Contract
EXHIBIT
10.10
2009
SUB DEBT CONSENT, WAIVER AND AMENDMENT AGREEMENT
THIS 2009 SUB DEBT CONSENT, WAIVER
AND AMENDMENT AGREEMENT (the “Agreement”), dated as of July 31, 2009,
is entered into by and among Capital Growth Systems, Inc., a Florida corporation
(the “Company”),
and the persons identified as “Holders” on the signature pages hereto (the
“Holders”). Defined
terms not otherwise defined herein shall have the meanings set forth in the
March Purchase Agreement (as defined below).
WHEREAS, pursuant to a Securities Purchase
Agreement, dated March 11, 2008 (the “March
Purchase Agreement”), among the Company and the purchasers from the
Company of an aggregate of $19,000,000 in principal amount of Variable Rate
Secured Convertible Debentures of the Company (the “March
Debentures”), and such purchasers were issued warrants exercisable for
shares of Common Stock (the “March
Warrants”); the March Debentures and March Warrants were reissued as
original issue discount debentures effective November 19, 2008 in connection
with a Waiver, Consent, Amendment and Exchange Agreement as of such date (the
“November
Waiver, Consent, Amendment and Exchange Agreement”), and with such July
Debentures being hereinafter sometimes referred to as the “Amended
and Restated March Debentures,” and with all transaction documents
associated with the March Purchase Agreement as amended by the November Waiver,
Consent, Amendment and Exchange Agreement being hereinafter referred to as the
“March
Transaction Documents.”
WHEREAS, pursuant to a
Securities Purchase Agreement, dated November 19, 2008 (the “November
Purchase Agreement”), among the Company and the purchasers from the
Company of an aggregate of $14,891,250 in aggregate principal amount of original
issue discount secured convertible debentures with an initial subscription
amount of $9,025,000 (the “November
Debentures”), such purchasers were issued the November Debentures and
warrants exercisable for shares of Common Stock (the “November
Warrants”), with all transaction documents associated with the November
Purchase Agreement being the “November
Transaction Documents.”
WHEREAS, pursuant to a
Securities Purchase Agreement of even date herewith in the form attached as
Exhibit A
hereto, including all exhibits thereto (the “July
Purchase Agreement”) among the Company and the purchasers identified on
the signature pages thereto (collectively, the “July
Purchasers”), the July Purchasers will be purchasing up to $10,500,000 in
aggregate principal amount of Original Issue Discount Secured Convertible
Debentures due, subject to the terms therein, due May 30, 2011 (the “July
Debentures” together with warrants to purchase shares of Common Stock
(the offer and sale of such July Debentures and warrants pursuant to the July
Purchase Agreement are hereafter referred to as the “July
Financing”); Aequitas Capital Management, Inc. or its successor in
interest is named as “Collateral
Agent” for the holders of the July Debentures pursuant to the Security
Agreement attached as an exhibit to the July Purchase Agreement, and all the
transaction documents associated with the July Financing are hereinafter
sometimes referred to as the “July
Transaction Documents;” and
WHEREAS, the Company has
adopted a Vendor Payment Plan to be administered and modified by time to time by
the Company with input from the Collateral Agent. As part of the
Vendor Payment Plan, up to $2,500,000 of obligations of the Company shall be
exchanged with creditors of the Company for debentures (“VPP
Debentures”) showing a cash subscription amount on a dollar for dollar
basis equal to the preceding exchanged obligations, and with a 65% OID factor
increasing the principal amount of the VPP Debentures accordingly, which VPP
Debentures shall be substantially similar to the November Debentures, shall be
subject to a security agreement appointing Aequitas Capital Management, Inc. as
collateral agent, with the VPP Debentures to be on a pari passu basis with the
November Debentures and the Other Debentures, and the holders thereof shall have
warrant coverage comparable to the warrants issued pursuant to the November
Debentures, all as more fully set forth in the form of purchase agreement
(“VPP
Purchase Agreement,” with the financing thereof being the “VPP
Financing” and the purchasers of the VPP Debentures being the “VPP
Purchasers”), a copy of which has been made available for review upon
request of the other Holders.
WHEREAS, the July Purchasers
are making their investment contingent upon, among other things, the due
execution of the Holders counterparty hereto of this Consent, Waiver and
Amendment Agreement, and the establishment by the Company of the Vendor Payment
Plan.
