PURCHASE AGREEMENT
EXHIBIT
10.1
This
PURCHASE AGREEMENT (the “Agreement”), by and between Augustine Fund, L.P., an
Illinois limited partnership (“Augustine”), Capital Growth Systems, Inc., a
Florida corporation (“CGSY”) and Xxxxxxx Xxxxxx (“Xxxxxx”) and Xxxxx Lies
(“Lies”) (each of Balkin and Lies, also a “Guarantor” and collectively the
“Guarantors”) is entered into as of July 28, 2006 (the “Agreement
Date”).
RECITALS:
WHEREAS,
Augustine is the holder of the following promissory notes issued by 20/20
Technologies, Inc. (“20/20 Inc.”), 20/20 Technologies, LLC, and Magenta Netlogic
Limited d/b/a/ CSB Global, Ltd. (collectively, the “Debtors”) issued pursuant to
that certain Augustine Loan and Security Agreement dated January 13, 2005,
between the Debtors and Augustine, as amended on June 22, 2005 (the “Loan
Agreement”) in the aggregate original principal amount of $1,600,000
(collectively the “Notes”):
|
First
Tranche Convertible Promissory Note dated January 13, 2005
(as
amended by Allonge) (the “First Note”)
|
$
|
500,000
|
||
|
Second
Tranche Convertible Promissory Note, dated February 10, 2005
(the
“Second Note”)
|
$
|
500,000
|
||
|
Third
Tranche - First Advance Promissory Note,
dated
June 22, 2005 (the “Third Note”)
|
$
|
200,000
|
||
|
Third
Tranche - Second Advance Promissory Note,
dated
July 1, 2005 (the “Fourth Note”)
|
$
|
200,000
|
||
|
Third
Tranche - Third Advance Promissory Note,
dated
August 1, 2005 (the “Fifth Note”)
|
$
|
200,000
|
WHEREAS,
Augustine holds the Notes subject to the provisions of that certain Amended
and
Restated Intercreditor Agreement dated as of September 20, 2005 (the
“Intercreditor Agreement”);
WHEREAS,
the
First Note, the Third Note, and a portion of the Fifth Note equal to $188,888.88
of the underlying principal amount of the Fifth Note shall be deemed the “CGSY
Notes” (totaling $888,888.88 in principal), and the Second Note, the Fourth Note
and a portion of the Fifth Note equal to $11,111.12 of the underlying principal
amount of the Fifth Note shall be deemed the “Guarantor Notes” (totaling
$711,111.12 in principal);
WHEREAS,
Augustine also holds warrants to acquire an aggregate of 2,055,747 shares of
Series C Preferred Shares of 20/20 Inc. as set forth on Schedule 1
(collectively, the “Warrants”). The “Second Warrant”, the “Fourth Warrant” and a
portion of the “Fifth Warrant” (each as defined in Schedule 1 attached hereto)
in an amount equal to the same proportion of the underlying principal amount
of
the Fifth Note purchased by the Guarantors hereunder (totaling 14,277 shares
of
the Fifth Warrant and collectively, totaling 913,666 shares) shall be deemed
the
“Guarantor Warrants.” The remaining balance of each Warrant (totaling 1,142,081
shares) shall be deemed the “CGSY Warrants”;
WHEREAS,
Augustine desires to sell to each of Balkin and Lies an equal portion of the
Guarantor Notes and the Guarantor Warrants, and Balkin and Lies each desire
to
purchase from Augustine an equal portion of the Guarantor Notes and the
Guarantor Warrants, on the terms and conditions set forth below;
WHEREAS,
Augustine desires to sell to CGSY the CGSY Notes and the CGSY Warrants, and
CGSY
desires to purchase from Augustine the CGSY Notes and the CGSY Warrants, on
the
terms and subject to the conditions set forth below;
NOW,
THEREFORE,
in
consideration of the foregoing, the mutual promises, covenants and agreements
of
the parties hereto set forth herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by each party
hereto, the parties hereby agree as follows:
| 1. |
Sale
and Purchase of the Guarantor Notes and Warrants.
At the Initial Closing (as defined in Section 2
below), Augustine shall sell, assign and deliver to the Guarantors,
the
Guarantor Notes and the Guarantor Warrants, free and clear of any
and all
liens, claims, pledges, security interests and other encumbrances
of any
kind or nature, and the Guarantors shall purchase the Guarantor Notes
and
the Guarantor Warrants, for the amount specified in Section 3
below.
|
| 2. |
Initial
Closing Date.
