Exhibit 10.41
April 19, 2002
Cybernet Internet Services International, Inc.
Xxxxxx-Xxxxxx-Xxxx 00 - 00
00000 Xxxxxx, Xxxxxxx
ATTENTION: PRESIDENT
Dear Sirs:
This letter agreement (this "Agreement") confirms the agreement of Cybernet
Internet Services International, Inc. (together with its subsidiaries and
affiliates, the "Company") to engage MFC Bancorp Ltd. (together with its
affiliate MFC Merchant Bank S.A., "MFC") as exclusive financial advisor for the
Company in connection with the services set forth below.
1. As the Company's financial advisor, MFC will perform, upon request by the
Company, until the date of the termination of this Agreement the following
financial and market related advisory services for the Company in
connection with the analysis, design, formulation and execution of a
Restructuring Transaction (as defined below):
(a) advising and assisting the Company in connection with any
restructuring of the Company's liabilities, including, without
limitation, any repayment, exchange or conversion of any liabilities
of the Company, or any modification, amendment, deferral,
restructuring, recapitalization, rescheduling, moratorium, or
adjustment of the terms and/or conditions of any liabilities of the
Company outstanding on the date of this Agreement (any such
restructuring of the Company's liabilities being referred to as a
"Restructuring Transaction");
(b) to the extent permitted by applicable law, assisting the Company in
soliciting tenders and consents in connection with any Restructuring
Transaction;
(c) for a period of up to 180 days, advising and assisting the Company in
connection with any operational reviews, strategic and business plans,
optimizing operations and personnel and assessing strategic
alternatives to enhance stakeholder value. In connection therewith, we
shall utilize and make available to the Company as required the
services of X. Xxxxxxx, X. Xxxxxxxx, X. Xxxxxx, X. Xxxx and X.
Xxxxxxxx or other suitable qualified alternative personnel (the
"Review Personnel"); and
(d) to the extent determined by the Company, advising and assisting the
Company in connection with any and all sale(s), disposition(s),
transfers or spin-offs of any assets, operations or parts of the
business of the Company involving consideration, value or proceeds
of US$500,000 or more (but excluding the option
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to purchase granted to Telehouse Deutschland GmbH, as amended),
whether part of a Restructuring Transaction or otherwise (an
"Asset Sale").
2. For MFC's services hereunder, the Company agrees to pay to MFC the
following non-refundable fees:
(a) A monthly cash advisory fee of US$175,000 (each, a "Monthly Advisory
Fee"), payable in advance upon execution of this Agreement and each
monthly anniversary thereafter, or, if any such day is not a business
day, on the business day immediately preceding such date; for such
monthly periods as the Company is utilizing the Review Personnel,
provided that such fee shall be pro-rated for any partial months;
(b) In the event that the Company consummates a Restructuring Transaction,
a fee (a "Restructuring Fee") equal to 2.5% of the face amount
restructured of the Company's outstanding 14% Senior Notes due 2009,
the Company's 13% Convertible Senior Subordinated Discount Notes due
2009 and the Company's 13% Convertible Senior Subordinated Pay-in-Kind
Notes due 2009 (the "Notes"), on the date the Restructuring
Transaction is consummated. A Restructuring Transaction shall be
deemed to have been consummated (and MFC's fee shall be deemed to have
been fully earned) upon the earliest of (i) the date when its terms
become binding on the creditors affected thereby; (ii) the date when
any lender committee, bondholder committee or other official or
unofficial group or committee of creditors agrees to the terms of a
Restructuring Transaction; (iii) the date when any out-of-court
Restructuring Transaction is completed; and (iv) in the case of any
reorganization, arrangement, compromise or similar restructuring to be
effectuated under any applicable bankruptcy, insolvency, creditor
protection or any similar legislation pursuant to which a plan of
reorganization, arrangement or compromise may be effected with respect
to creditors, the requisite affirmative vote of creditors approving
the plan and any required approval(s) of a court of competent
jurisdiction (the "Approval Date");
(c) If MFC agrees to be engaged in respect of any (i) private placement of
securities, (ii) financing with any bank, insurance company, financial
institution or other lenders, or (iii) public offering of securities
(each transaction described in (i), (ii) and (iii) being referred to
