SECURITIES AND EXCHANGE COMMISSION
FORM 10
GENERAL FORM REGISTRATION OF SECURITIES PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES ACT OF 1934
_____________________________________________________________________
billserv.com, Inc.
(Exact name of issuer as specified in its charter)
_____________________________________________________________________
Nevada
(State or other jurisdiction of incorporation or organization)
_____________________________________________________________________
Lori Turner Marshall Millard
Vice President and Chief Financial Officer Vice President and General Counsel
14607 San Pedro Ave., Suite 100
San Antonio, Texas 78233
210.402.5000
(Address, including zip code, and telephone number, including area code
of issuer's principal executive offices)
_____________________________________________________________________
Nevada Agency & Trust Company
50 West Liberty Street, Suite 880
Reno, Nevada 89501
702.322.0626
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_____________________________________________________________________
I.R.S. Employer Identification Number
98-0190072
_____________________________________________________________________
Securities to be registered pursuant to Section 12(b) of the Act:
Common Stock $.001 par value
(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act: None
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. BUSINESS................................................. 3
ITEM 2. FINANCIAL INFORMATION.................................... 10
ITEM 3. PROPERTIES AND EQUIPMENT................................. 24
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................. 24
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.. 26
ITEM 6. EXECUTIVE COMPENSATION................................... 29
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........... 30
ITEM 8. LEGAL PROCEEDINGS........................................ 31
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS................ 31
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.................. 32
ITEM 11. DESCRIPTION OF THE COMPANY'S SECURITIES.................. 33
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS................ 34
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA............... 35
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 35
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS........................ 35
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ITEM 1. BUSINESS
1. GENERAL
billserv.com, Inc. (the "Company") is a service bureau clearinghouse in the
electronic bill presentment and payment ("EBPP") industry. EBPP is the process
of presenting a bill in a secure environment on the Internet and allowing the
customer to pay the bill through the electronic transfer of funds. EBPP is
alternatively referred to as "Internet billing" or "Ebilling."
As a startup enterprise, the Company has yet to receive any operating revenues.
However, the Company intends to generate four principal revenue streams:
Internet billing services, Internet publishing of statements (also referred to
as "EPublishing"), customer care services through Internet and traditional
telephony technologies, and professional services associated with the
implementation and maintenance of these Internet technologies. In addition, the
Company is developing an Internet portal with EBPP capabilities.
The Company primarily targets small to medium size billers that produce monthly
recurring bills to their customer base. Examples of these billers include
utilities, credit card issuers, security monitoring services, financial
services, cable service providers and communications providers. The Company also
targets traditional print-house service companies that require assistance in
their conversion to Internet billing.
In a typical scenario, the Company will analyze a biller's existing billing
system and enable the biller to transmit its print stream to the Company for
electronic bill processing. The Company will then process the billing
information from the biller's print stream and transmit the data to a selected
consumer "front end," an Internet website destination where the consumer has
chosen to receive bills in an electronic medium. Examples of front ends, also
called aggregators, include QuickenTM, MS- MoneyTM, CheckfreeTM, TranspointTM,
the biller's website, the consumer's bank website, and Internet portals such as
YahooTM, ExciteTM , LycosTM , AOLTM and others. After receiving the bill on its
chosen website, the consumer may review and pay the bill by selecting the
available payment option on the website. Payment is completed through ACH
(Automated Clearing House) transfer of funds as directed by the consumer and
enabled by the consumer's chosen front end.
The Company will charge a volume-sensitive transaction fee for each bill or
statement presented electronically over the Internet. Pricing is also reflective
of the multi-year term commitment selected by the biller. The Company also
charges a set-up fee for implementing Internet billing capabilities for the
biller.
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The Company believes a biller can achieve substantial savings by utilizing the
electronic billing services offered by the Company instead of continuing to
publish paper-based bills. These savings are primarily realized in reduced
printing, mailing and handling costs.
The Company believes that consumers will increasingly demand to receive and pay
their bills over the Internet, particularly at a single front end website
individually selected by the consumer. The Company believes it has an advantage
in the EBPP market in that it can assist a biller in presenting a bill to any
consumer at any Internet website chosen by that consumer. In this regard, the
Company functions as a clearinghouse for selected consumer front ends. By
contrast, the Company believes that today a biller is forced to either choose
one particular consumer front end, and therefore one website, or build its own
EBPP capabilities and manage all of the various front end relationships itself,
an undertaking which involves considerable time and costs, and displaces the
biller's resources from its core business functions.
The Company believes that a biller's statement, as presented on a consumer's
chosen website, provides targeted marketing opportunities for that biller and
third party advertisers. Just as paper- based bills received by consumers often
contain marketing inserts and product offerings, the electronic bill provides
for electronic bill inserts. The Company believes that the biller can achieve
additional revenues by providing consumers with purchasing opportunities on its
bill space.
The Company believes that today it has few competitors in its role as an EPBB
service bureau clearinghouse of small to medium size billers. The Company,
however, expects that competition will increase dramatically in the near future.
The Company expects to have increased competition from front ends, traditional
print and mail companies, and existing and new market entrants.
Electronic presentment of statements, or EPublishing, enables a company to
provide business-to- business distribution of traditional paper-based statements
over the Internet. An example of such statements includes those sent by
investment or fund managers to brokers. The Company believes that statement
producers can achieve substantial time and cost savings by transferring
publishing and distribution functions to an Internet-based service provider.
The Company believes it can also generate revenues from call center operations,
whether those operations are generated from billers' outsourced customer care
functions or from marketing opportunities from electronic bill marketing
inserts. The Company therefore plans to build Internet- enabled customer
interaction centers to capitalize on these marketing opportunities.
The Company offers professional consulting services to assist billers, statement
producers, call center operators and other Internet business participants in
establishing and maintaining their own customized Internet billing, presentment
or communications systems.
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In April 1999, the Company announced that it was establishing its own Internet
portal at the website WWW.BILLS.COM. The operations of the Internet portal have
been organized under "bills.com, Inc.", a Delaware corporation which will
operate as a wholly-owned subsidiary of the Company. The Company expects that
the Internet portal of bills.comTM will be designed and developed during the
second and third quarters of 1999, and will be available for consumer use and
interaction thereafter. Consumers may currently register with bills.comTM by
visiting the website and entering applicable billing information.
The core function of bills.comTM is to operate as an Internet bill presentment
and payment service for consumers. In this regard, bills.comTM will operate a
consumer front end, similar to CheckFreeTM. Unlike other consumer front ends,
however, bills.comTM will offer its services free of charge to consumers. In
addition, bills.comTM will provide other on-line features such as stock quotes,
mortgage quotes, loan applications and approvals, banking, shopping, news,
weather, sports and other features.
bills.comTM expects to earn revenues through Internet banner advertising on its
website, as well as through sponsorship agreements with other Internet portals.
The Company believes that companies will purchase space on its bills.comTM
website in order to take advantage of the potentially large number of consumers
who will use the site as an Internet bill presentment and payment service. The
Company also will seek relationships with other Internet portals such as
YahooTM, LycosTM, AOLTM, ExciteTM, Amazon.comTM, EbayTM, NetcentivesTM,
Shop.comTM, and Net BankTM ,which may result in payments of annual sponsorship
fees to bills.comTM in exchange for providing links to their respective Internet
portals.
2. INDUSTRY OVERVIEW
Internet usage has increased dramatically in the last decade. As a result, many
new personal and commercial applications have been developed for Internet users
and increasingly consumers are conducting business through Internet
applications. The Company believes that Internet billing will be one of the next
significant applications of the Internet. Companies such as CheckfreeTM and
TranspointTM have been established in order to develop Internet billing into a
commercially viable alternative to paper-based billing and payment systems.
Research indicates that there are approximately 110 million households in the
United States with each receiving an average of twelve (12) bills per month.
Assuming an average charge of $0.40 for each EBPP transaction, the Company
estimates annual industry revenue potential of $6.4 billion. If 33% of
households pay their bills online, the market potential is $2.1 billion per
year. The Company believes that if small businesses are included in the
calculation, the market size doubles to over $4 billion per year.
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The Company estimates that the percentage of consumer acceptance of electronic
billing will be five percent (5%) in 1999. Industry research projects that
consumers will view and pay more than 1 billion bills on the Internet by the
year 2001. Conservative projections have the consumer acceptance rate growing to
thirty-five percent (35%) by the year 2007.
According to the Bank Administration Institute, five industries--utilities,
communications, credit cards, insurance, and lending institutions--are
responsible for over one-half of all consumer bill payments. Because of the
large number of recurring bills, these industries are the most likely to be the
first to offer electronic bill presentment.
3. PRODUCTS AND SERVICES
In order to meet real and anticipated market demand, the Company is developing
and will market the following products and services:
ESERV(SM) (INTERNET BILLING SERVICE BUREAU). EServ creates the option for
companies currently printing and mailing bills to instead publish the bills on
the Internet wherever their consumers may choose to receive, view and pay them.
Currently, there are several Internet locations, or "front ends," from which
consumers may choose to access and pay bills electronically. The principal front
ends are the billers' website, online banking systems, QuickenTM, MSMoneyTM,
TransPoint'sTM website, and CheckFree'sTM website. It is important for a biller
to be able to deliver statements to all of these front ends, because each
consumer will demand to receive electronic bills at their preferred front end.
Similarly, consumer acceptance will be accelerated if consumers can use any
front end they wish to view and pay their bills.
EServ is the focal point for managing all of the front end relationships. EServ
will allow billers to concentrate resources on their core business and still
exploit the growth of Internet billing. EServ's goal is to offer a familiar
business model to billers who today use traditional print and mail methods, but
allow for one delivery channel to publish bills and one delivery channel to
receive payments and accounts receivable data. With EServ, billserv.com assumes
the responsibility of managing the multiple systems, multiple delivery channels,
and multiple relationships necessary to make Internet billing effective.
EServ is competitively priced because billserv.com pays one-time integration
fees to the front ends for each biller, and volume-based per statement charges,
aggregating the volume of all of its billers. This reduction in cost enables
billserv.com to charge a one-time implementation fee to each biller
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and a per statement fee which is less than the rate a biller would pay if
supporting an internal Internet billing system.
EPUBLISHING(SM) (INTERNET PRESENTMENT OF STATEMENTS). The EPublishing product
enables business- to-business distribution of traditional paper-based
statements, such as those produced by investment or fund managers for their
brokers.
The EPublishing solution will allow businesses such as investment fund managers
or current print vendors to transmit already existing print files to the Company
for manipulation and presentment on a website that the brokerage community or
other business can access for viewing. The Company will also implement
substantial data archival systems that will house statement history and allow
for disaster recovery through a sophisticated back-up system.
While the market size for this product is very difficult to estimate, the
Company believes it is substantial. The Company is aware of one large
traditional print and mail operation that produces more than six million
statement pages per month. These paper statements are boxed and mailed to more
than 2,500 brokers. Each broker reviews and files these statements creating
inefficient workflow processes and storage costs. Assuming that most brokers are
already Internet-enabled, making the transition to an electronic retrieval and
storage system will be simple and more cost efficient than the current methods.
ECARE(SM) (CUSTOMER INTERACTION CENTER). ECare is similar in nature to
traditional call centers, but with multiple communication entry points such as
telephone, Internet, interactive voice response, email and fax. The Internet
communication component may support Web chat, IP Telephony (voice over the
Internet), Web Whiteboarding (visual interactive on-screen markings), email and
Web Video conferencing. The call centers will provide revenue opportunities
through traditional outsourced customer care services as well as through
fulfillment services via electronic bill marketing inserts.
ECONSULTING(SM) (PROFESSIONAL SERVICES). EConsulting will provide custom build
solutions for companies seeking an in-house EBPP or related system. These
services can range from assisting in the development an Internet billing
strategy to actually building an EBPP system for the biller. In this regard, the
Company can assist the biller in overcoming the learning curve associated with
EBPP. The market for this product primarily consists of large first tier or
second tier billers.
BILLS.COM(TM) (INTERNET PORTAL). Bills.com will operate as an Internet portal
offering an electronic bill presentment service for consumers. In this regard,
bills.com will operate a consumer front end, similar to CheckFreeTM. Unlike
other consumer front ends, however, bills.com will offer its services free of
charge to consumers. In addition, bills.com will provide other on-line features
such as stock
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quotes, mortgage quotes, loan applications and approvals, banking, shopping,
news, weather, sports and other features to consumers who enter the website.
D. SALES AND MARKETING
The Company foresees two broad-based approaches to its sales and marketing
strategy. The first approach is based on a geographic concentration, whereby the
Company will attempt to secure a critical mass of billing customers in a densely
populated metropolitan area. These billing customers would be local and regional
utilities or other companies from which consumers receive a substantial number
of their total monthly statements. The Company will concurrently approach local
banks and credit unions in order to develop Internet billing relationships.
These financial institutions could also market to their respective customer
bases, thereby driving consumer acceptance and demand for Internet billing
services. The geographic model would be replicated on a national and
international basis. The Company will develop a sales force to meet the demands
presented by the geographic sales model.
The second approach of the Company's sales and marketing strategy will be a
non-geographic expansion model. In this approach, the Company will pursue
vertical markets and traditional print and mail enterprises and encourage
companies in these areas to offer Internet billing services to their print and
mail customers, wherever they may be located.
To supplement its sales efforts, the Company intends to develop a marketing
compact disc which would be presented to targeted executives within prospective
billing customers. The CD will contain a clear value proposition supported by
video and demonstration capabilities.
To further its sales and marketing strategies, the Company will attend and make
presentations at industry-specific trade shows and in trade publications. It is
the Company's plan to have a significant presence at each of these trade shows
to ensure direct contact with prospect companies and executives. Trade
publications will be used to promote the brand and services. The Company will
evaluate the effectiveness of this program based upon revenue generation, reader
response cards and in-bound calls for more information.
For the newly-formed bills.com subsidiary, aggressive marketing efforts will be
directed toward a nationwide campaign of television commercials, Internet banner
advertisements, news media briefings, and the offering of incentives for new
subscribers. The bills.com subsidiary will expend a significant percentage of
its capital resources in executing an aggressive market strategy.
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E. PLAN OF OPERATION FOR REMAINDER OF FISCAL YEAR
The Company's plan of operation for the remainder of the 1999 fiscal year is to:
(1) develop trading partner relationships with front ends such as CheckFreeTM,
TranspointTM, CybercashTM, Net DeliveryTM, and Internet portals such as YahooTM,
ExciteTM, LycosTM and AOLTM in order to gain access to as many Internet users as
possible; (2) execute billing agreements with as many billers as possible; (3)
design, develop and market its Internet portal where the consumer can view and
pay bills; (4) build systems which will operate the EBPP and other operations of
the Company; (5) attract and retain highly qualified employees in order to
appropriately staff business operations; and (6) provide the facilities and
resources necessary to achieve the business goals of the Company. The Company
may also pursue a secondary offering or other capital raising effort in order to
fund the operations of an Internet-enabled customer call center and for
acquisitions or other corporate purposes. The Company currently projects that it
will have approximately 60 employees by the end of 1999.
F. COMPANY HISTORY
billserv.com is a Nevada corporation with its principal offices currently
located at 14607 San Pedro Ave., Suite 100, San Antonio, Texas 78233. Additional
information about the Company may be obtained at the Company's Internet address,
HTTP://WWW.BILLSERV.COM. The Company offices may be contacted by telephone at
210-402-5000. The Company was incorporated in June 1998 as a mineral development
company, under the name Goldking Resources, Inc. The principal asset of the
company was a mineral claim located in British Columbia, Canada. After the
Company further analyzed the cost involved in developing the mineral claim, it
determined that the Company would have greater value as a corporate vehicle for
other operations. Accordingly, the Company obtained NASD OTC Bulletin Board
("BB") trading status, and acquired and merged with billserv.com, Inc., a
company incorporated in Texas in July 1998 ("billserv-Texas"), with business
plans to operate in the Internet billing industry, but having no substantial
assets, revenues or operations. billserv-Texas was owned in its entirety by the
current management directors of the Company. On December 3, 1998, Goldking
Resources, Inc. changed its name to billserv.com, Inc. and began trading under
the symbol BLLS. By virtue of this reverse merger, the former Goldking
Resources, Inc. was able to position itself into an emerging high-growth market,
and billserv-Texas was able to merge with and into a company already trading on
the NASD OTC BB. Concurrent with the merger with billserv- Texas, the Company
secured equity financing of $5.3 million to fund its initial startup,
development and investor relations efforts. The Company currently has 10,976,428
shares of common stock issued and outstanding. Four million of these shares are
restricted stock owned by the directors and certain key employees of the
Company. The remaining 6,976,428 shares are owned by approximately 3700
shareholders, none of whom the Company believes holds more than five per cent
(5%) ownership of the Company. (See Item 4 - Security Ownership of Certain
Beneficial
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Owners and Management.). In March 1999, bills.com, Inc. was incorporated in
Delaware, as a wholly-owned subsidiary of the Company.
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Special
Risk Factors" described in Item 2 below.
ITEM 2. FINANCIAL INFORMATION
A. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data of billserv.com,
Inc. as of and for the calendar quarter ended March 31, 1999, and as of and for
the period from inception (July 30, 1998) through December 31, 1998. The
information contained in the following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and related notes included
elsewhere herein.
CALENDAR QUARTER JULY 30 1998
MARCH 31 1999 (INCEPTION) TO
DECEMBER 31 1998
Revenues ............................ $ -- $ --
Net loss ............................ (800,860) (289,770)
Net loss per common share - basic
and diluted ....................... (0.08) (0.03)
Total assets ........................ 676,890 407,530
B. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THIS REPORT ON FORM 10 AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
CONTAIN FORWARD- LOOKING STATEMENTS BASED ON CURRENT EXPECTATION, ESTIMATES AND
PROJECTIONS ABOUT THE COMPANY'S INDUSTRY, MANAGEMENT'S BELIEFS AND CERTAIN
ASSUMPTIONS MADE BY MANAGEMENT. ALL STATEMENTS, TRENDS, ANALYSES AND OTHER
INFORMATION CONTAINED IN THIS REPORT RELATIVE TO TRENDS IN NET SALES, GROSS
MARGIN, ANTICIPATED EXPENSE LEVELS AND LIQUIDITY AND CAPITAL RESOURCES, AS WELL
AS OTHER STATEMENTS, INCLUDING, BUT NOT LIMITED TO, WORDS SUCH AS "ANTICIPATE,"
"BELIEVE," "PLAN," "INTEND," "EXPECT," AND OTHER SIMILAR EXPRESSIONS CONSTITUTE
FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES
OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
ARE DIFFICULT TO PREDICT. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE ANTICIPATED OR
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EXPRESSED IN SUCH STATEMENTS. POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, AMONG
OTHERS, THOSE SET FORTH BELOW AS WELL AS IN THE PREVIOUS "BUSINESS" SECTION.
PARTICULAR ATTENTION SHOULD BE PAID TO THE CAUTIONARY STATEMENTS INVOLVING THE
COMPANY'S LIMITED OPERATING HISTORY, THE UNPREDICTABILITY OF ITS FUTURE
REVENUES, THE UNPREDICTABLE AND EVOLVING NATURE OF ITS BUSINESS MODEL, THE
INTENSELY COMPETITIVE ONLINE COMMERCE INDUSTRY AND THE RISKS ASSOCIATED WITH
CAPACITY CONSTRAINTS, SYSTEMS DEVELOPMENT, MANAGEMENT OF GROWTH AND BUSINESS
EXPANSION. EXCEPT AS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS, OR OTHERWISE. READERS, HOWEVER, SHOULD CAREFULLY REVIEW THE
FACTORS SET FORTH IN REPORTS OR DOCUMENTS THAT THE COMPANY FILES FROM TIME TO
TIME WITH THE SEC.
GENERAL
billserv.com, Inc. is a service bureau consolidator in the EBPP industry. As a
startup enterprise, the Company has yet to receive any operating revenues.
However, the Company intends to generate four principal revenue streams:
Internet billing services, Internet publishing of statements (also referred to
as "EPublishing"), customer care services through Internet and traditional
telephony technologies, and professional services associated with the
implementation and maintenance of these Internet technologies. The Company has a
limited operating history on which to base an evaluation of its businesses and
prospects. The Company's prospects must be considered in light of the risks,
expenses, and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as electronic commerce. Such risks for the Company include, but are not
limited to, an evolving and unpredictable business model and the management of
growth. To address these risks, the Company must, among other things, maintain
and increase its customer base, implement and successfully execute its business
and marketing strategy, continue to develop and upgrade its technology and
transaction-processing systems, provide superior customer service, respond to
competitive developments, improve its Web site, and attract, retain and motivate
qualified personnel. There can be no assurance that the Company will be
successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
Since inception, the Company has incurred losses and as of March 31, 1999 had an
accumulated deficit of $1,090,630. The Company believes that its success will
depend in large part on its ability to (a) secure additional financing to meet
capital and operating requirements, (b) capture a major portion of the medium to
large size market of billers as its customer base, (c) drive the consumer
adoption rate of EBPP, and (d) meet changing customer requirements and
technological changes in an emerging market. Accordingly the Company intends to
invest heavily in its product development, technology, and operating
infrastructure development as well as marketing and promotion. Because the
Company's services will require a significant amount of investment in
infrastructure and a substantial level of fixed operating expenses, achieving
profitability depends on
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the Company's ability to generate a high volume of revenues. As a result of the
Company's limited operating history and the emerging nature of the markets in
which it competes, the Company is unable to accurately forecast its revenues.
The Company's current and future expense levels are based largely on its
investment plans and estimates of future revenues and are to a large extent
fixed. Sales and operating results will depend on the volume of transactions
completed and related services rendered. The timing of such services and
transactions and the Company's ability to fulfill a biller's demands are
difficult to forecast. The Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues in relation to the Company's planned
expenditures could have an adverse effect on the Company's business, prospects,
financial condition and results of operations. Further, the Company may from
time to time make certain pricing, service, marketing or acquisition decisions
that could have a material adverse effect on its business, prospects, financial
conditions and results of operations.
RESULTS OF OPERATIONS--FROM INCEPTION TO DECEMBER 31, 1998
The Company's activities for the five month period from inception to December
31, 1998 resulted in net operating losses of $289,770. The Company generated no
revenues during the period. Operating expenses were generally not incurred until
November 1998.
Selling expenses consisted primarily of payroll and related expenses for
personnel engaged in marketing and selling activities, as well as advertising
services under a consulting agreement with the Consulting Group described below
at Item 7. The Company expanded its sales and marketing staff subsequent to
December 31, 1998 and intends to continue such expansion. It also will increase
marketing and sales capabilities through various marketing and sales activities,
including, advertising in trade publications, promotional activities and
aggressive trade show attendance. Therefore the Company expects marketing and
sales expense to increase substantially.
General and administrative expenses consisted primarily of payroll and related
expenses for executive, accounting, legal and administrative personnel, as well
as professional and consulting fees and other general corporate expenses. In
1998, financial and investor relation services provided to the Company by the
Consulting Group, a related party, totaled $100,000. The Company expanded its
general and administrative staff subsequent to December 31, 1998 and intends to
continue such expansion. Therefore, the Company expects general and
administrative expenses to increase substantially as it incurs additional costs
related to the growth of its business.
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RESULTS OF OPERATIONS--QUARTER ENDED MARCH 31, 1999
The Company's activities for the quarter ending March 31, 1999 resulted in a net
operating loss of $800,860. The Company generated no revenues during the period.
Selling expenses consisted primarily of payroll and related expenses for
personnel engaged in marketing and selling activities, as well as advertising
services purchased from the Company's Consulting Group (defined below at Item 7)
which totaled $150,000. The Company expanded its sales and marketing staff
subsequent to March 31, 1999 and intends to continue such expansion. As of May
19, 1999, the Company has opened sales offices in North Carolina, Hollidaysburg,
PA, Phoenix, AZ, Dallas, TX, and San Antonio, TX. The Company plans to increase
its marketing and sales capacities through various marketing and sales
activities, including, advertising in trade publications, promotional
activities, and aggressive trade show attendance. Therefore the Company expects
marketing and sales expense to increase substantially.
General and administrative expenses consisted primarily of payroll and related
expenses for executive, accounting, legal and administrative personnel, as well
as professional and consulting fees and other general corporate expenses. For
the March 31, 1999 quarter, financial and investor relations services provided
under the Consulting Agreement totaled $250,000. The Company expanded its
general and administrative staff subsequent to March 31, 1999 and intends to
continue such expansion. Therefore, the Company expects general and
administrative expenses to increase substantially as it incurs additional costs
related to the growth of its business.
LIQUIDITY AND CAPITAL RESOURCES
From inception to date, the Company's operations have been funded from advances
under an equity placement with a third party. This placement was concluded and
fully funded on June 11, 1999, pursuant to Regulation S. The total proceeds of
the placement were $5.3 million. The Company issued 946,428 shares of common
stock in exchange for this funding.
As of March 31, 1999, the Company's working capital was a deficit of
approximately negative $1,330,000. As of that date, the Company's principal
commitments consisted of an advance under the Regulation S equity financing
described above, and an account payable to the Consulting Group. Subsequent to
that date, the Company made significant expenditures and commitments for capital
improvements consistent with anticipated growth in operations, infrastructure
and personnel. The Company anticipates it will make additional investments in
and for capital improvements which will require additional financing, either
through the use of equipment leasing arrangements, or other equity financing.
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As of March 31, 1999, the Company's headquarters were housed in approximately
3,000 square feet of temporary office space. Subsequent to the quarter end, the
Company entered into a two-year lease for its headquarters in San Antonio
beginning in May 1999 for 8,000 square feet. The Company anticipates acquiring
additional adjacent leased space to meet the requirements of its expanding
clerical, administrative and sales activities. Additionally, the Company opened
sales offices in Hollidaysburg, Pennsylvania and Phoenix, Arizona subsequent to
March 31, 1999, and plans to open additional sales offices throughout the United
States. The Company also anticipates increasing its lease commitments with the
establishment of a call center within the next 12 months.
The Company is currently in the process of determining whether or not its
products, its internal systems, computers and software, and the products and
systems of its critical vendors and suppliers are Year 2000 compliant. Because
the Company's systems and software are relatively new, management does not
expect Year 2000 issues related to its own internal systems to be significant.
Although the Company believes that its Year 2000 plan will identify all material
Year 2000 issues, there can be no assurance that the Company will be able to
identify, evaluate and resolve all such issues. The Company does not
concurrently expect that costs associated with Year 2000 compliance will have a
material effect on operations or financial position. However, if the Company
discovers Year 2000 problems in the future, it may not be able to develop,
implement, or test remediation or contingency plans in a timely or
cost-effective manner. See "Special Risk Factors" discussion below.
The Company plans to meet its capital requirements primarily through use of cash
on hand, additional issuance of equity securities, capital lease financing, and
in the longer term, revenue from services.
C. SPECIAL RISK FACTORS
Investors should carefully consider the following information which outlines
special market and other risk factors affecting the industry and the Company.
DEPENDENCE ON INTERNET AND INTERNET TECHNOLOGY. The electronic commerce market
is a relatively new and growing service industry. If the electronic commerce
market fails to grow or grows slower than anticipated, or if the Company,
despite an investment of significant resources, is unable to adapt to meet
changing customer requirements or technological changes in this emerging market,
or if the Company's services and related products do not maintain a
proportionate degree of acceptance in this growing market, the Company's
business, operating results, and financial condition could be materially
adversely affected. Additionally, the security and privacy concerns of existing
and potential customers may inhibit the growth of the electronic commerce market
in general, and the Company's customer base and revenues in particular. Similar
to the emergence of the credit card and automatic teller machine ("ATM")
industries, the Company and other
14
<PAGE>
organizations serving the electronic commerce market must educate users that
electronic transactions use encryption technology and other electronic security
measures that make electronic transactions more secure than paper-based
transactions. While the Company believes that it is utilizing proven
applications designed for premium data security and integrity to process
electronic transactions, there can be no assurance that the Company's use of
such applications will be sufficient to address the changing market conditions
or the security and privacy concerns of existing and potential customers.
Adverse publicity raising concerns about the safety or privacy of electronic
transactions, or widely reported breaches of the Company's or another providers'
security, have the potential to undermine consumer confidence in the technology
and thereby have a materially adverse effect on the Company's business. In
addition, there can be no guarantee that the Internet will continue to grow in
acceptance or maintain its reliability, or that new technologies might supplant
the Internet in part or in whole.
PROPORTION OF ELECTRONIC REMITTANCES. The Company's future financial performance
will be materially affected by the percentage of bill payments which can be
cleared electronically. As compared with making payment by paper check or by
draft, electronic payments: (i) cost much less to complete; (ii) give rise to
fewer errors, which are costly to resolve; (iii) generate far fewer customer
inquiries and therefore consume fewer customer care resources. Accordingly, the
Company's inability to continue to decrease the percentage of remittances
effected by paper documents will result in flat or decreased margins, and a
reversal of the current trend toward a smaller proportion of paper-based
payments would have a material adverse effect upon the Company's business,
operating results, and financial condition.
RAPID TECHNOLOGICAL CHANGE; RISK OF DELAYS. The Company's success is highly
dependent on its ability to develop new and enhanced services, and related
products that meet changing customer requirements. The market for the Company's
services is characterized by rapidly changing technology, evolving industry
standards, emerging competition and frequent new and enhanced software, service
and related product introductions. In addition, the software market is subject
to rapid and substantial technological change. The Company, to remain
successful, must be responsive to new developments in hardware and semiconductor
technology, operating systems, programming technology, and computer
capabilities. In many instances, the new and enhanced services, products, and
technologies are in the emerging stages of development and marketing, and are
subject to the risks inherent in the development and marketing of new software,
services, and products. There can be no assurance that the Company can
successfully identify new service opportunities and develop and bring new and
enhanced services and related products to market in a timely manner, that such
services, products or technologies will develop or will be commercially
successful, that the Company will benefit from such developments or that
services, products, or technologies developed by others will not render the
Company's services, and related products noncompetitive or obsolete. If the
Company is unable, for technological or other reasons, to develop and introduce
new services
15
<PAGE>
and products in a timely manner in response to changing market conditions or
customer requirements, or if new or enhanced software, services, and related
products do not achieve a significant degree of market acceptance, the Company's
business, operating results, and financial condition would be materially
adversely affected.
GOVERNMENT REGULATION. Management believes that the Company is not required to
be licensed by the Office of the Comptroller of the Currency, the Federal
Reserve Board, or other federal or state agencies that regulate or monitor banks
or other types of providers of electronic commerce services. There can be no
assurance that a federal or state agency will not attempt to regulate providers
of electronic commerce services, such as the Company, which could impede the
Company's ability to do business in the regulator's jurisdiction. The Company is
subject to various laws and regulations relating to commercial transactions
generally, such as the Uniform Commercial Code, and may also be subject to the
electronic funds transfer rules embodied in Regulation E, promulgated by the
Federal Reserve Board. Given the expansion of the electronic commerce market, it
is possible that the Federal Reserve might revise Regulation E or adopt new
rules for electronic funds transfer affecting users other than consumers.
Because of growth in the electronic commerce market, Congress has held hearings
on whether to regulate providers of services and transactions in the electronic
commerce market, and it is possible that Congress or individual states could
enact laws regulating the electronic commerce market. If enacted, such laws,
rules and regulations could be imposed on the Company's business and industry
and could have a material adverse effect on the Company's business, operating
results, and financial condition.
ACH ACCESS. The Federal Reserve rules provide that the Federal Reserve's ACH
system is available only through a bank. If the Federal Reserve rules were to
change to further restrict access to the ACH, the Company's business could be
materially adversely affected.
