AEQUITAS LOAN AGREEMENT
AEQUITAS
LOAN AGREEMENT
THIS
AEQUITAS LOAN AGREEMENT dated as of November 30, 2007 is by and between
Capital Growth Systems, Inc., a Florida corporation (“Company”), Aequitas
Capital Management, Inc. (“Aequitas”).
RECITALS:
A. Company
(together with its wholly owned subsidiaries—together with Company, collectively
referred to as the “Debtors,”) has entered into a Note Purchase Agreement dated
as of January 12, 2007, as amended by first amendment (“First Amendment”) dated
as of June 5, 2007, and as may be hereafter amended from time to time (the
“Note Purchase Agreement”), calling for the issuance of up to $10,000,000 of
original principal amount of promissory notes (the “Notes”), with warrant
coverage to be issued by the Company (based upon warrants to purchase 200,000
shares of Common Stock of Company for each $100,000 of Notes issued as of the
date of the First Amendment (and 150,000 shares of Common Stock prior to that
date); the warrants issuable pursuant to the Note Purchase Agreement are
hereinafter referred to as the “Warrants.”
B. Aequitas
is willing to fund or cause to be funded not less than $1,000,000 of Notes,
nor
more than $2,000,000 of Notes, subject to the Company entering into the
agreements and undertakings set forth below.
NOW,
THEREFORE, in consideration of the foregoing, and for the covenants and
agreements contained herein, the parties hereto agree as follows:
1. Recitals,
Consent.
The
recitals set forth above are incorporated by reference herein and made a
part
herewith as if fully rewritten.
2. Loan
to Credit Parties.
Simultaneously with the execution of this Agreement, Aequitas agrees to execute
and/or cause one or more of its designees (collectively, the “Aequitas
Purchasers”) to execute the Note Purchase Agreement (and exhibits thereto) to
subscribe for and fund not less than $1,000,000 nor more than $2,000,000
of
Notes (or such other greater amount as is mutually agreeable to the Company
and
Aequitas), subject to the remaining terms of this Section 2.
The
outside date for purchase of the Notes shall be December 15, 2007 unless
mutually agreed by the parties to be extended (the “Outside Date”). The initial
funding pursuant to this Agreement shall be subject to satisfaction or waiver
to
the conditions precedent to funding in favor of Aequitas as set forth in
the
November 6, 2007 Term Sheet between the parties. Notwithstanding the terms
of the Note Purchase Agreement, the following shall supersede any
inconsistencies with the terms of the Note Purchase Agreement and the
instruments and ancillary agreements associated therewith: (i) the warrants
to
be issued to the Aequitas Purchasers (“Warrants”) shall be for a five year term
expiring December 31, 2012 and the weighted average antidilution price shall
be
adjusted to account for all issuances to date of Common Stock and warrants
exercisable for Common Stock at $0.15 per share; for the avoidance of doubt,
assuming the issuance of the amounts of Common Stock and warrants to purchase
common stock at $0.15 per share as set forth on Exhibit
A,
then
the exercise price of the Warrants shall be as set forth in Exhibit A (subject
to further adjustment based upon actual amounts of stock and warrants issued,
including any subsequent issuances) ; (ii) the Note Administration and Security
Agreement among the existing holders of Notes and the Debtors shall be amended
as of the date of the initial Note Purchase contemplated hereunder to add
Aequitas and the Aequitas Purchasers as of the initial closing in the form
attached as Exhibit B;
and
(iii) the Company’s obligation to file a registration statement to register the
shares of Common Stock underlying the Warrants and Notes (“Underlying Shares”)
shall be thirty (30) days from such date as counsel for the Company reasonably
determines that it is more likely than not that the Securities & Exchange
Commission shall permit the registration of the Underlying Shares after giving
due effect to its application of Rule 415 with respect to the registration
obligations of the Company with respect to previously issued securities;
and
(iv) the Aequitas Purchasers shall have the right to purchase at $0.15 per
share
up to $600,000 of Common Stock through the Outside Date, pro rated based
upon
the percentage of $2,000,000 of loans funded by them (ie $0.30 of Common
Stock
for each $1.00 of loan funded).
3. Transaction
Fees.
Effective as of the initial closing of the Note purchase contemplated hereunder,
the Company shall pay Aequitas a transaction fee of $100,000, and the Company
further agrees to reimburse Aequitas for all expenses incurred by them in
connection with the transactions contemplated herein, including without limited
to reasonable attorneys fees (including in house counsel), asset appraisals,
travel costs, lien search fees, and other associated costs, estimated not
to
exceed $25,000. Any one of the following shall constitute an Event of Default
hereunder:
In
the
event Aequitas is ready, willing and able to consummate the initial closing
of
the transactions contemplated herein and the Company fails to do so due to
entering into a competing transaction other than any financings currently
contemplated by the parties (including those that may be contemplated with
third
parties), then the Company shall pay to Aequitas a break up fee equal to:
(i)
$75,000 in cash; and (ii) the grant of an option to acquire 125,000 share
of
Common Stock at $0.01 per share, effective as of the closing of the competing
transaction.