WHEREAS, pursuant to a Loan
and Security Agreement by and among the Company and its Subsidiaries and ACF
CGS, L.L.C., as Collateral Agent for itself and the other lenders party thereto
(the “Senior
Lender Agreement”) dated November 19, 2008 in the form attached as
Exhibit B to the November Consent, Waiver, Amendment and Exchange Agreement
(“Senior
Lender”), Senior Lender loaned to the Company $8,500,000 pursuant to a
secured promissory note, presently due 24 months following its issuance (“Senior
Lender Note,” with the loan secured thereby being the “Senior
Loan”) (the issuance of the Senior Lender Note pursuant to the Senior
Lender Agreement as amended from time to time is hereafter referred to as the
“Senior
Lender Financing”). Senior Lender has delivered a notice of
default with respect to the Senior Lender Financing and is willing to waive the
defaults set forth therein upon the due execution and closing a modification of
the terms of the Senior Lender Agreement as set forth in Exhibit B attached
(the “Senior
Lender Financing Modification”), and Senior Lender has also required that
the July Purchasers execute a form of intercreditor agreement subordinating the
July Debentures to the Senior Loan (“Senior
Lender/July Debenture Intercreditor Agreement”) and that the VPP
Purchasers execute a form of intercreditor agreement subordinating the Junior
Debentures to the Senior Loan (“Senior
Lender/VPP Debenture Intercreditor Agreement”); copies of the Senior
Lender Financing Modification and the two new intercreditor agreements
referenced above are all attached as Exhibit B.
NOW THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Holder hereby agrees as follows:
2
1. Waivers and
Consents. Subject to the terms and conditions hereunder, each
Holder hereby waives compliance with the Company’s obligation to provide, and
the Holder’s right to receive those items enumerated in this Section
1. Subject to the terms and conditions hereunder, each Holder hereby
amends and waives the restrictions set forth in Sections 4.13(a) of the March
Purchase Agreement and Sections 7(a) and 7(b) of the Amended and Restated March
Debentures and Sections 4.13(a) of the November Purchase Agreement
and Sections 7(a) and 7(b) of the November Debentures with respect to the July
Financing and VPP Financing and agrees that such restrictions shall not apply to
the issuance of the July Debentures and warrants pursuant to the July Financing
or the VPP Debentures and warrants. Further, subject to the terms and
conditions hereunder, each Holder hereby amends and waives the restrictions
applicable to him, her or it, set forth in Sections 7(a) and 7(b) of the Amended
and Restated March Debentures with respect to the Senior Lender Financing
Modifications and the July Financing. In addition, subject to the
terms and conditions hereunder, each Holder hereby waives the restrictions set
forth in Section 7(a) of the Amended and Restated March Debentures and November
Debentures respectively, with respect to the issuance of the Vendor Payment Plan
or the taking of any actions in connection therewith satisfactory to the
Collateral Agent for the Debentures. Lastly, subject to the terms
hereunder, each Holder hereby waives the existence of any circumstance accrued
through the date of closing of the July Financing which may be deemed to
constitute an “event of default” under or breach of any of the March Transaction
Documents or the November Transaction Documents, to the extent applicable to
that Holder or due to an “event of default” with respect to any other purchaser
or his or its assigns under the March Transaction Documents or November
Transaction Documents, in consideration for the issuance to that Holder of his,
her or its pro rata share of the $700,000 in principal amount of July
Debentures, as set forth on Schedule 2.1 to the July Purchase Agreement, the
terms of which are incorporated by reference herein and made a part hereof as if
fully rewritten. Each Holder further consents to the taking by the
Company of all actions contemplated to be taken in the July Transaction
Documents (and waives any right to declare a default under the November
Transactions Documents or March Transaction Documents with respect to the taking
of any of the transactions contemplated therein), and to the amendment of the
Amended and Restated March Transaction Documents and November Transaction
Documents as set forth in Section 2 of this Agreement; execution of this
Agreement shall be deemed to constitute counterpart execution of the July
Transaction Documents by each holder of Amended and Restated March Debentures or
November Debentures as they relate to the allocation of the portion of the
Schedule 2.1 (of the July Purchase Agreement) ownership in the July Debentures
(and corresponding Warrants) to the Holder executing this
Agreement. Each of the Holders signatory hereto consents to the entry
by the Company into the Senior Lender Financing Modification, as well as to the
existence of the Senior Lender/July Debenture Intercreditor Agreement and the
Senior Lender/VPP Debenture Intercreditor Agreement. Each of the
Holders signatory hereto acknowledges and agrees that the effective time of this
Agreement shall be as of a time immediately prior to the initial closing of the
July Financing and the VPP Financing so that it is acknowledged and agreed
that:
(a) the
July Financing and VPP Financing constitute Exempt Issuances for purposes of the
Holders’ March Transaction Documents and November Transaction Documents;
and
(b) the
amendments set forth in Section 2 below are amendments to the March Transaction
Documents and November Transaction Documents duly approved.
