AMENDMENT NO. 1 TO POLLAN EMPLOYMENT AGREEMENT
AMENDMENT
NO. 1
TO
This
Amendment No. 1 (“Amendment”) is effective as of December 28, 2007, and is by
and between CAPITAL
GROWTH SYSTEMS, INC.,
a
Florida corporation (“Company”), and XXXXXX
XXXXXX
(“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,
Company and Executive entered into an Employment Agreement, dated as of February
5, 2007 (the “Employment Agreement”), pursuant to which Company employs
Executive;
WHEREAS,
since becoming the Chief Information and Strategy Officer of Company, Executive
has made significant and valuable contributions to Company; including becoming
the COO of the Company and providing significant leadership with respect to
Company’s business development, operational and financing initiatives.
WHEREAS,
Company, believes that the existing financial incentives in Executive’s
Employment Agreement do not properly reward Executive for his efforts and
Company is also desirous of providing for additional economic incentives in
order to retain Executive and to encourage continued efforts for the benefit
of
Company, and in return Executive agrees to enter into the restrictive covenant
set forth herein in addition to the restrictive covenants presently in
Executive’s employment agreement.
NOW,
THEREFORE, in consideration of the foregoing recitals, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Company and Executive, intending to be legally bound, hereby
agree
as follows:
1. Grant
of Additional Stock Options.
(a) Vested
Stock Options.
Company
through its compensation committee has granted effective December 10, 2007
fully
vested options to purchase up to 5,750,000 shares of Common Stock to Executive
in accordance with the form of option agreement attached hereto as Exhibit
A.
(b) Performance
Options.
Company
through its compensation committee has granted effective December 10, 2007
unvested options to purchase up to 7,000,000 shares of Common Stock to Executive
in accordance with the form of option agreement attached hereto as Exhibit
B.
2. Terms
of Employment.
(a) Section 4(a)
of the
Employment Agreement is amended and restated as follows:
“(a) Executive
shall serve as COO of Company and shall have the normal duties, responsibilities
and authority of the position of COO, subject to the power of the Board to
limit
such duties, responsibilities and authority.”
(b) The
following paragraph is added to the end of Section 4(b)(i)
entitled
“Base Salary:”
“Effective
January 1, 2008, Executive’s Base Salary shall be increased to $250,000 per
annum.”
(c) Section 4(b)(ii)
entitled
“Additional Compensation” is amended and restated as follows:
“(ii) Additional
Compensation
In
addition to Base Salary, Executive shall be eligible to receive an annual bonus
based upon the attainment of certain performance goals and objectives
established by the Board and/or the Compensation Committee established by the
Board, in accordance with annual objectives, with no less than 2/3 tied to
objective results (such as monthly recurring revenue and EBITDA),and the
remaining percentage tied to subjective results (which could include
departmental management, establishment of a cooperative working environment,
effort and other factors). The target annual bonus, assuming accomplishment
of
100% of the target objectives and the wherewithal of Company to pay the same
is
100% of Base Salary. With respect to 2007 Executive shall be entitled to a
cash
bonus of: (A) $25,000, payable prior to January 31, 2008; and (B) $50,000
payable thirty (30) days after the receipt by Company or one if its subsidiaries
(hereinafter referred to as a “Subsidiary”) of the first payment for the
570th
installed circuit by Company of its current contract to install circuits with
a
carrier engaged in the sale of voice minutes.
The
incentive bonus for 2008 and thereafter will be determined annually by the
Board
or by the Compensation Committee if delegated such task by the Board. There
will
be no cap, with incentive bonus to increase with increased profit performance
for over plan achievement. Plan metrics will be set annually and agreed to
by
the CEO. Executive shall be entitled at Executive’s option to take payment of
incentive bonus either 100% in cash, or to take a lesser amount of cash (the
amount of cash bonus to be paid in such event, if any, is the “Retained Sum”)
and accept a grant of “European Options” to purchase Common Stock of Company
pursuant to the “Formula Amount.” The “Formula Amount” will be based upon the
amount of the bonus not taken in cash (the “Non-cash Sum”), whereby Company will
determine the ten (10) day average closing price of Company’s Common Stock for
the last ten (10) trading days immediately preceding the date of the
announcement of the bonus (the “TDA”), and Executive will then be entitled to an
option to purchase that number of shares of Common Stock equal to the Non-cash
Sum divided by one half of the TDA, with the purchase price for such shares
to
be one half of the TDA. The European Option, if selected, will be fully vested,
but will be exercisable only at any time during the calendar year following
the
year in which the European Option is selected, subject to a Change in Control
provision which would change the exercise period in a manner substantially
similar to that set forth in the form of option agreement attached hereto as
Exhibit B
with
respect to a Change in Control. The form and remaining terms of the European
Option(s) shall be substantially similar to the form and terms attached as
Exhibit B,
and
shall be in such form as Company in good faith shall submit to Executive. The
determination by Executive to accept the European Options with respect to a
particular year must be made within one (1) business day of being informed
of
his incentive bonus amount, and absent delivery of notice of election of the
European Option, the entire bonus shall be payable in cash. By way of example,
if the TDA was $2.00 per share and the Non-cash Sum elected by Executive was
$100,000, then the European Options would relate to 100,000 shares of Common
Stock, purchasable at $1.00 per share.”