4. Investor
Rights.
For so
long as any of the Notes issued to an Aequitas Purchaser remains outstanding,
the Company grants to Aequitas or its designee the following
rights:
(a) The
Company will provide Aequitas with quarterly unaudited financial reports
(balance sheet, income statement and statement of cash flows) within forty-five
(45) days following the close of each calendar quarter and with annual audited
financial statements within the time frames required by the SEC.
(b) The
Company will provide Aequitas with monthly financial reporting within fifteen
(15) days (provided that in 2007 this can be within thirty (30) days) of
the
close of each monthly period including: (i) profit and loss statement; (ii)
balance sheet; (iii) statement of cash flows; (iv) rolling twelve (12) month
financial forecast; (v) rolling twelve (12) week cash flow forecast; (vi)
sales
pipeline; and (vii) summary accounts payable and accounts receivable
agings.
(c) At
any
time requested by Aequitas, the Company will furnish any additional information
regarding the Company’s financial condition and business operations that
Aequitas reasonably requests.
(d) The
Company will be responsible for maintaining in force, for so long as any
of the
Notes remain outstanding, property and liability insurance in amounts and
coverage reasonably satisfactory to Aequitas.
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(e) An
individual designated by Aequitas shall have board observation rights, including
the right to attend (in person or by teleconference) all board of director
meetings and all board of director committee meetings of the Company and
of each
of its subsidiaries. The Company agrees to provide to provide to Aequitas
copies
of the notices for all such meetings at the same time as such notices are
first
delivered to its applicable board and/or committee members, as well as copies
of
all financial statements, correspondence and any other materials as shall
be
provided to directors, including oral information, subject to the right to
withhold any information that is subject to attorney client privilege to
the
extent the Company in good faith determines that such disclosure could terminate
or waive the privilege regarding such oral or written
communication.
5. Notices.
All
notices required or permitted to be given hereunder shall be given in writing
and may be delivered personally or by courier to the person to whom it is
authorized to be given, or sent by registered or certified mail, postage
paid,
return receipt requested, addressed as follows (or such other address as
the
party entitled to notice shall provide to the other parties hereto from time
to
time):
|
To
Company
|
c/o
Capital Growth Systems, Inc.
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇, CEO
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
To
Aequitas:
|
Aequitas
Capital Management, Inc.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
6. General.
(a) No
delay
on the part of Aequitas on behalf of itself or any of the Aequitas Purchasers
in
the exercise of any rights or remedies shall operate as a waiver thereof,
and no
single or partial exercise by Holder of any right or remedy shall preclude
other
or further exercise thereof or the exercise of any other right or
remedy.
(b) This
Agreement shall remain in full force and effect until the payment in full
of the
Notes by Aequitas Purchasers or the conversion of the Notes into equity by
each
Aequitas Purchaser. This Agreement has been delivered at Chicago, Illinois,
and
shall be construed in accordance with and governed by the internal laws of
the
State of Illinois. Any dispute with respect to this Agreement shall be litigated
in the state or federal courts situated in ▇▇▇▇ County, Illinois to which
jurisdiction and venue all parties consent, and shall be adjudicated by bench
trial, with all parties waiving their right to trial by jury. The rights
and
privileges of the parties hereunder shall inure to the benefit of their
respective successors and assigns.
(c) This
Agreement and the previously executed November 6, 2007 Term Sheet contains
the
entire agreement among the parties hereto with respect to the matters set
forth
herein, provided that this Agreement shall supersede any inconsistencies
with
the terms of the Term Sheet. This Agreement shall be binding upon and inure
to
the benefit of the parties hereto and their successors and
assigns.
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(d) This
Agreement may be executed in any number of counterparts and by the different
parties hereto and on separate counterparts and each such counterpart shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same agreement.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF, this Agreement has been duly executed as of the day and the
year first above written.
|
COMPANY:
|
AEQUITAS:
|
|||
|
Capital
Growth Systems, Inc.
|
Aequitas
Capital Management, Inc.
|
|||
|
By:
|
By:
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|||
|
Its:
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▇▇▇▇▇▇
▇▇▇▇▇▇▇, Chief Executive Officer
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5
EXHIBIT
A
ANTI-DILUTION
SCENARIOS
EXHIBIT
A
|
Anti-Dilution
Scenarios based on new equity and warrants at
$.15
|
|||||||||||||
|
Calculation
for $.45 exercise price warrants
|
|||||||||||||
|
Anti-Dilution
Formula:
|
W+X
|
||||||||||||
|
Y+Z
|
|||||||||||||
|
Current
Shares Outstanding:
|
78,257,475
|
(Y
|
)
|
||||||||||
|
Original
Offering Share Price:
|
$
|
0.45
|
|||||||||||
|
Valuation
based on Offering Price:
|
$
|
35,215,864
|
(W
|
)
|
|||||||||
|
Cash
received from new equity at $.15
|
$
|
5,147,459
|
Warrant
exercise plus new subscriptions
|
||||||||||
|
Value
of warrants issued at $.15
|
$
|
300,000
|
3,500,000
warrants to Hilco
|
||||||||||
|
$
|
5,972,459
|
(X
|
)
|
||||||||||
|
Share
Equivalent
|
39,816,393
|
(Z
|
)
|
||||||||||
|
Weighted
Avg Anti-Dilution Price:
|
$
|
0.35
|
|||||||||||
This
is
the current estimate on the new equity coming in from both warrants and the
subscription. Actual
antidilution amount will vary based upon final amount of Common Stock
purchases at $0.15 per share, warrants issued with $0.15 per share exercise
price and any subsequent issuances of Common Stock or options, warrants or
other rights to acquire Common Stock at a price per share below the
Weighted Average Anti-Dilution Price.
