EXHIBIT 10.4
XXXXXXXXX ADVISORY SERVICES AGREEMENT
March 31, 2004
Capital Growth Systems, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxx, Chief Executive Officer
Dear Xxxxx:
This letter is intended to memorialize our understanding that Xxx
Xxxxxxxxx ("Advisor") has been retained as a financial advisor to Capital Growth
Systems, Inc. (the "Company") to perform such financial consulting services as
the Company may reasonably request. The term of the Advisory Services Agreement
("Agreement") shall extend through September 30, 2005, provided, however, that
either the Company or Advisor may terminate this Agreement prior to such date
and as of the end of any month upon no less than 30 days' prior written notice.
It is contemplated that Advisor will provide financial advisory
services to the Company in connection with the Company's (i) mergers and
acquisitions and due diligence in connection therewith; (ii) negotiations with
prospective target companies; (iii) consideration of merger contacts and market
positioning; (iv) analysis of strategic alternatives including possible
disposition of the Company; (v) strategy related to new product development and
marketing; (vi) capital market strategies for debt and equity financings; and
(vii) such other services as the Company may request from time to time. Advisor
will provide such financial advisory services to the Company on an as requested
basis by the Company, of which such service is not to exceed 10 hours per week,
noncumulative.
As consideration to Advisor for entering into this Agreement, the
Company will grant to Advisor or its designees, three year warrants with
cashless exercise rights, exercisable at $1.35 per share for 250,000 shares of
the Company's common stock.
The Company further agrees to reimburse Advisor for all reasonable
out-of-pocket expenses incurred in carrying out the terms of this Agreement,
including travel, telephone, facsimile, courier, computer time charges,
attorneys' fees and disbursements, and any sales, use or similar taxes. These
out-of-pocket expenses will be payable from time to time promptly upon invoicing
by Advisor to the Company. Any individual expense in excess of $500 shall be
pre-approved by the Company.
It is contemplated that from time to time the Company may request
Advisor to perform financial advisory services in addition to those provided
under this Agreement. Any fees which Advisor shall become entitled to receive
from the Company in connection with the performance of any such services shall
be set forth in a separate agreement between the Company and Advisor and shall
be in addition to the compensation provided herein. Neither the Company nor
Advisor, however, will have any obligation to enter into any separate agreement,
the terms and conditions of which must be negotiated between Advisor and the
Company. Nothing contained in the
Agreement shall preclude the Company from engaging any other person to provide
financial advisory or investment banking services to the Company; provided
however, that during the term of this Agreement and for a period of six months
thereafter, the Company shall give Advisor the irrevocable right of first
refusal to act as an advisor with respect to mergers and acquisitions, in
addition to being an advisor in regards to other services, provided that Advisor
offers such services on terms no less favorable than the Company can obtain
elsewhere. The Company shall give Advisor five business days to notify them of
their intention to match the terms and services or such right of first refusal
will expire. The Board shall have the sole right in determining whether
Advisor's terms and services are equal to those offered to the Company by other
persons.
In order to enable Advisor to render its services hereunder, the
Company agrees to provide Advisor, among other things, all reasonable
information requested or required by Advisor including, but not limited to,
information concerning historical and projected financial results and possible
and known litigious, environmental and other contingent liabilities. The Company
also agrees to make available to Advisor such representatives of the Company,
including, among others, directors, officers, employees, outside counsel and
independent certified public accountants, as Advisor may reasonably request. The
Company will promptly advise Advisor of any material changes in its business or
finances during the term of this Agreement. The Company represents that all
information made available to Advisor by the Company will be complete and
correct in all material respects and will not contain any untrue statements of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which such
statements are made. In rendering its services hereunder, Advisor will be using
and relying primarily on such information without independent verification
thereof or independent appraisal of any of the Company's assets. Advisor does
not assume responsibility for the accuracy or completeness of the information to
which reference is made hereto.
The services herein provided are to be rendered solely to the Company.
They are not being rendered by Advisor as an agent or as a fiduciary of the
shareholders of the Company and Advisor shall not have any liability or
obligation with respect to its services hereunder to such shareholders or any
other person, firm or corporation.
The Company and Advisor hereby agrees to the terms and conditions of
the Indemnification Agreement attached hereto as Appendix A with the same force
and effect as if such terms and conditions were set forth at length herein.
This Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be terminated or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties hereto or except as
otherwise provided herein. This Agreement shall be binding upon and inure to the
benefit of any successors and assigns of the Company and Advisor.
