Exhibit 10.47
[COMMITMENT LETTER]
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
425 Lexington Avenue
3rd Floor
New York, New York 10017
December 11, 1996
MagiNet Corporation
405 Tasman Drive
Sunnyvale, California 94089
Attention: Kenneth R. Hamlet
Gentlemen:
You have requested that CIBC WG ARGOSY MERCHANT FUND 2, L.L.C. ("CIBC"),
an indirect majority-owned subsidiary of Canadian Imperial Bank of Commerce and
each party to which CIBC may syndicate a portion of the commitment made hereby
pursuant to Section 7 hereof (the "Syndication Parties") commit to provide to
MagiNet Corporation (the "Company") funds in the amount of up to $10 million in
the form of senior subordinated notes to be made available as described in
Section 1 hereof (the "Senior Subordinated Notes"). Concurrently with the
issuance of any Senior Subordinated Notes, and in consideration therefor, the
Company will issue to CIBC up to 1,333,333 Warrants to purchase Company Common
Stock, par value $.0001 per share (the "Financing Warrants") on a pro rata basis
equal to the principal amount of Senior Subordinated Notes issued. The
commitment to acquire the Senior Subordinated Notes has been requested to
provide the Company with assurances as to the general availability of funds to
the Company for its ongoing operations in the event the initial public offering
of the Company's common equity ("IPO") currently being pursued is not
consummated. The financing evidenced by the Senior Subordinated Notes and the
issuance of the Financing Warrants is referred to herein as the "Transaction".
Accordingly, subject to the terms and conditions set forth or
incorporated in this letter, CIBC (the "Lender") agrees with you as follows:
Section 1. Senior Subordinated Notes. The Lender hereby commits, subject
to the terms and conditions hereof and
-2-
in the Summary Term Sheet attached hereto as Exhibit A (the "Term Sheet"), to
provide to the Company at its request, subject to the conditions set forth
herein and the issuance of the pro rata portion of the Financing Warrants, up to
$10 million through the issuance of Senior Subordinated Notes. The commitment
contemplated hereby shall expire at 5:00 p.m. New York time on January 15, 1997
(the "Closing Date," which may be extended by the Extended Commitment Option (as
defined in Section 6 hereof)). The proportion of each of CIBC's and each
Syndication Party's commitment to provide the financing evidenced by the Senior
Subordinated Notes is set forth in their respective commitment letters, if any,
delivered to the Company. The Lender shall be obligated to provide the entire
amount of such funds in the event that no other person elects to become a
Syndication Party. In addition to the Senior Subordinated Notes and the
Financing Warrants, the Company will issue to the Lender (A) upon delivery and
acceptance of this commitment letter, 40,000 warrants to purchase fully diluted
common stock of the Company at a nominal exercise price ($.01 per warrant (the
"Initial Warrants") and (B) for so long as any Senior Subordinated Notes are
outstanding, upon each annual anniversary of the issuance of the Senior
Subordinated Notes, 200,000 warrants (subject to adjustment as set forth in the
Term Sheet) to purchase fully diluted common stock of the Company at a nominal
exercise price ($.01 per warrant) (the "Annual Warrants").
The proceeds of the Transaction shall be used for general corporate
purposes other than repayment of indebtedness or the purchase or redemption of,
or any payments on, equity securities of the Company. The principal terms of the
Senior Subordinated Notes and the Financing Warrants are summarized in the Term
Sheet.
This letter is not intended to be, nor shall it be construed as, an
attempt to define or set forth all of the terms and conditions of the
Transaction. Rather, it is intended only as a statement of the principal terms
of the basic business understanding, around which the legal documentation is to
be structured. Further negotiations within the general parameters of these
principal terms shall not be precluded by the issuance of this letter or its
acceptance by you, although in no event may Lender negotiate to (i) reduce the
maximum principal amount, (ii) shorten the final maturity date, (iii) increase
the annual interest rate, (iv) increase the amount of the redemption premium or
the change in control premium, (v) increase the amount of any fees, (vi)
increase the
-3-
number of Financing Warrants or the Initial Warrants (including the rate at
which Additional Warrants are to be granted), or decrease the exercise price
thereof, other than, as may be adjusted pursuant to the Term Sheet or (vii)
shorten the commitment expiry date. This letter agreement is a binding
agreement between the parties with respect to such principal terms.
