Exhibit 99(i)
MEDCROSS, INC. (I-LINK)
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June 6, 1997
Term Sheet for Proposed Equity Investment
by Winter Harbor, L.L.C.
Issuer.............................. Medcross, Inc. (to be renamed "I-Link
Communications, Inc."), a Florida
corporation ("I-Link").
Investor............................ Winter Harbor, L.L.C., a Delaware
limited liability company, or an
affiliate of First Media, L.P., its
sole member, controlled by the
controlling stockholder of First
Media's sole general partner ("Winter
Harbor")
Debt Investment..................... Winter Harbor will extend to I-Link a
$2,000,000 Senior Secured Term Loan
(the "Loan"), and in connection
therewith I-Link will issue to Winter
Harbor warrants to acquire 500,000
shares of the common stock of I-Link
at an exercise price of $4.97 per
share, subject to adjustment, all on
the terms and subject to the
conditions specified in the April 11,
1997 commitment letter (including
Exhibit A thereto) between Winter
Harbor and I-Link, as the same may be
modified from time to time.
Equity Investment................... Winter Harbor will invest $12,100,000
in a new series of I-Link
convertible, participating preferred
stock to be created (the "Series M
Preferred Stock").
Price per Share of Series M
Preferred Stock.................... $ 2.75.
Number of Shares of Series M
Preferred Stock to be Issued....... 4,400,000.
Dividends........................... The Series M Preferred Stock will be
entitled to receive cumulative
dividends in the amount of 10% per
annum before any other class of
preferred or common stock receives any
dividends. Thereafter, the Series M
Preferred Stock will participate with
the common stock in the issuance of any
dividends on a per share basis.
Liquidation Preference.............. Upon any liquidation, dissolution or
winding up of I-Link, Winter Harbor
shall be entitled to receive from
assets available for distribution to
shareholders, before any payment or
distribution to any other class of
the capital stock of I-Link, an
amount in cash (and, to the extent
sufficient cash is not available for
such payment, property at its fair
market value), equal to such amount
as, when combined with the aggregate
of all other distributions made by
I-Link to Winter Harbor, is
sufficient to effect a return to
Winter Harbor of its purchase price
for the Series M Preferred Stock
plus a cumulative preferred return
of 10% per annum compounded annually
from the closing date on its
purchase of the Series M Preferred
Stock. Thereafter, any remaining
cash or assets available for
distribution to the shareholders of
I-Link would be distributed first to
the holders of any other preferred
stock of I-Link in accordance with
the terms of I-Link's Articles of
Incorporation, and then to the
holders of the Series M Preferred
Stock and the holders of the Common
Stock on a per share basis. A
merger or consolidation of I-Link as
a result of which the shareholders
of I-Link do not continue to hold
more than a 50% interest in the
successor entity or a transaction or
series of related transactions in
which I-Link's shareholders transfer
more than 50% of the voting power of
I-Link, or a sale of all or
substantially all of its assets
shall be deemed to be a
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"liquidation, dissolution or winding up
of I-Link" for purposes of the
liquidation preference.
Voluntary Conversion................ Each share of the Series M Preferred
Stock will be convertible at any time
prior to the fifth anniversary of the
issuance thereof at the sole option
of Winter Harbor into one share of
I-Link common stock at any time at no
cost. The one-to-one conversion
factor will be appropriately adjusted
upon the happening of certain events,
such as, but not limited to, the
issuance of stock dividends, the
recapitalization of I-Link, and the
issuance of stock at less than the
fair market value thereof.
Automatic Conversion................ The Series M Preferred Stock will be
automatically converted on the fifth
anniversary of the issuance thereof
into I-Link common stock at no cost.
The conversion price shall be equal
to the lower of $2.75 per share or
50% of the average closing bid price
of the Common Stock for the ten
trading days immediately preceding
the fifth anniversary of such
issuance. The conversion price will
be appropriately adjusted upon the
happening of certain events, such as,
but not limited to, the issuance of
stock dividends, the recapitalization
of I-Link, and the issuance of stock
at less than the fair market value
thereof.