Subject to the conditions set forth in Section 12.1, the closing
of the
sale and purchase of the Guarantor Notes and the Guarantor Warrants
(the
“Initial Closing”) shall be held at 3:00 p.m., Chicago time, on July 28,
2006 or such other date that the foregoing conditions have been satisfied
(or waived) in accordance with the terms hereof (such date and time
of the
Closing being referred to as the “Initial Closing Date”) and will be
deemed to be effective at the end of that business day. The Closing
will
take place at the offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 X. Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, or such other location as the parties shall
agree.
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| 3. |
Guarantor
Purchase Price.
For the Guarantor Notes and the Guarantor Warrants, the Guarantors
shall
deliver to Augustine a cash
payment in the amount of $800,000 (the “Guarantor Purchase Price”). Each
Guarantor shall purchase 50% of the Guarantor Notes and the Guarantor
Warrants and pay 50% of the Guarantor Purchase
Price.
|
| 4. |
Deliverables
at the Initial Closing.
|
4.1. By
Augustine.
At the
Initial Closing, Augustine shall take or have taken or caused the following
actions and deliver the following executed documents and other deliverables:
4.1.1. Augustine
shall deliver to the Guarantors the Guarantor Notes and the Guarantor Warrants,
accompanied by duly executed assignment documents, sufficient to transfer such
instruments, pending receipt of the Guarantor Purchase Price;
4.1.2. Augustine
shall deliver to the Guarantors such other documents, instruments or consents
as
shall be reasonably requested by the Guarantors to effectuate or confirm the
transactions contemplated by this Agreement; and
4.1.3. Augustine
shall assign to the Guarantors all of its rights, obligations and interest
under
the Loan Agreement and the Intercreditor Agreement related to the Guarantor
Notes and the Guarantor Warrants.
4.2. By
the
Guarantors.
At the
Closing, CGSY shall take or have taken or caused the following actions and
deliver the following executed documents and other deliverables:
4.2.1. Each
Guarantor shall deliver to Augustine 50% of the Purchase Price; and
4.2.2. Each
Guarantor shall deliver such other documents, instruments or consents as shall
be reasonably requested by Augustine to effectuate or confirm the transactions
contemplated by this Agreement.
4.3. UCC
Filings.
Promptly following the Initial Closing, Augustine will make, or authorize the
Guarantors to make, filings as necessary under the Uniform Commercial Code
to
reflect the assignment to the Guarantors of Augustine’s security interest in
certain assets of the Debtors.
| 5. |
Sale
and Purchase of the CGSY Notes and Warrants.
At the Second Closing (as defined in Section 6 below), Augustine
shall sell, assign and deliver to CGSY, the CGSY Notes and the CGSY
Warrants, free and clear of any and all liens, claims, pledges, security
interests and other encumbrances of any kind or nature, and CGSY
shall
purchase the CGSY Notes and the CGSY Warrants, for the amount specified
in
Section 7 below.
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| 6. |
Second
Closing Date.
Subject to the conditions set forth in Section 12.2, the closing
of the
sale and purchase of the CGSY Notes and the CGSY Warrants (the “Second
Closing”) shall be held at 3:00 p.m., Chicago time, on August 31, 2006 or
such other date that the foregoing conditions have been satisfied
(or
waived) in accordance with the terms hereof (such date and time of
the
Closing being referred to as the “Second Closing Date”) and will be deemed
to be effective at the end of that business day. The Closing will
take
place at the offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 X. Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, or such other location as the parties shall
agree.
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| 7. |
CGSY
Purchase Price.
For the CGSY Notes and the CGSY Warrants, CGSY shall deliver to Augustine
a cash payment in the amount of $1,000,000 (the “CGSY Purchase Price”). In
further consideration of the Augustine entering into this Agreement,
CGSY
shall upon execution of this Agreement, issue a warrant to purchase
150,000 shares of common stock of CGSY in the form attached hereto
as
Exhibit A (the “Warrant”) to Augustine or its affiliated designee(s).
|
| 8. |
Deliverables
at the Second Closing.
|
8.1. By
Augustine.
At the
Second Closing, Augustine shall take or have taken or caused the following
actions and deliver the following executed documents and other deliverables:
8.1.1. Augustine
shall deliver to CGSY the CGSY Notes and the CGSY Warrants, accompanied by
duly
executed assignment documents, sufficient to transfer such instruments, pending
receipt of the CGSY Purchase Price;
8.1.2. Augustine
shall assign to CGSY all of its rights, obligations and interest under the
Loan
Agreement and the Intercreditor Agreement as related to the CGSY Notes and
the
CGSY Warrants; and
8.1.3. Augustine
shall deliver such other documents, instruments or consents as shall be
reasonably requested by CGSY to effectuate or confirm the transactions
contemplated by this Agreement.