Unless the Lender's commitment hereunder shall have been terminated
pursuant to Section 6 and subject to participations which may be made available
pursuant to Section 7, the Lender shall have the exclusive right to provide the
financing evidenced by the Senior Subordinated Notes.
The Lender has reviewed certain historical and pro forma financial
statements of the Company and has met with you and with the management of the
Company and is pleased to advise you that the results of the Lender's
investigations to date are satisfactory.
You hereby represent and covenant that based on your review and
analysis, to the best of your knowledge (a) all information , including the
Projections (as defined below), which has been or is hereafter made available to
the Lender by you or your representatives, advisors or affiliates in connection
with the transactions contemplated hereby (the "Information") has been reviewed
and analyzed by you in connection with the performance of your own due diligence
and is, or in the case of Information made available after the date hereof will
be, complete and correct in all material respects and does not and will not
contain any untrue statement of a material fact or omit to state a material fact
known to you and necessary to make the statements contained therein, in the
light of the circumstances under which such statements were or are made, not
misleading and (b) all financial projections (after giving pro forma effect to
the Transaction and all other transactions referred to in the IPO other than the
consummation of the IPO) that have been or are hereafter made available to the
Lender by you or your representatives, advisors or affiliates in connection with
the transactions contemplated hereby (the "Projections") have been or, in the
case of Projections made available after the date hereof, will be prepared in
good faith based upon reasonable assumptions (it being understood that the
Projections are subject to significant uncertainties and contingencies, many of
which are beyond your control and that no assurance can be given that such
Projections will be realized). You agree to supplement the Information and the
Projections from time to time until the Closing Date so that the
-4-
representation and warranty made in the preceding sentence is correct on the
Closing Date. In making the commitment contemplated hereby and syndicating such
commitment, CIBC will be using and relying on the Information and the
Projections without independent verification thereof. In addition, the Lender
does not intend to conduct any appraisal of the current or prospective assets of
the Company. Prior to the execution of the Financing Documentation you shall
provide the Lender and its counsel access to such documents agreements and
persons as is reasonably requested to confirm the Information and as requested
in connection with Lender's counsel's legal due diligence. the representations
and covenants contained in this paragraph shall remain effective until a
definitive financing agreement is executed and thereafter the disclosure
representations contained herein shall be terminated and be of no further force
and effect.
Section 2. Financing Documentation. The issuance of the Senior
Subordinated Notes and the Financing Warrants (together, the "Financing
Documentation") and the Initial Warrants, Additional Warrants and Annual
Warrants (collectively the "Fee Warrants") required hereby will be governed by
definitive loan and related agreements and documentation in form and substance
reasonably satisfactory to the Lender and you. This commitment letter, the Fee
Warrants and the Financing Documentation shall be prepared by Cahill Gordon &
Reindel, special counsel to the Lender. The Fee Warrants and Financing
Documentation shall contain such covenants, terms and conditions as are
consistent with this letter and the Term Sheet and such other covenants, terms,
conditions, representations, warranties, indemnities, events of default and
remedies provisions as shall be reasonably satisfactory to the Lender and you.
At the request of the Company, but subject to the receipt by the Lender of
reasonable assurances from the Company as to the reimbursement of its expenses
as set forth in Section 5 hereof, the Lender will make reasonable commercial
efforts to execute Financing Documentation as soon as reasonably practicable.
Section 3. Conditions. The obligation of the Lender under Section 1 of
this letter to provide the financing evidenced by the Senior Subordinated Notes
is subject to fulfillment of conditions precedent typical in the context of a
borrowing such as that evidenced by the Senior Subordinated Notes, including the
following:
(a) Financing Documentation. The Company and the Lender shall have
entered into the financing Documentation
-5-
relating to the Transaction, on terms and in form and substance reasonably
satisfactory to the Lender.
