The Restructuring will also include a recapitalization (the "Marret Plan"), as described below, unless, by April 30, 2013, Cline implements a transaction the ("Cline Transaction") which results in any of (i) a take-over bid of, or other business combination with, Cline in which any person or group of persons acting in concert acquires 50% or more of the equity securities of Cline, (ii) the sale of all or substantially all of the assets or business of Cline and its subsidiaries, or (iii) a recapitalization of Cline, subject to certain conditions including that as a result of such recapitalization Cline receives at least CDN$35,000,000 of gross cash proceeds from the issuance of equity securities or, as a result of such sale, Cline receives sufficient net proceeds to repay all amounts (including interest, premium, principal and other fees) owing on or under the Bonds and the other financing documents. The principal terms and conditions of the Marret Plan, which will be subject to the approval of the TSX, are set out below:
-- US$25,000,000 principal amount of the Bonds will be exchanged for 2.091 billion common shares of Cline, being an effective exchange price of approximately US$0.012 per share;-- the current common shareholders of Cline will receive rights to subscribe for up to an aggregate of 1.711 billion common shares at a subscription price of CDN$0.0205 per share for gross proceeds of CDN$35,000,000. Marret, on behalf of the bondholders, will act as stand- by underwriter for the rights offering for a fee of US$3,500,000 which may, at the option of Cline, be satisfied by the issuance of Bonds which Marret would exchange for common shares of Cline at the rights offering subscription price. Assuming that all rights are exercised by the current common shareholders of Cline, and subject to currency fluctuations, those shareholders will then own approximately 46% of the outstanding common shares and the bondholders will own approximately 54%;-- the maturity date of the Bonds will be extended for two years to February 27, 2016;-- Cline will issue warrants to its current common shareholders on a pro rata basis, entitling the holders to acquire common shares for no consideration for a period of three years. The common shares issuable on exercise of the warrants will, in the aggregate, represent 5% of the pro forma outstanding common shares. The warrants will not be exercisable except (i) when the 20-day volume-weighted average trading price of the common shares reaches or exceeds CDN$0.0615 per share, or (ii) immediately preceding a transaction that would constitute a change of control of Cline (including by way of a merger, plan of arrangement or similar transaction) at a price (or value) per common share equal to or greater than CDN$0.0615. In either of these two events, the warrants will be deemed to be exercised and automatically converted into common shares;-- the Marret Plan will be implemented on the earliest of (i) March 10, 2013, if by February 28, 2013 Cline has not received a letter of intent by February 28, 2013 with respect to a Cline Transaction, (ii) April 10, 2013, if by March 31, 2013 Cline has not entered into a binding agreement to implement a Cline Transaction, or (iii) May 10, 2013, if by April 30, 2013 Cline has not implemented a transaction to effect a Cline Transaction; and-- a one-time termination fee of CDN$1,750,000, plus all reasonable legal fees and related expenses incurred by the bondholders will be payable by Cline if the Marret Plan does not proceed, except under certain conditions including if the Marret Plan does not obtain requisite approvals.
