ROBERT POLLAN EMPLOYMENT AGREEMENT
XXXXXX
XXXXXX
Agreement
dated as of February 5, 2007, between Capital
Growth Systems, Inc.,
a
Florida corporation, having a place of business at 00 Xxxx Xxxxxxxx Xxxxx,
Xxxxx
X, Xxxxxxxxxx, Xxxxxxxx 00000 (the “Company”), and Xxxxxx
X.
Xxxxxx
(the
“Executive”).
WITNESSETH
WHEREAS,
the Company wishes Executive to serve as Chief Information & Strategy
Officer of the Company, effective immediately and Executive wishes to serve
in
such capacity, subject to the terms and conditions hereof;
WHEREAS,
the Board of Directors (“Board”) of the Company believes it to be in the best
interests of the Company to enter into this Agreement to assure Executive’s
services to the Company and to encourage Executive’s full attention and
dedication to the Company; and
WHEREAS,
in order to accomplish all the above objectives, the Board has authorized the
Company to enter into this Agreement;
NOW,
THEREFORE, in consideration of the mutual promises herein contained, including
the foregoing recitals which are made a part hereof, the Company and Executive
hereby agree as follows:
1. Certain
Definitions.
(a) The
“Effective Date” shall mean the date hereof.
(b) The
“Change-in-Control Date” shall mean the first date during the Employment Period
(as defined in Section 1(c)) on which a Change-in-Control (as defined in Section
2) occurs.
(c) The
“Employment Period” shall mean the period commencing on the Effective Date and
ending on the second (2nd) anniversary of such date; provided, however, that
on
each anniversary of the Effective Date, and on each successive annual
anniversary of such date thereafter (such date and each annual anniversary
thereof shall be hereinafter referred to as the “Renewal Date”), the Employment
Period shall be automatically extended so as to terminate on one (1) year from
such Renewal Date, unless at least ninety (90) days prior to the Renewal Date
either party shall give notice to the other that the Employment Period shall
not
be so extended; and provided, further, that upon the occurrence of a
Change-in-Control Date, the Employment Period shall automatically be extended
so
as to terminate on the first (1st) anniversary of such date.
2. Change-in-Control.
For the
purpose of this Agreement, a “Change-in-Control” or “Change-in-Control” shall
mean:
(a) The
acquisition by an individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of common stock of Company (the “Outstanding Company Common
Stock”) or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
the following acquisitions shall not constitute a Change-in-Control: (w) any
acquisition directly from the Company, (x) any acquisition by the Company or
any
of its subsidiaries, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its subsidiaries
or (z) any acquisition by any corporation with respect to which, following
such
acquisition, more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally
in
the election of directors, is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were beneficial
owners, respectively of the Outstanding Company Common Stock and Outstanding
Company Voting Securities in substantially the same proportions as their
ownership, immediately prior to such acquisition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be;
or
(b) Completion
by the Company of a reorganization, merger or consolidation, in each case,
with
respect to which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, less than 50% of, respectively, of the then outstanding shares
of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case
may be, of the corporation resulting from such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities,
as the case may be; or
(c) Completion
by the Company of (i) a complete liquidation or dissolution of Company or (ii)
the sale or other disposition of all or substantially all of the assets of
the
Company, other than to a corporation, with respect to which following such
sale
or other disposition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or
indirectly, by all or substantially all of the individuals and entities who
were
the beneficial owners, respectively, of the Outstanding Company Common Stock
and
Outstanding Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company Common
Stock
and Outstanding Company Voting Securities, as the case may be.
3. Employment
Period.
The
Company hereby agrees to continue Executive in its employ, and Executive hereby
agrees to remain in the employ of the Company, during the Employment Period
under the terms and conditions provided herein.
4. Terms
of Employment.
(a) Position
and Duties.
Executive is appointed to the position of Chief Information & Strategy
Officer of the Company and shall have the normal duties, responsibilities and
authority of the position of Chief Information and Strategy Officer, subject
to
the power of the Board or the Company’s CEO to limit such duties,
responsibilities and authority. Executive may perform his duties in Wayne,
Pennsylvania or mutually agreed location or as otherwise mutually agreed by
the
Company and Executive. The Company agrees to make an office available to
Executive in the city specified by the Executive at a location mutually
agreeable to Executive and Company. Excluding any periods of vacation and sick
leave to which Executive is entitled, Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs
the
Company and, to the extent necessary to discharge the responsibilities assigned
to Executive hereunder, to use Executive’s reasonable best efforts to perform
faithfully and efficiently such responsibilities. It shall not be a violation
of
this Agreement for Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is also expressly understood and agreed that to the extent
that such activities have been conducted by Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall
not
thereafter be deemed to interfere with the performance of Executive’s
responsibilities to the Company.