(b) No Adverse Change or Development, Etc. (i) Since the date hereof,
nothing shall have occurred which could reasonably be likely to have a
material adverse effect on the rights or remedies of the Lender, or on the
ability of the Company and its subsidiaries to perform their respective
obligations to the Lender under the Financing Documentation and the Fee
Warrants; (ii) there shall not have been, in the sole judgment of the
Lender, any material adverse change in the business, prospects, condition
(financial or other), results of operations, operations, property, assets
or liabilities of the Company and its subsidiaries, taken as a whole
(provided that the failure of the Company to consummate the IPO shall in no
event be deemed to be such a material adverse change) and there shall not
have come to the attention of the Lender any misstatements in, or omissions
from, the Information which, in the sole judgment of Lender, are material;
(iii) trading in securities generally on the Toronto, New York or American
Stock Exchange shall not have been suspended; minimum or maximum prices
shall not have been established on any such exchange; (iv) a banking
moratorium shall not have been declared by New York, United States or
Canadian authorities; and (v) there shall not have been (A) a material
outbreak or escalation of hostilities between the United States or Canada
and any foreign power, or (B) a material outbreak or escalation of any
other insurrection or armed conflict involving the United States, Canada or
any other national or international calamity or emergency, or (C) any fire,
flood, earthquake, strike, civil disturbance or act of God which, in each
case, in the reasonable judgment of the Lender, makes it impracticable or
inadvisable to proceed with the consummation of the Transaction or any
of the other transactions contemplated hereby or that would materially
effect the ability to sell the Senior Subordinated Notes or the Financing
Warrants, in each case, on the terms contemplated hereby.
(c) No Defaults. On the Closing Date, the Company and its
subsidiaries shall not be in default under any material agreement or
instrument. Consummation of the Transaction will not cause or result in any
breach or default (including any event, which, with notice or lapse of time
or both would be a breach or a default) or trigger
-6-
any purchase requirements under any of the terms or provisions of any of
the instruments governing the existing indebtedness of the Company or any
of its subsidiaries to remain outstanding after the consummation of the
Transaction.
(d) Capital Structure. The consolidated capital structure of the
Company, after giving effect to the Transaction, shall be consistent with
the capital structure described in the Company's registration statement
with respect to the IPO as on file as of the date hereof (the "IPO
Registration Statement") under the caption "Capitalization" in the column
titled "actual".
(e) Solvency Certificate. As of the Closing Date, the Lender shall
have received a solvency certificate from the Company's chief financial
officer, and in form and substance, reasonably satisfactory to the Lender,
setting forth the conclusion that, after giving effect to the Transaction,
the Company and its subsidiaries taken as a whole are not insolvent and
will not be rendered insolvent by the Transaction and will not be left with
unreasonably small capital with which to engage in their business and will
not have incurred debts beyond its ability to pay such debts as they
mature.
(f) Applicable Law. The Lender and its counsel shall be reasonably
satisfied that the consummation of the Transaction shall be in compliance
with all applicable statutes, laws, rules and regulations of all applicable
governmental and regulatory agencies and authorities. There shall not have
occurred after the date hereof any change in law, rule or regulation which
would prohibit or impose conditions upon the Lender's ability to provide
the financing evidenced by the Senior Subordinated Notes or the commitment
hereunder which are materially adverse to the Lender or would result in or
require any material adverse change to the net capital of the Lender. There
shall not exist any judgement, order, injunction or other restraint
prohibiting or imposing conditions upon consummation of any portion of the
Transaction which are materially adverse to the Lender or the Company and
its subsidiaries taken as a whole.
(g) Financial Statements. The Lender shall be satisfied with the
audited, unaudited and pro forma financial statements meeting the
requirements of Regulation S-X
-7-
under the Securities Act of 1933, as amended (the "Act"), of the Company
(in a form no more detailed or comprehensive than the financial statements
in the form included in the IPO Registration Statement.