INTENSE COMPETITION. Portions of the electronic commerce market are becoming
increasingly competitive. The Company expects to face significant competition in
all of its customer markets. Although few companies have focused their efforts
as service bureau consolidators in the EBPP industry, the Company expects that
new service bureau companies will emerge and compete for the small to medium
size biller business. The Company further believes that software providers,
consumer front ends, banks and Internet portals will provide increasingly
competitive billing solutions for small to medium size billers. In addition, a
number of banks have developed, and others in the future may develop, home
banking services in-house. The Company believes that banks will also compete for
the EBPP business of small to medium size billers.
The Company expects competition to increase from both established and emerging
companies and that such increased competition will result in reduced transaction
costs which could materially adversely affect the Company's business, operating
results, and financial condition. Moreover, the Company's current and potential
competitors, many of whom have significantly greater financial, technical,
marketing, and other resources than the Company, may respond more quickly than
the
16
<PAGE>
Company to new or emerging technologies or could expand to compete directly
against the Company in any or all of its target markets. Accordingly, it is
possible that current or potential competitors could rapidly acquire significant
market share. There can be no assurance that the Company will be able to compete
against current or future competitors successfully or that competitive pressures
faced by the Company will not have a material adverse effect on its business,
operating results, and financial condition.
LACK OF OPERATING HISTORY; LIMITED RELEVANCE OF HISTORICAL FINANCIAL
INFORMATION. The Company was organized in 1998 and has only recently begun
operations as a public company. The Company's stock has only recently begun
trading on the NASD OTC BB on December 3, 1998, under the symbol BLLS.
Accordingly, the financial information included herein may not necessarily
reflect the results of operations, financial position and cash flows of the
Company in the future.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING. The Company currently
plans to meet its capital requirements primarily through issuance of equity
securities, capital lease financing, and in the longer term, revenue from
operations. The Company recently concluded equity financing under Regulation S
for the amount of $5.3 million, in exchange for which the Company issued 946,428
shares of common stock. However, the Company anticipates the need to raise
additional funds through public or private debt or equity financing in order to
take advantage of unanticipated opportunities, including more rapid expansion or
acquisitions of complementary businesses or technologies, or to develop new or
enhanced services and related products, or otherwise respond to unanticipated
competitive pressures. If additional funds are raised through the issuance of
equity securities, the percentage ownership of the then current stockholders of
the Company may be reduced and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Company's common
stock. There can be no assurance that additional financing will be available on
terms favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to take
advantage of unanticipated opportunities, develop new or enhanced services and
related products or otherwise respond to unanticipated competitive pressures and
the Company's business, operating results, and financial condition could be
materially adversely affected.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
degree upon the continued contributions of its key management, marketing,
service and related product development and operational personnel, including its
Chairman, and Chief Executive Officer, Michael R. Long; its President and Chief
Operating Officer, Louis A. Hoch; its Senior Vice President of Business
Development, David S. Jones; its Chief Financial Officer, Lori K. Turner; its
General Counsel, Marshall N. Millard; and its Vice President of Business
Development, Randy Kauftheil. The Company's operations could be affected
adversely if, for any reason, any of these officers ceased to be active in the
Company's management. The Company maintains proprietary nondisclosure and
non-compete agreements with all of its key employees. The Company intends to
secure key person life insurance policies on Mr. Long. The success of the
Company depends to a large extent upon its
17
<PAGE>
ability to retain and continue to attract highly skilled personnel. Competition
for employees in the electronic commerce industry is intense, and there can be
no assurance that the Company will be able to attract and retain enough
qualified employees. If the business of the Company grows, it may become
increasingly difficult to hire, train and assimilate the new employees needed.
The Company's inability to retain and attract key employees could have a
material adverse effect on the Company's business, operating results, and
financial condition.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The Company's quarterly results of
operations may fluctuate significantly as a result of a number of factors,
including changes in the Company's pricing policies or those of its competitors,
relative rates of acquisition of new customers, delays in the introduction of
new or enhanced services, software, and related products by the Company or by
its competitors or market acceptance of such services and products, other
changes in operating expenses, personnel changes, and general economic
conditions. These factors will impact the Company's operating results.
Fluctuations in operating results could result in volatility in the price of the
Company's common stock.
RISK OF PRODUCT DEFECTS. The software products utilized by the Company could
contain errors or "bugs" that could adversely affect the performance of services
or damage a user's data. In addition, as the Company increases its share of the
electronic commerce services market, software reliability and security demands
will increase. The Company attempts to limit its potential liability for
warranty claims through limitation-of-liability provisions in its customer
agreements. There can be no assurance that the measures taken by the Company
will prove effective in limiting the Company's exposure to warranty claims.
Despite the existence of various security precautions, the Company's computer
infrastructure may be also vulnerable to viruses or similar disruptive problems
caused by its customers or third parties gaining access to the Company's
processing system.
EROSION OF REVENUE FROM SERVICES. The profitability of the Company's business
depends, to a substantial degree, upon billers electing to continue to
periodically renew contracts. In the event that a substantial number of these
customers were to decline to renew these contracts for any reason, the Company's
revenues and profits would be adversely affected. Sales of the Company's
services are dependent upon customer demand for the services, which is affected
by pricing decisions, the competition of similar products and services, and
reputation of the products and services for performance. Most of the Company's
services are likely to be sold within the utilities and financial services
industries, and poor performance by the Company in performing its services has
the potential to undermine the Company's reputation and affect future sales of
other services. A substantial decrease in revenue from services would have a
material adverse effect upon the Company's business, operating results, and
financial condition.
RISK OF LOSS FROM RETURNED TRANSACTIONS, MERCHANT FRAUD OR ERRONEOUS
TRANSMISSIONS. The Company relies upon the Federal Reserve's ACH for electronic
fund transfers and conventional paper check and draft clearing systems for
settlement of payments by check or drafts. In its use of
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<PAGE>
these established payment clearance systems, the Company generally bears the
same credit risks normally assumed by other users of these systems arising from
returned transactions caused by insufficient funds, stop payment orders, closed
accounts, frozen accounts, unauthorized use, disputes, theft, or fraud. In
addition, the Company also assumes the risk of merchant fraud and transmission
errors when it is unable to have erroneously transmitted funds returned by an
unintended recipient. Merchant fraud includes such actions as inputting false
sales transactions or false credits.
RISK OF SYSTEM FAILURE. The Company's operations are dependent on its ability to
protect its computer equipment against damage from fire, earthquake, power loss,
telecommunications failure or similar event. Any damage or failure that causes
interruptions in the Company's operations could have a material adverse effect
on the Company's business, operating results, and financial condition. The
Company's property and business interruption insurance may not be adequate to
compensate the Company for all losses that may occur.
YEAR 2000 COMPLIANCE. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field and
cannot distinguish 21st century dates from 20th century dates. These date code
fields will need to distinguish 21st century dates from 20th century dates to
avoid system failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. As a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements.
The Company is currently in the process of determining whether or not its
products, its internal systems, computers and software, and the products and
systems of its critical vendors and suppliers are Year 2000 compliant. This
determination is or will be on an internally developed Year 2000 plan. This plan
will be implemented in the following four consecutive phases:
1. An inventory and data gathering phase in which products and systems
and the products and systems of critical vendors and suppliers are
catalogued;
2. A testing stage to determine whether or not such catalogued products
and systems are Year 2000 compliant;
3. A replacement phase in which non-compliant products and systems will
be upgraded or replaced; and
4. A monitoring phase in which products and systems will be tested for
Year 2000 compliance on an ongoing basis.
The Company's Year 2000 plan has only been partially implemented. To date, the
Year 2000 plan has resulted in the following:
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o Products. The Company has developed an internal battery of tests to
ascertain whether or not products are Year 2000 compliant. Based on
these tests, the Company believes its current products are Year 2000
compliant.
o Vendors. The Company is currently in the process of ascertaining
whether or not its vendors and suppliers are Year 2000 compliant.
The Company is also reviewing assembly and test equipment for Year 2000
compliance, which is expected to be completed by mid-1999.
o IT Systems. The Company has conducted a preliminary survey of its IT
hardware and software and anticipates that any hardware and software
that is not Year 2000 compliant will be upgraded or replaced prior to
2000.
o Non-IT Systems and Infrastructure. Machinery and equipment used in
operations have been inventoried and are currently being assessed for
Year 2000 compliance.
Although the Company believes that its Year 2000 plan will identify all material
Year 2000 issues, there can be no assurance that the Company will be able to
identify, evaluate and resolve all such issues.
The Company does not currently expect that costs associated with Year 2000
compliance will have a material effect on operations or financial position.
However, if the Company discovers Year 2000 problems in the future, it may not
be able to develop, implement, or test remediation or contingency plans in a
timely or cost-effective manner.
The Company believes that the risks of noncompliance could delay purchases or
replacement of products and services. Failure of third party products, such as a
breakdown in telephone, electric service or other utilities, e-mail, voicemail
or the World Wide Web could cause a disruption in service to customers.
Disruptions in the services provided by banks, telephone companies and the U.S.
Postal Service could have a pervasive negative impact on the Company's business
as a whole. Although the Company's products are undergoing Year 2000-specific
testing procedures, the Company's products may not contain all of the date codes
necessary to operate in the year 2000. Any failure of such products to perform
could result in the delay or cancellation of product orders and the diversion of
managerial and technical resources from product development and other business
activities to attend to Y2K issues. These risks could have a material adverse
effect on the Company's business, operating results and financial condition.
Until the completion of the Year 2000 compliance evaluation of the Company's
suppliers, and the completion of internal IT and non-IT systems reviews, the
Company believes that it is not practical to develop comprehensive contingency
plans. Even if such plans are completed and implemented
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<PAGE>
in a timely manner, they may be insufficient to address any third party failures
and there can be no assurance that undetected internal and external Year 2000
issues will not materially impact the Company's business, financial condition,
results of operations and cash flows. See "Management's Discussion and Analysis
of Financial Condition and Results of Operation".
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISK OF THIRD PARTY INFRINGEMENT
CLAIMS. The Company regards some of its services as proprietary and relies
primarily on a combination of trademark and trade secret laws, employee and
third party non-disclosure agreements, and other intellectual property
protection methods to protect its services. Existing intellectual property laws
afford only limited protection, and it may be possible for unauthorized third
parties to copy the Company's services and related products or to reverse
engineer or obtain and use information that the Company regards as proprietary.
There can be no assurance that the Company's competitors will not independently
develop services and related products that are substantially equivalent or
superior to those of the Company.
LIMITED PRIOR MARKET; VOLATILITY OF STOCK PRICE. Prior to December 3, 1998,
there was no public market for the Company's common stock. Although the Company
is listed on the NASD OTC Bulletin Board, there can be no assurance that an
active or liquid trading market in the Company's common stock will continue. The
market price of the Company's common stock is subject to significant
fluctuations in response to variations in quarterly operating results, the
failure of the Company to achieve operating results consistent with securities
analysts' projections of the Company's performance, and other factors. The stock
market has experienced extreme price and volume fluctuations and volatility that
has particularly affected the market prices of many technology, emerging growth,
and developmental stage companies. Such fluctuations and volatility have often
been unrelated or disproportionate to the operating performance of such
companies. Factors such as announcements of the introduction of new or enhanced
services or related products by the Company or its competitors, announcements of
joint development efforts or corporate partnerships in the electronic commerce
market, market conditions in the technology, banking, telecommunications and
other emerging growth sectors, and rumors relating to the Company or its
competitors may have a significant impact on the market price of the Company's
common stock.
CONTROL BY PRINCIPAL STOCKHOLDERS. Currently, the directors and executive
officers of the Company and their affiliates collectively owned approximately
40% of the outstanding shares of the Company's common stock. As a result, these
stockholders are able to exercise significant influence over matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may have the
effect of delaying or preventing a change in control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON MARKET PRICE.
Currently, the Company has 10,976,428 shares of the Company's common stock
outstanding. Four million shares are restricted pursuant to Rule 144; 946,428
are restricted under Regulation S; but 6,030,000 are not.
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Sales of substantial amounts of these shares in the public market or the
prospect of such sales could adversely affect the market price of the Company's
Common Stock.
ANTI-TAKEOVER PROVISIONS; CERTAIN PROVISIONS OF NEVADA LAW; CERTIFICATE OF
INCORPORATION, BY-LAWS, AND STOCKHOLDER RIGHTS PLAN. Certain provisions of
Nevada law, the Company's Certificate of Incorporation, Bylaws, and a proposed
stockholder rights plan could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. In 1999, the Company intends to seek
shareholder approval of amendments to its Certificate of Incorporation, to
provide for the Board of Directors to be divided into three classes of directors
serving staggered three-year terms. Such classification of the Board of
Directors would expand the time required to change the composition of a majority
of directors and may tend to discourage a proxy contest or other takeover bid
for the Company. The Company also intends to seek shareholder approval to allow
issuance of rights to acquire common stock under certain conditions, without any
further vote or action by the stockholders. The issuance of common stock under a
stockholder rights plan could decrease the amount of earnings and assets
available for distribution to the holders of the Company's common stock or could
adversely affect the rights and powers, including voting rights, of the holders
of the Company's common stock. In certain circumstances, such issuance could
have the effect of decreasing the market price of the Company's common stock.
MANAGEMENT OF GROWTH. The Company may experience a period of rapid growth which
could place a significant strain on its resources. The Company's ability to
manage growth successfully will require the Company to continue to improve its
operational, management and financial systems and controls as well as to expand
its work force. A significant increase in the Company's customer base would
necessitate the hiring of a significant number of additional customer care and
technical support personnel as well as computer software developers and
technicians, qualified candidates for which, at the present time, are in short
supply. In addition, the expansion and adaptation of the Company's computer and
administrative infrastructure will require substantial operational, management,
and financial resources. Although the Company believes that its current
infrastructure is adequate to meet the needs of its customers in the foreseeable
future, there can be no assurance that the Company will be able to expand and
adapt its infrastructure to meet additional demand on a timely basis, at a
commercially reasonable cost, or at all. If the Company's management is unable
to manage growth effectively, hire needed personnel, expand and adapt its
computer infrastructure or improve its operational, management, and financial
systems and controls, the Company's business, operating results, and financial
condition could be materially adversely affected.
ACQUISITION-RELATED RISKS. In the future, the Company may pursue additional
acquisitions of complementary service or product lines, technologies, or
businesses. Future acquisitions by the Company could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities, and amortization expenses related to goodwill and other intangible
assets, any of which could materially adversely affect the Company's business,
operating results, and
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financial condition. In addition, acquisitions involve numerous risks, including
difficulties in the assimilation of the operations, technologies, services, and
products of the acquired companies, the diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
or limited direct prior experience, and the potential loss of key employees of
the acquired company. From time to time, the Company evaluates potential
acquisitions of businesses, services, products, or technologies. The Company has
no present commitments or agreements with respect to any material acquisition of
other businesses, services, products, or technologies. In the event that such an
acquisition were to occur, however, there can be no assurance that the Company's
business, operating results, and financial condition would not be materially
adversely affected.
DIVIDEND POLICY. The Company has paid no cash dividends and has no present plan
to pay cash dividends, intending instead to reinvest its earnings, if any.
However, payment of future cash dividends will be determined from time to time
by its board of directors, based upon its future earnings, financial condition,
capital requirements and other factors. The Company is not presently subject to
any restriction on its present or future ability to pay such dividends.
DEPENDENCE UPON CONTRACTS WITH BILLERS. The Company's business is dependent upon
performing under the terms of agreements with billers. Although the Company is
unaware of any circumstance which would prevent the enforcement of these
agreements, there can be no assurance that the Company might not be able to
fully perform under these agreements or that other factors may prevent billers
from processing billing information through the Company.
DEPENDENCE UPON CONTRACTS WITH TRADING PARTNERS. The Company's business is
dependent upon executing and maintaining agreements with front ends such as
CheckfreeTM, TranspointTM, and IntuitTM to provide dependable financial services
for customers of billers. Such financial services include ACH processing through
the customer's bank and delivery of good funds to the Company for remittance to
the billers. There can be no assurance that any of the front ends will be able
to perform under these agreements in the future.
ANTICIPATED BILLING SYSTEM EXPENDITURES. To facilitate and support the growth
anticipated in its business, the Company plans to make significant expenditures
in its operations over the next one to three years. These expenditures are
expected to be made in the areas of software development, licensing, hardware,
and related staffing. The Company believes that it will be able to fund these
expenditures with internally generated funds and financing, but there can be no
assurance that such funds will be generated or spent in these projects.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE. This registration statement
contains certain forward-looking statements and information relating to the
Company that are based on the beliefs of the Company's management as well as
assumptions made by and assumptions made by and information currently available
to the Company's management. When used in this document, the
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words "anticipate," "believe," "estimate," "expect," and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
registration statement. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended. The Company does not intend to update these
forward-looking statements.
ITEM 3. PROPERTIES AND EQUIPMENT
As of March 31, 1999 the Company headquarters were housed in approximately 3,000
square feet of temporary office space. Subsequent to the quarter end, the
Company entered into a two-year lease for its headquarters in San Antonio, Texas
beginning in May 1999 for 8,000 square feet. The Company anticipates acquiring
additional adjacent leased space to meet the needs of its expanding clerical,
administrative and sales activity. Additionally, the Company opened sales
offices in Hollidaysburg, Pennsylvania and Phoenix, Arizona subsequent to March
31, 1999, and plans to open additional sales offices throughout the United
States. The Company also anticipates increasing its lease commitments with the
establishment of a call center within the next twelve months.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
1. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company has no non-management, beneficial owners of more than 5
percent of the outstanding amount of its common stock.
2. SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the share
ownership of the Company's common stock by its officers and directors, both
individually and as a group, and by the record and/or beneficial owners of more
than 5 percent of the outstanding amount of such stock:
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SHARES OWNED BENEFICIALLY AND OF RECORD
PERCENT OF CLASS
<TABLE>
<CAPTION>
AMOUNT & NATURE
TITLE OF OF BENEFICIAL PERCENT OF OWNERSHIP
CLASS NAME AND ADDRESS OWNERSHIP AS OF JUNE 11, 1999 (1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Michael R. Long (2)
Stock 15546 Clover Ridge
San Antonio, TX 78248 1,183,333 10.8%
Common Louis A. Hoch (3)
Stock 15138 Grayoak Forest
San Antonio, TX 78248 1,183,334 10.8%
Common David S. Jones (4)
Stock 11530 Vance Jackson
San Antonio, TX 78230 1,183,333 10.8%
Common Lori Turner
Stock 11205 Woodridge Forest
San Antonio TX 78249 100,000 0.9%
Common Marshall Millard
Stock 18123 Summer Knoll
San Antonio, TX 78258 150,000 1.3%
Common All directors, officers
Stock and employees as a group (5)
(7 persons) 4,000,000 36.4%
</TABLE>
(1) All ownership is stated as of June 11, 1999. In 1999, the Company has
awarded, subject to shareholder approval, options to purchase 754,000
shares of common stock to various executive officers, directors and
employees, including those listed above. See Item 6. Executive
Compensation below.
(2) Michael R. Long is the Chairman of the Board of Directors and Chief
Executive Officer of the Company.
(3) Louis A. Hoch, is the Chief Operating Officer, President and a director
of the Company.
(4) David S. Jones is the Senior Vice President and a director of the
Company.
(5) All stock held by officers and/or directors is restricted per Rule 144.
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3. CHANGE IN CONTROL
There are no arrangements known to the Company the operation of which may
result in a change of control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following sets forth the directors and executive officers and key
employees of the Company as of May 31, 1999, their respective ages, the year in
which each was first elected or appointed a director, and any other office in
the Company held by each director.
1. DIRECTORS AND EXECUTIVE OFFICERS
Directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME OF DIRECTOR/ AGE POSITION HELD POSITION HELD
OFFICER SINCE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael R. Long 54 Director, Chairman and C.E.O. November, 1998
Louis A. Hoch 33 Director, President and C.O.O. November, 1998
David S. Jones 25 Director and Sr. Vice President November, 1998
Lori A. Turner 41 Treasurer, Vice President and C.F.O. December, 1998
Marshall Millard 37 Secretary, Vice President and November, 1998
General Counsel
E. Scott Crist 35 Director January, 1999
Roger R. Hemminghaus 61 Director April, 1999
</TABLE>
2. FAMILY RELATIONSHIPS
No family relationship exists between or among any of the directors, executive
officers, and significant employees, as defined below, of the Company or any
person contemplated to become such.
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3. BUSINESS EXPERIENCE
MICHAEL R. LONG, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Long became Chairman and Chief Executive Officer of the Company as of
November 1998. Mr. Long has over 29 years of senior executive management and
systems development experience in six publicly traded companies, as well as
successfully operating his own systems consulting business. In the past five
years, Mr. Long has held positions at U.S. Long Distance, Inc., as Vice
President of Management Information Systems from December 1993 to August 1996;
Billing Concepts, Inc., as Vice President of Information Technologies from
August 1996 to June 1997, and Andersen Consulting as Business Development
Director, Financial Services, from October 1997 to November 1998.
LOUIS A. HOCH, DIRECTOR, PRESIDENT AND CHIEF OPERATING OFFICER
Mr. Hoch joined the Company as President and Chief Executive Officer in November
1998. Mr. Hoch's background has been primarily in the telecommunications
industry in which he has over 10 years of experience. In the past five years, he
has held positions with Andersen Consulting, Billing Concepts, Inc., and U.S.
Long Distance, Inc.. He possesses in-depth knowledge in the billing and customer
care processes of regional bell operating companies, interexchange carriers,
competitive local exchange carriers and Internet service providers. He has
successfully built large billing systems that were proven flexible enough to
sustain exponential growth in record volumes. He played a significant part in
growing a billing company from inception to becoming the market leader. He has
built multiple call centers that integrated the latest in technology and
processes. His leadership in the call center industry has been recognized by the
largest worldwide consulting firm, which classified his processes and technology
architecture to be one of their guidelines for best practices in call center
development. Mr. Hoch holds a B.B.A. in Computer Information Systems and an
M.B.A. in International Business Management, both from Our Lady of the Lake
University. He is certified as a Computer Professional (CCP) by the Institute
for Certification of Computing Professionals (ICCP).
DAVID S. JONES, DIRECTOR AND SENIOR VICE-PRESIDENT
Mr. Jones joined the Company in November 1998. He has been active in the
Internet billing industry almost since its inception. While employed at Billing
Concepts, Inc., from 1997-98, Mr. Jones was responsible for defining strategic
direction involving Internet technology. Mr. Jones has played an essential role
in the development of the necessary relationships needed to be effective in the
Internet billing marketplace, and has been directly involved in the marketing of
the Company's products. Mr. Jones continues to manage the ongoing development of
systems for the Company. From 1996 to 1997, Mr. Jones owned and operated his own
business which provided ongoing service and support to automated teller
facilities for various financial institutions. From 1993 to
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<PAGE>
1996, Mr. Jones was general manager of a specialty beverage operation in San
Antonio. He has completed business finance and general business studies at
Millikin University and the University of Texas at Austin.
LORI A. TURNER, TREASURER, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Lori A. Turner, C.P.A., joined the Company as Chief Financial Officer in
December 1998. Prior to joining the Company, Ms. Turner served as Treasurer and
Chief Financial Officer at Docucon, Inc. She held various positions at Docucon,
including Controller, Vice-President, Finance, and Assistant Secretary from 1990
until her departure in 1999. From 1984 through 1989, Ms. Turner held various
financial positions at Fuddruckers, Inc., a fast-food restaurant chain. Prior to
joining Fuddruckers, she worked as a consultant for Fuddruckers and other firms.
Ms. Turner holds a M.B.A. from the University of Texas at San Antonio.
MARSHALL MILLARD, SECRETARY, VICE PRESIDENT AND GENERAL COUNSEL
Mr. Millard also joined the Company in December 1998. He possesses over 10 years
experience in providing legal counsel to publicly-traded and privately-held
companies. Mr. Millard has extensive experience in negotiating and preparing
strategic alliances, mergers and acquisitions, financing agreements and other
business contracts. Mr. Millard also has a strong background in litigation and
appeals. He is licensed to practice law in the Supreme Court and all lower
courts in the State of Texas, the Western District of Texas and the Fifth
Circuit Court of Appeals. He earned a Juris Doctor degree from St. Mary's
University School of Law, in 1988, where he served as a Senior Associate Editor
for the ST. MARY'S LAW JOURNAL. Mr. Millard has held corporate counsel positions
at Southwestern Bell Telephone, a subsidiary of SBC Communications, 1993; U.S.
Long Distance (now owned by Qwest Communications International), 1993-1996; and
Billing Concepts, 1996- 1998.
E. SCOTT CRIST, DIRECTOR
Mr. Crist became a director of the Company in January 1999. He is the President
and Chief Executive Officer of Telscape International, Inc., one of the world's
fastest growing multinational carriers of voice, video and data services. Prior
to joining Telscape, Mr. Crist was a founder of Orion Communications, Inc., a
long distance company, where he served as President. He also previously served a
President and Chief Executive Officer of Matrix Telecom, a long distance company
which ranked number 7 on the Inc. Magazine list of the 500 fastest growing
companies in 1995. Mr. Crist also founded D.S. Communications, a domestic long
distance company, where he served as President and Chief Executive Officer. Mr.
Crist holds a M.B.A. from the J.L. Kellogg School at Northwestern University,
and a B.S., magna cum laude, in Electrical Engineering, with a
Telecommunications Design emphasis, from North Carolina State University.
28
<PAGE>
ROGER R. HEMMINGHAUS, DIRECTOR
Mr. Hemminghaus became a director of the Company in April 1999. He currently
serves as Chairman of the Board of Directors of Ultramar Diamond Shamrock Corp.,
having retired in January 1999 as Chief Executive Officer of the same company.
He also serves as a director for Luby's Cafeterias, Inc.; New Centuries
Energies; and The Nature Conservancy of Texas. From 1996 to January 1999, Mr.
Hemminghaus served as Chairman and Chief Executive Officer of Ultramar Diamond
Shamrock Corp, following the merger of Ultramar Corporation and Diamond
Shamrock, Inc. Prior to this merger, Mr. Hemminghaus served as Chairman, Chief
Executive and President of Diamond Shamrock, Inc., where he had been employed
since 1984. Mr. Hemminghaus also serves on the National Executive Board of the
Boy Scouts of America, and various non-profit boards in Texas. He is a graduate
of Auburn University, where he received a B.S. in Chemical Engineering.
4. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
None of the directors or executive officers of the Company have been
involved in any legal proceedings during the past five (5) years that are
material to an evaluation of their ability or integrity as a director or
executive officer of the Company.
ITEM 6. EXECUTIVE COMPENSATION
1. EXECUTIVE OFFICER COMPENSATION
No executive officer of the Company received or accrued cash compensation
in excess of $20,000 during fiscal year ended 1998. The following tables sets
forth all compensation paid by the Company during the fiscal year ending
December 31, 1998 to all executive officers of the Company:
NAME OF PRINCIPAL RESTRICTED
POSITION YEAR SALARY (1) STOCK AWARDS (2)
- -------------------------------------------------------------------------------
Michael R. Long 1998 $ 14,835 1,183,333
Chairman and C.E.O.
Louis A. Hoch 1998 $ 11,868 1,183,334
President and C.O.O.
David S. Jones 1998 $ 14,840 1,183,333
Sr. Vice President
Marshall Millard 1998 $ 7,318 150,000
Secretary, Vice President
and General Counsel
Lori A. Turner 1998 $ NA 100,000
Treasurer, Vice President
and C.F.O.
29
<PAGE>
(1) Each of the named executives have entered into an employment agreement
with the Company. These agreements have a three (3) year term and provide for an
annual salary, bonuses at the discretion of the Board of Directors, and health
benefits. The figures reflected are stated for December 1998. In 1999, each of
the named officers are to receive 1999 salary compensation as follows: Mr. Long,
$150,000; Mr. Hoch, $140,000; Mr. Jones, $120,000; Ms. Turner, $100,000; and Mr.
Millard, $100,000.
(2) This table reflects common stock ownership granted in connection with
the executive's employment arrangement with the Company. In 1999, subject to
shareholder approval, the officers named have been awarded the following number
of options to purchase shares of common stock of the Company: Mr. Long, 100,000;
Mr. Hoch, 100,000; Mr. Jones, 100,000; Ms. Turner, 40,000; and Mr. Millard,
40,000. The option price in each case is $2.81 per share.
2. COMPENSATION OF DIRECTORS
In 1998, the directors of the Company were not compensated for their services in
that capacity. In 1999, the Company intends to seek shareholder approval of a
director's compensation plan, which would provide for certain stock options and
$1,000 per meeting, plus out-of-pocket expenses.
Subject to stockholder approval of the director's compensation plan, the Company
has awarded options to purchase common stock of the Company to Messrs. Crist and
Hemminghaus. Mr. Crist holds 40,000 options with an exercise price of $2.81 per
share; Mr. Hemminghaus holds 80,000 options with an exercise price of $5.81 per
share. The options vest over a three year period.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. TRANSACTIONS WITH MANAGEMENT AND OTHERS; CERTAIN BUSINESS RELATIONSHIPS;
PROMOTERS
Concurrent with and in connection with the Regulation S equity financing
described herein above, the Company has entered into a consulting agreement,
effective November 1, 1998, with Messrs. James R. King, Jr.; Robert D. Smith and
Richard M. Jeffs (the "Consulting Group"), all of 1090 W. Pender Street, Suite
420, Vancouver BC V632N7, under which that Group provided or will
30
<PAGE>
provide financing, investor relations, public relations and advertising services
for the Company for a period of one year. The total consideration paid and to be
paid to the Consulting Group is $1.2 million. A portion of the consideration
paid or to be paid is in consideration of the Consulting Group's efforts in
arranging the Regulation S equity financing described above.
On May 7, 1999, the Company entered into a certain Business Development
Agreement, and a related Independent Sales Agent Agreement, with Southwest
Business Corporation, of San Antonio, Texas. In exchange for sales and marketing
services and support described in these agreements, and subject to performance
criteria described therein, Southwest Business Corporation may earn the right to
purchase up to 500,000 shares of common stock of the Company. The warrant is for
a term of three years after the Company's common stock is offered for sale on a
recognized stock market, which the Company construes to include the NASDAQ
National or SmallCap Markets; the exercise price is 110% of the per share price
of the common stock at May 7, 1999, which was $6.50.
2. INDEBTEDNESS OF MANAGEMENT
No member of management of the Company is or has been indebted to the Company in
an amount in excess of $60,000.00. No director or executive officer is
personally liable for repayment of amounts advanced any financing received by
the Company.
ITEM 8. LEGAL PROCEEDINGS
There is no litigation currently pending and the Company is not aware of any
disputes that may lead to litigation.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
1. MARKET INFORMATION
The Company's common stock is traded on the NASD OTC Bulletin Board. The
following table sets forth the range of high and low bid quotations as reported
during the most recent fiscal year. Bid quotations represent prices between
dealers, do not include retail markup, mark down or other fees or commissions,
and do not necessarily represent actual transactions.
31
<PAGE>
CALENDAR QUARTER BID PRICES
ENDED LOW HIGH
- --------------------------------------------------------------
December 31, 1998(1) 2 3/8 3 3/8
March 31, 1999 2 3/4 8 5/8
(1) No previous periods are reported as the Company was initially listed in the
fourth quarter 1998.
The Company has 10,976,428 shares of common stock outstanding; of this amount,
6,030,000 of such shares are nonrestricted; 4,000,000 of such shares are
restricted pursuant to Rule 144; and 946,428 shares are restricted pursuant to
Regulation S. As of June 4, 1999, the number of holders of record of the common
stock, $.001 par value, of the Company was 3,696.
