EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") dated March 1, 2004, is entered into by and
between Xxxxx Xxxxxxxxxxx, (the "Executive") and Now Solutions Inc. (NOW), a
Delaware corporation and Vertical Computer Systems, Inc (VCSY) a Delaware
corporation or any of its affiliates ("the Company"). This agreement may be
unilaterally transferred to an affiliate of the Company, without economic
detriment to the Employee.
BACKGROUND
A. The Company has been established for the purpose of marketing Human
Resource Payroll software products;
B. The Company desires to employ the Executive as Chief Financial Officer
(CFO) of NOW and VCSY and the Executive desires to be so employed and;
NOW, THEREFORE, the parties desire to memorialize herein the terms and
conditions of the Executive's employment. In consideration of the mutual
covenants and promises contained herein and other good and valuable
consideration, the parties hereby acknowledge the receipt and sufficiency of
which hereto, the parties agree as follows:
1. Position.
The Executive shall serve as CFO upon the terms set forth in this
Agreement. The Executive shall have the duties and responsibilities set forth in
Schedule 1 and such other duties and responsibilities inherent in this position
unless otherwise directed by the Board the executive shall report to the
Company's Chairman and the Executive shall perform any other duties reasonably
required by the Chairman.
2. Term of Employment.
Subject to the provisions of this Agreement, the term of the Executive's
employment under this Agreement shall commence on the Effective Date pursuant to
terms of the letter Agreement dated March 1, 2004, 2004 and shall continue for
two (2) years thereafter (the "Initial Term"). This Agreement may be renewed for
successive periods of one (1) year terms. Unless either party elects to
terminate this Agreement at the end of the initial or any renewal term by giving
the other party written notice of such election at least ninety (90) days before
the expiration of the then-current term, this Agreement shall be deemed to have
been renewed for an additional term of one (1) year commencing on the day after
the expiration of the then-current term. In the event that the Executive elects
not to renew this Agreement this Section 2 shall govern the Executive's
termination, without reference to Section 4, and the Company shall provide the
Executive all compensation and benefits to which the Executive is entitled
through the date of termination and thereafter the Company's obligation
hereunder shall cease. In the event that the Company elects not to renew this
Agreement, this section 2 shall govern the Executive's termination, without
reference to Section 4, and the Company shall provide Executive six (6) months'
salary paid as part of the Company's normal payroll cycle and provide for
continuation of all Company benefits to Executive, subject to the approval of
the Company's group insurance carrier(s), for a period of six (6) months in the
manner provided as of the date of termination.
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3. Compensation and Bonus.
3.1 Salary. The Company shall pay the Executive an annual base
salary of ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS U. S. ($125,000.00) during
the term of the Executive's employment, payable in accordance with the
semi-monthly payroll disbursement cycle in use by the Company ("Base
Compensation") The Executive's Base Compensation shall be reviewed and may be
increased each year during the term of the Executive's employment, provided that
the Company's performance criteria are achieved as set forth by the Board of
Directors (the BOARD") each year; and
3.2 Bonus. The Executive shall receive an annual bonus one hundred
twenty (120) days after the end of the Company's fiscal year from a pool equal
to five (5) percent of the Company taxable income from the federal tax return
filed before depreciation. The Executive's share of the bonus pool is equal to
the percentage of the Executive's annual base compensation to the total combined
annual base compensation of all executives of the Company in bonus pool for 50%
of the bonus pool and a discretionary share of the remaining 50% of bonus pool
based upon the Executive Committee's allocation based upon the individual
Executive's performance as determined by the Executive Committee at its sole and
absolute discretion .
3.3 Phantom Stock. The Executive shall receive ONE AND A HALF
PERCENT (1.5%) of the Company (the "Units"), subject to the terms of the Phantom
Stock Agreement, dated January 2, 2004 between NOW and Executive, which is
attached as Exhibit B and incorporated herein by this reference.
3.4 Stock Option. Executive shall receive a five (5) year incentive
stock option to purchase TWO MILLION FIVE HUNDRED THOUSAND (2,500,000) shares of
NOW's majority owner, Vertical Computer Systems, Inc. common stock at a strike
price of $0.014. These shares will be issued within forty-five (45) business
days from the date of this agreement. These shares are to vest on the one-year
anniversary of the effective date of this employment agreement. There will be a
lockout agreement whereby the Executive can only sell 20% of the total number of
shares purchasable under the option grant each quarter after the shares are
freely trading subject to any rules or regulations relating to xxxxxxx xxxxxxx
issued by the Security and Exchange Commission. In the event Vertical Computer
systems, Inc. files a registration statement then the common stock underlying
the option will be included in the registration.
