EXHIBIT 10.7
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into by
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and between NETZEE, INC., a Georgia corporation (the "Company"), and C. XXXXXXX
XXXXXX, an individual resident of the State of Georgia (the "Executive"), to be
effective as of the 1/st/ day of September, 1999 (the "Effective Date").
The Company desires to employ the Executive as its Chief Operating Officer
and President and the Executive is willing to serve the Company on the terms and
conditions provided herein.
Defined Terms: Capitalized terms used in this Agreement that are not otherwise
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defined herein are defined at Section 19 hereof.
1. Employment. The Company hereby employs the Executive, and the
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Executive hereby agrees to serve the Company, as the Chief Operating
Officer and President of the Company, upon the terms and conditions
set forth herein. The Executive shall be the only Chief Operating
Officer and President of the Company. The Executive shall have such
authority and responsibilities as are consistent with his position as
provided herein and as may be set forth in the Bylaws or assigned by
the Chief Executive Officer of the Company (the "CEO") from time to
time. The Executive shall report to the CEO.
The Executive shall devote his full business time, attention, skill,
and efforts to the performance of his duties hereunder, except during
periods of illness or periods of vacation and leaves of absence
consistent with Company policy. This employment relationship between
the Executive and the Company shall be exclusive; provided, however,
the Executive may devote reasonable periods of time (and be
exclusively entitled to all compensation and other income related
thereto) to continue to provide consulting services to other persons
and organizations, to serve as a director or advisor to other
organizations, to perform charitable and other community activities,
and to manage his personal investments; provided, further, however,
that such activities do not interfere with the performance of his
duties hereunder and are not adverse to the interests of the Company.
Unless otherwise agreed to by the Executive, the Executive shall be
headquartered at the Company's offices in and around the metropolitan
area of Atlanta, Georgia, but shall do such traveling as is reasonably
required of him in the performance of his duties.
2. Term. Unless earlier terminated as provided herein, the Executive's
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employment
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under this Agreement shall commence as of the Effective Date and shall
continue for a period of two (2) years (the "Initial Term"); provided,
however, the Company may extend the Initial Term for another two (2)
years (the "Extended Term") upon (i) written notice to the Executive
on or before January 15, 2001, and (ii) a minimum of a seven percent
(7%) increase to the Executive's then existing base salary (as
described at Section 3.a. below). (The Initial Term and the Extended
Term shall be individually and collectively referred to herein as the
"Term.")
3. Compensation and Benefits.
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a. The Company shall pay to the Executive a base salary at a rate of
not less than $200,000 per annum, in accordance with the salary
payment practices of the Company in effect from time to time.
On or before each September 1/st/ of the Term (beginning
September 1,2000) the CEO (or Compensation Committee) shall
review the base salary of the Executive and increase (but not
decrease) such base salary by an amount determined in the
discretion of the CEO (or Compensation Committee).
b. For each year of the Term, the Executive shall be eligible to
participate in any management incentive programs established by
the Company and to receive incentive compensation based upon
achievement of targeted levels of performance and such other
criteria as the CEO (or Compensation Committee) may establish
from time to time. In addition, the CEO (or the Compensation
Committee) shall annually consider (on or before each September
1/st/) the Executive's performance and determine if additional
bonus is appropriate.
c. The Executive may participate in any executive stock incentive
plans established by the Company from time to time and shall be
eligible for the grant of stock options, stock, and/or other
awards provided thereunder. Additionally, the Board (or the
Compensation Committee), upon recommendation by the CEO, shall
annually consider (on or before each September 1/st/) the
Executive's performance and determine if additional grants of
stock options, stock, and/or other awards are appropriate.
d. The Executive shall continue to participate in all retirement,
welfare, deferred compensation, life and health insurance
(including health insurance for Executive's spouse and his
dependants), and other benefit plans or programs of the Company
now or hereafter applicable to the Executive or applicable
generally to executives of the Company or to a class of
executives that includes senior executives of the Company;
provided, however, that during any period during the Term that
the Executive is subject to a Disability, and
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during the 180-day period of physical or mental infirmity leading
up to the Executive's Disability, the amount of the Executive's
compensation provided under Section 3.a. shall be reduced by the
sum of the amounts, if any, paid to the Executive for the same
period under any disability benefit or pension plan of the
Company or any of its subsidiaries.
e. The Company shall provide to the Executive an automobile owned or
leased by the Company of a make and model appropriate to the
Executive's status (in the reasonable business judgment of the
Executive) or, in lieu thereof at the Executive's option, shall
provide the Executive with an monthly allowance of not less than
$1,000 to partially cover the cost of an automobile owned or
leased by the Executive.