2. DIVIDEND POLICY
The Company has paid no cash or stock dividends and has no present plan to pay
any such dividends, intending instead to reinvest its earnings, if any. However,
payment of future dividends will be determined from time to time by its board of
directors, based upon its future earnings, financial condition, capital
requirements and other factors. The Company is not presently subject to any
restriction on its present or future ability to pay such dividends.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
There are issued and outstanding 10,976,428 shares of common stock which
were sold as follows:
On or about July 10 and 14, 1998, a total of 10,000,000 shares of common
stock were sold for a total of $10,000 to one individual, then a director and
the President of the Company, and seven (7) corporate shareholders; the
individual acquired 4,000,000 shares at such time; the corporate shareholders
acquired 6,000,000 shares. On or about July 15 and 30, and August 19, 1998,
thirty-three (33) individuals acquired 742,500 shares of common stock, for the
total purchase price of $7,425. On or about September 5, 1998, three (3)
individual shareholders paid $13,000 for 130,000 shares. All of the foregoing
shares of common stock were issued in compliance with Section 4(2) of the
Securities Act of 1933, as amended, or pursuant to exemption under Rule 504. Of
the total shares issued, 670,500 were issued pursuant to Rule 504 exemption.
On or about October 26, 1998, the current management directors of the
Company acquired the 4,000,000 shares held by the President of the Company, then
known as Goldking Resources, Inc.; these shares were transferred to the current
management directors of the Company, Messrs. Long, Hoch and Jones, and other key
executives of the Company. Neither Messrs. Long, Hoch and Jones
32
<PAGE>
nor any other executive of the Company paid cash consideration for the shares
received, but instead transferred their shares in billserv-Texas to Goldking,
which subsequently caused the merger of billserv-Texas into Goldking. All of
these common shares were transferred in compliance with Section 4(1) of the
Securities Act of 1933. The shares are restricted under Rule 144.
On December 3, 1998, the Company issued 5,359,500 shares of common stock
at par in reliance upon exemption under Rule 504, and received for cancellation
6,202,000 shares, with unanimous shareholder consent. The stock described above
was issued to fifteen (15) individual and institutional investors. The total
purchase price for all shares issued was $5,359.50.
On May 7, 1999, the Company contracted to issue a warrant for the purchase
of up to 500,000 shares of common stock to Southwest Business Corporation, of
San Antonio, Texas. Subject to specific performance criteria in sales and
marketing of the Company's products, Southwest Business Corporation may earn the
right to purchase shares of common stock, at 110% of the closing bid price as of
May 7, 1999 ($6.50), over a three year term. If Southwest Business Corporation
meets the contract requirements, the warrant will be issued in accordance with
Section 4(2) of the Securities Act of 1933, as amended.
On June 11, 1999, the Company issued 946,428 shares of common stock to two
corporate investors, in exchange for $5.3 million in cash. The stock was issued
pursuant to exemption under Regulation S.
ITEM 11. DESCRIPTION OF THE COMPANY'S SECURITIES
1. GENERAL
The Company is authorized to issue 200,000,000 shares of common stock of $.001
par value per share. This is the only class of stock currently authorized for
issuance by the Company. The common stock has no conversion, preemptive or
subscription rights as to any securities of the Company and are not liable to
assessments or further calls. Each share of common stock of the Company, when
fully paid for, will be validly issued and outstanding, is entitled to one vote
on all matters to be voted on by shareholders, is entitled to equal dividends
when and as declared by the board of directors from funds legally available
therefor, and is entitled to a pro rata share of the Company's net assets in the
event of dissolution, liquidation or winding up of the Company.
The holders of shares of common stock are entitled to dividends when and as
declared by the Board of Directors from funds legally available therefore and,
upon liquidation, are entitled to share pro rata in any distribution to common
shareholders. Holders of the common stock have one non-cumulative vote for each
share held. There are no preemptive, conversion or redemption privileges, nor
sinking fund provisions, with respect to the common stock. All of the
outstanding shares of common stock are validly issued, fully paid and
non-assessable.
33
<PAGE>
Since the common stock of the Company does not have cumulative voting rights,
the holders of more than 50 percent of the outstanding shares can elect all of
the directors, if they choose to do so, in which event the holders of the
remaining shares cannot elect any directors. Accordingly, if the present
shareholders in the foreseeable future own more than 50 percent of the
outstanding shares, they will be able to elect all of the directors.
2. DIVIDEND POLICY
The payment by the Company of dividends, if any, in the future rests principally
on the discretion of its board of directors, and will depend, among other
things, upon the Company's earnings, its capital requirements, and its financial
condition, as well as other relevant factors. The Company has not paid or
declared any dividends upon its common stock since its inception, and by reason
of its contemplated financial requirements, does not contemplate or anticipate
paying any dividends upon its common stock in the foreseeable future. See
"Special Risk Factors."
3. REPORTS TO SHAREHOLDERS
The Company intends to furnish its shareholders with annual reports of its
operations, containing financial statements. The Company will also file annual
and quarterly reports as required by the Securities Exchange Act of 1934.
4. TRANSFER AGENT
The Company has contracted with NEVADA AGENCY AND TRUST COMPANY, 50 West
Liberty, Suite 880, Reno, Nevada 89501, as its transfer agent.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada law sets forth the powers of the Company to indemnify officers,
directors, employees and agents. The Articles of Incorporation for the Company
provide as follows:
"No director or officer shall have any personal liability to the
corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, except that this Article shall not eliminate or
limit the liability of a director or officer for (i) acts or omissions
that involve intentional misconduct, fraud or a knowing violation of the
law, or (ii) the payment of dividends in violation of Nevada Revised
Statutes."
Except to the extent herein above set forth, there is no charter provision,
bylaw, contract, arrangement or statute pursuant to which any director or
officer of the Company is indemnified in any manner against any liability which
he may incur in his capacity as such. The Company also
34
<PAGE>
maintains a standard director and officer liability policy, to fund the
Company's obligations as stated herein above.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The financial statements of the Company, itemized in the sub-topic, "Financial
Statements" under Item 15 hereof, are set forth below.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There exists no disagreement between the Company and its accountants on any
matter of accounting principles or practice or financial statement disclosure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
billserv.com, Inc.
(a development stage company)
Financial Statements
PERIOD ENDED DECEMBER 31, 1998
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
billserv.com, Inc.
(a development stage company)
Financial Statements
Period Ended December 31, 1998
CONTENTS
Report of Independent Auditors ........................................1
Financial Statements
Balance Sheet .........................................................2
Statement of Operations ...............................................3
Statement of Shareholders' Equity (Deficit) ...........................4
Statement of Cash Flows ...............................................5
Notes to Financial Statements .........................................6
<PAGE>
Report of Independent Auditors
Board of Directors
billserv.com, Inc.
We have audited the accompanying balance sheet of billserv.com, Inc. (a
development stage company) as of December 31, 1998, and the related statements
of operations, shareholders' equity (deficit), and cash flows for the period
from inception (July 30, 1998) through December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of billserv.com, Inc. at December
31, 1998, and the results of its operations and its cash flows for the period
from inception (July 30, 1998) through December 31, 1998 in conformity with
generally accepted accounting principles.
Ernst & Young LLP
San Antonio, Texas
June 1, 1999
1
<PAGE>
billserv.com, Inc.
(a development stage company)
Balance Sheet
December 31, 1998
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 329,618
Related party accounts receivable ............................ 24,000
Prepaid expenses ............................................. 3,213
Other current assets ......................................... 31,149
---------
Total current assets ........................................... 387,980
Property and equipment, net of
accumulated depreciation of $559 ............................. 19,550
---------
Total assets ................................................... $ 407,530
=========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ............................................. $ 3,779
Accounts payable - related party ............................. 150,000
Accrued expenses ............................................. 38,127
Advance from shareholders .................................... 500,000
---------
Total current liabilities ...................................... 691,906
Shareholders' equity (deficit):
Common stock - $.001 par value, 200,000,000 shares
authorized, 10,030,000 shares issued and outstanding
at December 31, 1998 ........................................ 10,030
Additional paid-in capital ................................... --
Deficit accumulated during the development stage ............. (294,406)
---------
Total shareholders' equity (deficit) ........................... (284,376)
---------
Total liabilities and shareholders' equity (deficit) ........... $ 407,530
=========
SEE ACCOMPANYING NOTES.
2
<PAGE>
billserv.com, Inc.
(a development stage company)
Statement of Operations
From Inception (July 30, 1998) to December 31, 1998
Revenues .................................................... $ --
Operating expenses:
Selling expenses .......................................... 88,298
General and administrative ................................ 200,913
Depreciation .............................................. 559
------------
Total operating expenses .................................... 289,770
------------
Loss before income taxes .................................... (289,770)
Income taxes ................................................ --
------------
Net loss .................................................... $ (289,770)
============
Net loss per common share - basic ........................... $ (0.03)
============
Weighted average common shares outstanding - basic .......... 10,030,000
============
SEE ACCOMPANYING NOTES.
3
<PAGE>
billserv.com, Inc.
(a development stage company)
Statement of Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
ADDITIONAL DURING THE SHAREHOLDERS'
COMMON STOCK PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL STAGE (DEFICIT)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at inception .................. 1,000 $ -- $ -- $ -- $ --
Acquisition of shares and reverse
merger on December 9, 1998 ......... 10,029,000 10,030 -- (4,636) 5,394
Net loss for the period ............... -- -- -- (289,770) (289,770)
----------------------------------------------------------------------------------
Balance at December 31, 1998 .......... 10,030,000 $ 10,030 $ -- $ (294,406) $ (284,376)
==================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
billserv.com, Inc.
(a development stage company)
Statement of Cash Flows
From Inception (July 30, 1998) to December 31, 1998
OPERATING ACTIVITIES
Net loss ........................................................ $(289,770)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation ................................................. 559
Changes in operating assets and liabilities:
Increase in related party receivables ...................... (24,000)
Increase in prepaid expenses and other current assets ...... (34,362)
Increase in accounts payable and accrued liabilities ....... 191,906
---------
Net cash used in operating activities ........................... (155,667)
INVESTING ACTIVITIES
Purchase of equipment ........................................... (20,109)
Proceeds of acquisition/merger .................................. 5,394
---------
Net cash used in investing activity ............................. (14,715)
FINANCING ACTIVITY
Advance from shareholders ....................................... 500,000
---------
Net cash provided by financing activity ......................... 500,000
---------
Increase in cash ................................................ 329,618
Cash and cash equivalents at beginning of period ................ --
---------
Cash and cash equivalents at end of period ...................... $ 329,618
=========
SEE ACCOMPANYING NOTES.
5
<PAGE>
billserv.com, Inc.
(a development stage company)
Notes to Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
billserv.com, Inc. (the Company) was incorporated on July 30, 1998 under the
laws of the state of Texas for the purpose of providing billing services over
the Internet. The Company, having no substantial assets, was acquired by and
merged with and into Goldking Resources, Inc. (Goldking). A shareholder of
Goldking transferred 4,000,000 shares of stock to the principals and certain key
employees of the Company in exchange for all 1,000 shares of the Company's
stock.
The shares of Goldking, a Nevada corporation formed to develop mineral rights,
are traded on the National Association of Securities Dealers Over-the-Counter
Bulletin Board (NASD OTC BB). On December 3, 1998, Goldking Resources, Inc.
changed its name to billserv.com, Inc. and began trading under the symbol BLLS.
The acquisition has been accounted for as a "reverse acquisition" under the
purchase method. The paid-in capital of the Company has been credited for
$5,394, the fair value of the tangible net assets of Goldking. The results of
operations of Goldking have been included in the Company's financial statements
from December 9, 1998.
Comprehensive loss is the same as net loss for the period ended December 31,
1998.
BASIS OF PRESENTATION
The Company's principal activities have been research and development, raising
capital, and organizational activities. Accordingly, it is considered a
development stage company. The Company expects to incur losses during its first
year of operations and may incur losses in subsequent years as development
efforts continue after the commencement of generation of revenues. The Company
plans to meet its capital requirements primarily through funding under a
financing agreement and issuance of equity securities, capital lease financing,
and in the longer term, revenue from services.
6
<PAGE>
billserv.com, Inc.
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
REVENUE RECOGNITION
Revenue consists of implementation fees, transaction fees, and professional and
consulting fees. Recognition of implementation fee revenue is recognized when
customer setup is complete. Transaction fees are recognized as revenue upon
completion of transactions. Professional and consulting fees are recognized when
services are rendered.
FEDERAL INCOME TAXES
The Company follows SFAS No. 109, "Accounting for Income Taxes." This statement
establishes financial accounting and reporting standards for deferred income tax
assets and liabilities that arise as a result of differences between the
reported amounts of assets and liabilities for financial reporting and income
tax purposes.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at original cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the related
assets. The Company's computer systems are currently depreciated over a period
of three years.
7
<PAGE>
billserv.com, Inc.
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1998
1. SIGNFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period. Diluted
net loss per common share is not presented as the assumed exercise of stock
options is antidilutive due to the Company's net loss.
2. ADVANCE FROM SHAREHOLDERS
The Company has received advances from a related party on a contemplated private
placement of the Company's common stock. As of December 31, 1998, $500,000 had
been advanced to the Company. An additional $1,500,000 was advanced in the
period from January 1999 through May 1999. The equity securities will be issued
under a Regulation S exemption. It is anticipated that net proceeds to the
Company under this offering will be approximately $5.3 million. Of the proceeds,
$1.2 million will be reserved for payments under the Company's Consulting
Agreement. See Note 3.
3. CONSULTING AGREEMENT
The Company has entered into a Consulting Agreement with a consulting group,
consisting of minority shareholders, which will provide financial consulting,
public relations services, advertising services, and investor relations
services. The term of the agreement is for one year, from November 1, 1998 to
October 31, 1999, and provides for services totaling $1.2 million. At December
31, 1998, the Company had received $150,000 in services from the consulting
group. The related liability has been recorded as Accounts Payable - Related
Party and will be paid from the proceeds of the Regulation S offering. See Note
2.
4. INCOME TAXES
At December 31, 1998, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $290,000 which expires in the tax
year 2019. The Company recorded a deferred tax asset and a corresponding
valuation allowance of approximately $98,000 at December 31, 1998. There were no
material temporary differences between the financial statement and tax basis of
assets and liabilities.
8
<PAGE>
billserv.com, Inc.
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1998
4. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense at December 31, 1998 is:
Tax at U.S. federal statutory rates $(98,000)
Valuation allowance 98,000
-------------
Income tax expense $ -
=============
5. SUBSEQUENT EVENT
In January 1999, the Company's Board of Directors ratified, subject to
shareholder approval, the adoption of three stock option plans and reserved
4,500,000 shares of its common stock for issuance to certain employees,
consultants and directors. Under this plan, incentive and nonqualified options
may be granted. Options granted under this plan are 33 1/3% vested after one
year and vest thereafter at a rate of approximately 2.78% per month. In the
event of a stock dividend, stock split or reverse stock split, reclassification,
or recapitalization, the aggregate number and/or class of shares subject to the
plan and exercise price prior to such occurrence are appropriately adjusted. The
Company intends to submit these plans for shareholder approval in late 1999.
6. YEAR 2000 ISSUE (UNAUDITED)
Although the Company is not aware of any material operational issue or costs
associated with preparing its internal systems for the year 2000, there can be
no assurance that the Company will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in the
technology used in its internal systems, which include third-party software and
hardware technology.
9
<PAGE>
billserv.com, Inc.
(a development stage company)
Financial Statements
(Unaudited)
PERIOD ENDED MARCH 31, 1999
<PAGE>
billserv.com, Inc.
(a development stage company)
Financial Statements
(Unaudited)
Period Ended March 31, 1999
CONTENTS
Financial Statements
Balance Sheets ........................................................1
Statements of Operations ..............................................2
Statement of Shareholders' Equity (Deficit) ...........................3
Statements of Cash Flows ..............................................4
Notes to Financial Statements .........................................5
<PAGE>
billserv.com, Inc.
(a development stage company)
Balance Sheets
MARCH 31 DECEMBER 31
1999 1998
----------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 353,392 $329,618
Related party accounts receivable - 24,000
Prepaid expenses 9,215 3,213
Other current assets 69,403 31,149
----------------------------
Total current assets 432,010 387,980
Property and equipment, net of
accumulated depreciation of $13,253 and
$559 229,880 19,550
Other assets 15,000 -
----------------------------
Total assets $ 676,890 $407,530
============================
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable $ 154,369 $ 3,779
Accounts payable - related party 550,000 150,000
Accrued expenses 57,757 38,127
Advance from shareholders 1,000,000 500,000
----------------------------
Total current liabilities 1,762,126 691,906
Shareholders' equity (deficit):
Common stock - $.001 par value,
200,000,000 shares authorized,
10,030,000 shares issued
and outstanding at March 31, 1999 and
December 31, 1998 10,030 10,030
Additional paid-in capital - -
Deficit accumulated during the
development stage (1,095,266) (294,406)
----------------------------
Total shareholders' equity (deficit) (1,085,236) (284,376)
----------------------------
Total liabilities and shareholders'
equity (deficit) $ 676,890 $407,530
============================
SEE ACCOMPANYING NOTES.
1
<PAGE>
billserv.com, Inc.
(a development stage company)
Statements of Operations
(Unaudited)
JULY 30,
1998
PERIOD ENDED (INCEPTION)
MARCH 31 TO MARCH 31
1999 1999
-------------------------------
Revenues $ -- $ --
Operating expenses:
Research and development 172,191 172,191
Selling expenses 287,172 375,470
General and administrative 331,507 532,420
Depreciation 12,694 13,253
-------------------------------
Total operating expenses 803,564 1,093,334
-------------------------------
Operating loss (803,564) (1,093,334)
Other income (expense):
Interest income 2,704 2,704
-------------------------------
Loss before income taxes (800,860) (1,090,630)
Income taxes -- --
-------------------------------
Net loss $ (800,860) $ (1,090,630)
===============================
Net loss per common share - basic $ (0.08) $ (0.11)
===============================
Weighted average common shares outstanding -
basic 10,030,000 10,030,000
-------------------------------
SEE ACCOMPANYING NOTES.
2
<PAGE>
billserv.com, Inc.
(a development stage company)
Statement of Shareholders' Equity (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
ADDITIONAL DURING THE SHAREHOLDERS'
COMMON STOCK PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL STAGE (DEFICIT)
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at inception 1,000 $ - $ - $ - $ -
Acquisition of shares and reverse
merger on December 9, 1998 10,029,000 10,030 - (4,636) 5,394
Net loss from inception to December
31, 1998 - - - (289,770) (289,770)
------------------------------------------------------------------
Balance at December 31, 1998 10,030,000 10,030 - (294,406) (284,376)
Net loss for period ending March 31,
1999 - - - (800,860) (800,860)
------------------------------------------------------------------
Balance at March 31, 1999 10,030,000 $10,030 $ - $(1,095,266) $(1,085,236)
==================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
billserv.com, Inc.
(a development stage company)
Statements of Cash Flows
(Unaudited)
JULY 30, 1998
PERIOD ENDED (INCEPTION)
MARCH 31 TO MARCH 31
1999 1999
-----------------------------
OPERATING ACTIVITIES
Net loss $ (800,860) $(1,090,630)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 12,694 13,253
Changes in operating assets and
liabilities:
Decrease in related party receivables 24,000 -
Increase in prepaid expenses and other
current assets (44,256) (78,618)
Increase in accounts payable and
accrued liabilities 570,220 762,126
Other (15,000) (15,000)
-----------------------------
Net cash used in operating activities (253,202) (408,869)
INVESTING ACTIVITIES
Purchase of property and equipment (223,024) (243,133)
Proceeds of acquisition/merger - 5,394
-----------------------------
Net cash used in investing activities (223,024) (237,739)
-----------------------------
FINANCING ACTIVITY
Advance from shareholders 500,000 1,000,000
-----------------------------
Net cash provided by financing activity 500,000 1,000,000
-----------------------------
Increase in cash 23,774 353,392
Cash and cash equivalents at beginning of
period 329,618 -
-----------------------------
Cash and cash equivalents at end of period $ 353,392 $ 353,392
=============================
SEE ACCOMPANYING NOTES.
4
<PAGE>
billserv.com, Inc.
(a development stage company)
Notes to Financial Statements
(Unaudited)
March 31, 1999
1. BASIS OF PRESENTATION
The Company's principal activities have been research and development, raising
capital, and organizational activities. Accordingly, it is considered a
development stage company. The Company expects to incur losses during its first
year of operations and may incur losses in subsequent years as development
efforts continue after the commencement of generation of revenues. The Company
plans to meet its capital requirements primarily through funding under a
financing agreement and issuance of equity securities, capital lease financing,
and in the longer term, revenue from services.
The financial statements have been prepared by billserv.com (Company) pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC)
and, in the opinion of management, include all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the results for the
interim periods shown. Certain information and footnote disclosures, normally
included in financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to such SEC rules
and regulations. The results for the interim periods are not necessarily
indicative of results for the full year. The financial statements contained
herein should be read in conjunction with the financial statements and notes
thereto included in the Company's 1998 financial statements.
2. ADVANCE FROM SHAREHOLDERS
The Company has received advances from a related party on a contemplated private
placement of the Company's common stock. As of March 31, 1999, $1,000,000 had
been advanced to the Company. An additional $1,000,000 was advanced in the
period from April 1999 through May 1999. The equity securities will be issued
under a Regulation S exemption. It is anticipated that net proceeds to the
Company under this offering will be approximately $5.3 million. Of the proceeds,
$1.2 million will be reserved for payments under the Company's Consulting
Agreement. See Note 3.
3. CONSULTING AGREEMENT
The Company has entered into a Consulting Agreement with a consulting group,
consisting of minority shareholders, which will provide financial consulting,
public relations services, advertising services, and investor relations
services. The term of the agreement is for one year, from November 1, 1998 to
October 31, 1999, and provides for
5
<PAGE>
billserv.com, Inc.
(a development stage company)
Notes to Financial Statements (continued)
(Unaudited)
March 31, 1999
services totaling $1.2 million. At March 31, 1999, the Company had received
$550,000 in services from the consulting group. The related liability has been
recorded as Accounts Payable - Related Party and will be paid from the proceeds
of the Regulation S offering. See Note 2.
4. YEAR 2000 ISSUE
Although the Company is not aware of any material operational issue or costs
associated with preparing its internal systems for the year 2000, there can be
no assurance that the Company will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in the
technology used in its internal systems, which include third-party software and
hardware technology.
6
<PAGE>
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Special
Risk Factors."
35
<PAGE>
EXHIBITS
1. Financial Statements (see above).
2. Articles of Incorporation of Goldking Resources, Inc., a Nevada
corporation, filed with the Secretary of State of Nevada on June 4,
1998.
3. Certificate of Amendment to Articles of Amendment, filed with the
Secretary of State of Nevada on December 3, 1998 (reflecting name
change to "billserv.com, Inc.").
4. Bylaws of the Company, formerly known as Goldking Resources, Inc.,
adopted June 4, 1998.
5. Specimen of common stock certificate, of billserv.com, Inc., par
value $0.001
6. Employment Agreement, dated November 28, 1998, by and between
billserv.com, Inc. and Michael Long.
7. Employment Agreement, dated November 28, 1998, by and between
billserv.com, Inc. and Louis Hoch.
8. Employment Agreement, dated November 28, 1998, by and between
billserv.com, Inc. and David Jones.
9. Employment Agreement, dated November 28, 1998, by and between
billserv.com, Inc. and Lori Turner.
10. Employment Agreement, dated November 28, 1998, by and between
billserv.com, Inc. and Marshall Millard.
11. Employment Agreement, dated November 28, 1998, by and between
billserv.com, Inc. and Randy Kauftheil.
12. Consulting Agreement, dated November 1, 1998, by and between
billserv.com, Inc. and Richard N. Jeffs, James R. King, and Robert
B. Smith.
13. Business Development Agreement, dated May 7, 1999, by and between
billserv.com, Inc. and Southwest Business Corporation.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
billserv.com, Inc.
A Nevada corporation
By:_________________________
Name:_______________________
President
By:_________________________
Name:_______________________
Secretary
37
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUN 04 1998
No. C13059-98
/s/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE:
ARTICLES OF INCORPORATION
OF
GOLDKING RESOURCES INC.
* * * * *
The undersigned, acting as incorporator, pursuant to the provisions
of the laws of the State of Nevada relating to private corporations, hereby
adopts the following Articles of Incorporation:
ARTICLE ONE. [NAME]. The name of the corporation is:
GOLDKING RESOURCES INC.
ARTICLE TWO. [RESIDENT AGENT]. The initial agent for service of
process is Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880,
City of Reno, County of Washoe, State of Nevada 89501.
ARTICLE THREE. [PURPOSES]. The purposes for which the corporation
is organized are to engage in any activity or business not in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generality of the foregoing, specifically:
I. [OMNIBUS]. To have to exercise all the powers now or
hereafter conferred by the laws of the State of Nevada upon
corporations organized pursuant to the laws under which the
corporation is organized and any and all acts amendatory thereof
and supplemental thereto.
II. [CARRYING ON BUSINESS OUTSIDE STATE]. To conduct and carry
on its business or any branch thereof in any state or territory of
the United States or in any foreign country in conformity with the
laws of such state, territory, or foreign country, and to have and
maintain in any state, territory, or foreign country a business
office, plant, store or other facility.
III. [PURPOSES TO BE CONSTRUED AS POWERS]. The purposes
specified herein shall be construed both as purposes and powers and
shall be in no wise limited or restricted by reference to, or
inference from, the terms
<PAGE>
of any other clause in this or any other article, but the purposes
and powers specified in each of the clauses herein shall be
regarded as independent purposes and powers, and the enumeration of
specific purposes and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or of the
general powers of the corporation; nor shall the expression of one
thing be deemed to exclude another, although it be of like nature
not expressed.
ARTICLE FOUR. [CAPITAL STOCK]. The corporation shall have authority
to issue an aggregate of TWO HUNDRED MILLION (200,000,000) COMMON CAPITAL
SHARES, PAR VALUE ONE MILL ($0.00l) per share for a total capitalization of TWO
HUNDRED THOUSAND DOLLARS ($200,000).
The holders of shares of capital stock of the corporation shall not
be entitled to pre-emptive or preferential rights to subscribe to any unissued
stock or any other securities which the corporation may now or hereafter be
authorized to issue.
The corporation's capital stock may be issued and sold from time to
time for such consideration as may be fixed by the Board of Directors, provided
that the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting rights at all
shareholders meetings called for the purpose of electing a Board of Directors.
ARTICLE FIVE. [DIRECTORS]. The affairs of the corporation shall be
governed by a Board of Directors of no more than eight (8) nor less than one (1)
person. The names and addresses of the first Board of Directors are:
NAME ADDRESS
---- -------
Adam Smith 1327 Laburnum Street
Vancouver, British Columbia
Canada V6J 3W4
Gordon Ross Krushnisky 1070 Eden Crescent
Delta, British Columbia
Canada V41 1W7
ARTICLE SIX. [ASSESSMENT OF STOCK]. The capital stock of the
corporation, after the amount of the subscription price or par value has been
paid in, shall not be subject to pay debts of
2
<PAGE>
the corporation, and no paid up stock and no stock issued as fully paid up shall
ever be assessable or assessed.
ARTICLE SEVEN. [INCORPORATOR]. The name and address of the
incorporator of the corporation is as follows:
NAME ADDRESS
------ ---------
Amanda Cardinalli 50 West Liberty Street, Suite 880
Reno, Nevada 89501
ARTICLE EIGHT. [PERIOD OF EXISTENCE]. The period of existence of
the corporation shall be perpetual.
ARTICLE NINE. [BY-LAWS]. The initial By-laws of the corporation
shall be adopted by its Board of Directors. The power to alter, amend, or repeal
the By-laws, or to adopt new By-laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-laws.
ARTICLE TEN. [STOCKHOLDERS' MEETINGS]. Meetings of stockholders
shall be held at such place within or without the State of Nevada as may be
provided by the By-laws of the corporation. Special meetings of the stockholders
may be called by the President or any other executive officer of the
corporation, the Board of Directors, or any member thereof, or by the record
holder or holders of at least ten percent (10%) of all shares entitled to vote
at the meeting. Any action otherwise required to be taken at a meeting of the
stockholders, except election of directors, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by
stockholders having at least a majority of the voting power.
ARTICLE ELEVEN. [CONTRACTS OF CORPORATION). No contract or other
transaction between the corporation and any other corporation, whether or not a
majority of the shares of the capital stock of such other corporation is owned
by this corporation, and no act of this corporation shall in any way be affected
or invalidated by the fact that any of the directors of this corporation are
pecuniarily or otherwise interested in, or are directors or officers of such
other corporation. Any director of this corporation, individually, or any firm
of which such director may be a member, may be a party to, or may be pecuniarily
or otherwise interested in any contract or transaction of the corporation;
provided, however, that the fact that he or such firm is so interested shall be
disclosed or shall have been known to the Board of Directors of this
corporation, or a majority thereof; and any director of this corporation who is
also a director or officer of such other corporation, or who is so interested,
may be counted in determining the existence of a quorum at any meeting of the
3
<PAGE>
Board of Directors of this corporation that shall authorize such contract or
transaction, and may vote thereat to authorize such contract or transaction,
with like force and effect as if he were not such director or officer of such
other corporation or not so interested.
ARTICLE TWELVE. [LIABILITY OF DIRECTORS AND OFFICERS]. No director
or officer shall have any personal liability to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
except that this Article Twelve shall not eliminate or limit the liability of a
director or officer for (I) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of the Nevada Revised Statutes.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto
affixed her signature at Reno, Nevada this 3rd day of June, 1998.
/s/ AMANDA CARDINALLI
AMANDA CARDINALLI
STATE OF NEVADA }
} ss.
COUNTY OF WASHOE }
On the 3rd day of June, 1998, before me, the undersigned, a Notary
Public in and for the State of Nevada, personally appeared AMANDA CARDINALLI,
known to me to be the person described in and who executed the foregoing
instrument, and who acknowledged to me that she executed the same freely and
voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
/s/ MARGARET A. OLIVER
NOTARY PUBLIC
Residing in Reno, Nevada
My Commission Expires:
OCTOBER 10, 1998
[MARGARET A. OLIVER
NOTARY PUBLIC SEAL]
4
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 03 1998
No. C13059-98
DEAN HELLER
DEAN HELLER SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
GOLDKING RESOURCES INC.
The undersigned certify that, pursuant to the provisions of the Nevada Revised
Statues, GOLDKING RESOURCES INC., a Nevada corporation, adopted the following
resolutions to amend its articles of incorporation:
1. All of the directors consented in writing to the following resolution
dated November 20, 1998:
RESOLVED that the secretary of the Company is directed to obtain from the
stockholders owning at least a majority of the voting power of the
outstanding stock of the Company their written consent to the amendment
of article one of the articles of incorporation to change the name of the
Company from GOLDKING RESOURCES INC. to BILLSERV.COM, INC.
2. A majority of the stockholders holding ninety-one percent of the common
shares outstanding of Goldking Resources Inc. consented in writing to the
following resolution dated November 20, 1998:
RESOLVED that article one of the Company's articles of incorporation be
amended as follows:
ARTICLE ONE. [NAME] The name of the corporation is:
BILLSERV.COM, INC.
The undersigned president and secretary of GOLDKING RESOURCES INC., a Nevada
corporation, signed below on November 26, 1998.
GOLDKING RESOURCES INC.
/s/ ADAM SMITH
Adam Smith, President
/s/ MARY M. HETHEY
Mary M. Hethey, Secretary
Province of
British Columbia
On November 26, 1998, before me, the undersigned notary public, personally
appeared ADAM SMITH, PRESIDENT, and MARY M. HETHEY, SECRETARY, known to be the
persons described in and who executed the foregoing instrument and who
acknowledged to me that they executed it voluntarily for the purposes described.
I have set my hand and affixed my official seal on November 26, 1998.
/s/ SUSAN JEFFS
Notary Public
Residing in BRITISH COLUMBIA
My commission expires: ON DEATH
SUSAN JEFFS
Barrister & Solicitor
Suite 420, 1090 West Pender Street
Vancouver, B.C. V6E 2N7
Tel: (604) 664-0525
<PAGE>
Province of
British Columbia
On November 26, 1998, before me, the undersigned notary public, personally
appeared MARY M. HETHEY, SECRETARY, known to be the persons described in and who
executed the foregoing instrument and who acknowledged to me that they executed
it voluntarily for the purposes described.