EXHIBIT
B
AMENDED
AND RESTATED NOTE ADMINISTRATION
AND
SECURITY AGREEMENT
EXHIBIT
B
AMENDED
AND RESTATED CGSI 2-YEAR TERM NOTE ADMINISTRATION AND SECURITY
AGREEMENT
THIS
AMENDED AND RESTATED CGSI 2-YEAR TERM NOTE ADMINISTRATION AND SECURITY AGREEMENT
is dated as of November 12, 2007 and amends and restates in its entirety the
form of Note Administration and Security Agreement dated as of January 11,
2007,
by and among Capital Growth Systems, Inc., a Florida corporation (“Company”),
20/20 Technologies, Inc., a Delaware corporation (“2020, Inc.”), 20/20
Technologies I, LLC, a Delaware limited liability company (“2020 LLC”), Magenta
NetLogic, Limited, a corporation formed under the laws of England (“Magenta”),
Frontrunner Network Systems Corporation, a Delaware corporation (“Frontrunner”),
CentrePath, Inc., a Delaware corporation (“CentrePath”) and Global Capacity
Group, Inc., a Texas corporation (“Global”—together with 2020, Inc., 20/20, LLC,
Magenta, Frontrunner and CentrePath—hereinafter collectively referred to as the
“Credit Parties” and the Credit Parties together with Company are hereinafter
collectively referred to as “Debtors” and each individually referred to as a
“Debtor”), CGSI Term Note Servicer, Inc., an Illinois corporation (“ Old
Servicer”), Aequitas Capital Management, Inc. (“Servicer”) and each holder of a
CGSI Term Note (each a “Note” and collectively, the “Notes,” and the holder of
each Note being a “Holder” and collectively, the “Holders”) issued pursuant to
the form of CGSI 2-Year Term Note Purchase Agreement dated as of January 12,
2007 (“Purchase Agreement”) among Debtors and the purchasers executing
counterpart copies thereof, as amended through the date hereof.
RECITALS:
A. Credit
Parties are in need of term note financing to be funded by the Holders to
Company on behalf of itself and the Credit Parties, in accordance with the
terms
of the Purchase Agreement, the proceeds of which will be used by Company (or
to
the extent previously funded and evidenced by existing promissory notes which
have been assigned to the Company as part of the Purchase Agreement, with an
assignment to the Holders of the rights securing the Notes) to fund the working
capital needs of Credit Parties. The obligations of Debtors with respect to
the
Purchase Agreement are collectively referred to as the “Obligations,” which
shall be secured by the security interest granted herein in the assets of the
Credit Parties. On January 19, 2007 the Credit Parties funded the initial
funding of a senior credit facility with Hilco Finance, LLC as administrative
agent for itself and others who may participate with it and their respective
assigns (“Hilco”), to be evidenced by a form of credit agreement, which as
amended by first amendment through the date hereof, and as may hereafter be
amended (“Credit Agreement”), includes a subordination agreement executed by
each of the Holders (the “Hilco Subordination Agreement”), to which each of the
Holders has consented and is a party. If during the term of the Notes evidencing
the Obligations the Holders are required (in the good faith opinion of the
Company) to enter into an amendment to the Hilco Subordination Agreement or
into
a new subordination agreement with one or more persons or entities providing
or
proposing to provide the primary senior secured financing to the Company, each
such amended or new subordination agreement so proposed is referred to herein
as
a “Subordination Agreement,” with the senior lender(s) providing such financing
being hereinafter sometimes referred to each as a “Senior Lender”).
B
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1
B. The
parties desire to enter into this Agreement to set forth the terms and
conditions governing the Obligations and related transactions (the
“Transactions”), and further to confirm acknowledgment that the Notes shall be
secured by substantially the same Collateral, and be subject to administration
as provided by the Servicer on behalf of all of the Holders (as substitute
servicer for the Old Servicer which has served in such capacity through the
date
first set forth above) pro rata in accordance with the Obligations, expressly
subject to the Hilco Subordination Agreement. Servicer has been formed to act
as
collateral agent on behalf of all the Holders as set forth below.
NOW,
THEREFORE, in consideration of the foregoing, and for the covenants and
agreements contained herein, the parties hereto agree as follows:
1. Recitals,
Consent.