8.2. By
CGSY.
At the
Second Closing, CGSY shall take or have taken or caused the following actions
and deliver the following executed documents and other
deliverables:
8.2.1. CGSY
shall deliver to Augustine the CGSY Purchase Price; and
8.2.2. CGSY
shall assume all of Augustine’s rights, obligations and interest under the Loan
Agreement and the Intercreditor Agreement; and
8.2.3. CGSY
shall deliver such other documents, instruments or consents as shall be
reasonably requested by Augustine to effectuate or confirm the transactions
contemplated by this Agreement.
8.3. UCC
Filings.
Promptly following the Second Closing, Augustine will make, or authorize CGSY
to
make, filings as necessary under the Uniform Commercial Code to reflect the
assignment to CGSY of Augustine’s security interest in certain assets of the
Debtors.
| 9. |
Representations
and Warranties of Augustine.
Augustine hereby represents and warrants to CGSY and each of the
Guarantors, as of the Agreement Date, the Initial Closing Date and
the
Second Closing Date as follows:
|
9.1. Augustine
is the beneficial owner of the Guarantor Notes, the CGSY Notes, the CGSY
Warrants and the Guarantor Warrants and has full and complete title thereto
with
absolute right to sell them, and there are no liens, pledges, chattel mortgages,
or other encumbrances of any kind against any of the Notes or the
Warrants;
9.2. There
are
no undisclosed interests, present or future, in the Guarantor Notes, the CGSY
Notes, the Guarantor Warrants or the CGSY Warrants, nor does Augustine know
of
any assertion of such an interest, or of any fact or circumstances that would
give any person any such present or future interest or entitle any person to
assert such an interest;
9.3. There
is
no provision of any contract, indenture, or other instrument to which Augustine
is a party or to which any of the Guarantor Notes, the CGSY Notes, the Guarantor
Warrants or the CGSY Warrants are subject that would prevent, limit, or
condition the sale or transfer of such instruments;
9.4. Augustine
has the right, power, legal capacity and authority to execute and enter into
this Agreement and to execute all other documents and perform all other acts
to
be executed or performed by it as may be necessary in connection with the
performance of this Agreement;
9.5. Neither
the execution and delivery of any of this Purchase Agreement by Augustine,
nor
the consummation of the transactions contemplated therein, nor performance
of
and compliance with the terms and provisions thereof will violate any law,
legal
order or other legal requirement applicable to Augustine;
9.6. No
approval or consent not heretofore obtained by any person or entity is necessary
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby; and
9.7. Augustine
acknowledges that the Notes are currently in default and that the current value
of the Warrants is questionable. Augustine represents and warrants that all
remedies are available with respect to the Notes and the Warrants and Augustine
has granted no waiver of any its rights under the Notes or with respect to
any
default with respect to such Notes.
| 10. |
Representations
and Warranties of each Guarantor.
Each Guarantor, severally but not jointly, hereby represents and
warrants
to Augustine, as of the Agreement Date, the Initial Closing Date
and the
Second Closing Date as follows:
|
10.1. There
is
no provision of any contract, indenture, or other instrument to which such
Guarantor is a party that would prevent, limit, or condition its purchase of
the
Guarantor Notes or the Guarantor Warrants, or his obligations under Section
13
hereof;
10.2. Such
Guarantor has the right, power, legal capacity and authority to execute and
enter into this Agreement and to execute all other documents and perform all
other acts to be executed or performed by him as may be necessary in connection
with the performance of this Agreement;
10.3. No
approval or consent not heretofore obtained by any person or entity is necessary
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby; and
10.4. Guarantor
understands that the Notes are currently in default and that the current value
of the Warrants is questionable. Guarantor is not relying on Augustine for
any
information regarding, and Guarantor has performed his own due diligence with
respect to, the Debtors and their business and prospects, the collateral
securing the Notes, and the prospects of repayment and/or continued default
with
respect to the Notes.
| 11. |
Representations
and Warranties of CGSY.
CGSY hereby represents and warrants to Augustine, as of the Agreement
Date, the Initial Closing Date and the Second Closing Date as
follows:
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11.1. There
is
no provision of any contract, indenture, or other instrument to which CGSY
is a
party that would prevent, limit, or condition its purchase of the CGSY Notes
or
the CGSY Warrants;
11.2. CGSY
has
the right, power, legal capacity and authority to execute and enter into this
Agreement and to execute all other documents and perform all other acts to
be
executed or performed by him as may be necessary in connection with the
performance of this Agreement;
11.3. No
approval or consent not heretofore obtained by any person or entity is necessary
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby.