herein as a "Financing"), the Company shall pay to MFC a fee (a
"Financing Fee") customary with respect to such financing, except that
the parties agree that for a "vulture light" financing, the Financing
Fee will be in the range of 3.5% to 4.5% of the aggregate face amount
of debt raised. The Financing Fee shall be payable on the date that
the Company first receives funds made available under the Financing,
except that with respect to debtor-in-possession financing, the
Financing Fee shall be payable on the date that the Company receives a
commitment from a qualified financial institution to advance
debtor-in-possession financing;
(d) In the event any Restructuring Transaction involves any exchange
offer, tender offer or consent solicitation, prior to the commencement
thereof the Company
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shall enter into with MFC a separate dealer manager or other
appropriate agreement containing terms and conditions, including
appropriate representations and legal opinions customary for MFC. If
the Company determines to pursue a cash tender offer for the Notes
(the "Cash Tender Offer"), the Company shall, subject to satisfaction
of all applicable regulatory requirements, offer to engage MFC as
dealer manager and solicitation agent for a fee customary for such
engagements, payable upon commencement of the tender offer; and
(e) In the event the Company completes an Asset Sale utilizing MFC, a
success fee based upon the amount of gross proceeds received by the
Company (including any assumption of indebtedness or liabilities)
determined as follows:
(i) 7.5% of the first US$1,000,000;
(ii) 5.0% of the next US$4,000,000; and
(iii) 4.0% on proceeds in excess thereof.
In addition to any fees payable to MFC, the Company will reimburse MFC,
upon request made from time to time, for all of its reasonable
out-of-pocket expenses incurred in connection with this engagement,
including the fees, disbursements and other charges of its legal counsel,
if any.
Any fees payable pursuant to the above shall be paid to us in cash in
United States dollars, provided that, at MFC's sole option, we may elect in
writing to receive all or part of such fees (the "Elected Amount") in
common shares of the Company (the "Share Election"). In the event that MFC
advises the Company of the Share Election, the Company shall issue to MFC
or its order, such number of fully paid and non-assessable common shares in
the capital stock of the Company having a "Market Value" equal to the
Elected Amount. For the purposes of this Agreement, "Market Value" means
the average closing trading price for the Company's common shares on the
principal stock exchange or quotation service for the 10 trading days
immediately prior to the delivery of the Share Election by MFC to the
Company less 10%.
All or part of the amounts payable pursuant to this Agreement may be
subject to applicable sales, value added or services tax ("Sales Tax").
Where Sales Tax is applicable, an additional amount equal to the amount of
Sales Tax owing will be charged to and paid by the Company.
We shall be responsible and liable for the payment of all costs, benefits
and amounts due to the Review Personnel.
Notwithstanding any provision hereof, the maximum amount of fees payable by
the Company for all services provided by MFC hereunder shall be limited to
US$5.5 million.
3. In rendering its services to the Company hereunder, MFC is not assuming any
responsibility for the Company's underlying business decision to pursue or
not to pursue any business strategy or to effect or not to effect any
Restructuring Transaction or
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Financing. The Company agrees that MFC shall not have any obligation or
responsibility to provide "crisis management" services for the Company or
to provide any advice or opinions with respect to solvency or to perform a
valuation of the Company or its assets in connection with any
Restructuring Transaction.
4. The Company also agrees that neither MFC nor any of its affiliates,
directors, agents employees or controlling persons shall have any liability
to the Company or any person asserting claims on behalf of the Company in
connection with or as a result of MFC's engagement under this Agreement or
any matter referred to in this Agreement, except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company
are determined by a court of competent jurisdiction in a judgment that has
become final in that it is no longer subject to appeal or other review to
have resulted solely from the gross negligence, bad faith or willful
misconduct of MFC in performing the services that are the subject of this
Agreement.