f. The Executive shall be entitled to three (3) weeks paid vacation
(in addition to Company-wide holiday periods) each year during
the Term, to be taken in accordance with the Company's vacation
policies for executives, as in effect from time to time.
g. The Company shall reimburse the Executive's expenses for dues and
capital assessments (but not initiation fees) of one (1) country
and (1) dining club membership currently held (or to be held) by
the Executive; provided, however, that if the Executive during
the term of his employment with the Company ceases his membership
in any such clubs and any bonds or other capital payments made by
the Company are repaid to the Executive, the Executive shall pay
over such payments to the Company.
h. The Company shall reimburse the Executive for first-class travel
and accommodations, seminar, and other expenses related to the
Executive's duties that are incurred and accounted for in
accordance with the practices of the Company, as in effect from
time to time.
Upon the prior approval of the CEO, the Executive shall be
entitled to personal use of assets of the Company, free of charge
or assessment, whether or not such personal use is separate or in
conjunction with a business purpose.
i. The Company agrees that the Executive shall be entitled to invest
in venture capital and similar investments whether or not the
Company also participates in such investments.
4. Termination.
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a. The Executive's employment under this Agreement may be terminated
prior
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to the end of the Initial Term, or if extended, the Extended
Term, only as follows:
(i) upon the death of the Executive;
(ii) by the Company due to the Disability of the Executive upon
delivery of a Notice of Termination to the Executive;
(iii) by the Company for Cause upon delivery of a Notice of
Termination to the Executive;
(iv) by the Company without Cause upon delivery of a Notice of
Termination;
(v) following a Change in Control, by the Executive for any
reason upon delivery of a Notice of Termination to the
Company within a 90-day period beginning on the 30/th/ day
after any occurrence of a Change in Control or within a
90-day period beginning on the one year anniversary of the
occurrence of any Change in Control; and
(vi) by the Executive upon a material breach of this Agreement
by the Company, upon delivery of a Notice of Termination
to the Company at least thirty (30) days prior to the
Termination Date and chance to cure therein.
b. If the Executive's employment with the Company shall be terminated
during the Term (i) by reason of the Executive's death, or (ii) by the
Company for Disability or Cause, the Company shall pay to the
Executive (or in the case of his death, the Executive's estate) within
15 days after the Termination Date, a lump sum cash payment equal to
the Accrued Compensation and, if such termination is other than by the
Company for Cause, the Pro Rata Bonus.
c. If the Executive's employment with the Company shall be terminated
during the Term pursuant to Sections 4.a. (iv), (v), or (vi), the
Executive shall be entitled to all of the following:
(i) the Company shall pay to the Executive in cash, as a lump-sum,
within 15 days of the Termination Date, an amount equal to all
Accrued Compensation and the Pro Rata Bonus;
(ii) the Company shall pay to the Executive in cash, as a lump-sum,
within 15 days of the Termination Date, an amount equal to the
base
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salary (as described in Section 3.a.), then in effect, that would
otherwise have been payable to the Executive during the Term if
such Term was not earlier terminated; provided, however, if the
otherwise remaining Term is less than 365 days, such remaining
Term shall automatically be deemed to be 365 days;
(iii) the Company shall pay to the Executive in cash, as a lump-sum,
within 15 days of the Termination Date an amount equal to the
product of the Bonus Amount, multiplied by the number of months
that were otherwise remaining in the Term, divided by 12;
(iv) the Company shall pay to the Executive in cash, as a lump-sum,
within 15 days of the Termination Date, an amount equal to those
amounts described in Sections 3.e. and 3.g. that would have
otherwise been payable during the Term if such Term was not
earlier terminated;
(v) the restrictions on any outstanding incentive awards (including
stock options) granted to the Executive under any Company plan or
arrangement shall lapse and such incentive award shall become
100% vested, and all stock options and stock appreciation rights
granted to the Executive by the Company shall become immediately
exercisable and shall become 100% vested; and
(vi) upon a Termination Date occurring prior to the earlier of (A) an
Initial Public Offering, or (B) the date in which the Company
becomes subject to the reporting requirements set forth in the
Securities Exchange Act of 1934, the Company shall, within 15
days after the Termination Date, offer to repurchase all of the
Company's capital stock and other debt and securities of the
Company (collectively, the "Company Equity") then owned by the
Executive, at a purchase price equal to the Fair Market Value of
such Company Equity, as determined in accordance with the
provisions below. The question of the Fair Market Value of the
Company Equity shall be submitted to three impartial and
reputable appraisers. The Executive and the Company shall each
select one appraiser, and such appraisers shall select a third,
independent appraiser. The three appraisers shall thereafter
proceed as expeditiously as possible to determine (by concurrence
of a majority of such appraisers) the Fair Market Value of the
Company Equity, and the appraisers shall deliver an appraisal
report to the Executive and the Company as soon as practicable
after it is completed. The determination of the question of the
Fair Market Value of the Company Equity by such appraisers shall
be final and
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binding on the Executive and the Company for purposes of this
Agreement. The Company shall pay the reasonable fees and expenses
of such appraisers. For the purposes hereof, "Fair Market Value"
shall mean the relevant percentage of the fair value of the
business of the Company represented by the Company Equity as to
which such determination is being made, which shall be determined
on a going concern basis and as between a willing seller and a
willing buyer, taking into account the Company's financial
condition, performance, market share and other relevant criteria,
but not taking into account the absence of a public market for
the shares or that the shares constitute a minority interest in
the Company.
d. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset nor reduced by the
amount of any compensation or benefits provided to the Executive in
any subsequent employment.
e. In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code")) to the Executive or for his benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment
with the Company or a change in ownership or effective control of the
Company or of a substantial portion of its assets ( a "Payment" or
"Payments"), would be subject to the excise tax imposed by Section
4999 of the Code and/or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall promptly
receive an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including any
interest or penalties, other than interest and penalties imposed by
reason of the Executive's failure to file timely a tax return or pay
taxes shown due on his return, imposed with respect to such taxes and
the Excise Tax, including any Excise Tax imposed upon the Gross-Up
Payment, the Executive would retain an amount equal to such original
payment or benefit.
f. The severance pay and benefits provided for in this Section 4 shall be
in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination
plan, program, practice or arrangement. The Executive's entitlement to
any other compensation or benefits shall be determined in accordance
with the Company's executive benefit plans and other applicable
programs, policies and practices then in
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effect.
5. Protection of Trade Secrets and Confidential Information.
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a. Through exercise of his rights and performance of his obligations
under this Agreement, Executive will be exposed to "Trade
Secrets" and "Confidential Information" (as those terms are
defined below). "Trade Secrets" shall mean information or data or
of about the Company or any affiliated entity, including, but not
limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, products plans, or
lists of actual or potential customers, clients, distributors, or
licensees, that: (i) derive economic value, actual or potential,
from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain
economic value from their disclosure or use; and (ii) are the
subject of efforts that are reasonable under the circumstances to
maintain their secrecy. To the extent that the foregoing
definition is inconsistent with a definition of "trade secret"
mandated under applicable law, the latter definition shall govern
for purposes of interpreting Executive's obligations under this
Agreement. Except as required to perform his obligations under
this Agreement or except with Company's prior written permission,
Executive shall not use, redistribute, market, publish, disclose
or divulge to any other person or entity any Trade Secrets of the
Company. The Executive's obligations under this provision shall
remain in force (during and after the Term) for so long as such
information or data shall continue to constitute a "trade secret"
under applicable law. Executive agrees to cooperate with any and
all confidentiality requirements of the Company and Executive
shall immediately notify the Company of any unauthorized
disclosure or use of any Trade Secrets of which Executive becomes
aware.
b. The Executive agrees to maintain in strict confidence and, except
as necessary to perform his duties for the Company, not to use or
disclose any Confidential Business Information at any time during
the term of his employment and for a period of one year after the
later of (i) the Executive's last date of employment and (ii) the
last day of the period with respect to which the Executive
received compensation by reason of his termination of employment.
"Confidential Business Information" shall mean any non-public
information of a competitively sensitive or personal nature,
other than Trade Secrets, acquired by the Executive, directly or
indirectly, in connection with the Executive's employment
(including his employment with the Company prior to the date of
this Agreement), including (without limitation) oral and written
information concerning the Company or its affiliates relating to
financial position and results of operations (revenues, margins,
assets, net
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income, etc.), annual and long-range business plans, marketing
plans and methods, account invoices, oral or written customer
information, and personnel information. Confidential Business
Information also includes information recorded in manuals,
memoranda, projections, minutes, plans, computer programs, and
records, whether or not legended or otherwise identified by the
company and its affiliates as Confidential Business Information,
as well as information that is the subject of meetings and
discussions and not so recorded; provided, however, that
Confidential Business Information shall not include information
that is generally available to the public, other than as a result
of disclosure, directly or indirectly, by the Executive, or was
available to the Executive on a non-confidential basis prior to
its disclosure to the Executive.