I have set my hand and affixed my official seal on November 26th, 1998.
/s/ SUSAN JEFFS
Notary Public
Residing in VANCOUVER, BC
SUSAN JEFFS
Barrister & Solicitor
Suite 420, 1090 West Pender Street
Vancouver, B.C. V6E 2N7
Tel: (604) 664-0525
My commission expires: ON DEATH
<PAGE>
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of
the document as filed in this
office.
DEC 04 '98
DEAN HELLER
Secretary of State
By MARY MH
BY LAWS
OF
GOLDKING RE0SOURCES INC.
A NEVADA CORPORATION
ARTICLE 1
OFFICES
SECTION 1. The registered office of this corporation shall be in the City of
Reno, State of Nevada.
SECTION 2. The Corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
SECTION 1. All annual meetings of the stockholders shall be held at the
registered office of the corporation or at such other place within or without
the State of Nevada as the Directors shall determine. Special meetings of the
stockholders may be held at such time and place within or without the State of
Nevada as shall be stated in the notice of the meeting, or in a duly executed
waiver of notice thereof.
SECTION 2. Annual meetings of the stockholders shall be held on the anniversary
date of incorporation each year if not a legal holiday and, and if a legal
holiday, then on the next secular day following, or at such other time as may be
set by the Board of Directors from time to time, at which the stockholders shall
elect by vote a Board of Directors and transact such other business as may
properly be brought before the meeting.
SECTION 3. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Articles of Incorporation, may
be called by the President or the Secretary, by resolution of the Board of
Directors or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose of the proposed meeting.
SECTION 4. Notices of meetings shall be in writing and signed by the President
or Vice-President or the Secretary or an Assistant Secretary or by such other
person or persons as the Directors shall designate. Such notice shall state the
purpose or purposes for which the meeting is called and the time and the place,
which may be within or without this State, where it is to be held. A copy of
such notice shall be either delivered personally to or shall be mailed, postage
prepaid, to each stockholder of record entitled to vote at such meeting not less
than ten nor more than sixty days before such meeting. If mailed, it shall be
directed to a stockholder at his address as it appears upon the records of the
corporation and upon such mailing of any such notice, the service thereof shall
be complete and the time of the notice shall begin to run from the date upon
which such notice is deposited in the mail for transmission to such stockholder.
Personal delivery of any such notice to an officer of the corporation or
association, or to any member of a partnership shall constitute delivery of such
notice to such corporation, association or partnership. In the event of the
transfer of stock after delivery of such notice of and prior to the holding of
the meeting, it shall not be necessary to deliver or mail such notice of the
meeting to the transferee.
SECTION 5. Business transactions at any special meeting of stockholders shall be
limited to the purpose stated in the notice.
SECTION 6. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such
<PAGE>
-2-
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcements at the meeting, until a quorum shall be presented or
represented. At such adjourned meetings at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION 7. When a quorum is present or represented at any meeting, the vote of
the holders of 10% of the stock having voting power present in person or
represented by proxy shall be sufficient to elect Directors or to decide any
question brought before such meeting, unless the question is one upon which by
express provision of the statute or of the Articles of Incorporation, a
different vote shall govern and control the decision of such question.
SECTION 8. Each stockholder of record of the corporation shall be entitled at
each meeting of the stockholders to one vote for each share standing in his name
on the books of the corporation. Upon the demand of any stockholder, the vote
for Directors and the vote upon any question before the meeting shall be by
ballot.
SECTION 9. At any meeting of the stockholders any stockholder may be represented
and vote by a proxy or proxies appointed by an instrument in writing. In the
event that any such instrument in writing shall designate two or more persons to
act as proxies, a majority of such persons present at the meeting, or, if only
one shall be present, then that one shall have and may exercise all the powers
conferred by such written instruction upon all of the persons so designated
unless the instrument shall otherwise provide. No proxy or power of attorney to
vote shall be voted at a meeting of the stockholders unless it shall have been
filed with the Secretary of the meeting when required by the inspectors of
election. All questions regarding the qualifications of voters, the validity of
proxies and the acceptance of or rejection of votes shall be decided by the
inspectors of election who shall be appointed by the Board of Directors, or if
not so appointed, then by the presiding officer at the meeting.
SECTION 10. Any action which may be taken by the vote of the stockholders at a
meeting may be taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power, unless the
provisions of the statute or the Articles of Incorporation require a greater
proportion of voting power to authorize such action in which case such greater
proportion of written consents shall be required.
ARTICLE 3
DIRECTORS
SECTION 1. The business of the corporation shall be managed by its Board of
Directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Articles of Incorporation
or by these Bylaws directed or required to be exercised or done by the
stockholders.
SECTION 2. The number of Directors which shall constitute the whole board shall
be not less than one and not more than eight. The number of Directors may from
time to time be increased or decreased to not less than one nor more than eight
by action of the Board of Directors. The Directors shall be elected at the
annual meeting of the stockholders and except as provided in section 2 of this
Article, each Director elected shall hold office until his successor is elected
and qualified. Directors need not be stockholders.
SECTION 3. Vacancies in the Board of Directors including those caused by an
increase in the number of Directors, may be filed by a majority of the remaining
Directors, though less than a quorum, or by a sole remaining Director, and each
Director so elected shall hold office until his successor is elected at the
annual or a special meeting of the stockholders. The holders of a two-thirds of
the outstanding shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the Directors by vote at a meeting
called for such purpose or by a written statement filed with the Secretary or,
in his absence, with any other officer. Such removal shall be effective
immediately, even if successors are not elected simultaneously and the vacancies
on the Board of Directors resulting therefrom shall only be filled from the
stockholders.
A vacancy or vacancies on the Board of Directors shall be deemed to
exist in case of death, resignation or removal of any Director, or if the
authorized number of Directors be increased, or if the stockholders fail at any
annual or special meeting of stockholders at which any Director or Directors are
elected to elect the full authorized number of Directors to be voted for at that
meeting.
<PAGE>
-3-
The stockholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors. If the Board of
Directors accepts the resignation of a Director tendered to take effect at a
future time, the Board or the stockholders shall have power to elect a successor
to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the
effect of removing any Director prior to the expiration of his term of office.
ARTICLE 4
MEETING OF THE BOARD OF DIRECTORS
SECTION 1. Regular meetings of the Board of Directors shall be held at any place
within or without the State which has been designated from time to time by
resolution of the Board or by written consent of all members of the Board. In
the absence of such designation regular meetings shall be held at the registered
office of the corporation. Special meetings of the Board may be held either at a
place so designated or at the registered office.
SECTION 2. The first meeting of each newly elected Board of Directors shall be
held immediately following the adjournment of the meeting of stockholders and at
the place thereof. No notice of such meeting shall be necessary to the Directors
in order legally to constitute the meeting, provided a quorum be present. In the
event such meeting is not so held, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors.
SECTION 3. Regular meetings of the Board of Directors may be held without call
or notice at such time and at such place as shall from time to time be fixed and
determined by the Board of Directors.
SECTION 4. Special meetings of the Board of Directors may be called by the
Chairman or the President or by the Vice-President or by any two Directors.
Written notice of the time and place of special meetings shall be
delivered personally to each Director, or sent to each Director by mail or by
other form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records or if not readily ascertainable, at the
place in which the meetings of the Directors are regularly held. In case such
notice is mailed or telegraphed, it shall be deposited in the postal service or
delivered to the telegraph company at least forty-eight (48) hours prior to the
time of the holding of the meeting. In case such notice is delivered or faxed,
it shall be so delivered or faxed at least twenty-four (24) hours prior to the
time of the holding of the meeting. Such mailing, telegraphing, delivery or
faxing as above provided shall be due, legal and personal notice of such
Director.
SECTION 5. Notice of the time and place of holding an adjourned meeting need not
be given to the absent Directors if the time and place be fixed at the meeting
adjourned.
SECTION 6. The transaction of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though transacted at a
meeting duly held after regular call and notice, if a quorum be present, and if,
either before or after such meeting, each of the Directors not present signs a
written waiver of notice, or a consent of holding such meeting, or approvals of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
SECTION 7. The majority of the authorized number of Directors shall be necessary
to constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
Directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors, unless a greater number be
required by law or by the Articles of Incorporation. Any action of a majority,
although not at a regularly called meeting, and the record thereof, if assented
to in writing by all of the other members of the Board shall be as valid and
effective in all respects as if passed by the Board in regular meeting.
<PAGE>
-4-
SECTION 8. A quorum of the Directors may adjourn any Directors meeting to meet
again at stated day and hour; provided, however, that in the absence of a
quorum, a majority of the Directors present at any Directors meeting, either
regular or special, may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
ARTICLE 5
COMMITTEES OF DIRECTORS
SECTION 1. The Board of Directors may, by resolution adopted by a majority of
the whole Board, designate one or more committees of the Board of Directors,
each committee to consist of two or more of the Directors of the corporation
which, to the extent provided in the resolution, shall and may exercise the
power of the Board of Directors in the management of the business and affairs of
the corporation and may have power to authorize the seal of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by the
Board of Directors. The members of any such committee present at any meeting and
not disqualified from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. At meetings of such
committees, a majority of the members or alternate members at any meeting at
which there is a quorum shall be the act of the committee.
SECTION 2. The committee shall keep regular minutes of their proceedings and
report the same to the Board of Directors.
SECTION 3. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written consent thereto is signed by all members of the Board of Directors or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee.
ARTICLE 6
COMPENSATION OF DIRECTORS
SECTION 1. The Directors may be paid their expenses of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE 7
NOTICES
SECTION 1. Notices to Directors and stockholders shall be in writing and
delivered personally or mailed to the Directors or stockholders at their
addresses appearing on the books of the corporation. Notices to Directors may
also be given by fax and by telegram. Notice by mail, fax or telegram shall be
deemed to be given at the time when the same shall be mailed.
SECTION 2. Whenever all parties entitled to vote at any meeting, whether of
Directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the Secretary, or by presence at such meeting or oral
consent entered on the minutes, or by taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be as valid as if
had at a meeting regularly called and noticed, and at such meeting any business
may be transacted which is not excepted from the written consent to the
consideration of which no objection for want of notice is made at the time, and
if any meeting be irregular for want of notice or such consent, provided a
quorum was present at such meeting, the proceedings of said meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting; and such consent or approval of stockholders may be by proxy or
attorney, but all such proxies and powers of attorney must be in writing.
<PAGE>
-5-
SECTION 3. whenever any notice whatever is required to be given under the
provisions of the statute, of the Articles of Incorporation or of these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 8
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary and a Treasurer. Any person may
hold two or more offices.
SECTION 2. The Board of Directors at its first meeting after each annual meeting
of stockholders shall choose a Chairman of the Board who shall be a Director,
and shall choose a President, a Secretary and a Treasurer, none of whom need be
Directors.
SECTION 3. The Board of Directors may appoint a Vice-Chairman of the Board,
Vice-Presidents and one or more Assistant Secretaries and Assistant Treasurers
and such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 4. The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office at the pleasure of
the Board of Directors. Any officer elected or appointed by the Board of
Directors may be removed any time by the Board of Directors. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors.
SECTION 6. The CHAIRMAN OF THE BOARD shall preside at meetings of the
stockholders and the Board of Directors, and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
SECTION 7. The VICE-CHAIRMAN shall, in the absence or disability of the Chairman
of the Board, perform the duties and exercise the powers of the Chairman of the
Board and shall perform other such duties as the Board of Directors may from
time to time prescribe.
SECTION 8. The PRESIDENT shall be the chief executive officer of the corporation
and shall have active management of the business of the corporation. He shall
execute on behalf of the corporation all instruments requiring such execution
except to the extent the signing and execution thereof shall be expressly
designated by the Board of Directors to some other officer or agent of the
corporation.
SECTION 9. The VICE-PRESIDENTS shall act under the direction of the President
and in absence or disability of the President shall perform the duties and
exercise the powers of the President. They shall perform such other duties and
have such other powers as the President or the Board of Directors may from time
to time prescribe. The Board of Directors may designate one or more Executive
Vice-Presidents or may otherwise specify the order of seniority of the
Vice-Presidents. The duties and powers of the President shall descend to the
Vice-Presidents in such specified order of seniority.
SECTION 10. The SECRETARV shall act under the direction of the President.
Subject to the direction of the President he shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record the
proceedings. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and will perform
other such duties as may be prescribed by the President or the Board of
Directors.
SECTION 11. The ASSISTANT SECRETARIES shall act under the direction ofthe
President. In order of their seniority, unless otherwise determined by the
President or the Board of Directors, they shall, in the absence or
<PAGE>
-6-
disability of the Secretary, perform the duties and exercise the powers of the
Secretary. They shall perform other such duties and have such other powers as
the President and the Board of Directors may from time to time prescribe.
SECTION 12. The TREASURER shall act under the direction of the President.
Subject to the direction of the President he shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all money
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the corporation as may be ordered by the President or the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sum and with such surety as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
SECTION 13. The ASSISTANT TREASURERS in order of their seniority, unless
otherwise determined by the President or the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
ARTICLE 9
CERTIFICATES OF STOCK
SECTION 1. Every stockholder shall be entitled to have a certificate signed by
the President or a Vice-President and the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the corporation, certifing the
number of shares owned by him in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series thereof and the
qualifications, limitations or restrictions of such rights, shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such stock.
SECTION 2. If a certificate is signed (a) by a transfer agent other than the
corporation or its employees or (b) by a registrar other than the corporation or
its employees, the signatures of the officers of the corporation may be
facsimiles. In case any officer who has signed or whose facsimile signatures
have been placed upon a certificate shall cease to be such officer before such
certificate is issued, such certificate may be issued with the same effect as
though the person had not ceased to be such officer. The seal of the
corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
SECTION 3. The Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
SECTION 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation, if it is satisfied that all provisions of the laws and
regulations applicable to the corporation regarding transfer and ownership of
shares have been compiled with, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
<PAGE>
-7-
SECTION 5. The Board of Directors may fix in advance a date not exceeding sixty
(60) days nor less than ten (10) days preceding the date of any meeting of
stockholders, or the date of the payment of any dividend, or the date of the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent of stockholders for any purpose, as a record date for the termination of
the stockholders entitled to notice of and to vote at any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
give such consent, and in the such case, such stockholders, and only such
stockholders as shall be stockholders of record on the date so fixed, shall be
entitled to notice of and to vote as such meeting, or any adjournment thereof,
or to receive such payment of dividend, or to receive such allotment of rights,
or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
such record date fixed as aforesaid.
SECTION 6. The corporation shall be entitled to recognize the person registered
on its books as the owner of the share to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be bound
to recognize any equitable or other claims to or interest in such shares or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE 10
GENERAL PROVISIONS
SECTION 1. Dividends upon the capital stock of the corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in shares of the capital stock, subject to
the provisions of the Articles of Incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends or for
repairing and maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interests of the
corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 3. All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
SECTION 4. The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
SECTION 5. The corporation may or may not have a corporate seal, as may be from
time to time determined by resolution of the Board of Directors. If a corporate
seal is adopted, it shall have inscribed thereon the name of the corporation and
the words "Corporate Seal" and "Nevada". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE 11
INDEMNIFICATION
Every person who was or is a party or is a threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a Director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a Director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest legally permissible under the
General Corporation Law of the State of Nevada from time to time against all
expenses, liability and loss (including attorney's fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and Directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
<PAGE>
-8-
Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such Directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and
maintain insurance on behalf of any person who is or was a Director or officer
of the corporation, or is or was serving at the request of the corporation as a
Director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may from time to time adopt further Bylaws
with respect to indemnification and amend these and such Bylaws to provide at
all times the fullest indemnification permitted by the General Corporation Law
of the State of Nevada.
ARTICLE 12
AMENDMENTS
SECTION 1. The Bylaws may be amended by a majority vote of all the stock issued
and outstanding and entitled to vote at any annual or special meeting of the
stockholders, provided notice of intention to amend shall have been contained in
the notice of the meeting.
SECTION 2. The Board of Directors by a majority vote of the whole Board at any
meeting may amend these Bylaws, including Bylaws adopted by the stockholders,
but the stockholders may from time to time specify particulars of the Bylaws
which shall not be amended by the Board of Directors.
APPROVED AND ADOPTED JUNE 4,1998.
CERTIFICATE OF THE SECRETARY
I, Mary Hethey, hereby certify that I am the Secretary of GOLDKING RESOURCES
INC., and the foregoing Bylaws, consisting of 8 pages, constitute the code of
Bylaws of this company as duly adopted at a regular meeting of the Board of
Directors of the corporation held on June 4, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name on June 4, 1998.
/s/ MARY HETHEY
Secretary
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP NO. 090181 10 8
NUMBER SHARES
BILLSERV.COM, INC.
AUTHORIZED COMMON STOCK: 200,000,000 SHARES
PAR VALUE:$.001
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
-- Shares of billserv.com, Inc. Common Stock --
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of is duly authorized officers.
Dated:
L. A. HOCH
PRESIDENT
SEAL
MICHAEL R. LONG
CEO
NOT VALID UNLESS COUNTERSIGNED Countersigned Registered:
BY TRANSFER AGENT NEVADA AGENCY AND TRUST COMPANY
50 WEST LIBERTY STREET, SUITE 880
RENO, NEVADA 89501
By______________________________
Authorized Signature
NOTICE: Signature must be guaranteed by a firm which is a member of a registered
national stock exchange, or by a bank (other than a saving bank), or a
trust company. The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations.
TEN COM -- as tenants in common UNIF GIFT MIN ACT --_____Custodian_____
TEN ENT -- as tenants by (Cust) (Minor)
the entireties
JT TEN -- as joint tenants under Uniform Gifts to Minors
with right of Act __________________________
survivorship and (State)
not as tenants
in common
Additional abbreviations may also be used though not in the above list.
For Value Received, _______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
|------------------------------------|
| |
|------------------------------------|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________
_________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER
EXHIBIT 6
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of November 28, 1998, is made and entered into by and
between billserv.com inc., a Nevada corporation, having an office address at
1100 N.W. Loop 410, San Antonio, Texas 78213 ("billserv.com" or the "Company")
and the individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and for the
position set forth on Schedule 1 attached hereto. Executive hereby
accepts such employment with the Company upon the terms and
conditions hereinafter set forth. Executive further agrees to serve
as the Chairman of the Board of Directors of the Company (the
"Board") during the term of this Agreement.
(b) The duties of the Executive shall include the duties and services
described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board
and shall include such other duties, as may be assigned by the Board
commensurate with the responsibilities normally associated with
Executive's position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed by an
Executive with the position set forth in Schedule 1 of a business
similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the
Company which are reasonable and consistent with the Company's
operations, taking into account Executive's expertise and job
responsibilities. During the term of this Agreement, Executive
agrees to devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts
to perform faithfully and efficiently such responsibilities. The
Executive will use Executive's best efforts to promote the interests
of the Company.
(b) During this Agreement, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions; or (iii) manage personal
investments or companies in which personal investments are made so
long as such activities do not significantly interfere with
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<PAGE>
the performance of Executive's responsibilities with the Company and
which companies are not in direct competition with the Company. Any
income incurred by Executive outside the scope of his employment and
permitted pursuant to the provisions hereof, shall inure to the
benefit of Executive, and the Company shall not claim any
entitlement thereto; provided, however, that any income derived by
Executive related to the business of the Company, including, without
limitation, compensation for serving on boards of directors of
companies in which the Company has a significant investment, shall
be paid over to the Company as and when received.
(c) During the term of this Agreement, the Company shall furnish, at
Executive's principal place of employment, an office, furnishings,
secretary and such other facilities commensurate and suitable to his
position and adequate for the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term") shall
commence effective as of the date hereof (the "Commencement Date"),
and shall continue until December 31, 2001, unless (i) extended by
the mutual agreement of the Company and the Executive or (ii)
extended or terminated as hereinafter provided.
(b) Termination of Employment by the Company for Cause. The Company may
terminate Executive's employment if such termination is for "Cause"
(as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in
reasonable detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any of the
following, which act or omission is in bad faith by Executive
without a reasonable belief that such act or omission would benefit
the Company:
(i) a default or breach by Executive of any of the provisions of
this Agreement materially detrimental to the Company which is
not cured within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud, embezzlement or
dishonesty which result in a conviction of a criminal offense
not yet overturned on appeal;
(iii) actions by Executive in intentionally furnishing materially
false, misleading, or omissive information to the Company's
Board of Directors that is materially detrimental to the
Company;
(iv) actions constituting a breach of the Sections 7 or 8 of this
Agreement which is materially detrimental to the Company;
(v) acts or omissions which constitute willful failure to follow
reasonable and lawful directives of the Company's Board of
Directors, which are
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<PAGE>
consistent with Executive's job responsibilities and
performance which is not cured within 15 days following
written notice thereof.
Upon termination for Cause, Executive shall immediately cease to
have any power of his position, but shall nevertheless be given a
reasonable opportunity to access his office with the Company for the
purpose of retrieving his personal goods and files. If any
conviction pursuant to Section 3(b) above is overturned on appeal,
Executive will be deemed to have been terminated without Cause as of
the effective date of his earlier termination.
(c) Termination Without Cause. The Company has the right to terminate
this Agreement without Cause upon written notice, subject to payment
by the Company of the Deferred Compensation described in Section
4(c) herein. In such event, Executive shall cease to have any power
of his office as of the effective date of the termination specified
in such written notice.
(d) Termination by Executive. Executive may terminate this Agreement
upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured
within the 30- day notice period. Such notice shall set forth in
reasonable detail the acts underlying the default. If Executive
terminates this Agreement under this Section 3(d), Executive shall
be entitled to the Deferred Compensation as described in Section
4(c) herein.
(e) Termination by Executive Upon Change of Control. Executive may
terminate this Agreement upon 30 days' written notice at any time
within 6 months following the occurrence of a "Change of Control",
but only prior to Executive's receiving a notice of termination by
the Company for Cause. Upon such termination Executive shall be
entitled to the Deferred Compensation described in Section 4(c)
herein. Change of Control is defined for the purposes of this
Agreement as any of the following acts:
(i) The acquisition by any person, entity or "group" within the
meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), other than a
person, entity or "group" that includes Executive, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the
Board of Directors or (B) after the consummation of a
Qualified Public Offering, more than 40% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of
Directors ; or
(ii) If the individuals who serve on the Board of Directors as of
the Commencement Date (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, any person who becomes a
director subsequent to the Commencement Date, whose election
or nomination for election was approved by a vote of at least
a majority of the directors then
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constituting the Incumbent Board, shall for purposes of this
Agreement be considered a member of the Incumbent Board; or
(iii) Approval by the Company's equity holders of (A) a merger,
reorganization or consolidation whereby the Company's equity
holders immediately prior to such approval do not, immediately
after consummation of such reorganization, merger or
consolidation own more than 50% of the combined voting power
of the surviving entity's then outstanding voting securities
entitled to vote generally in the election of directors; or
(B) liquidation or dissolution of the Company; or (C) the sale
of all or substantially all of the assets of the Company.
(f) Termination by Executive for Good Reason. Executive may terminate
this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to
Section 1 and 2 of this Agreement, (ii) Executive's title is altered
in a material and adverse manner, (iii) Executive's reporting
relationship is materially and adversely modified, (iv) Executive's
Base Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation, as
provided hereunder, is adversely (from the Executive's point of
view) altered or (vi) the Company shall relocate its executive
offices more than 40 miles from their current location (collectively
"Good Reason"). Upon such termination Executive shall be entitled to
the Deferred Compensation described in Section 4(c) herein.
(g) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 30 days' written
notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of
such notice) Executive shall cease to have any power of his office.
(h) Automatic Extension. This Agreement shall be automatically extended
for successive one-year periods at the end of the initial term and
each extended term thereafter, unless either party provides written
notice of termination to the other party at least three months prior
to the expiration of the initial or such extended term,
respectively. In the event the Company terminates this Agreement or
fails to renew this Agreement or does not permit the automatic
extension to occur at the end of any term hereof, Executive shall be
entitled to receive his Deferred Compensation under Section 4(c)
hereof.
4. COMPENSATION.
(a) Base Salary.
(i) Executive shall receive a base salary as set forth on Part I
of Schedule 4(a) attached hereto.
(ii) Each January, commencing with January 2000, the Board of
Directors of the Company shall review Executive's performance
and the Board of Directors may in its sole discretion elect to
increase the salary then paid
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to Executive above the amount set forth on Schedule 4(a)(i),
however, there shall be absolutely no obligation to do so.
(b) Bonus Compensation.
(i) The Executive shall receive as "Bonus Compensation" each year,
the amount calculated in accordance with Schedule 4(b)
attached hereto.
(ii) If at anytime hereafter, the Company shall adopt a bonus
program, an option program or any other form of equity
participation for senior executive officers of the Company,
the Executive shall be eligible to participate in such bonus
program, option program or other form of equity participation
in a manner and capacity commensurate with his position and
duties.
(c) Deferred Compensation.
(i) When Due. Executive (or his estate as the case may be) shall
be entitled to the Deferred Compensation as calculated below,
the initial installment of which is to be paid within 30 days
after the event giving rise to the payout (except as provided
below) in the event that Executive's employment is terminated
for any of the following reasons herein: (A) death of
Executive; (B) termination by the Company without cause
pursuant to Section 3(c); (C) termination by Executive upon
default by the Company pursuant to Section 3(d); (D)
termination by Executive after a Change of Control pursuant to
Section 3(e); (E) termination by the Executive pursuant to
Section 3(f); (F) termination by the Company pursuant to
Section 3(h); or (G) termination by the Company pursuant to
Section 7(a).
(ii) Amount. The Deferred Compensation shall be the amount ("Base
Deferred Compensation") which is calculated as the greater of
(A) the Base Salary payments Executive would have received had
his employment continued for the remaining term of this
Agreement (including yearly increases calculated at the
maximum increase for the prior two years); or (B) an amount
equal to 150% of the higher annual compensation earned by
Executive in the past two years (including both Base Salary
and Bonus Compensation). In addition to the Base Deferred
Compensation, Executive shall be entitled to the following
(which, together with the Base Deferred Compensation and the
Bonus Deferred Compensation (as defined below) shall be
collectively called the "Deferred Compensation") all of the
benefits and personal perquisites otherwise provided in this
Agreement (including automobile expenses) during that period
of time which is the greater of (X) the remaining term of this
Agreement, or (Y) one year (the "Deferral Period") and an
amount equal to the pro rata portion of the Bonus Compensation
for the year in which executive's employment is terminated
determined on the basis of the number of days elapsed in such
year prior to such
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termination (the "Bonus Deferred Compensation"). The Deferred
Compensation herein shall be deemed liquidated damages
resulting from the Company's termination of this Agreement and
shall be Executive's sole and exclusive remedy for any such
termination. Deferred Compensation shall not be diminished or
offset by reason of any earnings by Executive subsequent to
the date of termination.
(d) Payment of Deferred Compensation. Except as provided below, the
Deferred Compensation shall be paid in monthly installments over the
12 months following the event giving rise to a Deferred
Compensation. If such termination is a result of the death of
Executive, the initial Deferred Compensation shall be made within 15
days after the personal representative of Executive's estate
notifies the Company that Letters of Administration have been filed
in the probate proceeding. The Company shall have the option at all
times during the term of this Agreement to maintain key man life
insurance on Executive's life to cover the cost of any Deferred
Compensation due to Executive. If such key man life insurance is
maintained, and the Deferred Compensation is due as a result of
Executive's death, the Deferred Compensation shall be paid 100% in
cash upon Executive's death. The Bonus Deferred Compensation shall
be paid in a single lump sum within 90 days of the end of the year
in which Executive's employment is terminated.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid vacation
during each 12-month period during the term of this Agreement. In
addition, Executive shall be entitled to paid time off for the same
holidays as other employees of the Company as established by the
Board.
(b) Executive shall be entitled to reimbursement for all maintenance,
insurance and gasoline expenses incidental to the use of one
automobile.
(c) Executive shall be entitled to participate (in a manner and capacity
commensurate with his position and duties), subject to eligibility
and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans,
stock option plans, group hospitalization, health, dental care
(which health insurance shall also cover Executive's dependents),
profit sharing and pension, bonus and other benefit plans), as may
be adopted or amended by the Company from time to time.
(d) Following the consummation of a Qualified Public Offering, the
Company shall pay the premium on a "whole life" insurance policy on
the life of Executive in the initial face amount of seven times Base
Salary during the term hereof. Executive shall have the right to
designate the beneficiaries of such policies. The Company shall pay
timely all premiums on such life insurance, and on demand provide
Executive due proof of such payment. The insurance companies issuing
such policies shall be authorized to give Executive, upon his
request, any information regarding the status of any such policy.
Any dividend declared upon such policy shall be applied to the
premium.
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(e) Following the consummation of a Qualified Public Offering, the
Company shall pay all initial membership fees and monthly dues on
behalf of Executive for Executive's membership in one business
luncheon club, and one airline club; provided that the aggregate
initial membership fees and the annual membership fees of such clubs
in the aggregate do not exceed $2,000 and $1,000, respectively.
Executive shall pay all expenses for such club use that is not
otherwise reimbursable as a Company business expense.
(f) The Company will reimburse Executive for the cost of reasonable tax
and financial preparation and planning, including services that may
be requested by Executive from time to time pertaining to this
Agreement.
(g) Executive shall receive any such additional benefits that any other
executive officer may receive during the term of this Agreement at
the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive may fly first class
on domestic flights and business class on international flights. In addition,
upon the submission of appropriate vouchers or other receipts the Company shall
reimburse Executive for tolls and reasonable business car phone charges.
Executive shall submit vouchers or other receipts once per calendar month and
shall be reimbursed by Company within 30 days of submission.
7. DISABILITY.
(a) In the event of the death of the Executive during the Term, the
Executive's employment hereunder shall automatically terminate. In
the event that Executive shall become mentally or physically
Disabled (as hereinafter defined) so as to be unable to fully
perform his duties herein, Executive shall continue to receive his
monthly salary for each of the first nine months or any part thereof
of any continuous Disability, less any amounts received by him under
any disability insurance paid for by the Company. If upon the
expiration of nine months of continuous Disability, Executive
remains incapacitated (hereinafter, "Permanent Disability"), the
Company shall have the right to immediately terminate this
Agreement. Such "Permanent Disability" shall be established by a
written certification submitted by a medical doctor agreed to by the
Executive and the Company. In the absence of agreement, the Company
and the Executive shall each nominate a qualified medical doctor and
these two doctors shall select a third qualified medical doctor,
which third doctor shall make the determination as to total
disability. After the termination of these time periods, Executive
will receive disability insurance proceeds for the term of such
disability.
(b) The Company shall reimburse Executive for the premiums of all
insurance policies covering the long and short-term disability of
Executive not to exceed
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$10,000 per annum (as adjusted for increases in the Consumer Price
Index) during the term hereof.
(c) Disability for the purposes of this Agreement shall mean that the
Executive is judged disabled pursuant to the Company's long term
disability policy.
8. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
During the Term and for a period of two years thereafter, except if the Company
breaches its obligations to pay the Deferred Compensation pursuant to Section
4(c) hereof:
(a) Executive shall not, directly or indirectly, enter into or
participate (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee, principal or in any other
relationship or capacity) in any business operating or providing
services in the United States within any State in which the Company
or its affiliates are operating or providing services as of the date
of termination which is, or owns, manages or performs Internet
billing services, including without limitation as principal or on
behalf of others and the development or operation of any network to
accomplish same (a "Competing Entity").