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(b) Compensation.
(i) Base
Salary.
The
Company shall pay Executive a base salary at an annual rate of $200,000
(initially and as adjusted in accordance with the terms of this Agreement,
“Base
Salary”). Base Salary shall be reviewed at least annually and shall be adjusted
as agreed between the Board and Executive (in the event no agreement is reached,
Base Salary shall remain unchanged). Any increase in Base Salary shall not
serve
to limit or reduce any other obligation to Executive under this Agreement.
Base
Salary shall not be reduced after any such increase including in connection
with
Company wide reductions applied to other senior executives of the Company.
(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 Company’s Chief Executive Officer and in
accordance with the Company’s business plan, as may be approved annually by the
Board. The incentive bonus amount to be paid to Executive will be determined
annually by the Board; it shall be initially set at $200,000, based upon 100%
achievement of his annual plan. There will be no cap, increasing linearly with
increased profit performance for over plan achievement. Plan metrics will be
set
annually and agreed to by the CEO. Executive shall also be eligible for stock
awards under the Company’s current equity incentive plan and any successor or
additional plans, as determined by the Board.
(iii) Fringe
Benefits.
While
Executive is employed by the Company under this Agreement, Executive shall
be
entitled to participate in all insurance, vacation days and other benefit plans
or programs as are provided from time to time by the Company to its other
executives, in accordance with the terms of such plans or programs and the
Company’s benefits practices then in effect.
(iv) Stock
Options.
(1) Grant
of Option/Price.
The
Company agrees to grant Executive stock options, as of the Effective Date,
to
acquire 500,000 shares of the Company’s common stock for a strike price equal to
a per share price equal to the average closing price of the Company’s common
stock for the last ten trading days immediately preceding the date of this
Agreement (the “Ten Day Average Closing Price”) (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”).
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(2) Vesting.
In
accordance with the Option Agreement (i) 25% of the Employee Options shall
vest
immediately upon the Effective Date, and (ii) 25% shall thereafter vest on
the
yearly anniversary of this Agreement over the next three (3) years, commencing
on February 5, 2008, with 100% vested on February 5, 2010, subject to the
terms hereof (including accelerated vesting in the event of Change in Control
as
specified below) and the Option Agreement.
(v) Performance
Equity Options.
(1) Grant
of Performance Option.
The
Company agrees to grant, as of the Effective Date, options to acquire 1,000,000
shares of the Company’s common stock for a strike price equal to the Ten Day
Average Closing Price per share (as equitably adjusted for reverse splits,
forward splits and recapitalizations) (the “Performance Options”) as an
incentive to attain certain revenue objectives as set forth in clause (2)
hereof.
(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%.
(c) Board
Seat.
The
Company reserves the right to appoint the Executive to serve on the Board of
Directors of the Company, subject in all events to there being an available
board seat for such appointment, and the Executive agrees to duly consider
serving on the Board of Directors of the Company if so appointed; the Company
also reserves the right to nominate the Executive to serve on its Board of
Directors, and the Executive agrees to duly consider any such
nomination.
(d) Expenses.
The
Company shall reimburse Executive for all reasonable and ordinary expenses
incurred by Executive in the performance of Executive’s duties hereunder
including expenses for entertainment, travel and similar items that arise
related to and for promoting the business of the Company; provided, however,
that Executive shall account to the Company for such expenses in the manner
customarily prescribed by the Company for its executives.
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(e) Next
Equity Financing.
For
purposes of this Agreement, Next Equity Financing means the closing of a capital
raise by the Company in a minimum aggregate gross proceeds of $6.0 million
(the
“Next Equity Financing”).
5. Termination.
(a) Death
or Disability.
This
Agreement shall terminate automatically upon Executive’s death. If the Company
determines in good faith that the Disability of Executive has occurred (pursuant
to the definition of Disability set forth below), it may give to Executive
written notice of its intention to terminate Executive’s employment hereunder.
In such event, Executive’s employment with the Company shall terminate effective
on the 90th day after receipt by Executive of such notice given at any time
after a period of six consecutive months of Disability and while such Disability
is continuing (the “Disability Effective Date”), provided that, within the 90
days after such receipt, Executive shall not have returned to at least 80%
of
full-time performance of Executive’s duties. For purposes of this Agreement,
“Disability” means disability which, at least six months after its commencement,
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to Executive or Executive’s legal representative
(such agreement as to acceptability not to be withheld unreasonably). During
such three month period and until the Disability Effective Date, Executive
shall
be entitled to all compensation provided for under Section 4
hereof.