3.5 Service with the Company. During the term of this Agreement, the
Executive shall perform such reasonable employment duties, commensurate with the
Executive's position, as the Chairman, shall, from time to time, assign to the
Executive;
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3.6 Performance of Duties. The Executive shall serve the Company
faithfully and to the best of the Executive's ability and shall devote
Executive's full business time, attention, skill and effort exclusively to the
performance of the duties described in this Agreement. Executive acknowledges
that full business time will require that Executive work at the Company's
offices a minimum forty (40) hours per week except as directed by the Chairman.
The Executive shall comply with all policies, procedures and budgets established
by the Company in the performance of the Executive's duties and
responsibilities. During the Period of Employment and commencement of the
compensation (i) the Executive's entire working time, energy, skill and best
efforts shall be devoted to the performance of the Executive's duties hereunder
in a manner which will faithfully and diligently further the business and
interests of the Company; and (ii) the Executive shall not accept any other
employment, or engage, directly or indirectly, in any other business,
commercial, or professional activity (whether or not providing compensation)
that is or may be competitive with the Company or any Affiliate that might
create a conflict of interest with the Company or any Affiliate or that
otherwise might interfere with the business of the Company or any Affiliate. The
Executive may engage in charitable, civic, fraternal, professional and trade
association activities that do not interfere materially with the Executive's
obligations to the Company;
3.7 Vacation and Sick Leave. The Executive will be entitled to four
(4) weeks of vacation and sick leave equal to six (6) days per year. Vacation
time and sick leave accumulation will be in accordance with the Company's
policies and practices as set forth in the Company's employee manual. The
Executive's use of vacation time shall be subject to the prior approval by the
Board not unreasonably withheld. Sick leave shall accumulate at the rate of one
half day per month;
3.8 Expenses. The Company shall reimburse the Executive for all
expenses incurred in connection with the Executive's duties on behalf of the
Company, provided that the Executive shall keep, and present to the Company,
records and receipts relating to reimbursable expenses incurred by him. Such
records and receipts shall be maintained and presented in a format, and with
such regularity, as the Company reasonably may require in order to substantiate
the Company's right to claim income tax deductions for such expenses. Without
limiting the generality of the foregoing, the Executive shall be entitled to
reimbursement for all reasonable business-related travel, business-related
entertainment, whether at the Executive's residence or otherwise, or other costs
and customary business expenses reasonably incident to the performance of the
Executive's duties on behalf of the Company. The Executive will be entitled to
reimbursement of all reasonable, customary business expenses incurred by him in
the performance of the Executive's duties.
3.9 Benefits. The Executive will be entitled to participate in the
employee benefit plans or programs of the Company, including medical and life
insurance and profit sharing, to the fullest extent possible, subject to the
rules and regulations applicable hereto and to standard eligibility and vesting
requirements of any coverage and shall be furnished with other services and
prerequisites appropriate to the Executive's position. Without limiting the
generality of the foregoing, the Executive shall be entitled to the following
benefits mainly paid by the Company in accordance with the Company's policy:
(a) Comprehensive medical insurance for the Executive, the
Executive's spouse, and the Executive's dependent children;
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(b) Dental insurance for the Executive, the Executive's
spouse, and the Executive's dependent children;
(c) Group term life insurance with death benefits equal to one
hundred percent (100%) of base salary; and
(d) Annual physical examinations;
4. Termination.
4.1 Due to Disability.
(a) If the Executive becomes unable to perform the duties
specified hereunder due to partial or total disability or incapacity resulting
from a mental or physical illness, injury or any other cause, the Company will
continue the payment of the Executive's base salary at its then current rate for
a period of twenty-six (26) weeks following the date the Executive is first
unable to perform such duties due to such disability or incapacity. Thereafter,
the Company shall have no obligation for base salary, bonus or other
compensation payments to the Executive during the continuance of such disability
or incapacity. The Company will continue to provide benefits to the Executive so
long as the Executive remains employed;
(b) If the Executive is unable to perform the duties specified
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any other cause for a period of ten (10)
consecutive weeks or for a cumulative period of seventy (70) business days
during any five (5) month period ("Disability"), then, to the extent permitted
by law, the Company shall have the right to terminate this Agreement thereafter,
in which event the Company shall have no further obligations or liabilities
hereunder after the date of such termination except the Executive will be deemed
disabled and eligible for the payments outlined in paragraph 4.1(a). EXECUTIVE
REPRESENTS THAT TO THE BEST OF HER KNOWLEDGE HE HAS NO MEDICAL CONDITION THAT
COULD CAUSE PARTIAL OR TOTAL DISABILITY THAT WOULD RENDER HIM UNABLE TO PERFORM
THE DUTIES SPECIFIED IN THIS AGREEMENT OTHERWISE THE BENEFITS IN PARAGRAPH
4.1(a) SHALL BE NULL AND VOID.
