EXHIBIT 10.2
LOAN CONVERSION AGREEMENT
Agreement as of the 31st day of December, 2003, by and among NEXVU
TECHNOLOGIES, L.L.C., a Delaware limited liability company ("Company"), ROBERT
T. GERAS ("RTG"), BALKIN FAMILY L.P. ("BFLP"), CARL GREER TRUST ("CGT"), DAVID J
LIES ("DJL"), LINDA M. LIES ("LML") and KAREN JAIMOVICH ("KJ") (the parties
other than Company, are individually referred to as a "Lender," and
collectively, as the "Lenders").
RECITALS:
A. The Lenders have funded convertible loans (each a "Loan" and
collectively, the "Loans") in the original principal amounts set forth below,
with each loan convertible into Class B Interests ("Interests") of the Company
at a conversion price of $0.3247692 per Interest and evidenced by a form of one
or more convertible notes in the aggregate principal amount set forth below
(each such note is referred to as a "Note"). Each Lender has been issued a
warrant by the Company (individually a "Warrant" and collectively, the
"Warrants") to purchase Interests in the Company at the above purchase price in
an amount equal to fifty percent (50%) of the original principal amount of the
Lender's Notes ("Half Loan Amount") provided that upon the effective date of a
proposed merger ("Merger") of the Company with a wholly-owned subsidiary of
Capital Growth Systems, Inc., a Florida corporation ("CGSI"), each Warrant is
exercisable for the purchase of that number of CGSI common shares equal to the
quotient of the Half Loan Amount divided by $1.35.
B. The first $250,000 loaned by CGT has automatically converted to
Interests and the lenders are desirous of converting the remaining $925,000 of
original principal amount of each Loan on a ratable basis as set forth in the
"Conversion Amount" and "Number of Interests" columns below, so that the
aggregate Interest issuance effective as of the date first set forth above,
together with the $2,075,000 of outstanding Interests will equal the maximum
initially authorized number of Class B Interests per the Company's Second
Amended and Restated Operating Agreement as amended by first amendment through
the date hereof:
INITIAL NUMBER REMAINING
LOAN CONVERSION OF INTERESTS LOAN
LENDER AMOUNT(1) AMOUNT ------------ BALANCE
- ------ --------- ------ -------
Robert T. Geras.................................. $ 300,000 $ 188,136 579,291 $111,864
Carl Greer Trust................................. 500,000 313,559 965,483 186,441
Balkin Family L.P................................ 250,000 156,780 482,743 93,220
David J. Lies.................................... 300,000 188,136 579,291 111,864
Linda M. Lies.................................... 25,000 15,678 48,274 9,322
Karen Jaimovich.................................. 100,000 62,711 193,094 37,289
---------- ---------- --------- --------
TOTAL: $1,475,000 $1,175,000 2,848,176 $550,000
========== ========== ========= ========
- ------------------
(1) Net of prior automatic conversion of initial $250,000 CGT Loan.
C. The parties wish to further codify their Agreements as set forth
below in a manner intended to encourage the proposed Merger of the Company with
a wholly-owned subsidiary ("MergerSub") of CGSI pursuant to a merger agreement
("Merger Agreement") to contain terms substantially similar to those proposed in
CGSI's December 16, 2003 private placement memorandum for the sale of up to
$5,000,000 of capital stock.
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. Each of the parties
confirms all of the statements of fact set forth in the recitals above as they
apply to the undersigned.
2. Conversion. Each Lender effective as of the date first set forth
above hereby converts to Interests the principal amount of his, her or its Loan
into the number of Interests opposite the Lender's name as set forth in the
columns titled "Conversion Amount" and "Number of Interests," respectively, in
Recital B above. The remaining principal balance of each Lender's Loan and the
accrued, unpaid interest with respect to each Lender's
Loan shall remain outstanding, and notwithstanding anything to the contrary in
the form of note evidencing each such Loan, the Lenders and Company agree that
no further conversions of any of the Loans shall occur for a period of sixty
(60) days following the date of this Agreement (the "Outside Date") subject to
the terms of Section 3 below.
3. Merger Agreement. The Company expects to execute and close the
Merger Agreement on or before the Outside Date. The Company agrees to cause the
Merger Agreement to provide that:
(a) the principal amount of each Loan (i.e., $550,000 in the
aggregate) that has not been converted to Interests shall on the
closing of the Merger Agreement be applied toward the purchase of CGSI
common stock at a purchase price of $0.9523809 per share; and
(b) the Warrants issued to each Lender shall continue in full
force and effect, subject to CGSI's right to substitute them with new
warrants ("New Warrant") direct from CGSI on substantially identical
terms, and expiring December 31, 2006. Upon tender of CGSI of a New
Warrant to the undersigned, the old Warrant shall be deemed null and
void in all respects.
