EXHIBIT 10.22
MAI AMENDMENT NO.THREE
This Amendment No. Three (the "Amendment No. Three") is dated
as of January 13, 2003, by and among MAI Systems Corporation, a Delaware
corporation ("MAI") and CPI Securities LP, a California limited partnership, The
Value Realization Fund, L.P., a Delaware limited partnership, The Value
Realization Fund, L.P., a Cayman Islands corporation and GRS Partners II
(collectively, "Canyon").
RECITALS
A. WHEREAS, MAI is as of this date obligated to Canyon for unpaid
principal and interest under that certain Note Purchase Agreement, dated as of
March 3, 1997 (as amended (i) by the Forbearance Agreement dated October 28,
1999, (ii) by Amendment No. One dated as of February 14, 2000, (iii) by
Amendment No. Two dated April 13, 2000, (iv) the MAI Supplement dated September
2000, and (v) an MAI Supplement and Amendment dated January 31, 2001
(collectively, the "Canyon Loan Agreement"), among MAI and Canyon. Capitalized
terms not defined herein shall have the meanings assigned to such terms in the
Canyon Loan Agreement; and
B. WHEREAS, MAI has presented to Canyon for its approval the
terms of that certain Amendment Number Eight to Loan and Security Agreement
between MAI, Coast Business Credit ("Coast"), which amendment is attached hereto
as Exhibit A (the "Coast Amendment") and a certain term sheet respecting CSA
Private Limited ("CSA"), which term sheet is attached hereto as Exhibit B (the
"CSA Note Modification") and
C. WHEREAS, MAI has requested that Canyon also agree to an
extension of the maturity date of the Notes and other modifications to the terms
of the Notes, which Canyon has agreed to subject to MAI's performance under this
Amendment No. Three; and
D. WHEREAS, MAI and Canyon wish to enter into this Amendment No.
Three to confirm the unpaid principal and interest currently owed to Canyon by
MAI and to confirm the terms of the aforesaid modifications to the Notes and
Canyon's consent to MAI's execution of the Coast and CSA Note Modifications.
NOW THEREFORE, the parties agree as follows:
AGREEMENT
1. PRINCIPAL BALANCE AND AGREEMENT TO INCREASE PAYMENTS. MAI
acknowledges that as of December 31, 2002, it is obligated to Canyon in the
amount of $5,662,437. As of December 31, 2002, Canyon acknowledges that there is
no accrued interest due from MAI not reflected in the foregoing amount. MAI
confirms to Canyon that upon the repayment in full of Coast, Canyon shall
succeed to a first priority secured position in the Collateral covered by the
Security Agreement.
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2. MODIFIED TERMS. The parties agree to the following additional
modified terms relating to the Canyon Loan Agreement: (i) Canyon consents to
MAI's execution of the Coast Amendment and CSA Note Modifications containing the
terms set forth on Exhibits A and B hereto; (ii) the Notes shall require monthly
payments of Fifty-Two Thousand Dollars ($52,000) until the later of (a) the date
the Coast debt is paid off in full or (b) February 28, 2005 (the "Pay Date"). In
addition, MAI shall pay to Canyon the maximum amount permitted to be paid to
Canyon pursuant to Article I, Section 2 of the Amendment Number One to
Intercreditor and Subordination Agreement of January 13, 2003.
On the Pay Date, the Notes shall be converted to three-year
amortizing loan paying equal monthly payments of principal and interest at 11%
per annum, until February 28, 2008, at which time any and all principal and
accrued interest then outstanding shall be due an payable, and from and after
the Pay Date, MAI shall pay to Canyon on a quarterly basis, fifty percent (50%)
of all quarterly amounts greater than $125,000 of an EBITDA-based formula
calculated as follows:
ACTUAL EBITDA LESS EACH OF THE FOLLOWING WITHOUT DUPLICATION:
(1) PRINCIPAL AND INTEREST PAYMENTS ON ALL DEBT PERMITTED
UNDER THE CANYON LOAN AGREEMENT, (2) NON-FINANCED CAPITAL
EXPENDITURES PAID IN CASH NOT TO EXCEED $182,000 IN YEAR ONE,
$325,000 IN YEAR TWO, $379,000 IN YEAR THREE, $438,000 IN YEAR
FOUR, $459,000 IN YEAR FIVE AND $504,000 IN YEAR SIX, IF
APPLICABLE, OF THIS AMENDMENT AND (3) CASH ACTUALLY PAID FOR
ALL TAXES.
IN ALL EVENTS, THE NOTES SHALL BE FULLY DUE AND PAYABLE ON
FEBRUARY 28, 2008.
3. ISSUANCE OF MAI COMMON STOCK. MAI shall issue 200,000 Shares
of its Common Stock to Canyon in the amounts set forth on the signature page
hereof, subject to a private placement legend in customary form.