11.4. CGSY
understands that the Notes are currently in default and that the current value
of the Warrants is questionable. CGSY is not relying on Augustine for any
information regarding, and CGSY has performed its own due diligence with respect
to, the Debtors and their business and prospects, the collateral securing the
Notes, and the prospects of repayment and/or continued default with respect
to
the Notes.
| 12. |
Conditions
to Each Closing.
|
12.1. Initial
Closing.
12.1.1. The
obligations of Augustine to effect the transactions contemplated by the Initial
Closing shall be conditioned on (i) the representations and warranties of CGSY
and the Guarantors being true and accurate when made and as of the date of
the
Initial Closing, and (ii) CGSY being ready and able to deliver all deliverables
specified in Section 4.2.
12.1.2. The
obligations of the Guarantors to effect the transactions contemplated by the
Initial Closing shall be conditioned on (i) the representations and warranties
of Augustine being true and accurate when made and as of the date of the Initial
Closing, and (ii) Augustine being ready and able to deliver all deliverables
specified in Section 4.1.
12.2. Second
Closing.
12.2.1. The
obligations of Augustine to effect the transactions contemplated by the Second
Closing shall be conditioned on (i) the representations and warranties of CGSY
and the Guarantors being true and accurate when made and as of the date of
the
Initial Closing, and (ii) CGSY being ready and able to deliver all deliverables
specified in Section 8.2.
12.2.2. The
obligations of CGSY to effect the transactions contemplated by the Second
Closing shall be conditioned on (i) the representations and warranties of
Augustine being true and accurate when made and as of the date of the Initial
Closing, and (ii) Augustine being ready and able to deliver all deliverables
specified in Section 8.1.
12.3. Waiver.
12.3.1. The
conditions set forth in Sections 12.1.1 and 12.2.1 are for Augustine’s sole
benefit and may be waived by Augustine at any time, in its sole discretion,
by
providing the applicable counterparty with prior written notice thereof.
12.3.2. The
conditions set forth in Sections 12.1.2 and 12.2.2 are for CGSY’s and the
Guarantors’ benefit, and may be waived upon prior written notice to Augustine;
provided, however, that in such event Augustine shall not be required to proceed
with either the Initial Closing or the Second Closing unless any such waiver
is
countersigned by CGSY and each Guarantor.
| 13. |
Guarantee.
|
13.1. Each
Guarantor, jointly and severally, hereby (i) unconditionally and irrevocably
guarantees to Augustine, the punctual payment of the CGSY Purchase Price (the
“Guaranteed Obligations”), and (ii) agrees to pay, upon demand, any and all
reasonable expenses (including reasonable counsel fees and expenses) incurred
by
Augustine in enforcing any rights under this Section 13. In the event that
Augustine has satisfied all conditions set forth in Section 12.2.2, and the
Second Closing has not occurred by 3:00 p.m. on August 31, 2006, Augustine
shall
notify the Guarantors who shall satisfy such payment obligations within two
(2)
business days of deemed receipt of such notice.
13.2. The
liability of each Guarantor shall not be affected or impaired by any of the
following acts or things: (i) any waiver or indulgence granted in respect
of, or any delay or lack of diligence in the enforcement of, any of the
Guaranteed Obligations, or any failure to institute proceedings, file a claim,
give any required notice or otherwise protect any of the Guaranteed Obligations;
(ii) any full or partial release of, settlement with or agreement not to
xxx any person in respect of any of the Guaranteed Obligations; or
(iii) any discharge of any evidence of any of the Guaranteed Obligations or
any acceptance of any instrument or substitution therefore; provided, that
any
such substitute instrument provides for identical terms as the original
instrument.
13.3. The
liability of each Guarantor hereunder shall be irrevocable, absolute and
unconditional, irrespective of, and each Guarantor hereby irrevocably waives
any
defenses it may now or hereafter have in any way relating to, any or all of
the
following: (i) any lack of validity or enforceability of this Agreement or
any
agreement or instrument relating hereto which may be available to any person
liable in respect of any of the Guaranteed Obligations; or (ii) the existence
of
any claim, set-off, defense that such Guarantor may have at any time against
any
Person.
13.4. Each
Guarantor hereby waives (i) promptness and diligence, (ii) notice of
acceptance, and any other notice, with respect to any of the Guaranteed
Obligations, (iii) any requirement that Augustine exhaust any right or take
any action against CGSY, (iv) any right to compel or direct Augustine to
seek payment or recovery of any amounts owed from any one particular fund or
source or to exhaust any right or take any action against CGSY or any other
person, (v) any requirement that Augustine exhaust any right or take any
action against CGSY or any other person and (vi) any other defense
available to such Guarantor.