c. Upon termination of employment, the Executive shall leave with
the Company all business records relating to the Company and its
affiliates including, without limitation, all contracts,
calendars, and other materials or business records concerning its
business or customers, including all physical, electronic, and
computer copies thereof, whether or not the Executive prepared
such materials or records himself. Upon such termination, the
Executive shall retain no copies of any such materials.
d. As set forth above, the Executive shall not disclose Trade
Secrets or Confidential Business Information. However, nothing
in this provision shall prevent the Executive from disclosing
Trade Secrets or Confidential Business Information pursuant to a
court order or court-issued subpoena, so long as the Executive
first notifies (unless such notice is impracticable or
impossible) the Company of said order or subpoena in sufficient
time to allow the Company to seek an appropriate protective
order. The Executive agrees that if he receives any formal or
informal discovery request, court order, or subpoena requesting
that he disclose Trade Secrets or Confidential Business
Information, he will immediately notify the Company and provide
the Company with a copy of said request, court order, or
subpoena.
6. Non-Solicitation and Related Matters.
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a. If the Executive is terminated for Cause or if the Executive
resigns without Adequate Justification, then for a period of two
years following the date of termination, the Executive shall not
(except on behalf of or with the prior written consent of the
Company) either directly or indirectly, on the Executive's own
behalf or in the service or on behalf of others, (i) solicit,
divert, or appropriate to or for a Competing Business, or (ii)
attempt to solicit, divert, or appropriate to or for a Competing
Business, any person or entity that was a customer or prospective
customer of the Company on the
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date of termination and with whom the Executive had direct
material contact within twelve months of the Executive's last
date of employment.
b. If the Executive is terminated for Cause or if the Executive
resigns without Adequate Justification, then for a period of two
years following the date of termination, the Executive shall not,
either directly or indirectly, on the Executive's own behalf or
in the service or on behalf of others, (i) solicit, divert, or
hire away, or (ii) attempt to solicit, divert, or hire away any
employee of, or consultant to, the Company or any of its
affiliates engaged or experienced in the Business, regardless of
whether the employee or consultant is full-time or temporary, the
employment or engagement is pursuant to written agreement, or the
employment is for a determined period or is at will.
c. The Executive acknowledges and agrees that great loss and
irreparable damage would be suffered by the Company if the
Executive should breach or violate any of the terms or provisions
of the covenants and agreements set forth in this Section 6. The
Executive further acknowledges and agrees that each of these
covenants and agreements is reasonably necessary to protect and
preserve the interests of the Company. The parties agree that
money damages for any breach of clauses (a) and (b) of this
Section 6 will be insufficient to compensate for any breaches
thereof, and that the Executive or any of the Executive's
affiliates, as the case may be, will, to the extent permitted by
law, waive in any proceeding initiated to enforce such provisions
any claim or defense that an adequate remedy at law exists. The
existence of any claim, demand, action, or cause of action
against the Company, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by
the Company of any of the covenants or agreements in this
Agreement; provided, however, that nothing in this Agreement
shall be deemed to deny the Executive the right to defend against
this enforcement on the basis that the Company has no right to
its enforcement under the terms of this Agreement.
d. The Executive acknowledges and agrees that: (i) the covenants and
agreements contained in clauses (a) through (e) of this Section 6
are the essence of this Agreement; (ii) that the Executive has
received good, adequate and valuable consideration for each of
these covenants; and (iii) each of these covenants is reasonable
and necessary to protect and preserve the interests and
properties of the Company. The Executive also acknowledges and
agrees that: (i) irreparable loss and damage will be suffered by
the company should the Executive breach any of these covenants
and agreements; (ii) each of these covenants and agreements in
clauses (a) and (b) of this Section 6 is separate, distinct and
severable not only from the
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other covenants and agreements but also from the remaining
provisions of this Agreement; and (iii) the unenforceability of
any covenants or agreements shall not affect the validity or
enforceability of any of the other covenants or agreements or any
other provision or provisions of this Agreement. The Executive
acknowledges and agrees that if any of the provisions of clauses
(a) and (b) of this Section 6 shall ever be deemed to exceed the
time, activity, or geographic limitations permitted by applicable
law, then such provisions shall be and hereby are reformed to the
maximum time, activity, or geographical limitations permitted by
applicable law.
e. The Executive and the Company hereby acknowledge that it may be
appropriate from time to time to modify the terms of this Section
6 and the definition of the term "Business" to reflect changes in
the Company's business and affairs so that the scope of the
limitations placed on the Executive's activities by this Section
6 accomplishes the parties' intent in relation to the then
current facts and circumstances. Any such amendment shall be
effective only when completed in writing and signed by the
Executive and the Company.
