WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT
WAIVER
AND AMENDMENT NO. 1
TO
THIS
WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”)
is
dated as of October 31, 2007, by and among 20/20 TECHNOLOGIES, INC., a Delaware
corporation (“20/20
Inc.”),
20/20
TECHNOLOGIES I, LLC, a Delaware limited liability company (“20/20
LLC”),
CENTREPATH, INC., a Delaware corporation (“Centrepath”),
FRONTRUNNER NETWORK SYSTEMS, CORP., a Delaware corporation (“Frontrunner”),
GLOBAL CAPACITY GROUP, INC., a Texas corporation (“Global”),
NEXVU
TECHNOLOGIES, LLC, a Delaware limited liability company (“Nexvu”;
20/20
Inc., 20/20 LLC, Centrepath, Frontrunner, Global and Nexvu are sometimes
referred to herein individually as a “Borrower”
and
collectively as “Borrowers”),
CAPITAL GROWTH SYSTEMS, INC., a Florida corporation (“CGS”)
and
MAGENTA NETLOGIC LIMITED, a private limited company organized under the laws
of
the United Kingdom (“Magenta”;
CGS
and Magenta are sometimes referred to herein individually as a “Guarantor”
and
collectively as “Guarantors”);
CGS,
acting in its capacity as funds administrator and borrowing agent for Borrowers
(in such capacity, “Funds
Administrator”;
Borrowers, Guarantors and Funds Administrator are collectively referred to
herein as the “Credit
Parties”
and
individually as a “Credit
Party”);
and
HILCO FINANCIAL, LLC, a Delaware limited liability company (“Lender”).
Capitalized terms used herein but not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.
WITNESSETH:
WHEREAS,
Credit Parties and Lender are parties to that certain Credit Agreement dated
as
of January 19, 2007 (as amended, restated, amended and restated, supplemented
or
otherwise modified and in effect from time to time, including pursuant to the
terms of this Amendment, the “Credit
Agreement”),
pursuant to which Lender agreed to make certain loans and other financial
accommodations to or for the account of Borrowers; and
WHEREAS,
the Designated Defaults (as such term is defined herein below) has occurred
and
is continuing under the Credit Agreement;
WHEREAS,
Credit Parties have requested that Lender (i) waive the Designated Defaults,
and
(ii) amend the Credit Agreement; and
WHEREAS,
Lender has agreed to (i) waive the Designated Defaults, and (ii) amend the
Credit Agreement, in each case on the terms and subject to the conditions
hereinafter set forth;
NOW,
THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the respective parties
hereto hereby agree as follows:
1. Waiver
of Designated Defaults.
Effective
as of the date hereof, upon satisfaction of the conditions precedent set forth
in Section 3 below, and in reliance upon the representations and warranties
of
each Credit Party set forth herein and in each of the Credit
Documents, Lender
hereby waives the Event of Defaults (the “Designated Defaults”) occurring under
Section 8.1(b) of the Credit Agreement solely as a result of:
1.1 the
amendment of the terms of all existing Warrants issued by CGS pursuant to the
Offer to Purchase CGSY Warrants dated October 5, 2007. resulting in the
reduction of the exercise price thereof to $.15 per share and extension of
the
outside date of the exercise thereof, in each case if exercised between October
2, 2007 and October 31, 2007;
1.2 (i)
the
incurrence by CGS of the Indebtedness evidenced by those certain unsecured
promissory notes issued on August 22, 2007, to Xxxxxxx Xxxxxx, Xxxxx Xxxxxxx,
Xxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxx and Xxxx Xxxxxx, respectively,
in
the aggregate original principal amount of $350,000, (ii) the modification
of
each of such notes as of the date hereof to extend the maturity date thereof
from September 30, 2007, to November 30, 2007, and (iii) the payment of the
principal amount thereof on such date;
1.3 the
amendment of the terms of the existing promissory note issued by Frontrunner
to
Nortel Networks Systems Corp. (“Nortel”)
to
increase the per annum rate of interest thereunder to ten percent (10%) in
connection with the establishment of $200,000 of additional credit terms for
purchases by Frontrunner from Nortel; and
1.4 the
Credit Parties permitting EBITDA for the fiscal quarter of the Consolidated
Entity ending as of September 30, 2007, and any fiscal quarter ending prior
thereto, to be an amount that is more than twenty-five percent (25%) less than
projected EBITDA for such fiscal quarter as set forth in the Initial
Projections.