(h) Financing Warrants and Fees. On the Closing Date, the Company
shall have issued a pro rata portion of the Financing Warrants and paid all
fees (including, without limitation, the Initial Warrants and any
Additional Warrants (as defined)) that are due to the Lender at or prior to
the funding of the Senior Subordinated Notes.
(i) Litigation. Except as disclosed in publicly available documents
filed by the Company with the Securities and Exchange Commission prior to
the date hereof under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, no litigation or similar
proceeding (governmental or other) shall exist or be threatened with
respect to or affecting (i) the Company, any of its subsidiaries, or the
Transaction, which is reasonably likely to have a material adverse effect
on the Company and its subsidiaries, taken as a whole, or (ii) the
Financing Documentation or the consummation of the Transaction.
(j) Notice. The Company shall have delivered written notice to the
Lender setting forth the anticipated funding date, which shall not be less
than two weeks from the date of such notice.
Section 4. Indemnification and Contribution. You agree to indemnify
CIBC and each of its affiliates, any Syndication Parties and each person in
control of CIBC or any of the Syndication Parties and each of its or their
affiliates and the respective officers, directors, employees, agents and
representatives of CIBC, its affiliates, the Syndication Parties and their
respective control persons, as provided in the Indemnity Letter dated the date
hereof (the "Indemnity Letter") and attached hereto; provided that upon
execution of the Financing Documentation, the Indemnity Letter shall be
terminated and of no further force and effect, it being understood that the
Financing Documentation will contain indemnification provisions relating to the
matters and periods of time covered in the Indemnity Letter.
Section 5. Structuring and Commitment Fees and Expenses. The Company
shall pay the Lender a cash commitment
-8-
fee of 3.5% of the aggregate principal amount of the Senior Subordinated Notes
committed to be purchased (the "Original Cash Commitment Fee") by CIBC as set
forth on the signature page hereof. Such fee shall be due and owing from and
after the date hereof but shall be payable on the earliest to occur of (a) the
closing date of the IPO, (b) fifteen days following the expiration of this
commitment and (c) the date any of the Senior Subordinated Notes are issued. The
Company shall also pay Additional Commitment Fees (as defined in Section 6
below) and issue Additional Warrants (as defined in Section 6 below) in the
event the Company exercises the Extended Commitment Option (as defined in
Section 6 below). The Company shall also issue the Annual Warrants on the same
basis and terms as the Initial Warrants in accordance with Section 1 above. In
addition to any fees that may be payable to the Lender hereunder and regardless
of whether any of the transactions contemplated by this letter agreement are
consummated, this letter agreement is terminated, the financing evidenced by the
Senior Subordinated Notes is made available or the Financing Documentation is
executed and delivered, you hereby agree to reimburse the Lender for all
reasonable fees (not to exceed $100,000) and disbursements of legal counsel,
including but not limited to the reasonable fees and disbursements of Cahill
Gordon & Reindel, the Lender's special counsel, and all of the Lender's travel
and other reasonable out-of-pocket expenses incurred in connection with the
Transaction or otherwise arising out of the Lender's commitment hereunder.
Section 6. Termination. The Lender's commitment hereunder to provide
the financing evidenced by the Senior Subordinated Notes shall terminate, unless
expressly agreed to by the Lender in its sole discretion to be extended to
another date, on January 15, 1997 if the Senior Subordinated Notes have not been
issued. Notwithstanding the foregoing, the Lender agrees to extend its
commitment to provide the financing evidenced by the Senior Subordinated Notes,
upon notice from the Company (received on or prior to January 15, 1997) and in
the Company's sole discretion, until (a) February 15, 1997 or (b) March 15, 1997
(the "Extended Commitment Option"). Upon exercise of the Extended Commitment
Option, the Company shall immediately issue 50,000 warrants if the one month
Extended Commitment Option is selected and 75,000 warrants if the two month
Extended Commitment Option is selected (collectively, the "Additional Warrants")
on the same basis and with an identical exercise price as the Initial Warrants.
