EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of May 31, 2001, is made and entered into by and
between Billserv, inc., a Nevada corporation, having an office address at 0000
X.X. Xxxx 000, Xxx Xxxxxxx, Xxxxx 00000 ("Billserv " or the "Company") and the
individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and
for the position set forth on Schedule 1 attached hereto.
Executive hereby accepts such employment with the Company
upon the terms and conditions hereinafter set forth.
Executive further agrees to serve as the Chairman of the
Board of Directors of the Company (the "Board") during the
term of this Agreement.
(b) The duties of the Executive shall include the duties and
services described in Schedule 1, which duties and services
shall at all times be subject to the direction, approval and
control of the Board and shall include such other duties, as
may be assigned by the Board commensurate with the
responsibilities normally associated with Executive's
position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed
by an Executive with the position set forth in Schedule 1 of
a business similar in size and scope as the Company and such
other reasonable additional duties as may be prescribed from
time to time by the Company which are reasonable and
consistent with the Company's operations, taking into
account Executive's expertise and job responsibilities.
During the term of this Agreement, Executive agrees to
devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge
the responsibilities assigned to Executive and to use
reasonable efforts to perform faithfully and efficiently
such responsibilities. The Executive will use Executive's
best efforts to promote the interests of the Company.
(b) During this Agreement, it shall not be a violation of this
Agreement for Executive to (i) serve on corporate, civic or
charitable boards or committees; (ii) deliver lectures,
fulfill speaking engagements or teach at educational
institutions; or (iii) manage personal investments or
companies in which personal
investments are made so long as such activities do not
significantly interfere with the performance of Executive's
responsibilities with the Company and which companies are
not in direct competition with the Company. Any income
incurred by Executive outside the scope of his employment
and permitted pursuant to the provisions hereof, shall inure
to the benefit of Executive, and the Company shall not claim
any entitlement thereto; provided, however, that any income
derived by Executive related to the business of the Company,
including, without limitation, compensation for serving on
boards of directors of companies in which the Company has a
significant investment, shall be paid over to the Company as
and when received.
(c) During the term of this Agreement, the Company shall
furnish, at Executive's principal place of employment, an
office, furnishings, secretary and such other facilities
commensurate and suitable to his position and adequate for
the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term")
shall commence effective as of the date hereof (the
"Commencement Date"), and shall continue until December 31,
2002, unless (i) extended by the mutual agreement of the
Company and the Executive or (ii) extended or terminated as
hereinafter provided.
(b) Termination of Employment by the Company for Cause. The
Company may terminate Executive's employment if such
termination is for "Cause" (as defined herein) and Cause is
not cured by Executive within any available cure period
provided below. Such notice must set forth in reasonable
detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any
of the following, which act or omission is in bad faith by
Executive without a reasonable belief that such act or
omission would benefit the Company:
(i) a default or breach by Executive of any of the
provisions of this Agreement materially
detrimental to the Company which is not cured
within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud,
embezzlement or dishonesty which result in a
conviction of a criminal offense not yet
overturned on appeal;
(iii) actions by Executive in intentionally furnishing
materially false, misleading, or omissive
information to the Company's Board of Directors
that is materially detrimental to the Company;
(iv) actions constituting a breach of the Sections 7 or
8 of this Agreement which is materially
detrimental to the Company;
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(v) acts or omissions which constitute willful failure
to follow reasonable and lawful directives of the
Company's Board of Directors, which are consistent
with Executive's job responsibilities and
performance which is not cured within 15 days
following written notice thereof.
Upon termination for Cause, Executive shall immediately
cease to have any power of his position, but shall
nevertheless be given a reasonable opportunity to access his
office with the Company for the purpose of retrieving his
personal goods and files. If any conviction pursuant to
Section 3(b) above is overturned on appeal, Executive will
be deemed to have been terminated without Cause as of the
effective date of his earlier termination.
(c) Termination Without Cause. The Company has the right to
terminate this Agreement without Cause upon written notice,
subject to payment by the Company of the Deferred
Compensation described in Section 4(c) herein. In such
event, Executive shall cease to have any power of his office
as of the effective date of the termination specified in
such written notice.
(d) Termination by Executive. Executive may terminate this
Agreement upon 30 days' written notice after the occurrence
of a material default of this Agreement by the Company,
which default is not cured within the 30- day notice period.