2. Amendment
to Credit Agreement.
Effective
as of the date hereof, upon satisfaction of the conditions precedent set forth
in Section 3 below, and in reliance upon the representations and warranties
of
each Credit Party set forth herein and in each of the Credit Documents, the
Credit Agreement is hereby amended as follows:
2.1 Section
1.1
of the
Credit Agreement is hereby amended by deleting the defined term “Credit
Documents” set forth therein in its entirety and substituting therefor the
following language:
“Credit
Documents”
means,
collectively, this Credit Agreement, the Notes, the Hilco Warrant Documents,
each of the Collateral Documents, each Subordination Agreement and all other
agreements, documents, instruments, opinions and certificates now or hereafter
executed and delivered in connection herewith or therewith, as the same may
be
amended, restated, amended and restated, supplemented or otherwise modified
and
in effect from time to time.
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2.2 Section
1.1
of the
Credit Agreement is hereby amended by deleting the defined term “Designated
Sublimit” set forth therein in its entirety and substituting therefor the
following language:
“Designated
Sublimit”
means
$6,500,000, provided,
that,
notwithstanding the foregoing or anything to the contrary set forth herein
or in
any of the other Credit Documents, such amount shall automatically and
permanently reduce to $4,000,000 on December 31, 2007, without the necessity
of
any notice from Lender to any Credit Party or any other Person.
2.3 Section
1.1
of the
Credit Agreement is hereby amended by deleting the defined term “Hilco Warrants”
set forth therein in its entirety and substituting therefor the following
language:
“Hilco
Warrant” means
that certain Warrant to Purchase Common Stock of Capital Growth Systems, Inc.
issued on October 31, 2007 to Lender by CGS.
2.4 Section
1.1
of the
Credit Agreement is hereby further amended by inserting the following new
defined terms therein in the appropriate alphabetical order:
“Amendment
No. 1 Projections”
means
the projections of the financial condition and results of operations of the
Consolidated Entity attached hereto as Annex
II.
“Hilco
Registration Rights Agreement”
means
that certain Registration Rights Agreement dated as of October 31, 2007, between
CGS and Lender, as the same may be amended, restated, amended and restated,
supplemented or otherwise modified and in effect from time to time.
2.5 Section
1.1
of the
Credit Agreement is hereby further amended by inserting the following new
defined term therein in the appropriate alphabetical order:
“Hilco
Warrant Documents”
means
(i) the Hilco Warrant and (ii) the Hilco Registration Rights Agreement, in
each
case as the same may be amended, restated, amended and restated, supplemented
or
otherwise modified and in effect from time to time.
2.6 Section
5.7(b)
of the
Credit Agreement is hereby amended by inserting therein the words “and the
Amendment No. 1 Projections” immediately following the words “Initial
Projections” appearing therein.
2.7 Section
7.1
of the
Credit Agreement is hereby amended in its entirety and the following language
is
hereby substituted therefor:
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7.1 Financial
Covenants.
(a) The
Credit Parties shall not make or commit to make, or permit any of their
respective Subsidiaries to make to commit to make, Capital Expenditures during
any fiscal year of the Consolidated Entity that exceed in the aggregate for
all
Credit Parties and their respective Subsidiaries combined an amount equal to
projected Capital Expenditures for such fiscal year set forth in the Amendment
No. 1 Projections.
