Incomnet Announces Extension of Forbearance Agreement With WorldCom and First Bank; Extension of Board Change Agreement

Business Wire, Sept 25, 1998

WOODLAND HILLS, Calif.--(BUSINESS WIRE)--Sept. 25, 1998--Incomnet Inc. (Nasdaq:ICNT) Friday announced that WorldCom Network Services and First Bank & Trust of Newport Beach, Calif., have agreed to continue to forbear until Oct. 30, 1998, from taking any action with respect to current defaults by National Telephone & Communications Inc. (NTC), the company's principal subsidiary, under NTC's respective agreements with them.

WorldCom is the provider of all of NTC's telecommunication services, and First Bank is NTC's primary lender. The agreement, which is subject to the satisfaction of certain conditions, includes continued forbearance by WorldCom from taking any action to implement WorldCom's notice of intent to disconnect all of NTC's telecommunication services no later than Aug. 28, 1998.

WorldCom and First Bank had previously agreed to forebear until Sept. 25, 1998, from taking any actions with respect to NTC's defaults.

Under the extended forbearance agreement, NTC must make payments to First Bank of $800,000 on each of Sept. 25 and Oct. 2, 1998, and must make a payment of approximately $2.2 million plus finance charges to WorldCom on Sept. 30, 1998. The extended forbearance agreement also requires that on or before Oct. 2, 1998.

John P. Casey, the company's largest shareholder, must provide written notice that the change in the composition of the company's board of directors described below has occurred, that the new board of directors is in control of the company and NTC, and that an equity investment of at least $10 million into NTC has been arranged for completion by no later than Oct. 30, 1998.

The extended forbearance agreement also provides that a potential lender to NTC, with whom NTC is in discussions regarding a secured credit facility, must provide its response on or before Oct. 2, 1998, as to whether it will provide financing to NTC.

If any of these conditions is not satisfied on a timely basis, or if such lender rejects NTC's proposal for financing, WorldCom's and First Bank's forbearances will immediately terminate. If these conditions are satisfied and the lender agrees to provide financing, then both WorldCom and First Bank will continue to forbear until Oct. 30, 1998.

The company and Casey are continuing their efforts to seek new equity and/or debt financing in order to recapitalize the company's and NTC's operations and to satisfy its obligations to WorldCom and First Bank, although no assurances can be given that these efforts will be successful or that the other conditions to WorldCom's and First Bank's continued forbearance will be satisfied.

NTC has received a written proposal from the potential lender expressing its interest in providing financing to NTC, but the lender has not committed to provide financing to NTC and there can be no assurance that such financing will be forthcoming.

If the WorldCom forbearance terminates, WorldCom could terminate providing NTC's telecommunications services, in which case NTC would be unable to continue to provide telecommunications services to its customers.

As previously announced, the company has entered into an agreement with Casey which will result in a change in the composition of the company's board of directors.

The agreement provides for the resignation of five of the company's six current directors, including Melvyn Reznick, the company's chairman of the board, and the appointment of a 4-person board consisting of Casey and two of his designees, and Howard Silverman, who is currently a member of the company's board of directors.

In connection with the extension of the forbearance agreements from WorldCom and First Bank, the company and Casey have established Oct. 2, 1998, as the target date for the consummation of the board change.

The consummation of the board change and the other matters provided for in the board change agreement are subject to various conditions, including execution of a satisfactory settlement agreement among the named parties to the company's pending securities class action lawsuit and the withdrawal by WorldCom on satisfactory terms of its notice of intent to terminate the telecommunications services offered by NTC.

No assurances can be given that the conditions to the board change will be satisfied. As set forth above, the consummation of the board change on or before Oct. 2, 1998, is a condition to continued forbearance by WorldCom and First Bank.