The
recitals set forth above are incorporated by reference herein and made a part
herewith as if fully rewritten. All actions taken by Debtors and Servicer
through the date hereof are hereby ratified, confirmed and
approved.
2. Loan
to Credit Parties.
Simultaneously with the execution of each counterpart to the Purchase Agreement,
the Holder signing such counterpart shall loan or has loaned the sum set forth
below Holder’s signature on the signature page thereof for an amount agreed to
between that Holder and Company (on behalf of the Credit Parties), and with
the
sum set forth as to each Holder on the Purchase Agreement constituting that
Holder’s “Loan” to the Credit Parties, and all of which are collectively
referred to as the “Loans.
3. Grant
of Security Interest.
(a) As
security for the Obligations, effective as of the original date of this
Agreement each Debtor has assigned to the Holders and granted to the Holders
a
continuing security interest in the following assets, whether now owned or
hereafter existing or acquired by any of the Debtors to the extent owned by
the
Debtor in question (collectively, the “Collateral”): all assets of the Debtor of
every nature and kind, including but not limited to its equipment, accounts
receivable and contract rights and all proceeds therefrom.
(b) The
security interest of each Holder under this Agreement extends to all Collateral
of the kind which is the subject of this Agreement. By counterpart execution
hereof, each Holder hereby appoints Servicer to act as his, her or its
collateral agent with respect to the Collateral called for hereunder and with
respect to the enforcement of the rights of the Holders as more fully set forth
below, with any such action taken to be taken on behalf of all of the Holders
on
a pro rata basis based upon the percentage of total Obligations owing to each
of
the Holders from time to time (the percentage as to each Holder being the
Holder’s “Ownership Percentage”). All references herein to “Servicer” shall
include the Servicer named above or any successor person or entity appointed
by
written consent signed by Holders holding a majority of the outstanding unpaid
principal with respect to the Notes from time to time (such majority in interest
being the “Majority Holders” and each such successor being named by the Majority
Holders hereinafter sometimes referred to as a “Successor Servicer”), and in the
event the Servicer ceases to serve for any reason and there is no Successor
Servicer, then all actions to be taken by Servicer on behalf of the Holders
shall be valid if taken at the direction of the Majority Holders, which action
shall be binding upon all of the Holders if taken by a duly appointed Servicer,
Successor Servicer or the Majority Holders.
B
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(c) Each
Debtor hereby authorizes the Servicer on behalf of the Holders to file such
Uniform Commercial Code financing statements and such other public or private
filings as the Servicer (including a Debenture in the UK with respect to
Magenta) deems necessary and proper to: (i) evidence or perfect the Holders’
security interest in the Collateral, including but not limited to, such filings
as the Servicer deems necessary and proper to file with the Offices of the
Secretary of State of the States of Florida, Delaware and Texas (and the
comparable regulatory authority in the UK); (ii) modify the security interest
in
favor of the Holder, terminate said security interest in whole or part and
release the collateral securing the same in whole or part. Each Debtor hereby
grants to Servicer (and any executive officer of Servicer, as well as any
Successor Servicer as called for hereunder and its executive officers, and
the
original Old Servicer and its executive officers) an irrevocable power of
attorney to execute any of the documents referenced in this Section
3(c)
in the
name, place and stead of such Debtor, as Holder deems necessary and proper.
This
power of attorney is irrevocable and coupled with an interest.
4. Debtor
Covenants.
From
and after the date hereof and so long as any amount remains unpaid on any of
the
Notes, except to the extent compliance in any case or cases is waived in writing
by the Holder, each Debtor hereby covenants and agrees with Servicer on behalf
of each of the Holders as follows:
(a) Servicer
and each Holder or their respective designees shall at all reasonable times
have
full access to, and the right to audit, check, inspect and make abstracts and
copies from such Debtor’s books, records and audits. Servicer, each Holder and
their respective designees shall keep all such information obtained from each
Debtor and Servicer confidential.
(b) Each
Debtor will at any times and from time to time upon request of Servicer take
or
cause to be taken any action and execute, acknowledge, deliver or record any
further documents, opinions, security agreements or other instruments which
Servicer in its reasonable discretion deems necessary or appropriate to carry
out the purposes of this Agreement and to preserve, protect and perfect the
security intended to be created and preserved in the Collateral and to
establish, preserve and protect the security interest of Holders in and to
the
Collateral. The Holders acknowledge that: (i) the security interest in favor
of
the Debtors is expressly subordinate to the security interest in favor of any
senior lender to any of Debtors as evidenced by the Hilco Subordination
Agreement and any subsequent Subordination Agreement and (ii) certain of the
Debtors have acquired equipment which is subject to one or more financing
statements in favor of the original seller of or a financier or lessor of the
equipment, where such equipment is subject to a prior lien, all of which shall
be deemed to constitute permitted prior liens.
