MCG Capital Corporation
EXHIBIT
10.64
MCG
Capital Corporation
0000
Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxxx,
XX 00000
October
10, 2005
XFone,
Inc.
XFone
USA, Inc.
c/o
Xxx
Xxxxxxxxx
0000
Xxxxxxxx Xxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
I-55
Internet Services, Inc.
c/o
Xxxxxx XxXxxxxxxx, President
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxx,
XX 00000
|
Re:
|
(i)
|
Agreement
and Plan of Merger dated August 18, 2005 by and among XFone, Inc.
(“XFone”), XFone USA, Inc. (“XFone USA”), I-55 Internet Services, Inc.
(the “Company”) and Xxxxxx XxXxxxxxxx and Xxxxx Xxxxxx (the “Merger
Agreement”); and
|
|
(ii)
|
Letter
Agreement dated August 18, 2005 (“MCG Letter”) between I-55 Internet
Services, Inc. and MCG Capital Corporation (“MCG” or “MCG Capital”)
regarding the treatment of MCG’s Equity Rights in connection with the
Transaction Under the Merger Agreement
|
Ladies
and Gentlemen:
MCG
Capital, by execution hereof and in order to induce XFone, Inc. and XFone
USA,
Inc. not to terminate the Merger Agreement due to a material adverse effect
that
Hurricane Xxxxxxx has had on the business and assets of the Company and to
execute the First Amendment to the Merger Agreement, MCG does hereby agree
to
amend and restate the MCG Letter as follows:
1. MCG
Capital has the full power and authority to execute this Letter Agreement
and
make the representations and agreements stated herein. MCG hereby consents
to
the execution of the First Amendment to the Merger Agreement by the
Company.
2. MCG
Capital represents that as of the date hereof it is the holder of 5,982,307.69
Warrants (as defined in the Second Amended and Restated Warrant Agreement
dated
as of May 31, 2005 (the “Warrant Agreement”) between MCG Capital and I-55), of
which 2,777,585 are vested as of the date of this Letter Agreement and that
it
owns no other capital stock, warrants, options or other equity instruments
in
I-55 Internet as of the date of this Letter Agreement. MCG Capital is the
sole
beneficial owner of the Warrants and such Warrants are free and clear of
any
liens or other encumbrances created by MCG Capital.
-1-
3. MCG
Capital agrees that notwithstanding anything to the contrary contained in
the
Merger Agreement or the Warrant Agreement, the vested Warrants shall be deemed
exercised immediately prior to the effective time of the Merger into 2,697,519
(as such amount may be increased to the extent additional vesting occurs
between
the date of this Letter Agreement and Closing of the Merger) shares of Common
Stock of I-55 Internet (assuming a cashless exercise) and that MCG Capital
shall
be entitled to receive the same consideration per share of Common Stock as
each
other Company Stockholder. Upon the deemed exercise of the Warrants, the
Warrant
Agreement shall be terminated and any and all obligations thereunder satisfied
in full and the only rights that MCG Capital shall have thereafter is the
rights
as Company Stockholder to have its Company Common Stock converted into XFone
Stock and Warrants in accordance with the Merger Agreement.
4. This
Letter Agreement and MCG Capital’s obligations hereunder shall expire on January
15, 2006 if the transactions contemplated by the Merger Agreement have not
been
consummated prior thereto and all rights of MCG Capital under the Warrant
Agreement shall be reinstated ab initio
as if
this Letter Agreement were never executed.
5. Prior
to
the consummation of the Merger, MCG Capital will provide I-55 Internet and
XFone
with a payoff letter in the form attached hereto as Exhibit A specifying
the
Payoff Amount as of the date of the proposed consummation of the Merger.
