Exhibit
10.4
SUBSIDIARY
GUARANTEE
SUBSIDIARY GUARANTEE, dated as of November __,
2008 (this “Guarantee”), made by each of the
signatories hereto (together with any other entity that may become
a party hereto as provided herein, the “Guarantors”),
in favor of Vanco plc (in administration) (together with its
permitted assigns, “Vanco”).
WITNESSETH:
WHEREAS, pursuant to that certain Interest and
Loan Purchase Agreement, dated as of the date hereof, by and
between Capital Growth Systems, Inc., a Florida corporation (the
“Company”), Capital Growth Acquisition Inc., a wholly
owned subsidiary of the Company (“CGAI”), Vanco and
Vanco Direct USA, LLC, a wholly owned subsidiary of Vanco
(“VDUL”) (the “Purchase Agreement”), in
partial consideration for all of the outstanding membership
interests of VDUL, the Company has agreed to sell and issue to
Vanco the Company’s Variable Rate Convertible Debenture, due seven years following its
issuance (the “Debenture”), subject to the terms and
conditions set forth therein; and
WHEREAS, each Guarantor will
directly benefit from the extension of credit to the Company
represented by the issuance of the Debenture; and
NOW, THEREFORE, in consideration of
the premises and to induce Vanco to enter into the Purchase
Agreement and purchase the Debenture and to carry out the
transactions contemplated thereby, each Guarantor hereby agrees
with Vanco as follows:
1. Definitions . Unless otherwise defined herein,
terms defined in the Debenture and used herein shall have the
meanings given to them in the Debenture. The words
“hereof,” “herein,” “hereto”
and “hereunder” and words of similar import when used
in this Guarantee shall refer to this Guarantee as a whole and not
to any particular provision of this Guarantee, and Section and
Schedule references are to this Guarantee unless otherwise
specified. The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms. The following terms shall have the following
meanings:
“Affiliate” means any Person that,
directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 405 under the
Securities Act.
“Guarantee” means this
Subsidiary Guarantee, as the same may be amended, supplemented or
otherwise modified from time to time.
“Lien” means a lien,
charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.
“Obligations” means, in addition to
all other costs and expenses of collection incurred by Vanco in
enforcing any of such Obligations and/or this Guarantee, all of the
liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that
are now or may be hereafter contracted or acquired, or owing to, of
the Company or any Guarantor to Vanco, including, without
limitation, all obligations under this Guarantee, the Debenture and
any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct
or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from Vanco
as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or
modified from time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include,
without limitation: (i) principal of, and interest on the Debenture
and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the
Company or any Guarantor from time to time under or in connection
with this Guarantee, the Debenture and any other instruments,
agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including
but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Company or any Guarantor.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Subsidiary” means any
direct or indirect subsidiary of the Company.
(i) The Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantee to Vanco and
its successors, indorsees, transferees and assigns, the prompt and
complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the
Obligations.
(ii) The maximum liability of each
Guarantor hereunder shall in no event exceed the amount which can
be guaranteed by such Guarantor under applicable federal and state
laws, including laws relating to the insolvency of debtors,
fraudulent conveyance or transfer or laws affecting the rights of
creditors generally (after giving effect to the right of
contribution established in Section 2(b) ).
(iii) Each Guarantor agrees that the
Obligations may at any time and from time to time exceed the amount
of the liability of such Guarantor hereunder without impairing the
guarantee contained in this Section 2 or affecting the
rights and remedies of Vanco hereunder.
(iv) The guarantee contained in this
Section 2 shall remain in full force and effect until all
the Obligations and the obligations of each Guarantor under the
guarantee contained in this Section 2 shall have been
satisfied by indefeasible payment in full.
(v) No payment made by the Company, any
of the Guarantors, any other guarantor or any other Person or
received or collected by Vanco from the Company, any of the
Guarantors, any other guarantor or any other Person by virtue of
any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in
payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Obligations or
any payment received or collected from such Guarantor in respect of
the Obligations), remain liable for the Obligations up to the
maximum liability of such Guarantor hereunder until the Obligations
are indefeasibly paid in full.
(vi) Notwithstanding anything to the
contrary in this Guarantee, with respect to any defaulted
non-monetary Obligations the specific performance of which by the
Guarantors is not reasonably possible (e.g. the issuance of the
Company's Common Stock), the Guarantors shall only be liable for
making Vanco whole on a monetary basis for the Company's failure to
perform such Obligations in accordance with the
Debenture.
(b) Right of Contribution
. Subject to Section
2(c) , each Guarantor hereby agrees that to the extent that a
Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek
and receive contribution from and against any other Guarantor
hereunder which has not paid its proportionate share of such
payment. Each Guarantor's right of contribution shall be subject to
the terms and conditions of Section 2(c) . The provisions of
this Section 2(b) shall in no respect limit the obligations
and liabilities of any Guarantor to Vanco and each Guarantor shall
remain liable to Vanco for the full amount guaranteed by such
Guarantor hereunder.
(c) No Subrogation
. Notwithstanding any
payment made by any Guarantor hereunder or any set-off or
application of funds of any Guarantor by Vanco, no Guarantor shall
be entitled to be subrogated to any of the rights of Vanco against
the Company or any other Guarantor or any collateral security or
guarantee or right of offset held by Vanco for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Company or any other
Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to Vanco by the Company on account of the
Obligations are indefeasibly paid in full. If any amount shall be
paid to any Guarantor on account of such subrogation rights at any
time when all of the Obligations shall not have been paid in full,
such amount shall be held by such Guarantor in trust for Vanco,
segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to Vanco in the
exact form received by such Guarantor (duly indorsed by such
Guarantor to Vanco, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as Vanco
may determine.
(d) Amendments, Etc. With Respect to the
Obligations .
Each Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against any Guarantor and
without notice to or further assent by any Guarantor, any demand
for payment of any of the Obligations made by Vanco may be
rescinded by Vanco and any of the Obligations continued, and the
Obligations, or the liability of any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by Vanco,
and the Purchase Agreement and the Debenture and any other
documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part,
as Vanco may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by Vanco
for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Vanco shall have no obligation to protect,
secure, perfect or insure any Lien at any time held by them as
security for the Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
(e) Guarantee Absolute and
Unconditional . Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by Vanco upon the
guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2 ; the Obligations, and
any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 2 ;
and all dealings between the Company and any of the Guarantors, on
the one hand, and Vanco, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance
upon the guarantee contained in this Section 2 . Each
Guarantor waives to the extent permitted by law diligence,
presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Company or any of the Guarantors with
respect to the Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of
payment and performance without regard to (a) the validity or
enforceability of the Purchase Agreement or the Debenture, any of
the Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or
from time to time held by Vanco, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance or
fraud by Vanco) which may at any time be available to or be
asserted by the Company or any other Person against Vanco, or (c)
any other circumstance whatsoever (with or without notice to or
knowledge of the Company or such Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge
of the Company for the Obligations, or of such Guarantor under the
guarantee contained in this Section 2 , in bankruptcy or in
any other instance. When making any demand hereunder or otherwise
pursuing its rights and remedies hereunder against any Guarantor,
Vanco may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as they may
have against the Company, any other Guarantor or any other Person
or against any collateral security or guarantee for the Obligations
or any right of offset with respect thereto, and any
failur
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