Voting Rights....................... The Series M Preferred Stock will
vote with the Common Stock on an
as-converted basis on all matters
which are submitted to a vote of the
stockholders, except those matters as
to which, by law or by the Articles
of Incorporation or By-Laws of
I-Link, the Series M Preferred Stock
is to vote as a separate class.
Appointment of Directors............ The Series M Preferred Stock will
have the right to appoint two
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directors to the I-Link Board of
Directors.
Consummation of Equity Upon the closing of the issuance of
Offering............................ the Series M Preferred Stock, Winter
Harbor shall be entitled to a credit
against the purchase price of the
Series M Preferred Stock in the
amount of principal and accrued
interest under the Loan; and the
notes evidencing the Loan shall be
cancelled.
Additional Warrants................. As additional consideration for its
equity financing commitments, Winter
Harbor will be issued additional
warrants by I-Link to acquire (a)
2,500,000 shares of the common stock
of I-Link at an exercise price of
$2.75 per share, subject to
adjustment (the "Series A
Warrants"), (b) 2,500,000 shares of
the common stock of I-Link at an
exercise price of $4.00 per share,
subject to adjustment (the "Series B
Warrants") and (c) 5,000,000 shares
of the common stock of I-Link at an
exercise price of $9.31, subject to
adjustment (the "Series C Warrants"
and, together with the Series A
Warrants and the Series B Warrants,
collectively, the "Warrants"). The
Series A Warrants will be
exercisable at any time during the
thirty month period following the
date of issuance, and the Series B
Warrants and the Series C Warrants
will be exercisable at any time
during the five-year period
following the date of issuance. All
of the Warrants (i) will have
registration rights and
anti-dilution protection as
summarized below, and (ii) will
contain a standard cashless exercise
provision.
Antidilution The exercise price of the Warrants
Provisions.......................... and the number of shares of I-Link
common stock to be issued upon
conversion of the Series M
Preferred
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Stock and upon exercise of
the Warrants shall be subject to
adjustment to prevent dilution (i)
in the event that I-Link issues
additional shares of common stock
(except for the issuance of common
stock upon the conversion of
existing shares of I-Link Class B or
Class C preferred stock, and except
for the issuance of shares pursuant
to existing warrants or employee
stock benefit programs); (ii) in the
event that I-Link issues other
securities convertible into or
exchangeable for shares of I-Link's
common stock; and (iii) upon stock
splits, stock dividends,
combinations, recapitalizations,
reclassifications or other similar
events; provided, however, that if
I-Link issues common stock in
connection with an acquisition or
other transaction, in either case
approved in writing by Winter
Harbor, then the adjustment required
by this paragraph shall not be made
unless I-Link agrees to such
adjustment in connection with
obtaining Winter Harbor's consent to
such acquisition or other
transaction. The exercise price for
each of the Warrants shall be
adjusted on a "full ratchet" basis
in the cases of (i) and (ii) above
when the issuance of the securities
described therein occurs at a price
per share that is less than the
exercise price of such Warrant (as
such exercise price amount may be
further adjusted). In addition, if,
as of the time of exercise of any
Series B Warrant or Series C
Warrant, the average closing bid
price of the I-Link common stock for
the five trading days immediately
preceding the date of exercise is
less than the stated exercise price
of such Warrant, then the exercise
price of such Warrant shall be
reduced to such average closing bid
price; provided, however, that in no
event will the
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exercise price of the Series B
Warrants or the Series C Warrants
fall below $2.75 as a result of the
application of this sentence.
