TGH NOVEMBER 2007 AGREEMENT
Agreement
as of this 30th day of November, 2007, by and between Capital
Growth Systems, Inc.
(“Company”) and Xxxxxx
X.
Xxxxxx
(“TGH”).
RECITALS:
A. TGH
presently holds 2,248,037 shares of Common Stock of the Company and TGH also
holds the following warrants and options issued by Company exercisable for
the
purchase of Common Stock:
Class
of Warrant/Option
|
Number
of
shares
|
||||||
Employee
Option (at $0.70/Share)
|
1,800,000
|
||||||
Performance
Option (at $0.70/Share)
|
1,000,000
|
||||||
20/20
Bridge Loan Warrants (at $0.45/Share)
|
37,557
|
||||||
CentrePath
Inc. (“CP”) Bridge Loan Warrant (at $0.45/Share)
|
1,500,000
|
||||||
Unit
Warrants from Conversion of CP Loan to equity from
11/24/06
|
1,124,749
|
(1)
|
|||||
Unit
Warrants from Conversion of CP Loan to equity from
11/30/06
|
1,123,288
|
(2)
|
|||||
Global
Capacity (“GC”) Bridge Loan Warrants (at $0.45/Share)
|
500,000
|
(3)
|
|||||
2-Year
Short-Term Bridge Loan Warrants (at $0.45/Share)
|
756,411
|
(4)
|
|||||
Total:
|
7,842,005
|
(1)
|
From
November 24, 2006 advance (“CP 11/24 Warrants” - allocable 562,375 shares
at $0.45 per share - the “CP 11/24 $0.45 Warrants;” and 562,374 Shares at
$0.65 per share - the “CP 11/24 $0.65
Warrants”).
|
(2)
|
From
November 30, 2006 advance (“CP 11/30 Warrants” - allocable 561,644 Shares
at $0.45 per share - the “CP 11/30 $0.45 Warrants;” and 561,644 Shares at
$0.65 per share - the “CP 11/30 $0.65
Warrants”).
|
(3)
|
For
funding of $500,000 bridge loan to acquire GC (the “GC
Warrants”).
|
(4)
|
For
funding of $500,000 plus accrued interest ($4,273.95) in connection
with
2-Year Short-Term Bridge Loan (“2-Year
Warrants”).
|
B.
TGH
terminated his employment with Company in May, 2007, has alleged certain
injuries associated with such termination, and Company is desirous of providing
for mutual releases between the parties. The parties acknowledge that the
Company is presently issuing Common Stock at a price of $0.15 per share pursuant
to an offer to Warrant holders to exercise their Warrants at this reduced
price
and also pursuant to a private offering of Common Stock to a limited number
of
investors at $0.15 per share, both presently scheduled to expire on November
30,
2007.
NOW,
THEREFORE, in consideration of the premises and covenants contained herein
and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties agree as follows:
1. Recitals.
The
recitals set forth above are incorporated by reference herein and made a part
hereof as if fully rewritten.
2.
Issuance
of Stock.
For and
in consideration of delivery of the release provided by TGH set forth in
Section 4
below
(the “TGH Release”), Company hereby agrees to issue to TGH a total of 2,000,000
shares of Common Stock (the “Shares”) on January 15, 2008 (which amount of
shares shall be equitably adjusted to account for any forward or reverse
splits
of Common Stock between the date hereof and the date of issuance of the Common
Stock). TGH acknowledges that:
(a) all
Shares of Common Stock to be issued to TGH in connection with the Release are
for investment purposes only, without a view toward resale;
(b) TGH
is an
“accredited investor” as that term is defined under Rule 501 promulgated under
the Securities act of 1933, as amended;
(c) TGH
acknowledges that the Shares to be issued for the Release hereunder are subject
to a high degree of risk and TGH has been afforded and opportunity to ask
questions of Company and receive answers to his satisfaction;
(d) all
Shares to be issued to TGH hereunder shall be unregistered and subject to
restrictions on resale under the Securities Act, as well as a restrictive
legend
shall appear on the certificates for such Shares prohibiting transfer absent
registration or resale pursuant to an appropriate exemption from
registration;
(e) None
of
the Shares shall be issued to TGH prior to January 15, 2008 and TGH shall have
no rights as a shareholder with respect to the Shares before they are issued
to
him.
