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 200 South Wacker 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:
 
 
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““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:

 
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“(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 200 South Wacker Street, Chicago, Illinois.”
 
(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:
 
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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.

 
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(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.

 
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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]

 
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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/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
GLOBAL CAPACITY GROUP, INC.
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
CENTREPATH, INC.
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
20/20 TECHNOLOGIES, INC.
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
20/20 TECHNOLOGIES I, LLC
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO

 
 

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NEXVU TECHNOLOGIES, LLC
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
CAPITAL GROWTH ACQUISITION, INC.
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
FNS 2007, INC.
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
VANCO DIRECT USA, LLC, t/b/k/a GLOBAL CAPACITY DIRECT, LLC
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO
       
MAGENTA NETLOGIC LIMITED
       
By:
/s/ Patrick Shutt
 
Name:
Patrick Shutt
 
Title:
CEO

 

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AGENT and REQUIRED LENDER:
 
ACF CGS, L.L.C.
     
By:
/s/ Eric Edidin
 
Name:
Eric Edidin
 
Title:
Authorized Representative

 
 

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