7. Successors; Binding Agreement.
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a. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the
Company shall require any Successors and Assigns to expressly
assume 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 or assignment had taken place.
b. Neither this Agreement not any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries
or legal representatives, except by will or by the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal personal
representative.
8. Fees and Expenses. The Company shall pay all reasonable legal fees
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and related expenses (including but not limited to the costs of
experts, accountants and counsel) incurred by the Executive as they
become due as a result of any of the following: (a) the preparation,
negotiation, counsel, and execution of this Agreement; (b) the
termination of the Executive's employment (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination of employment); or (c) the Executive seeking to obtain or
enforce any right or benefit provided by this Agreement.
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9. Notice. For the purposes of this Agreement, notices and all other
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communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly
given when personally delivered or sent by certified mail, return
receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other; provided, however,
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that all notices to the Company shall be directed to the attention of
the Chairman of Board with a copy to the Secretary of the Company.
All notices and communications shall be deemed to have been received
on the date of delivery thereof.
10. Settlement of Claim. The Company's obligation to make the payments
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provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment,
defense or other right that the Company may have against the Executive
or others. The Company may, however, withhold from any benefits
payable under this Agreement all federal, state, city, or other taxes
as shall be required pursuant to any law or governmental regulation or
ruling.
11. Modification and Waiver. No provisions of this Agreement may be
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modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and the
Company. No waiver by any party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall
be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
12. Governing Law. This Agreement shall be governed by and construed and
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enforced in accordance with the laws of the State of Georgia without
giving effect to the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained
in a court of competent jurisdiction in State Georgia.
13. Severability. The provisions of this Agreement shall be deemed
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severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties hereto and supersedes all prior agreement, if any,
understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
15. Headings. The headings of Sections herein are included solely for
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convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
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16. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
17. Piggyback Registration Rights.
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a. Rights. Subject to the provision of this Section 17, if the
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Company proposes to make a registered public offering or shares
of its Common Stock excluding an Initial Public Offering, of any
of its securities under the Act (whether to be sold by it or by
one or more third parties), other than an offering registered on
Form X-0, Xxxx X-0, or comparable forms, the Company shall, not
less than 45 days prior to the proposed filing date of the
registration form, given written notice of the proposed
registration to the Executive, and at the written request of the
Executive delivered to the Company within 15 days after the
receipt of such notice, shall, subject to the provisions of
subsection (b) below, include in such registration and offering,
and in any underwriting of such offering, all shares of Common
Stock as may have been designated in the Executive's request.
b. Offering Reduction. If a registration in which the Executive has
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the right to participate pursuant to this Section 17 is an
underwritten offering, and if the managing underwriters determine
in their reasonable discretion, that the number of securities
requested to be included in such registration exceeds the number
that can be sold in such offering, then the Company shall include
in such registration only the number of shares of Common Stock
requested to be sold by the Company as the managing underwriters
shall determine; and the Executive and all other persons who have
exercised registration rights with respect to the proposed
offering shall participate in the offering in proportion to the
number of shares of Common Stock so requested by each of them to
be so included.
18. Other Registration Issues.
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a. The Company shall have no obligation to include shares of Common
Stock owned by the Executive in a registration statement pursuant
to Section 17 hereof, unless and until the Executive has
furnished the Company with all information and statements about
or pertaining to the Executive in such reasonable detail as is
reasonably deemed by the Company to be necessary or appropriate
with respect to the preparation of the registration statement.
Whenever the Executive has requested that any shares of Common
Stock be registered pursuant to Section 17 hereof, subject to the
provisions of those Sections, the Company shall, as expeditiously
as reasonably possible:
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(i) prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to
cause such registration statement to become effective as
soon as reasonably practicable thereafter (provided that
before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall
furnish counsel for the Executive with copies of all such
documents proposed to be filed);
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus
used in connection therewith as may be necessary to keep
such registration statement effective for a period of not
less than nine (9) months or until the underwriters have
completed the distribution described in such registration
statement, whichever occurs first;
(iii) furnish to the Executive such number of copies of such
registration statement, each amendment and supplement
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), and
such other documents as the Executive may reasonably
request;
(iv) use its best efforts to register or qualify such shares
under such other securities or Blue Sky Laws of such
jurisdictions as the Executive reasonably requests (and
to maintain such registrations and qualifications
effective for a period of nine months or until the
underwriters have completed the distribution of such
shares, whichever occurs first), and to do any and all
other acts and things which may be necessary or advisable
to enable the Executive or underwriters to consummate the
disposition in such jurisdictions of such shares;
provided, further, however, that, notwithstanding
anything to the contrary in this Agreement with respect
to the bearing of expenses, if any such jurisdiction
shall require that expenses incurred in connection with
the qualification of such shares in that jurisdiction be
borne in part or full by the Executive, then the
Executive shall pay such expenses to the extent required
by such jurisdiction;
(v) cause all such shares to be listed on securities
exchanges, if any, on which similar securities issued by
the Company are then listed;
(vi) provide a transfer agent and registrar for all such
shares not later than the effective date of such
registration statements;
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(vii) enter into such customary agreements (including an
underwriting agreement in customary form) and take all
such other actions as the Executive and underwriters
reasonably request (and subject to approval by the
Company's counsel) in order to expedite or facilitate the
disposition of such shares; and
(viii) make available for inspection by the Executive, by any
underwriter participating in any distribution pursuant to
such registration statement, and by any attorney,
accountant or other agent retained by the Executive or
underwriter, or by any such underwriter, all financial
and other records, pertinent corporate documents, and
properties (other than confidential intellectual
property) of the Company; provided, however, that the
Company may condition delivery of any information,
records or corporate documents upon the receipt from the
Executive and the underwriter and their counsel,
accountants, advisors and agents, of a confidentiality
agreement in form and substance acceptable to the Company
and its counsel in the exercise of their exclusive
discretion.