Company
acknowledges that the Board of Directors of Company has authorized its CEO
to
finalize and execute this Agreement and no consent of any person or governmental
authority is required for the execution, delivery and performance of this
Agreement, and all shares of Common Stock issued pursuant to this Agreement
when
issued will be duly and validly issued, fully paid and
nonassessable.
3. Warrant
Cancellation and Cashless Rights.
Simultaneous with the execution hereof, TGH and Company hereby
agree:
(a) that
562,375 shares of Common Stock subject to the CP 11/24 $0.45 Warrants and
437,625 shares of Common Stock subject to the CP 11/30 $0.45 Warrants are hereby
cancelled (leaving 124,019 shares exercisable thereunder; and
(b)
effective as of the date first set forth above, 1,000,000 of the 1,500,000
shares of Common Stock issuable with respect to the outstanding warrant
designated as the CP Bridge Loan Warrant set forth below shall be subject
to
cashless exercise rights in accordance with the alternative cashless exercise
rights set forth in said warrant, and the Company agrees to exchange the
warrant
designated as the CP Bridge Loan Warrant below for a new warrant that will
be
substantially identical to the old warrant except for the granting of the
cashless exercise rights so referenced. The cashless rights may be exercised
before any payment of cash is required. TGH and Company agree that no
consideration was paid for these cashless exercise rights other than surrender
of securities of the Company as set forth in Section 3(a) and that the holding
period for the new warrant may be tacked from the date of the original warrant
for the purposes of Rule 144.
As
a
result of the foregoing, the ownership of TGH following the execution of this
Agreement (the “TGH Ownership”) shall be as follows.
Class
of Warrant
|
Amount
Exercised
|
Amount
Cancelled
|
Amount
Remaining
|
||||||||||
CP
11/24 @ $0.45(1)
|
0
|
562,375
|
0
|
||||||||||
CP
11/30 @ $0.45(1)
|
0
|
437,625
|
124,019
|
||||||||||
CP
11/24 @ $0.65(1)
|
0
|
0
|
562,374
|
||||||||||
CP
11/30 @ $0.65(1)
|
0
|
0
|
561,644
|
||||||||||
CP
Bridge Loan Warrants(2)
|
0
|
0
|
1,500,000
|
||||||||||
GC
Warrants
|
0
|
0
|
500,000
|
||||||||||
2-Year
Warrants
|
0
|
0
|
756,411
|
||||||||||
20/20
Warrants
|
0
|
0
|
37,557
|
||||||||||
Employee
Option (at $0.70/share)(3)
|
0
|
0
|
1,800,000
|
||||||||||
Performance
Option (at $0.70/share)(3)
|
0
|
0
|
1,000,000
|
||||||||||
Common
Stock presently owned
|
N/A
|
N/A
|
2,248,037
|
||||||||||
Common
Stock to be issued under this Agreement
|
N/A
|
N/A
|
2,000,000
|
(1)
|
Concurrent
with the execution hereof, TGH agrees to tender either the original
Warrant with respect to the Warrant in question or a Lost Warrant
Affidavit.
|
(2)
|
A
counterpart copy of this Agreement shall serve as evidence that
the
referenced Warrant contains cashless exercise rights as to 1,000,000
of
the 1,500,000 shares subject to the
Warrant..
|
(3)
|
As
a result of the letter agreement dated May 17, 2007, all of these
options
are 100% vested and have an exercisable term of June 28,
2016.
|
2
4.
Release
by TGH.
