This is a document preview
INTEREST AND LOAN PURCHASE AGREEMENT
This Interest and Loan Purchase Agreement (the “Agreement”), dated as of November 14, 2008 (the “Effective Date”), by and among Vanco plc (in administration), a company incorporated under the laws of England and Wales with registered company number 3470117 (“Seller”), Simon John Granger and Chad Griffin, each an insolvency practitioner of FTI Consulting Limited, a company incorporated under the laws of England and Wales with registered company number 04805205, in their respective capacities as joint administrators of Seller (collectively, “Administrators”), and Capital Growth Acquisition, Inc., a corporation organized under the laws of Delaware (“Buyer”).
WHEREAS, Administrators were appointed to act as joint administrators of Seller on May 25, 2008 by Lloyds TSB Bank plc in accordance with paragraph 14 to Schedule B1 to the (English) Insolvency Act 1986;
WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell to Buyer all issued and outstanding limited liability company interests of Vanco Direct USA, LLC, a Delaware limited liability company (the “Company” or “VDUL”) on the terms and subject to the conditions set forth herein;
WHEREAS, in connection with Buyer’s acquisition of the Units (as defined below), Buyer desires to purchase from Seller and Seller desires to sell to Buyer all of Seller’s rights, title and interest in that certain Intercompany Loan Agreement, dated May 25, 2008, by and between VDUL as borrower and Seller as Lender (the “Loan”), and pursuant to which Seller agreed to loan VDUL up to £5,000,000, with $3,851,176 outstanding as of the Effective Date (the purchase and sale of the Units and Loan shall hereinafter be referred to as the “Acquisition”); and
WHEREAS, the parties also wish to provide for the treatment of certain rights, liabilities and obligations of VDUL in connection with the Acquisition.
NOW, THEREFORE, the parties agree as follows:
1.1. Acquisition .
(a) At the Initial Closing (as defined below), Buyer shall purchase from Seller, and Seller shall sell to Buyer, such right, title and interest as Seller may have in (i) 1000 units (the “Units”) of limited liability company interests of VDUL presently owned by Seller, which, to the awareness of the Administrators, represent 100% of the limited liability company interests of VDUL owned by Seller, and (ii) the Loan; provided , however , that legal title to the Units shall not transfer to Buyer until the Regulatory Approvals (as defined below) are addressed, as required hereunder, and certain other conditions set forth herein are satisfied.
(b) The aggregate purchase price payable by Buyer for the Units and the Loan (the "Purchase Price") is $15,233,452. The Purchase Price shall be adjusted in accordance with Section 1.1(c) below and shall be allocated between the Units and the Loan as follows: (A) $11,382,276 is allocable to the Units; and (B) $3,851,176 (representing the outstanding principal and interest of all amounts owed by VDUL to Seller under the Loan as of the Effective Date) is allocable to the Loan.
(c) The Purchase Price shall be (i) increased by any additional payments made by Seller to VDUL under the Loan from the Effective Date through the Initial Closing Date (as defined below)(each, an “Additional Loan Payment”), and (ii) decreased by any distributions made by VDUL to Seller (such distributions being limited to dividends or the payment of any management charges to Seller or any of its affiliates) from the Effective Date through the Initial Closing Date. Buyer and Seller hereby acknowledge that delivery from Seller to Buyer of a copy of a receipt of funds or bank statement evidencing any such Additional Loan Payment shall constitute sufficient evidence of the same. The allocation of Purchase Price to the Loan, as set forth in Section 1.1(b) above, shall be increased in an amount equal to all such Additional Loan Payment(s). The Purchase Price as adjusted through the Initial Closing Date shall hereinafter be referred to as the “Final Purchase Price.”
1.2. Management Services Agreement .
(a) The Company holds domestic and international Section 214 authorizations from the U.S. Federal Communications Commission (“FCC”) and certificates of public convenience and necessity or the equivalent from various state telecommunications regulatory commissions (the “State Commissions” and, collectively with the FCC, the “Commissions”)(such authorizations and certificates collectively referred to as the “Licenses”).
(b) Immediately following the execution of this Agreement, Buyer shall:
(i) initiate the delivery of the FCC (a) applications to transfer control of the Licenses to Buyer (individually, an “FCC Transfer Application” and collectively, the “FCC Transfer Applications”) and (b) requests for special temporary authority from the FCC pursuant to which control of VDUL will be transferred to Buyer until the FCC Transfer Applications have been approved (“STA Requests”), such that the FCC Transfer Applications and STA Requests are duly filed with the FCC no later than the business day following the Effective Date; provided , however , that Buyer shall use its best efforts to file the FCC Transfer Applications and STA Requests on the Effective Date; and
(ii) enter into a management services agreement (the “MSA”) in the form attached hereto as Exhibit A, which MSA shall become effective as of the Initial Closing Date.
(c) As soon as practicable, but in any event no later than five business days after the Effective Date, Buyer shall use its best efforts to file with the State Commissions all required notices, applications, petitions or other requests for approval to transfer control of the Company or Licenses to Buyer (“State Transfer Applications” and together with the FCC Transfer Applications, “Transfer Applications”); provided , however , the State Transfer Application(s) required by the state of New York shall be filed within one (1) business day after the Effective Date via overnight delivery service. For purposes of this Agreement, the term “business day” shall mean any day other than (1) a Saturday or Sunday, or (2) a day on which banking and savings and loan institutions are authorized or required by law to be closed in the State of Illinois or the District of Columbia.
(d) From and after the Initial Closing Date until the termination of the MSA, Buyer shall operate the business of the Company pursuant to the MSA until (i) all notice waiting periods have expired or been waived by the corresponding State Commissions, and (ii) all Transfer Application approvals have been issued (collectively, “Regulatory Approvals”). A list of the required Regulatory Approvals is set forth in Schedule 1 attached hereto.