(c) Except
as
set forth in Section
3(d),
above
or as otherwise permitted by Servicer or by Holders by written consent of
Majority Holders, each Debtor shall not sell, transfer, convey or otherwise
dispose of any of the Collateral or any of the assets of Debtors other than:
(i)
dispositions of inventory in the ordinary course of business or the assets
referenced in Section 4(b) immediately above; or (ii) dispositions consented
to
by any Senior Lender.
B
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(d) The
Company will not take any of the following actions without the prior consent
of
Servicer (which consent may be made either directly by Servicer in its sole
discretion) or as approved by holders of a Majority in Interest of the Notes:
(i) declare or issue any dividends or make any distributions to its
shareholders; (ii) incur indebtedness for borrowed money in excess of: (A)
the
amounts permitted to be incurred under the Credit Agreement (or as permitted
under the “New Credit Agreement” as hereinafter defined) without the consent of
the Servicer; (B) up to $10,000,000 in original principal amount of financing
pursuant to the Notes; (C) such other outstanding borrowings of the Debtors
as
of the date hereof (plus additional indebtedness accruing thereunder); and
(D)
any refinancing of any of the aforesaid borrowings; (iii) funding of capital
expenditures in excess of those permitted pursuant to the Credit Agreement
(or
in excess of those permitted under the New Credit Agreement); and (iv)
refinancing of the Credit Agreement with a new credit agreement (or any
refinancing of any such substitute credit agreement—collectively, the “New
Credit Agreement”), provided that Servicer agrees to not unreasonably withhold
its consent to any proposed New Credit Agreement.
5. Default.
Any one
of the following shall constitute an Event of Default hereunder:
(a) Any
of
the Debtors fails to make a payment when due under any Note;
(b) Any
of
the Debtors fails to timely perform or observe any term, covenant or agreement
contained in this Agreement or the CGSI 2-Year Term Note Purchase
Agreement;
(c) Any
representation or warranty made by any Debtor herein is false in any material
respect on the date hereof;
(d) Any
Debtor suspends the operation of its business (provided however that to the
extent a Debtor presently acts as a holding company, then its business shall
be
deemed to constitute a holding company business and provided further that the
cessation of active business by Nexvu is consented to), except to the extent
that the suspension of such business would not have a material adverse effect
upon the Company’s business as a whole;
(e) Any
Debtor becomes the subject of state insolvency proceedings, or makes an
assignment for the benefit of creditors; or a receiver, trustee, custodian
or
other similar official is appointed for, or takes possession of any substantial
part of the property of any Debtor and such proceeding or appointed receiver,
trustee, custodian or other appointment remains in place for 30 days following
such action or appointment; or
(f) Any
Debtor takes corporate action to authorize such organization to become the
subject of proceedings under the United States Bankruptcy Code or the execution
by any Debtor of a petition to become a debtor under the United States
Bankruptcy Code or the filing of any involuntary petition against any Debtor
under the United States Bankruptcy Code which remains undismissed for a period
of 30 days; or the entry of an order for relief under the United States
Bankruptcy Code against any Debtor.
B
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(g) Whenever
an Event of Default shall be existing hereunder, Servicer on behalf of Holders
may exercise from time to time any rights and remedies available to any Holder
under applicable law. Any notification of and intended disposition of any of
the
Collateral required by law shall be deemed reasonable if properly given at
least
twenty (20) days before such disposition. Any proceeds of any disposition by
Servicer on behalf of the Holders of the Collateral may be applied by Servicer
to the payment of expenses in connection with the Collateral, including
reasonable attorneys' fees and legal expenses of Servicer, and any balance
of
such proceeds may be applied by Servicer toward the payment of the Notes, pro
rata among the Holders in accordance with the Ownership Percentages
(i.e.,
the
relative outstanding principal amounts of the varying Notes).
Each
Debtor hereby appoints Servicer its true and lawful attorney in fact,
irrevocably, with full power after the occurrence of an Event of Default and
with full power with respect to any proposed amendment to the CGSI 2-Year Term
Note Purchase Agreement or any of the agreements contemplated therein, including
but not limited to this Agreement: to: (i) act, require, demand, receive,
compound and give acquittance for any and all monies and claims for monies
due
or to become due to such Debtor under or arising out of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and
to
file any claims or take any actions or institute any proceedings which Servicer
may deem to be necessary or advisable in the premises, which appointment as
attorney is coupled with an interest; (ii) execute such amendments to the CGSI
2-Year Term Note Purchase Agreement, any of the Notes (by way of form of Allonge
or otherwise) or any of the agreements contemplated therein, including but
not
limited to this Agreement, provided such proposed amendment is approved by
the
Majority Holders; (iii) modify and/or release any or all of the Collateral
securing the Obligations; and (iv) execute such forms of Subordination
Agreement, waivers, consents and other agreements or documentation required
by
the Senior Lender or any other lender to any of the Debtors as a condition
precedent to its extension or continued extension of credit to any of the
Debtors.
6. Specific
Rights and Obligations of Servicer.
(a) Appointment
of Servicer.