(b) The
Credit Parties shall not permit EBITDA for any fiscal quarter of the
Consolidated Entity ending after the Closing Date to be more than twenty percent
(20%) less than projected EBITDA for such fiscal quarter set forth in the
Amendment No. 1 Projections.
2.8 The
Credit Agreement is hereby amended by inserting therein as Annex
II
to the
Credit Agreement the Projections attached hereto as Exhibit
A.
2.9 The
Credit Agreement is hereby amended by amending the respective disclosure
schedules described in Exhibit
A
hereto
in the manner set forth on Exhibit
A.
3. Conditions
Precedent.
This
Amendment shall become effective as of the date hereof, upon satisfaction of
each of the following conditions:
(a) Lender
shall have received a copy of this Amendment, duly executed and delivered by
each Credit Party;
(b) Lender
shall have received a First Amendment and Reaffirmation Agreement duly executed
and delivered by CGSI Term Note Servicer, Inc., acting in its capacity as
contractual representative of and collateral agent for each of the Subordinated
Noteholders;
(c) Lender
shall have received the Hilco Warrant Documents, where applicable duly issued,
executed and delivered by CGS; and
(d) except
for the Designated Defaults, no Default or Event of Default shall have occurred
which is continuing.
4. Representations
and Warranties.
4.1 Each
Credit Party hereby represents and warrants to Lender that, after giving effect
to this Amendment:
(a) the
representations and warranties made by the Credit Parties contained in
Article
5
of the
Credit Agreement and in each of the other Credit Documents are true and correct
in all material respects on and as of the date of this Amendment as though
made
on and as of such date, except for such representations and warranties that
are
subject to a Material Adverse Effect or other materiality qualifier, which
are
true and correct in all respects as of such date;
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(b) no
Default or Event of Default has occurred that is continuing;
(c) this
Amendment, and the Credit Agreement, as amended hereby, constitute legal, valid
and binding obligations of each of the Credit Parties and are enforceable
against each of the Credit Parties in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws; and
(d) the
execution and delivery by each Credit Party of this Amendment (i) do not and
will not contravene, conflict with, violate or constitute a default under its
certificate of incorporation or bylaws, or other applicable organizational
documents, of any Credit Party, or any applicable law, rule, regulation,
judgment, decree or order or any agreement, indenture or instrument to which
any
Credit Party is a party or is bound or which is binding upon or applicable
to
all or any portion of any Credit Party’s property, and (ii) do not require the
consent or approval of any Person.
5. Reference
to and Effect on the Credit Agreement and the Other Credit Documents;
Reaffirmation.
5.1 Upon
the
effectiveness of this Amendment, each reference in the Credit Agreement to
“this
Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each
reference in each of the other Credit Documents to the “Credit Agreement” shall
in each case mean and be a reference to the Credit Agreement as amended
hereby.
5.2 Except
as
expressly set forth herein, (a) the execution and delivery of this Amendment
shall in no way affect any of the respective rights, powers or remedies of
Lender with respect to any Default or Event of Default nor constitute a waiver,
amendment or other modification of any term or provision of the Credit Agreement
or any of the other Credit Documents, and (b) all of the respective terms and
provisions of the Credit Agreement, the other Credit Documents and all other
documents, instruments, amendments and agreements executed and/or delivered
by
any Credit Party pursuant thereto or in connection therewith shall remain in
full force and effect and are hereby ratified and confirmed in all respects.
The
execution and delivery of this Amendment by Lender shall in no way obligate
Lender, at any time hereafter, to consent to any other amendment or modification
of any term or provision of the Credit Agreement or any of the other Credit
Documents, whether of a similar or different nature.