In lieu
of cash for the Payoff Amount (as defined in the Payoff Letter), MCG agrees
that
MCG, as Administrative Agent for the Lenders, will accept a number of shares
of
restricted common stock of XFone, Inc. with a value equal to the Payoff Amount
determined using the average of the closing prices for the XFone common stock
as
reported on the website of the American Stock Exchange for the ten (10) trading
days immediately preceding the Payoff Date (which
average of closing prices shall in no event be less than $2.70 per share
or
greater than $3.70 per share)
(such
shares are herein referred to as the “XFone Securities for MCG Debt”). If XFone
registers any shares of its common stock with the Securities and Exchange
Commission (“SEC”) for sale in a secondary offering at a time when (i) a
registration statement including the XFone Securities for MCG Debt is not
otherwise effective and (ii) the holder of the XFone Securities for MCG Debt
is
not otherwise able to transfer the shares without restriction under Rule
144(k),
then
XFone
will register the XFone Securities for MCG Debt with the SEC at XFone’s expense
as part of such registration; provided, however, if XFone has not filed a
registration statement that includes all of the XFone Securities for MCG
Debt
and that has been declared effective by the SEC within ninety (90) calendar
days
after the issuance of the XFone Securities for MCG Debt and that thereafter
remains effective, then
XFone
shall file a registration statement at XFone’s expense to register all of the
XFone Securities for MCG Debt with the SEC within thirty (30) calendar days
after the end of such 90-day period or any subsequent failure of such
registration statement to remain effective. Notwithstanding the registration
rights granted hereinabove, MCG agrees that the total shares of the XFone
Securities for MCG Debt sold by MCG in market transaction with a broker
(i.e.,
excluding block trades, privately negotiated transactions and other non-market
trades) in any one calendar month period during the 15 calendar months
commencing with the month of Closing of the Merger shall not exceed the greater
of the following (a) 10.0% of the average monthly trading volume of the common
stock of XFone during the immediately preceding calendar month and
(b)
|
1st
Month
|
=>
|
6,000
shares
|
|
2nd
Month
|
=>
|
6,600
shares
|
|
3rd
Month
|
=>
|
7,260
shares
|
|
4th
Month
|
=>
|
7,986
shares
|
|
5th
Month
|
=>
|
8,785
shares
|
|
6th
Month
|
=>
|
9,663
shares
|
|
7th
Month
|
=>
|
10,629
shares
|
|
8th
Month
|
=>
|
11,692
shares
|
|
9th
Month
|
=>
|
12,862
shares
|
|
10th
Month
|
=>
|
14,148
shares
|
|
11th
Month
|
=>
|
15,562
shares
|
|
12th
Month
|
=>
|
17,119
shares
|
|
13th
Month
|
=>
|
18,831
shares
|
|
14th
Month
|
=>
|
20,714
shares
|
|
15th
Month
|
=>
|
22,785
shares
|
-2-
In
consideration for MCG agreeing to the sale restrictions as provided hereinabove,
XFone hereby waives the sale restrictions in Section 8.11
of the
Merger Agreement with respect to (a) any shares of equity securities of XFone
owned by MCG Capital (including, the XFone Securities for MCG Debt) other than
the
shares of common stock of XFone received in the Merger in exchange for the
Warrants and/or (b) any shares of equity securities of XFone owned by MCG
Capital that are not sold in market transactions with a broker (i.e.,
block
trades, privately negotiated transactions and other non-market trades).
6. MCG
Capital, as Administrative Agent and a lender, hereby agrees that, as of
September 30, 2005, the following amounts constitute all of the Obligations
owed
and that would have been payable to MCG under the Credit Agreement with I-55
Internet and subsidiaries dated as of October 29, 1999 (as amended) if a
complete prepayment would have occurred as of September 30, 2005: (a)
$1,778,033.44 of outstanding principal balance, (b) $50,378.33 of accrued
but
unpaid current interest, (c) $500.00 of LIBOR breakage fees, (d) $2,293.90
of
late payment fees in connection with cash flow sweeps, and (e) $6,000 of
outstanding legal and documentation fees.
This
Letter Agreement hereby amends, restates and supersedes the MCG Letter. Please
indicate your agreement to the terms of this Letter Agreement by execution
below
and return the duplicate original of this Letter Agreement as attached hereto
to
me at your earliest convenience.
|
Sincerely,
MCG
Capital Corporation
|
||
| |
|
|
| By: | /s/ | |
|
Name |
||
| Title | ||
By
execution below, each undersigned does hereby agree to the terms and provisions
as set forth in this Letter Agreement.
| I-55 INTERNET SERVICES, INC. | ||
| |
|
|
| By: | /s/ Xxxxxx XxXxxxxxxx | |
|
Xxxxxx XxXxxxxxxx |
||
| President | ||
| XFONE, INC. | ||
| |
|
|
| By: | /s/ Xxx Xxxxxxxxx | |
|
Xxx Xxxxxxxxx |
||
| President | ||
| XFONE USA, INC. | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxx | |
|
Xxxx Xxxxxxx |
||
| President | ||
-3-
Exhibit
A
Form
of Payoff Letter
MCG
CAPITAL
CORPORATION
0000
Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxxxxxxx 00000
_____________,
200__
I-55
Internet Services, Inc.
c/o
Xxxxxx XxXxxxxxxx, President
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxx,
XX 00000
XFone,
Inc.
c/o
XFone, USA, Inc.