b. Holdback Agreement. In the event that the Company effects an
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underwritten public offering of any of the Company's equity
securities, the Executive agrees, if requested by the managing
underwriters, not to effect any sale or distribution, including
any sale pursuant to Rule 144 under the Act, of any equity
securities (except as party of such underwritten offering) during
the 180-day period commencing with the effective date of the
registration statement for such offering.
c. Stockholder Expenses. If, pursuant to Section 17 hereof, shares
--------------------
of Common Stock owned by the Executive are included in a
registration statement, then the Executive shall pay all transfer
taxes, if any, relating to the sale of its shares, the fees and
expenses of his own counsel, and its pro rata portion of any
underwriting discounts, fees or commissions or the equivalent
thereof.
d. The Company's Expenses. Except for the fees and expenses
----------------------
specified in Section 18(c) hereof and except as provided below in
this Section 18(d), the Company shall pay all expenses incident
to the registration and to the Company's performance of or
compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance
with securities or Blue Sky Laws, underwriting discounts, fees
and commissions (other than the Executive's pro rata portion of
any underwriting discounts or commissions or the equivalent
thereof), printing expenses, messenger and delivery expenses, and
fees and expenses of counsel
14
for the Company and all independent certified public accountants
and other persons retained by the Company. If the Company shall
previously have paid, pursuant to this Section 18(d), the
expenses of a registration, then the Executive shall pay all
expenses described in this Section 18(d) (but not expenses
described in Section 18(e) hereof).
e. Other. With respect to any registration pursuant to Section 17
-----
hereof, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties) and the expenses
and fees for listing the securities to be registered on exchanges
on which similar securities issued by the Company are then
listed.
f. Indemnity. In the event that any shares of Common Stock owned by
---------
the Executive are offered or sold by means of a registration
statement pursuant to Section 17 hereof, the Company agrees to
indemnify and hold harmless the Executive and each person, if
any, who controls or may control the Executive within the meaning
of the Act (the Executive and any such other persons being
hereinafter referred to individually as an "Indemnified Person"
and collectively as "Indemnified Persons") from and against all
demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs, and expenses, including,
without limitation, interest, penalties, and reasonable attorneys
fees and disbursements, asserted against, resulting to, imposed
upon or incurred by such Indemnified Person, jointly or
severally, directly or indirectly (hereinafter referred to in
this Section 18(f) in the singular as a "claim" and in the plural
as "claims"), based upon, arising out of, or resulting from any
untrue statement or alleged untrue statement of a material fact
contained in the registration statement, any preliminary or final
prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or
qualification of any such shares, or any omission or alleged
omission to state therein a material fact necessary to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading, or any violation by the
Company of the Act of any state securities or Blue Sky Laws,
except insofar as such claim is based upon, arises out of or
results from information developed or certified by the Executive
for use in connection with the registration statement or arises
out of or results from the omission of information known to the
Executive prior to the violation or alleged violation. The
Executive agrees to indemnify and hold harmless the Company, its
officers and directors, and each person, if any, who controls or
may control the Company within the meaning of the Act (the
Company, its officers and directors, and any such persons also
being hereinafter referred to individually in this context as an
15
"Indemnified Person" and collectively as "Indemnified
Persons"(from and against all claims based upon, arising out of,
or resulting from any untrue statement of a material fact
contained in the registration statement, or any omission to state
therein a material fact necessary in order to make the statement
made therein, in the light of the circumstances under which they
were made, not misleading, to the extent that such claim is based
upon, arises out of, or results from information developed or
certified by the Executive for use in connection with the
registration statement or arises out of, or results from an