13.5. The
provisions of this Section 13 shall (i) remain in full force and effect until
the date on which all of the Guaranteed Obligations shall have been indefeasibly
paid in full in cash, (ii) be binding upon each Guarantor and its successors
and
assigns and (iii) inure to the benefit of and be enforceable by Augustine and
its permitted successors, pledgees, transferees and assigns.
| 14. |
Miscellaneous.
|
14.1. Confidentiality
and Information Sharing.
The
parties to this Agreement agree to keep the financial terms of the transactions
contemplated hereby confidential and will limit disclosure of such information
(i) to professional advisors, and (ii) as required for the filing of tax
returns; provided that CGSY may announce such transactions pursuant to a press
release to be mutually agreed upon and make such other filings with the
Securities and Exchange Commission as its counsel may deem necessary or
advisable for purposes of complying with CGSY’s public disclosure
obligations.
14.2. Amendment;
Waiver.
No
amendment, modification or alteration of the terms or provisions of this
Agreement, including waiver of any term or provision, shall be binding unless
the same shall be in writing and duly executed by all of the parties
hereto.
14.3. Assignment.
This
Agreement may not be assigned by any of the parties hereto without the prior
written consent of all the other parties hereto, and any attempted assignment
without such consent shall be deemed null and void and of no force or
effect.
14.4. Binding
Agreement.
This
Agreement is binding upon and will inure to the benefit of the parties, and
their respective heirs, executors, agents, legal representatives, successors
and
assigns, if any.
14.5. Entire
Agreement.
This
Agreement, including the exhibits attached hereto, constitutes the entire
agreement between the parties with respect to the sale and purchase of the
Debenture and the other transactions described herein and contemplated hereby,
and supersedes all prior and contemporaneous promises, communications and
agreements, whether verbal or written, with respect thereto.
14.6. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
for
all purposes be deemed to be an original and all of which together shall
constitute the same instrument.
14.7. Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the internal
laws and decisions of the State of Illinois, other than its principles of
conflicts of laws. The parties agree that all actions and proceedings arising
out of or related to this Agreement and the transactions contemplated hereby
shall be brought only in a state or federal court located in Xxxx County,
Illinois, and the parties hereby consent to such venue and to the jurisdiction
of such courts over the subject matter of such proceeding and
themselves.
14.8. Notices.
All
notices and other communications required or desired to be given pursuant to
this Agreement will be given in writing and will be deemed duly given upon
personal delivery, or on the third day after mailing if sent by registered
or
certified mail, postage prepaid, return receipt requested, or on the day after
mailing if sent by a nationally recognized overnight delivery service which
maintains records of the time, place and recipient of delivery, and in each
case
if addressed as follows:
14.8.1. If
to
Augustine, then to:
Augustine
Fund, L.P.
c/o
Augustine Capital Management, LLC
Attn:
Xxx
Xxxxxxxxx, COO
000
Xxxx
Xxxxxxx Xxxxxxxxx - xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
14.8.2. If
to
either Guarantor, then to:
c/o
Xxxxxxx Xxxxxx
0000
Xxxxx Xxx Xxxx
Xxxxxxx,
Xxxxxxxx 00000
14.8.3. If
to
CGSY, then to:
Capital
Growth Systems, Inc.
00
Xxxx
Xxxxxxxx Xx., Xxxxx X
Xxxxxxxxxx,
Xxxxxxxx 00000
or
to
such other person, entity or address as either party may respectively designate
in like manner, from time to time.
14.9. Severability.
If any
provision contained herein is held to be invalid or unenforceable by a court
of
competent jurisdiction, such provision will be severed herefrom and such
invalidity or unenforceability will not affect any other provision of this
Agreement, the balance of which will remain in and have its intended full force
and effect.
14.10. Survival.
All of
the terms, representations, warranties and other provisions of this Agreement
shall survive and remain in effect after the Closing Date.
14.11.
Appropriate Actions; Further Assurances.
Upon
reasonable request of any party to another party hereto, such other party shall
promptly execute and deliver, without payment of any additional consideration,
any other assurances or additional documents or instruments necessary, proper
or
advisable, and take such additional action as the requesting party may
reasonably request, to consummate the transactions contemplated by, and to
carry
out fully the purposes of, this Agreement.
14.12. No-Shop.
In
consideration for the considerable time, effort and expense to be undertaken
by
CGSY and each of the Guarantors in connection with transactions contemplated
hereby, from the Agreement Date through August 31, 2006, Augustine will not,
directly or indirectly, through any representative or otherwise, solicit or
entertain offers from, negotiate with or in any manner encourage, discuss,
accept, or consider any proposal of any other person or entity relating to
the
acquisition of the Guarantor Notes, the CGSY Notes, the Guarantor Warrants
or
the CGSY Warrants in whole or in part, whether directly or indirectly. Augustine
shall immediately notify CGSY and each of the Guarantors regarding any contact
between Augustine or its respective representatives and any other person or
entity regarding any such offer or proposal or any related inquiry.
