SECOND AMENDMENT AND WAIVER
EXHIBIT
10.2
SECOND
AMENDMENT AND WAIVER
THIS
SECOND AMENDMENT AND WAIVER, dated as of July 31, 2009 (this “Second Amendment”),
is entered into by and among (the “Agreement”), with
respect to the Term Loan and Security Agreement dated as of November 19, 2008,
by and among CAPITAL GROWTH SYSTEMS, INC., d/b/a Global Capacity, a Florida
corporation (“Parent”), GLOBAL
CAPACITY GROUP, INC., a Texas corporation (“GCG”), CENTREPATH,
INC., a Delaware corporation (“Centrepath”), 20/20
TECHNOLOGIES, INC., a Delaware corporation (“20/20 Inc.”), 20/20
TECHNOLOGIES I, LLC, a Delaware limited liability company (“20/20 LLC”), NEXVU
TECHNOLOGIES, LLC, a Delaware limited liability company (“Nexvu”), CAPITAL
GROWTH ACQUISITION, INC., a Delaware corporation (“CG Acquisition”), FNS
2007, INC., a Delaware corporation (“FNS”), GLOBAL
CAPACITY DIRECT, LLC f/k/a VANCO DIRECT USA, LLC (“GCD”), and MAGENTA
NETLOGIC LIMITED, a company incorporated under the laws of England and Wales
(“Magenta”;
Parent, GCG, Centrepath, 20/20 Inc., 20/20 LLC, Nexvu, CG Acquisition, FNS, GCD
and Magenta each individually as a “Borrower” and
collectively as the “Borrowers”), ACF CGS,
L.L.C., a Delaware limited liability company (“Agent”), as Agent and
the lenders party thereto (as amended, modified and/or restated from time to
time, the “Loan
Agreement”; all capitalized terms used and not otherwise defined herein
shall have their respective meanings as set forth in the Loan
Agreement).
WITNESSETH:
WHEREAS,
pursuant to (i) that certain Waiver and Notification dated February 18, 2009, by
and among Borrowers and Agent (the “First Waiver”), (ii)
that certain Waiver and Notification dated April 13, 2009, by and among
Borrowers and Agent (the “Second Waiver” and,
together with the First Waiver, collectively, the “Waiver Agreements”),
Agent agreed, under certain conditions, to waive certain existing Defaults
identified therein; and
WHEREAS, due to the passage of time and
failure to occur of certain conditions, the effectiveness of the waivers of the
Defaults identified in the Waiver Agreements have expired and such waivers are
no longer of any force and effect; and
WHEREAS, Borrowers and Agent executed
that certain First Amendment, Waiver, Extension and Consent dated April 23, 2009
(the “First
Amendment”), which First Amendment and the waivers of Defaults identified
therein failed to become effective due to the failure of the Borrowers to meet
certain conditions precedent contained therein; and
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=
WHEREAS, as a result of the expiration
of the waivers of Defaults contained in the Waiver Agreements and the
non-effectiveness of the First Amendment, as well as the occurrence of
additional Defaults, Defaults exist under Section 13 of the
Loan Agreement as a result of the (i) Borrowers’ noncompliance with the
covenants set forth in (v) Item 19(a) of the
Addendum (Fixed Charge Coverage Ratio) for the five months ending March
31, 2009, the six months ending April 30, 2009 and the seven months ending May
31, 2009; (w) Item
19(b) of the Addendum (Leverage Ratio) for the five months ending March
31, 2009, the six months ending April 30, 2009 and the seven months ending May
31, 2009; (x) Item
19(c) of the Addendum (Monthly Recurring Circuit Revenue) for the months
ending March 31, 2009, April 30, 2009, and May 31, 2009; (y) Item 19(d) of the
Addendum (Monthly Recurring Circuit Margin) for the months ending March
31, 2009, April 30, 2009, and May 31, 2009; and (z) Item 19(e) of the Addendum
(Cash Balances) as of the end of May 31, 2009, as well as any
noncompliance that has occurred or may occur with respect to the covenants
referenced in Items 19(a), (b), (c), (d) and (e) above for the month of June of
2009; (ii) failure of the Borrowers to deliver annual financial statements
required under Section
9(a) of the Loan Agreement by April 15, 2009 or failure to timely deliver
any of the other reports required under Section 9 of the Loan
Agreement through the date hereof, (iii) failure of Parent to increase its
authorized shares by 12,000,000 on or before the 75th day following the
Agreement Date; (iv) the failure of Parent to deliver a landlord waiver (the
“Landlord
Waiver”), in form and substance reasonably satisfactory to Agent, duly
executed by Vanco US, LLC, Orbitz, LLC (the “Sublessor”), Neustar,
Inc. and 000 Xxxxx Xxxxxx Property, LLC, as applicable; (v) failure of Parent to