Holders
appoint Servicer to act as their attorney in fact to take all actions to enforce
the rights of the Holders under the Notes and pursuant to this Agreement,
including, without limitation, the institution of and prosecution of lawsuits
and taking all other actions relating to the enforcement of the Holders’ rights.
Servicer shall maintain a list of Holders outstanding from time, which Servicer
shall append hereto in counterpart as Exhibit A.
(b) Default
Under Notes and Amendments.
Upon
Servicer’s receipt of: (i) a notice from a Holder (which may be an Affiliate of
Servicer) or from Company that Company or any of the other Debtors has defaulted
in its obligations under any of the Notes or this Agreement, which default
is
not timely cured, or (ii) any request by any of the Debtors to amend the CGSI
2-Year Term Note Purchase Agreement or any of the agreements contemplated
therein, including but not limited to this Agreement, then the Servicer shall
promptly send written notice to each of the Holders of the Notes which describes
the nature of the default or the proposed amendment(s). Such notice shall also
include one or more possible courses of action to be pursued in connection
with
such default or proposed amendment(s), which action may include but not be
limited to any of the following: (i) extension of due date and/or payment date
with respect to the Notes; (ii) release of some or all of the Collateral; (iii)
subordination of Notes; (iv) other modifications to Notes’ terms; (v) conversion
of Notes to equity; or (vi) increase the amount of maximum amount of loans
to be
funded pursuant to the CGSI 2-Year Term Note Purchase Agreement. The Servicer
shall take the action which is approved in writing by the Majority Holders;
provided,
however:
(i) the
Servicer need not take any proposed action unless it receives from the Holders
a
sufficient advance payment (pro rata based on the principal balance of
outstanding Notes) against prospective fees to render it comfortable in
undertaking such action. Should any Holder not pay the Holder’s proportionate
share of any Servicer fee assessment, then such Holder shall nonetheless be
liable therefor (on a nonrecourse basis, to the extent of the value of the
Holder’s Note) and further directs the Company and Servicer to deduct and pay
over to the Servicer, together with interest at twelve percent (12%) per annum,
such amount from the next proceeds payable to such Holder with respect to the
Holder’s Note; and (ii) the Servicer may take such action as Servicer deems
necessary and proper prior to receipt of the consent of the Majority Holders
if
Servicer in good faith believes that the necessary action must be taken on
an
emergency basis to protect the interests of the Holders and that the Servicer
will be unable to obtain the requisite consent on a timely basis necessary
to
enable it to act in the best interests of the Holders.
B
-
5
(c) Compensation
of a Servicer.
In
consideration for performing its duties under this Agreement, the Company agrees
to pay Servicer in the case of a default, a fee equal to Servicer’s employees’
or independent contractors’ regular hourly rates which Servicer may charge for
services plus reimbursement for all out-of-pocket costs including fees and
expenses of attorneys and other associated professionals as may be retained
by
Servicer for purposes of providing its services. The Holders direct the Company
and Servicer to deduct and pay over to Servicer and its associated service
providers any amounts payable by the Holders from the first proceeds otherwise
payable to each Holder to the extent such Holder has not advanced his pro rata
share thereof to Servicer.
(d) Written
Direction Upon Majority Holders.
In
carrying out its duties under this Agreement, the Servicer shall abide by the
direction of the Majority Holders and not in number of the Holders. Unless
the
direction from the Majority Holders indicates otherwise, a direction to the
Servicer to enforce the rights of the Holders under the Notes or this Agreement
shall authorize the Servicer to pursue, or elect not to pursue, one or more
remedies as the Servicer, in its sole discretion, shall determine. The Holders
acknowledge that the Servicer’s affiliates may hold a majority-in-interest of
the Notes individually or in concert with a minority of the remaining Holders,
which may provide Servicer the ability to determine the cause of action in
question. The parties further acknowledge that any net proceeds after costs
and
expenses that are realized with respect to collection of the Notes shall be
allocated pro rata among all Holders based upon the outstanding sums due to
them
from time to time with respect to the Notes.
B
-
6
(e) Voting.
Except
as expressly set forth above, all actions and votes of the Holders required
or
permitted under the terms of this Agreement or the Notes shall be conducted
pursuant to either written consent by the Majority Holders or a vote per the
following terms and provisions:
(i) The
Holder of each Note shall have the right to cast the number of votes determined
by dividing the outstanding principal balance of the Note of such Holder by
1,000.
(ii) All
votes
of the Holders shall be valid if in writing and signed by Holders constituting
Majority Holders. In connection with each vote (where written consent is not
sought by Servicer), the Servicer shall provide each Holder the
following:
(1) a
ballot
providing for each Holder to cast the Holders’ number of votes for or against
each matter being voted upon;
(2) a
statement that each Holder’s ballot must be received by the Servicer within
fifteen (15) days from the date on which such ballots are deposited in the
United States mail, postage prepaid, or otherwise delivered to the Holders
(which delivery may include by email transmission to the last known email
address of the Holder); and
(3) an
envelope self-addressed to the Servicer (in the event the ballot is being
provided other than pursuant to email).