(b) Company and Executive understand and agree that the scope and
duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to
protect the Company's legitimate business interests. Such covenants
shall survive the termination of Executive's employment except as
otherwise provided herein. The parties further agree that such
covenants shall be regarded as divisible and shall be operative as
to time and geographical area to the extent that they may be made so
and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder
shall not be affected. Executive hereby warrants to Company that
Executive's compliance with each of the restrictive covenants set
forth in this Agreement will not, upon the termination, of
Executive's employment with the Company for any reason whatsoever,
cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.
(c) Executive understands and agrees that, due to the highly competitive
nature of the Company's industry, the breach of any covenants set
out in this Section 8 will cause irreparable injury to the Company
for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal
court for any breach or threatened breach of Section 8. Nothing
herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the Company to leave the
employ of or terminate such person's relationship with the Company
or (ii) employ, hire, engage or be associated with, or endeavor to
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entice away from the Company any such person, or any customer of the
Company or its affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.
(e) Executive shall not disparage the business reputation of the Company
(or its management team) or take any actions that are harmful to the
Company's goodwill with its customers, content providers, bandwidth
or other network infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that such actions would
cause irreparable harm for which there is no adequate remedy at law
and that the Company may seek in state or federal court, and is
entitled to a temporary restraining order and to preliminary and
permanent injunctive relief in state or federal court to stop any
such conduct or statements for any breach or threatened breach of
this Section 8(e) during the term of this Agreement and for a period
of two years thereafter.
(f) Company spends considerable amounts of time, money and effort in
developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are
reasonable and necessary in all respects to protect the goodwill,
trade secrets, confidential information, and business interests of
Company; (ii) are not oppressive to Executive; and (iii) do not
impose any greater restraint on Executive than is reasonably
necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.
(g) Executive acknowledges and agrees that promises made by the Company
in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment
to provide severance compensation in the event of the termination of
Executive's employment for reasons other than Cause (subject to
certain requirements on the part of Executive), constitute one form
of consideration for Executive's agreement to and compliance with
the restrictive covenants in this Agreement. Executive acknowledges
and agrees that Company's agreement to provide Executive with access
to Company's confidential and proprietary information is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
agreement to permit the use of the Company's goodwill with the
Company's customers, investors and content providers is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
commitment to providing Executive with unique skill development and
training is a separate form of consideration supporting the
restrictive covenants in this Agreement.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the
business of the Company and its affiliates, including, without
limitation, financial information, trade secrets, information
concerning the operations, sales, personnel, suppliers, customers,
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costs, profits and pricing policies, "know how" and certain business
methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise all due
and diligent precautions to protect the integrity of the customer
lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes,
records, reports or other documents and any and all other materials
embodying any Confidential Information (the "Confidential
Materials") and, upon the Company's request in writing, Executive
shall immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's possession or
control.
(c) Executive shall not at any time, either during the Term of this
Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity
to obtain any Confidential Materials except (i) when required in the
course of performing Executive's duties hereunder, (ii) with the
Company's express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process or
(iv) the Executive shall have no responsibility for the divulgence
of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, the Executive promptly, but
in no event more than 48 hours after learning of such subpoena,
court order or other governmental process, shall notify, by personal
delivery or by electronic means, confirmed by mail, the Company and,
at the Company's expense, Executive shall (x) take all reasonably
necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government
process and (y) permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
(d) Upon termination of Executive's employment with the Company, the
Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which
Executive may then possess or have under Executive's control;
provided, however, that Executive shall be entitled to retain copies
of such documents reasonably necessary to document Executive's
financial relationship (both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the provisions of
these Sections 8 and 9 may cause substantial and irreparable harm to
the Company for which the Company would have no adequate remedy at
law and (ii) the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and its
affiliates.
10. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 8 or 9, the Company shall have the
right and remedy:
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(i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction or through arbitration
as provided herein; and
(ii) to require Executive to account for and to pay over the
Company all damages suffered by the Company (including
consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for
and pay over such damages to the Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause
substantial and irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In any
equitable proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a suit for
damages Company shall be required to prove the amount of damages
actually sustained.)
(c) Each of the rights and remedies enumerated in Section 10 (a) shall
be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of
any other rights and remedies available to the Company under law or
equity.
(d) If any provision of Section 8 or 9 is held to be unenforceable
because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such
scope, duration, or area, or all of them, and such provision or
provisions shall then be enforceable in such modified form.
(e) The Company and Executive agree that any dispute or controversy
arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute
or controversy involving the formation, terms or construction of
this Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The only
disputes not subject to mandatory, binding arbitration are requests
for injunctive relief. With respect to the arbitration of any
dispute or controversy, each party understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain remedies in
court, including to right to a jury trial;
(iii) discovery in arbitration is different and more limited than
discovery in litigation; and
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(iv) an arbitrator's award need not include factual findings or
legal reasoning, and any party's right to appeal or to seek
modification of a ruling by the arbitrator is strictly
limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.
11. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold harmless
and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the Executive (net
of any related insurance proceeds or other amounts received by the
Executive or paid by or on behalf of the Company on the Executive's
behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual
or completed action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in such
action, suit or proceeding, to which the Executive was, is or is
threatened to be made a named defendant or respondent (a
"Proceeding"), because such person is or was a director or officer
of the Company, or is or was serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary (an "Affiliate Executive") of
another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise
(each, a "Company Affiliate"). Upon authorization of indemnification
of the Executive by the Board of Directors in accordance with the
applicable provisions of the Nevada General Corporation Law (the
"NGCL"), the Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a Claim (as
hereinafter defined). Thereafter, the Company shall have the burden
of proof to overcome the presumption that the Executive is so
entitled. Such presumption shall only be overcome by a judgment or
other final adjudication, after all appeals and all time for appeals
have expired ("Final Determination"), adverse to the Executive
establishing that such indemnification
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is not permitted hereunder or by law. An actual determination by the
Company (including its Board of Directors, legal counsel, or its
stockholders) that the Executive has not met the applicable standard
of conduct for indemnification shall not be a defense to the action
or create a presumption that the Executive has not met the
applicable standard of conduct. The purchase, establishment or
maintenance of any Indemnification Arrangement shall not in any way
diminish, restrict, limit or affect the rights and obligations of
the Company or of the Executive under this Agreement except as
expressly provided herein, and the execution and delivery of this
Agreement by the Company and the Executive shall not in any way
diminish, restrict, limit or affect the Executive's right to
indemnification from the Company or any other party or parties under
any other indemnification arrangement, the Certificate of
Incorporation or Bylaws of the Company, or the NGCL.
(b) Subject only to the provisions of this Section 11(b), as long as the
Executive shall continue to serve as a director and/or officer of
the Company (or shall continue at the request of the Company to
serve as an Affiliate Executive) and, thereafter, as long as the
Executive shall be subject to any possible Proceeding by reason of
the fact that the Executive was or is a director and/or officer of
the Company (or served in any of said other capacities), the Company
shall, unless no such policies are available in any market, purchase
and maintain in effect for the benefit of the Executive one or more
valid, binding and enforceable policies (the "Insurance Policies")
of directors' and officers' liability insurance ("D&O Insurance")
providing adequate liability coverage for the Executive's acts as a
director and/or officer of the Company or as an Affiliate Executive.
The Company shall promptly notify the Executive of any lapse,
amendment or failure to renew said policy or policies or any
provision thereof relating to the extent or nature of coverage
provided thereunder. In the event the Company does not purchase and
maintain in effect said policy or policies of D&O Insurance pursuant
to the provisions of this Section 11(b), the Company shall, to the
full extent permitted by law, in addition to and not in limitation
of the other rights granted the Executive under this Agreement, hold
harmless and indemnify the Executive to the full extent of coverage
which would otherwise have been provided for the benefit of the
Executive pursuant to the Insurance Policies.
(c) The Executive shall have the right to receive from the Company on
demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all
expenses payable by the Company pursuant to the terms of this
Agreement as corresponding amounts are expended or incurred by the
Executive in connection with such Proceeding or otherwise expended
or incurred by the Executive (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any Advanced
Amount, pursuant to this Agreement, the Executive shall submit to
the Company a written request for payment (a "Claim"), which
includes a schedule setting forth in reasonable detail the dollar
amount expended (or incurred or expected to be expended or
incurred). Each item on such schedule shall be supported by the
bill, agreement or other documentation relating thereto, a copy of
which shall be appended to the schedule as an exhibit.
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Where the Executive is requesting Advanced Amounts, the Executive
must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law
for indemnification, and (ii) a written undertaking to repay such
Advanced Amounts if a Final Determination is made that the Executive
is not entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the
Executive of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provisions of any state
statutory law or common law.
(e) All agreements and obligations of the Company contained herein shall
continue during the period the Executive is a director and/or
officer of the Company (or is serving at the request of the Company
as an Affiliate Executive) and shall continue thereafter so long as
the Executive shall be subject to any possible Proceeding by reason
of the fact that the Executive was a director or officer of the
Company or was serving as such an Affiliate Executive.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but
failure to so notify the Company will not relieve the Company from
any liability which it may have to the Executive. With respect to
any such Proceeding:
(i) The Company shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Executive, the
Company shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Company shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Executive
without the Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to which the
Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the
Executive unreasonably withhold consent to any proposed
settlement.
12. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
13. ENTIRE AGREEMENT; AMENDMENTS.
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This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
14. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
15. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
16. SECTION HEADINGS.
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
19. SECTION 280G PROTECTION.
The Company shall make a cash payment to the Executive at the time set forth
below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section
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280G(b) of the Code. In addition to the foregoing, the cash payment due to the
Executive under this Section 19 shall be increased by the aggregate of the
amount of federal, state and local income and excise taxes for which the
Executive will be liable on account of the cash payments to be made under this
Section 19, such that the Executive will receive the excise tax gross-up payment
net of all income and excise taxes. The computation of this payment shall be
determined, at the expense of the Company, by an independent accounting,
actuarial or consulting firm selected by the Company. Payment of the cash amount
set forth above shall be made at such time as the Company shall determine, in
its sole discretion, but in no event later than the date five business days
before the due date, without regard to any extension, for filing the Executive's
federal income tax return for the calendar year which includes the date as of
which the aforementioned "excess parachute payments" are determined. In the
event that the Executive is ultimately assessed with excise taxes under Section
4999 of the Code as a result of payments made by the Company or any successor
thereto which exceed the amount of excise taxes used in computing the
Executive's payment under this Section 19, the Company or its successor shall
indemnify the Executive for such additional excise taxes plus any additional
excise taxes, income taxes, interest and penalties resulting from the additional
excise taxes and the indemnity hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV.COM INC.
By:
- -------------------------------------
Name:
Title: CFO
"EXECUTIVE"
- -----------------------------------------
Name:
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SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: Michael R. Long
15546 Clover Ridge
San Antonio, Texas 78248
2. Positions: (i) Chief Executive Officer
(ii) Chairman of the Board of Directors
3. Duties: Management, operations and administration as appropriate for
the Chief Executive Officer and Chairman of the Board of
Directors of the Company as further described in the Bylaws of
the Company.
SCHEDULE 4(A)(I)
$150,000 per annum
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SCHEDULE 1
EMPLOYMENT CONTRACT
SCHEDULE 4(B)
BONUS: Not to exceed 40% of the then-current annual
salary, as authorized by the Board of Directors.
long
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EXHIBIT 7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of November 28, 1998, is made and entered into by and
between billserv.com inc., a Nevada corporation, having an office address at
1100 N.W. Loop 410, San Antonio, Texas 78213 ("billserv.com" or the "Company")
and the individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and for the
position set forth on Schedule 1 attached hereto. Executive hereby
accepts such employment with the Company upon the terms and
conditions hereinafter set forth. Executive further agrees to serve
on the Board of Directors of the Company (the "Board") during the
term of this Agreement.
(b) The duties of the Executive shall include the duties and services
described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board
and shall include such other duties, as may be assigned by the Board
commensurate with the responsibilities normally associated with
Executive's position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed by an
Executive with the position set forth in Schedule 1 of a business
similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the
Company which are reasonable and consistent with the Company's
operations, taking into account Executive's expertise and job
responsibilities. During the term of this Agreement, Executive
agrees to devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts
to perform faithfully and efficiently such responsibilities. The
Executive will use Executive's best efforts to promote the interests
of the Company.
(b) During this Agreement, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions; or (iii) manage personal
investments or companies in which personal investments are made so
long as such activities do not significantly interfere with
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the performance of Executive's responsibilities with the Company and
which companies are not in direct competition with the Company. Any
income incurred by Executive outside the scope of his employment and
permitted pursuant to the provisions hereof, shall inure to the
benefit of Executive, and the Company shall not claim any
entitlement thereto; provided, however, that any income derived by
Executive related to the business of the Company, including, without
limitation, compensation for serving on boards of directors of
companies in which the Company has a significant investment, shall
be paid over to the Company as and when received.
(c) During the term of this Agreement, the Company shall furnish, at
Executive's principal place of employment, an office, furnishings,
secretary and such other facilities commensurate and suitable to his
position and adequate for the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term") shall
commence effective as of the date hereof (the "Commencement Date"),
and shall continue until December 31, 2001, unless (i) extended by
the mutual agreement of the Company and the Executive or (ii)
extended or terminated as hereinafter provided.
(b) Termination of Employment by the Company for Cause. The Company may
terminate Executive's employment if such termination is for "Cause"
(as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in
reasonable detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any of the
following, which act or omission is in bad faith by Executive
without a reasonable belief that such act or omission would benefit
the Company:
(i) a default or breach by Executive of any of the provisions of
this Agreement materially detrimental to the Company which is
not cured within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud, embezzlement or
dishonesty which result in a conviction of a criminal offense
not yet overturned on appeal;
(iii) actions by Executive in intentionally furnishing materially
false, misleading, or omissive information to the Company's
Board of Directors that is materially detrimental to the
Company;
(iv) actions constituting a breach of the Sections 7 or 8 of this
Agreement which is materially detrimental to the Company;
(v) acts or omissions which constitute willful failure to follow
reasonable and lawful directives of the Company's Board of
Directors, which are
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consistent with Executive's job responsibilities and
performance which is not cured within 15 days following
written notice thereof.
Upon termination for Cause, Executive shall immediately cease to
have any power of his position, but shall nevertheless be given a
reasonable opportunity to access his office with the Company for the
purpose of retrieving his personal goods and files. If any
conviction pursuant to Section 3(b) above is overturned on appeal,
Executive will be deemed to have been terminated without Cause as of
the effective date of his earlier termination.
(c) Termination Without Cause. The Company has the right to terminate
this Agreement without Cause upon written notice, subject to payment
by the Company of the Deferred Compensation described in Section
4(c) herein. In such event, Executive shall cease to have any power
of his office as of the effective date of the termination specified
in such written notice.
(d) Termination by Executive. Executive may terminate this Agreement
upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured
within the 30- day notice period. Such notice shall set forth in
reasonable detail the acts underlying the default. If Executive
terminates this Agreement under this Section 3(d), Executive shall
be entitled to the Deferred Compensation as described in Section
4(c) herein.
(e) Termination by Executive Upon Change of Control. Executive may
terminate this Agreement upon 30 days' written notice at any time
within 6 months following the occurrence of a "Change of Control",
but only prior to Executive's receiving a notice of termination by
the Company for Cause. Upon such termination Executive shall be
entitled to the Deferred Compensation described in Section 4(c)
herein. Change of Control is defined for the purposes of this
Agreement as any of the following acts:
(i) The acquisition by any person, entity or "group" within the
meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), other than a
person, entity or "group" that includes Executive, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the
Board of Directors or (B) after the consummation of a
Qualified Public Offering, more than 40% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of
Directors ; or
(ii) If the individuals who serve on the Board of Directors as of
the Commencement Date (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, any person who becomes a
director subsequent to the Commencement Date, whose election
or nomination for election was approved by a vote of at least
a majority of the directors then
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constituting the Incumbent Board, shall for purposes of this
Agreement be considered a member of the Incumbent Board; or
(iii) Approval by the Company's equity holders of (A) a merger,
reorganization or consolidation whereby the Company's equity
holders immediately prior to such approval do not, immediately
after consummation of such reorganization, merger or
consolidation own more than 50% of the combined voting power
of the surviving entity's then outstanding voting securities
entitled to vote generally in the election of directors; or
(B) liquidation or dissolution of the Company; or (C) the sale
of all or substantially all of the assets of the Company.
(f) Termination by Executive for Good Reason. Executive may terminate
this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to
Section 1 and 2 of this Agreement, (ii) Executive's title is altered
in a material and adverse manner, (iii) Executive's reporting
relationship is materially and adversely modified, (iv) Executive's
Base Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation, as
provided hereunder, is adversely (from the Executive's point of
view) altered or (vi) the Company shall relocate its executive
offices more than 40 miles from their current location (collectively
"Good Reason"). Upon such termination Executive shall be entitled to
the Deferred Compensation described in Section 4(c) herein.
(g) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 30 days' written
notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of
such notice) Executive shall cease to have any power of his office.
(h) Automatic Extension. This Agreement shall be automatically extended
for successive one-year periods at the end of the initial term and
each extended term thereafter, unless either party provides written
notice of termination to the other party at least three months prior
to the expiration of the initial or such extended term,
respectively. In the event the Company terminates this Agreement or
fails to renew this Agreement or does not permit the automatic
extension to occur at the end of any term hereof, Executive shall be
entitled to receive his Deferred Compensation under Section 4(c)
hereof.
4. COMPENSATION.
(a) Base Salary.
(i) Executive shall receive a base salary as set forth on Part I
of Schedule 4(a) attached hereto.
(ii) Each January, commencing with January 2000, the Board of
Directors of the Company shall review Executive's performance
and the Board of Directors may in its sole discretion elect to
increase the salary then paid
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to Executive above the amount set forth on Schedule 4(a)(i),
however, there shall be absolutely no obligation to do so.
(b) Bonus Compensation.
(i) The Executive shall receive as "Bonus Compensation" each year,
the amount calculated in accordance with Schedule 4(b)
attached hereto.
(ii) If at anytime hereafter, the Company shall adopt a bonus
program, an option program or any other form of equity
participation for senior executive officers of the Company,
the Executive shall be eligible to participate in such bonus
program, option program or other form of equity participation
in a manner and capacity commensurate with his position and
duties.
(c) Deferred Compensation.
(i) When Due. Executive (or his estate as the case may be) shall
be entitled to the Deferred Compensation as calculated below,
the initial installment of which is to be paid within 30 days
after the event giving rise to the payout (except as provided
below) in the event that Executive's employment is terminated
for any of the following reasons herein: (A) death of
Executive; (B) termination by the Company without cause
pursuant to Section 3(c); (C) termination by Executive upon
default by the Company pursuant to Section 3(d); (D)
termination by Executive after a Change of Control pursuant to
Section 3(e); (E) termination by the Executive pursuant to
Section 3(f); (F) termination by the Company pursuant to
Section 3(h); or (G) termination by the Company pursuant to
Section 7(a).
(ii) Amount. The Deferred Compensation shall be the amount ("Base
Deferred Compensation") which is calculated as the greater of
(A) the Base Salary payments Executive would have received had
his employment continued for the remaining term of this
Agreement (including yearly increases calculated at the
maximum increase for the prior two years); or (B) an amount
equal to 150% of the higher annual compensation earned by
Executive in the past two years (including both Base Salary
and Bonus Compensation). In addition to the Base Deferred
Compensation, Executive shall be entitled to the following
(which, together with the Base Deferred Compensation and the
Bonus Deferred Compensation (as defined below) shall be
collectively called the "Deferred Compensation") all of the
benefits and personal perquisites otherwise provided in this
Agreement (including automobile expenses) during that period
of time which is the greater of (X) the remaining term of this
Agreement, or (Y) one year (the "Deferral Period") and an
amount equal to the pro rata portion of the Bonus Compensation
for the year in which executive's employment is terminated
determined on the basis of the number of days elapsed in such
year prior to such
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termination (the "Bonus Deferred Compensation"). The Deferred
Compensation herein shall be deemed liquidated damages
resulting from the Company's termination of this Agreement and
shall be Executive's sole and exclusive remedy for any such
termination. Deferred Compensation shall not be diminished or
offset by reason of any earnings by Executive subsequent to
the date of termination.
(d) Payment of Deferred Compensation. Except as provided below, the
Deferred Compensation shall be paid in monthly installments over the
12 months following the event giving rise to a Deferred
Compensation. If such termination is a result of the death of
Executive, the initial Deferred Compensation shall be made within 15
days after the personal representative of Executive's estate
notifies the Company that Letters of Administration have been filed
in the probate proceeding. The Company shall have the option at all
times during the term of this Agreement to maintain key man life
insurance on Executive's life to cover the cost of any Deferred
Compensation due to Executive. If such key man life insurance is
maintained, and the Deferred Compensation is due as a result of
Executive's death, the Deferred Compensation shall be paid 100% in
cash upon Executive's death. The Bonus Deferred Compensation shall
be paid in a single lump sum within 90 days of the end of the year
in which Executive's employment is terminated.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid vacation
during each 12-month period during the term of this Agreement. In
addition, Executive shall be entitled to paid time off for the same
holidays as other employees of the Company as established by the
Board.
(b) Executive shall be entitled to reimbursement for all maintenance,
insurance and gasoline expenses incidental to the use of one
automobile.
(c) Executive shall be entitled to participate (in a manner and capacity
commensurate with his position and duties), subject to eligibility
and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans,
stock option plans, group hospitalization, health, dental care
(which health insurance shall also cover Executive's dependents),
profit sharing and pension, bonus and other benefit plans), as may
be adopted or amended by the Company from time to time.
(d) Following the consummation of a Qualified Public Offering, the
Company shall pay the premium on a "whole life" insurance policy on
the life of Executive in the initial face amount of five times Base
Salary during the term hereof. Executive shall have the right to
designate the beneficiaries of such policies. The Company shall pay
timely all premiums on such life insurance, and on demand provide
Executive due proof of such payment. The insurance companies issuing
such policies shall be authorized to give Executive, upon his
request, any information regarding the status of any such policy.
Any dividend declared upon such policy shall be applied to the
premium.
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(e) Following the consummation of a Qualified Public Offering, the
Company shall pay all initial membership fees and monthly dues on
behalf of Executive for Executive's membership in one business
luncheon club, and one airline club; provided that the aggregate
initial membership fees and the annual membership fees of such clubs
in the aggregate do not exceed $1,000 and $500, respectively.
Executive shall pay all expenses for such club use that is not
otherwise reimbursable as a Company business expense.
(f) The Company will reimburse Executive for the cost of reasonable tax
and financial preparation and planning, including services that may
be requested by Executive from time to time pertaining to this
Agreement.
(g) Executive shall receive any such additional benefits that any other
executive officer may receive during the term of this Agreement at
the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive may fly first class
on domestic flights and business class on international flights. In addition,
upon the submission of appropriate vouchers or other receipts the Company shall
reimburse Executive for tolls and reasonable business car phone charges.
Executive shall submit vouchers or other receipts once per calendar month and
shall be reimbursed by Company within 30 days of submission.
7. DISABILITY.
(a) In the event of the death of the Executive during the Term, the
Executive's employment hereunder shall automatically terminate. In
the event that Executive shall become mentally or physically
Disabled (as hereinafter defined) so as to be unable to fully
perform his duties herein, Executive shall continue to receive his
monthly salary for each of the first nine months or any part thereof
of any continuous Disability, less any amounts received by him under
any disability insurance paid for by the Company. If upon the
expiration of nine months of continuous Disability, Executive
remains incapacitated (hereinafter, "Permanent Disability"), the
Company shall have the right to immediately terminate this
Agreement. Such "Permanent Disability" shall be established by a
written certification submitted by a medical doctor agreed to by the
Executive and the Company. In the absence of agreement, the Company
and the Executive shall each nominate a qualified medical doctor and
these two doctors shall select a third qualified medical doctor,
which third doctor shall make the determination as to total
disability. After the termination of these time periods, Executive
will receive disability insurance proceeds for the term of such
disability.
(b) The Company shall reimburse Executive for the premiums of all
insurance policies covering the long and short-term disability of
Executive not to exceed
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$10,000 per annum (as adjusted for increases in the Consumer Price
Index) during the term hereof.
(c) Disability for the purposes of this Agreement shall mean that the
Executive is judged disabled pursuant to the Company's long term
disability policy.
8. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
During the Term and for a period of two years thereafter, except if the Company
breaches its obligations to pay the Deferred Compensation pursuant to Section
4(c) hereof:
(a) Executive shall not, directly or indirectly, enter into or
participate (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee, principal or in any other
relationship or capacity) in any business operating or providing
services in the United States within any State in which the Company
or its affiliates are operating or providing services as of the date
of termination which is, or owns, manages or performs Internet
billing services, including without limitation as principal or on
behalf of others and the development or operation of any network to
accomplish same (a "Competing Entity").
(b) Company and Executive understand and agree that the scope and
duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to
protect the Company's legitimate business interests. Such covenants
shall survive the termination of Executive's employment except as
otherwise provided herein. The parties further agree that such
covenants shall be regarded as divisible and shall be operative as
to time and geographical area to the extent that they may be made so
and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder
shall not be affected. Executive hereby warrants to Company that
Executive's compliance with each of the restrictive covenants set
forth in this Agreement will not, upon the termination, of
Executive's employment with the Company for any reason whatsoever,
cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.
(c) Executive understands and agrees that, due to the highly competitive
nature of the Company's industry, the breach of any covenants set
out in this Section 8 will cause irreparable injury to the Company
for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal
court for any breach or threatened breach of Section 8. Nothing
herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the Company to leave the
employ of or terminate such person's relationship with the Company
or (ii) employ, hire, engage or be associated with, or endeavor to
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entice away from the Company any such person, or any customer of the
Company or its affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.
(e) Executive shall not disparage the business reputation of the Company
(or its management team) or take any actions that are harmful to the
Company's goodwill with its customers, content providers, bandwidth
or other network infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that such actions would
cause irreparable harm for which there is no adequate remedy at law
and that the Company may seek in state or federal court, and is
entitled to a temporary restraining order and to preliminary and
permanent injunctive relief in state or federal court to stop any
such conduct or statements for any breach or threatened breach of
this Section 8(e) during the term of this Agreement and for a period
of two years thereafter.
(f) Company spends considerable amounts of time, money and effort in
developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are
reasonable and necessary in all respects to protect the goodwill,
trade secrets, confidential information, and business interests of
Company; (ii) are not oppressive to Executive; and (iii) do not
impose any greater restraint on Executive than is reasonably
necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.
(g) Executive acknowledges and agrees that promises made by the Company
in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment
to provide severance compensation in the event of the termination of
Executive's employment for reasons other than Cause (subject to
certain requirements on the part of Executive), constitute one form
of consideration for Executive's agreement to and compliance with
the restrictive covenants in this Agreement. Executive acknowledges
and agrees that Company's agreement to provide Executive with access
to Company's confidential and proprietary information is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
agreement to permit the use of the Company's goodwill with the
Company's customers, investors and content providers is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
commitment to providing Executive with unique skill development and
training is a separate form of consideration supporting the
restrictive covenants in this Agreement.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the
business of the Company and its affiliates, including, without
limitation, financial information, trade secrets, information
concerning the operations, sales, personnel, suppliers, customers,
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costs, profits and pricing policies, "know how" and certain business
methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise all due
and diligent precautions to protect the integrity of the customer
lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes,
records, reports or other documents and any and all other materials
embodying any Confidential Information (the "Confidential
Materials") and, upon the Company's request in writing, Executive
shall immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's possession or
control.
(c) Executive shall not at any time, either during the Term of this
Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity
to obtain any Confidential Materials except (i) when required in the
course of performing Executive's duties hereunder, (ii) with the
Company's express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process or
(iv) the Executive shall have no responsibility for the divulgence
of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, the Executive promptly, but
in no event more than 48 hours after learning of such subpoena,
court order or other governmental process, shall notify, by personal
delivery or by electronic means, confirmed by mail, the Company and,
at the Company's expense, Executive shall (x) take all reasonably
necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government
process and (y) permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
(d) Upon termination of Executive's employment with the Company, the
Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which
Executive may then possess or have under Executive's control;
provided, however, that Executive shall be entitled to retain copies
of such documents reasonably necessary to document Executive's
financial relationship (both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the provisions of
these Sections 8 and 9 may cause substantial and irreparable harm to
the Company for which the Company would have no adequate remedy at
law and (ii) the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and its
affiliates.
10. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 8 or 9, the Company shall have the
right and remedy:
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(i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction or through arbitration
as provided herein; and
(ii) to require Executive to account for and to pay over the
Company all damages suffered by the Company (including
consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for
and pay over such damages to the Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause
substantial and irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In any
equitable proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a suit for
damages Company shall be required to prove the amount of damages
actually sustained.)
(c) Each of the rights and remedies enumerated in Section 10 (a) shall
be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of
any other rights and remedies available to the Company under law or
equity.
(d) If any provision of Section 8 or 9 is held to be unenforceable
because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such
scope, duration, or area, or all of them, and such provision or
provisions shall then be enforceable in such modified form.
(e) The Company and Executive agree that any dispute or controversy
arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute
or controversy involving the formation, terms or construction of
this Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The only
disputes not subject to mandatory, binding arbitration are requests
for injunctive relief. With respect to the arbitration of any
dispute or controversy, each party understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain remedies in
court, including to right to a jury trial;
(iii) discovery in arbitration is different and more limited than
discovery in litigation; and
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(iv) an arbitrator's award need not include factual findings or
legal reasoning, and any party's right to appeal or to seek
modification of a ruling by the arbitrator is strictly
limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.
11. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold harmless
and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the Executive (net
of any related insurance proceeds or other amounts received by the
Executive or paid by or on behalf of the Company on the Executive's
behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual
or completed action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in such
action, suit or proceeding, to which the Executive was, is or is
threatened to be made a named defendant or respondent (a
"Proceeding"), because such person is or was a director or officer
of the Company, or is or was serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary (an "Affiliate Executive") of
another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise
(each, a "Company Affiliate"). Upon authorization of indemnification
of the Executive by the Board of Directors in accordance with the
applicable provisions of the Nevada General Corporation Law (the
"NGCL"), the Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a Claim (as
hereinafter defined). Thereafter, the Company shall have the burden
of proof to overcome the presumption that the Executive is so
entitled. Such presumption shall only be overcome by a judgment or
other final adjudication, after all appeals and all time for appeals
have expired ("Final Determination"), adverse to the Executive
establishing that such indemnification
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is not permitted hereunder or by law. An actual determination by the
Company (including its Board of Directors, legal counsel, or its
stockholders) that the Executive has not met the applicable standard
of conduct for indemnification shall not be a defense to the action
or create a presumption that the Executive has not met the
applicable standard of conduct. The purchase, establishment or
maintenance of any Indemnification Arrangement shall not in any way
diminish, restrict, limit or affect the rights and obligations of
the Company or of the Executive under this Agreement except as
expressly provided herein, and the execution and delivery of this
Agreement by the Company and the Executive shall not in any way
diminish, restrict, limit or affect the Executive's right to
indemnification from the Company or any other party or parties under
any other indemnification arrangement, the Certificate of
Incorporation or Bylaws of the Company, or the NGCL.
(b) Subject only to the provisions of this Section 11(b), as long as the
Executive shall continue to serve as a director and/or officer of
the Company (or shall continue at the request of the Company to
serve as an Affiliate Executive) and, thereafter, as long as the
Executive shall be subject to any possible Proceeding by reason of
the fact that the Executive was or is a director and/or officer of
the Company (or served in any of said other capacities), the Company
shall, unless no such policies are available in any market, purchase
and maintain in effect for the benefit of the Executive one or more
valid, binding and enforceable policies (the "Insurance Policies")
of directors' and officers' liability insurance ("D&O Insurance")
providing adequate liability coverage for the Executive's acts as a
director and/or officer of the Company or as an Affiliate Executive.
