EXHIBIT 99.2
DEBT RESTRUCTURING AGREEMENT
This Debt Restructuring Agreement is entered into this 25th day of
July, 2002 between I-Link Incorporated, a Florida corporation ("I-Link"),
Counsel Corporation (US), a Delaware corporation ("Counsel"), and Counsel
Springwell Communications LLC, a Delaware limited liability company formerly
known as Counsel Communications LLC ("Counsel Springwell").
RECITALS:
A. Counsel Springwell and I-Link entered into a Senior Convertible Loan
and Security Agreement dated as of March 1, 2001 as amended (the "March 1st Loan
Agreement"), pursuant to which Counsel Springwell has advanced to I-Link the
aggregate principal amount of $12,000,000.
B. Counsel, an affiliate of Counsel Springwell, and I-Link entered into
a Loan and Security Agreement dated as of June 6, 2001 (the "June 6th Loan
Agreement"). The June 6th Loan Agreement was amended on June 27, 2002 to
increase the total borrowing to $24,306,865.91.
C. I-Link is not currently paying interest on amounts advanced under
the June 6th Loan Agreement, as amended, and as of July 12 , 2002 the aggregate
amount of accrued and unpaid interest under the June 6th Loan Agreement, as
amended, is $1,606,669.79.
D. Pursuant to a Loan and Security Agreement dated as of June 4, 2001
(the "June 4th Loan Agreement"), Counsel advanced the principal amount of
$14,850,000 to WorldxChange Corp., a Delaware corporation and wholly-owned
subsidiary of I-Link ("WxC"), of which amount $12,350,000 remains outstanding.
E. In connection with the June 4th Loan Agreement, I-Link guaranteed
the repayment by WxC of all amounts due and owing under the June 4th Loan
Agreement (the "Guaranty") and issued Counsel warrants to purchase up to
15,000,000 shares of common stock, par value $.0007 per share, of I-Link (the
"Common Stock") for an exercise price of $0.60 per share (the "Warrants")
pursuant to the terms and conditions of a Warrant Agreement dated June 4, 2001
(the "Warrant Agreement").
F. As a further inducement for I-Link to engage in this transaction,
Counsel Springwell has agreed to guarantee WxC's obligations under the
Reciprocal Service Agreement dated July 12, 2001 between I-Link and WxC, as
amended by the First Amendment to Reciprocal Service Agreement dated June 4,
2002 (the "WxC Agreement").
G. As of July 12, 2002, I-Link has paid $181,323.39 in costs and fees
in connection with the transaction contemplated by this Agreement (the "Current
Transaction Costs").
H. Pursuant to an Assignment dated October 31, 2001, Counsel assigned
to Counsel Springwell all of its rights, title and interest in and to the
Warrants and the Warrant Agreement.
I. Counsel Springwell and Counsel Corporation have committed to fund,
through long-term intercompany advances or equity contributions, all capital
investment, working capital or other operational cash requirements of I-Link
through April 15, 2003 as set forth in that certain letter to I-Link, dated
April 3, 2002 (the "Commitment Letter"); and Counsel Springwell and Counsel
Corporation propose to amend the Commitment Letter to extend its effective
period through December 2003.
J. The parties wish to recapitalize the indebtedness of I-Link and WxC
on the terms and conditions set forth below.
Accordingly, the parties hereby agree as follows:
1. CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of I-Link, or such
other place as the parties may mutually agree, on or before the third business
day (the "Closing Date") following the day on which this Agreement is approved
by the stockholders of I-Link in accordance with the Amended and Restated
Articles of Incorporation of I-Link, as amended through the date of the
Shareholders Meeting (as defined below).
2. ACTIONS TO BE TAKEN UPON THE SIGNING OF THIS AGREEMENT. Upon the
signing of this Agreement the parties agree to take the following actions:
(a) Counsel Springwell shall pay or cause to be paid to I-Link
the Current Transaction Costs.