Covenants........................... The purchase agreement for the Series M
Preferred Stock, or the designation of
the terms of the Series M Preferred
Stock or other documents or instruments
acceptable to Winter Harbor, shall
provide that neither I-Link nor any of
its subsidiaries shall take any of the
following actions without the prior
written consent of Winter Harbor:
(i) the creation, authorization,
designation or issuance of any class or
series of equity securities;
(ii) any merger, recapitalization or
consolidation with or into any other
entity, or the sale, lease or other
disposition of all or substantially all
of its assets;
(iii) any liquidation or dissolution;
(iv) any sale, lease or other
disposition of assets with a value in
excess of $250,000;
(v) any acquisition of assets with a
value in excess of $250,000;
(vi) the incurrence or prepayment of
any indebtedness (or the entry into any
guarantee arrangement);
(vii) the making of any dividend,
distribution or redemption payment with
respect to any of its equity interests;
(viii) the creation of any subsidiary
or any investment in equity of another
entity;
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(ix) the entry into or amendment of
any contract or other arrangement or
transaction with any affiliate of I-Link
or of any of its shareholders;
(x) the entry into any business other
than the business as presently proposed
to be conducted by I-Link and its
subsidiaries;
(xi) the adoption or amendment of the
annual budget for I-Link and its
subsidiaries;
(xii) the hiring of executive
officers, managers and key employees;
(xiii) the initiation or settlement of
litigation involving amounts in
controversy in excess of $250,000;
(xiv) the engagement or change of
independent certified public
accountants;
(xv) the adoption or amendment of any
employee benefit plan or program;
(xvi) the making of any assignment for
the benefit of creditors or the
application for the appointment of a
receiver or the filing of any petition
initiating (or consenting to the
initiation of) any bankruptcy or
insolvency proceeding or the taking of
any similar action; and
(xvii) the entry into any commitment
or series of related commitments
involving a payment or payments by I-
Link or any of its subsidiaries of an
aggregate amount in excess of $500,000.
Tag-Along Rights.................... If certain stockholders or group of
such stockholders to be specified
(which shall include the key I-Link
management group)(the "Selling
Stockholders") propose to effect a
transfer to a third party (a "third
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party") of their interests in I-Link,
Winter Harbor shall have the option
to require such Selling Stockholders
to provide, as part of such
transfer, that the third party shall
grant Winter Harbor the right to
participate in such transaction on
the same terms and conditions as the
Selling Stockholders and transfer to
such third party the same proportion
of Winter Harbor's common stock
interest in I-Link (determined on an
"as converted" basis with respect to
its equity interest in I-Link and
its Warrants relating to I-Link
common stock), in accordance with
customary "tag-along" terms and
conditions and, if such option is
exercised by Winter Harbor, the Selling
Stockholders shall not proceed with such
transaction unless Winter Harbor is
given the right to so participate. The
foregoing tag-along rights shall not
apply to (a) pledges of stock to
financial institutions by any officer of
I-Link to secure personal borrowings,
(b) the foreclosure by any such
financial institution on any such
pledged stock, (c) transfers from an
officer of I-Link to a person who is
currently an executive officer of I-Link
or (d) other transfers or series of
related transfers of fewer than 250,000
shares in the aggregate of I-Link stock
not involving a change of control of
management of I-Link.
Registration Rights................... Winter Harbor shall be entitled to
request that I-Link file a
registration statement with respect
to any shares of I-Link held by
Winter Harbor, and I-Link will use
its best efforts to cause such
shares to be registered. Winter
Harbor shall be permitted to effect
three registrations under the
foregoing demand right provisions.
In addition, Winter Harbor shall be
entitled to "piggyback"
registration
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rights on all registrations (other than
registrations on Form S-8 with respect
to employee stock plans or registrations
on Form S-4 with respect to Rule 145
transactions), subject to the right of
I-Link's managing underwriters to reduce
or exclude shares proposed to be
registered based on market conditions.
Winter Harbor also shall be entitled to
unlimited registrations on Form S-3
(assuming I-Link qualifies for Form S-
3), provided aggregate proceeds exceed
$500,000 and subject to certain delay
provisions. I-Link shall pay for the
fees and expenses associated with all
such registrations (including, without
limitation, the fees and expenses of one
special counsel, if any, for Winter
Harbor), exclusive of underwriting
discounts and commissions. Winter Harbor
(and its affiliates and underwriters)
shall be entitled to indemnification by
I-Link pursuant to customary cross-
indemnification provisions, with the
indemnification obligations of any
selling stockholder to be limited to the
net proceeds received by such selling
stockholder pursuant to such
registration and public offering.