deliver prompt notification of all settlements of accounts receivable as
required under Section
7(a) of the Loan Agreement; (vi) failure of the Parent to remain current
with respect to its periodic filings as required under the Securities &
Exchange Act (Form 10-K for year ended December 31, 2008 and Form 10-Q for 3
months ended March 31, 2009 and June 30, 2009) or to maintain its continued
eligibility for trading of stock on the Over the Counter Bulletin Board, as
required under Lender’s form of warrant; (vii) any default by any of Borrowers
with respect to any of the Debenture Documents, including but not limited to
failure to meet any of the “Equity Conditions,” as those terms are defined in
the Debenture Documents, failure to maintain eligibility for resale of shares of
Parent under Rule 144, failure to effect the items referenced in subparagraph
(vi) immediately above, failure to hold a shareholder meeting for the
authorization of an increase in Parent’s authorized common stock and failure to
maintain minimum trading volumes in the trading of Parent’s common stock; and
(viii) failure of Borrowers to timely pay or have the ability to pay all or any
of their accounts payable when due (collectively, the “Specified Defaults”);
and
WHEREAS,
the Borrowers have requested that the Agent amend certain terms and conditions
of the Loan Agreement and permanently waive the Specified Defaults;
and
NOW,
THEREFORE, in consideration of the premises and the representations, warranties
and covenants set forth herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
1. Existing
Definitions. All capitalized terms used and not otherwise
defined herein shall have their respective meanings as set forth in the Loan
Agreement.
2. Amendments.
(a) The
defined term “Annualized EBITDA” set forth in Section 1 of the loan Agreement is
hereby deleted in its entirety.
(b) Each
of the following definitions: “Applicable Margin”, “Applicable Rate”, “BT
Receivable Payment”, “Debenture Intercreditor Agreement”, “Debenture Purchase
Agreements”, and “EBITDA” set forth in Section 1 of the Loan
Agreement are hereby amended to recite respectively as follows:
2
““Applicable Margin”
means 14%.”
““Applicable Rate”
means the rate of interest to be paid on the unpaid principal amount of the Term
Note from and after the Agreement Date being a rate per annum equal to the sum
of (i) the Prime Rate, plus (ii) the Applicable Margin, of which the Basic
Interest amount shall be paid in cash, and the amount in excess of the Basic
Interest shall be capitalized, compounded monthly and added to the unpaid
principal amount of the Term Note (whereupon from and after such date such
additional amounts shall also accrue interest) (such excess above the Basic
Interest component to be paid in cash being “PIK Interest”).”
““BT Receivable
Payment” means any cash received by a Borrower with respect to the BT
Receivable, including but not limited to any cash, proceeds or other amount
received in connection with any litigation or settlement with respect to the BT
Receivable, and further including, without limitation, all rights of the
Borrowers in any judgment or award obtained in connection with litigation
relative to the BT Receivable.”
““Debenture Intercreditor
Agreement” means each of: (i) that certain Debt Subordination and
Intercreditor Agreement dated on or about the Agreement Date among Agent, for
the benefit of the Agent and the Lenders, and the Debenture Purchasers party
thereto, (ii) the July Purchasers Intercreditor Agreement, and (iii) the VPP
Purchasers Intercreditor Agreement.”
““Debenture Purchase
Agreements” mean each of: (i) that certain Securities Purchase Agreement,
dated March 11, 2008, among the Parent and the Debenture Purchasers party
thererto; (ii) that certain Note Purchase Agreement dated as of
September 25, 2008, between Parent and Aequitas Catalyst Fund, LLC –Series B;
(iii) that certain Securities Purchase Agreement dated on or about the Agreement
Date among Parent and the Debenture Purchasers party thereto; (iv) the Interest
Purchase Agreement to the extent the same provides for the issuance of a
debenture to the Administrator in the original principal amount of $4,000,000;
(v) the July Subordinated Debenture Agreement; and (vi) the VPP Subordinated
Debenture Agreement, including any amendments, modifications, restatements or
supplements from time to time with respect to clauses (i) through (vi)
above.”