5. It is understood and agreed that nothing contained in Section 2(c) shall
constitute a commitment by MFC to underwrite, place or purchase any
securities or to arrange any other form of financing or to act as financial
advisor with respect to any other transaction. Any such commitment by MFC
shall be at MFC's option and would, in each case, be subject to, among
other things, the satisfactory completion by MFC of an appropriate due
diligence investigation of the Company. Any agreement regarding such a
commitment shall be set forth in a separate engagement, underwriting,
placement agency or similar agreement relating to such transaction, which
contains fee arrangements and other terms and conditions, including
appropriate indemnification provisions, satisfactory to MFC and the
Company.
6. MFC and its subsidiaries and affiliates (the "MFC Group") is involved in a
wide range of commercial banking, investment banking and other activities
(including investment management, corporate finance and securities issuing,
trading and research) from which conflicting interests, or duties may
arise. Information which is held elsewhere within MFC or within the MFC
Group, but of which none of the individuals in the Corporate Finance
Division of MFC involved in carrying out this engagement actually has
knowledge, will not for any purpose be taken into account in determining
MFC's responsibilities to the Company under this engagement. Neither MFC
nor any other part of the MFC Group will have any duty to disclose to the
Company or utilize for the Company's benefit any non-public information
acquired in the course of providing services to any other person, engaging
in any transaction (on its own account or otherwise) or otherwise carrying
on its business. In addition, in the ordinary course of its business, MFC
and its affiliates may trade the securities of the Company for its own or
their account and for the accounts of clients, and MFC and its affiliates
may at any time hold a long or short position in such securities.
7. The Company will furnish, or cause to be furnished, to MFC all data,
material and other information as MFC believes appropriate to its
assignment (all such information so furnished being the "Information"). The
Company recognizes and confirms that MFC (a) will use and rely primarily on
the Information and on information available from generally recognized
public sources in performing the services contemplated by this
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Agreement without having independently verified the same, (b) does not
assume responsibility for the accuracy or completeness of the Information
and such other information, and (c) will not make an appraisal of any
assets or liabilities (contingent or otherwise) of the Company. To the
best of the Company's knowledge, the Information to be furnished by the
Company, when delivered, will be true and correct in all material respects
and will not contain any material misstatement of fact or omit to state
any material fact necessary to make the statements contained therein not
misleading. The Company will promptly notify MFC if it learns of any
material inaccuracy or misstatement in, or material omission from, any
Information theretofore delivered to MFC.
MFC agrees that, except as otherwise required by law, judicial or
administrative processes, regulatory request or demand, or any other body
having jurisdiction over MFC, or as contemplated by its engagement
hereunder, any non-public information obtained by MFC in connection with
this engagement shall be held by MFC as confidential and shall be used by
MFC only in connection with the performance of its services for the Company
under this Agreement, except that (a) such information may be disclosed by
MFC to officers, directors, employees, counsel of and advisors to the
Company or MFC, and such other persons as the Company shall request, and
(b) such information may be disclosed to the extent otherwise publicly
available through no breach by MFC or available to MFC from a source, other
than the Company and its representatives, not known to MFC to be subject to
a duty of confidentiality to the Company with respect to such information.
8. The Company agrees to the indemnification and other agreements set forth in
the Indemnification Agreement attached hereto as Schedule A, the provisions
of which are incorporated herein by reference and shall survive the
termination, expiration or supersession of this Agreement.
9. Except to the extent legally required (after consultation with MFC and its
counsel) none of (i) the name of MFC, (ii) any advice rendered by MFC to
the Company or (iii) any communication from MFC in connection with the
services performed by MFC pursuant to this Agreement will be quoted or
referred to orally or in writing or, in the case of (ii) or (iii),
reproduced or disseminated by the Company or any of its affiliates or any
of their agents without MFC's consent.