Such notice shall set forth in reasonable detail the acts
underlying the default. If Executive terminates this
Agreement under this Section 3(d), Executive shall be
entitled to the Deferred Compensation as described in
Section 4(c) herein.
(e) Termination by Executive Upon Change of ControlThe Company
(or its successor) at its sole option, by written notice to
the Executive not later than 30 days after the effective
date of a "Change of Control" may extend this Agreement for
a period not to exceed one year from the effective date of
any such Change of Control, on terms not less favorable than
those set forth in this Agreement. During any such
extension, if Executive terminates this Agreement without
Cause or Good Reason prior to the expiration of the
applicable period of extension, Executive shall not be
entitled to the Deferred Compensation described in Section
4(c).
Upon the expiration of any extension of this Agreement as
provided above, or if no such extension is applicable, upon
a Change of Control, Executive shall be entitled to the
Deferred Compensation described in Section 4(c) herein.
Change of Control is defined for the purposes of this
Agreement as any of the following acts:
(i) The acquisition by any person, entity or "group"
within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a person, entity
or "group" that includes Executive, of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of (A) more
than 50% of the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of the Board of
Directors or (B) more than 40% of the combined
voting power of the then outstanding
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voting securities entitled to vote generally in
the election of the Board of Directors ; or
(ii) If the individuals who serve on the Board of
Directors as of the Commencement Date (the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board of
Directors; provided, however, any person who
becomes a director subsequent to the Commencement
Date, whose election or nomination for election
was approved by a vote of at least a majority of
the directors then constituting the Incumbent
Board, shall for purposes of this Agreement be
considered a member of the Incumbent Board; or
(iii) Approval by the Company's equity holders of (A) a
merger, reorganization or consolidation whereby
the Company's equity holders immediately prior to
such approval do not, immediately after
consummation of such reorganization, merger or
consolidation own more than 50% of the combined
voting power of the surviving entity's then
outstanding voting securities entitled to vote
generally in the election of directors; or (B)
liquidation or dissolution of the Company; or (C)
the sale of all or substantially all of the assets
of the Company.
(f) Termination by Executive for Good Reason. Executive may
terminate this Agreement upon 30 days' written notice if (i)
Executive's duties are materially diminished or altered in a
manner contrary to Section 1 and 2 of this Agreement, (ii)
Executive's title is altered in a material and adverse
manner, (iii) Executive's reporting relationship is
materially and adversely modified, (iv) Executive's Base
Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation,
as provided hereunder, is adversely (from the Executive's
point of view) altered or (vi) the Company shall relocate
its executive offices more than 40 miles from their current
location (collectively "Good Reason"). Upon such termination
Executive shall be entitled to the Deferred Compensation
described in Section 4(c) herein.
(g) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 30 days'
written notice. Upon the termination date specified in such
written notice (which date shall be not more than 30 days
following the date of such notice) Executive shall cease to
have any power of his office.
(h) Automatic Extension. This Agreement shall be automatically
extended for successive one-year periods at the end of the
initial term and each extended term thereafter, unless
either party provides written notice of termination to the
other party at least three months prior to the expiration of
the initial or such extended term, respectively. In the
event the Company terminates this Agreement or fails to
renew this Agreement or does not permit the automatic
extension to occur at the end of any term hereof, Executive
shall be entitled to receive his Deferred Compensation under
Section 4(c) hereof.
4. COMPENSATION.
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(a) Base Salary.
(i) Executive shall receive a base salary as set forth
on Part I of Schedule 4(a) attached hereto.
(ii) Each January, the Board of Directors of the
Company shall review Executive's performance and
the Board of Directors may in its sole discretion
elect to increase the salary then paid to
Executive above the amount set forth on Schedule
4(a)(i), however, there shall be absolutely no
obligation to do so.
(b) Bonus Compensation.
(i) The Executive shall receive as "Bonus
Compensation" each year, the amount calculated in
accordance with Schedule 4(b) attached hereto.
(ii) If at anytime hereafter, the Company shall adopt a
bonus program, an option program or any other form
of equity participation for senior executive
officers of the Company, the Executive shall be
eligible to participate in such bonus program,
option program or other form of equity
participation in a manner and capacity
commensurate with his position and duties.
(c) Deferred Compensation.