““EBITDA” means for
Borrowers on a consolidated basis, net income (excluding non-recurring gains and
extraordinary gains) before provision for (a) interest expense, (b) taxes, (c)
depreciation, (d) amortization, (e) financing and transaction fees relating to
the initial closing of this Agreement and the Acquisition, (f) non-recurring
expenses and transaction fees related to restructuring approved by Agent in its
sole discretion (including, but not limited to lease termination payments and
employment termination costs) not to exceed $75,000 in the
aggregate, determined in accordance with GAAP, and excluding, in any
event, any non-cash impact on income or loss from application of variable
accounting rules or requirements, and any expenses associated with original
issue discounts and Stock based compensation.”
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(c) Each
of the following definitions of “Basic Interest”, “July Debenture Purchasers”,
“July Purchasers Intercreditor Agreement”, “July Subordinated Debenture
Agreement”, “Second Amendment Date”, “VPP Purchasers”, ”VPP Purchasers
Intercreditor Agreement”, “VPP Subordinated Debenture Purchase Agreement”, and
“Vendor Payment Plan Budget” is hereby added to Section 1 of the Loan
Agreement in the correct alphabetical order:
““Basic Interest” means
the component of the Applicable Rate hereunder comprised of the Prime Rate plus
9%; this is the component of interest of the Term Loan which is payable monthly,
in cash.”
““July Debenture
Purchasers” means the Purchasers under and as defined in the July
Subordinated Purchase Agreement and any successor holders of Debenture
Indebtedness permitted under the July Purchasers Intercreditor
Agreement.”
““July Purchasers
Intercreditor Agreement” means that certain Debt Subordination and
Intercreditor Agreement dated on or about July __, 2009, among Agent, for the
benefit of the Agent and the Lenders, and the July Debenture Purchasers party
thereto, including any amendments, modifications, restatements or supplements
from time to time with respect thereto.”
“July Subordinated Debenture
Agreement” means that certain Securities Purchase Agreement dated on or
about July __, 2009, among the Parent and the July Debenture Purchasers party
thereto, including any amendments, modifications, restatements or supplements
from time to time.”
“Second Amendment
Date” means July [__], 2009.
““VPP Debenture
Purchasers” means the Purchasers under and as defined in the VPP
Subordinated Purchase Agreement and any successor holders of Debenture
Indebtedness permitted under the VPP Purchasers Intercreditor
Agreement.”
““VPP Purchasers Intercreditor
Agreement” means that certain Debt Subordination and Intercreditor
Agreement dated on or about July __, 2009 among Agent, for the benefit of the
Agent and the Lenders, and the VPP Debenture Purchasers party thereto, including
any amendments, modifications, restatements or supplements from time to time
with respect thereto.”
“VPP Subordinated Debenture
Agreement” means that certain Securities Purchase Agreement dated on or
about July __, 2009 among the Parent and the VPP Debenture Purchasers party
thereto, including any amendments, modifications, restatements or supplements
from time to time.”
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““Vendor Payment Plan
Budget” means that certain proposed vendor payment plan attached hereto
as Exhibit F
describing payments to be made to certain of Borrower’s vendors between July 23,
2009 and September 18, 2009, as updated from time to time pursuant to Section
9(i)(ii).”
(d)
Section
2(c)(iv) of the Loan Agreement is hereby amended by deleting the figure
“sixty-six percent (66%)” and substituting therefor “seventy-five percent
(75%)”.