In addition, if the one month Extended Commitment Option is selected, the
Company shall pay the Lender an additional cash commitment fee of
-9-
$250,000 and if the two month Extended Commitment Option is selected, an
additional cash commitment fee of $375,000 (the "Additional Commitment Fees").
In the event the Company elects to exercise the Extended Commitment Option, the
Original Cash Commitment Fee as well as any and all Additional Commitment Fees,
shall be payable on the earliest to occur of (a) 15 days following the final
expiration of the commitment made hereby, (b) the consummation of the IPO or (c)
the date any of the Senior Subordinated Notes are issued. No such termination
of any such commitment shall affect your obligations under Sections 4 and 5
hereof or this Section 6, which shall survive any such termination.
Section 7. Assignment; Qualified Institutional Buyers. This letter
shall not be assignable by any party hereto without the prior written consent of
the other parties (other than, in the case of the Lender, to an affiliate of the
Lender, it being understood that any such affiliate shall be subject to the
restrictions set forth in this Section 7); provided, however, that CIBC shall
have the right, in its sole discretion to sell portions of the Commitment
hereunder, the Senior Subordinated Notes and the Financing Warrants among banks
or other financial institutions pursuant to the Financing Documentation or
otherwise and to sell, transfer or assign all or any portion of, or interests or
participations in, the Senior Subordinated Notes, the Financing Warrants and the
Fee Warrants; provided that prior to the consummation of an initial public
offering CIBC shall not sell, transfer or assign all or any portion of the Fee
Warrants to any person who is not an affiliate without the consent of the
Company, which consent shall not be unreasonably withheld. CIBC agrees to act
as arranger, documentation agent and administrative agent for the Senior
Subordinated Notes, the Financing Warrants and the Fee Warrants unless removed
from such positions pursuant to the terms of the Financing Documentation or
unless prohibited from acting as such by any applicable statute, law, rule or
regulation. CIBC represents that it is a "Qualified Institutional Buyer" as
defined in Rule 144A of the Securities Act of 1933, as amended, and that any
Syndication Party described above will also be a "Qualified Institutional Buyer"
or an "institutional accredited investor".
Section 8. Miscellaneous. THIS LETTER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES GOVERNING CONFLICTS OF LAWS. This letter (including the
provisions of the Indemnity Letter specifically incorporated herein) embodies
-10-
the entire agreement and understanding between you and the Lender supersedes all
prior agreements and understandings relating to the subject matter hereof. This
letter may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
The Lender reserves the right to employ the services of its affiliates
(including CIBC Wood Gundy Securities Corp. ("WGSC")) in providing services
contemplated by this letter and to allocate, in whole or in part, to WGSC
certain fees payable to the Lender in such manner as the Lender and WGSC may
agree in their sole discretion. You acknowledge that the Lender may share
(without duplication) with any of its affiliates (including WGSC) and such
affiliates may share with the Lender (in each case, subject to any
confidentiality agreements applicable thereto), any information related to you
or your affiliates or their respective subsidiaries (including information
relating to creditworthiness) or the Transaction.
-11-
If you are in agreement with the foregoing, please sign and return to
the Lender at 425 Lexington Avenue, New York, New York 10017, the enclosed copy
of this letter no later than 5:00 p.m., New York time, on December 11, 1996,
whereupon the undertakings of the parties shall become effective to the extent
and in the manner provided hereby. A telecopied signature on this letter shall
be acceptable to and binding on each of the Company and the Lender; provided
that each party hereto shall undertake to promptly deliver to the other a signed
original hereof. This offer shall terminate if not so accepted by you on or
prior to that time.
