Amendment No. 5 to Credit and Security Agreement
dated as of November 14, 2006.

“Amendment No. 5 Effective Date” shall mean November 14, 2006.

5.  Additional Covenants. Borrower, jointly and severally, covenants and agrees
that, until full performance and satisfaction, and indefeasible payment in full
in cash, of all the Obligations and termination of the Loan Agreement, it shall
satisfy and comply with each of the following covenants and agreements, and
Borrower acknowledges and agrees that the failure to so comply as and when
required herein shall result in an Event of Default:
 
 
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(a)  Equity Raise. By not later than December 31, 2006, Borrower shall have
raised and received additional cash equity (either via a cash equity
contribution from Parent or otherwise) or subordinated debt, subordinated to the
Obligations by written agreement in form and substance and subject to
subordination or intercreditor terms acceptable to Lender, in an aggregate
amount of not less than Five Million Dollars ($5,000,000) (the “Raise”).
Borrower acknowledges and agrees that the Raise is consistent with the sound
exercise of Borrower’s fiduciary duties based upon Borrower’s current business
operations and financial condition, and in furtherance thereof, Borrower agrees
to obtain Lender’s prior written consent with respect to the Borrower’s use of
such Raise.
 
(b)  Budget; Consultant; Variances.
 
(i)  Borrower acknowledges and agrees that Lender may engage a management
consultant acceptable to Lender (the “Consultant”), for the purpose of analyzing
Borrower’s finances and operations and providing advise and consultation to
Lender. The Consultant shall be engaged at Borrower’s sole cost and expense.
Borrower shall give the Consultant access to such books and records of Borrower
and members of management of Borrower as the Consultant may reasonably request
in order to enable the Consultant to analyze the financial and operational
information of the Borrower.
 
(ii)  Lender has received a thirteen week cash budget and business plan attached
hereto as Exhibit A (the “Budget”), which Budget was prepared by management of
Borrower and was accompanied by a certificate signed by the President or Chief
Financial Officer of Borrower to the effect that such Budget has been prepared
on a basis consistent with past budgets and financial statements and that such
officer has no reason to question the reasonableness of any material assumptions
on which such projections were prepared. On the first day of each calendar
month, Borrower shall provide Lender with a revised Budget acceptable to Lender
for the ensuing thirteen (13) week period which must be approved in writing by
Lender. A failure of Borrower to comply with the Budget for any weekly period
shall constitute an Event of Default under the Loan Agreement.
 
(iii)  Borrower shall provide to Lender by 12:00 p.m. EST on Wednesday of each
week (commencing with November 8, 2006) with a written report (“Variance
Report”), in form and substance satisfactory to Lender, analyzing the variances
between the actual results of Borrower for the immediately preceding week and
the cumulative weekly periods then ended to the applicable amounts set forth in
the Budget.
 
(iv)  Borrower shall provide Lender the monthly financial statements and
Compliance Certificate required by Section 6.1(a)(ii) of the Loan Agreement (x)
by November 15, 2006 for the months of July and August, 2006, and (y) by
November 30, 2006, for the months of September and October, 2006.
 
(c)  Reporting. Borrower shall diligently comply with each of the reporting
requirements set forth in Section 6.1 of the Loan Agreement, including
delivering a Borrowing Certificate prepared and delivered in accordance with
Section 2.4 of the Loan Agreement.
 
 
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(d)  Lockbox Notices. By not later than (i) November 15, 2006, Borrower shall
have sent written notifications to each of its ten (10) largest Account Debtors
directing them to make all payments directly to a Lockbox Account and (ii)
November 30, 2006, Borrower shall have sent written notifications to all other
Account Debtors directing them to make all payments directly to a Lockbox
Account, in each case as required pursuant to Section 2.5 of the Loan Agreement.
Borrower shall provide Lender copies of each such notice and such other evidence
as Lender may require to confirm the delivery thereof to the Account Debtors.
 
6.  Waiver of Minimum Termination Fee. Notwithstanding Section 11.1(b) of the
Loan Agreement or any other provision of the Loan Agreement, in the event the
Obligations are indefeasibly repaid in full in cash by December 31, 2006, Lender
shall waive payment of the applicable Minimum Termination Fee. If the
Obligations are not repaid as provided above, then Borrower shall pay the
Minimum Termination Fee as and when required in the Loan Agreement.
 
7.  Conditions of Effectiveness. This Amendment shall become effective upon
Lender’s receipt of the following items in form and substance satisfactory to
Lender and its counsel:
 
(a)  four (4) copies of this Amendment duly executed by Borrower;
 
(b)  executed joint and several guaranties from Frank Crivello and David Marks
in form acceptable to Lender, including a representation by each of them as to
their combined minimum net worth at the time of execution of the guaranties
being at least $5,000,000;
 
(c)  Borrower shall pay all costs, fees and expenses of Lender (including the
reasonable costs, fees and expenses of Lender’s in-house and outside counsel)
incurred by Lender in connection with the negotiation, preparation and closing
of this Amendment; and
 
(d)  such other certificates, instruments, documents and agreements as may be
required by Lender or its counsel.
 