(e) Section 2(c)(v) of
the Loan Agreement is hereby amended by deleting such section in its entirety
and replacing it with the following:
“(v) Within
ten (10) days following delivery to Agent and the Lenders of Borrowers’ monthly
financial statements pursuant to Section 9(a) for each fiscal
quarter end (commencing with the delivery to Agent and Lenders of the financial
statements for the fiscal quarter end December 31, 2009) or, if such financial
statements are not delivered to Agent and the Lenders on the date such
statements are required to be delivered pursuant to Section 9(a), ten (10) days
after the date such statements are required to be delivered to Agent and the
Lenders pursuant to Section
9(a), Borrowers shall prepay the outstanding principal amount of the
Obligations in an amount equal to 50% of the Excess Cash Flow of the Borrowers
for such fiscal quarter. If the information in the Borrowers’ audited
financial statements delivered pursuant to Section 9(a) for such
immediately preceding fiscal quarter proves to be incorrect such that the
Borrowers have overpaid the Excess
Cash Flow payment referred to herein, then the Agent shall credit such
overpayment to any interest then due and payable, if any, or the Borrowers’ next
scheduled payment of interest if no interest is then due and
payable. If the information in the Borrowers’ audited financial
statements delivered pursuant to Section 9(a) for such fiscal
quarter end proves to be incorrect such that the Borrowers have underpaid the Excess
Cash Flow payment referred to herein, then the amount of such underpayment shall
be immediately due and payable in cash to the Agent for application to any
outstanding Obligations. A payment hereunder shall not constitute a
prepayment for purposes of any fees payable under Item 5 of
the Addendum.”
(f) Section 2 of the Loan
Agreement is hereby amended by the addition of the following subsection sections
(vi) and (vii):
“(vi) Agent
acknowledges that Borrowers have paid to the Agent the sum of $1,000,000 (the
“Conditional Principal
Paydown”), to be held by Agent and applied as a principal pay down of the
Term Loan on August 31, 2009 in the event that, as of such date, the sum of (i)
the amount of collections by the Parent of Non-recurring Receipts (as such term
is defined in the July Subordinated Debenture Agreement as in effect on the
Second Amendment Date), plus (ii) the amount Parent receives via wire transfer
or a certified check, in immediately available funds equal to the cash proceeds
actually received on account of the Second Tranche Subscription Amount (as such
term is defined in the July Subordinated Debenture Agreement as in effect on the
Second Amendment Date), is less than $2,000,000. In the event that as
of August 31, 2009 the sum of clauses (i) and (ii) is greater than or equal to
$2,000,000, the Agent agrees to promptly return to Borrowers the amount of the
Conditional Principal Paydown.”
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(g) Section 2(f) of the
Loan Agreement is hereby amended by deleting such section in its entirety and
replacing it with the following:
“Repayment
and Amortization of Term Loan. The outstanding principal
balance of the Term Loan shall be paid as follows:
(i) Commencing
with the month ending January 31, 2010 and continuing through the Termination
Date as provided for in Item 3 of
the Addendum, the Borrowers shall repay the principal balance of the Term
Loan on each date and in the amount as set forth on the attached
Exhibit
E;
(ii) The
entire outstanding principal balance of the Term Loan, together with all accrued
and unpaid interest and all other outstanding Obligations, shall be due and
payable on the Termination Date as provided for in Item 3 of
the Addendum, unless sooner due as a result of acceleration or demand
hereunder; and
(iii) Borrowers
shall make each payment required hereunder or under any other Loan Document
without setoff, deduction or counterclaim. All payments by Borrowers
shall be made to Agent’s for the account of the Lenders or as
otherwise directed by the Agent in writing from time to time and shall be made
in immediately available funds, no later than 2:00 p.m. (New York City
time) on the date specified herein. Any payment received by Agent (or
such Person to whom the Agent has directed payment) later than 2:00 p.m.
(New York City time), shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day.”
(h) Section 8(g) of the
Loan Agreement is hereby amended by deleting such section in its entirety and
replacing it with the following:
“(g) Capital
Expenditures. Borrowers shall not make or incur capital
expenditures in excess of the amount set forth for the period shown on Item 21
of the Addendum, determined for all Borrowers on a consolidated
basis.”
(i) Section 9(e) of the
Loan Agreement is hereby amended by deleting such section in its entirety and
replacing it with the following:
6
“(e) BT
Receivable. Borrowers will deliver to Agent, (A) promptly, and
in any case not later than (i) one (1) day following each receipt of a BT
Receivable Payment, and (ii) two (2) Business Days after the end of each month,
a reconciliation and report showing any amounts collected with respect to the BT
Receivable, the amount left uncollected and any issues, disputes and offsets
with respect to collection of the BT Receivable, (B) promptly, and in any case
not later than one (1) day after receipt or filing of the same, copies of all
pleadings hereafter filed in any litigation or other proceeding relative to the
BT Receivable by any party, and (C) upon request by the Agent, periodic updates
on the progress of any such litigation or proceeding (so long as such updates do
not violate any attorney-client privilege or any orders of the applicable
court), and such additional information with respect to the foregoing as
requested by Agent.”