5.3 Each
Credit Party, in its respective capacities under each of the Credit Documents
to
which it is a party (including the capacities of obligor, grantor, mortgagor,
pledgor, guarantor, indemnitor and assignor, as applicable, and each other
similar capacity, if any, in which such Credit Party has granted Liens on all
or
any part of the properties or assets of such Credit Party, or otherwise acts
as
an accommodation party, guarantor, indemnitor or surety with respect to all
or
any part of the Obligations), hereby (a) except as otherwise expressly set
forth
herein, agrees that the terms and provisions hereof shall not affect in any
way
any payment, performance, observance or other obligations or liabilities of
such
Credit Party under the Credit Agreement or any of the other Credit Documents,
all of which obligations and liabilities shall remain in full force and effect
and extend to the further loans, extensions of credit and other Obligations
provided for thereunder, and each of which obligations and liabilities are
hereby ratified, confirmed and reaffirmed in all respects; (b) to the extent
such Credit Party has granted Liens on any of its properties or assets pursuant
to any of the Credit Documents to secure the prompt and complete payment,
performance and/or observance of all or any part of the Obligations,
acknowledges, ratifies, confirms and reaffirms such grant of Liens, and
acknowledges and agrees that all of such Liens are intended and shall be deemed
and construed to secure to the fullest extent set forth therein all now existing
and hereafter arising Obligations under and as defined in this Credit Agreement,
as amended, restated, supplemented and otherwise modified and in effect from
time to time; and (c) acknowledges and agrees that, as of the date hereof,
Lender has fully performed all obligations to such Credit Party.
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5.4 GOVERNING
LAW.
THE RIGHTS AND DUTIES OF EACH CREDIT PARTY AND LENDER UNDER THIS AMENDMENT
AND
THE OTHER CREDIT DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
6. Headings.
Section
headings in this Amendment are included herein for convenience of reference
only
and shall not constitute a part of this Amendment for any other
purpose.
7. Counterparts.
This
Amendment may be executed or otherwise authenticated in any number of
counterparts and by the different parties hereto in separate counterparts,
each
of which when so executed or otherwise authenticated and delivered shall be
an
original, but all of which shall together constitute one and the same
instrument. Any such counterpart which may be delivered by facsimile, email
or
similar electronic transmission shall be deemed the equivalent of an originally
signed counterpart and shall be fully admissible in any enforcement proceedings
regarding this Amendment.
[Remainder
of Page Intentionally Left Blank;
Signature
Pages Follow]
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IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed and delivered
by
their proper and duly authorized officers as of the date first set forth
above.
BORROWERS: | ||
20/20 TECHNOLOGIES, INC., a Delaware corporation | ||
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By: | ||
Name: | ||
Title: |
20/20
TECHNOLOGIES I, LLC,
a
Delaware limited liability company
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By: | 20/20
TECHNOLOGIES, INC.,
a
Delaware
corporation
Its: Manager
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By: | |||
Name: | |||
Title: |
CENTREPATH, INC., a Delaware corporation | ||
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By: | ||
Name: | ||
Title: |
FRONTRUNNER NETWORK SYSTEMS, CORP., a Delaware corporation | ||
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By: | ||
Name: | ||
Title: |
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed and delivered
by
their proper and duly authorized officers as of the date first set forth
above.
BORROWERS
(continued):
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NEXVU TECHNOLOGIES, LLC, a Delaware limited liability company | |||
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By: |
CAPITAL
GROWTH SYSTEMS, INC.,
a
Florida
corporation
Its: Manager
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By: | |||
Name: | |||
Title: |
GLOBAL CAPACITY GROUP, INC., a Texas corporation | ||
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By: | ||
Name: | ||
Title: |
GUARANTORS:
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CAPITAL
GROWTH SYSTEMS, INC.,
a
Florida corporation
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By: |
CAPITAL
GROWTH SYSTEMS, INC.,
a
Florida
corporation
Its: Manager
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By: | |||
Name: | |||
Title: |
MAGENTA
NETLOGIC LIMITED,
a
private limited company organized under the laws of the United Kingdom
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By: | ||
Name: | ||
Title: |
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be duly executed and delivered
by
their proper and duly authorized officers as of the date first set forth
above.
LENDER:
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HILCO FINANCIAL, LLC | |||
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By: | |||
Name: | |||
Title: |