(b) Cause.
The
Company may terminate this Agreement and Executive’s employment with the Company
for Cause. For purposes of this Agreement, “Cause” means: (i) an act or acts of
personal dishonesty taken by Executive and intended to result in substantial
personal enrichment of Executive at the expense of the Company, (ii) repeated
violations by Executive of Executive’s obligations under Section 4(a) of this
Agreement which are demonstrably willful and deliberate on Executive’s part and
which are not remedied in a reasonable period of time after receipt of written
notice from the Company, or (iii) the conviction of Executive of a
felony.
(c) Good
Reason.
During
the Employment Period, Executive’s employment hereunder may be terminated by
Executive for Good Reason. For purposes of this Agreement, “Good Reason”
means:
(i) the
assignment to Executive of any duties inconsistent in any respect with
Executive’s position (including status, offices, titles and reporting
relationships), authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement (including, without limitation, failure to comply with
Section 4(c), or any other action by the Company which results in a diminution
in such position, authority, duties or responsibilities;
(ii) any
action by the Company which results in the diminution of Executive’s position,
authority, duties, or responsibilities or any change whereby Executive is not
reporting exclusively to the CEO and is a member of the Company’s Executive
Committee;
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(iii) any
failure by the Company to comply with any of the material provisions of this
Agreement;
(iv) the
Company requiring Executive to be based at any office or location other than
that described in Section 4(a) hereof, except for travel reasonably required
in
the performance of Executive’s responsibilities;
(v) any
purported termination by the Company of Executive’s employment otherwise than as
expressly permitted by this Agreement; or
(vi) any
failure by the Company to comply with and satisfy Sections 4(c) or 11(c) of
this
Agreement.
Prior
to
giving a Notice of Termination for Good Reason, Executive shall notify the
Company within 30 days of action the Company has taken in such 30 day period,
together with any other similar actions within the prior six months, which
Executive believes constitutes Good Reason. The Company shall have 30 days
to
cure such circumstances, and if not cured to the reasonable satisfaction of
Executive, then Executive may give such Notice of Termination for Good
Reason.
(d) Change-in-Control.
Executive’s employment may be terminated by Executive within six (6) months of a
Change-in-Control.
(e) Notice
of Termination.
Any
termination of Executive’s employment hereunder by the Company for Cause or by
Executive for Good Reason shall be communicated by Notice of Termination to
such
other party hereto given in accordance with 13(b) of this Agreement. For
purposes of this Agreement, a “Notice of Termination” means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive’s employment under the provision
so indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than fifteen (15) days after the giving of such notice).
Further, a Notice of Termination for Cause is required to include a copy of
a
resolution duly adopted by the affirmative vote of not less than three quarters
(3/4) of the entire membership of the Board (excluding Executive) at a meeting
of the Board which was called and held for the purpose of considering such
termination (after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, Executive was guilty
of
conduct set forth in the definition of Cause herein, and specifying the
particulars thereof in detail.
(f) Date
of Termination.
“Date
of Termination” means the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be; provided, however, that (i)
if
Executive’s employment hereunder is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies Executive of such termination and (ii) if Executive’s
employment hereunder is terminated by reason of death or Disability, the Date
of
Termination shall be the date of death of Executive or the Disability Effective
Date, as the case may be.
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6. Obligations
of the Company upon Termination.
(a) Death.
If
Executive’s employment hereunder is terminated by reason of Executive’s death,
this Agreement shall terminate without further obligations to Executive’s legal
representatives under this Agreement, other than those obligations accrued
or
earned and vested (if applicable) by Executive as of the Date of Termination,
including, for this purpose (i) Executive’s Base Salary through the Date of
Termination at the rate in effect on the Date of Termination disregarding any
reduction in Base Salary in violation of this Agreement, and (ii) any
compensation previously deferred by Executive and not yet paid by the Company
(including accrued interest thereon) and any accrued vacation pay not yet paid
by the Company (such amounts specified in clauses (i) and (ii) are hereinafter
referred to as “Accrued Obligations”). All such Accrued Obligations shall be
paid to Executive’s estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. In addition, if Executive’s
employment is terminated by reason of Executive’s death, Executive’s estate will
have one (1) year to exercise any options vested or earned as of the Date of
Termination and all unvested or otherwise unearned options (whether in
connection with the Employee Options or the Performance Option) will terminate
on the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, Executive’s family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any
of
its subsidiaries to surviving families of employees of the Company and such
subsidiaries under such plans, programs, practices and policies relating to
family death benefits, if any, in accordance with the most favorable plans,
programs, practices and policies of the Company and its subsidiaries in effect
on the date of Executive’s death with respect to other key employees of the
Company and its subsidiaries and their families.