(j) Section 9 of the Loan
Agreement is hereby amended by the addition of the following subsection section
(h):
“(h) Retention
of Consultant. The
Borrowers agree that, until notification by the Agent to the contrary
(which notification may be given or not given in Agent’s sole
discretion), they shall continue to employ at their sole cost and expense
Sherwood Strategic Consulting, LLC or another consultant with experience in
turnaround situations in the telecommunications industry reasonably acceptable
to the Agent and the Required Lenders (the “Consultant”). The
terms, conditions, scope and duration of the Borrowers’ engagement of the
Consultant shall continue to be reasonably acceptable to the Agent and the
Required Lenders, provided that except as noted in the following sentence, at a
minimum, the Consultant shall be engaged to (i) evaluate the Borrowers’ revised
2009-2010 monthly budget and provide recommendations as to how to maximize
profitability, (ii) assist the Borrowers in their weekly preparation of the
rolling 13-week cash flow forecast, (iii) assess the Borrowers’ procedures
relating to compliance of the financial reporting obligations contained in the
Loan Agreement and provide recommendations on improving compliance, and (iv)
assist the Borrowers in designing and implementing the Vendor Payment Plan
Budget (as hereinafter defined). Provided that as of October
31, 2009 and for each reporting period thereafter, if the Borrowers have met the
financial covenants contained in Item 19 of the
Addendum and have complied with all reporting requirements hereunder for
the immediately preceding month, then the Borrowers need not retain the
Consultant to provide services more than one day per month, and, provided
further, that to the extent that Sherwood Strategic Consulting, LLC shall
increase its hourly rates in excess of $250, $200 and/or $175 per hour,
depending upon the individuals in question, then Borrower may retain an
alternative Consultant reasonably acceptable to Agent.”
(k) Section 9 of the Loan
Agreement is hereby amended by the addition of the following subsection section
(i):
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“(i) Additional
Reporting. Borrowers shall
deliver to Agent, (i) no later than the second Business Day of each calendar
week, (a) an update to the Borrowers’ 13-week rolling cash flow projection
(including actual cash balance for the week then ended, receipts by Borrower,
disbursements above $50,000, variance analysis for the previous week, and
comments on revisions to prior forecasts) for the Borrowers, and (b) commencing
with the report due on August 4, 2009, an update of accounts payable
disbursements relating to the Vendor Payment Plan Budget for the prior two week
period, (ii) no later than each of September 15, 2009, November 10, 2009 and
January 5, 2010, the Borrowers shall provide an updated Vendor Payment Plan
Budget describing payments for the next 8 week period, all in form and substance
satisfactory to Agent, and (iii) no later than October 31, 2009 (a) annual
financial statements required under Section 9(a) of the
Loan Agreement for the fiscal year ended December 31, 2008, and (b) a landlord
waiver in form and substance reasonably satisfactory to Agent for the Borrowers’
office space located at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx.”
(l) Item 9 of the
Addendum (Existing Debt and Guarantees) of the Loan Agreement is hereby
amended by deleting such section in its entirety and replacing it with the
following:
“The
Debenture Indebtedness is comprised of the following components: (i) Amended and
Restated March Debentures in the principal amount of $21,920,000, representing
$16,000,000 in original principal amount of the March Debentures that had been
exchanged for the Amended and Restated March Debentures, plus an add on amount
of $4,000,000 (equal to 25% of the original principal amount thereof), plus a
liquidated damages add on amount in the amount of 12% of the original principal
thereof (an additional $1,920,000) as of November 19, 2008 (as reduced to the
extent of conversions to equity through the date of the Second Amendment to this
Agreement); (ii) two affiliated holders of the original March Debentures held
approximately $2,459,160 of debentures at November 19, 2008 (reduced from the
original principal amount of $3,000,000 and further reduced by an approximately
$950,000 payment at November 19, 2008 and further reduced through conversions to
equity through the date of the Second Amendment to this Agreement); (iii)
additional debentures in the amount of up to $10,500,000 will be issued to the
holders of the debentures and up to $4,125,000 will be issued to the holders of
debentures described in clauses (e) and (f) respectively, of the definition of
“Debenture Purchase Agreements” set forth herein (the principal amounts of the
debentures described in such clause (e) will be grossed up by 65% in lieu of any
future accrual of interest); (iv) the Administrator will receive up to
$4,000,000 in debentures to be issued to it as a deferred purchase payment
pursuant to the Interest Purchase Agreement; and (v) debentures in the original
principal amount of 14,891,250 (including gross up of 65% to account for OID
factor) issued to the Debenture Purchasers party thereto as further described in
clause (c) of the definition of Debenture Purchase Agreements.”