2. Amendments and Other
Agreements.
(a) Amended and Restated March
Debentures and November Debentures. Effective upon the initial
closing of the July Purchase Agreement and the execution of this Agreement by
the Holders holding not less than 67% of the outstanding principal amount of:
(i) the Amended and Restated March Debentures; and (ii) the November Debentures,
then:
3
(A) each
of the following defined terms in the Amended and Restated March Debentures and
the November Debentures shall be amended and restated to be identical to the
following defined terms set forth in the July Debentures attached hereto as part
of Exhibit A, and the terms of which are incorporated by reference herein and
made a part hereof as if fully rewritten: “March Purchase Agreement;” “March
Debentures;” “Equity Conditions;” “Exempt Issuance; “Other Debentures;”
“November Debentures;” “November Purchase Agreement;” “Permitted Indebtedness;”
“Senior Debt;” “67% Majority;” “Trading Market.” “Vendor Payment Plan;” “VPP
Debentures;” and “VPP Purchase Agreement.” In addition, any defined
terms set forth in the July Purchase Agreement and not otherwise defined in the
amendments to the Amended and Restated March Debentures, the November Debentures
and the VPP Debentures set forth in this Agreement, are hereby added as defined
terms to each of said Other Debentures and incorporated by reference therein and
made a part thereof as if fully rewritten.
(B) The
negative covenants set forth in Sections 7(d) and 7(e) of each of the Amended
and Restated March Debentures and each of the November Debentures are hereby
amended and restated as set forth in Sections 7(d) and 7(e), respectively of the
July Debentures, attached hereto as part of Exhibit A, and the terms of which
are incorporated by reference herein and made a part hereof as if fully
rewritten;
(C) The
events of default set forth in Sections 8(a)(i), 8(a)(ii), 8(a)(iii), 8(a)(vi)
and 8(a)(ix) of each of the Amended and Restated March Debentures and each of
the November Debentures are hereby amended and restated in their entirety as set
forth in Sections 8(a)(iii), 8(a)(vi) and 8(a)(ix) respectively, of the July
Debentures, attached hereto as part of Exhibit A, and the terms of which are
incorporated by reference herein and made a part hereof as if fully
rewritten;
(D) The
following sentences are added to the end of Section 5.5 of each of the Amended
and Restated March Debentures and each of the November Debentures:
“Any
breach of any covenant or obligation of the Company or any of its Subsidiaries
with respect to this Agreement through the date of closing of the issuance of
not less than $7,000,000 in original principal amount of debentures (subject to
increase by up to an additional $3,500,000) maturing May 30, 2011 (the “July
Debentures”) is hereby waived. Any rights to payment with respect to
this Debenture are expressly subordinated to the rights to payment with respect
to the July Debentures, and the terms of that certain Intercreditor Agreement
attached as an exhibit to the July Purchase Agreement, among the initial holders
of the July Debentures, the holders of the VPP Debentures (executing such
agreement from tie to time) and holders of not less than 67% of principal amount
of the other outstanding secured debentures of the Company is incorporated by
reference herein and made a part hereof as if fully rewritten and shall be
binding upon the holder of this Debenture. The holders of 67% of the
aggregate principal amount of all of the Debentures outstanding shall have the
right to waive any of the rights of the holders of all of the Debentures with
respect to any matter.
4
(E) The
following sentence is added at the end of Section 6(a) of each of the Amended
and Restated March Debentures and each of the November Debentures:
“Notwithstanding
anything to the contrary contained herein, the Company shall be under no
obligation to make any Quarterly Redemptions (whether cash or shares) prior to
July 1, 2012, and there shall be no accrual of interest with respect to any
Quarterly Redemption obligations prior to July 1, 2012.
