EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Identical to Exhibit 2.1 to this Current Report on Form 8-K, which
Agreement and Plan of Merger was previously filed by the Company as an exhibit
to its Current Report on Form 8-K, filed August 13, 2004 (SEC File No.
000-30831), and is incorporated herein by reference.
EXHIBIT B
STOCK OWNERSHIP, DEBT HOLDINGS AND NEW CGSI SHARES
CURRENT CREDITOR OWNERSHIP OF
-------------------------------------
FUNDS FUNDS NEW CGSI
PROVIDED PROVIDED COMMON CURRENT COMPANY COMPANY
COMPRISING COMPRISING STOCK COMPANY PREFERRED PREFERRED
COMEXPO 2003-2004 ISSUABLE FOR COMMON STOCK - STOCK -
NAME OF CREDITOR LIABILITIES FUNDINGS OBLIGATIONS(2) STOCK JUNIOR JUNIOR A
- ---------------- ----------- -------- -------------- ----- ------ --------
BLUESTEM CAPITAL PARTNERS II,
LIMITED PARTNERSHIP -- $ 215,000 113,438 0 -- 2,500
MESIROW CAPITAL PARTNERS VI $ 300,802 619,307 326,756 29,202,632 700 181
THE EDGEWATER PRIVATE EQUITY
FUND II, L.P. 300,802 519,179 273,928 29,161,031 699 181
21ST CENTURY COMMUNICATIONS
PARTNERS L.P.(3) 229,333 46,184 24,368 21,746,758 533 94
21ST CENTURY COMMUNICATIONS
T-E PARTNERS, L.P.(3) -- 15,692 8,279 -- -- 32
21ST CENTURY COMMUNICATIONS
FOREIGN PARTNERS, L.P.(3) -- 6,124 3,231 -- -- 12
PHILIP KENNY(2) -- 0 75,000 0 --
JOHN JELLINEK(2) -- 0 75,000 0
JAMES CUPPINI(2) -- 0 100,000 0 --
---------- ---------- ---------- ---------- ---------- ----------
Total: $ 830,937(1) $1,421,486(1) 1,000,000 80,110,421 1,932 3,000
========== ========== ========== ========== ========== ==========
(1) DOES NOT INCLUDE ACCRUED, UNPAID INTEREST OR OTHER CLAIMS OF CREDITOR
AGAINST COMPANY, ALL OF WHICH ARE EXTINGUISHED EFFECTIVE UPON THE
CLOSING DATE, WHICH OBLIGATIONS EXCEED THE ESTIMATED FAIR MARKET
VALUE OF THE NEW CGSI COMMON STOCK PER COLUMN 3 ALLOCABLE TO
CREDITOR.
(2) CREDITOR IS A CREDITOR WITH RESPECT TO ANY PAYMENTS MADE TO OR ON
BEHALF OF THE COMPANY AS A GUARANTOR OF COMPANY OBLIGATIONS AND/OR
WITH RESPECT TO CLAIMS FROM TIME TO TIME BY COMPANY OF BREACH OF
CONTRACT, ALL OF WHICH OBLIGATIONS ARE EXTINGUISHED EFFECTIVE AS OF
THE CLOSING DATE, WHICH OBLIGATIONS EXCEED THE ESTIMATED FAIR MARKET
VALUE OF THE NEW CGSI COMMON STOCK PER COLUMN 3 ALLOCABLE TO
CREDITOR.
(3) SUBJECT TO REALLOCATION AMONG THE 21ST CENTURY FUNDS TO THE EXTENT
PROVIDED BY THEM TO COMPANY PRIOR TO THE CLOSING DATE.
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made and entered into this
14th day of September, 2004, by and among Capital Growth Systems, Inc. a Florida
corporation ("CGSI"), Frontrunner Representative, Inc., as the escrow agent (the
"Representative") and each party named on the signature line below under
"Creditor" (each a "Creditor" and collectively, the "Creditors").
RECITALS
A. Pursuant to each of those certain Creditor Waiver and Consent
Agreements, each dated August 6, 2004 (each, a "Creditor Agreement" and
collectively the "Creditor Agreements"), by and among CGSI, Frontrunner Network
Systems Corp., a Delaware corporation (the "Company") and each of the Creditors,
an aggregate of 133,368 shares of common stock of CGSI (the "Escrowed Shares")
are being delivered to the Representative for the benefit of the Creditors to
secure the indemnification obligations of the Creditors under the Creditor
Agreements.
B. The parties hereto desire to have the Representative hold and
release the Escrowed Shares and any proceeds thereof pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1. Representative. The Representative hereby agrees to hold and release
the Escrowed Shares and any proceeds thereof (collectively, the "Collateral") in
accordance with the terms hereof.