TGH, on
behalf of himself, his heirs, Affiliates, successors and assigns (collectively,
the “TGH Releasors”), jointly and severally, for and in consideration of the
undertakings in Section 2
and the
following Section 5
and
other valuable consideration in hand paid, the receipt and sufficiency
of which
is hereby acknowledged, does hereby and by these presents, for anyone claiming
by or through or under any TGH Releasor, fully remise, release, acquit
and
forever discharge each of the Company Releasors (as defined in Section 5
hereinafter) and each of the Company Releasors’ respective agents,
xxxxxxxxx-xx-xxxx, xxxxx, xxxxxxx, successors, assigns, members, trustees,
employees, directors, officers and personal representatives, as well as
any
predecessor, successor, subsidiary or affiliated corporation or other entity,
jointly and severally, individually and collectively, the “Company Releasees”)
from and against (except as expressly noted in Section 6
below),
any and all liability, claims, costs and damages of any manner or nature
whatsoever from the beginning of time to the date hereof, including but
not
limited to any obligation with respect to physical or mental injuries or
damage,
any obligation to reimburse expenses, or any obligation under TGH’s employment
agreement or May 17, 2007 severance letter with the Company or entitlement
to
any severance payments of any nature whatsoever, all of which are hereby
deemed
terminated in all respects with no further obligations or liabilities thereunder
from any of the Company Releasees to any of the TGH Releasors provided
that
the
following are not released: (i) obligations under this Agreement, (ii)
stock,
warrants and options with respect to TGH Ownership and other attributes
of
ownership (iii) amounts currently outstanding under a convertible promissory
note (the “Promissory Note”) dated January 19, 2007 with a principal balance of
$504,273.95 plus accrued interest to date and through maturity and rights
of
conversion thereunder and (iv) any right to coverage under any insurance
policy,
directors and officers insurance policies, rights to indemnification and
advancement of expenses under any agreement, law, by-law, certificate or
articles or certificate of incorporation or similar document of the Company
or
any subsidiary.
5.
Release
by Company.
Company
on behalf of itself, and its respective agents, subsidiaries, estates,
executors, assigns, directors and officers (collectively, the “Company
Releasors”) jointly and severally, for and in consideration of the undertakings
of Section 4
and
other valuable consideration in hand paid, the receipt and sufficiency
of which
are hereby acknowledged, does hereby and by these presents, for anyone
claiming
by or through or under any Company Releasor, fully remise, release and
forever
discharge each of the TGH Releasors and each of the TGH Releasors’ respective
agents, xxxxxxxxx-xx-xxxx, xxxxx, xxxxxxx, successors, assigns, members,
trustees, employees, directors, officers and personal representatives,
as well
as any predecessor, successor, subsidiary or affiliated corporation or
other
entity, jointly and severally (individually and collectively, the “TGH
Releasees”) from and against any and all liabilities, claims, costs and damages
of any manner or nature whatsoever from the beginning of time to the date
hereof
(except as noted in Section 6
below),
including but not limited to any obligations under the Merger
Agreement.
6.
Ongoing
Obligations.
Notwithstanding anything to the contrary contained in this Release, the
obligations of the respective parties with respect to this Agreement (including,
but not limited to, the Company’s obligation to effect the actions set forth in
Sections 2
and 3
and
TGH’s obligation to effect the cancellations set forth in Section 3)
shall
remain in full force and effect and nothing contained herein shall be deemed
to
reduce, diminish or release any of the obligations contained in this Agreement.
In addition, TGH acknowledges that all obligations if any for the payment
of
income taxes or other taxes with respect to the issuance of Shares called
for in
Section 2 of this Agreement (the “Share Issuance”) shall be his obligation and
he agrees to indemnify and hold harmless the Company from and against any
taxes,
loss, costs, interest, penalties or other liability associated with the
Share
Issuance, including but not limited to the obligation to withhold any funds
associated with the Share Issuance or to pay any taxes, penalties or interest
associated with the issuance of the Shares (collectively, the “TGH Indemnity
Obligations”); the Company shall have the right to set off the amounts evidenced
by the TGH Indemnity Obligations against any monies that may be owing from
the
Company to TGH from time to time. The parties acknowledge that in 2008
the
Company will issue a Form 1099 to TGH for the 2,000,000 Shares showing
a value
of $0.15 per share for the Share Issuance, which price per share is the
same as
the price per share pursuant to the private offering it has made for Common
Stock ending at or about the time of this Agreement.
3
7.
Share
Transfers and Registration Rights; Promissory Note.