(F) The
Holders of Amended and Restated March Debentures and November Debentures consent
to the issuance of the VPP Debentures and corresponding warrants in
accordance with the terms of the VPP Debenture Purchase Agreement.
(b) Amendments to the March
Purchase Agreement and November Purchase Agreement. Effective
upon the initial closing of the July Purchase Agreement and execution of this
Agreement by the Holders of not less than 67% of the outstanding principal
amount of: (i) the Amended and Restated March Debentures; and (ii) the November
Debentures, then each of the following sections of each of the March Purchase
Agreement and the November Purchase Agreement shall be amended and restated in
its entirety to be as set forth in the corresponding Section of the July
Purchase Agreement, attached as Exhibit A and the terms of which are
incorporated by reference herein and made a part hereof as if fully
rewritten:
(A) Section
1.1 – the definition of “Effective Date” and the additional definitions set
forth in Section 2(a)(A) of this Agreement;
(B) Section 4.3
(Regarding furnishing of information, public information);
(C) Section
4.11(d) (Regarding holding of special meeting of shareholders);
(D) Section
4.12 (Regarding participation in future financing);
(E) Section
4.13 (Regarding subsequent equity sales);
(F) Section
4.14 (Regarding equal treatment);
(G) Section
4.17 (Regarding capital changes);
(H) Section
4.21 (Regarding issuance of stock to management); and
(I) Section
5.5 (Regarding amendment and waiver of transaction documents).
5
(b) The
Holders of Amended and Restated March Debentures and November Debentures consent
to the issuance of the VPP Debentures and corresponding warrants in accordance
with the VPP Purchase Agreement.
(c) Security
Agreement. Effective upon the initial closing of the July
Purchase Agreement and the execution of this Agreement by the Holders holding
not less than 67% of the outstanding principal amount of: (i) The Amended and
Restated March Debentures; and (ii) the November Debentures, then the following
sentence shall be added to the end of Section 19(c) of the security agreement
among the Company and its Subsidiaries and each of the holders of Amended and
Restated March Debentures and of November Debentures:
“Notwithstanding
anything to the contrary contained herein, for so long as any of the Debtors
remains indebted to ACF CGS, L.L.C., as Collateral Agent for itself and the
other lenders party thereto (if any—collectively, “Collateral Agent”), pursuant
to the loan agreement with the Debtors dated as of November 19, 2008, then to
the extent Collateral Agent is granted any senior rights with respect to any of
Debtors or the Collateral, then the grant or operation of such senior rights
shall not constitute a breach of this Agreement or an event of default
hereunder.”
(d) Approval of Subsequent
Transactions. Each of the Holders agrees to vote all shares of
Common Stock of the Holder in favor of the Authorized Share Approval (as defined
in the July Purchase Agreement), and to the extent that the Holder fails to vote
in such election, grants an irrevocable power proxy to each of the executive
officers of the Company to vote the shares of Common Stock standing in the name
of the Holder in favor of the Authorized Share Approval.
Each of
the Holders consents to the refinancing by the Company (and its subsidiaries if
applicable) of its Senior Debt (the new lender thereto or any successor from a
subsequent refinancing being the “New
Senior Lender”) and agrees to execute such form of subordination
agreement, intercreditor agreement and other agreements as the New Senior Lender
shall require (collectively, the “New
Senior Lender Documents”), provided such refinancing is approved by the
Holders of 67% of outstanding principal amount of the July Debentures and Other
Debentures collectively and the New Senior Loan Documents do not obligate the
Holder to fund any additional monies. Should any Holder fail to
execute the New Senior Lender Documents, then the Holder grants an irrevocable
power of attorney to each of the executive officers of the Company to execute
the New Senior Lender Documents in the name, place and stead of the
Holder.
3. Representations and
Warranties. The Company hereby makes to the Holders the following
representations and warranties:
6
(a) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its board of directors or its
stockholders in connection therewith. This Agreement has been duly
executed by the Company and, when delivered in accordance with the terms hereof
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) No
Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument (evidencing a Company or
Subsidiary debt or otherwise) or other material understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, provided that the Company
receives consent to the transactions contemplated herein by Senior Lender as
well as the holders of the Prior Debentures; or (iii) conflict with or result in
a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(c) Survival and Bring
Down. All of the Company’s warranties and representations
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties hereto. The Company expressly
reaffirms that, except as set forth in the Disclosure Schedules to the July
Purchase Agreement, and the amendments to the transaction documents being made
hereunder with respect to the March Purchase Agreement and the November Purchase
Agreement, each of the representations and warranties set forth in the March
Purchase Agreement and the November Purchase Agreement, continues to be true,
accurate and complete, and the Company hereby remakes and incorporates herein by
reference each such representation and warranty as though made on the date of
this Agreement, subject to the understanding and agreement that any item
referred in the Disclosure Schedules which may be deemed to be an event of
default under the March Purchase Agreement or November Purchase Agreement is
subject to the waiver of default provided for in this
Agreement.