(b) The parties acknowledge that I-Link has received invoices
and will receive invoices for costs and fees incurred but not yet
invoiced relating to the work of the current special committee of
I-Link's board of directors ("Special Committee") and its legal,
accounting and financial advisors in connection with the transaction
contemplated by this Agreement. The parties agree that all such
invoices shall be forwarded to Counsel Springwell, and that Counsel
Springwell will reimburse I-Link, or cause I-Link to be reimbursed,
promptly upon receipt. Counsel Springwell further agrees to promptly
reimburse, or cause I-Link to be reimbursed, all future Special
Committee fees and costs, accounting, legal and regulatory costs,
investment banking fees and expenses, all costs incident to I-Link's
annual shareholder meeting and any special shareholder meetings for
soliciting and obtaining shareholder approval of the transactions
contemplated hereby, and all other direct costs incurred by I-Link in
connection with consummating the transaction contemplated this
Agreement.
2
(c) Counsel Springwell shall, at its expense, promptly apply
for all regulatory approvals required in connection with the
consummation of the transactions contemplated by this Agreement.
(d) From and after the execution of this Agreement and unless
and until the WxC Agreement is terminated, Counsel and Counsel
Springwell jointly and severally guarantee the full and prompt
performance and payment of WxC's obligations under the WxC Agreement.
(e) The parties acknowledge and agree that Counsel
Springwell's payment of the amounts specified in this Section 2 shall
not be treated as advancements, loans, or stock purchases, nor shall
such amounts be subject to conversion into Common Stock.
3. ACTIONS TO BE TAKEN AT THE CLOSING. The parties hereby agree to take
the following actions at the Closing:
(a) In exchange for and in satisfaction of the aggregate
principal amount outstanding as of the Closing Date under the June 6th
Loan Agreement, and all accrued and unpaid interest thereon through
July 12, 2002 (it being agreed and understood that, subject to the
terms and conditions of this Agreement, interest under the June 6th
Loan Agreement shall cease to accrue as of July 12, 2002) the Closing
Date, I-Link shall issue to Counsel Springwell the number of shares of
Common Stock equal to the quotient of (i) the aggregate principal
amount outstanding as of the Closing Date under the June 6th Loan
Agreement, and all accrued and unpaid interest thereon, through July
12, 2002, divided by (ii) $0.18864, the average closing transaction
price for the month of May 2002 (the "Effective Price"). Counsel
represents and warrants to I-Link that it has not assigned, pledged or
otherwise transferred or encumbered its rights under the June 6th Loan
Agreement.
(b) Counsel shall release and discharge I-Link from its
obligations under the Guaranty, the June 4th Loan Agreement and the
June 6th Loan Agreement and agrees that, from and after the Closing
Date, I-Link shall have no further obligations or liabilities
thereunder, without any further action by the parties hereto. Counsel
represents and warrants to I-Link that it has not assigned, pledged or
otherwise transferred or encumbered its rights under the June 4th Loan
Agreement or the Guaranty.
(c) Counsel Springwell shall surrender the Warrants to I-Link
for cancellation and agrees that, from and after the Closing Date, it
shall have no further rights under the Warrant Agreement. Counsel
Springwell represents and warrants to I-Link that it is the sole owner
of the Warrants and it has not assigned, pledged or otherwise
transferred or encumbered the Warrants or its rights under the Warrant
Agreement.
(d) I-Link shall convey, transfer and assign to Counsel
Springwell all of the issued and outstanding shares of capital stock of
CPT-1 Holdings, Inc. (a wholly-owned subsidiary of I-link and the sole
shareholder of WxC).