0000
Xxxxxxxx Xxxxx Xxxxx 000
Xxxxxxx,
Xxxxxxxxxxx 00000
|
Re:
|
Payment
Acknowledgment and Release (“Letter
Agreement”)
|
Ladies
and Gentlemen:
Reference
is hereby made to that certain Credit Facility Agreement (as amended from
time
to time, the “Credit Agreement”) dated as of October 29, 1999 by and among
I-55
Internet Services, Inc. (“I-55”)
and each
of its direct and indirect Subsidiaries
(each,
including I-55, a “Borrower”; collectively, including I-55, the “Borrowers”),
and the
lenders that are parties thereto (each, "Lender"; collectively,
"Lenders"),
and MCG
Capital Corporation
(as
assignee of the interest of MCG Finance I, LLC (f/k/a MCG Finance Corporation),
and including its successors, assigns, participants, pledgees and transferees,
“Administrative Agent”), as administrative agent for the Lenders. Capitalized
terms used herein but not defined shall have the meaning given to such terms
in
the Credit Agreement.
-4-
Borrowers
and Administrative Agent hereby agree that, as of __________,
200__
(“Anticipated Payment Date”), the amount of Obligations owing to Administrative
Agent and each Lender under the Loan Documents will be equal to $____________
(“Anticipated
Payoff Amount”), which is comprised of the following components:
1. [$1,778,033.44] Outstanding
principal balance under Term Loan Facility
2. $__________ Accrued
but unpaid current interest on the outstanding principal balance of Term
Loan
Facility
3. $500.00 LIBOR
Breakage Fee for the Term Loan Facility
4. $__________ Outstanding
Legal Fees
5. $__________ Documentation
Fee
6. $_________ Late
Payment Fee in connection with Cash Flow Sweep
In
lieu
of receiving immediately available funds for the Payoff Amount as defined
herein, Lenders agree to accept a number of shares of restricted Common Stock
of
XFone, Inc. (without any legends other than as to non-registration thereof)
with
a value equal to the Payoff Amount determined using the average of the closing
prices for XFone common stock as reported on the website of the American
Stock
Exchange for the ten (10) trading days immediately preceding the Payoff Date
(which
average of closing prices shall in no event be less than $2.70 per share
or
greater than $3.70 per share)
(the
“XFone Securities for MCG Debt”). The XFone Securities for MCG Debt shall be
subject to the rights, terms, limitations and conditions set forth in that
certain Letter Agreement dated October 10, 2005 among MCG, XFone, Inc., XFone
USA, Inc. and I-55 (the “MCG Letter Agreement”).
The
amount of Obligations set forth in the preceding chart is based upon the
following assumptions: (a) the certificates evidencing the XFone Securities
for
MCG Debt will be delivered to Administrative Agent before 5:00 p.m. (Eastern
Time) by facsimile on the Anticipated Payment Date (with the original of
such
certificate being sent to Administrative Agent by overnight courier on the
Anticipated Payment Date for next day delivery or by other means acceptable
to
the Administrative Agent), and
(b) no
further payments or advances are made under the Loan Documents between the
date
of this Letter Agreement and the Anticipated Payment Date, and
(c) no
further costs or expenses are incurred by Administrative Agent or any Lender
as
to which Administrative Agent or any Lender is entitled to indemnification
or
reimbursement under the Loan Documents between the date of this Letter Agreement
and the Anticipated Payment Date.
If
the
Anticipated Payoff Amount is not received by Administrative Agent in accordance
with Clause “(a)” above, then
additional interest shall be due and payable from and after the Anticipated
Payment Date at the rate of [$837.65] [Comment:
Amount will change if associated LIBOR changes before execution of
letter]
per
calendar day (“Per Diem Amount”; and together with the Anticipated Payoff
Amount, the “Payoff Amount”) until
the
Payoff Amount is received by Administrative Agent in accordance with Clause
“(a)”. Moreover, if the Payoff Amount is not received by Administrative Agent
in
accordance with Clause “(a)” above prior to January 15, 2006, then
Administrative Agent’s agreements hereunder will no longer be
effective.
-5-
The
XFone Securities
for MCG Debt shall be issued and delivered as follows:
MCG
Capital Corporation
0000
Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxxx,
XX 00000
EIN: 00-0000000
Attention: Legal
Affairs Division
Administrative
Agent hereby agrees that, upon receipt by Administrative Agent of the XFone
Securities for MCG Debt as described above, except as otherwise provided
in this
Letter Agreement or in the MCG Letter Agreement: (1) all of the Obligations
under the Loan Documents will have been paid, satisfied and discharged in
full,
and
(2) all
right, title and interest of Administrative Agent under the Loan Documents
in
the assets of any Obligor (including any security interests, collateral
assignments and/or pledges in favor of Administrative Agent) automatically
shall
be released, discharged and terminated (without representation, warranty,
recourse or liability of any kind by or to Administrative Agent or any Lender).