In the
event Company grants any investor registration rights or registers the shares
of
any investor following the date hereof Company shall also grant TGH “Pro Rata”
registration rights with respect to such registration. For purposes hereof,
the
“Pro Rata” rights of registration shall be the same proportionate number of
shares to be registered as to each “tranche” of securities representing the TGH
Ownership, to the extent that registration is effected on behalf of the holders
of that tranche of securities, and whereby TGH shall be permitted to register
that percentage of the tranche of securities as the amount of TGH Ownership
bears to the other holders of that tranche of securities with the registration
rights, subject to the understanding that the number of shares eligible for
registration will most likely be subject to limitations imposed by the SEC
under
Rule 415. Each “tranche” of securities of TGH Ownership would be the aggregate
number of outstanding securities from each tranche of issuance of securities
comprising the TGH Ownership (for instance there is presently approximately
$7,315,000 of outstanding convertible notes, of which TGH holds $504,273.95
of
original principal amount, or about 6.893% and which would be one tranche
of the
securities, and if 100,000 shares allocable to the convertible notes was
registered, then TGH’s share would be 6893 of those shares). The Company shall
promptly facilitate any share transfers, option exercises or warrant exercises.
The Company represents and warrants the Promissory Note is the legal, valid
and
binding obligation of the Company and is not subject to any defenses, set-off
or
counterclaim, except per the terms of Section 6 of this Agreement.
8. Miscellaneous.
(a) Survival.
All
representations, warranties and covenants of the parties contained in this
Agreement or made pursuant hereto, shall survive the date of execution of this
Agreement and remain in full force and effect, and shall survive the termination
or expiration of this Agreement.
(b) Counsel.
All
parties hereto have been represented by counsel, and no inference shall be
drawn
in favor of or against any party by virtue of the fact that such party’s counsel
was or was not the principal draftsman of this Agreement.
(c) Notices.
All
notices or other communications required or permitted under this Agreement
shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, postage prepaid or via
national courier, addressed as to the party entitled to notice at the address
set forth below:
If
to Company, to:
|
Capital
Growth Systems, Inc.
Attention: Xxxxxxx
X. Xxxxx
000
X. Xxxxxxx - Xxxxx 0000
Xxxxxxx,
XX 00000
Facsimile: (000)
000-0000
E-Mail: XXxxxx@xxxxxxxxxxxxxx.xxx
|
If
to TGH, to:
|
Xx.
Xxxxxx X. Xxxxxx
00
Xxxxxxx Xxxxx Xxxx
Xxxxx
Xxx, XX 00000
E-Mail: xxxxxxxxxxxxx@xxxxx.xxx
|
|
or
such other address as is subsequently provided by written notice
from such
party to the other parties.
|
4
(d) No
Assignment.
Except
as expressly noted below, this Agreement and the rights of the parties under
this Agreement may not be sold, assigned or otherwise transferred without the
prior written consent of the other party.
(e) Entire
Agreement.
This
Agreement, sets forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contemplated hereby, and supersedes
all
prior agreements, arrangements and understandings relating to the subject matter
hereof.
(f)
Applicable
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Illinois. Should any dispute arise under this Agreement, it shall
be
litigated in the state or federal courts situated in Xxxx County, Illinois,
to
which jurisdiction and venue all parties consent.
(g) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which, whether
photocopy, facsimile, e-mail in PDF format or ink, shall be deemed an original,
but all of which together shall constitute one instrument.
(h) Approval.
This
Agreement shall be binding upon the parties, their respective heirs, successors
and assigns, and each entity party represents and warrants that this Agreement
has been duly approved by proper corporate action.
(i) Remedies.
No
party hereunder shall be entitled to consequential damages as a result of the
breach by any other party of its obligations hereunder. Each party’s damages
shall be limited to actual damages as a result of the breach of any obligation
hereunder.
(j)
Specific
Performance.
In the
event of any breach or threatened breach of this Agreement in which the
aggrieved party desires to protect and enforce its rights by suit in equity
for
the specific performance of any term contained in this Agreement or for an
injunction against any breach of any such term or in aid of the exercise
of any
power to enforce such performance or to enforce any other legal or equitable
right of the enforcing party, that party may take any one or more of such
actions, and shall be paid all costs and expenses, including attorneys’ fees
incurred in connection with any such action or actions should it prevail
in such
action. Any suit to specifically enforce the terms of this Agreement shall
be
litigated in the state or federal courts located in Xxxx County,
Illinois.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
5
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first set forth above.
COMPANY:
|
TGH:
|
||
Capital
Growth Systems, Inc.
|
|||
Xxxxxx
X. Xxxxxx
|
|||
By:
|
|||
Xxxxxxx
X. Xxxxx
|
|||
Chief
Executive Officer
|
|
6