7
4. Public Information Failure
Payments. Section 4 of the November Waiver, Consent Amendment
and Exchange Agreement is hereby deleted in its entirety, inasmuch as the issues
addressed therein are now addressed by Section 4.3(a) of the July Purchase
Agreement as set forth in Section 2 above, the terms of which supersede the
prior terms of said agreement, and all obligations of the Company for penalties
or otherwise accrued to the Holders thereunder through the date hereof are
waived.
5. Miscellaneous.
(a) The
foregoing waivers shall not be effective unless and until: (i) Holders holding
at least 67% of the Amended and Restated March Debentures and at least 67% of
the November Debentures shall (collectively, the “67%
Majority”) have agreed to the terms and conditions hereunder, (ii) the
July Purchasers and Holders representing the 67% Majority execute and deliver an
Intercreditor Agreement in the Form of Exhibit D attached
hereto, and (iii) the July Purchasers and Senior Lender execute and deliver an
Intercreditor Agreement in form and substance agreeable to Senior Lender. The
waivers, agreements and obligations of the Holders set forth herein shall be
null and void in the event the July Financing and the Senior Lender Financing
are not consummated on or before July 31, 2009, or such later date extended by
consent of the Collateral Agent, not to exceed August 31,
2009. In addition, the respective obligations, amendments, agreements
and waivers of the Holders hereunder are subject to the following conditions
being met: (a) the accuracy in all material respects of the representations and
warranties of the Company contained herein (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) and (b) the performance by the
Company of all if its obligations, covenants and agreements required to be
performed hereunder. Except as expressly set forth above, all of the terms and
conditions of the March Transaction Documents and November Transaction Documents
shall continue in full force and effect after the execution of this Agreement
and shall not be in any way changed, modified or superseded by the terms set
forth herein. The Company shall, on or before 8:30 AM (NY time) on
the 2nd Trading Day following the date hereof, issue a Current Report on Form
8-K, reasonably acceptable to the Collateral Agent disclosing the material terms
of the transactions contemplated hereby, and shall attach this Agreement and all
other related agreements thereto (the “8-K
Filing”). The Company shall consult with the Holders in
issuing any other press releases with respect to the transactions contemplated
hereby.
(b) This
Agreement may be executed in two or more counterparts and by facsimile signature
or otherwise, and each of such counterparts shall be deemed an original and all
of such counterparts together shall constitute one and the same
agreement.
8
(c) The
Company has elected to provide all Holders with the same terms and form of
agreement for the convenience of the Company and not because it was required or
requested to do so by the Holders. The obligations of each Holder
under this Agreement are several and not joint with the obligations of any other
Holder, and no Holder shall be responsible in any way for the performance or
non-performance of the obligations of any other Holder under this Agreement or
any transaction document applicable to the March Purchase Agreement, July
Purchase Agreement, VPP Purchase Agreement or November Purchase Agreement
(hereinafter collectively referred to as the “Transaction
Documents”). Except to the extent contemplated by the Security
Agreement applicable to the Holder(s) in question, nothing contained herein or
in any Transaction Document, and no action taken by any Holder pursuant thereto,
shall be deemed to constitute the Holders as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Holders are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement or the
Transaction Documents. Each Holder shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose. Each Holder has been represented by its
own separate legal counsel in their review and negotiation of this Agreement and
the Transaction Documents.
(d) Except
as set forth in the Transaction Documents (as defined in the July Purchase
Agreement) each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the July
Debentures.
(e) If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
9
IN
WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.
CAPITAL
GROWTH SYSTEMS, INC.
|
By:
|
/s/ Xxxxxxx
Xxxxx
|
|
Name: Xxxxxxx
Xxxxx
Title: CEO
[signature
page(s) of Holders to follow]
10