(b) Disability.
If
Executive’s employment is terminated by reason of Executive’s Disability, this
Agreement shall terminate without further obligations to Executive, other than
those obligations accrued or earned and vested (if applicable) by Executive
as
of the Date of Termination, including for this purpose, all Accrued Obligations.
All such Accrued Obligations shall be paid to Executive in a lump sum in cash
within 30 days of the Date of Termination. In addition, if Executive’s
employment is terminated by reason of Executive’s Disability, Executive or his
personal representative will have one (1) year to exercise any options vested
or
earned as of the Date of Termination and all unvested or otherwise unearned
options (whether in connection with the Employee Options or the Performance
Option) will terminate on the Date of Termination. Anything in this Agreement
to
the contrary notwithstanding, Executive shall be entitled after the Disability
Effective Date to receive disability and other benefits at least equal to the
most favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect on or after the Effective Date or, if more favorable
to
Executive and/or Executive’s family, as in effect at any time thereafter with
respect to other key employees of the Company and its subsidiaries and their
families.
(c) Cause.
If
Executive’s employment shall be terminated for Cause, this Agreement shall
terminate without further obligations to Executive other than those obligations
accrued or earned and vested (if applicable) by Executive as of the Date of
Termination, including for this purpose all Accrued Obligations, including
any
vested Employee Options or vested Performance Options. All such Accrued
Obligations shall be paid to Executive in a lump sum in cash within 30 days
of
the Date of Termination. Notwithstanding anything herein to the contrary, if
Executive’s employment is terminated for Cause, Executive will have thirty (30)
days to exercise any options vested or earned as of the Date of Termination
and
all unvested or otherwise unearned options (whether in connection with the
Employee Options or the Performance Options) will terminate on the Date of
Termination.
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(d) Other
than for Good Reason.
If
Executive terminates employment other than for Good Reason prior to a
Change-in-Control, this Agreement shall terminate without further obligations
to
Executive, other than those obligations accrued or earned and vested (if
applicable) by Executive through the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations shall be paid
to
Executive in a lump sum in cash within 30 days of the Date of Termination.
Notwithstanding anything herein to the contrary, if Executive’s employment is
terminated for other than Good Reason by Executive, Executive will have one
(1)
year to exercise any options vested or earned as of the Date of Termination
and
all unvested or otherwise unearned options (whether arising from the Employee
Options or the Performance Options) will terminate on the Date of
Termination.
(e) Good
Reason or Other Than for Cause.
If the
Company shall terminate Executive’s employment hereunder other than for Cause or
if Executive shall terminate his employment hereunder for Good
Reason:
(i) the
Company shall pay to Executive in a lump sum in cash within thirty (30) days
(or
such longer period necessary for the release referred to in Section 9(f) to
become irrevocable) after the Date of Termination all such Accrued Obligations;
(ii) the
Company shall, for a period of one year after the Date of Termination continue
to pay the Base Salary and benefits to Executive and/or Executive’s family at
least equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iii)
including health insurance and life insurance, in accordance with the most
favorable plans, practices, programs or policies of the Company and its
subsidiaries in effect on the Date of Termination; provided that the Company
shall not be required to provide a benefit or benefits under this Section (other
than continuation of Base Salary) to the extent Executive is reemployed during
such one year period and such subsequent employer provides a comparable benefit
or benefits; and
(iii) in
addition to the foregoing, (A) all of Executive’s unvested Employee Options or
Performance Options shall immediately vest, and (B) all of Executive’s options
(whether arising from the Employee Options or the Performance Option) as of
the
Date of Termination shall remain exercisable for two (2) years after such Date
of Termination.
(f) Good
Reason - Change-in-Control.