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be executed and delivered by their
respective, duly authorized representatives as of the date first above
written.
| Augustine Fund, L.P. | Capital Growth Systems, Inc. | ||
|
By: Augustine Capital Management, LLC,
|
|||
|
Its General Partner
|
|||
| /s/ Xxxxxx Xxxxxxxxx | /s/ Xxxxxx X. Xxxxxx | ||
|
|
|
||
| By:
Xxxxxx
Xxxxxxxxx Its: CFO |
By:
Xxxxxx X.
Xxxxxx Its: CEO |
| /s/ Xxxxxxx Xxxxxx | /s/ Xxxxx Lies | ||
|
Xxxxxxx Xxxxxx |
Xxxxx Lies |
||
Schedule
1
Warrants
Augustine
First Tranche Warrant
Series
C Preferred Stock Purchase Warrant, January 13, 2005, No.: C-3
642,420 (the “First Warrant”)
642,420 (the “First Warrant”)
Augustine
Second Tranche Warrant
Series
C Preferred Stock Purchase Warrant, February 10, 2005, No.: C-4
642,420 (the “Second Warrant”)
642,420 (the “Second Warrant”)
Series
C Preferred Stock Purchase Warrant
(Third
Tranche - First Advance), June 22, 2005, No.: Aug. Tranche 3 -
#1
256,969 (the “Third Warrant”)
256,969 (the “Third Warrant”)
Series
C Preferred Stock Purchase Warrant
(Third
Tranche - Second Advance), July 1, 2005, No.: Aug. Tranche 3 - #2
256,969 (the “Fourth Warrant”)
256,969 (the “Fourth Warrant”)
Series
C Preferred Stock Purchase Warrant
(Third
Tranche - Third Advance), August 1, 2005, No.: Aug. Tranche 3 -
#3
256,969 (the “Fifth Warrant”)
256,969 (the “Fifth Warrant”)
Total:
2,055,747
EXHIBIT
A
WARRANT
See
Attached.
THIS
CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAW, AND IN THE ABSENCE OF
SUCH REGISTRATION MAY NOT BE SOLD OR TRANSFERRED UNLESS THE ISSUER OF THIS
WARRANT HAS RECEIVED AN OPINION OF ITS COUNSEL, OR OF COUNSEL REASONABLY
SATISFACTORY TO IT, THAT THE PROPOSED SALE OR TRANSFER WILL NOT VIOLATE THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW.
Warrant
No. _____
Issue
Date: July 28, 2006
WARRANT
TO PURCHASE COMMON STOCK OF
CAPITAL
GROWTH SYSTEMS, INC.
(a
Florida corporation)
This
is
to certify that Augustine Capital Management, LLC, or his, her or its permitted
assigns (“Holder”), is entitled to purchase, subject to the provisions of this
Warrant, from Capital Growth Systems, Inc., its successors and assigns (the
“Company”), at any time on or after the Issue Date and for a period of three (3)
years after the Issue Date (the “Exercise Period”), 150,000 shares of Common
Stock (the “Warrant Shares”), for an exercise price equal to $0.50 per share of
Common Stock to be issued hereunder.
The
number of shares of Common Stock to be received upon the exercise of this
Warrant (the “Exercisable Shares”) and the exercise price to be paid for a share
of Common Stock (the “Exercise Price”) may be adjusted from time to time as
herein set forth.
1. Method
of Exercise.
Subject
to the other provisions of this Warrant, this Warrant may only be exercised
in
whole or in part during the Exercise Period by (i) payment of the Exercise
Price
by either (A) cash or a certified or bank check, payable to the order of the
Company or (B) a written notice to the Company that Holder is exercising this
Warrant (or a portion thereof) by authorizing the Company to withhold from
issuance a number of shares of Warrant Shares issuable upon exercise of this
Warrant which when multiplied by the Market Price of the Warrant Shares is
equal
to the aggregate Exercise Price (and such withheld shares shall no longer be
issuable under this Warrant), and (ii) presentation and surrender of this
Warrant to the Company with the exercise notice substantially in the form
attached hereto as Exhibit A
duly
executed (the “Exercise Notice”). Upon receipt by the Company of this Warrant
and the Exercise Notice in proper form for exercise, the Holder shall be deemed
to be the Holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. The Company shall use its
best efforts to issue the proper stock certificate within five (5) business
days
of receiving all required documentation. Such stock certificate shall bear
such
legends as the Company may deem necessary or appropriate.