3
(e) On the Closing Date, Counsel Springwell shall pay or cause
to be paid to I-Link for the following: (i) $505,000 incurred for the
Xxxxxx and Monitor studies purchased by I-Link with respect to the
"dial-around" business, which studies shall be assigned to Counsel
Springwell at the time of such payment; (ii) $245,000 relating to
licensing fees and regulatory fees incurred by I-Link with respect to
WxC; and (iii) $250,000 relating to FCC and SEC costs incurred in
connection with the acquisition by WxC of certain assets from World
Access, Inc.
The parties acknowledge and agree that Counsel Springwell's
payment of the amounts specified in this Section 3 shall not be treated
as advancements, loans or stock purchases, nor shall such amounts be
subject to conversion into Common Stock. Such amounts, together with
the reimbursement of the Current Transaction Costs, shall be utilized
by I-Link as a reserve (as increased or decreased in accordance with
the terms of this Agreement, the "Reserve") and shall not reduce
Counsel Springwell's Operating Commitment (as defined below) or its
funding obligations under Section 4 of this Agreement.
(f) Counsel Springwell and Counsel Corporation shall amend,
re-execute and deliver the Commitment Letter, in substantially its
current form except that the term of the Commitment Letter shall be
extended to December 31, 2003 (the "Commitment Letter Amendment"). The
Commitment Letter, as amended by the Commitment Letter Amendment, shall
survive the execution of this Agreement.
4. COMMITMENT TO PROVIDE ADDITIONAL FUNDING.
(a) Counsel Springwell hereby agrees to fund the Operating
Plan as approved by Counsel Springwell on June 10, 2002 (the "Operating
Plan"). Counsel Springwell shall provide I-Link with the following
amounts (the "Operating Commitment") to fund the cash requirements of
the Operating Plan during the balance of the 2002 calendar year:
August $480,552
September 322,293
October 976,187
November 550,459
December 0.00
In the event the cash requirements of I-Link in any of the remaining
months of the 2002 calendar year are greater than the amounts set forth
above, I-Link shall apply amounts in the Reserve to fund such
additional cash requirement and, in the event the Reserve is not
sufficient to fund the aggregate amount of such additional cash
requirements, Counsel Springwell shall provide such additional cash as
provided in the Commitment Letter. Except as provided in this Section
4(a), the Reserve shall be disbursed at the discretion of the Board of
Directors of I-Link.
4
(b) In addition to the Operating Commitment, Counsel
Springwell shall advance to I-Link (i) any and all amounts paid or
payable by I-Link to shareholders of I-Link that exercise their
dissenters' rights in connection with the transactions subject to this
Agreement; (ii) the amount, if any, in excess of the amount budgeted in
the Operating Plan for the annual premium to renew the existing
Directors and Officers insurance coverage (which is and shall be
separate and distinct from insurance policies maintained by Counsel or
their affiliated entities) for an additional two years from the current
date of its expiration in November 2002, and Counsel and Counsel
Springwell represent and covenant that they will do any and all things
reasonably necessary to cause such insurance to be continued in effect
until at least November 2004 in types and amounts that are, at a
minimum, currently in force, so long as such insurance is available on
commercially reasonable terms; (iii) such amounts as may be required to
be paid by I-Link to third parties in respect of costs, fees and
contingencies that are not contemplated by the Operating Plan,
including but not limited to litigation and settlement costs, carrier
disputes and payables, and other potential liabilities; and (iv) any
amounts which I-Link is billed by WxC in excess of WxC's per minute
billing to I-Link based upon WXC's true NPA/NXX cost per minute to
outside carrier's under the WXC Agreement. Such funding shall be
provided from time to time, when, as and if requested in writing by
I-Link. Any such funding provided by Counsel Springwell pursuant to
Section 4(a) and this Section 4(b) prior to December 31, 2002 shall
constitute a purchase of additional shares of Common Stock for a
purchase price per share equal to the Effective Price. Counsel
Springwell shall cause each disbursement to be made within ten (10)
calendar days of the receipt by Counsel Springwell of a written request
to fund. I-Link shall issue certificates representing the purchased
shares concurrently with or subsequent to such fundings. The Operating
Commitment shall not be reduced or offset by the funds received in
respect of the reimbursements addressed in this Section 4 or funds
received under Section 2.