If
Executive shall terminate his employment within six (6) months of a
Change-in-Control:
(i) if
the
termination is accompanied by any element of Good Cause set forth in Section
5(c
)(i) - (vi) also being present, the Company shall pay to Executive in a lump
sum
in cash within thirty (30) days (or such longer period necessary for the release
referred to in Section 9(f) to become irrevocable) after the Date of Termination
all such Accrued Obligations plus three times (3x) less $1.00 of an amount
equal
to Executive’s average base salary and incentive payments paid to the Executive
in the prior three years or such lesser period of time that Executive has been
employed by the Company; in the event such termination is not accompanied by
Good Cause then the Executive shall be paid the same amount immediately set
forth above but the multiplier in the prior sentence shall be one and one-half
times (1.5x), not three (3x) times; and
8
(ii) in
addition to the forgoing, (A) all of Executive’s unvested Employee Options or
Performance Options shall immediately vest, and (B) all of Executive’s options
(whether arising from the Employee Options or the Performance Option) as of
the
Date of Termination shall remain exercisable for two (2) years after such Date
of Termination.
(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),
100% of such options shall vest immediately prior to the completion of a
Change-in-Control, unless at the time 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), such options shall
vest as follows:
(1) 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
(2) 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.
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Upon
the completion of a Change-in-Control, any such Performance Options
that
remain unvested after the application of provisions (1) and (2) of
this
Section 6(g)(ii) shall expire.
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7. Non-Exclusivity
of Rights.
Nothing
in this Agreement shall prevent or limit Executive’s continuing or future
participation in any benefit, bonus, incentive or other plans, programs,
policies or practices, provided by Company, the Company or any of their
respective subsidiaries and for which Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may have under any
stock option, restricted stock or other agreements with Company, the Company
or
any of their respective subsidiaries. Amounts which are vested benefits or
which
Executive is otherwise entitled to receive under any plan, policy, practice
or
program of Company, the Company or any of their respective subsidiaries at
or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy practice or program.
8. Full
Settlement.
The
Company’s obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which
the Company may have against Executive or others. In no event shall Executive
be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Executive under any of the provisions of this
Agreement.
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9. Certain
Covenants of Executive.
(a) As
used
in Section 9 and Section 10, the Company shall include the Company and each
corporation, partnership, or other entity that controls the Company, is
controlled by the Company, or is under common control with the Company (in
each
case “control” meaning the direct or indirect ownership of 50% or more of all
outstanding equity interests).
(b) While
Executive is employed by the Company and, following the termination of
Executive’s employment for any reason, until the first anniversary of the Date
of Termination, Executive will not, directly or indirectly:
(i) employ
or
attempt to employ any director, officer, or employee of the Company, or
otherwise interfere with or disrupt any employment relationship (contractual
or
other) of the Company;
(ii) solicit,
request, advise, or induce any present or potential customer (defined by those
companies from which the Company has either solicited business or have prepared
marketing proposals for the solicitation of business within the past 12 months
prior the Date of Termination), supplier, or other business contact of the
Company to cancel, curtail, or otherwise change its relationship with the
Company; or
(iii) publicly
criticize or disparage in any manner or by any means the Company or its
management, policies, operations, products, services, practices, or
personnel.
(c) Executive
hereby acknowledges and agrees that all non-public information and data of
the
Company, including without limitation that related to product and service
formulation, customers, pricing, sales, and financial results (collectively,
“Trade Secrets”) are of substantial value to the Company, provide it with a
substantial competitive advantage in its business, and are and have been
maintained in the strictest confidence as trade secrets. Except as permitted
by
the Board, or as appropriate in the performance of Executive’s duties in the
normal course of business, Executive shall not at any time disclose or make
accessible to anyone any Trade Secrets.
(d) Executive
acknowledges and agrees that this Section 9 and each provision hereof are
reasonable and necessary to ensure that the Company receives the expected
benefits of this Agreement and that violation of this Section will harm the
Company to such an extent that monetary damages alone would be an inadequate
remedy. Consequently, in the event of any violation or threatened violation
by
Executive of any provision of this Section, the Company shall be entitled to
an
injunction (in addition to all other remedies it may have) restraining Executive
from committing or continuing such violation. If any provision or application
of
this Section is held unlawful or unenforceable in any respect, this Section
shall be revised or applied in a manner that renders it lawful and enforceable
to the fullest extent possible.
(e) Upon
termination of Executive’s employment for any reason, Executive covenants to
resign from the Board effective no later than the Termination Date.
10
(f) Prior
to
the payment of any amount pursuant to Section 6, Executive shall have executed
the release in the form set forth as Exhibit A (with the blanks appropriately
filled in) and such release shall have become irrevocable. The release shall
exclude those claims related to Executive’s vested Employee Options, vested
Performance Options, Accrued Obligations, the obligations of paragraph 9(g),
and
any rights of indemnification from third party claims that existed prior to
Executive’s termination.
