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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
by and between NETZEE, INC., a Georgia corporation (the "Company"), and XXXXXXX
X. XXXXXXXX, XX., an individual resident of the State of Georgia (the
"Executive"), to be effective as of the 1st day of March, 2000 (the "Effective
Date").
The Company and the Executive previously entered into that certain
Employment Agreement, dated September 1, 1999 (the "Old Agreement"), whereby the
Executive was employed by the Company as the Company's Executive Vice President
of Finance and Chief Financial Officer. The Company and the Executive desire to
mutually terminate the Old Agreement, effective as of the Effective Date, and
adopt this Agreement for the purpose of making such changes as the parties
herein agree, in consideration for the outstanding efforts and achievements of
the Executive since the commencement of the Old Agreement.
In this regard, the Company desires to continue the employment of the
Executive as its Executive Vice President of Finance and Chief Financial
Officer, and the Executive is willing to continue to serve the Company on the
terms and conditions provided herein.
Defined Terms: Capitalized terms used in this Agreement that are not otherwise
defined herein are defined at Section 19 hereof.
1. Employment. The Company hereby employs the Executive, and the
Executive hereby agrees to serve the Company, as the Executive
Vice President of Finance and Chief Financial Officer of the
Company, upon the terms and conditions set forth herein. The
Executive shall be the only Executive Vice President of
Finance and Chief Financial Officer 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,
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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 employment under this Agreement shall commence as
of the Effective Date and shall continue until August 31,
2001(the "Initial Term"); provided, however, the Company may
extend the Initial Term for two (2) addition years (the
"Extended Term"), effective September 1, 2001, 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.
a. The Company shall pay to the Executive a base salary
at a rate of not less than $140,000 per annum, in
accordance with the salary payment practices of the
Company in effect from time to time.
On or before each September 1st 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. During 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 1st) 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
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recommendation by the CEO, shall annually consider
(on or before each September 1st) 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 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 judgement 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. Further, the Company shall reimburse the
Executive for all fees, dues, seminars (including
travel and lodging) and other related costs and
expenses reasonably required by the
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Executive to maintain his status as a certified
public accountant in each state that the Executive
is, or may be, so certified.
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.
a. The Executive's employment under this Agreement may
be terminated prior 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 30th 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
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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 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
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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 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.
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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
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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
effect.
5. Protection of Trade Secrets and Confidential Information.
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
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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 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
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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.
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 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
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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 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.
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.
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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 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.
9. Notice. For the purposes of this Agreement, notices and all
other 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, 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 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 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 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
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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
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 between the parties hereto and supersedes all prior
agreements (including the Old Agreement), 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 convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
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.
a. Rights. Subject to the provision of this Section 17,
if the Company proposes to make a registered public
offering of 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 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
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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.
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:
(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
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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;
(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 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.
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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
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
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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 "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
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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 tot he 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 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:
a. "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).
b. "Act" shall mean the Securities Act of 1933, as
amended.
c. "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
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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.
d. "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.
e. "Business" shall mean the design, development,
marketing and implementation of electronic banking
software and services for financial institutions.
f. "Bylaws" shall mean the Bylaws of the Company, as
amended, supplemented or otherwise modified form time
to time.
g. "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
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(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.
b. A "Change in Control" shall mean the occurrence
during the Term of any of the following events:
(i) 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
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
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by reason of any agreement intended to avoid
or settle any Election contest or Proxy
Contest; or (1)
(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
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
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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.
i. "Compensation Committee" shall mean the compensation committee
of the Board.
j. "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.
k. "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.
l. "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).
m. "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.
n. "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.
o. "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.
p. "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.]
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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: Xxxx X. Xxxxx
---------------------------------------
Title: Chief Executive Officer
---------------------------------------
EXECUTIVE:
/s/ Xxxxxxx X. Xxxxxxxx, Xx.
--------------------------------------------
XXXXXXX X. XXXXXXXX, XX.
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