(m) Item 19 of the
Addendum (Financial Covenants) of the Loan Agreement is hereby amended by
deleting such section in its entirety and replacing it with the
following:
“(a)
Borrowers
shall achieve on a consolidated basis, EBITDA of at least the amount set forth
below for the applicable indicated:
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|
Period
|
Applicable
Amount
|
|||
|
For
the three months then ended on October 31, 2009
|
$ | 300,000 | ||
|
For
the three months then ended on November 30, 2009
|
$ | 300,000 | ||
|
For
the three months then ended on December 31, 2009
|
$ | 300,000 | ||
|
For
the three months then ended on January 31, 2010
|
$ | 500,000 | ||
|
For
the three months then ended on February 28, 2010
|
$ | 900,000 | ||
|
For
the three months then ended on March 31, 2010
|
$ | 1,300,000 | ||
|
For
the three months then ended on April 30, 2010
|
$ | 1,350,000 | ||
|
For
the three months then ended on May 31, 2010
|
$ | 1,400,000 | ||
|
For
the three months then ended on June 30, 2010
|
$ | 1,450,000 | ||
|
For
the three months then ended on July 31, 2010
|
$ | 1,500,000 | ||
|
For
the three months then ended on August 31, 2010
|
$ | 1,550,000 | ||
|
For
the three months then ended on September 30, 2010
|
$ | 1,600,000 | ||
|
For
the three months then ended on October 31, 2010
|
$ | 1,650,000 | ||
(b) Borrowers
shall achieve, on a consolidated basis, Monthly Recurring Circuit Revenue of at
least the amount set forth below for the applicable indicated:
|
Period
|
Monthly Recurring
Circuit Revenue
|
|||
|
For
the month ending August 31, 2009
|
$ | 4,100,000 | ||
|
For
the month ending September 30, 2009
|
$ | 4,300,000 | ||
|
For
the month ending October 31, 2009
|
$ | 4,300,000 | ||
|
For
the month ending November 30, 2009
|
$ | 4,500,000 | ||
|
For
the month ending December 31, 2009
|
$ | 4,500,000 | ||
|
For
the month ending January 31, 2010
|
$ | 4,700,000 | ||
|
For
the month ending February 28, 2010
|
$ | 4,700,000 | ||
|
For
the month ending March 31, 2010
|
$ | 4,700,000 | ||
|
For
the month ending April 30, 2010 and each month thereafter
|
$ | 5,000,000 | ||
(c) Borrowers
shall achieve, on a consolidated basis, Monthly Recurring Circuit Margin of at
least the amount set forth below for the applicable period:
|
Period
|
Monthly Recurring
Circuit Margin
|
|||
|
For
the month ending August 31, 2009
|
$ | 900,000 | ||
|
For
the month ending September 30, 2009
|
$ | 950,000 | ||
|
For
the month ending October 31, 2009
|
$ | 950,000 | ||
|
For
the month ending November 30, 2009
|
$ | 1,000,000 | ||
|
For
the month ending December 31, 2009
|
$ | 1,000,000 | ||
|
For
the month ending January 31, 2010
|
$ | 1,000,000 | ||
|
For
the month ending February 28, 2010
|
$ | 1,000,000 | ||
|
For
the month ending March 31, 2010
|
$ | 1,000,000 | ||
|
For
the month ending April 30, 2010
|
$ | 1,100,000 | ||
|
For
the month ending May 31, 2010
|
$ | 1,100,000 | ||
|
For
the month ending June 30, 2010
|
$ | 1,100,000 | ||
|
For
the month ending July 31, 2010 and each month thereafter
|
$ | 1,200,000 | ||
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(d) At
all times, Borrowers shall have a Cash Balance (net of outstanding checks) in an
amount not less than the amount set forth below for the applicable
period:
|
Period
|
Cash Balance
|
|||
|
For
the month ending August 31, 2009
|
$ | 1,000,000 | ||
|
For
the month ending September 30, 2009
|
$ | 1,000,000 | ||
|
For
the month ending October 31, 2009
|
$ | 1,000,000 | ||
|
For
the month ending November 30, 2009
|
$ | 1,000,000 | ||
|
For
the month ending December 31, 2009
|
$ | 1,000,000 | ||
|
For
the month ending January 31, 2010 and each month
thereafter
|
$ | 1,500,000 | ||
(e) Borrowers
shall not deviate by more than 15.0% on a cumulative basis for the prior two (2)