By counterpart execution of this Agreement, each Lender acknowledges receipt of
the PPM and hereby subscribes to purchase the amount of CGSI common stock for
the principal amount of the Loan set forth below in this Section 3, with payment
for such shares to be made by assignment by each Lender to CGSI on the effective
date of the Merger ("Effective Date") of all right, title and interest in the
Lender's Note(s) evidencing the remaining principal balance of the Lender's
Loans, subject further to CGSI's obligation to pay over to each Lender the
accrued unpaid interest with respect to each Note so tendered (as accrued
through the Effective Date) promptly following the Merger. Each Lender further
grants to the Manager of the Company and to RTG the power of attorney to execute
in the name, place and stead of the Lender such other documentation as he deems
necessary and proper to effect the purchase of the CGSI common stock and other
transactions contemplated herein, including but not limited to endorsement of
the Note(s) held by each Lender to the order of CGSI.
Should a Lender fail to deliver his, her or its Note to enable the
Company to effect the issuance of CGSI Shares contemplated by this Section 3,
then by execution hereof, the Lender agrees to indemnify and hold harmless the
Company and CGSI for any loss or liability incurred with respect to the Note
(subject to their obligation to effect the transactions contemplated herein) and
further authorizes the Manager to deliver a lost note affidavit on behalf of the
Lender (executed per its power of attorney) in lieu of the original Note(s),
codifying such undertaking and to serve as a substitute for the Note
endorsement, so as to entitle the tender to the CGSI shares contemplated by this
Section 3.
NUMBER OF CGSI SHARES
LENDER NOTE AMOUNT AT $0.9523809
- ------ ----------- -------------
Robert T. Geras................................................. $111,864 117,457
Carl Greer Trust................................................ 186,441 195,763
Balkin Family L.P............................................... 93,220 97,881
David J. Lies................................................... 111,864 117,457
Linda M. Lies................................................... 9,322 9,788
Karen Jaimovich................................................. 37,289 39,154
-------- -------
TOTAL: $550,000 577,500
======== =======
If for whatever reason the Merger is not consummated by the Outside
Date, then each Lender shall continue to hold his, her or its respective Notes
and Warrants subject only to the prior conversion to Interests of the amounts
set forth above.
4. Consent. By execution of this Agreement, each Lender votes all
Interests owned by the Lender (inclusive of those issued upon effecting the
conversion set forth above) in favor of the Merger and further authorizes the
Manager of the Company to take such steps and execute such ancillary documents
as it deems necessary and proper to effectuate the Merger.
5. Miscellaneous.
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(a) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter
hereof, and cannot be modified unless in writing and signed by the
Company and holders of a majority of the outstanding principal amount
outstanding of the Notes. By execution hereof, each Lender acknowledges
and agrees that this Agreement supersedes any other action or inaction
taken by the Lender with respect to any conversion of principal amount
of his, her or its Note, which shall be deemed null and void ab initio.
(b) 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.
(c) Counsel. This Agreement has been drafted by Shefsky &
Froelich Ltd. ("S&F") in its capacity as counsel for Company, and the
parties acknowledge that S&F has not represented Subscriber at any time
with respect to the Subscriber Class B Interests and has advised
Subscriber to retain independent counsel with respect to the subject
matter of this Agreement. No inference in favor or against any party
shall be inferred based upon whom served as draftsman of this
Agreement.
(d) 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: (i) delivered personally; or (ii) three (3)
days after mailed by registered or certified mail, postage prepaid; or
(iii) one (1) business day sent via national courier, addressed as to
the party entitled to notice at the address set forth below:
IF TO COMPANY, TO: WITH A COPY TO:
Nexvu Technologies, L.L.C. Shefsky & Froelich Ltd.
1100 East Woodfield Road - Suite 100 444 North Michigan Avenue - Suite 2500
Schaumburg, IL 60173 Chicago, IL 60611
Attention: Rory Herriman Attention: Mitchell D. Goldsmith, Esq.
Facsimile: 630-872-5872 Facsimile: 312-527-3194
E-Mail: rherriman@nexvu.com E-Mail: mgoldsmith@shefskylaw.com
IF TO A LENDER, TO:
The address set forth directly below their signature.
or such other address as is subsequently provided by written notice
from such party to the other parties.
(e) 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.
(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 by bench
trial, in the state or federal courts situated in Cook County,
Illinois, to which jurisdiction and venue all parties consent. Each
party hereto waives his or its right to trial by jury.
(g) Counterparts. This Agreement may be executed in two or
more counterparts, each of which, whether photocopy, facsimile 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.
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(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 the State of Illinois.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first set forth above.
COMPANY: LENDERS:
NEXVU TECHNOLOGIES, L.L.C.
-------------------------------------------
ROBERT T. GERAS, Individually
By: LASALLE NEXVU MANAGER, L.L.C., its
Manager Address: 55 East Erie - Suite 2905
Chicago, IL 60611-2703
By:
---------------------------
Robert T. Geras, Manager BALKIN FAMILY L.P.
By:
-----------------------------------
Michael Balkin, General Partner
Address: c/o William Blair & Company
222 West Adams Street
Chicago, IL 60606
CARL GREER TRUST
By:
-----------------------------------
Carl C. Greer, Trustee
Address: c/o Tom Floyd
4501 West 127th Street - Suite C
Alsip IL 60803
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DAVID J. LIES
-------------------------------------------
LINDA M. LIES
Address: 1210 Sheridan Road
Wilmette, IL 60091
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KAREN JAIMOVICH
Address: 4025 Greenacre Drive
Northbrook, IL 60062
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