2. Escrow Account.
(a) Pursuant to and in accordance with Section 3 of the
Creditor Agreements, and out of the shares of common stock of CGSI
("CGSI Common Stock") to be issued to the Creditors in connection with
the Creditor Agreements, CGSI is delivering, for and on behalf of the
Creditors, the following into escrow with the Representative: (i) the
Escrowed Shares; and (ii) stock powers (duly executed in blank)
covering the Escrowed Shares. The Representative hereby acknowledges
receipt of the Escrowed Shares and stock powers. The Creditors hereby
(i) authorize CGSI to deliver directly to the Representative all
non-cash dividends and distributions made in respect of any Escrowed
Shares (whether paid in shares of CGSI Common Stock, other securities
or other property, in each case other than cash), all of which
dividends and distributions shall be added to and become part of the
Collateral, and (ii) agree to deliver to the Representative such
additional stock powers and other instruments of transfer (duly
executed in blank) as CGSI shall reasonably request from time to time
in respect of all securities and other property (other than cash)
deposited with the Representative from time to time pursuant to clause
(i) of this sentence.
(b) The Representative shall maintain a separate account for
each of the Creditors (each such account, the "Creditor's Escrow
Account"), including the number of
Escrowed Shares held on such Creditor's behalf and any subsequent
non-cash dividends or distributions deposited with the Representative
with respect to such Creditor's Escrowed Shares. The initial number of
Escrowed Shares held on behalf of each Creditor is set forth on
Schedule A attached to this Agreement. The Collateral shall not be
subject to any lien or attachment by any creditor of CGSI, the
Representative or any of the Creditors.
3. Rights in Escrowed Shares. Except as provided herein, all legal and
beneficial ownership rights to the Collateral shall remain with the Creditors
during such time as the Collateral is held by the Representative, including, but
not limited to, any right to vote or to receive distributions thereon. All
communications, cash distributions and cash dividends paid or sent by CGSI with
respect to the Collateral shall be paid or sent directly to the Creditors.
4. Procedures for Claims. Upon delivery by CGSI to the Representative
of a Claim Notice (as defined in the Creditor Agreement) pursuant to Section
3(d) of the Creditor Agreements prior to the Termination Date (as defined
herein), the Representative and CGSI shall promptly meet to resolve the Claim
Notice. Pursuant to the Creditor Agreement, Representative shall have full legal
right and authority to settle any claims on behalf of the Creditors and to
release the Escrowed Shares in settlement of such claims. If Representative and
CGSI do not reach a settlement within thirty-days of the date of the Claim
Notice, CGSI shall have the right to bring suit against the Creditors to resolve
such claim and pursue any other legal remedies it may have with respect to such
claim. Upon delivery to Representative of (i) a written agreement signed by the
Representative and CGSI, or (ii) a certified copy of a final judgment or decree
binding on the Creditors, each of which fixes the amount of the Merger Agreement
Losses (as defined in the Creditor Agreement) to which CGSI is entitled to be
indemnified (the "Indemnifiable Damages"), the Representative shall deliver to
CGSI that portion of the Collateral equal in value to the Indemnifiable Damages.
For purposes of this Agreement, a share of CGSI Common Stock shall have a value
of $1.35. In accordance with Section 3 of the Creditor Agreement, the Creditors
shall share any Indemnifiable Damages in accordance with their Pro Rata Share
(as defined in the Creditor Agreement), and the Representative shall make
corresponding deductions of Collateral from each Creditor's Escrow Account.
5. Termination of Escrow. Upon the first anniversary of the date of
this Agreement (the "Termination Date") the Representative shall release to each
Creditor the Collateral in its Creditor Escrow Account, less each Creditor's Pro
Rata Share of the amount of any unresolved claims as set forth in a Claim Notice
that has been delivered prior to the Termination Date ("Pending Claims"). The
Representative shall continue to hold the Collateral after the Termination Date
until the Pending Claims are settled in accordance with Section 4 of this
Agreement, and upon resolution of such Pending Claims, disburse the Collateral
to the CGSI in the amount of the Indemnifiable Damages, if any, and any balance
to the Creditors.
6. Representative Provisions.
(a) The Creditors agree to indemnify and hold Representative
harmless from all losses, costs, damages, expenses and reasonable
attorneys' fees incurred by Representative arising from acts or
omissions of Representative in the performance of or pursuant to this
Agreement, except such acts or omissions as may be the result of
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Representative's gross negligence or misconduct. Representative shall
have no liability to the Creditors arising from acts or omissions of
Representative pursuant to this Agreement except such acts or omissions
as may be the result of the Representative's gross negligence or
misconduct.
(b) The Representative may rely upon any instrument in writing
believed by it to be genuine, sufficient and properly presented.