10. MFC's services hereunder may be terminated by the Company or MFC upon 30
days prior written notice without liability or continuing obligation of the
Company or MFC except that (i) MFC shall be entitled to any fees earned
prior to the date of termination, and (ii) expenses incurred by MFC as a
result of services rendered prior to the date of the termination shall
become immediately payable in full, and provided that Sections 4, 8, 9,
10, 11, 12, 13, 14, 15, 16, 17 and 18 hereof shall remain operative and in
full force and effect regardless of any termination. MFC shall be entitled
to payment in full of the fees referred to in section 2(b) and 2(c) in the
cash of a cash tender offer if at any time prior to the expiration of 18
months after the termination of MFC's engagement hereunder, creditors of
the Company agree to a plan of reorganization or the Company consummates or
files a plan of reorganization or enters into a letter of intent or any
agreement that subsequently results in the consummation of, a Restructuring
Transaction. If MFC
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unilaterally terminates this Agreement, MFC will not be entitled to
receive additional fees which arise pursuant to this paragraph after the
termination hereof.
11. The obligations of the Company hereunder shall be the joint and several
obligations of the entities comprising the Company.
12. MFC may, at its own expense, place customary tombstone announcements or
advertisements in financial newspapers and journals describing its services
hereunder.
13. If the Company or any entity comprising part of the Company becomes subject
to proceedings under any applicable bankruptcy, insolvency, creditor
protection or similar legislation and if the Company determines that it
wishes to retain a financial advisor in connection with such proceedings
and MFC agrees to so act as financial advisor, the Company will, to the
extent necessary, use its best efforts to continue MFC's engagement
(including, without limitation, obtaining all necessary court approvals
therefor as soon as possible after commencing such proceedings) on
substantially the terms set forth in this Agreement. MFC shall not be
required to serve as the Company's financial advisor during any proceeding
unless the order approving its retention is reasonably satisfactory to MFC.
14. The Company acknowledges and agrees that MFC has been retained to act
solely as advisor to the Company, and not as an advisor of any other
person, and the Company's engagement of MFC is not intended to confer
rights upon any person (including shareholders, employees or creditors of
the Company) not a party hereto as against MFC or its affiliates, or their
respective directors, officers, employees or agents, successors or assigns.
MFC shall act as an independent contractor under this Agreement, and any
duties arising out of its engagement shall be owed solely to the Company.
15. This Agreement shall be binding upon MFC and the Company and their
respective successors and assigns and any successor or assign of any
substantial portion of the Company's and MFC's respective businesses and/or
assets.
16. In the event that any transaction contemplated herein is effected through
an entity other than the Company, then the Company shall cause such entity
to assume and honour the obligations and liabilities of the Company
hereunder, including, without limitation, the Company's obligations and
liabilities pursuant to provisions concerning indemnification, contribution
and the Company's obligation to pay fees and to reimburse expenses
contained herein and in the attached Indemnification Agreement.
17. This Agreement (including Schedule A) and any claim, counterclaim or
dispute of any kind or nature whatsoever arising out of or in any way
relating to this Agreement (a "Claim"), directly or indirectly, shall be
governed by and construed in accordance with the laws of the Province of
British Columbia and the federal laws of Canada applicable therein. Except
as set forth below, no Claim may be commenced, prosecuted or continued in
any court other than the courts of the Province of British Columbia, which
courts shall have exclusive jurisdiction over the adjudication of such
matters, and the Company and MFC consent to the jurisdiction of such courts
and personal service with
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respect thereto. The Company hereby consents to personal jurisdiction,
service and venue in any court in which any Claim arising out of or in any
way relating to this Agreement is brought by any third party against MFC or
any indemnified party. Each of MFC and the Company (on its own behalf and,
to the extent permitted by applicable law, on behalf of its shareholders
and affiliates) waives all right to trial by jury in any proceeding or
counterclaim (whether based upon contract, tort or otherwise) in any way
arising out of or relating to this Agreement. The Company agrees that a
final judgment in any such proceeding or counterclaim brought in any such
court shall be conclusive and binding upon the Company and may be enforced
in any other courts to the jurisdiction of which the Company is or may be
subject, by suit upon such judgment.