4.2 Due to Death. If the Executive dies during the period of
employment, the Executive's employment with the Company shall terminate as of
the end of the calendar month in which the death occurs. The Company shall have
no obligation to the Executive or the Executive's estate for Base Compensation
or other form of compensation or benefit other than amounts accrued through the
date of the Executive's death, except as otherwise required by law or by benefit
plans provided at the Company's expense.
In the event of the termination of the Executive's employment due to the
Executive's death or Disability, the Executive or the Executive's legal
representatives, as the case may be, shall be entitled to:
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(a) In the case of death, unpaid Base Compensation earned or
accrued through the Executive's date of death and continued Base Compensation at
a rate in effect at the time of death, through the end of one (1) calendar year
after which the Executive's death occurs or the end of the employment term,
which ever is the lesser amount which in no case shall such continuation be for
a period of less than six (6) months.
(b) Any performance or special incentive bonus earned but not
yet paid;
(c) A pro rata performance bonus for the year in which
employment terminates due to death or Disability based on the performance of the
Company for the year during which such termination occurs or, if performance
results are not available, based on the performance bonus paid to the Executive
for the prior year; and
(d) Any other compensation and benefits to which the Executive
or the Executive's legal representatives may be entitled under applicable plans,
programs and agreements of the Company to the extent permitted under the terms
thereof, including, without limitation, life insurance as provided in Section
3.8 above.
4.3 For Cause. The Company may terminate the Executive's employment
relationship with the Company at any time for Cause.
(a) For purposes of this Agreement, termination of employment
of the Executive by the Company for cause means termination for the following
reasons: (i) frequent and unjustifiable absenteeism, other than solely by reason
of the Executive's illness or physical or mental disability; (ii) failing to
follow the reasonable instructions of the Board; (iii) proven dishonesty
materially injurious to the Company or to its business, operations, assets or
condition (an "Adverse Effect"); (iv) insubordination; or gross violation of the
Company policy or procedure after being warned, notified, or the Executive's
acknowledged, gross or willful misconduct, or willful neglect to act, which
misconduct or neglect is committed or omitted by the Executive in bad faith and
had an Adverse Effect; and
(b) The Company shall have no obligation to the Executive for
Base Compensation or other form of compensation or benefits, except as otherwise
required by law, other than (a) amounts accrued through the date of termination,
and (b) reimbursement of appropriately documented expenses incurred by the
Executive before the termination of employment, to the extent that the Executive
would have been entitled to such reimbursement but for the termination of
employment.
4.4 Without Cause. At any time, the Company may terminate the
Executive for any reason, without cause, by providing the Executive ten (10)
days' advance written notice with payment of the balance of Base Compensation
for the remaining term of this Agreement, which in no case shall be less than
six (6) months' Base Compensation, and provide the Executive all Company
benefits for the balance of the term which in no case shall be less than six (6)
months. Thereafter, all obligations of the Company under this Agreement shall
cease. The Company may dismiss the Executive without cause notwithstanding
anything to the contrary contained in or arising from any statements, policies,
or practices of the Company.
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4.5 Termination Obligations.
(a) All of the Company's tangible Property shall be returned
promptly to the Company upon termination of the Period of Employment at the
Company's expense;
(b) All benefits to which the Executive is otherwise entitled
shall cease upon the Executive's termination, unless explicitly continued either
under this Agreement or under any specific written policy or benefit plan of the
Company;
(c) Upon termination of the Period of Employment, the
Executive shall be deemed to have resigned from all offices and directorships
then held with the Company or any Affiliate;
(d) The provisions of Sections 4.5, 5, 6, 7, 8, 9, and 11 and
any other provision which by its terms is meant to survive termination of this
Agreement, shall survive termination of this Agreement; and
(e) Following any termination of the Period of Employment, the
Executive shall cooperate fully with the Company in all matters relating to
completing pending work on behalf of the Company and the orderly transfer of
work to other employees of the Company not to exceed thirty (30) days. The
Executive shall also cooperate in the defense of any action brought by any third
party against the Company that relates in any way to the Executive's acts or
omissions while employed by the Company.