The Company shall promptly notify the Executive of any lapse,
amendment or failure to renew said policy or policies or any
provision thereof relating to the extent or nature of coverage
provided thereunder. In the event the Company does not purchase and
maintain in effect said policy or policies of D&O Insurance pursuant
to the provisions of this Section 11(b), the Company shall, to the
full extent permitted by law, in addition to and not in limitation
of the other rights granted the Executive under this Agreement, hold
harmless and indemnify the Executive to the full extent of coverage
which would otherwise have been provided for the benefit of the
Executive pursuant to the Insurance Policies.
(c) The Executive shall have the right to receive from the Company on
demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all
expenses payable by the Company pursuant to the terms of this
Agreement as corresponding amounts are expended or incurred by the
Executive in connection with such Proceeding or otherwise expended
or incurred by the Executive (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any Advanced
Amount, pursuant to this Agreement, the Executive shall submit to
the Company a written request for payment (a "Claim"), which
includes a schedule setting forth in reasonable detail the dollar
amount expended (or incurred or expected to be expended or
incurred). Each item on such schedule shall be supported by the
bill, agreement or other documentation relating thereto, a copy of
which shall be appended to the schedule as an exhibit.
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Where the Executive is requesting Advanced Amounts, the Executive
must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law
for indemnification, and (ii) a written undertaking to repay such
Advanced Amounts if a Final Determination is made that the Executive
is not entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the
Executive of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provisions of any state
statutory law or common law.
(e) All agreements and obligations of the Company contained herein shall
continue during the period the Executive is a director and/or
officer of the Company (or is serving at the request of the Company
as an Affiliate Executive) and shall continue thereafter so long as
the Executive shall be subject to any possible Proceeding by reason
of the fact that the Executive was a director or officer of the
Company or was serving as such an Affiliate Executive.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but
failure to so notify the Company will not relieve the Company from
any liability which it may have to the Executive. With respect to
any such Proceeding:
(i) The Company shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Executive, the
Company shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Company shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Executive
without the Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to which the
Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the
Executive unreasonably withhold consent to any proposed
settlement.
12. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
13. ENTIRE AGREEMENT; AMENDMENTS.
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This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
14. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
15. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
16. SECTION HEADINGS.
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
19. SECTION 280G PROTECTION.
The Company shall make a cash payment to the Executive at the time set forth
below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section
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280G(b) of the Code. In addition to the foregoing, the cash payment due to the
Executive under this Section 19 shall be increased by the aggregate of the
amount of federal, state and local income and excise taxes for which the
Executive will be liable on account of the cash payments to be made under this
Section 19, such that the Executive will receive the excise tax gross-up payment
net of all income and excise taxes. The computation of this payment shall be
determined, at the expense of the Company, by an independent accounting,
actuarial or consulting firm selected by the Company. Payment of the cash amount
set forth above shall be made at such time as the Company shall determine, in
its sole discretion, but in no event later than the date five business days
before the due date, without regard to any extension, for filing the Executive's
federal income tax return for the calendar year which includes the date as of
which the aforementioned "excess parachute payments" are determined. In the
event that the Executive is ultimately assessed with excise taxes under Section
4999 of the Code as a result of payments made by the Company or any successor
thereto which exceed the amount of excise taxes used in computing the
Executive's payment under this Section 19, the Company or its successor shall
indemnify the Executive for such additional excise taxes plus any additional
excise taxes, income taxes, interest and penalties resulting from the additional
excise taxes and the indemnity hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV.COM INC.
By:
- -------------------------------------
Name:
Title: CFO
"EXECUTIVE"
- -----------------------------------------
Name:
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SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: Louis A. Hoch
15138 Grey Oak Forest
San Antonio, Texas 78248
2. Positions: (i) President
(ii) Chief Operating Officer
3. Duties: Management, operations and administration as appropriate for
the President and Chief Operating Officer of the Company as
further described in the Bylaws of the Company.
SCHEDULE 4(A)(I)
$140,000 per annum
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SCHEDULE 1
EMPLOYMENT CONTRACT
SCHEDULE 4(B)
BONUS: Not to exceed 40% of the then-current annual
salary, as authorized by the Board of Directors.
hoch
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EXHIBIT 8
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of November 28, 1998, is made and entered into by and
between billserv.com inc., a Nevada corporation, having an office address at
1100 N.W. Loop 410, San Antonio, Texas 78213 ("billserv.com" or the "Company")
and the individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and for the
position set forth on Schedule 1 attached hereto. Executive hereby
accepts such employment with the Company upon the terms and
conditions hereinafter set forth. Executive further agrees to serve
on the Board of Directors of the Company (the "Board") during the
term of this Agreement.
(b) The duties of the Executive shall include the duties and services
described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board
and shall include such other duties, as may be assigned by the Board
commensurate with the responsibilities normally associated with
Executive's position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed by an
Executive with the position set forth in Schedule 1 of a business
similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the
Company which are reasonable and consistent with the Company's
operations, taking into account Executive's expertise and job
responsibilities. During the term of this Agreement, Executive
agrees to devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts
to perform faithfully and efficiently such responsibilities. The
Executive will use Executive's best efforts to promote the interests
of the Company.
(b) During this Agreement, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions; or (iii) manage personal
investments or companies in which personal investments are made so
long as such activities do not significantly interfere with
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the performance of Executive's responsibilities with the Company and
which companies are not in direct competition with the Company. Any
income incurred by Executive outside the scope of his employment and
permitted pursuant to the provisions hereof, shall inure to the
benefit of Executive, and the Company shall not claim any
entitlement thereto; provided, however, that any income derived by
Executive related to the business of the Company, including, without
limitation, compensation for serving on boards of directors of
companies in which the Company has a significant investment, shall
be paid over to the Company as and when received.
(c) During the term of this Agreement, the Company shall furnish, at
Executive's principal place of employment, an office, furnishings,
secretary and such other facilities commensurate and suitable to his
position and adequate for the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term") shall
commence effective as of the date hereof (the "Commencement Date"),
and shall continue until December 31, 2001, unless (i) extended by
the mutual agreement of the Company and the Executive or (ii)
extended or terminated as hereinafter provided.
(b) Termination of Employment by the Company for Cause. The Company may
terminate Executive's employment if such termination is for "Cause"
(as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in
reasonable detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any of the
following, which act or omission is in bad faith by Executive
without a reasonable belief that such act or omission would benefit
the Company:
(i) a default or breach by Executive of any of the provisions of
this Agreement materially detrimental to the Company which is
not cured within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud, embezzlement or
dishonesty which result in a conviction of a criminal offense
not yet overturned on appeal;
(iii) actions by Executive in intentionally furnishing materially
false, misleading, or omissive information to the Company's
Board of Directors that is materially detrimental to the
Company;
(iv) actions constituting a breach of the Sections 7 or 8 of this
Agreement which is materially detrimental to the Company;
(v) acts or omissions which constitute willful failure to follow
reasonable and lawful directives of the Company's Board of
Directors, which are
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consistent with Executive's job responsibilities and
performance which is not cured within 15 days following
written notice thereof.
Upon termination for Cause, Executive shall immediately cease to
have any power of his position, but shall nevertheless be given a
reasonable opportunity to access his office with the Company for the
purpose of retrieving his personal goods and files. If any
conviction pursuant to Section 3(b) above is overturned on appeal,
Executive will be deemed to have been terminated without Cause as of
the effective date of his earlier termination.
(c) Termination Without Cause. The Company has the right to terminate
this Agreement without Cause upon written notice, subject to payment
by the Company of the Deferred Compensation described in Section
4(c) herein. In such event, Executive shall cease to have any power
of his office as of the effective date of the termination specified
in such written notice.
(d) Termination by Executive. Executive may terminate this Agreement
upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured
within the 30- day notice period. Such notice shall set forth in
reasonable detail the acts underlying the default. If Executive
terminates this Agreement under this Section 3(d), Executive shall
be entitled to the Deferred Compensation as described in Section
4(c) herein.
(e) Termination by Executive Upon Change of Control. Executive may
terminate this Agreement upon 30 days' written notice at any time
within 6 months following the occurrence of a "Change of Control",
but only prior to Executive's receiving a notice of termination by
the Company for Cause. Upon such termination Executive shall be
entitled to the Deferred Compensation described in Section 4(c)
herein. Change of Control is defined for the purposes of this
Agreement as any of the following acts:
(i) The acquisition by any person, entity or "group" within the
meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), other than a
person, entity or "group" that includes Executive, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the
Board of Directors or (B) after the consummation of a
Qualified Public Offering, more than 40% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of
Directors ; or
(ii) If the individuals who serve on the Board of Directors as of
the Commencement Date (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, any person who becomes a
director subsequent to the Commencement Date, whose election
or nomination for election was approved by a vote of at least
a majority of the directors then
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constituting the Incumbent Board, shall for purposes of this
Agreement be considered a member of the Incumbent Board; or
(iii) Approval by the Company's equity holders of (A) a merger,
reorganization or consolidation whereby the Company's equity
holders immediately prior to such approval do not, immediately
after consummation of such reorganization, merger or
consolidation own more than 50% of the combined voting power
of the surviving entity's then outstanding voting securities
entitled to vote generally in the election of directors; or
(B) liquidation or dissolution of the Company; or (C) the sale
of all or substantially all of the assets of the Company.
(f) Termination by Executive for Good Reason. Executive may terminate
this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to
Section 1 and 2 of this Agreement, (ii) Executive's title is altered
in a material and adverse manner, (iii) Executive's reporting
relationship is materially and adversely modified, (iv) Executive's
Base Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation, as
provided hereunder, is adversely (from the Executive's point of
view) altered or (vi) the Company shall relocate its executive
offices more than 40 miles from their current location (collectively
"Good Reason"). Upon such termination Executive shall be entitled to
the Deferred Compensation described in Section 4(c) herein.
(g) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 30 days' written
notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of
such notice) Executive shall cease to have any power of his office.
(h) Automatic Extension. This Agreement shall be automatically extended
for successive one-year periods at the end of the initial term and
each extended term thereafter, unless either party provides written
notice of termination to the other party at least three months prior
to the expiration of the initial or such extended term,
respectively. In the event the Company terminates this Agreement or
fails to renew this Agreement or does not permit the automatic
extension to occur at the end of any term hereof, Executive shall be
entitled to receive his Deferred Compensation under Section 4(c)
hereof.
4. COMPENSATION.
(a) Base Salary.
(i) Executive shall receive a base salary as set forth on Part I
of Schedule 4(a) attached hereto.
(ii) Each January, commencing with January 2000, the Board of
Directors of the Company shall review Executive's performance
and the Board of Directors may in its sole discretion elect to
increase the salary then paid
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to Executive above the amount set forth on Schedule 4(a)(i),
however, there shall be absolutely no obligation to do so.
(b) Bonus Compensation.
(i) The Executive shall receive as "Bonus Compensation" each year,
the amount calculated in accordance with Schedule 4(b)
attached hereto.
(ii) If at anytime hereafter, the Company shall adopt a bonus
program, an option program or any other form of equity
participation for senior executive officers of the Company,
the Executive shall be eligible to participate in such bonus
program, option program or other form of equity participation
in a manner and capacity commensurate with his position and
duties.
(c) Deferred Compensation.
(i) When Due. Executive (or his estate as the case may be) shall
be entitled to the Deferred Compensation as calculated below,
the initial installment of which is to be paid within 30 days
after the event giving rise to the payout (except as provided
below) in the event that Executive's employment is terminated
for any of the following reasons herein: (A) death of
Executive; (B) termination by the Company without cause
pursuant to Section 3(c); (C) termination by Executive upon
default by the Company pursuant to Section 3(d); (D)
termination by Executive after a Change of Control pursuant to
Section 3(e); (E) termination by the Executive pursuant to
Section 3(f); (F) termination by the Company pursuant to
Section 3(h); or (G) termination by the Company pursuant to
Section 7(a).
(ii) Amount. The Deferred Compensation shall be the amount ("Base
Deferred Compensation") which is calculated as the greater of
(A) the Base Salary payments Executive would have received had
his employment continued for the remaining term of this
Agreement (including yearly increases calculated at the
maximum increase for the prior two years); or (B) an amount
equal to 150% of the higher annual compensation earned by
Executive in the past two years (including both Base Salary
and Bonus Compensation). In addition to the Base Deferred
Compensation, Executive shall be entitled to the following
(which, together with the Base Deferred Compensation and the
Bonus Deferred Compensation (as defined below) shall be
collectively called the "Deferred Compensation") all of the
benefits and personal perquisites otherwise provided in this
Agreement (including automobile expenses) during that period
of time which is the greater of (X) the remaining term of this
Agreement, or (Y) one year (the "Deferral Period") and an
amount equal to the pro rata portion of the Bonus Compensation
for the year in which executive's employment is terminated
determined on the basis of the number of days elapsed in such
year prior to such
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termination (the "Bonus Deferred Compensation"). The Deferred
Compensation herein shall be deemed liquidated damages
resulting from the Company's termination of this Agreement and
shall be Executive's sole and exclusive remedy for any such
termination. Deferred Compensation shall not be diminished or
offset by reason of any earnings by Executive subsequent to
the date of termination.
(d) Payment of Deferred Compensation. Except as provided below, the
Deferred Compensation shall be paid in monthly installments over the
12 months following the event giving rise to a Deferred
Compensation. If such termination is a result of the death of
Executive, the initial Deferred Compensation shall be made within 15
days after the personal representative of Executive's estate
notifies the Company that Letters of Administration have been filed
in the probate proceeding. The Company shall have the option at all
times during the term of this Agreement to maintain key man life
insurance on Executive's life to cover the cost of any Deferred
Compensation due to Executive. If such key man life insurance is
maintained, and the Deferred Compensation is due as a result of
Executive's death, the Deferred Compensation shall be paid 100% in
cash upon Executive's death. The Bonus Deferred Compensation shall
be paid in a single lump sum within 90 days of the end of the year
in which Executive's employment is terminated.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid vacation
during each 12-month period during the term of this Agreement. In
addition, Executive shall be entitled to paid time off for the same
holidays as other employees of the Company as established by the
Board.
(b) Executive shall be entitled to reimbursement for all maintenance,
insurance and gasoline expenses incidental to the use of one
automobile.
(c) Executive shall be entitled to participate (in a manner and capacity
commensurate with his position and duties), subject to eligibility
and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans,
stock option plans, group hospitalization, health, dental care
(which health insurance shall also cover Executive's dependents),
profit sharing and pension, bonus and other benefit plans), as may
be adopted or amended by the Company from time to time.
(d) Following the consummation of a Qualified Public Offering, the
Company shall pay the premium on a "whole life" insurance policy on
the life of Executive in the initial face amount of five times Base
Salary during the term hereof. Executive shall have the right to
designate the beneficiaries of such policies. The Company shall pay
timely all premiums on such life insurance, and on demand provide
Executive due proof of such payment. The insurance companies issuing
such policies shall be authorized to give Executive, upon his
request, any information regarding the status of any such policy.
Any dividend declared upon such policy shall be applied to the
premium.
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(e) Following the consummation of a Qualified Public Offering, the
Company shall pay all initial membership fees and monthly dues on
behalf of Executive for Executive's membership in one business
luncheon club, and one airline club; provided that the aggregate
initial membership fees and the annual membership fees of such clubs
in the aggregate do not exceed $1,000 and $500, respectively.
Executive shall pay all expenses for such club use that is not
otherwise reimbursable as a Company business expense.
(f) The Company will reimburse Executive for the cost of reasonable tax
and financial preparation and planning, including services that may
be requested by Executive from time to time pertaining to this
Agreement.
(g) Executive shall receive any such additional benefits that any other
executive officer may receive during the term of this Agreement at
the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive may fly first class
on domestic flights and business class on international flights. In addition,
upon the submission of appropriate vouchers or other receipts the Company shall
reimburse Executive for tolls and reasonable business car phone charges.
Executive shall submit vouchers or other receipts once per calendar month and
shall be reimbursed by Company within 30 days of submission.
7. DISABILITY.
(a) In the event of the death of the Executive during the Term, the
Executive's employment hereunder shall automatically terminate. In
the event that Executive shall become mentally or physically
Disabled (as hereinafter defined) so as to be unable to fully
perform his duties herein, Executive shall continue to receive his
monthly salary for each of the first nine months or any part thereof
of any continuous Disability, less any amounts received by him under
any disability insurance paid for by the Company. If upon the
expiration of nine months of continuous Disability, Executive
remains incapacitated (hereinafter, "Permanent Disability"), the
Company shall have the right to immediately terminate this
Agreement. Such "Permanent Disability" shall be established by a
written certification submitted by a medical doctor agreed to by the
Executive and the Company. In the absence of agreement, the Company
and the Executive shall each nominate a qualified medical doctor and
these two doctors shall select a third qualified medical doctor,
which third doctor shall make the determination as to total
disability. After the termination of these time periods, Executive
will receive disability insurance proceeds for the term of such
disability.
(b) The Company shall reimburse Executive for the premiums of all
insurance policies covering the long and short-term disability of
Executive not to exceed
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$10,000 per annum (as adjusted for increases in the Consumer Price
Index) during the term hereof.
(c) Disability for the purposes of this Agreement shall mean that the
Executive is judged disabled pursuant to the Company's long term
disability policy.
8. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
During the Term and for a period of two years thereafter, except if the Company
breaches its obligations to pay the Deferred Compensation pursuant to Section
4(c) hereof:
(a) Executive shall not, directly or indirectly, enter into or
participate (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee, principal or in any other
relationship or capacity) in any business operating or providing
services in the United States within any State in which the Company
or its affiliates are operating or providing services as of the date
of termination which is, or owns, manages or performs Internet
billing services, including without limitation as principal or on
behalf of others and the development or operation of any network to
accomplish same (a "Competing Entity").
(b) Company and Executive understand and agree that the scope and
duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to
protect the Company's legitimate business interests. Such covenants
shall survive the termination of Executive's employment except as
otherwise provided herein. The parties further agree that such
covenants shall be regarded as divisible and shall be operative as
to time and geographical area to the extent that they may be made so
and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder
shall not be affected. Executive hereby warrants to Company that
Executive's compliance with each of the restrictive covenants set
forth in this Agreement will not, upon the termination, of
Executive's employment with the Company for any reason whatsoever,
cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.
(c) Executive understands and agrees that, due to the highly competitive
nature of the Company's industry, the breach of any covenants set
out in this Section 8 will cause irreparable injury to the Company
for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal
court for any breach or threatened breach of Section 8. Nothing
herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the Company to leave the
employ of or terminate such person's relationship with the Company
or (ii) employ, hire, engage or be associated with, or endeavor to
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entice away from the Company any such person, or any customer of the
Company or its affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.
(e) Executive shall not disparage the business reputation of the Company
(or its management team) or take any actions that are harmful to the
Company's goodwill with its customers, content providers, bandwidth
or other network infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that such actions would
cause irreparable harm for which there is no adequate remedy at law
and that the Company may seek in state or federal court, and is
entitled to a temporary restraining order and to preliminary and
permanent injunctive relief in state or federal court to stop any
such conduct or statements for any breach or threatened breach of
this Section 8(e) during the term of this Agreement and for a period
of two years thereafter.
(f) Company spends considerable amounts of time, money and effort in
developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are
reasonable and necessary in all respects to protect the goodwill,
trade secrets, confidential information, and business interests of
Company; (ii) are not oppressive to Executive; and (iii) do not
impose any greater restraint on Executive than is reasonably
necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.
(g) Executive acknowledges and agrees that promises made by the Company
in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment
to provide severance compensation in the event of the termination of
Executive's employment for reasons other than Cause (subject to
certain requirements on the part of Executive), constitute one form
of consideration for Executive's agreement to and compliance with
the restrictive covenants in this Agreement. Executive acknowledges
and agrees that Company's agreement to provide Executive with access
to Company's confidential and proprietary information is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
agreement to permit the use of the Company's goodwill with the
Company's customers, investors and content providers is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
commitment to providing Executive with unique skill development and
training is a separate form of consideration supporting the
restrictive covenants in this Agreement.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the
business of the Company and its affiliates, including, without
limitation, financial information, trade secrets, information
concerning the operations, sales, personnel, suppliers, customers,
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costs, profits and pricing policies, "know how" and certain business
methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise all due
and diligent precautions to protect the integrity of the customer
lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes,
records, reports or other documents and any and all other materials
embodying any Confidential Information (the "Confidential
Materials") and, upon the Company's request in writing, Executive
shall immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's possession or
control.
(c) Executive shall not at any time, either during the Term of this
Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity
to obtain any Confidential Materials except (i) when required in the
course of performing Executive's duties hereunder, (ii) with the
Company's express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process or
(iv) the Executive shall have no responsibility for the divulgence
of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, the Executive promptly, but
in no event more than 48 hours after learning of such subpoena,
court order or other governmental process, shall notify, by personal
delivery or by electronic means, confirmed by mail, the Company and,
at the Company's expense, Executive shall (x) take all reasonably
necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government
process and (y) permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
(d) Upon termination of Executive's employment with the Company, the
Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which
Executive may then possess or have under Executive's control;
provided, however, that Executive shall be entitled to retain copies
of such documents reasonably necessary to document Executive's
financial relationship (both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the provisions of
these Sections 8 and 9 may cause substantial and irreparable harm to
the Company for which the Company would have no adequate remedy at
law and (ii) the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and its
affiliates.
10. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 8 or 9, the Company shall have the
right and remedy:
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(i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction or through arbitration
as provided herein; and
(ii) to require Executive to account for and to pay over the
Company all damages suffered by the Company (including
consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for
and pay over such damages to the Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause
substantial and irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In any
equitable proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a suit for
damages Company shall be required to prove the amount of damages
actually sustained.)
(c) Each of the rights and remedies enumerated in Section 10 (a) shall
be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of
any other rights and remedies available to the Company under law or
equity.
(d) If any provision of Section 8 or 9 is held to be unenforceable
because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such
scope, duration, or area, or all of them, and such provision or
provisions shall then be enforceable in such modified form.
(e) The Company and Executive agree that any dispute or controversy
arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute
or controversy involving the formation, terms or construction of
this Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The only
disputes not subject to mandatory, binding arbitration are requests
for injunctive relief. With respect to the arbitration of any
dispute or controversy, each party understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain remedies in
court, including to right to a jury trial;
(iii) discovery in arbitration is different and more limited than
discovery in litigation; and
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(iv) an arbitrator's award need not include factual findings or
legal reasoning, and any party's right to appeal or to seek
modification of a ruling by the arbitrator is strictly
limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.
11. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold harmless
and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the Executive (net
of any related insurance proceeds or other amounts received by the
Executive or paid by or on behalf of the Company on the Executive's
behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual
or completed action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in such
action, suit or proceeding, to which the Executive was, is or is
threatened to be made a named defendant or respondent (a
"Proceeding"), because such person is or was a director or officer
of the Company, or is or was serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary (an "Affiliate Executive") of
another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise
(each, a "Company Affiliate"). Upon authorization of indemnification
of the Executive by the Board of Directors in accordance with the
applicable provisions of the Nevada General Corporation Law (the
"NGCL"), the Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a Claim (as
hereinafter defined). Thereafter, the Company shall have the burden
of proof to overcome the presumption that the Executive is so
entitled. Such presumption shall only be overcome by a judgment or
other final adjudication, after all appeals and all time for appeals
have expired ("Final Determination"), adverse to the Executive
establishing that such indemnification
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is not permitted hereunder or by law. An actual determination by the
Company (including its Board of Directors, legal counsel, or its
stockholders) that the Executive has not met the applicable standard
of conduct for indemnification shall not be a defense to the action
or create a presumption that the Executive has not met the
applicable standard of conduct. The purchase, establishment or
maintenance of any Indemnification Arrangement shall not in any way
diminish, restrict, limit or affect the rights and obligations of
the Company or of the Executive under this Agreement except as
expressly provided herein, and the execution and delivery of this
Agreement by the Company and the Executive shall not in any way
diminish, restrict, limit or affect the Executive's right to
indemnification from the Company or any other party or parties under
any other indemnification arrangement, the Certificate of
Incorporation or Bylaws of the Company, or the NGCL.
(b) Subject only to the provisions of this Section 11(b), as long as the
Executive shall continue to serve as a director and/or officer of
the Company (or shall continue at the request of the Company to
serve as an Affiliate Executive) and, thereafter, as long as the
Executive shall be subject to any possible Proceeding by reason of
the fact that the Executive was or is a director and/or officer of
the Company (or served in any of said other capacities), the Company
shall, unless no such policies are available in any market, purchase
and maintain in effect for the benefit of the Executive one or more
valid, binding and enforceable policies (the "Insurance Policies")
of directors' and officers' liability insurance ("D&O Insurance")
providing adequate liability coverage for the Executive's acts as a
director and/or officer of the Company or as an Affiliate Executive.
The Company shall promptly notify the Executive of any lapse,
amendment or failure to renew said policy or policies or any
provision thereof relating to the extent or nature of coverage
provided thereunder. In the event the Company does not purchase and
maintain in effect said policy or policies of D&O Insurance pursuant
to the provisions of this Section 11(b), the Company shall, to the
full extent permitted by law, in addition to and not in limitation
of the other rights granted the Executive under this Agreement, hold
harmless and indemnify the Executive to the full extent of coverage
which would otherwise have been provided for the benefit of the
Executive pursuant to the Insurance Policies.
(c) The Executive shall have the right to receive from the Company on
demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all
expenses payable by the Company pursuant to the terms of this
Agreement as corresponding amounts are expended or incurred by the
Executive in connection with such Proceeding or otherwise expended
or incurred by the Executive (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any Advanced
Amount, pursuant to this Agreement, the Executive shall submit to
the Company a written request for payment (a "Claim"), which
includes a schedule setting forth in reasonable detail the dollar
amount expended (or incurred or expected to be expended or
incurred). Each item on such schedule shall be supported by the
bill, agreement or other documentation relating thereto, a copy of
which shall be appended to the schedule as an exhibit.
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Where the Executive is requesting Advanced Amounts, the Executive
must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law
for indemnification, and (ii) a written undertaking to repay such
Advanced Amounts if a Final Determination is made that the Executive
is not entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the
Executive of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provisions of any state
statutory law or common law.
(e) All agreements and obligations of the Company contained herein shall
continue during the period the Executive is a director and/or
officer of the Company (or is serving at the request of the Company
as an Affiliate Executive) and shall continue thereafter so long as
the Executive shall be subject to any possible Proceeding by reason
of the fact that the Executive was a director or officer of the
Company or was serving as such an Affiliate Executive.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but
failure to so notify the Company will not relieve the Company from
any liability which it may have to the Executive. With respect to
any such Proceeding:
(i) The Company shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Executive, the
Company shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Company shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Executive
without the Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to which the
Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the
Executive unreasonably withhold consent to any proposed
settlement.
12. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
13. ENTIRE AGREEMENT; AMENDMENTS.
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This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
14. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
15. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
16. SECTION HEADINGS.
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
19. SECTION 280G PROTECTION.
The Company shall make a cash payment to the Executive at the time set forth
below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section
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280G(b) of the Code. In addition to the foregoing, the cash payment due to the
Executive under this Section 19 shall be increased by the aggregate of the
amount of federal, state and local income and excise taxes for which the
Executive will be liable on account of the cash payments to be made under this
Section 19, such that the Executive will receive the excise tax gross-up payment
net of all income and excise taxes. The computation of this payment shall be
determined, at the expense of the Company, by an independent accounting,
actuarial or consulting firm selected by the Company. Payment of the cash amount
set forth above shall be made at such time as the Company shall determine, in
its sole discretion, but in no event later than the date five business days
before the due date, without regard to any extension, for filing the Executive's
federal income tax return for the calendar year which includes the date as of
which the aforementioned "excess parachute payments" are determined. In the
event that the Executive is ultimately assessed with excise taxes under Section
4999 of the Code as a result of payments made by the Company or any successor
thereto which exceed the amount of excise taxes used in computing the
Executive's payment under this Section 19, the Company or its successor shall
indemnify the Executive for such additional excise taxes plus any additional
excise taxes, income taxes, interest and penalties resulting from the additional
excise taxes and the indemnity hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV.COM INC.
By:
- -------------------------------------
Name:
Title: CFO
"EXECUTIVE"
- -----------------------------------------
Name:
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SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: David S. Jones
San Antonio, Texas
2. Position: Senior Vice President-Strategic Planning and Marketing
3. Duties: Management, operations and administration as appropriate for
the Senior Vice President-Strategic Planning and Marketing
position of the Company.
SCHEDULE 4(A)(I)
$120,000 per annum
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SCHEDULE 1
EMPLOYMENT CONTRACT
SCHEDULE 4(B)
BONUS: Not to exceed 40% of the then-current annual
salary, as authorized by the Board of Directors.
jones
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EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of November 28, 1998, is made and entered into by and
between billserv.com inc., a Nevada corporation, having an office address at
1100 N.W. Loop 410, San Antonio, Texas 78213 ("billserv.com" or the "Company")
and the individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and for the
position set forth on Schedule 1 attached hereto. Executive hereby
accepts such employment with the Company upon the terms and
conditions hereinafter set forth.
(b) The duties of the Executive shall include the duties and services
described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board
and shall include such other duties, as may be assigned by the Board
commensurate with the responsibilities normally associated with
Executive's position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed by an
Executive with the position set forth in Schedule 1 of a business
similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the
Company which are reasonable and consistent with the Company's
operations, taking into account Executive's expertise and job
responsibilities. During the term of this Agreement, Executive
agrees to devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts
to perform faithfully and efficiently such responsibilities. The
Executive will use Executive's best efforts to promote the interests
of the Company.
(b) During this Agreement, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions; or (iii) manage personal
investments or companies in which personal investments are made so
long as such activities do not significantly interfere with the
performance of Executive's responsibilities with the Company and
which companies are not in direct competition with the Company. Any
income incurred by Executive outside the scope of his employment and
permitted
<PAGE>
pursuant to the provisions hereof, shall inure to the benefit of
Executive, and the Company shall not claim any entitlement thereto;
provided, however, that any income derived by Executive related to
the business of the Company, including, without limitation,
compensation for serving on boards of directors of companies in
which the Company has a significant investment, shall be paid over
to the Company as and when received.
(c) During the term of this Agreement, the Company shall furnish, at
Executive's principal place of employment, an office, furnishings,
secretary and such other facilities commensurate and suitable to his
position and adequate for the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term") shall
commence effective as of the date hereof (the "Commencement Date"),
and shall continue until December 31, 2001, unless (i) extended by
the mutual agreement of the Company and the Executive or (ii)
extended or terminated as hereinafter provided.
(b) Termination of Employment by the Company for Cause. The Company may
terminate Executive's employment if such termination is for "Cause"
(as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in
reasonable detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any of the
following, which act or omission is in bad faith by Executive
without a reasonable belief that such act or omission would benefit
the Company:
(i) a default or breach by Executive of any of the provisions of
this Agreement materially detrimental to the Company which is
not cured within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud, embezzlement or
dishonesty which result in a conviction of a criminal offense
not yet overturned on appeal;
(iii) actions by Executive in intentionally furnishing materially
false, misleading, or omissive information to the Company's
Board of Directors that is materially detrimental to the
Company;
(iv) actions constituting a breach of the Sections 7 or 8 of this
Agreement which is materially detrimental to the Company;
(v) acts or omissions which constitute willful failure to follow
reasonable and lawful directives of the Company's Board of
Directors, which are consistent with Executive's job
responsibilities and performance which is not cured within 15
days following written notice thereof.
Upon termination for Cause, Executive shall immediately cease to
have any power of his position, but shall nevertheless be given a
reasonable opportunity to
<PAGE>
access his office with the Company for the purpose of retrieving his
personal goods and files. If any conviction pursuant to Section 3(b)
above is overturned on appeal, Executive will be deemed to have been
terminated without Cause as of the effective date of his earlier
termination.
