JIM MCDEVITT EMPLOYMENT AGREEMENT
XXX
XXXXXXXX
Agreement
dated as of December 28, 2007, between CAPITAL GROWTH SYSTEMS, INC.,
a Florida corporation, having a place of business at 000 X. Xxxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 (the “Company”), and XXX
XXXXXXXX
(the “Executive”).
WITNESSETH
WHEREAS,
the Company wishes Executive to serve as Chief Financial Officer, Secretary,
Treasurer, and Senior Vice President - Finance of the Company during the term
of
this Agreement 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 January 1, 2008.
(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” 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 fifty percent (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 fifty percent (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 fifty percent (50%) of, respectively, 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 fifty percent (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.
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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 Financial Officer, Secretary,
Treasurer, and Senior Vice President - Finance of the Company and shall have
the
normal duties, responsibilities and authority of these positions, 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 his town of residence 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.
(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 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
one hundred percent (100%) of the target objectives and the wherewithal of
Company to pay the same is one hundred percent (100%) of Base
Salary.
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(iii) 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 one hundred percent (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.
(iv) 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.
(v) Stock
Options.
The Company has granted options on December 10, 2007 to Executive to purchase:
(i) up to 715,000 shares of Common Stock vested as of such date; and (ii) up
to
1,000,000 shares of Common Stock vesting subject to designated performance
criteria as set forth in separate forms of Option Grants; the parties
acknowledge and agree that the aforesaid grants were made in anticipation of
this Agreement and in consideration of the undertakings of Executive set forth
in Section 9 below.
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(c) 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.
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 ninety (90) days after such receipt, Executive shall not have
returned to at least eighty percent (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 thirty (30) days of action the Company has taken in such thirty
(30) day period, together with any other similar actions within the prior six
months, which Executive believes constitutes Good Reason. The Company shall
have
thirty (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 thirty (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) 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 thirty (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 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.
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(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. All such Accrued Obligations shall be paid to Executive
in a lump sum in cash within thirty (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 will terminate on the Date of
Termination.
(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 thirty (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 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 (1) 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
(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
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(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. With
regard to Employee options granted to Executive pursuant to Section 4(b)(iv)
after the date hereof, one hundred percent (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.
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.
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 fifty percent (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;
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(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 twelve
(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;
(iii) publicly
criticize or disparage in any manner or by any means the Company or its
management, policies, operations, products, services, practices, or personnel;
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 that 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:
(1) competes
with Company in the Business of Company; or
(2) 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:
a. provision
of telecom network integration services, including the sale or lease of
broadband circuits for the transmission of data or voice;
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b. cost
reduction solutions for companies aimed at taking cost out of their network
usage or procurement, including network optimization and least cost
routing;
c. licensing
or sale of software intended to effect the foregoing:
i. 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
ii. 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 thirty (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) provided that it makes payment to Executive no later than thirty (30)
days following the termination of his employment with the Company or any of
its
subsidiaries of one half the amount of severance payments that would otherwise
be payable to him under this Agreement as if he had been terminated without
“cause.”
(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.
11
(e) Upon
termination of Executive’s employment for any reason, Executive covenants to
resign from the Board effective no later than the Termination Date.
(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 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. Sec. 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.
12
(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. 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.
13
(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.
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:
|
At
Executive’s home address on the Company’s books and
records
|
|
with
a copy to:
|
|
|
____________________________
____________________________
____________________________
____________________________
|
|
|
If
to the Company:
|
Capital
Growth Systems, Inc.
000
Xxxx Xxxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
|
|
with
a copy to:
|
|
|
Xxxxxxxx
X. Xxxxxxxxx Esq.
Xxxxxxx
& Xxxxxxxx Ltd.
000
Xxxx Xxxxxx Xxxxx - Xxxxx 0000
Xxxxxxx,
XX 00000
|
14
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.
(f) Words
or terms used in this Agreement that 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]
15
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:
|
XXX
XXXXXXXX
|
|||
|
Its:
|
||||
|
Date:
|
||||
16
EXHIBIT
A
RELEASE
AGREEMENT
CAPITAL
GROWTH SYSTEMS, INC.
(the “Company”) and XXX
XXXXXXXX
(“Executive”) agree as follows:
WHEREAS,
the Company and Executive are parties to that certain Employment Agreement
dated
as of January 1, 2008 (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, 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 that 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.,
000
X. Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, 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:
|
||
|
XXX
XXXXXXXX
|
|||
A-2
I
agree to accept the terms of this Release Agreement.
|
COMPANY:
|
EXECUTIVE:
|
||||
|
CAPITAL
GROWTH SYSTEMS, INC.
|
|||||
|
By:
|
XXX
XXXXXXXX
|
||||
|
Its:
|
|||||
|
Date:
|
Date:
|
||||
A-3