omission of information known to the Executive prior to the
violation or alleged violation; provided, however, that the
maximum amount of liability in respect of such indemnification
shall be limited to an amount equal to the net proceeds actually
received by the Company or the Executive from the sale of such
shares effected pursuant to such registration. The
indemnifications set forth herein shall be in addition to any
liability the Company or the Executive may otherwise have to the
Indemnified Persons. Promptly after actually receiving definitive
notice of any claim in respect of which an Indemnified Person may
seek indemnification under this Section 18(f), such Indemnified
Person shall submit written notice thereof to either the Company
or the Executive, as the case may be (sometimes being hereinafter
referred to as an "Indemnifying Person"). The omission of the
Indemnified Person so to notify the Indemnifying Person of any
such claim shall not relieve the Indemnifying Person from any
liability it may have hereunder except to the extent that (a)
such liability was caused or increased by such omission, or (b)
the ability of the Indemnifying Person to reduce such liability
was materially adversely affected by such omission. In addition,
the omission of the Indemnified Person to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying
Person to notify the Indemnifying Person of any such claim shall
not relieve the Indemnifying Person from any liability it may
have otherwise hereunder. The Indemnifying Person shall have the
right to undertake, by counsel or representatives of its own
choosing, the defense, compromise or settlement (without
admitting liability of the Indemnified Person) of any such claim
asserted, such defense, compromise or settlement to be undertaken
at the expense and risk of the Indemnifying Person, and the
Indemnified Person shall have the right to engage separate
counsel, at its own expense, whom counsel for the Indemnifying
Person shall keep informed and consult with in a reasonable
manner. In the event the Indemnifying Person shall elect not to
undertake such defense by its own representatives, the
Indemnifying Person shall give prompt written notice of such
election to the Indemnified Person, and the Indemnified Person
shall give prompt written notice os such election to the
Indemnified Person, and the Indemnified Person shall undertake
the defense, compromise or settlement (without admitting
liability of the Indemnified Person) thereof on behalf of and for
the account and risk of the
16
Indemnifying Person by counsel or other representatives designed
by the Indemnified Person. In the event that any claim shall
arise out of a transaction or cover any period or periods wherein
the Company and the Executive shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the
parties shall, each choosing its own counsel and bearing its own
expenses, defend such claims, and no settlement or compromise of
such claim may be made without the joint consent or approval of
the Company and the Executive. Notwithstanding the foregoing, no
Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if such settlement is
effected without the consent of such Indemnifying Person (which
consent shall not be unreasonably withheld).
19. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following meanings:
i. "Accrued Compensation" shall mean the aggregate amount of all
amounts earned or accrued through the Termination Date but not
paid as of the Termination Date including (i) base salary and
other amounts set forth in Sections 3.e., f., g., and h., (ii)
reimbursement for expenses incurred by the Executive on behalf of
the Company during the period ending on the Termination Date and
not otherwise reimbursed hereunder, and (iii) bonuses and
incentive compensation (other than the Pro Rata Bonus).
ii. "Act" shall mean the Securities Act of 1933, as amended.
iii. "Adequate Justification" shall mean the occurrence after a Change
in Control of any of the following events or conditions: (i) a
material failure of the Company to comply with the terms of this
Agreement; (ii) any relocation of the Executive outside the
Atlanta, Georgia metropolitan area; or (iii) other than as
provided for herein, the removal of the Executive from the
position and/or duties described above or any other substantial
diminution in the Executive's authority or the Executive's
responsibilities that is not approved by a majority of the members
of the Board.
iv. "Bonus Amount" shall mean the greater of (i) the most recent annual
bonuses paid or payable to the Executive, or (ii) the average of
the annual bonuses paid or payable to the Executive during all
previous fiscal years ended prior to the Termination Date.
v. "Business" shall mean the design, development, marketing and
implementation of electronic banking software and services for
financial institutions.