(i) When Due. Executive (or his estate as the case may
be) shall be entitled to the Deferred Compensation
as calculated below, the initial installment of
which is to be paid within 30 days after the event
giving rise to the payout (except as provided
below) in the event that Executive's employment is
terminated for any of the following reasons
herein: (A) death of Executive; (B) termination by
the Company without cause pursuant to Section
3(c); (C) termination by Executive upon default by
the Company pursuant to Section 3(d); (D)
termination by Executive after a Change of Control
pursuant to Section 3(e); (E) termination by the
Executive pursuant to Section 3(f); (F)
termination by the Company pursuant to Section
3(h); or (G) termination by the Company pursuant
to Section 7(a).
(ii) Amount. The Deferred Compensation shall be the
amount ("Base Deferred Compensation") which is
calculated as the greater of (A) the Base Salary
payments Executive would have received had his
employment continued for the remaining term of
this Agreement (including yearly increases
calculated at the maximum increase for the prior
two years); or (B) an amount equal to 2.95 times
the higher annual compensation earned by Executive
in the past two years (including both Base Salary
and Bonus Compensation). In addition to the Base
Deferred Compensation, Executive shall be entitled
to the following (which, together with the Base
Deferred Compensation and the Bonus Deferred
Compensation (as defined below) shall be
collectively called the "Deferred Compensation")
all of the benefits otherwise provided in this
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Agreement (including automobile expenses) during
that period of time which is the greater of (X)
the remaining term of this Agreement, or (Y) one
year (the "Deferral Period"), and an amount equal
to the pro rata portion of the Bonus Compensation
for the year in which executive's employment is
terminated determined on the basis of the number
of days elapsed in such year prior to such
termination (the "Bonus Deferred Compensation").
The Deferred Compensation herein shall be deemed
liquidated damages resulting from the Company's
termination of this Agreement and shall be
Executive's sole and exclusive remedy for any such
termination. Deferred Compensation shall not be
diminished or offset by reason of any earnings by
Executive subsequent to the date of termination.
(d) Payment of Deferred Compensation. Except as provided below,
the Deferred Compensation shall be paid in monthly
installments over the 12 months following the event giving
rise to a Deferred Compensation. If such termination is a
result of the death of Executive, the initial Deferred
Compensation shall be made within 15 days after the personal
representative of Executive's estate notifies the Company
that Letters of Administration have been filed in the
probate proceeding. The Company shall have the option at all
times during the term of this Agreement to maintain key man
life insurance on Executive's life to cover the cost of any
Deferred Compensation due to Executive. If such key man life
insurance is maintained, and the Deferred Compensation is
due as a result of Executive's death, the Deferred
Compensation shall be paid 100% in cash upon Executive's
death. The Bonus Deferred Compensation shall be paid in a
single lump sum within 90 days of the end of the year in
which Executive's employment is terminated.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid
vacation during each 12-month period during the term of this
Agreement. In addition, Executive shall be entitled to paid
time off for the same holidays as other employees of the
Company as established by the Board.
(b) Executive shall be entitled to reimbursement for all
maintenance, insurance and gasoline expenses incidental to
the use of one automobile.
(c) Executive shall be entitled to participate (in a manner and
capacity commensurate with his position and duties), subject
to eligibility and other terms generally established by the
Board, in any employee benefit plan (including but not
limited to life insurance plans, stock option plans, group
hospitalization, health, dental care (which health insurance
shall also cover Executive's dependents), profit sharing and
pension, bonus and other benefit plans), as may be adopted
or amended by the Company from time to time.
(d) The Company shall pay the premium on a "whole life"
insurance policy on the life of Executive in the initial
face amount of seven times Base Salary during the term
hereof. Executive shall have the right to designate the
beneficiaries of such policies. The Company shall pay timely
all premiums on such life insurance,
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and on demand provide Executive due proof of such payment.
The insurance companies issuing such policies shall be
authorized to give Executive, upon his request, any
information regarding the status of any such policy. Any
dividend declared upon such policy shall be applied to the
premium.
(e) The Company shall pay all initial membership fees and
monthly dues on behalf of Executive for Executive's
membership in one country club, and one airline club;
provided that the aggregate initial membership fees and the
annual membership fees of such clubs in the aggregate do not
exceed $5,000. Executive shall pay all expenses for such
club use that is not otherwise reimbursable as a Company
business expense.
(f) The Company will reimburse Executive for the cost of
reasonable tax and financial preparation and planning,
including services that may be requested by Executive from
time to time pertaining to this Agreement.