(g) Upon
termination of the Executive’s employment for any reason, the Company shall not
publicly criticize or disparage in any manner or by any means the Executive.
Upon termination of the Executive’s employment for any reason, Executive shall
not publicly criticize or disparage in any manner or by any means the Company.
10. Creations.
(a) Executive
hereby transfers and assigns to the Company (or its designee) all right, title,
and interest of Executive in and to every idea, concept, invention, and
improvement (whether patented or not) conceived by Executive and all copyrighted
or copyrightable matter created by Executive during the Term hereof that relates
to the Company’s business (collectively, “Creations”). Executive shall
communicate promptly and disclose to the Company, in such form as the Company
may request, all information, details, and data pertaining to each Creation.
Every copyrightable Creation, regardless of whether copyright protection is
sought or preserved by the Company, shall be “work for hire” as defined in 17
U.S.C. § 101 and the Company shall own all rights in and to such matter
throughout the world, without the payment of any royalty or other consideration
to Executive or anyone claiming through Executive.
(b) All
right, title, and interest in and to any and all trademarks, trade names,
service marks, and logos adopted, used, or considered for use by the Company
during Executive’s employment (whether or not developed by Executive) to
identify the Company’s products or services (collectively, the “Marks”) and all
other materials, ideas, or other property conceived, created, developed,
adopted, or improved by Executive solely or jointly during Executive’s
employment by the Company and relating to its business, shall be owned
exclusively by the Company. Executive shall not have, and will not claim to
have, any right, title, or interest of any kind in or to the Marks or such
other
property.
(c) Executive
shall execute and deliver to the Company such formal transfers and assignments
and such other documents as the Company may request to permit the Company (or
its designee) to file and prosecute such registration applications and other
documents it deems useful to protect its rights under this Agreement. Any idea,
copyrightable matter, or other property relating to the Company’s business and
disclosed by Executive prior to the first anniversary of the Date of Termination
shall be deemed to be governed hereby unless proved by Executive to have been
first conceived and made after the Date of Termination.
(d) Executive
acknowledges and understands that this Agreement does not apply to any invention
that qualifies fully under the provisions of the Illinois Employee Patent Act,
765 ILCS 1060 seq. (i.e., an invention for which no Company equipment, supplies,
facility, or trade secret information was used and which was developed entirely
on the employee's own time and (1) does not relate to Company business and
(2)
does not result from any work performed by Executive for the
Company).
11
11. Successors.
(a) This
Agreement is personal to Executive and without the prior written consent of
the
Company shall not be assignable by Executive otherwise than by will or the
laws
of descent and distribution. This Agreement shall inure to the benefit of and
be
enforceable by Executive’s legal representatives.
(b) This
Agreement shall inure to the benefit of and be binding upon Company and the
Company and their respective successors and assigns.
(c) The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of its business
and/or assets to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such succession had taken place. As used in this Agreement, “Company”
shall mean as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Arbitration.
Any
controversy or claim arising out of or relating to this Agreement, or the breach
of this Agreement, other than claims for specific performance or injunctive
relief pursuant to Section 9, shall be settled by arbitration before one
arbitrator conducted in Chicago, Illinois, and judgment upon any award rendered
by the arbitrator may be entered in any Illinois state or United States federal
court sitting in Chicago, Illinois.
13. Tax
and Legal Considerations.
(a) Golden
Parachute Gross-Up Payment.
In the
event it shall be determined that any payments due under this Agreement would
be
subject to an excise tax imposed by Section 4999 of the Code, or any interest
or
penalties (an “Excise Tax”), then Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment
by Executive of Federal and state income tax and Excise Tax imposed upon the
Gross-Up Payment, Executive will have received an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon such payments. All determinations required
to be made under this Section 13(a), including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately
prior
to a Change-in-Control of the Corporation (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Corporation and Executive.
Any Gross-Up Payment, as determined pursuant to this Section 13(a), shall be
paid by the Company to Executive within ten (10) days of the determination.
The
determination by the Accounting Firm shall be binding upon the Corporation
and
Executive.
(b) Deferred
Compensation Restrictions.