1.3. Payment of Purchase Price .
(a) Prior to the execution of this Agreement, Buyer made a non-refundable payment of $500,000 to Seller (the “Deposit”) for the sole benefit of Seller. Notwithstanding anything to the contrary herein, the Deposit shall not be returned to Buyer for any reason, including, without limitation, the failure of any Closing (as defined below) to have occurred.
(b) Immediately upon Buyer’s receipt of the Instruction Letter (as defined below), but in any case no later than the next business day after Buyer’s receipt of the same, Buyer shall pay, or cause to be paid, the Final Purchase Price as follows:
(i) Buyer shall deliver to Seller a fully executed debenture, in the form attached hereto as Appendix 1 (the “Debenture”), in the principal amount of $3,000,000 (the “Debenture Amount”).
(ii) To the extent that such payment has not already been made, £735,365 (the “Hitachi Funds”) shall be paid by wire transfer of immediately available funds to an account designated by Hitachi Capital UK plc (“Hitachi”), representing the full and final settlement of VDUL’s payment obligation to Hitachi under that certain Software Assignment Agreement, dated May 24, 2008.
(iii) An amount equal to the Final Purchase Price less the Deposit, the Debenture Amount and the Hitachi Funds (as applicable), shall be paid by wire transfer of immediately available funds to the Seller.
(c) Notwithstanding anything herein to the contrary, in addition to the payment by Buyer to Seller of the Purchase Price in accordance with the terms of this Agreement, Buyer shall also fully and irrevocably assign, transfer and deliver, or cause to be delivered, to Seller, the Options (as defined below) concurrently with the payment of the Final Purchase Price.
(d) (i) As used herein, “Instruction Letter” shall mean a letter from Seller (which may be delivered by means of documented overnight delivery service, facsimile, electronic mail or other electronic transmission) informing Buyer that the STA Requests have been approved, or otherwise confirming the same, and thereby instructing the Buyer to pay, or cause to be paid, no later than one business day following delivery of such notification to Buyer, the Final Purchase Price in accordance with the provisions of this Agreement. The Instruction Letter shall be in a form agreed to by the parties prior to the Effective Date.
(ii) As used herein, “Options” shall mean, collectively, those certain options to purchase an aggregate of 5,750,001 shares of Common Stock pursuant to each Capital Growth Systems, Inc. Fixed Stock Option Grant Agreement attached hereto as Appendix 2.
1.4. Closings .
(a) The payments set forth in Section 1.3(b) above and the deliverables set forth in Section 1.5 below shall each be made, and the initial closing of the Acquisition (“Initial Closing”) shall take place at the offices of Shefsky & Froelich Ltd., 111 E. Wacker #2800, Chicago, Illinois 60601 (the “Closing Offices”), immediately following Buyer’s receipt of the Instruction Letter, but in no event later than the next business day thereafter; provided , however , if the Initial Closing has not occurred by the seventh (7th) business day following the Effective Date, then either party may terminate this Agreement by delivery of five (5) business days notice (such date as of the end of the notice period being the “Outside Date” and such notice being the “Termination Notice”), in which event this Agreement shall be terminated. Notwithstanding the foregoing, the parties may elect to close at such other time, date and place as they may mutually agree. The Seller shall deliver the Instruction Letter to the Buyer (with a copy delivered to Buyer’s counsel) immediately upon any party’s receipt of written, or other, notice from the FCC that the STA Requests have been approved. The date on which the Initial Closing is actually held hereunder is referred to herein as the “Initial Closing Date”. In the event of termination of this Agreement pursuant to delivery of the Termination Notice, neither party shall have any liability to the other party for failure to close the transactions contemplated herein, except that a party may be liable if such termination is a direct result of such party’s breach of its obligations under Section 1.2(b)(i) or (ii) above.
(b) The final closing (“Final Closing”, together with the Initial Closing, the “Closings” and each, a “Closing”) shall take place at the Closing Offices as soon as practicable after all remaining Regulatory Approvals have been received (or jointly waived to the extent agreed between the parties that any Regulatory Approval is no longer required), but in any event no later than three (3) business days thereafter; provided that Buyer may elect to waive any such remaining Regulatory Approval(s) after ninety one (91) days following the Effective Date; provided , further , that in the event that Regulatory Approval for the State Commission for the State of New York is approved prior to ninety one (91) days after the Effective Date, then the Final Closing shall be held on the date of such approval, but in no event earlier than forty five (45) days following the date of the Initial Closing. At the Final Closing, legal title to the Units shall automatically be transferred to Buyer pursuant to the terms of the Escrow Agreement referenced in Section 1.5(a)(ix) without any further action required by any party. The date on which the Final Closing is actually held hereunder is referred to herein as the “Final Closing Date”.
1.5. Deliveries at Closings . At the Initial Closing, and subject to the simultaneous payment of funds and delivery of the Debenture and the Options described in Sections 1.3(b) and (c) above, the following deliveries shall be made:
(a) Seller shall deliver, or cause to be delivered, to Buyer or its designees as follows:
(i) a counterpart executed copy of that certain Term Loan and Security Agreement, as executed by VDUL in favor of ACF CGS as agent (“Agent”) for the lenders named therein, substantially in the form attached hereto as Exhibit B (the “Loan and Security Agreement”), whereby VDUL pledges to Agent a security interest as of Initial Closing in all of its assets except those telecom related assets where prior approval of the State Commissions is required for such approval; a counterpart executed copy of that certain Security Agreement, as executed by VDUL in favor of the subordinated lenders named therein in the form attached hereto as Exhibit C (the “Subordi