Preemptive Rights..................... Winter Harbor shall have preemptive
rights with respect to future
issuances of equity interests or
securities convertible into or
exchangeable for equity interests of
I-Link in order that Winter Harbor
may purchase a number of such shares
(or other securities) sufficient to
permit Winter Harbor to maintain its
proportional economic interest in
I-Link.
Reports............................... I-Link shall deliver to Winter Harbor:
(i) monthly unaudited financial
reports;
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(ii) monthly operating reports;
(iii) an annual audited financial
report; and
(iv) its annual financial plan and
budget and such other information
concerning the business and
operations of I-Link or its financial
condition as Winter Harbor may
reasonably request.
In addition, I-Link will permit
Winter Harbor to visit and inspect
I-Link's and its subsidiaries'
properties, to examine its books of
account and records and to discuss
its affairs with management and its
independent accountants, all at such
reasonable times as shall be
requested by Winter Harbor.
Put Right........................... At any time beginning on or after a
Change of Control (as shall be
defined), Winter Harbor shall have
the right (the "Put Right") to cause
I-Link to purchase all, but not less
than all, of the equity interests
then held by Winter Harbor in I-Link
at a price equal to the fair market
value of such equity interests (the
"Put Price"), as determined in
accordance with procedures to be
mutually agreed upon by Winter Harbor
and I-Link and incorporated in the
definitive documents for this
transaction. Such procedures shall
include provisions for an independent
appraisal of the value of Winter
Harbor's equity interests, with no
discount for a minority position or
illiquidity (i.e., treated as on the
same basis as selling I-Link as a
going concern).
After the Put Price is established in
accordance with such procedures,
I-Link shall purchase the equity
interests then held by Winter Harbor
in I-Link, in accordance with
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procedures to be mutually agreed upon by
Winter Harbor and I-Link. If the
purchase of such equity interests
pursuant to the exercise of the Put
Right would result in a breach or a
default under any material credit
agreement or other contractual
obligation of I-Link, or if I-Link would
thereby be rendered insolvent, I-Link
will take all reasonable and lawful
actions to avoid or cure such breach or
default and enable I-Link to make such
purchase to the fullest extent possible
without thereby being rendered
insolvent, including without limitation
(i) the sale of additional equity
securities, (ii) any necessary action
under applicable law to reduce I-Link's
stated capital or otherwise increase I-
Link's surplus or other funds legally
available, (iii) additional borrowings
by, or a refinancing of, I-Link, and
(iv) asset sales.
Additional Closing Condition........ As a condition to Winter Harbor's
obligation to purchase the Series M
Preferred Stock, holders of warrants to
acquire an aggregate of 1,000,000 shares
of I-Link common stock, which warrants
have an exercise price of not to exceed
$2.00 per share, shall have entered into
agreements with Winter Harbor to sell
such warrants to Winter Harbor for an
aggregate purchase price of $1,000,000,
and the acquisition of such warrants
shall be consummated simultaneously with
the acquisition of the Series M
Preferred Stock.
Employment Agreements............... Winter Harbor will review the
existing employment, non-competition and
consulting agreements of I-Link's key
executives. As a condition to Winter
Harbor's investment in I-Link, the
substance of all such agreements shall
be satisfactory to Winter Harbor and not
otherwise inconsistent with the terms
set forth herein.
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Key Person Insurance................ I-Link shall have made arrangements
for key-man life insurance with respect
to such executive officers as may be
designated by Winter Harbor, and in such
amount and upon such terms as otherwise
shall be reasonably satisfactory to
Winter Harbor.
Expenses............................ I-Link shall pay all reasonable
expenses of Winter Harbor incurred by it
in connection with the equity financing
described herein (including but not
limited to attorney and other
professional fees and expenses), without
regard to whether or not the investment
is consummated.
Other Terms and Conditions.......... The Securities Purchase Agreement
giving effect to the terms set forth
herein shall contain such other
representations, warranties, covenants
and conditions as are customary for an
investment of this nature and otherwise
as may be required to give effect to the
terms set forth herein. The agreements
shall be governed by Delaware law,
without regard to its provisions as to
conflicts of law.
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