It is
intended that any amounts payable under this Agreement shall comply with the
provisions of Section 409A of the Internal Revenue Code of 1986, as amended
(the
“Code”), and the treasury regulations promulgated thereunder. To avoid any
penalties or excise tax on Executive as imposed by Section 409A, required
payments to Executive upon termination of his employment shall be distributed
on
the later of (i) the dates specified in this Agreement or (ii) six (6) months
after Executive’s Date of Termination. The term “termination of employment” and
other similar terms used in this Agreement shall be construed to have the same
meaning as is given to the term “Separation from Service” in Section 409A.
Executive and the Company agree to cooperate to make such other amendments
to
the terms of this Agreement as may be necessary to avoid the imposition of
penalties and additional taxes under Section 409A of the Code.
12
14. Miscellaneous.
(a) This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Illinois, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have
no force or effect. This Agreement may not be amended or modified otherwise
than
by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
|
If
to Executive:
|
Xxxxxx
X. Xxxxxx
Global
Capacity Group, Inc.
000
Xxxxx Xxxxxx - Xxxxx 000
Xxxxxxx,
XX 00000
|
|
with
a copy to:
|
|
|
If
to the Company:
|
Capital
Growth Systems, Inc.
00
Xxxx Xxxxxxxx Xxxxx - Xxxxx X
Xxxxxxxxxx,
Xxxxxxxx 00000
|
|
with
a copy to:
|
|
|
Xxxxxxxx
X. Xxxxxxxxx, Esq.
Xxxxxxx
& Xxxxxxxx Ltc.
000
Xxxx Xxxxxx Xxxxx Xxxxx 0000
Xxxxxxx,
XX 00000
|
or
to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressees.
(c) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
(d) The
Company may withhold from any amounts payable under this Agreement such Federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) Executive’s
failure to insist upon strict compliance with any provision hereof shall not
be
deemed to be a waiver of such provision or any other provision
thereof.
13
(f) Words
or
terms used in this Agreement which connote the masculine gender are deemed
to
apply equally to female executives.
(g) If
any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
court costs and out-of-pocket expenses incurred in connection with that action
or proceeding, in additional to any other relief which it or they may be
entitled.
(h) Failure
by either party to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right
or
remedy hereunder at any time be deemed a waiver or relinquishment of such right
or remedy.
(i) If
any
provision of this Agreement, as applied to any party or to any circumstance,
shall be found by a court to be void, invalid or unenforceable, the same shall
in no way affect any other provision of this Agreement or the application of
any
such provision in any other circumstance, or the validity or enforceability
of
this Agreement.
(j) This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns. Except as expressly provided herein, the rights,
benefits and obligations of Executive under this Agreement are personal to
him,
and any voluntary or involuntary alienation, assignment or transfer by Executive
shall be null and void.
(k) This
Agreement contains the entire understanding of the parties hereto relating
to
the subject matter contained herein and supersedes all prior and collateral
agreements, understandings, statements and negotiations of the parties. Each
party acknowledges that no representations, inducements, promises or agreements,
oral or written, with reference to the subject matter hereof have been made
other than as expressly set forth herein. This Agreement may not be modified
or
rescinded except by a written agreement signed by both parties.
[REMAINDER
OF PAGE IS BLANK.]
14
IN
WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant to the
authorization from its Board of Directors, the Company has caused those present
to be executed in its name on its behalf, all as of the day and year first
above
written.
|
COMPANY:
|
EXECUTIVE:
|
|||
|
Capital
Growth Systems, Inc.
|
||||
|
By:
|
Xxxxxx
X. Xxxxxx
|
|||
|
Its:
|
||||
|
Date:
|
||||
15
EXHIBIT
A
RELEASE
AGREEMENT
Capital
Growth Systems, Inc.
(the
“Company”) and Xxxxxx
X.
Xxxxxx
(“Executive”) agree as follows:
WHEREAS,
the Company and Executive are parties to that certain Employment Agreement
dated
February ___, 2007 (the “Employment Agreement”); and
WHEREAS,
the Company and Executive have agreed to terminate the Employment Agreement
releasing each other from all further obligations except those specifically
identified therein as surviving such termination.
THEREFORE,
in consideration of the covenants and obligations set forth below, the Company
and Executive agree as follows:
1. Separation
from Employment.
Executive’s employment with the Company will terminate on
_________________.
2. Severance.
The
Company agrees to pay Executive severance benefits in accordance with the terms
of the Employment Agreement, as may be amended from time to time, commencing
as
soon as practicable following the expiration of the rescission period referred
to below.
3. Release
of Claims.
