AMENDMENT NO. 1 TO THOMAS G. HUDSON EMPLOYMENT AGREEMENT
EXHIBIT
10.24
AMENDMENT
NO. 1
TO
XXXXXX
X. XXXXXX
This
Amendment No. 1 (this “Amendment”) is effective as of September 8, 2006, and is
by and between Capital
Growth Systems, Inc.,
a
Florida corporation (the “Company”), and Xxxxxx
X.
Xxxxxx,
a
resident of Minnesota (the “Executive”). All capitalized terms used in this
Amendment and not otherwise defined shall have the meanings assigned to them
in
the Employment Agreement (as defined below).
WHEREAS,
the Company and the Executive entered into an Employment Agreement, dated as
of
June 28, 2006 (the “Employment Agreement”), pursuant to which the Company
employs the Executive;
WHEREAS,
pursuant to the terms of the Employment Agreement Executive received a Stock
Option Agreement (“Option Agreement”) and a Performance Stock Option Agreement
(“Performance Option Agreement”);
WHEREAS,
since becoming the CEO of the Company, Executive has made significant and
valuable contributions to the Company;
WHEREAS,
the Company, in seeking to offer a more attractive compensation package to
potential new executives, desires to have Executive surrender certain of his
previously-granted Performance Options to reduce the potential dilution related
to the granting of options to potential new executives;
WHEREAS,
in recognition Executive’s contributions, the Company desires to grant Executive
an additional Stock Option;
WHEREAS,
the Company and Executive wish to clarify Section 4(b)(v)(2) of the Employment
Agreement governing the vesting of Performance Options to ensure such section
is
consistent with the parties’ understanding regarding the vesting of Performance
Options; and
WHEREAS,
the Company and Executive wish to amend Section 6(g) of the Employment Agreement
regarding vesting of options in the event of a Change in Control.
NOW,
THEREFORE, in consideration of the foregoing recitals, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and the Executive, intending to be legally bound,
hereby agree as follows:
1. Grant
of Additional Stock Options.
(a) Grant
of Option/Price.
The
Company agrees to grant Executive options on the date of this Amendment to
acquire 303,007 shares of the Company’s common stock for a strike price equal to
$0.70 per share (as equitably adjusted for reverse splits, forward splits and
recapitalizations) (the “Employee Options”). The Employee Options shall be
governed by an option agreement between Executive and the Company, in
substantially the form attached hereto (the “Option Agreement”).
(b) Vesting.
In
accordance with the Option Agreement (i) 25% of the Employee Options shall
vest
immediately upon execution of this Amendment, and (ii) 25% shall thereafter
vest
on the yearly anniversary of this Amendment over the next three (3) years,
commencing on September 8, 2007, with 100% vested on September 8, 2009,
subject to the terms hereof and the Option Agreement.
2. Cancellation
of Portion of Previously Granted Performance Options.
The
Company and Executive agree that 1,993,985 of the Performance Options granted
to
Executive on June 28, 2006 pursuant to Section 4(b)(v) of the Employment
Agreement shall be cancelled. Executive shall return his original Performance
Option Agreement for 2,993,985 shares of common stock and said option agreement
shall be cancelled and Executive shall be reissued a new Performance Option
Agreement to purchase 1,000,000 shares of Company common stock.
3. Clarification
of Employment Agreement Regarding Vesting of Performance Options.
In
order to clarify Section 4(b)(v)(2) of the Employment Agreement governing the
vesting of Performance Options, Section 4(b)(v)(2) of the Employment Agreement
is hereby revised in its entirety to read as follows:
“(2) Vesting.
In
accordance with the Performance Option Agreement, the Performance Options shall
vest on the following basis. Upon realization by the Company of an incremental
$20 million of third party service and/or maintenance revenue from new or
existing customers with the calculation commencing one day prior to the
Effective Date, with gross margins in excess of 30%, pursuant to an agreement
of
one year or more, Executive shall vest, incrementally, in 50% of the option
shares of the total number of share in the Performance Options. The Executive
shall vest in the remaining shares in the Performance Options upon realization
by the Company of a second $20 million of third party service and/or maintenance
revenue from new customers, with gross margins in excess of 30%.”
4. Amendment
of Employment Agreement Regarding Change in Control Vesting.
Section
6(g) of the Employment Agreement is hereby revised in its entirety to read
as
follows:
“(g) Change
in Control.
In
addition to the vesting of Executive’s options provided elsewhere in this
Agreement, Executive’s unvested options shall become vested as follows:
(i)
Employee
Options.
With
regard to Employee Options granted to Executive pursuant to Section 4(b)(iv)
of
the Employment Agreement dated June 28, 2006 and the additional options granted
to Executive pursuant to paragraph 1 of Amendment No. 1 to Employment Agreement,
100% of such options shall vest immediately prior to the completion of a Change
in Control, unless, at the time of completion of such Change in Control
transaction, the unvested options are substituted or continued by the acquirer,
regardless of whether Executive’s employment is terminated.
(ii) Performance
Options.
With
regard to Performance Options granted under Section 4(b)(v) of the Employment
Agreement dated June 28, 2006, as modified by paragraph 2 of Amendment No.
1 to
Employment Agreement, such options shall vest as follows: (A) 50% shall vest
immediately if at anytime after the occurrence of a Change in Control or the
announcement of a Change in Control the price per share of the Company’s common
stock equals or exceeds $1.80, and (B) 100% shall vest immediately if at anytime
after the occurrence of a Change in Control or the announcement of a Change
in
Control the price per share of the Company’s common stock equals or exceeds
$2.35. Upon the completion of a Change in Control, any such Performance Options
that remain unvested after the application of provisions (A) and (B) of this
Section shall expire.”
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5. Construction;
Severability.
The
provisions of this Amendment shall be applied and interpreted in a manner
consistent with each other so as to carry out the purposes and intent of the
parties hereto, but if for any reason any provision hereof is determined to
be
unenforceable or invalid, such provision or such part thereof as may be
unenforceable or invalid shall be deemed severed from this Amendment and the
remaining provisions carried out with the same force and effect as if the
severed provision or part thereof had not been a part of this
Amendment.
6. Counterparts.
This
Amendment may be executed in one or more counterparts, each of which shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same Amendment.
7. Continuation.
Except
as amended hereby, the Employment Agreement shall remain in full force and
effect.
[Signature
Page to Follow]
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IN
WITNESS WHEREOF, the undersigned have executed this Amendment.
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COMPANY:
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EXECUTIVE:
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Capital
Growth Systems, Inc.
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/s/
Xxxxxx X. Xxxxxx
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Xxxxxx
X. Xxxxxx
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By:
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/s/
Xxxxxxx Xxxxxx
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Executive
Vice President
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