(g) Executive shall receive any such additional benefits that
any other executive officer may receive during the term of
this Agreement at the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive may fly first class
on domestic flights and business class on international flights. In addition,
upon the submission of appropriate vouchers or other receipts the Company shall
reimburse Executive for tolls and reasonable business car phone charges.
Executive shall submit vouchers or other receipts once per calendar month and
shall be reimbursed by Company within 30 days of submission.
7. DISABILITY.
(a) In the event of the death of the Executive during the Term,
the Executive's employment hereunder shall automatically
terminate. In the event that Executive shall become mentally
or physically Disabled (as hereinafter defined) so as to be
unable to fully perform his duties herein, Executive shall
continue to receive his monthly salary for each of the first
nine months or any part thereof of any continuous
Disability, less any amounts received by him under any
disability insurance paid for by the Company. If upon the
expiration of nine months of continuous Disability,
Executive remains incapacitated (hereinafter, "Permanent
Disability"), the Company shall have the right to
immediately terminate this Agreement. Such "Permanent
Disability" shall be established by a written certification
submitted by a medical doctor agreed to by the Executive and
the Company. In the absence of agreement, the Company and
the Executive shall each nominate a qualified medical doctor
and these two doctors shall select a third qualified medical
doctor, which third doctor shall make the determination as
to total disability. After the termination of these time
periods, Executive will receive disability insurance
proceeds for the term of such disability.
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(b) The Company shall reimburse Executive for the premiums of
all insurance policies covering the long and short-term
disability of Executive not to exceed $10,000 per annum (as
adjusted for increases in the Consumer Price Index) during
the term hereof.
(c) Disability for the purposes of this Agreement shall mean
that the Executive is judged disabled pursuant to the
Company's long term disability policy.
8. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
(a) During the Term and for a period of two years thereafter:
(i) Executive shall not, directly or indirectly, enter
into or participate (whether as owner, partner,
shareholder, officer, director, salesman,
consultant, employee, principal or in any other
relationship or capacity) in any business
operating or providing services in the United
States within any State in which the Company or
its affiliates are operating or providing services
as of the date of termination which is, or owns,
manages or performs Internet billing services,
including without limitation as principal or on
behalf of others and the development or operation
of any network to accomplish same (a "Competing
Entity").
(ii) Company and Executive understand and agree that
the scope and duration of the covenants contained
in this Section 8 are reasonable both in time and
geographical area and are fairly necessary to
protect the Company's legitimate business
interests. Such covenants shall survive the
termination of Executive's employment except as
otherwise provided herein. The parties further
agree that such covenants shall be regarded as
divisible and shall be operative as to time and
geographical area to the extent that they may be
made so and, if any part of such covenants is
declared invalid or unenforceable, the validity
and enforceability of the remainder shall not be
affected. Executive hereby warrants to Company
that Executive's compliance with each of the
restrictive covenants set forth in this Agreement
will not, upon the termination, of Executive's
employment with the Company for any reason
whatsoever, cause Executive to be unable to earn a
living that is suitable and acceptable to
Executive.
(iii) Executive understands and agrees that, due to the
highly competitive nature of the Company's
industry, the breach of any covenants set out in
this Section 8 will cause irreparable injury to
the Company for which it will have no adequate
remedy at law. Therefore, the Company shall be
entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining
order and to preliminary and permanent injunctive
relief in state or federal court for any breach or
threatened breach of Section 8. Nothing herein,
however, shall be construed as prohibiting the
Company from pursuing any other remedies available
to it for such breach or threatened breach,
including the recovery of damages from Executive,
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(iv) Executive shall not, without the prior written
consent of the Company, directly or indirectly,
(i) solicit, request, cause or induce any person
who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the
Company to leave the employ of or terminate such
person's relationship with the Company or (ii)
employ, hire, engage or be associated with, or
endeavor to entice away from the Company any such
person, or any customer of the Company or its
affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship
existing between the Company and/or its affiliates
with a third party.
(v) Executive shall not disparage the business
reputation of the Company (or its management team)
or take any actions that are harmful to the
Company's goodwill with its customers, content
providers, bandwidth or other network
infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that
such actions would cause irreparable harm for
which there is no adequate remedy at law and that
the Company may seek in state or federal court,
and is entitled to a temporary restraining order
and to preliminary and permanent injunctive relief
in state or federal court to stop any such conduct
or statements for any breach or threatened breach
of this Section 8(e) during the term of this
Agreement and for a period of two years
thereafter.