(c) Termination Without Cause. The Company has the right to terminate
this Agreement without Cause upon written notice, subject to payment
by the Company of the Deferred Compensation described in Section
4(c) herein. In such event, Executive shall cease to have any power
of his office as of the effective date of the termination specified
in such written notice.
(d) Termination by Executive. Executive may terminate this Agreement
upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured
within the 30- day notice period. Such notice shall set forth in
reasonable detail the acts underlying the default. If Executive
terminates this Agreement under this Section 3(d), Executive shall
be entitled to the Deferred Compensation as described in Section
4(c) herein.
(e) Termination by Executive Upon Change of Control. Executive may
terminate this Agreement upon 30 days' written notice at any time
within 6 months following the occurrence of a "Change of Control",
but only prior to Executive's receiving a notice of termination by
the Company for Cause. Upon such termination Executive shall be
entitled to the Deferred Compensation described in Section 4(c)
herein. Change of Control is defined for the purposes of this
Agreement as any of the following acts:
(i) The acquisition by any person, entity or "group" within the
meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), other than a
person, entity or "group" that includes Executive, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the
Board of Directors or (B) after the consummation of a
Qualified Public Offering, more than 40% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of
Directors ; or
(ii) If the individuals who serve on the Board of Directors as of
the Commencement Date (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, any person who becomes a
director subsequent to the Commencement Date, whose election
or nomination for election was approved by a vote of at least
a majority of the directors then constituting the Incumbent
Board, shall for purposes of this Agreement be considered a
member of the Incumbent Board; or
(iii) Approval by the Company's equity holders of (A) a merger,
reorganization or consolidation whereby the Company's equity
holders immediately prior to such approval do not, immediately
after consummation of such reorganization, merger or
consolidation own more
<PAGE>
than 50% of the combined voting power of the surviving
entity's then outstanding voting securities entitled to vote
generally in the election of directors; or (B) liquidation or
dissolution of the Company; or (C) the sale of all or
substantially all of the assets of the Company.
(f) Termination by Executive for Good Reason. Executive may terminate
this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to
Section 1 and 2 of this Agreement, (ii) Executive's title is altered
in a material and adverse manner, (iii) Executive's reporting
relationship is materially and adversely modified, (iv) Executive's
Base Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation, as
provided hereunder, is adversely (from the Executive's point of
view) altered or (vi) the Company shall relocate its executive
offices more than 40 miles from their current location (collectively
"Good Reason"). Upon such termination Executive shall be entitled to
the Deferred Compensation described in Section 4(c) herein.
(g) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 30 days' written
notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of
such notice) Executive shall cease to have any power of his office.
(h) Automatic Extension. This Agreement shall be automatically extended
for successive one-year periods at the end of the initial term and
each extended term thereafter, unless either party provides written
notice of termination to the other party at least three months prior
to the expiration of the initial or such extended term,
respectively. In the event the Company terminates this Agreement or
fails to renew this Agreement or does not permit the automatic
extension to occur at the end of any term hereof, Executive shall be
entitled to receive his Deferred Compensation under Section 4(c)
hereof.
4. COMPENSATION.
(a) Base Salary.
(i) Executive shall receive a base salary as set forth on Part I
of Schedule 4(a) attached hereto.
(ii) Each January, commencing with January 2000, the Board of
Directors of the Company shall review Executive's performance
and the Board of Directors may in its sole discretion elect to
increase the salary then paid to Executive above the amount
set forth on Schedule 4(a)(i), however, there shall be
absolutely no obligation to do so.
(b) Bonus Compensation.
(i) The Executive shall receive as "Bonus Compensation" each year,
the amount calculated in accordance with Schedule 4(b)
attached hereto.
<PAGE>
(ii) If at anytime hereafter, the Company shall adopt a bonus
program, an option program or any other form of equity
participation for senior executive officers of the Company,
the Executive shall be eligible to participate in such bonus
program, option program or other form of equity participation
in a manner and capacity commensurate with his position and
duties.
(c) Deferred Compensation.
(i) When Due. Executive (or his estate as the case may be) shall
be entitled to the Deferred Compensation as calculated below,
the initial installment of which is to be paid within 30 days
after the event giving rise to the payout (except as provided
below) in the event that Executive's employment is terminated
for any of the following reasons herein: (A) death of
Executive; (B) termination by the Company without cause
pursuant to Section 3(c); (C) termination by Executive upon
default by the Company pursuant to Section 3(d); (D)
termination by Executive after a Change of Control pursuant to
Section 3(e); (E) termination by the Executive pursuant to
Section 3(f); (F) termination by the Company pursuant to
Section 3(h); or (G) termination by the Company pursuant to
Section 7(a).
(ii) Amount. The Deferred Compensation shall be the amount ("Base
Deferred Compensation") which is calculated as the greater of
(A) the Base Salary payments Executive would have received had
his employment continued for the remaining term of this
Agreement (including yearly increases calculated at the
maximum increase for the prior two years); or (B) an amount
equal to 150% of the higher annual compensation earned by
Executive in the past two years (including both Base Salary
and Bonus Compensation). In addition to the Base Deferred
Compensation, Executive shall be entitled to the following
(which, together with the Base Deferred Compensation and the
Bonus Deferred Compensation (as defined below) shall be
collectively called the "Deferred Compensation") all of the
benefits and personal perquisites otherwise provided in this
Agreement (including automobile expenses) during that period
of time which is the greater of (X) the remaining term of this
Agreement, or (Y) one year (the "Deferral Period") and an
amount equal to the pro rata portion of the Bonus Compensation
for the year in which executive's employment is terminated
determined on the basis of the number of days elapsed in such
year prior to such termination (the "Bonus Deferred
Compensation"). The Deferred Compensation herein shall be
deemed liquidated damages resulting from the Company's
termination of this Agreement and shall be Executive's sole
and exclusive remedy for any such termination. Deferred
Compensation shall not be diminished or offset by reason of
any earnings by Executive subsequent to the date of
termination.
(d) Payment of Deferred Compensation. Except as provided below, the
Deferred Compensation shall be paid in monthly installments over the
12 months following the event giving rise to a Deferred
Compensation. If such termination
<PAGE>
is a result of the death of Executive, the initial Deferred
Compensation shall be made within 15 days after the personal
representative of Executive's estate notifies the Company that
Letters of Administration have been filed in the probate proceeding.
The Company shall have the option at all times during the term of
this Agreement to maintain key man life insurance on Executive's
life to cover the cost of any Deferred Compensation due to
Executive. If such key man life insurance is maintained, and the
Deferred Compensation is due as a result of Executive's death, the
Deferred Compensation shall be paid 100% in cash upon Executive's
death. The Bonus Deferred Compensation shall be paid in a single
lump sum within 90 days of the end of the year in which Executive's
employment is terminated.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid vacation
during each 12-month period during the term of this Agreement. In
addition, Executive shall be entitled to paid time off for the same
holidays as other employees of the Company as established by the
Board.
(b) Executive shall be entitled to reimbursement for all maintenance,
insurance and gasoline expenses incidental to the use of one
automobile.
(c) Executive shall be entitled to participate (in a manner and capacity
commensurate with his position and duties), subject to eligibility
and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans,
stock option plans, group hospitalization, health, dental care
(which health insurance shall also cover Executive's dependents),
profit sharing and pension, bonus and other benefit plans), as may
be adopted or amended by the Company from time to time.
(d) Following the consummation of a Qualified Public Offering, the
Company shall pay the premium on a "whole life" insurance policy on
the life of Executive in the initial face amount of seven times Base
Salary during the term hereof. Executive shall have the right to
designate the beneficiaries of such policies. The Company shall pay
timely all premiums on such life insurance, and on demand provide
Executive due proof of such payment. The insurance companies issuing
such policies shall be authorized to give Executive, upon his
request, any information regarding the status of any such policy.
Any dividend declared upon such policy shall be applied to the
premium.
(e) Following the consummation of a Qualified Public Offering, the
Company shall pay all initial membership fees and monthly dues on
behalf of Executive for Executive's membership in one business
luncheon club, and one airline club; provided that the aggregate
initial membership fees and the annual membership fees of such clubs
in the aggregate do not exceed $2,000 and $1,000, respectively.
Executive shall pay all expenses for such club use that is not
otherwise reimbursable as a Company business expense.
(f) The Company will reimburse Executive for the cost of reasonable tax
and financial preparation and planning, including services that may
be requested by Executive from time to time pertaining to this
Agreement.
<PAGE>
(g) Executive shall receive any such additional benefits that any other
executive officer may receive during the term of this Agreement at
the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive may fly first class
on domestic flights and business class on international flights. In addition,
upon the submission of appropriate vouchers or other receipts the Company shall
reimburse Executive for tolls and reasonable business car phone charges.
Executive shall submit vouchers or other receipts once per calendar month and
shall be reimbursed by Company within 30 days of submission.
7. DISABILITY.
(a) In the event of the death of the Executive during the Term, the
Executive's employment hereunder shall automatically terminate. In
the event that Executive shall become mentally or physically
Disabled (as hereinafter defined) so as to be unable to fully
perform his duties herein, Executive shall continue to receive his
monthly salary for each of the first nine months or any part thereof
of any continuous Disability, less any amounts received by him under
any disability insurance paid for by the Company. If upon the
expiration of nine months of continuous Disability, Executive
remains incapacitated (hereinafter, "Permanent Disability"), the
Company shall have the right to immediately terminate this
Agreement. Such "Permanent Disability" shall be established by a
written certification submitted by a medical doctor agreed to by the
Executive and the Company. In the absence of agreement, the Company
and the Executive shall each nominate a qualified medical doctor and
these two doctors shall select a third qualified medical doctor,
which third doctor shall make the determination as to total
disability. After the termination of these time periods, Executive
will receive disability insurance proceeds for the term of such
disability.
(b) The Company shall reimburse Executive for the premiums of all
insurance policies covering the long and short-term disability of
Executive not to exceed $10,000 per annum (as adjusted for increases
in the Consumer Price Index) during the term hereof.
(c) Disability for the purposes of this Agreement shall mean that the
Executive is judged disabled pursuant to the Company's long term
disability policy.
8. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
During the Term and for a period of two years thereafter, except if the Company
breaches its obligations to pay the Deferred Compensation pursuant to Section
4(c) hereof:
(a) Executive shall not, directly or indirectly, enter into or
participate (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee,
<PAGE>
principal or in any other relationship or capacity) in any business
operating or providing services in the United States within any
State in which the Company or its affiliates are operating or
providing services as of the date of termination which is, or owns,
manages or performs Internet billing services, including without
limitation as principal or on behalf of others and the development
or operation of any network to accomplish same (a "Competing
Entity").
(b) Company and Executive understand and agree that the scope and
duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to
protect the Company's legitimate business interests. Such covenants
shall survive the termination of Executive's employment except as
otherwise provided herein. The parties further agree that such
covenants shall be regarded as divisible and shall be operative as
to time and geographical area to the extent that they may be made so
and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder
shall not be affected. Executive hereby warrants to Company that
Executive's compliance with each of the restrictive covenants set
forth in this Agreement will not, upon the termination, of
Executive's employment with the Company for any reason whatsoever,
cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.
(c) Executive understands and agrees that, due to the highly competitive
nature of the Company's industry, the breach of any covenants set
out in this Section 8 will cause irreparable injury to the Company
for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal
court for any breach or threatened breach of Section 8. Nothing
herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the Company to leave the
employ of or terminate such person's relationship with the Company
or (ii) employ, hire, engage or be associated with, or endeavor to
entice away from the Company any such person, or any customer of the
Company or its affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.
(e) Executive shall not disparage the business reputation of the Company
(or its management team) or take any actions that are harmful to the
Company's goodwill with its customers, content providers, bandwidth
or other network infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that such actions would
cause irreparable harm for which there is no adequate remedy at law
and that the Company may seek in state or federal court, and is
entitled to a temporary restraining order and to preliminary and
permanent injunctive relief in state or federal court to stop any
such conduct or statements for any breach or threatened breach of
this Section 8(e) during the term of this Agreement and for a period
of two years thereafter.
<PAGE>
(f) Company spends considerable amounts of time, money and effort in
developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are
reasonable and necessary in all respects to protect the goodwill,
trade secrets, confidential information, and business interests of
Company; (ii) are not oppressive to Executive; and (iii) do not
impose any greater restraint on Executive than is reasonably
necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.
(g) Executive acknowledges and agrees that promises made by the Company
in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment
to provide severance compensation in the event of the termination of
Executive's employment for reasons other than Cause (subject to
certain requirements on the part of Executive), constitute one form
of consideration for Executive's agreement to and compliance with
the restrictive covenants in this Agreement. Executive acknowledges
and agrees that Company's agreement to provide Executive with access
to Company's confidential and proprietary information is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
agreement to permit the use of the Company's goodwill with the
Company's customers, investors and content providers is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
commitment to providing Executive with unique skill development and
training is a separate form of consideration supporting the
restrictive covenants in this Agreement.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the
business of the Company and its affiliates, including, without
limitation, financial information, trade secrets, information
concerning the operations, sales, personnel, suppliers, customers,
costs, profits and pricing policies, "know how" and certain business
methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise all due
and diligent precautions to protect the integrity of the customer
lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes,
records, reports or other documents and any and all other materials
embodying any Confidential Information (the "Confidential
Materials") and, upon the Company's request in writing, Executive
shall immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's possession or
control.
(c) Executive shall not at any time, either during the Term of this
Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity
to obtain any Confidential Materials except (i) when required in the
course of performing Executive's duties hereunder, (ii) with
<PAGE>
the Company's express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process or
(iv) the Executive shall have no responsibility for the divulgence
of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, the Executive promptly, but
in no event more than 48 hours after learning of such subpoena,
court order or other governmental process, shall notify, by personal
delivery or by electronic means, confirmed by mail, the Company and,
at the Company's expense, Executive shall (x) take all reasonably
necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government
process and (y) permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
(d) Upon termination of Executive's employment with the Company, the
Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which
Executive may then possess or have under Executive's control;
provided, however, that Executive shall be entitled to retain copies
of such documents reasonably necessary to document Executive's
financial relationship (both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the provisions of
these Sections 8 and 9 may cause substantial and irreparable harm to
the Company for which the Company would have no adequate remedy at
law and (ii) the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and its
affiliates.
10. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 8 or 9, the Company shall have the
right and remedy:
(i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction or through arbitration
as provided herein; and
(ii) to require Executive to account for and to pay over the
Company all damages suffered by the Company (including
consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for
and pay over such damages to the Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause
substantial and irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In any
equitable proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a suit for
damages Company shall be required to prove the amount of damages
actually sustained.)
<PAGE>
(c) Each of the rights and remedies enumerated in Section 10 (a) shall
be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of
any other rights and remedies available to the Company under law or
equity.
(d) If any provision of Section 8 or 9 is held to be unenforceable
because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such
scope, duration, or area, or all of them, and such provision or
provisions shall then be enforceable in such modified form.
(e) The Company and Executive agree that any dispute or controversy
arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute
or controversy involving the formation, terms or construction of
this Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The only
disputes not subject to mandatory, binding arbitration are requests
for injunctive relief. With respect to the arbitration of any
dispute or controversy, each party understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain remedies in
court, including to right to a jury trial;
(iii) discovery in arbitration is different and more limited than
discovery in litigation; and
(iv) an arbitrator's award need not include factual findings or
legal reasoning, and any party's right to appeal or to seek
modification of a ruling by the arbitrator is strictly
limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.
<PAGE>
11. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold harmless
and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the Executive (net
of any related insurance proceeds or other amounts received by the
Executive or paid by or on behalf of the Company on the Executive's
behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual
or completed action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in such
action, suit or proceeding, to which the Executive was, is or is
threatened to be made a named defendant or respondent (a
"Proceeding"), because such person is or was a director or officer
of the Company, or is or was serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary (an "Affiliate Executive") of
another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise
(each, a "Company Affiliate"). Upon authorization of indemnification
of the Executive by the Board of Directors in accordance with the
applicable provisions of the Nevada General Corporation Law (the
"NGCL"), the Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a Claim (as
hereinafter defined). Thereafter, the Company shall have the burden
of proof to overcome the presumption that the Executive is so
entitled. Such presumption shall only be overcome by a judgment or
other final adjudication, after all appeals and all time for appeals
have expired ("Final Determination"), adverse to the Executive
establishing that such indemnification is not permitted hereunder or
by law. An actual determination by the Company (including its Board
of Directors, legal counsel, or its stockholders) that the Executive
has not met the applicable standard of conduct for indemnification
shall not be a defense to the action or create a presumption that
the Executive has not met the applicable standard of conduct. The
purchase, establishment or maintenance of any Indemnification
Arrangement shall not in any way diminish, restrict, limit or affect
the rights and obligations of the Company or of the Executive under
this Agreement except as expressly provided herein, and the
execution and delivery of this Agreement by the Company and the
Executive shall not in any way diminish, restrict, limit or affect
the Executive's right to indemnification from the Company or any
other party or parties under any other indemnification arrangement,
the Certificate of Incorporation or Bylaws of the Company, or the
NGCL.
(b) Subject only to the provisions of this Section 11(b), as long as the
Executive shall continue to serve as a director and/or officer of
the Company (or shall continue at the request of the Company to
serve as an Affiliate Executive) and, thereafter, as long as the
Executive shall be subject to any possible Proceeding by reason of
the fact that the Executive was or is a director and/or officer of
the Company (or served in any of said other capacities), the Company
shall, unless no such policies are available in any market, purchase
and maintain in effect for the benefit of the Executive one or more
valid, binding and enforceable policies (the "Insurance Policies")
of directors' and officers' liability insurance ("D&O Insurance")
providing adequate liability coverage for the Executive's acts as a
<PAGE>
director and/or officer of the Company or as an Affiliate Executive.
The Company shall promptly notify the Executive of any lapse,
amendment or failure to renew said policy or policies or any
provision thereof relating to the extent or nature of coverage
provided thereunder. In the event the Company does not purchase and
maintain in effect said policy or policies of D&O Insurance pursuant
to the provisions of this Section 11(b), the Company shall, to the
full extent permitted by law, in addition to and not in limitation
of the other rights granted the Executive under this Agreement, hold
harmless and indemnify the Executive to the full extent of coverage
which would otherwise have been provided for the benefit of the
Executive pursuant to the Insurance Policies.
(c) The Executive shall have the right to receive from the Company on
demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all
expenses payable by the Company pursuant to the terms of this
Agreement as corresponding amounts are expended or incurred by the
Executive in connection with such Proceeding or otherwise expended
or incurred by the Executive (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any Advanced
Amount, pursuant to this Agreement, the Executive shall submit to
the Company a written request for payment (a "Claim"), which
includes a schedule setting forth in reasonable detail the dollar
amount expended (or incurred or expected to be expended or
incurred). Each item on such schedule shall be supported by the
bill, agreement or other documentation relating thereto, a copy of
which shall be appended to the schedule as an exhibit.
Where the Executive is requesting Advanced Amounts, the Executive
must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law
for indemnification, and (ii) a written undertaking to repay such
Advanced Amounts if a Final Determination is made that the Executive
is not entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the
Executive of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provisions of any state
statutory law or common law.
(e) All agreements and obligations of the Company contained herein shall
continue during the period the Executive is a director and/or
officer of the Company (or is serving at the request of the Company
as an Affiliate Executive) and shall continue thereafter so long as
the Executive shall be subject to any possible Proceeding by reason
of the fact that the Executive was a director or officer of the
Company or was serving as such an Affiliate Executive.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but
failure to so notify the Company will not relieve the Company from
any liability which it may have to the Executive. With respect to
any such Proceeding:
<PAGE>
(i) The Company shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Executive, the
Company shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Company shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Executive
without the Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to which the
Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the
Executive unreasonably withhold consent to any proposed
settlement.
12. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
13. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
14. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
15. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
16. SECTION HEADINGS.
<PAGE>
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
19. SECTION 280G PROTECTION.
The Company shall make a cash payment to the Executive at the time set forth
below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section 280G(b) of the Code. In addition to the foregoing,
the cash payment due to the Executive under this Section 19 shall be increased
by the aggregate of the amount of federal, state and local income and excise
taxes for which the Executive will be liable on account of the cash payments to
be made under this Section 19, such that the Executive will receive the excise
tax gross-up payment net of all income and excise taxes. The computation of this
payment shall be determined, at the expense of the Company, by an independent
accounting, actuarial or consulting firm selected by the Company. Payment of the
cash amount set forth above shall be made at such time as the Company shall
determine, in its sole discretion, but in no event later than the date five
business days before the due date, without regard to any extension, for filing
the Executive's federal income tax return for the calendar year which includes
the date as of which the aforementioned "excess parachute payments" are
determined. In the event that the Executive is ultimately assessed with excise
taxes under Section 4999 of the Code as a result of payments made by the Company
or any successor thereto which exceed the amount of excise taxes used in
computing the Executive's payment under this Section 19, the Company or its
successor shall indemnify the Executive for such additional excise taxes plus
any additional excise taxes, income taxes, interest and penalties resulting from
the additional excise taxes and the indemnity hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV.COM INC.
By:
- -------------------------------------
<PAGE>
Name:
Title: Chief Executive Officer
"EXECUTIVE"
- -----------------------------------------
Name:
<PAGE>
SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: Lori A. Turner
2. Position: Vice President and Chief Financial Officer
3. Duties: Management, operations and administration as appropriate for
the Chief Executive Officer of the Company.
SCHEDULE 4(A)(I)
$100,000 per annum
<PAGE>
SCHEDULE 1
EMPLOYMENT CONTRACT
SCHEDULE 4(B)
BONUS: Not to exceed 40% of the then-current annual
salary, as authorized by the Board of Directors.
EXHIBIT 10
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of November 28, 1998, is made and entered into by and
between billserv.com inc., a Nevada corporation, having an office address at
1100 N.W. Loop 410, San Antonio, Texas 78213 ("billserv.com" or the "Company")
and the individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and for the
position set forth on Schedule 1 attached hereto. Executive hereby
accepts such employment with the Company upon the terms and
conditions hereinafter set forth.
(b) The duties of the Executive shall include the duties and services
described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board
and shall include such other duties, as may be assigned by the Board
commensurate with the responsibilities normally associated with
Executive's position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed by an
Executive with the position set forth in Schedule 1 of a business
similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the
Company which are reasonable and consistent with the Company's
operations, taking into account Executive's expertise and job
responsibilities. During the term of this Agreement, Executive
agrees to devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts
to perform faithfully and efficiently such responsibilities. The
Executive will use Executive's best efforts to promote the interests
of the Company.
(b) During this Agreement, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions; or (iii) manage personal
investments or companies in which personal investments are made so
long as such activities do not significantly interfere with the
performance of Executive's responsibilities with the Company and
which companies are not in direct competition with the Company. Any
income incurred by Executive outside the scope of his employment and
permitted
<PAGE>
pursuant to the provisions hereof, shall inure to the benefit of
Executive, and the Company shall not claim any entitlement thereto;
provided, however, that any income derived by Executive related to
the business of the Company, including, without limitation,
compensation for serving on boards of directors of companies in
which the Company has a significant investment, shall be paid over
to the Company as and when received.
(c) During the term of this Agreement, the Company shall furnish, at
Executive's principal place of employment, an office, furnishings,
secretary and such other facilities commensurate and suitable to his
position and adequate for the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term") shall
commence effective as of the date hereof (the "Commencement Date"),
and shall continue until December 31, 2001, unless (i) extended by
the mutual agreement of the Company and the Executive or (ii)
extended or terminated as hereinafter provided.
(b) Termination of Employment by the Company for Cause. The Company may
terminate Executive's employment if such termination is for "Cause"
(as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in
reasonable detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any of the
following, which act or omission is in bad faith by Executive
without a reasonable belief that such act or omission would benefit
the Company:
(i) a default or breach by Executive of any of the provisions of
this Agreement materially detrimental to the Company which is
not cured within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud, embezzlement or
dishonesty which result in a conviction of a criminal offense
not yet overturned on appeal;
(iii) actions by Executive in intentionally furnishing materially
false, misleading, or omissive information to the Company's
Board of Directors that is materially detrimental to the
Company;
(iv) actions constituting a breach of the Sections 7 or 8 of this
Agreement which is materially detrimental to the Company;
(v) acts or omissions which constitute willful failure to follow
reasonable and lawful directives of the Company's Board of
Directors, which are consistent with Executive's job
responsibilities and performance which is not cured within 15
days following written notice thereof.
Upon termination for Cause, Executive shall immediately cease to
have any power of his position, but shall nevertheless be given a
reasonable opportunity to
<PAGE>
access his office with the Company for the purpose of retrieving his
personal goods and files. If any conviction pursuant to Section 3(b)
above is overturned on appeal, Executive will be deemed to have been
terminated without Cause as of the effective date of his earlier
termination.
(c) Termination Without Cause. The Company has the right to terminate
this Agreement without Cause upon written notice, subject to payment
by the Company of the Deferred Compensation described in Section
4(c) herein. In such event, Executive shall cease to have any power
of his office as of the effective date of the termination specified
in such written notice.
(d) Termination by Executive. Executive may terminate this Agreement
upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured
within the 30- day notice period. Such notice shall set forth in
reasonable detail the acts underlying the default. If Executive
terminates this Agreement under this Section 3(d), Executive shall
be entitled to the Deferred Compensation as described in Section
4(c) herein.
(e) Termination by Executive Upon Change of Control. Executive may
terminate this Agreement upon 30 days' written notice at any time
within 6 months following the occurrence of a "Change of Control",
but only prior to Executive's receiving a notice of termination by
the Company for Cause. Upon such termination Executive shall be
entitled to the Deferred Compensation described in Section 4(c)
herein. Change of Control is defined for the purposes of this
Agreement as any of the following acts:
(i) The acquisition by any person, entity or "group" within the
meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), other than a
person, entity or "group" that includes Executive, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the
Board of Directors or (B) after the consummation of a
Qualified Public Offering, more than 40% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of
Directors ; or
(ii) If the individuals who serve on the Board of Directors as of
the Commencement Date (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, any person who becomes a
director subsequent to the Commencement Date, whose election
or nomination for election was approved by a vote of at least
a majority of the directors then constituting the Incumbent
Board, shall for purposes of this Agreement be considered a
member of the Incumbent Board; or
(iii) Approval by the Company's equity holders of (A) a merger,
reorganization or consolidation whereby the Company's equity
holders immediately prior to such approval do not, immediately
after consummation of such reorganization, merger or
consolidation own more
<PAGE>
than 50% of the combined voting power of the surviving
entity's then outstanding voting securities entitled to vote
generally in the election of directors; or (B) liquidation or
dissolution of the Company; or (C) the sale of all or
substantially all of the assets of the Company.
(f) Termination by Executive for Good Reason. Executive may terminate
this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to
Section 1 and 2 of this Agreement, (ii) Executive's title is altered
in a material and adverse manner, (iii) Executive's reporting
relationship is materially and adversely modified, (iv) Executive's
Base Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation, as
provided hereunder, is adversely (from the Executive's point of
view) altered or (vi) the Company shall relocate its executive
offices more than 40 miles from their current location (collectively
"Good Reason"). Upon such termination Executive shall be entitled to
the Deferred Compensation described in Section 4(c) herein.
(g) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 30 days' written
notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of
such notice) Executive shall cease to have any power of his office.
(h) Automatic Extension. This Agreement shall be automatically extended
for successive one-year periods at the end of the initial term and
each extended term thereafter, unless either party provides written
notice of termination to the other party at least three months prior
to the expiration of the initial or such extended term,
respectively. In the event the Company terminates this Agreement or
fails to renew this Agreement or does not permit the automatic
extension to occur at the end of any term hereof, Executive shall be
entitled to receive his Deferred Compensation under Section 4(c)
hereof.
4. COMPENSATION.
(a) Base Salary.
(i) Executive shall receive a base salary as set forth on Part I
of Schedule 4(a) attached hereto.
(ii) Each January, commencing with January 2000, the Board of
Directors of the Company shall review Executive's performance
and the Board of Directors may in its sole discretion elect to
increase the salary then paid to Executive above the amount
set forth on Schedule 4(a)(i), however, there shall be
absolutely no obligation to do so.
(b) Bonus Compensation.
(i) The Executive shall receive as "Bonus Compensation" each year,
the amount calculated in accordance with Schedule 4(b)
attached hereto.
<PAGE>
(ii) If at anytime hereafter, the Company shall adopt a bonus
program, an option program or any other form of equity
participation for senior executive officers of the Company,
the Executive shall be eligible to participate in such bonus
program, option program or other form of equity participation
in a manner and capacity commensurate with his position and
duties.
(c) Deferred Compensation.
(i) When Due. Executive (or his estate as the case may be) shall
be entitled to the Deferred Compensation as calculated below,
the initial installment of which is to be paid within 30 days
after the event giving rise to the payout (except as provided
below) in the event that Executive's employment is terminated
for any of the following reasons herein: (A) death of
Executive; (B) termination by the Company without cause
pursuant to Section 3(c); (C) termination by Executive upon
default by the Company pursuant to Section 3(d); (D)
termination by Executive after a Change of Control pursuant to
Section 3(e); (E) termination by the Executive pursuant to
Section 3(f); (F) termination by the Company pursuant to
Section 3(h); or (G) termination by the Company pursuant to
Section 7(a).
(ii) Amount. The Deferred Compensation shall be the amount ("Base
Deferred Compensation") which is calculated as the greater of
(A) the Base Salary payments Executive would have received had
his employment continued for the remaining term of this
Agreement (including yearly increases calculated at the
maximum increase for the prior two years); or (B) an amount
equal to 150% of the higher annual compensation earned by
Executive in the past two years (including both Base Salary
and Bonus Compensation). In addition to the Base Deferred
Compensation, Executive shall be entitled to the following
(which, together with the Base Deferred Compensation and the
Bonus Deferred Compensation (as defined below) shall be
collectively called the "Deferred Compensation") all of the
benefits and personal perquisites otherwise provided in this
Agreement (including automobile expenses) during that period
of time which is the greater of (X) the remaining term of this
Agreement, or (Y) one year (the "Deferral Period") and an
amount equal to the pro rata portion of the Bonus Compensation
for the year in which executive's employment is terminated
determined on the basis of the number of days elapsed in such
year prior to such termination (the "Bonus Deferred
Compensation"). The Deferred Compensation herein shall be
deemed liquidated damages resulting from the Company's
termination of this Agreement and shall be Executive's sole
and exclusive remedy for any such termination. Deferred
Compensation shall not be diminished or offset by reason of
any earnings by Executive subsequent to the date of
termination.
(d) Payment of Deferred Compensation. Except as provided below, the
Deferred Compensation shall be paid in monthly installments over the
12 months following the event giving rise to a Deferred
Compensation. If such termination
<PAGE>
is a result of the death of Executive, the initial Deferred
Compensation shall be made within 15 days after the personal
representative of Executive's estate notifies the Company that
Letters of Administration have been filed in the probate proceeding.
The Company shall have the option at all times during the term of
this Agreement to maintain key man life insurance on Executive's
life to cover the cost of any Deferred Compensation due to
Executive. If such key man life insurance is maintained, and the
Deferred Compensation is due as a result of Executive's death, the
Deferred Compensation shall be paid 100% in cash upon Executive's
death. The Bonus Deferred Compensation shall be paid in a single
lump sum within 90 days of the end of the year in which Executive's
employment is terminated.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid vacation
during each 12-month period during the term of this Agreement. In
addition, Executive shall be entitled to paid time off for the same
holidays as other employees of the Company as established by the
Board.
(b) Executive shall be entitled to reimbursement for all maintenance,
insurance and gasoline expenses incidental to the use of one
automobile.