After
adequate opportunity to review this Release Agreement and to obtain the advice
of legal counsel of Executive’s choice, Executive hereby releases, acquits and
forever discharges the Company, and all of its directors, officers, agents,
employees, affiliates, parents, successors and assigns, from any and all
liability whatsoever arising from or relating to (i) his employment by the
Company, (ii) his separation from employment with the Company, or (iii) any
other claim or liability, excluding liabilities from claims arising under this
Release Agreement or under Sections 6(d) and 9 of the Employment Agreement,
including those claims related to Executive’s vested Employee Options, vested
Performance Options, Accrued Obligations, the obligations in paragraph 9(g)
of
the Employment Agreement, and any rights of indemnification from third party
claims that existed prior to Executive’s termination. Subject to the foregoing,
by this Release, Executive gives up any right to make a claim, bring a lawsuit,
or otherwise seek money damages or court orders as a result of his employment
by
the Company, his separation from employment with the Company, or otherwise.
Executive hereby acknowledges and intends that this Release applies to any
statutory or common law claims which have arisen through the date of Executive’s
signature below, including but not limited to, any and all claims of unpaid
wages, stock options, wrongful termination, defamation, intentional or negligent
infliction of emotional distress, negligence, breach of contract, fraud, and
any
claims under the Age Discrimination in Employment Act (ADEA), Title VII of
the
Civil Rights Act of 1964, the Americans with Disabilities Act, the Illinois
Human Rights Act (IHRA), the Family and Medical Leave Act, the Employee
Retirement Income Security Act, and any other local, state or federal statutes.
Executive acknowledges that this Release includes all claims Executive is
legally permitted to release and as such does not apply to any claim for
reemployment benefits, nor does it preclude Executive from filing a charge
of
discrimination with the state Department of Human Rights or the federal Equal
Employment Opportunity Commission although Executive would not be able to
recover any damages if Executive filed such a charge. This Release includes
but
is not limited to all claims relating to Executive’s employment and the
separation of Executive’s employment. This Release Agreement shall be binding
upon Executive and upon his heirs, administrators, representatives, executors,
successors and assigns. Notwithstanding anything to the contrary contained
herein, in no event shall this Release Agreement constitute a release by
Executive of his rights with respect to accrued benefits to which he would
otherwise be entitled under any of the Company's employee benefit plans,
programs or other employee benefit arrangements (excluding any severance plans
or arrangements).
A-1
4. Entire
Agreement.
This
Release Agreement contains the entire agreement between Executive and the
Company with respect to the subject matter hereof. No modification or amendment
to this Release Agreement shall be valid or binding unless made in writing
and
signed by the parties. This Release Agreement will be interpreted under the
laws
of Illinois.
5. Notification
of Rescission Rights.
(a) This
Release Agreement contains a release of certain legal rights which Executive
may
have under the ADEA or the IHRA. Executive should consult with an attorney
regarding such release and other aspects of this Release Agreement before
signing.
(b) The
termination of Executive’s employment by the Company will not be affected by
Executive’s acceptance or failure to accept this Release Agreement. If Executive
does not accept the terms hereof, or if Executive revokes his acceptance of
this
Release Agreement, the Company will not provide to him the benefits described
herein.
(c) Executive
has twenty-one (21) days to consider whether or not to sign this agreement,
starting from the date he first receives a copy of this agreement. Executive
may
sign this agreement at any time during this twenty-one (21) day
period.
(d) After
Executive has accepted this Release Agreement by signing it, he may revoke
his
acceptance for a period of fifteen (15) days after the date he signed this
Release Agreement. This Release Agreement will not be effective until this
fifteen (15) day revocation period has expired.
(e) If
Executive wishes to revoke his acceptance of this Release Agreement he must
notify the Company in writing within the fifteen (15) day revocation period.
Such notice must be delivered to the Company in person or mailed by certified
mail, return receipt requested, addressed to: Capital Growth Systems, Inc.,
00
Xxxx Xxxxxxxx Xxxxx, Xxxxx X, Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Board
of
Directors. If Executive fails to properly deliver or mail such written
revocation as instructed, the revocation will not be effective.
I
first
received a copy of this Release Agreement on _____________________.
|
Date:
|
EXECUTIVE:
|
||
|
Xxxxxx
X. Xxxxxx
|
|||
A-2
I
agree
to accept the terms of this Release Agreement.
|
COMPANY:
|
EXECUTIVE:
|
||||
|
Capital
Growth Systems, Inc.
|
|||||
|
By:
|
Xxxxxx
X. Xxxxxx
|
||||
|
Its:
|
|||||
|
Date:
|
Date:
|
||||
A-3