4.6 No Other Termination Obligations. Other than as provided in
Section 2 or Section 4, the Executive shall have no claim whatsoever against the
Company for compensation, damages or any other amounts arising out of or
relating to the expiry of the term or termination of the Executive's employment,
including claims arising at common law or under statute.
5. Confidentiality and Non-Disclosure.
The Executive agrees to abide by the terms of the Confidentiality and
Non-Disclosure Agreement appended hereto as Exhibit A and to comply with such
confidentiality, non-disclosure, and proprietary information policies now in
effect by the Company or as may be established in the future.
6. The Company Property.
All products, records, designs, patents, plans, data, manuals, brochures,
memoranda, devices, lists and other property delivered to the Executive by or on
behalf of the Company, all confidential information including, but not limited
to, lists of potential customers, prices, and similar confidential materials or
information respecting the business affairs of the Company, such as hardware
manufacturers, software developers, networks, strategic partners, business
practices regarding technology and schedules, legal actions and personnel
information, and all records compiled by the Executive which pertain to the
business of the Company, and all rights, title and interest now existing or that
may exist in the future in and to any intellectual property rights created by
the Executive for the Company, in performing the Executive's duties during the
term of this Agreement shall be and remain the property of the Company. The
Executive agrees to execute and deliver at a future date any further documents
that the Company, determines may be necessary or desirable to perfect the
Company's ownership in any intellectual or other property rights.
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7. Inventions.
7.1 "Inventions" shall mean any and all writings, original works or
authorship, patentable inventions, trademarks, service marks, patents,
copyrights, trade secrets, improvements, processes, designs, formulas,
discoveries, technology, computer hardware or software, procedures and/or
techniques which the Executive may make, conceive, discover, reduce to practice
or develop, either solely or jointly with any other person or persons, at any
time during the Period of Employment, whether or not during working hours and
whether or not at the request or upon the suggestion of the Company, which
relate to or are useful in connection with any business now or hereafter carried
on or contemplated by the Company, including developments or expansions of its
present fields of operations;
7.2 The Executive shall make full disclosure to the Company of all
Inventions and shall do everything necessary or desirable to vest the absolute
title thereto in the Company. The Executive shall write and prepare all
specifications and procedures regarding such inventions, improvements,
processes, procedures and techniques and otherwise aid and assist the Company so
that the Company can prepare and present applications for copyright or Letters
Patent therefor and can secure such copyright or Letters Patent wherever
possible, as well as reissues, renewals, and extensions thereof, and can obtain
the record title to such copyright or patents so that the Company shall be the
sole and absolute owner thereof in all countries in which it may desire to have
copyright or patent protection. The Executive shall not be entitled to any
additional or special compensation or reimbursement regarding any Invention;
7.3 All Inventions shall be the sole and exclusive property of the
Company. The Executive agrees to, and hereby does, assign to the Company all of
the Executive's right, title, and interest (throughout the United States and in
all foreign countries), free and clear of all liens and encumbrances, in and to
each Invention.
7.4 Continuing Obligations. The rights and obligations of the
Executive and the Company set forth in this Section shall survive the
termination of the Executive's employment and the expiration of this Agreement
8. Arbitration.
8.1 Arbitrable Claims. All disputes arising pursuant to this
Agreement, except disputes related to the Executive's breach of its obligations
with respect to the Company Intellectual Property or the Company Confidential
Information, shall be resolved pursuant to binding arbitration and be deemed
"Arbitrable Claims". All persons and entities specified in the preceding
sentence (other than the Company and the Executive) shall be considered
third-party beneficiaries of the rights and obligations created by this Section
on Arbitration. Arbitrable Claims shall include, but are not limited to,
contract (express or implied) and tort claims of all kinds, as well as all
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claims based on any federal, state or local law, statute or regulation,
excepting only claims under applicable workers' compensation law and
unemployment insurance claims. By way of example and not in limitation of the
foregoing, Arbitrable Claims shall include any claims arising under Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities;
8.2 Procedure. Arbitration of Arbitrable Claims shall be in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association, as amended ("AAA Employment Rules"), as
augmented in this Agreement. Arbitration shall be initiated as provided by the
AAA Employment Rules, although the written notice to the other party initiating
arbitration shall also include a statement of the claim(s) asserted and the
facts upon which the claim(s) are based. Arbitration shall be final and binding
upon the parties and shall be the exclusive remedy for all Arbitrable Claims.