18. This Agreement (including the attached Indemnification Agreement) embodies
the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof. If any provision of this Agreement is determined to be
invalid or unenforceable in any respect, such determination will not affect
such provision in any other respect or any other provision of this
Agreement, which will remain in full force and effect. This Agreement may
not be amended or otherwise modified or waived except by an instrument in
writing signed by both MFC and the Company. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same Agreement.
If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below, whereupon this Agreement and
your acceptance shall constitute a binding agreement between us.
Very truly yours,
MFC BANCORP LTD. MFC MERCHANT BANK S.A.
By: ________________________________ By: ________________________________
By: ________________________________
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Accepted and agreed to as of the date first above written:
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
Signed: ________________________________
Name: ________________________________
Title: ________________________________
SCHEDULE A
INDEMNITY AND CONTRIBUTION
In consideration of rendering professional services pursuant to the engagement
(the "Engagement") between MFC Bancorp Ltd. and its affiliate MFC Merchant Bank
S.A., (collectively, the "Advisor") and Cybernet Internet Services
International, Inc. (the "Company"), the Company hereby agrees to indemnify and
hold harmless the Advisor and the respective directors, officers, employees,
partners, affiliates, agents and shareholders of each of them (each such person
or company being referred to herein as an "Indemnified Person"), to the full
extent lawful, from and against all losses, claims, damages, liabilities,
obligations or expenses incurred by each Indemnified Person related to or
arising out of any activities performed in connection with the Engagement
whether performed before or after the execution of the engagement letter to
which this indemnity is a Schedule (collectively, the "Indemnifiable Loss"). The
Company will reimburse each Indemnified Person for all expenses reasonably
incurred by or on behalf of such Indemnified Person in connection with
investigating, preparing or defending any action (court or regulatory) or claim
relating to or in connection with the Engagement or which may result in an
Indemnifiable Loss, including payment to the Advisor at the applicable standard
per diem rate for the time expended by any director, officer, employee, partner
or agent of the Advisor or any affiliate attending at or participating in such
investigation, preparation or defence. The Company will not be responsible for
any Indemnifiable Loss, including all expenses incurred in connection with
investigating, preparing or defending any action or claim, of any Indemnified
Person which is, and no Indemnified Person shall have any liability (direct,
indirect, in contract, in tort or otherwise) to the Company except for losses,
claims, damages, liabilities, obligations or expenses incurred by or on behalf
of the Company which are, determined by a final judgment of a court of competent
jurisdiction to have resulted from actions taken or not taken by such
Indemnified Person through gross negligence or willful misconduct. The Company
will reimburse, monthly, any Indemnified Person involved in any capacity in any
investigation or proceeding commenced by any person in connection with the
Engagement for all expenses actually incurred in connection therewith, provided
that the Indemnified Person shall make prompt repayment to the Company of all
amounts so paid to it for which a court of competent jurisdiction in a final
judgment determines that such Indemnified Person is not entitled to
indemnification pursuant to the provisions hereof.
The Advisor agrees to notify the Company promptly of the assertion of any claim
or the commencement of any investigation or proceeding relating to the
performance of the Engagement in respect of which indemnification may be sought
hereunder, provided that the failure by the Advisor to do so shall not relieve
the Company from their obligations or liabilities hereunder, except to the
extent that such failure has materially and adversely affected the Company's
ability to reduce the amount of the Indemnifiable Loss or to defend against the
claim which gave rise to the Indemnifiable Loss. The Advisor shall, and shall
use its reasonable efforts to cause other relevant Indemnified Parties to,
co-operate with the Company in responding to any such investigation or defending
any such proceeding.