The parties acknowledge that this Agreement has been prepared by
Xxxxxxx & Xxxxxxxx Ltd ("S&F") solely in its capacity as counsel for the
Company. S&F has advised all parties that it has served as counsel for Xxx
Xxxxxxxxx and affiliates in the past and may in the future with
respect to matters unrelated to the Company, and has advised Xxx Xxxxxxxxx to
retain independent counsel with respect to the subject matter of this Agreement.
All parties consent to S&F's continued representation of the Company and
acknowledge having been advised of the potential conflicts of interest due to
its representation of Xxx Xxxxxxxxx and affiliates on other maters.
This Agreement shall be governed by and construed to be in accordance
with the laws of the State of Illinois applicable to contracts made and to be
performed solely in such State by citizens thereof. Any dispute arising out of
this Agreement shall be adjudicated in the courts of the State of Illinois or in
the federal courts sitting in the Northern District of Illinois and the Company
hereby agrees that service of process upon it by registered or certified mail at
its address set forth above shall be deemed adequate and lawful. The parties
hereto shall deliver notices to each other by personal delivery or by registered
or certified mail (return receipt requested) at the addresses set forth above.
This Agreement may be signed in any number of counterparts, each of
which shall be deemed and original, and all of which shall constitute one and
the same agreement.
ACKNOWLEDGED AND AGREED to this 31st day of March, 2004.
CAPITAL GROWTH SYSTEMS, INC.
_______________________________
XXX XXXXXXXXX
By:___________________________________
Its:__________________________________
EXHIBIT A
INDEMNIFICATION AGREEMENT
Exhibit A to this Advisory Services Agreement (the "Agreement") dated
March 31, 2004 by and between Capital Growth Systems, Inc. (the "Company") and
Xxx Xxxxxxxxx ("Advisor").
The Company agrees to indemnify and hold Advisor and its affiliates,
control persons, directors, officers, advisors, representatives, employees and
agents (each an "Indemnified Person") harmless from and against all losses,
claims, damages, liabilities, costs or expenses, including those resulting from
any threatened or pending investigation, action, proceeding or dispute, whether
or not Advisor or any such other Indemnified Person is a party to such
investigation, action, proceeding or dispute, arising out of Advisor's entering
into or performing services under this Agreement, or arising out of any matter
including, without limitation, any material misstatement or omission of a
material fact in any information provided to Advisor or any prospective investor
referred to in this Agreement. This indemnity shall also include Advisor and/or
any such other Indemnified Person's reasonable attorneys' and accountants' fees
and out-of-pocket expenses incurred in connection with such investigation,
actions, proceedings or disputes, which fees and expenses shall be periodically
reimbursed to Advisor and/or to any such other Indemnified Person as they are
incurred; provided, however, that the indemnity set forth herein shall not apply
where a court of competent jurisdiction has made a final determination that
Advisor acted in a negligent manner or engaged in gross misconduct in the
performance of its services hereunder which gave rise to the loss, claim,
damage, liability, cost or expense sought to be recovered hereunder (but pending
any such final determination, the indemnification and reimbursement provisions
herein above set forth shall apply and the Company shall perform its obligations
hereunder or reimburse Advisor and/or such other Indemnified Person periodically
for its, his or their fees and expenses as they are incurred). The Company also
agrees that neither Advisor nor any Indemnified Person shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for, or in connection with, any act or omission to act by Advisor as a result of
its engagement under this Agreement, except for any such liability for losses,
claims, damages, liabilities or expenses incurred that is found in a final
determination by a court of competent jurisdiction to have resulted from
Advisor's negligence or misconduct.
If for any reason the foregoing indemnification is unavailable to
Advisor or any such other Indemnified Person or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable by
Advisor or any such other Indemnified Person as a result of such loss, claim,
damage, liability, cost or expense in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the one hand,
but also the relative fault of the Company and Advisor or any such other
Indemnified Person, on the other hand, as well as any relevant equitable
considerations; provided that in no event will the aggregate contribution by
Advisor and any such other Indemnified Person hereunder exceed the amount of
fees actually received by Advisor pursuant to this Agreement. The reimbursement,
indemnity and contribution obligations of the Company herein above set forth
shall be in addition to any liability which the Company may otherwise have and
these obligations and the other provisions hereinabove set forth shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, Advisor and any other Indemnified
Person.
The terms and conditions herein above set forth in this Exhibit A shall
survive the termination or expiration of this Agreement and shall continue
indefinitely thereafter.
ACKNOWLEDGED AND AGREED to this 31st day of March, 2004.
CAPITAL GROWTH SYSTEMS, INC.
_______________________________
XXX XXXXXXXXX
By:_________________________
Its:________________________