2. Payment
of Taxes.
The
Company shall pay all expenses in connection with the issue or delivery of
this
Warrant, other than any tax or charge imposed by law upon Holder, in which
case
such taxes or charges shall be paid by Holder.
3. Fractional
Shares.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. With respect to any fraction of a share called
for
upon exercise hereof, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current Market Price of a full
share.
4. Exchange,
Assignment or Loss of Warrant.
(a) Exchange.
This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company for other Warrants in identical
form of different denominations entitling the Holder thereof to purchase in
the
aggregate the same number of shares of Common Stock purchasable
hereunder.
(b) Assignment.
This
Warrant may be freely assigned and transferred by the Holder without the consent
of the Company; provided, however that no Holder shall assign or transfer this
Warrant (or any portion hereof) to any Person that directly competes in whole
or
in significant part with the Company. Any assignment shall be made by surrender
of this Warrant to the Company with the assignment form substantially in the
form attached hereto as Exhibit B
duly
executed (the “Assignment Form”). The Company shall, within five (5) business
days of receipt of the Warrant and Assignment Form, either (i) consent to such
assignment and execute and deliver a new Warrant in identical form in the name
of the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled, or (ii) notify the Holder that the Company is withholding
its consent to such assignment. This Warrant may be divided or may be combined
with other Warrants which carry the same rights upon presentation hereof at
the
office of the Company together with a written notice specifying the names and
the denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term “Warrant” as used herein includes any Warrants issued in
substitution for or replacement of this Warrant or into which this Warrant
may
be divided or exchanged.
(c) Loss.
Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and (in the case of loss, theft
or
destruction) of reasonably satisfactory indemnification, and upon surrender
and
cancellation of this Warrant if mutilated, the Company will execute and will
deliver a new Warrant in identical form. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part
of
the Company, whether or not this Warrant so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
5. Rights
of the Holder.
The
Holder, by virtue hereof, shall not be entitled to any rights of a shareholder
in the Company, either at law or in equity, and the rights of the Holder are
limited to those expressed in this Warrant.
6. Anti-Dilution
Adjustments.
In
order to prevent dilution of the exercise rights granted hereunder, the terms
of
this Warrant will be subject to adjustment from time to time pursuant to this
Section 6.
(a) Adjustments
for Other Dividends and Distributions.
In the
event the Company at any time prior to the expiration of this Warrant makes
or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities
of
the Company other than shares of Common Stock, then and in each such event
provision shall be made so that the Holder shall receive upon exercise hereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Company which the Holder would have received had
this Warrant been exercised for Common Stock on the date of such event and
had
the Holder thereafter, during the period from the date of such event to and
including the exercise date, retained such securities receivable by the Holder
as aforesaid during such period, subject to all other adjustments called for
during such period under this Section 6 with respect to the rights of the Holder
of this Warrant.
(b) Subdivision
or Combination of Common Stock.
If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares
of
Common Stock into a greater number of shares, then simultaneously with the
happening of such event, (i) the Exercise Price shall, be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common
Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Exercise Price then in effect, and (ii) the number of shares
of Common Stock for which this Warrant is exercisable shall be proportionately
increased. If the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into
a
smaller number of shares, then simultaneously with the happening of such event,
the Exercise Price and the number of shares of Common Stock for which this
Warrant is exercisable shall immediately be proportionately
decreased.
(c) Certain
Events.
If any
event occurs of the type contemplated by the provisions of this Section 6
but not expressly provided for by such provisions, then the Company’s board of
directors and the Company will make an appropriate adjustment in the Exercise
Price and number of Exercisable Shares so as to protect the rights of the Holder
hereunder.
(d) Subsequent
Adjustments.
The
Exercise Price and number of Exercisable Shares, as so adjusted pursuant to
this
Section, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 6.
7. Reorganization,
Reclassification, Consolidation, Merger or Sale.
Any
capital reorganization, reclassification, consolidation, merger or sale of
all
or substantially all of the Company’s assets to another Person which is effected
in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) cash, stock, securities or assets
with
respect to or in exchange for Common Stock is referred to herein as an “Organic
Change.” Prior to the consummation of any Organic Change, the Company shall
provide Holder with notice of such Organic Change, such notice to reference
this
Section 7 and to be delivered at least thirty (30) days prior to the
consummation of the Organic Change. The Holder shall have a period of thirty
(30) days to exercise this Warrant (which exercise may be conditioned upon
the
consummation of the Organic Change), and upon consummation of the Organic
Change, this Warrant and any unexercised Warrant Shares shall automatically
terminate. In the event the Organic Change is not consummated, this Warrant
shall remain in full force and effect.