(vi) Company spends considerable amounts of time, money
and effort in developing and maintaining good will
in its industry. Executive agrees the covenants
contained within this Section 8: (i) are
reasonable and necessary in all respects to
protect the goodwill, trade secrets, confidential
information, and business interests of Company;
(ii) are not oppressive to Executive; and (iii) do
not impose any greater restraint on Executive than
is reasonably necessary to protect the goodwill,
trade secrets, confidential information and
legitimate business interests of Company.
(vii) Executive acknowledges and agrees that promises
made by the Company in this Agreement such as (i)
the establishment of a term of employment (rather
than employment at will) and (ii) the commitment
to provide severance compensation in the event of
the termination of Executive's employment for
reasons other than Cause (subject to certain
requirements on the part of Executive), constitute
one form of consideration for Executive's
agreement to and compliance with the restrictive
covenants in this Agreement. Executive
acknowledges and agrees that Company's agreement
to provide Executive with access to Company's
confidential and proprietary information is a
separate form of consideration supporting the
restrictive covenants in this Agreement. Executive
acknowledges and agrees that the Company's
agreement to permit the use of the Company's
goodwill with the Company's customers, investors
and content providers is a
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separate form of consideration supporting the
restrictive covenants in this Agreement. Executive
acknowledges and agrees that the Company's
commitment to providing Executive with unique
skill development and training is a separate form
of consideration supporting the restrictive
covenants in this Agreement.
(b) The Executive acknowledges that no additional compensation
(other than that described in Section 4) shall be payable
during the Term on account of the obligations described in
this Section 8. In consideration of Executive's obligations
after the Term described above in this Section 8, Executive
shall be paid an amount equal to two (2) times the Base
Salary paid to Executive in the year prior to the expiration
of the Term. Such amount shall be paid in monthly
installments over the two (2) year period during which
Executive is obligated under this Section 8.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and
after the Term, will obtain secret and confidential
information concerning the business of the Company and its
affiliates, including, without limitation, financial
information, trade secrets, information concerning the
operations, sales, personnel, suppliers, customers, costs,
profits and pricing policies, "know how" and certain
business methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise
all due and diligent precautions to protect the integrity of
the customer lists, mailing lists and sources thereof,
statistical data and compilations, agreements, contracts,
manuals, memoranda, notes, records, reports or other
documents and any and all other materials embodying any
Confidential Information (the "Confidential Materials") and,
upon the Company's request in writing, Executive shall
immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's
possession or control.
(c) Executive shall not at any time, either during the Term of
this Agreement or thereafter, divulge to any person or
entity any Confidential Information or deliver or permit any
person or entity to obtain any Confidential Materials except
(i) when required in the course of performing Executive's
duties hereunder, (ii) with the Company's express written
consent, (iii) where required to be disclosed by court
order, subpoena or other government process or (iv) the
Executive shall have no responsibility for the divulgence of
any information which is in the public domain. If the
Executive shall be required to make disclosure pursuant to
the provisions of clause (iii) of the preceding sentence,
the Executive promptly, but in no event more than 48 hours
after learning of such subpoena, court order or other
governmental process, shall notify, by personal delivery or
by electronic means, confirmed by mail, the Company and, at
the Company's expense, Executive shall (x) take all
reasonably necessary steps required by the Company to defend
against the enforcement of such subpoena, court order or
other government process and (y) permit the Company to
intervene and participate with counsel of its choice in any
proceeding relating to the enforcement thereof.
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(d) Upon termination of Executive's employment with the Company,
the Executive shall promptly deliver to the Company all
Confidential Materials relating to the Company and its
affiliates, which Executive may then possess or have under
Executive's control; provided, however, that Executive shall
be entitled to retain copies of such documents reasonably
necessary to document Executive's financial relationship
(both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the
provisions of these Sections 8 and 9 may cause substantial
and irreparable harm to the Company for which the Company
would have no adequate remedy at law and (ii) the provisions
of this Agreement are reasonable and necessary for the
protection of the business of the Company and its
affiliates.
10. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a
breach, of any of the provisions of Sections 8 or 9, the
Company shall have the right and remedy:
(i) to have the provisions of this Agreement
specifically enforced by any court having equity
jurisdiction or through arbitration as provided
herein;
(ii) cease any payments to Executive required under
Section 8(b); and
(iii) to require Executive to account for and to pay
over the Company all damages suffered by the
Company (including consequential and incidental
damages) as the result of any transactions
constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to
account for and pay over such damages to the
Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and
extraordinary character and that any such breach or
threatened breach may cause substantial and irreparable
injury to the Company and that money damages will not
provide an adequate remedy to the Company. In any equitable
proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a
suit for damages Company shall be required to prove the
amount of damages actually sustained.)