Moreover, each Borrower and Administrative Agent hereby agree that, upon
receipt
by Administrative Agent of the XFone Securities for MCG Debt as described
above,
each Loan Document (including the Collateral Security Documents), each
Commitment, each Facility, and any right, claim, counter-claim or cause of
action under or in connection with any Loan Document by or against any party
thereto, automatically shall be terminated, canceled and waived and no longer
of
any force or effect, subject to
the
waivers, reinstatement rights, and reimbursement and indemnification protections
in favor of Administrative Agent or any Lender under the Loan Documents (which
waivers, rights, and protections shall survive this Letter Agreement and
any
such termination of the Loan Documents).
Administrative
Agent, from time to time after the receipt of the XFone Securities for MCG
Debt
as provided above, (i) agrees to deliver to Borrowers any original stock
certificates and accompanying stock powers, and
(ii)
promptly upon Borrowers’ providing execution copies thereof in form and
substance satisfactory to Administrative Agent, agrees to deliver (at the
sole
expense of Borrowers and/or any successor or assign thereof, but without
representation, warranty, recourse or liability of any kind by or to
Administrative Agent or any Lender) to Borrowers (or at the direction thereof)
mortgage satisfactions, releases of liens, discharges, terminations and other
release documentation and instruments, and
(iii)
authorizes each of Borrower and XFone to file UCC termination statements
effecting the foregoing releases, discharges and terminations, and
(iv)
agrees, upon request of Borrowers, to deliver to Borrowers or such persons
as
Borrower shall designate the original Notes that are in the possession of
Lenders. Administrative Agent hereby agrees, from time to time after receipt
of
the XFone Securities for MCG Debt as provided above (at the request and sole
expense of Borrowers and/or any successor or assign thereof, but without
representation, warranty, recourse or liability of any kind by or to
Administrative Agent or any Lender), to execute and deliver to Borrowers
(or at
the direction thereof) such further instruments and documents that are provided
to Administrative Agent and to take such further actions as may be reasonably
requested to fully effect the foregoing releases, discharges and terminations.
Each Borrower hereby agrees to promptly pay upon demand by Administrative
Agent
all costs and expenses incurred by Lenders (including reasonable fees and
expenses of counsel thereto) in connection with the releases of Collateral
and
the enforcement of this Letter Agreement.
In
consideration for Administrative Agent executing and performing pursuant
to this
Letter Agreement and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), each Borrower hereby remises,
releases, waives and forever discharges Administrative Agent and its present,
future and/or former officers, directors, employees, agents, attorneys,
affiliates and/or representatives and all of their predecessors, successors
and
assigns (collectively, the “Released Parties”) of and from any and all claims,
losses, liabilities, demands and causes of action of any kind whatsoever
(if
any), whether absolute or contingent, known or unknown, matured or unmatured,
based in contract or tort, at law or in equity that any Borrower may now have or have ever had
in
whatever capacity against any Released Party arising from events or
circumstances relating to the Loan Documents, any financing or other
transactions contemplated by such agreements or any enforcement of any such
agreements. Included within this release and waiver are all claims and defenses
based on waiver (other than as expressly provided pursuant to a written
instrument signed by Administrative Agent), fraud, mistake, duress, usury,
failure or lack of consideration, capacity or authorization, unenforceability
of
agreements, suretyship rights and defenses, equitable subordination, conflicts
of interest, self dealing, breach of duty (fiduciary or otherwise), failure
to
act in a commercially reasonable manner or in a manner consistent with good
faith and fair dealing, and/or any other claim of so-called “lender liability”;
provided, however, this release shall not prohibit or limit, in any way,
the
right of any Borrower to defend any action by Administrative Agent or any
Lender
under the waivers, reinstatement rights, and reimbursement and indemnification
protections in favor of Administrative Agent or any Lender under the Loan
Documents (which waivers, rights, and protections shall survive this Letter
Agreement and any such termination of the Loan Documents).
-6-
This
Letter Agreement shall be governed by and construed in accordance with the
internal laws of the Commonwealth of Virginia. This Letter Agreement shall
not
be effective or binding upon Administrative Agent until accepted, executed
and
delivered by Borrowers. Administrative Agent and each Borrower agree that
delivery of an executed counterpart version of this Letter Agreement by
facsimile shall be deemed to be an effective delivery of an enforceable original
executed counterpart hereof, and
such
delivery may be relied upon by the recipient thereof as delivery of an
effective, executed original counterpart hereof.
Please
evidence agreement to the terms of this Letter Agreement by signing a copy
of
this letter where indicated below and returning it to me by overnight
courier.
|
Yours
truly,
MCG
CAPITAL CORPORATION
|
||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxxx | |
|
Xxxxxx Xxxxxxxx |
||
| Vice President | ||
|
I-55
INTERNET SERVICES, INC.
(on
behalf of itself and each other Borrower)
|
||
| |
|
|
| By: | /s/ | |
|
Name |
||
| Title | ||
-7-