Upon the satisfaction of the foregoing conditions Lender will release the
collateral pledge of the securities of Farwell Equity Partners, LLC.
 
8.  Representations and Warranties.
 
Each Credit Party hereby jointly and severally represents, warrants and
covenants to Lender that:
 
(a)  This Amendment and the Loan Agreement, as amended hereby, constitute legal,
valid and binding obligations of such Credit Party and are enforceable against
such Credit Party in accordance with their respective terms.
 
(b)  Upon the effectiveness of this Amendment, it hereby reaffirms all
covenants, representations and warranties made in the Loan Agreement and the
other Loan Documents to which it is a party to the extent the same are not
amended hereby and agree that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date of this Amendment.
 
 
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(c)  No Event of Default or Default has occurred and is continuing or would
exist after giving effect to the waiver provided in this Amendment.
 
(d)  it has no defense, counterclaim or offset with respect to the Loan
Agreement or any other Loan Document to which it is a party.
 
9.  Effect on the Loan Agreement.
 
(a)  Upon the effectiveness of this Amendment, each reference in the Loan
Agreement or any other Loan Document to “this Agreement,” “hereunder,” “hereof,”
“herein” or words of like import shall mean and be a reference to the Loan
Agreement or the applicable Loan Documents as amended hereby.
 
(b)  Except as set forth in Section 3 of this Amendment, the execution, delivery
and effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of Lender, nor constitute a waiver of any provision of the Loan
Agreement, or any other Loan Documents.
 
10.  Release. Each Credit Party, both individually and on behalf of its
Affiliates, hereby releases, remises, acquits and forever discharges Lender and
its employees, agents, representatives, consultants, attorneys, fiduciaries,
servants, officers, directors, partners, predecessors, successors and assigns,
subsidiary corporations, parent corporations, Affiliates and related corporate
divisions (all of the foregoing hereinafter called the “Released Parties”), from
any and all actions and causes of action, judgments, executions, suits, debts,
claims, counterclaims, demands, obligations, damages and expenses of any and
every character, known or unknown, direct and/or indirect, at law or in equity,
of whatsoever kind or nature, for or because of any matter or things done,
omitted or suffered to be done by any of the Released Parties prior to and
including the date of execution hereof, and in any way directly or indirectly
arising out of or in any way connected to the Loan Agreement, this Amendment and
the other Loan Documents (all of the foregoing hereinafter called the “Released
Matters”). Each Credit Party, both individually and on behalf of its Affiliates,
acknowledges that the agreements in this Section are intended to be in full
satisfaction of all or any alleged injuries or damages arising in connection
with the Released Matters. Each Credit Party agrees to indemnify and hold
harmless the Released Parties with respect to any action brought on behalf of
any of its Affiliates with respect to any of the Released Matters.
 
11.  Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Maryland without giving effect
to its choice of law provisions. Any judicial proceeding against Borrower with
respect to the Obligations, any Loan Document (including this Amendment) or any
related agreement may be brought in any federal or state court of competent
jurisdiction located in the State of Maryland. Any judicial proceedings against
Lender involving, directly or indirectly, the Obligations, any Loan Document or
any related agreement shall be brought only in a federal or state court located
in the State of Maryland. All parties acknowledge that they participated in the
negotiation and drafting of this Agreement with the assistance of counsel and
that, accordingly, no party shall move or petition a court construing this
Agreement to construe it more stringently against one party than against any
other.
 
 
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12.  Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
 
13.  Counterparts; Facsimile.
 
This Amendment may be executed by the parties hereto in one or more
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.

[SIGNATURE PAGE FOLLOWS]
 

60522064_2
 
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IN WITNESS WHEREOF, each of the parties has duly executed this Amendment No. 5
as of the date first written above.

        CAPITALSOURCE FINANCE LLC  
   
   
    By:   /s/ AKIM GRATE  

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Name: Akim Grate  
Its: Portfolio Manager
  Title 

        OBLIO TELECOM, INC.  
   
   
    By:   /s/ KURT JENSEN  

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Name: Kurt Jensen
Its: President and CEO
   

        PINLESS, INC.  
   
   
    By:   /s/ KURT JENSEN  

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Name: Kurt Jensen
Its: President and CEO
   

 

       
ACKNOWLEDGED AND AGREED:
 
TITAN GLOBAL HOLDINGS, INC.
     
   
   
   By: /s/ BRYAN CHANCE       

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Name: Bryan Chance
Title: President

 

       
FARWELL EQUITY PARTNERS, LLC
 
   By: /s/ DAVID MARKS       

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Name: David Marks
Its: Managing Member
     

 

       
 
    /s/ FRANK CRIVELLO       

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Frank Crivello
        /s/ DAVID MARKS    

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David Marks  

 

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