(iii) All
ballots must be returned to the Servicer not later than the date indicated
above. Ballots received after such fifteen (15) day period shall be considered
void.
(iv) No
later
than ten (10) days after the date indicated on the ballot pursuant to
Section 6(e)(ii(2)
above
the Servicer shall count the votes. All votes returned or received after the
fifteen (15) day period shall not be counted. The Servicer shall, within ten
(10) days after tallying the votes, notify the Holders of the outcome of said
vote by written notice. Notwithstanding the foregoing, if holders of a
Majority-in-Interest of the Holders’ Notes approve a proposed course of action,
the Servicer may take such action immediately and need not wait until subsequent
votes are tallied.
(v) Should
a
deadline fall on a weekend or holiday, the applicable time period shall be
extended to the end of the next business day.
7. Amendment
to Notes, Security Agreement.
In
addition to the enforcement actions referenced above, each Holder agrees that
either the Servicer (subject to due authorization as set forth above) or the
Majority Holders of the Notes shall have the right to act on behalf of each
Holder:
B
-
7
(a) to
modify
the terms of all the Notes, which modifications include but are not limited
to
extension of the due date of the Notes, modification of the interest called
for
thereunder or the conversion to equity of the Notes or any portion
thereof;
(b) to
modify
the term of the this Agreement, including coverage and for release of the
Collateral therefor or modify the terms of the Purchase Agreement;
and
(c) to
enter
into such forms of subordination agreement or standstill agreement as the
Servicer deems necessary and proper. By execution of this Agreement, each Holder
grants to Servicer and its officers (each an “Attorney”) an irrevocable power of
attorney to execute in such Holder’s name, place and stead any document said
Attorney deems necessary and proper to carry out the purpose or intent of this
Agreement or any actions contemplated hereunder, including but not limited
to
each of :
(i) any
future amendments to the Notes, this Agreement or the CGSI 2-Year Term Note
Purchase Agreement or any other agreement contemplated thereunder;
(ii) any
intercreditor agreement or Subordination Agreement they deem necessary and
proper;
(iii) any
amendments to any of the foregoing;
(iv) such
form
of UCC-3 amendment or termination to financing statement and such form of
comparable document or notice filing and such form of debenture as necessary
to
perfect the Holder’s security interest in the Collateral to the extent
applicable to a Debtor (including such forms of documents necessary to perfect
the collateral interests of the Holders in the assets of Magenta in the UK);
and
(v) any
release or modification of the Collateral.
8. Notices.
All
notices required or permitted to be given hereunder shall be given in writing
and may be delivered personally to the person to whom it is authorized to be
given, or sent by registered, certified or first class mail, postage paid,
addressed as follows (or such other address as the party entitled to notice
shall provide to the other parties hereto from time to time):
|
To
any Debtor:
|
c/o
Capital Growth Systems, Inc.
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇, CEO
▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
with
a copy to
|
|
|
▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, Ltd.
Attn.
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇
▇. ▇▇▇▇▇▇ #▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇. ▇▇▇▇▇
|
B
-
8
|
To
Servicer
|
Aequitas
Capital Management, Inc.
|
|
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
To
each Holder:
|
At
the address of record in the Company’s
offices.
|
9. Indemnification
of Servicer; Conflicts of Interest.
Holders
acknowledge that Servicer is acting as their agent and attorney in fact as
set
forth above and each agrees to indemnify, hold harmless and defend Servicer,
its
officers, directors, employees, agents, attorneys, subcontractors and assigns,
as well as Prior Servicer and any Successor Servicer (collectively, the
“Indemnitees) against all claims, actions, damages and expenses of any kind
arising out of or in connection with his, her or its actions taken under this
Agreement, or services taken with respect to this Agreement or reasonably
believed to be in the scope of the Indemnitee’s authority, provided that the
Indemnitee in question has not acted with willful misconduct or fraud in
connection with its actions.
10. Successors.
Should
Servicer wish to resign from its responsibilities hereunder, it may do so upon
delivery of fifteen (15) days’ prior notice to the parties hereto; in such event
or should the Holders seek to elect a new party to assume Servicer’s obligations
hereunder, they may do so upon approval in writing of the Majority Holders
and
delivery of notice to Servicer and to the Company, which shall promptly
disseminate said notice to the other parties hereto.
11. Removal.
The
Majority Holders may remove the Servicer and/or replace the Servicer with a
Substitute Servicer. Any such removal shall be effective only after ten (10)
days’ prior written notice is provided to Servicer that the removal has been
approved (or such shorter period of time as is mutually agreed by Servicer
and
the Holders).
12. General.
(a) Debtors
agree to pay all expenses (including reasonable attorneys' fees and legal
expenses) paid or incurred by Servicer on behalf of the Holders in endeavoring
to collect the Notes, and in enforcing this Agreement. No delay on the part
of
Servicer on behalf of the Holders in the exercise of any rights or remedies
shall operate as a waiver thereof, and no single or partial exercise by Holder
of any right or remedy shall preclude other or further exercise thereof or
the
exercise of any other right or remedy.