Upon the assertion of any claim against or the commencement of any
investigation or proceeding involving any Indemnified Person, the Company
may, and shall if reasonably requested by an Indemnified Person, participate
in such action, investigation or proceeding and assume the
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defence of any proceeding in respect of which indemnification may be sought
hereunder, including the employment of counsel of the Company's selection who
are satisfactory to the Advisor, acting reasonably, the fees and
disbursements of which counsel shall be paid by the Company. Upon such
assumption, the Advisor shall provide such assistance and documentation
relating to the investigation or proceeding as the Company may reasonably
request and, except as provided below, the Company shall not be liable for
the fees and disbursements of counsel retained by any Indemnified Person in
connection with such investigation or proceeding. In any investigation or
proceeding the defence of which the Company has assumed, any Indemnified
Person shall have the right to participate and to retain its own counsel, the
fees and disbursements of which shall be paid by such Indemnified Person
unless: (i) the Company and the Indemnified Person have agreed in writing to
the retention of such counsel; or (ii) collectively the Company and the
Indemnified Person are subject to the investigation or are parties to the
proceeding and the representation of both by the same counsel would be
inappropriate due to, or could give rise to, actual or potential difference
or conflicting interests between them. In no event will the Company be liable
for fees and expenses of more than one law firm in representing the
Indemnified Persons in any proceeding or group of related proceedings. If the
Company decides not to assume the defence of any proceeding in respect of
which indemnification may be brought, the Advisor shall throughout the course
of such investigation or proceeding, provide copies of all relevant
documentation to the Company, shall keep the Company advised of the progress
thereof, and shall discuss with the Company all significant actions proposed.
The Company shall not be responsible for any settlement, compromise or consent
to judgment in respect of any proceeding effected without its prior written
consent, acting reasonably, but shall indemnify each Indemnified Person to the
extent provided for in this agreement from and against any Indemnifiable Loss
incurred by reason of any settlement made with its consent or any final judgment
in favour of the plaintiff. The Company will not, without the prior written
consent of the Advisor, acting reasonably, settle, compromise or consent to any
judgment or decision in any proceeding in respect of which indemnification may
be sought hereunder unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Person from all liability arising out
of such proceeding. If the Company gives written notice of a settlement of a
specific claim, which settlement it is prepared to accept, and any Indemnified
Person is unwilling to accept such settlement, the amount which the Company is
required to pay the Indemnified Person in respect of that specific claim shall
be limited to an amount equal to the amount of such proposed settlement plus the
amount of all expenses for which the Indemnified Person would be entitled to be
reimbursed or indemnified as of the effective date of such proposed settlement.
If for any reason (other than a determination based on willful misconduct or
gross negligence as contemplated herein) the indemnification provided hereby
is unavailable to an Indemnified Person or is insufficient to hold an
Indemnified Person harmless, the Company shall contribute to the
Indemnifiable Loss incurred by the Indemnified Person in a proportion
appropriate to reflect not only the relative benefits received by the Company
on the one hand and all Indemnified Persons on the other hand, but also the
relative degrees of fault of the Company and of all Indemnified Persons and
any other equitable considerations, provided that the Company shall in any
event contribute to the amount paid or payable by any Indemnified Person as a
result of an Indemnifiable Loss any excess of such amount over the amount of
the fees actually received by the Advisor and all affiliates pursuant to the
Engagement.
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This indemnity shall apply to the Engagement and to any modification of the
terms thereof and shall remain in full force and effect following the completion
or termination of the Engagement. This indemnity shall be binding on and enure
to the benefit of the Company and each Indemnified Person and the respective
successors, assigns, heirs and personal representatives of each of them, and to
the extent necessary or appropriate may be enforced by the Advisor as trustee
for any other Indemnified Person. This indemnity shall be in addition to any
rights that the Company or any Indemnified Person may have at law.