week period, tested on a weekly basis (in accordance with Section 9(i)(i)(b))
above or below (i) the “Vendor Disbursements” line item set forth in the Vendor
Payment Plan Budget, or (ii) each individual disbursement line item comprising
the “Vendor Disbursements” line item set forth in the Vendor Payment Plan
Budget. Notwithstanding the foregoing, any deviation may be approved
by the Agent in writing in its sole discretion. The Borrowers may
prospectively update the Vendor Payment Plan Budget with respect to payments to
be made two (2) weeks from delivery of notice of such update to
Agent. With respect to such updates, in computing the 15.0%
deviation, the Borrowers (subject to the Agent’s approval in its reasonable
discretion), shall be permitted to exclude all direct costs associated with the
arrangement for “New Contracted Business,” including but not limited to any
costs associated with equipment purchases or rentals for handling such business,
payments or deposits to carriers or other as a condition to the procurement of
the necessary circuits, costs of software or software customization to
accommodate the business, associated vendor and supplier costs to support the
business and any third party commissions or fees paid in connection with the
procurement of the same. For purposes hereof, “New Contracted
Business” shall mean: (i) any new customer circuit business, exclusive of
replacement of existing circuits; and (ii) any other new business generated by
the Company or any of its subsidiaries which is incremental to existing business
in place for the immediately preceding calendar quarter.
(o) Item 21 of the
Addendum (Permitted Capital Expenditures) of the Loan Agreement is hereby
amended by deleting such section in its entirety and replacing it with the
following:
10
|
Period
|
Applicable Amount
|
|||
|
For
the period beginning July 1, 2009 through December 31,
2009
|
$ | 100,000 | ||
|
For
the period beginning January 1, 2010 through June 30, 2010
|
$ | 500,000 | ||
|
For
the period beginning July 1, 2010 through the Termination
Date.
|
$ | 1,000,000 | ||
3. Waiver. The
Required Lenders hereby agree to waive the Specified Defaults.
4. Conditions Precedent to
Effectiveness. The effectiveness of this Second Amendment is subject to
the satisfaction of the following conditions precedent (all documents to be in
form and substance satisfactory to Agent and Agent’s counsel):
(a) Agent
shall have received this Second Amendment properly executed by the
Borrowers;
(b) Borrowers
shall have paid to Agent any and all expenses, including reasonable counsel fees
and disbursements, incurred by Agent in connection with the preparation and
execution of this Second Amendment and all documents, instruments and agreements
contemplated hereby;
(c) Borrowers
shall have consummated all the transactions contemplated thereby, and executed
and delivered copies of all (i) documents relating to the Debenture Indebtedness
described in clause (v) of Item 9 of the
Addendum (and received at least $3,500,000 in net proceeds (before
collateral agent fees and other transaction expenses) as a result thereof) and
(ii) documents relating to the amendments of the Debenture Indebtedness
described in clauses (iii) of Item 9 of the
Addendum.
(d) Agent
shall have received all other documents, information and reports required or
requested to be executed and/or delivered by Borrowers under any provision of
this Agreement or any of the Loan Documents.
5. Representations and
Warranties.
(a) As
of the date of this Amendment, each of the representations and warranties
contained herein and in each of the Loan Documents is true, correct and complete
in all material respects to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and warranties
shall have been true, correct and complete in all material respects on and as of
such earlier date.