(b) This
Agreement shall remain in full force and effect until the payment in full of
the
Notes or the conversion of the Notes into equity in the sole discretion of
the
Holder of each Note. This Agreement has been delivered at Chicago, Illinois,
and
shall be construed in accordance with and governed by the internal laws of
the
State of Illinois. Any dispute with respect to this Agreement shall be litigated
in the state or federal courts situated in ▇▇▇▇ County, Illinois to which
jurisdiction and venue all parties consent, and shall be adjudicated by bench
trial, with all parties waiving their right to trial by jury. The rights and
privileges of Holder hereunder shall inure to the benefit of their respective
successors and assigns.
B
-
9
(c) This
Agreement contains the entire agreement among the parties hereto with respect
to
the matters set forth herein. This Agreement shall be binding upon and inure
to
the benefit of the parties hereto and their successors and assigns.
(d) This
Agreement may be executed in any number of counterparts and by the different
parties hereto and on separate counterparts and each such counterpart shall
be
deemed to be an original, but all such counterparts shall together constitute
one and the same agreement.
(e) The
Company shall reimburse the Servicer for its reasonable costs, including
attorneys’ fees, in connection with the documentation, review and negotiation of
this Transaction, including costs for the formation of the Holder as a limited
liability company.
13. Counsel.
THE
PARTIES ACKNOWLEDGE AND AGREE THAT ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ (“S&F”) IS ACTING
SOLELY IN ITS CAPACITY AS COUNSEL FOR DEBTORS WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREIN AND NOT ON BEHALF OF ANY HOLDER OR SERVICER. THE TERMS
OF
SECTION 8.7 OF THE CGSI TERM NOTE PURCHASE AGREEMENT REGARDING CONFLICTS OF
INTEREST ARE INCORPORATED BY REFERENCE HEREIN AND MADE A PART HEREOF AS IF
FULLY
REWRITTEN.
B
-
10
IN
WITNESS WHEREOF, this Agreement has been duly executed as of the day and the
year first above written.
|
DEBTORS:
|
HOLDER
(executing other than per power of
|
|||||||
|
attorney):
|
||||||||
|
Capital
Growth Systems, Inc.
|
||||||||
|
[Print
Name]
|
||||||||
|
By:
|
||||||||
|
Its:
|
By:
|
|||||||
|
Its:
|
||||||||
|
20/20
Technologies, Inc.
|
Principal
Amount of Note:
|
$
|
||||||
|
20/20
Technologies I, LLC
|
||||||||
|
Magenta
netLogic, Limited
|
||||||||
|
Frontrunner
Network Systems Corp.
|
HOLDERS
LISTED ON EXHIBIT
A
|
|||||||
|
CentrePath,
Inc.
|
(pursuant
to Power of Attorney in favor of the
|
|||||||
|
Global
Capacity Group, Inc.
|
undersigned
on behalf of all such Holders):
|
|||||||
|
20/20
Technologies, Inc.
|
||||||||
|
By:
|
||||||||
|
By:
|
Its:
|
|||||||
|
[Signature](1)
|
||||||||
|
SERVICER:
AEQUITAS CAPITAL MANAGEMENT, INC.
|
||||||||
|
PRIOR
SERVICER:
|
||||||||
|
By:_________________________________
|
||||||||
|
CGSI
Term Note Servicer, Inc.
|
Its:_________________________________
|
|||||||
|
By:
|
||||||||
|
Its:
|
||||||||
|
_________________
|
||||||||
|
(1)
|
Authorized
Signatory on behalf of each of the
Debtors.
|
|||||||
B
-
11
EXHIBIT
B
|
CGSI
2-Year Term Note Purchase Agreement Lenders
|
|||||||
|
Lender
|
Address
|
Principal
Amount
of Note
|
|||||
|
▇▇▇▇▇
Lies
|
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
$
|
3,453,654.40
|
||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇▇▇, ▇▇ ▇▇▇▇▇
|
504,164.40
|
|||||
|
Balkin
Family Limited Partnership
|
c/o
Magnetar Capital
Attention:▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
829,389.51
|
|||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
600,000.00
|
|||||
|
Aequitas
Hybrid Fund, LLC
|
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
500,000.00
|
|||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
|
500,000.00
|
|||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
100,000.00
|
|||||
|
▇▇▇▇
▇▇▇▇▇▇
|
c/o
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
50,000.00
|
|||||
|
Balkin
Family Limited Partnership
|
c/o
Magnetar Capital
Attention:▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
250,000.00
|
|||||
|
▇▇▇▇▇
Lies
|
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
250,000.00
|
|||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
100,000.00
|
|||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
25,000.00
|
|||||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
50,000.00
|
|||||
|
▇▇▇▇
▇. ▇▇▇▇▇
|
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
100,000.00
|
|||||
|
|
Total:
|
$
|
7,312,208.31
|
||||