(c) Each of the rights and remedies enumerated in Section 10(a)
shall be independent of the other, and shall be severally
enforceable, and such rights and remedies shall be in
addition to, and not in lieu of any other rights and
remedies available to the Company under law or equity.
(d) If any provision of Section 8 or 9 is held to be
unenforceable because of the scope, duration or area of its
applicability, the court making such determination shall
have the power to modify such scope, duration, or area, or
all of them, and such provision or provisions shall then be
enforceable in such modified form.
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(e) The Company and Executive agree that any dispute or
controversy arising between any of the parties to this
Agreement, or any person or entity in privity therewith, out
of the transactions effected and relationships created in
connection herewith, including any dispute or controversy
involving the formation, terms or construction of this
Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The
only disputes not subject to mandatory, binding arbitration
are requests for injunctive relief. With respect to the
arbitration of any dispute or controversy, each party
understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain
remedies in court, including to right to a jury
trial;
(iii) discovery in arbitration is different and more
limited than discovery in litigation; and
(iv) an arbitrator's award need not include factual
findings or legal reasoning, and any party's right
to appeal or to seek modification of a ruling by
the arbitrator is strictly limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.
11. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold
harmless and indemnify the Executive, his executors,
administrators or assigns, against any
12
and all judgments, penalties (including excise and similar
taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the
Executive (net of any related insurance proceeds or other
amounts received by the Executive or paid by or on behalf of
the Company on the Executive's behalf in compensation of
such judgments, penalties, fines, settlements or expenses)
in connection with any threatened, actual or completed
action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in
such action, suit or proceeding, to which the Executive was,
is or is threatened to be made a named defendant or
respondent (a "Proceeding"), because such person is or was a
director or officer of the Company, or is or was serving at
the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar
functionary (an "Affiliate Executive") of another
corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other
enterprise (each, a "Company Affiliate"). Upon authorization
of indemnification of the Executive by the Board of
Directors in accordance with the applicable provisions of
the Nevada General Corporation Law (the "NGCL"), the
Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a
Claim (as hereinafter defined). Thereafter, the Company
shall have the burden of proof to overcome the presumption
that the Executive is so entitled. Such presumption shall
only be overcome by a judgment or other final adjudication,
after all appeals and all time for appeals have expired
("Final Determination"), adverse to the Executive
establishing that such indemnification is not permitted
hereunder or by law. An actual determination by the Company
(including its Board of Directors, legal counsel, or its
stockholders) that the Executive has not met the applicable
standard of conduct for indemnification shall not be a
defense to the action or create a presumption that the
Executive has not met the applicable standard of conduct.
The purchase, establishment or maintenance of any
Indemnification Arrangement shall not in any way diminish,
restrict, limit or affect the rights and obligations of the
Company or of the Executive under this Agreement except as
expressly provided herein, and the execution and delivery of
this Agreement by the Company and the Executive shall not in
any way diminish, restrict, limit or affect the Executive's
right to indemnification from the Company or any other party
or parties under any other indemnification arrangement, the
Certificate of Incorporation or Bylaws of the Company, or
the NGCL.
(b) Subject only to the provisions of this Section 11(b), as
long as the Executive shall continue to serve as a director
and/or officer of the Company (or shall continue at the
request of the Company to serve as an Affiliate Executive)
and, thereafter, as long as the Executive shall be subject
to any possible Proceeding by reason of the fact that the
Executive was or is a director and/or officer of the Company
(or served in any of said other capacities), the Company
shall, unless no such policies are available in any market,
purchase and maintain in effect for the benefit of the
Executive one or more valid, binding and enforceable
policies (the "Insurance Policies") of directors' and
officers' liability insurance ("D&O Insurance") providing
adequate liability coverage for the Executive's acts as a
director and/or officer of the Company or as an Affiliate
Executive. The Company shall promptly notify the Executive
of any lapse, amendment or
13
failure to renew said policy or policies or any provision
thereof relating to the extent or nature of coverage
provided thereunder. In the event the Company does not
purchase and maintain in effect said policy or policies of
D&O Insurance pursuant to the provisions of this Section
11(b), the Company shall, to the full extent permitted by
law, in addition to and not in limitation of the other
rights granted the Executive under this Agreement, hold
harmless and indemnify the Executive to the full extent of
coverage which would otherwise have been provided for the
benefit of the Executive pursuant to the Insurance Policies.