8. Definitions.
(a) “Common
Stock” means, collectively, the Company’s common stock, par value
$.0001.
(b) “Market
Price” of any security means the average of the closing prices of such
security’s sales on all securities exchanges on which such security may at the
time be listed, or, if there has been no sales on any such exchange on any
day,
the average of the highest bid and lowest asked prices on all such exchanges
at
the end of such day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 4:00 P.M., New York time, or, if on any day such security is not quoted
in
the NASDAQ System, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
“Market Price” is being determined and the 20 consecutive business days prior to
such day. If at any time such security is not listed on any securities exchange
or quoted in the NASDAQ System or the over-the-counter market, the “Market
Price” will be the fair value thereof determined by the Company’s board of
directors, in good faith.
(c) “Person”
means an individual, a partnership, a limited liability company, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
9. Reservation
of Stock.
From
and after the issue date of this Warrant, the Company will at all times reserve
and keep available, solely for issuance and delivery on the exercise of the
Warrant, such number of shares of Common Stock as may from time to time be
issuable on the exercise of the Warrant.
10. Piggyback
Registration.
If the
Company proposes to file a Registration Statement in connection with a public
offering of any of its securities (other than a Registration Statement on Form
S-4 or Form S-8, or any comparable successor form or form substituting therefor,
or filed in connection with any exchange offer or an offering of securities
solely to the Company’s existing equity holders) (a “Piggyback Registration
Statement”), whether or not for sale for its own account, then each such time
the Company shall give written notice of a proposed offering (a “Piggyback
Notice”) to the Holder of its intention to effect such a registration at least
twenty (20) days prior to the anticipated filing date of such Piggyback
Registration Statement. The Piggyback Notice shall offer the Holder the
opportunity to include in such Piggyback Registration Statement such amount
of
Exercisable Shares as it may request. The Company will include in such Piggyback
Registration Statement (and related qualifications under blue sky laws) and
the
underwriting, if any, involved therein, all Exercisable Shares with respect
to
which the Company has received a written request from Holder for inclusion
therein within fifteen (15) days after receipt of the Piggyback Notice.
Notwithstanding the above, the Company may determine, at any time, not to
proceed with such Piggyback Registration Statement.
11. Notices.
Except
as otherwise expressly provided, all notices referred to herein will be in
writing and will be deemed duly given upon personal delivery, or on the third
day after mailing if sent by registered or certified mail, postage prepaid,
return receipt requested, or on the day after mailing if sent by a nationally
recognized overnight delivery service which maintains records of the time,
place
and recipient of delivery, in each case addressed (i) to the Company at its
principal executive offices, and (ii) to Holder at Holder’s address as it
appears in the stock records of the Company (unless otherwise indicated by
Holder).
12. Applicable
Law.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of Illinois
IN
WITNESS WHEREOF, Capital Growth Systems, Inc. has caused this Warrant to be
signed by its duly authorized officer and dated as of the date set forth
above.
| CAPITAL GROWTH SYSTEMS, INC. | ||
| |
|
|
| By: | ||
|
Name: Xxxxxx X. Xxxxxx |
||
|
Title:
CEO
|
||
Exhibit
A
Exercise
Notice
[To
be
executed only upon exercise of Warrant]
The
undersigned registered owner of this Warrant irrevocably exercises this Warrant
for the purchase of __________ Shares of Common Stock of Capital Growth Systems,
Inc. and herewith makes payment therefor, all at the price and on the terms
and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or property issuable
upon such exercise) be issued in the name of and delivered to
_________________________ whose address is _________________________ and, if
such shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and
date
for the balance of the shares of Common Stock issuable hereunder be delivered
to
the undersigned.
Dated:
__________ _________________________________
(Name
of Registered
Owner)
_________________________________
(Signature
of Registered
Owner)
_________________________________
(Street
Address)
_________________________________
(City)
(State) (Zip
Code)
Exhibit
B
Assignment
Form
FOR
VALUE
RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
under this Warrant, with respect to the number of shares of Common Stock set
forth below:
|
No. of Shares of
Name and Address of Assignee |
Common Stock | |||
and
if
such shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, then new Warrants of like tenor and date
shall be issued. The undersigned does hereby irrevocably constitute and appoint
_________________________ attorney-in-fact to register such transfer on the
books of Capital Growth Systems, Inc., maintained for the purpose, with full
power of substitution in the premises.
Dated:
__________ _________________________________
(Name
of Registered
Owner)
_________________________________
(Signature
of Registered
Owner)