Very truly yours,
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By: /s/ authorized signature
------------------------------------
Name:
Title:
Principal Amount of Senior
Subordinated Notes committed
to be purchased: $10 Million
Accepted and Agreed to as of
the date first above written:
MAGINET CORPORATION
By: /s/ authorized signature
-----------------------------
Name:
Title:
EXHIBIT A
SUMMARY OF TERMS AND CONDITIONS*
$10,000,000 SENIOR SUBORDINATED NOTES DUE 2003
AND RELATED WARRANTS TO PURCHASE COMMON STOCK
Issuer: MagiNet Corporation ("MagiNet" or
the "Company").
Issue: Senior Subordinated Notes (the
"Senior Subordinated Notes").
Principal Amount: Up to $10,000,000.
Final Maturity: 2004 (7 years).
Lender: CIBC WG Argosy Merchant Fund 2,
L.L.C.
Rate: 12% payable semi-annually.
Notes: Senior Subordinated Notes.
Financing Warrants: Up to 1,333,333 warrants to purchase
Company Common Stock, par value $.0001
per share, issuable on a pro rata basis
with the Senior Subordinated Notes. The
Financing Warrants shall expire seven
years from the date of issuance. The
Financing Warrants (and the Fee
Warrants) shall not be exercised by
Lender for greater than 5% of the voting
stock of the Company except in
compliance with the Bank Holding Company
Act.
Exercise Price of the Subject to the reset provisions
Financing Warrants: referred to below, the Financing
Warrants will be exercisable into
common stock of the Company at a
- ---------------------
* Capitalized terms not otherwise defined herein shall have the meanings
attributed to them in the Commitment Letter to which this term sheet is
attached.
-2-
price of $7.50 per share at any
time after the issuance of the
Senior Subordinated Notes prior to
their expiration (the "Exercise
Price").
Reset Provisions: The Exercise Price of the Financing
Warrants is to be reset to 85% of
the price to the public in the Com-
pany's initial public offering of
Common Stock ("IPO") if such reset
results in a reduction of the Exer-
cise Price below $7.50 per share
(the "First Reset Price"). In
addition, at the first year anni-
versary of the IPO the Exercise
Price is to be reset to the lower
of the First Reset Price and the
price of the Common Stock at such
time (the "Second Reset Price").
Pre-issuance The number of Financing Warrants
Anti-Dilution Adjustment and the Exercise Price shall be
adjusted in respect of any event
that occurs after the date of the
Commitment Letter and prior to the
date the Financing Warrants are
issued which would have caused an
anti-dilution adjustment under the
Financing Warrants had they been
outstanding at the time.
Anti-Dilution Provisions: The Financing Warrants will be
subject to standard and customary
adjustment including for shares of
Common Stock or equivalents issued
at a price per share of less than
Fair Market Value (to be defined)
(regardless of whether prior to or
after the consummation of an IPO).
Redemption of the Notes The Senior Subordinated Notes are
at the Option of the redeemable at the option of the
Issuer: Issuer, in whole or in part (pro-
vided that no less than $5 million
of Senior Subordinate Notes remain
outstanding) from the date of issu-
ance at a redemption price equal to
100% of the principal amount of the
Senior Subordinated Notes plus
-3-
accrued interest to the date of
redemption.
Redemption of the Notes In the event of a Change of Control
at the Option of the (to be defined) or other
Purchaser: Fundamental Change (to be defined)
the Senior Subordinated Notes will
be redeemable at the option of the
Purchaser at a purchase price equal
to 112% of principal amount.
In the event of the consummation of
an initial public offering of
equity or the issuance of any debt
securities or preferred stock the
Senior Subordinated Notes will be
redeemable at the option of the
Purchaser at a purchase price equal
to 100% of principal amount.
Registration Rights: The Purchaser will be entitled to
(i) unlimited piggy back registra-
tions subject to pro rata reduc-
tions, commencing on the issue
date, (ii) one demand registration
subject to pro rata reductions,
commencing on the issue date, and
(iii) certain rights to cause the
Company to effect and keep current
a shelf-registration on or after
the issue date. In each case, such
registration shall pertain to the
Common Stock underlying the Financ-
ing Warrants and the Fee Warrants.