(c) In addition to the funding to be provided in the 2002
calendar year pursuant to Sections 4(a) and (b), Counsel Springwell
shall fund all capital investment, working capital or other operational
cash requirements of I-Link through December 31, 2003 pursuant to the
Commitment Letter Amendment.. Any such additional funding provided by
Counsel Springwell in each month during the 2003 calendar year shall
constitute a purchase of additional shares of Common Stock for a
purchase price per shares equal to average closing transaction price
for a share of Common Stock for the immediately preceding month.
5. I-LINK FINANCIAL OBLIGATIONS SURVIVING THIS AGREEMENT. Counsel and
Counsel Springwell, jointly and severally, represent, warrant and agree that
from and after the Closing Date I-Link shall owe no amounts to Counsel, Counsel
Springwell or WxC except (i) those amounts that will become due and owing to
Counsel under the March 1st Loan Agreement and (ii) such amounts as may be
payable from time to time under the WxC Agreement; and that there is no default
under the March 1st Loan Agreement as of the date hereof.
5
6. AMENDMENTS TO THE MARCH 1ST LOAN AGREEMENT. The parties represent,
warrant and agree that the issuance of Common Stock by I-Link pursuant to this
Agreement results in weighted-average conversion price adjustment pursuant to
the provisions of the March 1st Loan Agreement and that the new conversion price
is $0.39221.
7. SECURITIES LAW REPRESENTATIONS. Counsel Springwell acknowledges that
the issuance of shares of Common Stock pursuant to the terms of this Agreement
(the "Shares") has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), the certificates representing the Shares shall
bear customary securities registration legends. Counsel Springwell hereby
represents and warrants to I-Link that:
(a) The Shares will be acquired for Counsel Springwell's own
account and not with a view to, or intention of, distribution thereof
in violation of the Securities Act, or any applicable state securities
laws, and the Shares will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(b) Counsel Springwell is sophisticated in financial matters
and is able to evaluate the risks and benefits of the investment in the
Shares.
(c) Counsel Springwell is able to bear the economic risk of
its investment in the Shares for an indefinite period of time because
the Shares have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
8. PROXY STATEMENT.
(a) Subject to Section 8(b) hereof, I-Link, acting through its
Board of Directors, shall:
(i) duly call, give notice of, convene and hold an
annual or special meeting of its shareholders (the
"SHAREHOLDERS MEETING") as soon as practicable following the
date hereof for the purpose of considering and taking action
upon this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy relating to this Agreement as soon as reasonably
practicable and obtain and furnish the information required to
be included by the SEC in the Proxy Statement and, after
consultation with Counsel Springwell, use its best efforts to
respond promptly to any comments made by the SEC with respect
to the preliminary proxy and cause a definitive proxy (as
amended or supplemented, the "PROXY STATEMENT") to be mailed
to its shareholders;
6
(iii) include in the definitive Proxy Statement the
written opinion of the financial advisor to the Special
Committee of the Board of Directors of I-Link that the
transactions contemplated by this Agreement are fair to the
shareholders of I-Link from a financial point of view;
(iv) afford to all of the shareholders of I-Link
dissenters' rights under Florida law relating to the matters
to be presented to them for consideration at the Shareholder
Meeting and relating to the subject matter of this Agreement;
and
(v) use its reasonable best efforts to obtain the
approval of this Agreement and the transactions contemplated
hereby by the holders of the requisite number of issued and
outstanding shares of capital stock of I-Link.