(c) The Executive shall have the right to receive from the
Company on demand, or at his option to have the Company pay
promptly on his behalf, in advance of a Final Determination
of a Proceeding all expenses payable by the Company pursuant
to the terms of this Agreement as corresponding amounts are
expended or incurred by the Executive in connection with
such Proceeding or otherwise expended or incurred by the
Executive (such amounts so expended or incurred being
referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any
Advanced Amount, pursuant to this Agreement, the Executive
shall submit to the Company a written request for payment (a
"Claim"), which includes a schedule setting forth in
reasonable detail the dollar amount expended (or incurred or
expected to be expended or incurred). Each item on such
schedule shall be supported by the xxxx, agreement or other
documentation relating thereto, a copy of which shall be
appended to the schedule as an exhibit.
Where the Executive is requesting Advanced Amounts, the
Executive must also provide (i) written affirmation of such
Executive's good faith belief that he has met the standard
of conduct required by law for indemnification, and (ii) a
written undertaking to repay such Advanced Amounts if a
Final Determination is made that the Executive is not
entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make
any payment in connection with any claim made against the
Executive for an accounting of profits made from the
purchase or sale by the Executive of securities of the
Company within the meaning of Section 16(b) of the Exchange
Act or similar provisions of any state statutory law or
common law.
(e) All agreements and obligations of the Company contained
herein shall continue during the period the Executive is a
director and/or officer of the Company (or is serving at the
request of the Company as an Affiliate Executive) and shall
continue thereafter so long as the Executive shall be
subject to any possible Proceeding by reason of the fact
that the Executive was a director or officer of the Company
or was serving as such an Affiliate Executive.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a
claim in respect thereof is to be made against the Company
under this Agreement, notify the Company of the commencement
thereof, but failure to so notify the Company will not
relieve the Company from any liability which it may have to
the Executive. With respect to any such Proceeding:
14
(i) The Company shall be entitled to participate
therein at its own expense;
(ii) Except with prior written consent of the
Executive, the Company shall not be entitled to
assume the defense of any Proceeding; and
(iii) The Company shall not settle any Proceeding in any
manner which would impose any penalty or
limitation on the Executive without the
Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to
which the Executive has received indemnified
amounts or Advanced Amounts without the Company's
prior written consent, nor will the Executive
unreasonably withhold consent to any proposed
settlement.
12. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
13. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
14. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
15. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
15
16. SECTION HEADINGS.
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
19. SECTION 280G PROTECTION.
The Company shall make a cash payment to the Executive at the time set forth
below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section 280G(b) of the Code. In addition to the foregoing,
the cash payment due to the Executive under this Section 19 shall be increased
by the aggregate of the amount of federal, state and local income, employment
and excise taxes for which the Executive will be liable on account of the cash
payments to be made under this Section 19, such that the Executive will receive
the excise tax gross-up payment net of all income and excise taxes. The
computation of this payment shall be determined, at the expense of the Company,
by an independent accounting, actuarial or consulting firm selected by the
Company (the "Accounting Firm"). Payment of the cash amount set forth above
shall be made at such time as the Company shall determine, in its sole
discretion, but in no event later than the date five business days before the
due date, without regard to any extension, for filing the Executive's federal
income tax return for the calendar year which includes the date as of which the
aforementioned "excess parachute payments" are determined. In the event that the
Executive is ultimately assessed with excise taxes under Section 4999 of the
Code as a result of payments made by the Company or any successor thereto which
exceed the amount of excise taxes used in computing the Executive's payment
under this Section 19, the Company or its successor shall indemnify the
Executive for such additional excise taxes plus any additional
16
excise taxes, income taxes, interest and penalties resulting from the additional
excise taxes and the indemnity hereunder.
20. TAX-RELATED REDUCTION OF PAYMENTS.
(a) Reduction. Notwithstanding any other provisions in this
Agreement, if it shall be determined that any payment or
distribution by the Company to or for the benefit of the
Executive pursuant to the terms of their Agreement or
otherwise (a "Payment"), would constitute an "excess
parachute payment", and that there is a Reduced Amount, the
amount of Payment to the Executive shall be reduced to such
Reduced Amount.