(c) The Representative may execute any of its duties under
this Agreement by or through agents or employees.
7. Amendments. This Agreement may not be amended, revoked or terminated
except upon the written consent of all of the parties hereto.
8. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage prepaid), guaranteed overnight delivery,
or facsimile transmission if such transmission is confirmed by delivery by
certified or registered mail (first class postage prepaid) or guaranteed
overnight delivery, to the following addresses and facsimile numbers (or to such
other addresses or facsimile numbers which such party shall designate in writing
to the other party):
IF TO CGSI TO:
Capital Growth Systems, Inc.
1100 East Woodfield Road, Suite 100
Schaumburg, Illinois 60173
WITH A COPY TO:
Shefsky & Froelich Ltd.
444 N. Michigan Avenue
Suite 2500
Chicago, IL 60611
Attn: Mitchell D. Goldsmith
Phone: 312-836-4006
Fax: 312-527-5921
IF TO REPRESENTATIVE:
c/o Phil Kenny
Seven K Construction Company
144 Green Bay Road
Winnetka, IL 60093
Phone: 847-446-7224
Fax: 847-446-7228
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner to the other parties hereto. Notice given
as set out above shall be
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deemed delivered (i) if by mail, three (3) days after deposit, (ii) if by
facsimile, on the day sent if received prior to 5:00 p.m. local time of the
receiving party and if after 5:00 p.m., on the next business day, and (iii) if
by overnight mail, the next business day. Each party hereto shall send a copy of
all notices and correspondence sent hereunder to the other parties to this
Agreement.
9. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs,
executors, successors and assigns. Nothing contained herein is intended to
confer upon any person other than the parties hereto and their respective heirs,
executors, successors and assigns as aforesaid, any rights or remedies under or
by reason of this Agreement.
10. Controlling Law. This Agreement shall be construed and enforced in
accordance with the laws of Illinois.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original agreement but all of
which shall be considered one and the same instrument.
12. Final Judgments. A judgment or decree or arbitration award shall be
deemed final for purposes hereof when the time for approval, if any, shall have
expired and no appeal shall have been taken or any appeals taken shall have been
finally determined.
13. Severability. If any provisions of this Agreement shall, for any
reason, be held unenforceable, such provision to the extent unenforceable shall
be severed from this Agreement unless, as a result of such severance, the Escrow
Agreement fails to reflect the basic intent of the parties. If this Agreement
continues to reflect the basic intent of the parties, then the invalidity of
such specific provisions shall not affect the enforceability of any other
provision herein, and the remaining provisions shall remain in full force and
effect.
14. Entire Agreement. This Escrow Agreement, the Creditor Agreements,
and the Agreement and Plan of Merger dated August 9, 2004 by and among CGSI, the
Company and Frontrunner Acquisition Inc., contain the entire agreement between
the parties with respect to the transactions contemplated hereby, and supersede
all written or verbal understandings prior to the date hereof between the CGSI,
the Creditors and the Representative.
15. Waivers. Any term of this Agreement may be waived by the party or
parties entitled to the benefits thereof but only by a writing executed by such
party. No waiver or any breach of this Agreement shall be held to constitute a
waiver of any other subsequent breach.
16. Recitals. The recitals set forth above are hereby incorporated into
and made a part of this Agreement by this reference.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective this 14th day of September, 2004.
CAPITAL GROWTH SYSTEMS, INC.
BY: /s/ Doug Stukel
--------------------------------------
FRONTRUNNER REPRESENTATIVE, INC.
BY: /s/ Philip B. Kenny
--------------------------------------
BLUESTEM CAPITAL PARTNERS II,
LIMITED PARTNERS
BY: /s/ Sandy Horst
--------------------------------------
Name: Sandy Horst
------------------------------
Its: CFO of the General Partner
------------------------------
MESIROW CAPITAL PARTNERS VI
BY: /s/ Thomas E. Galuhn
--------------------------------------
Name: Thomas E. Galuhn
------------------------------
Its: Sr. Managing Director of its
------------------------------
General Partner
------------------------------
EDGEWATER PRIVATE EQUITY FUND II, L.P.
BY: /s/ David M. Tolmie
--------------------------------------
David M. Tolmie, Partner
/s/ Philip Kenny
-----------------------------------------
Philip Kenny
/s/ James Cuppini
-----------------------------------------
James Cuppini
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SCHEDULE A
CREDITOR'S ESCROW ACCOUNT
CREDITOR NUMBER OF ESCROW SHARES
-------- -----------------------
Bluestem Capital Partners, II Limited Partnership 17,016
Mesirow Capital Partners VI 49,013
Edgewater Private Equity Fund II, L.P. 41,089
Philip Kenny 11,250
James Cuppini 15,000
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