4. ISSUANCE OF MAI WARRANTS. MAI shall issue Warrants at $0.40
per share for 1,000,000 shares of its Common Stock to Canyon, subject to a
private placement legend in customary form, pursuant to a Warrant Agreement
attached hereto as Exhibit C in the amounts set forth on the signature page
hereof. The Warrant Shares and the 200,000 Shares above shall receive the
benefit of the Registration Rights Agreement attached hereto as Exhibit D in
favor of Canyon.
5. NO ADDITIONAL DEBT, AMENDMENTS. MAI may not incur any
additional indebtedness without the consent of Canyon, except for capital lease
obligations not in excess of $150,000 in the aggregate per year. MAI covenants
not to further amend the Coast Loan Agreement nor the CSA agreements without the
consent of Canyon, and MAI may not extend (or allow Coast to extend) the term of
the Coast loan agreement for more than one year (to February 28, 2006) without
Canyon's written consent. MAI shall timely exercise its right to cancel the
automatic extension of Section 9.1 of the Coast Loan Agreement.
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6. FAILURE TO PAY. Failure to pay any amounts set forth above
shall be an "Event of Default" under the Canyon Loan, with such 'cure' periods
as provided for in the Canyon Loan Agreement.
7. AGREEMENT TO EXECUTE RELATED DOCUMENTATION. MAI agrees to
cause CSA to execute any appropriate amendments requested by Canyon in respect
to this Amendment No. Three to that certain Subordination Agreement and Rider
among Canyon and CSA. MAI agrees that no payments of interest in excess of the
amount set forth on Exhibit B, or principal of any amount, may be made to CSA
until all obligations owed to Canyon have been paid in full.
8. REPRESENTATIONS AND WARRANTIES. MAI hereby represents and
warrants to Canyon that, as of the date of this Amendment No. Three:
8.1 All of MAI's representations and warranties contained
in this Amendment No. Three, and the Canyon Loan Agreement are true and
correct on and as of the date hereof, as if then made (other than
representations and warranties which expressly related to an earlier
date); No Default or Event of Default (as such terms are defined in the
Canyon Loan Agreement) has occurred or is continuing, except for the
Coast covenant default and the CSA financial default as previously
disclosed.
8.2 The execution and delivery of this Amendment No.
Three by MAI and the performance of the transactions contemplated
hereby (a) are within MAI's corporate power, (b) have been duly
authorized by all necessary or proper corporate and shareholder action,
(c) when duly executed and delivered by MAI, shall constitute the
legal, valid and binding obligation of MAI enforceable against MAI in
accordance with its terms, and (d) have been consented to by Coast.
8.3 If any of the foregoing representations is untrue or
incorrect in any material respect, such untruthfulness or inaccuracy
shall constitute an Event of Default under the Canyon Loan Agreement.
9. EFFECTIVE DATE. This Amendment shall be effective and the
effectiveness of this Amendment is expressly conditioned upon the receipt by
Canyon of: (a) a copy of this Amendment duly executed by MAI; (b) a copy of that
certain Amendment Number One to Intercreditor and Subordination Agreement, of
even date herewith, duly executed by MAI and Coast; (c) payment for all
expenses, fully earned and payable on the date hereof, incurred by Canyon in
connection with making the amendments contained herein; and (d) delivery to
Canyon of the Warrants and Shares and the two associated agreements referred to
in Paragraphs 3 and 4.
10. LIMITATION. This Amendment No. Three shall be limited solely
to the matters expressly set forth herein and shall not (i) constitute an
amendment or waiver of any term of the Canyon Loan Agreement other than the
provisions thereof which are specifically and explicitly amended hereby, (ii)
constitute an amendment or waiver of any term or condition of the Canyon Loan
Agreement, the Notes or the Security Agreement, (iii) prejudice any right or
rights which Canyon may now have or may have in the future under or in
connection with the Canyon Loan Agreement the Notes or the Security Agreement,
(iv) require Canyon to agree to a similar
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transaction on a future occasion or (v) create any rights herein to another
person, entity or other beneficiary or otherwise, except to the extent
specifically provided herein.
11. RELEASE.
11.1 MAI acknowledges that Canyon would not enter into
this Amendment No. Three without MAI's assurance that MAI has no claim
against any of Canyon, their parents companies, subsidiaries,
affiliates, officers, directors, shareholders, employees, attorneys,
agents, professionals and servants, or any of their respective
predecessors, successors, heirs and assigns (collectively, the "Canyon
Parties" and each, a "Canyon Party"). MAI, for itself and on behalf of
its officers and directors, and its respective predecessors, successors
and assigns (collectively, the "Releasors") releases each Canyon Party
from any known or unknown claims which MAI now has against any Canyon
Party of any nature, including any claims that any Releasor, or any
Releasor's successors, counsel and advisors may in the future discover
they would have had now if they had known facts not now known to them,
whether founded in contract, in tort or pursuant to any other theory of
liability, including but not limited to any claims arising out of or
related to the Loan Documents or the transactions contemplated thereby.