(b) Reduced Amount. A "Reduced Amount" means the smallest
aggregate amount of Payments that (i) is less than the sum
of the all Payments (without regard to this Section 20) and
(ii) results in the greatest Net After-Tax Receipts to the
Executive. "Net After-Tax Receipts" means the present value
(determined pursuant to Section 280G(d)(4) of the Code) of
Payments, net of (a) federal, state, and local income taxes
payable with respect to the Payments, determined by applying
the highest marginal income tax rate applicable to
individuals in the year of the Executive's termination of
employment and by calculating state and local income taxes
net of any federal income tax deduction for such taxes and
(b) any excise tax payable with respect to such Payments
pursuant to Section 4999 of the Code.
(c) Determinations. All determinations made under this Section
20 shall be made by the Accounting Firm immediately prior to
the Change of Control, which firm shall provide its
determinations and any supporting calculations both to the
Company and the Executive within 20 days after the date of
termination of the Executive's employment. Any such
determinations by the Accounting Firm shall be binding upon
the Company and the Executive. If the Accounting Firm
determines that there exists a Reduced Amount, any reduction
or elimination in Payments shall be applied first to those
Payments that it is determined would otherwise constitute
"excess parachute payments" and that are payable to the
Executive at the furthest point in time after the date of
termination of employment.
(d) Fees and Expenses and Indemnification. All of the fees and
expenses of the Accounting Firm in performing the
determinations referred to in Section 20(c) shall be borne
solely by the Company. The Company agrees to indemnify and
hold harmless the Accounting Firm of and from any and all
claims, damages, and expense of any nature resulting from or
relating to its determinations pursuant to Section 20(c),
except for claims, damages, or expenses resulting from the
gross negligence or willful misconduct of the Accounting
Firm.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV, INC.
--------------
By:
-------------------------------------
Name:
Title: CFO
"EXECUTIVE"
-----------
-----------------------------------------
Name:
18
SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: Xxxxxxx X. Xxxx
Positions: (i) Chief Executive Officer
(ii) Chairman of the Board of Directors
Duties: Management, operations and administration as appropriate for
the Chief Executive Officer and Chairman of the Board of
Directors of the Company as further described in the Bylaws
of the Company.
SCHEDULE 4(a)(i)
----------------
$190,000 per annum
SCHEDULE 4(B)
-------------
BONUS: Not to exceed 40% of the then-current annual salary,
----- as authorized by the Board of Directors.
2. Executive: Xxxxx X. Xxxx
Positions: (i) President
(ii) Chief Operating Officer
(iii) Director
Duties: Management, operations and administration as
appropriate for the President and Chief Operating
Officer and a Director of the Company as further
described in the Bylaws of the Company.
SCHEDULE 4(a)(i)
----------------
$175,000 per annum
SCHEDULE 4(b)
-------------
BONUS: Not to exceed 40% of the then-current annual salary,
----- as authorized by the Board of Directors.
19
3 . Executive: Xxxxx X. Xxxxxx
Positions: (i) Executive Vice President
(ii) Chief Financial Officer
(iii) Director
Duties: Management, operations and administration as
appropriate for the Executive Vice President and
Chief Financial Officer and a Director of the
Company as further described in the Bylaws of the
Company.
SCHEDULE 4(a)(i)
----------------
$145,000 per annum
SCHEDULE 4(b)
-------------
BONUS: Not to exceed 40% of the then-current annual salary,
----- as authorized by the Board of Directors.
4. Executive: Xxxx X. Xxxxxxx
Position: (i) Senior Vice President, Sales and Marketing
Duties: Management, operations and administration as
appropriate for the Senior Vice President of Sales
and Marketing of the Company as further described
in the Bylaws of the Company.
SCHEDULE 4(a)(i)
----------------
$145,000 per annum
SCHEDULE 4(b)
-------------
BONUS: Not to exceed 40% of the then-current annual salary,
----- as authorized by the Board of Directors.
20
5. Executive: Xxxxxxxx X. Xxxxxxx
Positions: (i) Secretary
(ii) Senior Vice President
(iii) General Counsel
Duties: Management, operations and administration as
appropriate for the Secretary, Senior Vice President
and General Counsel of the Company as further
described in the Bylaws of the Company.
SCHEDULE 4(a)(i)
----------------
$120,000 per annum
SCHEDULE 4(b)
-------------
BONUS: Not to exceed 40% of the then-current annual salary,
----- as authorized by the Board of Directors.
21