Either party may bring an action in court to compel arbitration under this
Agreement and to enforce an arbitration award. Otherwise, neither party shall
initiate or prosecute any lawsuit or administrative action in any way related to
any Arbitrable Claim. Notwithstanding the foregoing, either party may, at its
option, seek injunctive relief. All arbitration hearings under this Agreement
shall be conducted in Fort Worth, Texas. THE PARTIES HEREBY WAIVE ANY RIGHTS
THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS, INCLUDING,
WITHOUT LIMITATION, ANY RIGHT TO TRIAL BY JURY AS TO THE MAKING, EXISTENCE,
VALIDITY OR ENFORCEABILITY OF THE AGREEMENT TO ARBITRATE;
8.3 Arbitrator Selection and Authority. All disputes involving
Arbitrable Claims shall be decided by a single arbitrator. The arbitrator shall
be selected by mutual agreement of the parties within thirty (30) days of the
effective date of the notice initiating the arbitration. If the parties cannot
agree on an arbitrator, then the complaining party shall notify the AAA and
request selection of an arbitrator in accordance with the AAA Employment Rules.
The arbitrator shall have authority to award equitable relief, damages, costs
and fees to the same extent that, but not greater than, a court would have. The
fees of the arbitrator shall be split between both parties equally, unless this
would render this Section of Arbitration unenforceable, in which case the
arbitrator shall apportion said fees so as to preserve enforceability. The
arbitrator shall have exclusive authority to resolve all Arbitrable Claims,
including, but not limited to, whether any particular claim is arbitrable and
whether all or any part of this Agreement is void or unenforceable;
8.4 Continuing Obligations. The rights and obligations of the
Executive and the Company set forth in this Section on Arbitration shall survive
the termination of the Executive's employment and the expiration of this
Agreement.
9. Prior Agreements; Conflicts of Interest. The Executive represents to
the Company: (a) that there are no restrictions, agreements or understandings,
oral or written, to which the Executive is a party or by which the Executive is
bound that prevent or make unlawful the Executive's execution or performance of
this Agreement; (b) none of the information supplied by the Executive to the
Company or any representative of the Company or placement agency in connection
with the Executive's employment by the Company misstated a material fact or
omitted information necessary to make the information supplied not materially
misleading; and (c) the Executive does not have any business or other
relationship that creates a conflict between the interests of the Executive and
the Company.
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10. Non-Competition. During the term of this Agreement the Executive shall
not:
10.1 Start employment with, offer consulting services to, or
otherwise become involved in, advise or participate on behalf of any other
company, entity or individual, in the field of the Company; and
10.2 Individually or through any agent, for himself or on behalf of
any other person or entity (i) solicit employees of the Company, to entice them
to leave the Company; or (ii) solicit or induce and third party now or at any
time during the term of this Agreement who is providing services to the Company,
through license, contract, partnership, or otherwise to terminate or reduce
their relationships with the Company.
11. Miscellaneous Provisions.
11.1 Authority. Each party hereto represents and warrants that it
has full power and authority to enter into this Agreement and to perform this
Agreement in accordance with its terms.
11.2 Governing Law. Without reference to its conflict of laws
provisions, this Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Texas and the courts of Texas shall
have exclusive jurisdiction with respect to any dispute arising herein, subject
to any local legislation which may apply to the Executive's employment in which
case the said legislation shall apply only with reference to the matter governed
therein and shall not in any other way affect the governing law of the Agreement
or the provisions hereof.
11.3 Successors and Assigns. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.
11.4 Captions. The captions of the sections of this Agreement are
for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
11.5 Severability. In the event that any provision of this Agreement
shall be invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
11.6 Amendment. This Agreement may be amended only in writing
executed by the parties hereto.
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11.7 Attorney's Fees. In the event of a dispute the prevailing party
shall be entitled to be reimbursed for its legal fees by the other party.
11.8 Finality of Agreement. The document, when executed by the
parties, supersedes all other agreements of the parties with respect to the
matters discussed.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first set forth above.
"EXECUTIVE"
Xxxxx Xxxxxxxxxxx, an individual
NOW SOLUTIONS INC.
By: ____________________________
Xxxxxxx Xxxx, Chairman
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