MAI, FOR ITSELF AND ON BEHALF OF EACH RELEASOR, WAIVES THE PROVISIONS
OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH STATE:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
11.2 The provisions, waivers and releases set forth in
this section are binding upon each Releasor. The provisions, waivers
and releases of this section shall inure to the benefit of each Canyon
Party.
11.3 The provisions of this section shall survive payment
in full of the Obligations, full performance of all of the terms of
this Amendment No. Three, the Canyon Loan Agreement, the Notes, and the
Security Agreement and/or any action by Canyon to exercise any remedy
available under such documents, applicable law or otherwise.
11.4 MAI warrants and represents that it is the sole and
lawful owner of all right, title and interest in and to all of the
claims released hereby and MAI has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to
assign or transfer to any person any such claim or any portion thereof.
MAI shall indemnify and hold harmless each Canyon Party from and
against any claim, demand, damage, debt, liability (including payment
of reasonable attorneys' fees and costs actually incurred whether or
not litigation is commenced) based on or arising out of any such
assignment or transfer.
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12. MISCELLANEOUS. The headings herein are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. No
amendment, modification, termination or waiver of any provision of this
Amendment No. Three, or any consent to any departure by MAI therefrom, shall in
any event be effective unless the same shall be in writing and signed by all of
the Canyon Parties. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
13. SOLE BENEFIT OF PARTIES. This Amendment No. 3 is solely for
the benefit of the parties hereto and their respective successors and assigns,
and no other person or entity shall have any right, benefit or interest under or
because of the existence of this Amendment No. Three.
14. RULE 144 COVENANT. MAI shall file as and when applicable, on a
timely basis, all reports required to be filed by it under the Securities
Exchange Act of 1934. If MAI is not required to file reports pursuant to the
Exchange Act, upon the request of Canyon, MAI shall make publicly available the
information specified in Rule 144 of the Securities Act of 1933, and take such
further action as may be reasonably required from time to time and as may be
within the reasonable control of MAI, to enable Canyon to transfer their Common
Stock Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act or
any similar rule or regulation hereafter adopted by the Securities and Exchange
Commission.
15. FURTHER ASSURANCES. MAI and Canyon shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out the provisions of this Amendment No. Three and the
Security Agreement.
16. CONSENT BY COAST. MAI represents that pursuant to the
Subordination and Intercreditor Agreement among Canyon, Coast and other parties,
Coast has consented to this Amendment No. Three.
17. COUNTERPARTS. This Amendment No. Three may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
18. GOVERNING LAW. THIS AGREEMENT, AND ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE HEREOF, SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA.
19. OTHER CHANGES. Other than as expressly set forth herein, all
provisions of the Canyon Loan Agreement shall remain in full force and effect.
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IN WITNESS HEREOF, the parties have executed this Amendment
No. Three as of the date first written above.
CPI SECURITIES LP, CANYON VALUE REALIZATION
a California limited partnership, FUND, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: Canpartners Incorporated,
a California corporation, By: Canpartners Investments III, L.P.,
its general partner a California limited partnership,
its general partner
By: Canyon Capital Advisors LLC,
By: _______________________ a Delaware limited liability company,
Name: its general partner
Title:
By: ___________________________
10,000 Shares Name:
50,000 Warrants Its Managing Director
90,000 Shares
450,000 Warrants
THE CANYON VALUE REALIZATION GRS PARTNERS II
FUND (CAYMAN), LTD.
By: MeesPierson (Cayman) Limited,
its Administrator
By: ___________________________
Name:
By: _______________________ Title:
Name:
Title: 10,000 Shares
50,000 Warrants
90,000 Shares
450,000 Warrants
MAI SYSTEMS CORPORATION,
A DELAWARE CORPORATION
By: _______________________
Name:
Title:
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EXHIBIT A
COAST LOAN AMENDMENT
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EXHIBIT B
CSA TERM SHEET
The proposed amendment to the terms of the December 1, 2001 secured Subordinated
Note due 2003, as amended ("Note") are as follows:
1. Agree to amend the 10% Subordinated Note to terms as follows:
a. Extend maturity date to February 28, 2011
b. The amended loan with CSA shall accrue interest at
10% and require monthly interest only payments not to exceed
$17,500 until the Coast and Canyon debt is paid off in full,
at which time the CSA loan shall be converted to three-year
amortizing loan paying equal monthly payments of principal
over the remaining term of the amended loan.
2. The parties shall be responsible for their own attorney fees
and any other costs associated in any way with the negotiation and execution of
this Amendment.
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EXHIBIT C
WARRANT AGREEMENT
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EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
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