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3. Addition
of Noncompetition Covenant.
The
following Section 9(b)(iv)
is added
to the Agreement (and the period at the end of Section 9(b)(iii)
of the
Agreement is deleted and replaced by “; or”):
“(iv) take
any
action that would violate the terms of this Section 9(b)(iv).
Executive acknowledges that the covenants set forth in this Section 9(b)(iv)
are
reasonable in scope and essential to the preservation of the Business of Company
(as defined herein). Executive also acknowledges that the enforcement of the
covenants set forth in this Section 9(b)(iv)
will not
preclude Executive from being gainfully employed in such manner and to the
extent as to provide a standard of living for himself, the members of his family
and the others dependent upon him of at least the level to which he and they
have become accustomed and may expect. In addition, Executive acknowledges
that
Company has obtained an advantage over its competitors as a result of its name,
location and reputation that is characterized by near permanent relationships
with vendors, customers, principals and other contacts which it has developed
at
great expense. Furthermore, Executive acknowledges that competition by him
following the termination or expiration of his employment would impair the
operation of Company beyond that which would arise from the competition of
an
unrelated third party with similar skills. Executive hereby agrees that he
shall
not, during his employment and for a period of one (1) year after the end of
his
employment, directly or indirectly, engage in or become directly or indirectly
interested in any proprietorship, partnership, firm, trust, company, limited
liability company or other entity, other than Company (whether as owner,
partner, trustee, beneficiary, stockholder, member, officer, director, employee,
independent contractor, agent, servant, consultant, manager, lessor, lessee
or
otherwise) that:
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(a) competes
with Company in the Business of Company; or
(b) competes
at a material level with Company in the Restricted Territory (as defined
herein), other than acquiring an ownership interest in a company listed on
a
recognized stock exchange in an amount which does not exceed five percent (5%)
of the outstanding stock of such corporation. For purposes of this Agreement,
the term “Business of Company” shall include all business activities and
ventures related to the business of providing of any of the
following:
(i) provision
of telecom network integration services, including the sale or lease of
broadband circuits for the transmission of data or voice;
(ii) cost
reduction solutions for companies aimed at taking cost out of their network
usage or procurement, including network optimization and least cost
routing;
(iii) licensing
or sale of software intended to effect the foregoing:
(1) all
other
businesses in which Company or any of its subsidiaries is engaged in as of
the
date of termination of Executive’s employment; and
(2) the
term
“Restricted Territory” means any state in the United States of America.
Executive specifically acknowledges that the Business of Company is not
naturally restricted by any geographic boundaries.
Notwithstanding
anything to the contrary contained in this Agreement, in order to enforce the
terms of the noncompetition covenant contained in this Section
9(b)(iv),
Company
must make payment to Executive no later than 30 days following the termination
of his employment with the Company or any of its subsidiaries of the full amount
of severance payments that would otherwise be payable to him under this
Agreement as if he had been terminated without “cause,” if it wishes to enforce
the noncompetition provisions called for hereunder. For the avoidance of doubt,
the payment called for in the preceding sentence will not be in addition to
the
severance otherwise payable hereunder, if any. Notwithstanding anything to
the
contrary contained in this paragraph, should Executive’s employment have been
terminated for “cause” as defined in this Agreement, then the Company shall be
entitled to enforce the noncompetition covenant contained in this Section
9(b)(iv) by
paying
to Executive no later than 30 days following the termination of his employment
with the Company or any of its subsidiaries of one half of the full amount
of
severance payments that would otherwise be payable to him under this Agreement
as if he had been terminated without “cause,” if it wishes to enforce the
noncompetition provisions called for hereunder.”
4. Notice
Provision.
The
addresses for the delivery of notices and communications with respect to this
Agreement in Section
14(b)
and with
respect to Exhibit A
are
hereby amended and restated as follows:
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If
to Executive:
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At
Executive’s home address as reflected on the books and records of Company,
with a copy to Executive at the address of Company set forth
below.
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If
to Company:
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Capital
Growth Systems, Inc.
000
Xxxx Xxxxxxx - Xxxxx 0000
Xxxxxxx,
XX 00000
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with
a copy to:
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Xxxxxxxx
X. Xxxxxxxxx, Esq.
Xxxxxxx
& Xxxxxxxx Ltd.
000
Xxxx Xxxxxx Xxxxx - Xxxxx 0000
Xxxxxxx,
XX 00000”
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5. Miscellaneous.
The
following Section
14(l)
is added
at the end of the Employment Agreement:
“(l) To
the
extent of any inconsistency between the terms of the First Amendment to this
Employment Agreement and the original form of Employment Agreement, the First
Amendment will prevail and supersede the terms of the original Employment
Agreement.”
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.
[SIGNATURE
PAGE TO FOLLOW]
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IN
WITNESS WHEREOF, the undersigned have executed this First Amendment to
Employment Agreement effective as of the date first set forth
above.
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COMPANY:
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EXECUTIVE:
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CAPITAL
GROWTH SYSTEMS, INC.,
a
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Florida
corporation
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XXXXXX
XXXXXX
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By:
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Its:
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