(b) The Board of Directors of I-Link shall recommend approval
and adoption of this Agreement and the transactions contemplated hereby
by I-Link's shareholders. The Board of Directors of I-Link shall not be
permitted to withdraw, amend or modify in a manner adverse to Counsel
and Counsel Springwell such recommendation (or announce publicly its
intention to do so), except that prior to the Shareholder Meeting, the
Board of Directors of I-Link shall be permitted to withdraw, amend or
modify its recommendation (or announce publicly its intention to do so)
but only if the Board of Directors of I-Link shall have determined in
its good faith judgment, based upon the advice of outside counsel, that
it is obligated by its fiduciary obligations under applicable law to
withdraw, amend or modify such recommendation. If the Shareholder
Meeting is being held, the recommendation of the Board of Directors of
I-Link shall be included in the Proxy Statement.
(c) Each of Counsel and Counsel Springwell agrees that it will
provide I-Link with the information concerning it required to be
included in the Proxy Statement and will vote, or cause to be voted,
all of the shares of the Common Stock then owned by it, directly or
indirectly, or over which it has the power to vote, in favor of
approval of this Agreement and the transactions contemplated hereby.
Counsel and Counsel Springwell shall have the right to review in
advance all characterizations and information related to them, this
Agreement and the transactions contemplated hereby which appear in the
Proxy Statement.
(d) Each of Counsel, Counsel Springwell and I-Link agrees
promptly to correct any information provided by it for use in the Proxy
Statement as and to the extent it shall have become false or misleading
in any material respect and to supplement the information provided by
it specifically for use in the Proxy Statement to include any
information that shall have become necessary, in order to make
statements contained therein, in light of the circumstances in which
they were made, not misleading, and each of Counsel, Counsel Springwell
and I-Link further agrees to take all steps necessary to cause the
Proxy Statement, as so corrected or supplemented, to be filed with the
SEC and to be disseminated to its shareholders in each case as and to
the extent required by applicable federal securities laws.
7
9. EXPENSES. Counsel Springwell shall bear all costs, fees and expenses
in connection with this Agreement and the transactions contemplated hereby.
10. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when received if
sent by registered or certified mail, return receipt requested, by facsimile
(with confirmation of receipt) or by reputable overnight delivery service, to
the parties at the following addresses (or at such other address as a party may
specify by like notice):
(a) If to I-Link:
00000 X. Xxxxxxxxx Xxxx Xx.
Xxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with copy to:
00000 X. Xxxxxxxxx Xxxx Xx.
Xxxxxx, XX 00000
Attention: Legal Department
Facsimile: (000) 000-0000
(b) If to Counsel or Counsel Springwell:
000 Xxxx Xxxxxx - 00 Xxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Counsel Springwell Communications LLC
Xxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Managing Director
Facsimile: (000) 000-0000
11. NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its rights to exercise any such or other right, power or remedy or to demand
such compliance.
8
12. AMENDMENT. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of the parties.
13. ENTIRE AGREEMENT. Except as specifically provided elsewhere in this
Agreement, this Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and thereof and supersedes all prior
agreements, representations and understandings among the parties with respect to
the subject matter hereof
14. FURTHER ASSURANCES. I-Link, Counsel Springwell and Counsel agree to
deliver or cause to be delivered to each other any such additional instrument or
take any action as any of them may reasonably request for the purpose of
carrying out transactions contemplated by this Agreement.
15. ASSIGNMENT. This Agreement shall inure to the benefit of, and be
binding upon, the parties and their respective successors and assigns. This
Agreement may not be assigned by a party without the prior written consent of
the other party.
16. GOVERNING LAW. This Agreement the parties hereto shall be governed
by and construed in accordance with the laws of the State of New York, except to
the extent that the Florida Corporations Law is applicable.
17. HEADINGS. The headings and captions in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature Page Follows.]
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
I-LINK INCORPORATED
By /S/ Xxxxx Y. L. Toh
------------------------------------
Name: Xxxxx Y. L. Toh
Title: Director
COUNSEL CORPORATION (US)
By /S/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: President
COUNSEL SPRINGWELL COMMUNICATIONS LLC
By /S/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director
10