17
vi. "Bylaws" shall mean the Bylaws of the Company, as amended,
supplemented or otherwise modified form time to time.
vii. "Cause" shall mean the occurrence of any of the following:
1. any act that constitutes, on the part of the Executive, fraud
or gross malfeasance of duty; provided, however, that such
conduct shall not constitute Cause:
(1.) unless (1) there shall have been delivered to the
Executive a written notice setting forth with
specificity the reasons that the Board believes the
Executive's conduct constitutes the criteria set forth
in clause (i), (2) the Executive shall have been
provided the opportunity, if such behavior is
susceptible to cure, to cure the specific inappropriate
behavior within 30 days following written notice, (3)
after such 30-day period, the Board of Directors
determines that the behavior has not been cured, and (4)
the termination is evidenced by a resolution adopted in
good faith by two-thirds of the members of the Board
(other than the Executive); or
(2.) if such conduct (1) was believed by the Executive in
good faith to have been in or not opposed to the
interests of the Company, and (2) was not intended to
and did not result in the direct or indirect gain to or
personal enrichment of the Executive; or
(ii) the conviction (from which no appeal may be or is timely
taken) or plea of other than "not guilty" of the Executive
of a felony or misdemeanor if such misdemeanor involves
moral turpitude; or
(iii) the material breach of this Agreement by the Executive,
upon forty-five (45) days written notice thereof and chance
to cure therein.
10. A "Change in Control" shall mean the occurrence during the Term of
any of the following events:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by
any "Person" (as the term "person" is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange act of 1934
(the "1934 Act")) immediately after which such Person has
"Beneficial Ownership" (within the
18
meaning of Rule 13d-3 promulgated under the 0000 Xxx) of 35%
or more of the combined voting power of the Company's then
outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting
Securities that are acquired in a "Non-Control Acquisition"
(as defined below) shall not constitute an acquisition that
would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (1) an employee benefit plan
(or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a
majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the
Company (a "Subsidiary"), (2) the Company or any Subsidiary,
or (3) any Person in connection with a "Non-Control
Transaction" (as defined below);
(ii) The individuals who, as of the date of the Initial Public
Offering, are members of the Board (the "Incumbent Board")
cease for any reason to constitute at least two-thirds of
the Board following the date of the Initial Public Offering;
provided, however, that if the election, or nomination for
election by the Company's stockholders, of any new director
was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of
this Agreement, be considered as a member of the Incumbent
Board; provided, further, however, that no individual shall
be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the 0000 Xxx) or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or
settle any Election contest or Proxy Contest; or
(iii) Approval by stockholders of the Company of:
(A.) A merger, consolidation, or reorganization involving
the Company, unless
(1) the stockholders of the Company, immediately
before such merger, consolidation or
reorganization, own, directly or indirectly,
immediately following such merger, consolidation
or reorganization, own at least two-thirds of the
combined voting power of the outstanding voting
securities of the corporation resulting form such
merger or consolidation or
19
reorganization (the "Surviving Corporation") in
substantially the same proportion as their
ownership of the Voting Securities immediately
before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds
of the members of the board of directors of the
Surviving Corporation.
(A transaction described in clauses (1) and (2)
shall herein be referred to as a "Non-Control
Transaction")
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that
such termination (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control and who effectuates a Change in Control
(a "Third Party") or (B) otherwise occurred in connection with, or
in anticipation of, a Change in Control that actually occurs, then
for all purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date immediately prior
to the date of such termination of the Executive's employment.
k. "Compensation Committee" shall mean the compensation committee of
the Board.
l. "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business, unless
such Business is operated and/or conducted by an affiliate of the
Company.
m. "Disability" shall mean the inability of the Executive to perform
substantially all of his current duties as required hereunder for a
continuous period of 90 days because of mental or physical
condition, illness or injury.
20
n. "Initial Public Offering" shall mean the closing of the first
public offering of the Company's common stock registered under the
Act in which aggregate proceeds to the Company, net of all
underwriting discounts and commissions and other expenses of
issuance and distribution as stated in the prospectus relating to
such offering, are equal to at least twelve million dollars
($12,000,000).
o. "Notice of Termination" shall mean a written notice of termination
from the Company or the Executive, as the case may be, that
specifies an effective date of termination, indicates the specific
termination provision in this Agreement relied upon, and sets forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the
provision so indicated.
p. "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction the numerator of which is the number of
days in the fiscal year through the Termination Date and the
denominator of which is 365.
q. "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the
Company (including this Agreement), whether by operation of law or
otherwise.
r. "Termination Date" shall mean, in the case of the Executive's
death, his date of death, and in all other cases, the date
specified in the Notice of Termination.
[Continued on the next page.]
21
IN WITNESS WHEREOF, the Company and Executive have caused this Agreement to
be executed, effective as of the Effective Date.
COMPANY:
Netzee, Inc.
by: /s/ Xxxxx X. Xxxxx
--------------------------
Name: Xxxxx X. Xxxxx
------------------------
Title: Chief Executive Officer
-----------------------
EXECUTIVE:
/s/ C. Xxxxxxx Xxxxxx
------------------------------
C. Xxxxxxx Xxxxxx
22