(b) Each
Borrower represents and warrants to Agent and each Lender, that after giving
effect to this Amendment, (i) no event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Second
Amendment that would constitute a Default, (ii) no consent or approval of, or
exemption by any Person is required to authorize, or is otherwise required in
connection with the execution and delivery of this Second Amendment which has
not been obtained and which remains in full force and effect, and (iii) no
material adverse change in the financial condition of the Borrowers has occurred
since the date of the most recent financial statements of the Borrowers
submitted to Agent.
11
(c) Each
Borrower represents and warrants to Agent and each Lender, that as of the date
of this Second Amendment: (i) the cash flow forecast delivered to Agent on July
23, 2009
is true, complete and correct and has not been amended modified or supplemented
in any respect, and (ii) the Vendor Payment Plan Budget delivered to Agent on
July 23, 2009 is true, complete and correct and has not been amended modified or
supplemented in any respect.
6. Security
Interests. Borrowers hereby confirm the security interests and
liens granted by Borrowers to Agent for the benefit of Lenders in and to the
Collateral in accordance with the Loan Agreement and other Loan Documents as
security for the Obligations.
7. Fees and
Expenses. Borrowers agree to pay any and all expenses,
including reasonable counsel fees and disbursements, incurred by Agent in
connection with the preparation and execution of this Second Amendment and all
documents, instruments and agreements contemplated hereby.
8. Effect. Except
as expressly provided for herein, no other amendments, waivers or modifications
to the Loan Agreement are intended or implied and all terms and conditions of
the Loan Agreement, and any and all Exhibits and Addendums annexed thereto and
all other writings submitted by the Borrowers to the Agent pursuant thereto,
shall remain unchanged and in full force and effect
9. Governing
Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of New York (without giving effect to
principles of conflicts of laws).
10. Binding
Effect. This Second Amendment shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns.
11. Counterparts. This
Second Amendment may be executed in any number of counterparts, but all of such
counterparts when executed shall together constitute but one and the same
agreement. In making proof of this Second Amendment , it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
12
12. RELEASE. EACH
BORROWER, ON BEHALF OF ITSELF AND ON BEHALF OF ALL THOSE ENTITIES CLAIMING BY,
THROUGH, OR UNDER IT, TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, HEREBY
ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT,
CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE
OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE OBLIGATIONS OR TO
SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT OR
LENDERS. EACH BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND
FOREVER DISCHARGES AGENT AND LENDERS, THEIR PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED,
FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR
IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH SUCH BORROWER
MAY NOW OR HEREAFTER (WHETHER OR NOT PRESENTLY SUSPECTED, CONTEMPLATED OR
ANTICIPATED) HAVE AGAINST AGENT OR ANY LENDER, THEIR PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY TERM LOANS, INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST
IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND
REMEDIES UNDER THE LOAN AGREEMENT OR LOAN DOCUMENTS, AND NEGOTIATION FOR AND
EXECUTION OF THIS AMENDMENT.
[SIGNATURE
PAGES FOLLOW]
13
IN
WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be
executed as of the day and year first above written.
|
BORROWERS:
|
||
|
CAPITAL
GROWTH SYSTEMS, INC.
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
GLOBAL
CAPACITY GROUP, INC.
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
CENTREPATH,
INC.
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
20/20
TECHNOLOGIES, INC.
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
20/20
TECHNOLOGIES I, LLC
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
NEXVU
TECHNOLOGIES, LLC
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
CAPITAL
GROWTH ACQUISITION, INC.
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
FNS
2007, INC.
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
VANCO
DIRECT USA, LLC, t/b/k/a GLOBAL CAPACITY DIRECT, LLC
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
MAGENTA
NETLOGIC LIMITED
|
||
|
By:
|
/s/ Xxxxxxx Xxxxx
|
|
|
Name:
|
Xxxxxxx Xxxxx
|
|
|
Title:
|
CEO
|
|
|
AGENT
and REQUIRED LENDER:
|
||
|
ACF
CGS, L.L.C.
|
||
|
By:
|
/s/ Xxxx Xxxxxx
|
|
|
Name:
|
Xxxx Xxxxxx
|
|
|
Title:
|
Authorized
Representative
|
|