Ranking: The Senior Subordinated Notes are
unconditional, unsecured and senior
subordinated obligations of the
Company and will rank senior to all
other unsecured and subordinated
obligations of the Company and jun-
ior to all other senior indebted-
ness of the Company.
Use of Proceeds: General corporate purposes other
than repayments of indebtedness or
-4-
purchases or redemptions of or pay-
ments on equity securities.
Commitment Fees: As set forth in Commitment Letter.
Funding Fee: 2.0% of Gross Proceeds.
Legal Fees: The Company and/or its agents will
reimburse Purchaser for the fees
and expenses of legal counsel to be
selected by the Purchaser whether
or not the transaction closes.
Certain Covenants: The Financing Documentation will
contain customary affirmative and
negative covenants, including,
without limitation, prohibitions on
the ability of the Company and its
subsidiaries to incur additional
indebtedness (subject to limited
exceptions), prohibitions on the
ability of the Company and its sub-
sidiaries to issue subordinated
indebtedness senior to the Senior
Subordinated Notes, prohibitions on
the ability of the Company to pay
certain dividends and make certain
other restricted payments and
investments including, without
limitation, the repurchase of capi-
tal stock or subordinated indebted-
ness (subject to limited excep-
tions), restrictions on the ability
of the Company and the Company's
subsidiaries to enter into agree-
ments which restrict their ability
to pay dividends or make certain
payments to the Company, create
liens, enter into transactions with
affiliates, merge, consolidate or
transfer substantially all of their
respective assets and restrictions
on the ability of the Company and
its subsidiaries to utilize pro-
ceeds from asset sales for purposes
other than related business
investments.
-5-
Participation/Assignment CIBC and each other Lender, if any, may, with the
or Syndication: consent of CIBC, participate out or sell or assign,
or syndicate to other lenders, the Senior
Subordinated Notes, in whole or in part, at any
time, subject to compliance with applicable
securities laws. Management of the Company will
cooperate to the fullest extent possible
(including, without limitation, participation in
road show presentations and investor meetings) in
any such syndication efforts.
Modifications and The consent of holders of a majority in outstanding
Amendments: aggregate principal amount of the Senior
Subordinated Notes will be required with respect to
amendments which do not affect the payments terms,
or relative ranking of the Senior Subordinated
Notes. The consent of holders of a majority of the
Financing Warrants will be required to amend any of
the principal terms thereof.
Representations and Customary for transactions of this type.
Warranties:
Conditions Precedent: As set forth in the Commitment Letter.
Events of Default: Customary for transactions of this type, including,
without limitation, payment defaults, covenant
defaults, bankruptcy and insolvency, judgments,
cross acceleration of and failure to pay at final
maturity other indebtedness aggregating $750,000 or
more.
Governing Law and Forum: The State of New York.
-6-
Indemnification and
Expense Reimbursement: Customary for transactions of this type.
Fee Warrants:
Initial Warrants: As set forth in Commitment Letter.
Issuance of Additional
Warrants: As set forth in Commitment Letter.
Issuance of Annual Warrants: As set forth in Commitment Letter.
Exercise Price: $.01 per share of Common Stock.
Term of Fee Warrants: The Fee Warrants will be exercisable for common
stock of the Company for a period of 7 years and
will be immediately exercisable.
Pre-issuance Anti- The number of Annual Warrants to be issued shall
dilution Protection: be adjusted in respect of any event that occurs
after the date of the Commitment Letter and prior
to the issuance of such Annual Warrants which
would have caused an anti-dilution adjustment
under the Annual Warrants had they been
outstanding at the time.
Anti-dilution Protection: The Fee Warrants will be subject to standard and
customary anti-dilution protection (i.e., stock
dividends, splits and reclassifications and, only
prior to the consummation of an IPO, below market
issuances of securities and assets).
Registration Rights: As set forth in the definitive Initial Warrant
issued on the date of the Commitment Letter. To
the extent the Financing Warrants are issued, the
Fee Warrants shall have identical registration
rights as are granted to the holders of Financing
Warrants.