(c) Executive shall be entitled to participate (in a manner and capacity
commensurate with his position and duties), subject to eligibility
and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans,
stock option plans, group hospitalization, health, dental care
(which health insurance shall also cover Executive's dependents),
profit sharing and pension, bonus and other benefit plans), as may
be adopted or amended by the Company from time to time.
(d) Following the consummation of a Qualified Public Offering, the
Company shall pay the premium on a "whole life" insurance policy on
the life of Executive in the initial face amount of seven times Base
Salary during the term hereof. Executive shall have the right to
designate the beneficiaries of such policies. The Company shall pay
timely all premiums on such life insurance, and on demand provide
Executive due proof of such payment. The insurance companies issuing
such policies shall be authorized to give Executive, upon his
request, any information regarding the status of any such policy.
Any dividend declared upon such policy shall be applied to the
premium.
(e) Following the consummation of a Qualified Public Offering, the
Company shall pay all initial membership fees and monthly dues on
behalf of Executive for Executive's membership in one business
luncheon club, and one airline club; provided that the aggregate
initial membership fees and the annual membership fees of such clubs
in the aggregate do not exceed $2,000 and $1,000, respectively.
Executive shall pay all expenses for such club use that is not
otherwise reimbursable as a Company business expense.
(f) The Company will reimburse Executive for the cost of reasonable tax
and financial preparation and planning, including services that may
be requested by Executive from time to time pertaining to this
Agreement.
<PAGE>
(g) Executive shall receive any such additional benefits that any other
executive officer may receive during the term of this Agreement at
the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive may fly first class
on domestic flights and business class on international flights. In addition,
upon the submission of appropriate vouchers or other receipts the Company shall
reimburse Executive for tolls and reasonable business car phone charges.
Executive shall submit vouchers or other receipts once per calendar month and
shall be reimbursed by Company within 30 days of submission.
7. DISABILITY.
(a) In the event of the death of the Executive during the Term, the
Executive's employment hereunder shall automatically terminate. In
the event that Executive shall become mentally or physically
Disabled (as hereinafter defined) so as to be unable to fully
perform his duties herein, Executive shall continue to receive his
monthly salary for each of the first nine months or any part thereof
of any continuous Disability, less any amounts received by him under
any disability insurance paid for by the Company. If upon the
expiration of nine months of continuous Disability, Executive
remains incapacitated (hereinafter, "Permanent Disability"), the
Company shall have the right to immediately terminate this
Agreement. Such "Permanent Disability" shall be established by a
written certification submitted by a medical doctor agreed to by the
Executive and the Company. In the absence of agreement, the Company
and the Executive shall each nominate a qualified medical doctor and
these two doctors shall select a third qualified medical doctor,
which third doctor shall make the determination as to total
disability. After the termination of these time periods, Executive
will receive disability insurance proceeds for the term of such
disability.
(b) The Company shall reimburse Executive for the premiums of all
insurance policies covering the long and short-term disability of
Executive not to exceed $10,000 per annum (as adjusted for increases
in the Consumer Price Index) during the term hereof.
(c) Disability for the purposes of this Agreement shall mean that the
Executive is judged disabled pursuant to the Company's long term
disability policy.
8. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
During the Term and for a period of two years thereafter, except if the Company
breaches its obligations to pay the Deferred Compensation pursuant to Section
4(c) hereof:
(a) Executive shall not, directly or indirectly, enter into or
participate (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee,
<PAGE>
principal or in any other relationship or capacity) in any business
operating or providing services in the United States within any
State in which the Company or its affiliates are operating or
providing services as of the date of termination which is, or owns,
manages or performs Internet billing services, including without
limitation as principal or on behalf of others and the development
or operation of any network to accomplish same (a "Competing
Entity").
(b) Company and Executive understand and agree that the scope and
duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to
protect the Company's legitimate business interests. Such covenants
shall survive the termination of Executive's employment except as
otherwise provided herein. The parties further agree that such
covenants shall be regarded as divisible and shall be operative as
to time and geographical area to the extent that they may be made so
and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder
shall not be affected. Executive hereby warrants to Company that
Executive's compliance with each of the restrictive covenants set
forth in this Agreement will not, upon the termination, of
Executive's employment with the Company for any reason whatsoever,
cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.
(c) Executive understands and agrees that, due to the highly competitive
nature of the Company's industry, the breach of any covenants set
out in this Section 8 will cause irreparable injury to the Company
for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal
court for any breach or threatened breach of Section 8. Nothing
herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the Company to leave the
employ of or terminate such person's relationship with the Company
or (ii) employ, hire, engage or be associated with, or endeavor to
entice away from the Company any such person, or any customer of the
Company or its affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.
(e) Executive shall not disparage the business reputation of the Company
(or its management team) or take any actions that are harmful to the
Company's goodwill with its customers, content providers, bandwidth
or other network infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that such actions would
cause irreparable harm for which there is no adequate remedy at law
and that the Company may seek in state or federal court, and is
entitled to a temporary restraining order and to preliminary and
permanent injunctive relief in state or federal court to stop any
such conduct or statements for any breach or threatened breach of
this Section 8(e) during the term of this Agreement and for a period
of two years thereafter.
<PAGE>
(f) Company spends considerable amounts of time, money and effort in
developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are
reasonable and necessary in all respects to protect the goodwill,
trade secrets, confidential information, and business interests of
Company; (ii) are not oppressive to Executive; and (iii) do not
impose any greater restraint on Executive than is reasonably
necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.
(g) Executive acknowledges and agrees that promises made by the Company
in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment
to provide severance compensation in the event of the termination of
Executive's employment for reasons other than Cause (subject to
certain requirements on the part of Executive), constitute one form
of consideration for Executive's agreement to and compliance with
the restrictive covenants in this Agreement. Executive acknowledges
and agrees that Company's agreement to provide Executive with access
to Company's confidential and proprietary information is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
agreement to permit the use of the Company's goodwill with the
Company's customers, investors and content providers is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
commitment to providing Executive with unique skill development and
training is a separate form of consideration supporting the
restrictive covenants in this Agreement.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the
business of the Company and its affiliates, including, without
limitation, financial information, trade secrets, information
concerning the operations, sales, personnel, suppliers, customers,
costs, profits and pricing policies, "know how" and certain business
methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise all due
and diligent precautions to protect the integrity of the customer
lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes,
records, reports or other documents and any and all other materials
embodying any Confidential Information (the "Confidential
Materials") and, upon the Company's request in writing, Executive
shall immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's possession or
control.
(c) Executive shall not at any time, either during the Term of this
Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity
to obtain any Confidential Materials except (i) when required in the
course of performing Executive's duties hereunder, (ii) with
<PAGE>
the Company's express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process or
(iv) the Executive shall have no responsibility for the divulgence
of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, the Executive promptly, but
in no event more than 48 hours after learning of such subpoena,
court order or other governmental process, shall notify, by personal
delivery or by electronic means, confirmed by mail, the Company and,
at the Company's expense, Executive shall (x) take all reasonably
necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government
process and (y) permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
(d) Upon termination of Executive's employment with the Company, the
Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which
Executive may then possess or have under Executive's control;
provided, however, that Executive shall be entitled to retain copies
of such documents reasonably necessary to document Executive's
financial relationship (both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the provisions of
these Sections 8 and 9 may cause substantial and irreparable harm to
the Company for which the Company would have no adequate remedy at
law and (ii) the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and its
affiliates.
10. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 8 or 9, the Company shall have the
right and remedy:
(i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction or through arbitration
as provided herein; and
(ii) to require Executive to account for and to pay over the
Company all damages suffered by the Company (including
consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for
and pay over such damages to the Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause
substantial and irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In any
equitable proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a suit for
damages Company shall be required to prove the amount of damages
actually sustained.)
<PAGE>
(c) Each of the rights and remedies enumerated in Section 10 (a) shall
be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of
any other rights and remedies available to the Company under law or
equity.
(d) If any provision of Section 8 or 9 is held to be unenforceable
because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such
scope, duration, or area, or all of them, and such provision or
provisions shall then be enforceable in such modified form.
(e) The Company and Executive agree that any dispute or controversy
arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute
or controversy involving the formation, terms or construction of
this Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The only
disputes not subject to mandatory, binding arbitration are requests
for injunctive relief. With respect to the arbitration of any
dispute or controversy, each party understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain remedies in
court, including to right to a jury trial;
(iii) discovery in arbitration is different and more limited than
discovery in litigation; and
(iv) an arbitrator's award need not include factual findings or
legal reasoning, and any party's right to appeal or to seek
modification of a ruling by the arbitrator is strictly
limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.
<PAGE>
11. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold harmless
and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the Executive (net
of any related insurance proceeds or other amounts received by the
Executive or paid by or on behalf of the Company on the Executive's
behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual
or completed action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in such
action, suit or proceeding, to which the Executive was, is or is
threatened to be made a named defendant or respondent (a
"Proceeding"), because such person is or was a director or officer
of the Company, or is or was serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary (an "Affiliate Executive") of
another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise
(each, a "Company Affiliate"). Upon authorization of indemnification
of the Executive by the Board of Directors in accordance with the
applicable provisions of the Nevada General Corporation Law (the
"NGCL"), the Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a Claim (as
hereinafter defined). Thereafter, the Company shall have the burden
of proof to overcome the presumption that the Executive is so
entitled. Such presumption shall only be overcome by a judgment or
other final adjudication, after all appeals and all time for appeals
have expired ("Final Determination"), adverse to the Executive
establishing that such indemnification is not permitted hereunder or
by law. An actual determination by the Company (including its Board
of Directors, legal counsel, or its stockholders) that the Executive
has not met the applicable standard of conduct for indemnification
shall not be a defense to the action or create a presumption that
the Executive has not met the applicable standard of conduct. The
purchase, establishment or maintenance of any Indemnification
Arrangement shall not in any way diminish, restrict, limit or affect
the rights and obligations of the Company or of the Executive under
this Agreement except as expressly provided herein, and the
execution and delivery of this Agreement by the Company and the
Executive shall not in any way diminish, restrict, limit or affect
the Executive's right to indemnification from the Company or any
other party or parties under any other indemnification arrangement,
the Certificate of Incorporation or Bylaws of the Company, or the
NGCL.
(b) Subject only to the provisions of this Section 11(b), as long as the
Executive shall continue to serve as a director and/or officer of
the Company (or shall continue at the request of the Company to
serve as an Affiliate Executive) and, thereafter, as long as the
Executive shall be subject to any possible Proceeding by reason of
the fact that the Executive was or is a director and/or officer of
the Company (or served in any of said other capacities), the Company
shall, unless no such policies are available in any market, purchase
and maintain in effect for the benefit of the Executive one or more
valid, binding and enforceable policies (the "Insurance Policies")
of directors' and officers' liability insurance ("D&O Insurance")
providing adequate liability coverage for the Executive's acts as a
<PAGE>
director and/or officer of the Company or as an Affiliate Executive.
The Company shall promptly notify the Executive of any lapse,
amendment or failure to renew said policy or policies or any
provision thereof relating to the extent or nature of coverage
provided thereunder. In the event the Company does not purchase and
maintain in effect said policy or policies of D&O Insurance pursuant
to the provisions of this Section 11(b), the Company shall, to the
full extent permitted by law, in addition to and not in limitation
of the other rights granted the Executive under this Agreement, hold
harmless and indemnify the Executive to the full extent of coverage
which would otherwise have been provided for the benefit of the
Executive pursuant to the Insurance Policies.
(c) The Executive shall have the right to receive from the Company on
demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all
expenses payable by the Company pursuant to the terms of this
Agreement as corresponding amounts are expended or incurred by the
Executive in connection with such Proceeding or otherwise expended
or incurred by the Executive (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any Advanced
Amount, pursuant to this Agreement, the Executive shall submit to
the Company a written request for payment (a "Claim"), which
includes a schedule setting forth in reasonable detail the dollar
amount expended (or incurred or expected to be expended or
incurred). Each item on such schedule shall be supported by the
bill, agreement or other documentation relating thereto, a copy of
which shall be appended to the schedule as an exhibit.
Where the Executive is requesting Advanced Amounts, the Executive
must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law
for indemnification, and (ii) a written undertaking to repay such
Advanced Amounts if a Final Determination is made that the Executive
is not entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the
Executive of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provisions of any state
statutory law or common law.
(e) All agreements and obligations of the Company contained herein shall
continue during the period the Executive is a director and/or
officer of the Company (or is serving at the request of the Company
as an Affiliate Executive) and shall continue thereafter so long as
the Executive shall be subject to any possible Proceeding by reason
of the fact that the Executive was a director or officer of the
Company or was serving as such an Affiliate Executive.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but
failure to so notify the Company will not relieve the Company from
any liability which it may have to the Executive. With respect to
any such Proceeding:
<PAGE>
(i) The Company shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Executive, the
Company shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Company shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Executive
without the Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to which the
Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the
Executive unreasonably withhold consent to any proposed
settlement.
12. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
13. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
14. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
15. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
16. SECTION HEADINGS.
<PAGE>
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
19. SECTION 280G PROTECTION.
The Company shall make a cash payment to the Executive at the time set forth
below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section 280G(b) of the Code. In addition to the foregoing,
the cash payment due to the Executive under this Section 19 shall be increased
by the aggregate of the amount of federal, state and local income and excise
taxes for which the Executive will be liable on account of the cash payments to
be made under this Section 19, such that the Executive will receive the excise
tax gross-up payment net of all income and excise taxes. The computation of this
payment shall be determined, at the expense of the Company, by an independent
accounting, actuarial or consulting firm selected by the Company. Payment of the
cash amount set forth above shall be made at such time as the Company shall
determine, in its sole discretion, but in no event later than the date five
business days before the due date, without regard to any extension, for filing
the Executive's federal income tax return for the calendar year which includes
the date as of which the aforementioned "excess parachute payments" are
determined. In the event that the Executive is ultimately assessed with excise
taxes under Section 4999 of the Code as a result of payments made by the Company
or any successor thereto which exceed the amount of excise taxes used in
computing the Executive's payment under this Section 19, the Company or its
successor shall indemnify the Executive for such additional excise taxes plus
any additional excise taxes, income taxes, interest and penalties resulting from
the additional excise taxes and the indemnity hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV.COM INC.
By:
- -------------------------------------
<PAGE>
Name:
Title: Chief Executive Officer
"EXECUTIVE"
- -----------------------------------------
Name:
<PAGE>
SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: Marshall N. Millard
2. Position: Vice President and General Counsel
3. Duties: Management, operations and administration as
appropriate for the General Counsel of the Company.
SCHEDULE 4(A)(I)
$100,000 per annum
<PAGE>
SCHEDULE 1
EMPLOYMENT CONTRACT
SCHEDULE 4(B)
BONUS: Not to exceed 40% of the then-current annual salary, as
authorized by the Board of Directors.
EXHIBIT 11
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of November 28, 1998, is made and entered into by and
between billserv.com inc., a Nevada corporation, having an office address at
1100 N.W. Loop 410, San Antonio, Texas 78213 ("billserv.com" or the "Company")
and the individual named in Schedule 1 hereto, residing at the address listed in
Schedule 1 (hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to hire and retain the Executive as an Executive to
perform certain services for the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and on
the attached Schedule, and for other good and valuable consideration the receipt
of which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE.
(a) The Company hereby employs the Executive in the capacity and for the
position set forth on Schedule 1 attached hereto. Executive hereby
accepts such employment with the Company upon the terms and
conditions hereinafter set forth.
(b) The duties of the Executive shall include the duties and services
described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board
and shall include such other duties, as may be assigned by the Board
commensurate with the responsibilities normally associated with
Executive's position.
2. SERVICES TO BE RENDERED.
(a) Executive shall perform such duties as are usually performed by an
Executive with the position set forth in Schedule 1 of a business
similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the
Company which are reasonable and consistent with the Company's
operations, taking into account Executive's expertise and job
responsibilities. During the term of this Agreement, Executive
agrees to devote his full time and attention to the business and
affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts
to perform faithfully and efficiently such responsibilities. The
Executive will use Executive's best efforts to promote the interests
of the Company.
(b) During this Agreement, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions; or (iii) manage personal
investments or companies in which personal investments are made so
long as such activities do not significantly interfere with the
performance of Executive's responsibilities with the Company and
which companies are not in direct competition with the Company. Any
income
<PAGE>
incurred by Executive outside the scope of his employment and
permitted pursuant to the provisions hereof, shall inure to the
benefit of Executive, and the Company shall not claim any
entitlement thereto; provided, however, that any income derived by
Executive related to the business of the Company, including, without
limitation, compensation for serving on boards of directors of
companies in which the Company has a significant investment, shall
be paid over to the Company as and when received.
(c) During the term of this Agreement, the Company shall furnish
facilities commensurate and suitable to Executive's position and
adequate for the performance of his duties hereunder.
3. TERM.
(a) Term of Employment. The term of this Agreement (the "Term") shall
commence effective as of the date hereof (the "Commencement Date"),
and shall continue until December 31, 2001, unless (i) extended by
the mutual agreement of the Company and the Executive or (ii)
extended or terminated as hereinafter provided.
(b) Termination of Employment by the Company for Cause. The Company may
terminate Executive's employment if such termination is for "Cause"
(as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in
reasonable detail the facts underlying the claim of Cause. For the
purposes of this Agreement, "Cause" shall be defined as any of the
following, which act or omission is in bad faith by Executive
without a reasonable belief that such act or omission would benefit
the Company:
(i) a default or breach by Executive of any of the provisions of
this Agreement materially detrimental to the Company which is
not cured within 15 days following written notice thereof;
(ii) actions by Executive constituting fraud, embezzlement or
dishonesty which result in a conviction of a criminal offense
not yet overturned on appeal;
(iii) actions by Executive in intentionally furnishing materially
false, misleading, or omissive information to the Company's
Board of Directors that is materially detrimental to the
Company;
(iv) actions constituting a breach of the Sections 7 or 8 of this
Agreement which is materially detrimental to the Company;
(v) acts or omissions which constitute willful failure to follow
reasonable and lawful directives of the Company's Board of
Directors, which are consistent with Executive's job
responsibilities and performance which is not cured within 15
days following written notice thereof.
Upon termination for Cause, Executive shall immediately cease to
have any power of his position, but shall nevertheless be given a
reasonable opportunity
<PAGE>
to access his office with the Company for the purpose of retrieving
his personal goods and files. If any conviction pursuant to Section
3(b) above is overturned on appeal, Executive will be deemed to have
been terminated without Cause as of the effective date of his
earlier termination.
(c) Termination by Executive. Executive may terminate this Agreement
upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured
within the 30- day notice period. Such notice shall set forth in
reasonable detail the acts underlying the default.
(d) Termination by Executive for Good Reason. Executive may terminate
this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to
Section 1 and 2 of this Agreement, (ii) Executive's title is altered
in a material and adverse manner, (iii) Executive's reporting
relationship is materially and adversely modified, (iv) Executive's
Base Salary, as provided hereunder, is diminished, (v) the
methodology for calculating Executive's Bonus Compensation, as
provided hereunder, is adversely (from the Executive's point of
view) altered or (vi) the Company shall relocate its executive
offices more than 40 miles from their current location (collectively
"Good Reason")..
(e) Termination by Executive Without Good Reason. Executive may
terminate this Agreement without Good Reason upon 90 days' written
notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of
such notice) Executive shall cease to have any power of his office.
(f) Automatic Extension. This Agreement shall be automatically extended
for successive one-year periods at the end of the initial term and
each extended term thereafter, unless either party provides written
notice of termination to the other party at least three months prior
to the expiration of the initial or such extended term,
respectively.
4. COMPENSATION.
(a) Base Salary.
(i) Executive shall receive a base salary as set forth on Part I
of Schedule 4(a) attached hereto.
(ii) Each January, commencing with January 2000, the Board of
Directors of the Company shall review Executive's performance
and the Board of Directors may in its sole discretion elect to
increase the salary then paid to Executive above the amount
set forth on Schedule 4(a)(i), however, there shall be
absolutely no obligation to do so.
(b) Bonus Compensation.
<PAGE>
(i) The Executive shall receive as "Bonus Compensation" each year,
the amount calculated in accordance with Schedule 4(b)
attached hereto.
(ii) If at anytime hereafter, the Company shall adopt a bonus
program, an option program or any other form of equity
participation for senior executive officers of the Company,
the Executive shall be eligible to participate in such bonus
program, option program or other form of equity participation
in a manner and capacity commensurate with his position and
duties.
5. BENEFITS.
(a) Executive shall be entitled to a minimum of 4 weeks paid vacation
during each 12-month period during the term of this Agreement. In
addition, Executive shall be entitled to paid time off for the same
holidays as other employees of the Company as established by the
Board.
(b) Executive shall be entitled to participate (in a manner and capacity
commensurate with his position and duties), subject to eligibility
and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans,
stock option plans, group hospitalization, health, dental care
(which health insurance shall also cover Executive's dependents),
profit sharing and pension, bonus and other benefit plans), as may
be adopted or amended by the Company from time to time.
(c) The Company will pay up to $500 for the annual membership fee to one
airline club. Executive shall pay all expenses for such club use
that is not otherwise reimbursable as a Company business expense.
(d) Executive shall receive any such additional benefits that any other
executive officer may receive during the term of this Agreement at
the reasonable discretion of the Board.
6. EXPENSES.
The Company shall reimburse the Executive against appropriate vouchers or other
receipts for business expenses reasonably incurred by Executive in the
performance of Executive's duties pursuant to the terms hereof. Executive is
authorized to incur reasonable traveling and other expenses in connection with
the Company's business and in performance of his duties under this Agreement.
When engaging in business related air travel, the executive should fly coach
class on domestic flights and business class on international flights. The
Company will reimburse Executive for upgrade coupon costs of $75.00 per flight
to a terminal destination. In addition, upon the submission of appropriate
vouchers or other receipts the Company shall reimburse Executive for tolls and
reasonable business car phone charges. Executive shall submit vouchers or other
receipts once per calendar month and shall be reimbursed by Company within 30
days of submission.
7. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
During the Term and for a period of two years thereafter:
<PAGE>
(a) Executive shall not, directly or indirectly, enter into or
participate (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee, principal or in any other
relationship or capacity) in any business operating or providing
services in the United States within any State in which the Company
or its affiliates are operating or providing services as of the date
of termination which is, or owns, manages or performs Internet
billing services, including without limitation as principal or on
behalf of others and the development or operation of any network to
accomplish same (a "Competing Entity").
(b) Company and Executive understand and agree that the scope and
duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to
protect the Company's legitimate business interests. Such covenants
shall survive the termination of Executive's employment except as
otherwise provided herein. The parties further agree that such
covenants shall be regarded as divisible and shall be operative as
to time and geographical area to the extent that they may be made so
and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder
shall not be affected. Executive hereby warrants to Company that
Executive's compliance with each of the restrictive covenants set
forth in this Agreement will not, upon the termination, of
Executive's employment with the Company for any reason whatsoever,
cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.
(c) Executive understands and agrees that, due to the highly competitive
nature of the Company's industry, the breach of any covenants set
out in this Section 8 will cause irreparable injury to the Company
for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal
court for any breach or threatened breach of Section 8. Nothing
herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had
been, an employee of or a consultant of the Company to leave the
employ of or terminate such person's relationship with the Company
or (ii) employ, hire, engage or be associated with, or endeavor to
entice away from the Company any such person, or any customer of the
Company or its affiliates or (iii) attempt to limit or interfere
with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.
(e) Executive shall not disparage the business reputation of the Company
(or its management team) or take any actions that are harmful to the
Company's goodwill with its customers, content providers, bandwidth
or other network infrastructure providers, vendors, employees, the
media or the public. Executive recognizes that such actions would
cause irreparable harm for which there is no adequate remedy at law
and that the Company may seek in state or federal court, and is
entitled to a temporary restraining order and to preliminary and
permanent
<PAGE>
injunctive relief in state or federal court to stop any such conduct
or statements for any breach or threatened breach of this Section
8(e) during the term of this Agreement and for a period of two years
thereafter.
(f) Company spends considerable amounts of time, money and effort in
developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are
reasonable and necessary in all respects to protect the goodwill,
trade secrets, confidential information, and business interests of
Company; (ii) are not oppressive to Executive; and (iii) do not
impose any greater restraint on Executive than is reasonably
necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.
(g) Executive acknowledges and agrees that promises made by the Company
in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment
to provide severance compensation in the event of the termination of
Executive's employment for reasons other than Cause (subject to
certain requirements on the part of Executive), constitute one form
of consideration for Executive's agreement to and compliance with
the restrictive covenants in this Agreement. Executive acknowledges
and agrees that Company's agreement to provide Executive with access
to Company's confidential and proprietary information is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
agreement to permit the use of the Company's goodwill with the
Company's customers, investors and content providers is a separate
form of consideration supporting the restrictive covenants in this
Agreement. Executive acknowledges and agrees that the Company's
commitment to providing Executive with unique skill development and
training is a separate form of consideration supporting the
restrictive covenants in this Agreement.
8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that as a result of Executive's
employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the
business of the Company and its affiliates, including, without
limitation, financial information, trade secrets, information
concerning the operations, sales, personnel, suppliers, customers,
costs, profits and pricing policies, "know how" and certain business
methodologies (the "Confidential Information").
(b) During the Term and thereafter, the Executive shall exercise all due
and diligent precautions to protect the integrity of the customer
lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes,
records, reports or other documents and any and all other materials
embodying any Confidential Information (the "Confidential
Materials") and, upon the Company's request in writing, Executive
shall immediately return to the Company all such Confidential
Materials (and copies thereof) then in Executive's possession or
control.
<PAGE>
(c) Executive shall not at any time, either during the Term of this
Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity
to obtain any Confidential Materials except (i) when required in the
course of performing Executive's duties hereunder, (ii) with the
Company's express written consent, (iii) where required to be
disclosed by court order, subpoena or other government process or
(iv) the Executive shall have no responsibility for the divulgence
of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, the Executive promptly, but
in no event more than 48 hours after learning of such subpoena,
court order or other governmental process, shall notify, by personal
delivery or by electronic means, confirmed by mail, the Company and,
at the Company's expense, Executive shall (x) take all reasonably
necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government
process and (y) permit the Company to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
(d) Upon termination of Executive's employment with the Company, the
Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which
Executive may then possess or have under Executive's control;
provided, however, that Executive shall be entitled to retain copies
of such documents reasonably necessary to document Executive's
financial relationship (both past and future) with the Company.
(e) The Executive acknowledges that (i) any breach of the provisions of
these Sections 8 and 9 may cause substantial and irreparable harm to
the Company for which the Company would have no adequate remedy at
law and (ii) the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and its
affiliates.
9. REMEDIES.
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Sections 8 or 9, the Company shall have the
right and remedy:
(i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction or through arbitration
as provided herein; and
(ii) to require Executive to account for and to pay over the
Company all damages suffered by the Company (including
consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for
and pay over such damages to the Company;
(b) The Executive acknowledges that the services being rendered
hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause
substantial and irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In any
equitable proceeding to enforce the provisions hereof, the Company
shall not have to prove irreparable harm. (However, in a suit for
<PAGE>
damages Company shall be required to prove the amount of damages
actually sustained.)
(c) Each of the rights and remedies enumerated in Section 10 (a) shall
be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of
any other rights and remedies available to the Company under law or
equity.
(d) If any provision of Section 8 or 9 is held to be unenforceable
because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such
scope, duration, or area, or all of them, and such provision or
provisions shall then be enforceable in such modified form.
(e) The Company and Executive agree that any dispute or controversy
arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute
or controversy involving the formation, terms or construction of
this Agreement, regardless of kind or character, will be resolved
through binding arbitration held in Bexar County, Texas. The only
disputes not subject to mandatory, binding arbitration are requests
for injunctive relief. With respect to the arbitration of any
dispute or controversy, each party understands that:
(i) arbitration is final and binding on the parties;
(ii) each party is waiving its right to seek certain remedies in
court, including to right to a jury trial;
(iii) discovery in arbitration is different and more limited than
discovery in litigation; and
(iv) an arbitrator's award need not include factual findings or
legal reasoning, and any party's right to appeal or to seek
modification of a ruling by the arbitrator is strictly
limited.
Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five days
after receiving a written request to do so from the other party. If any party
fails to submit a dispute or controversy to arbitration as requested, then the
requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in any
court of competent jurisdiction.
Any party to this Agreement may bring an action including a summary or expedited
proceeding, to counsel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provision or ancillary
remedies, including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is
<PAGE>
entitled to recover, from the losing party, its legal fees and out-of-pocket
expenses incurred in connection with the defense of such legal proceedings.
10. INDEMNIFICATION.
(a) To the full extent allowed by law, the Company shall hold harmless
and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses
(including attorneys' fees) actually incurred by the Executive (net
of any related insurance proceeds or other amounts received by the
Executive or paid by or on behalf of the Company on the Executive's
behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual
or completed action, suit or proceeding, whether civil, criminal,
arbitral, administrative or investigative, or any appeal in such
action, suit or proceeding, to which the Executive was, is or is
threatened to be made a named defendant or respondent (a
"Proceeding"), because such person is or was a director or officer
of the Company, or is or was serving at the request of the Company
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary (an "Affiliate Executive") of
another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise
(each, a "Company Affiliate"). Upon authorization of indemnification
of the Executive by the Board of Directors in accordance with the
applicable provisions of the Nevada General Corporation Law (the
"NGCL"), the Executive shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a Claim (as
hereinafter defined). Thereafter, the Company shall have the burden
of proof to overcome the presumption that the Executive is so
entitled. Such presumption shall only be overcome by a judgment or
other final adjudication, after all appeals and all time for appeals
have expired ("Final Determination"), adverse to the Executive
establishing that such indemnification is not permitted hereunder or
by law. An actual determination by the Company (including its Board
of Directors, legal counsel, or its stockholders) that the Executive
has not met the applicable standard of conduct for indemnification
shall not be a defense to the action or create a presumption that
the Executive has not met the applicable standard of conduct. The
purchase, establishment or maintenance of any Indemnification
Arrangement shall not in any way diminish, restrict, limit or affect
the rights and obligations of the Company or of the Executive under
this Agreement except as expressly provided herein, and the
execution and delivery of this Agreement by the Company and the
Executive shall not in any way diminish, restrict, limit or affect
the Executive's right to indemnification from the Company or any
other party or parties under any other indemnification arrangement,
the Certificate of Incorporation or Bylaws of the Company, or the
NGCL.
(b) Subject only to the provisions of this Section 11(b), as long as the
Executive shall continue to serve as an officer of the Company and,
thereafter, as long as the Executive shall be subject to any
possible Proceeding by reason of the fact that the Executive was or
is an officer of the Company, the Company shall, unless no such
policies are available in any market, purchase and maintain in
effect for the benefit of the Executive one or more valid, binding
and enforceable policies (the "Insurance Policies") of directors'
and officers' liability insurance ("D&O
<PAGE>
Insurance") providing adequate liability coverage for the
Executive's acts as an officer of the Company. The Company shall
promptly notify the Executive of any lapse, amendment or failure to
renew said policy or policies or any provision thereof relating to
the extent or nature of coverage provided thereunder. In the event
the Company does not purchase and maintain in effect said policy or
policies of D&O Insurance pursuant to the provisions of this Section
11(b), the Company shall, to the full extent permitted by law, in
addition to and not in limitation of the other rights granted the
Executive under this Agreement, hold harmless and indemnify the
Executive to the full extent of coverage which would otherwise have
been provided for the benefit of the Executive pursuant to the
Insurance Policies.
(c) The Executive shall have the right to receive from the Company on
demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all
expenses payable by the Company pursuant to the terms of this
Agreement as corresponding amounts are expended or incurred by the
Executive in connection with such Proceeding or otherwise expended
or incurred by the Executive (such amounts so expended or incurred
being referred to as "Advanced Amounts"). In making any claim for
payment by the Company of any expenses, including any Advanced
Amount, pursuant to this Agreement, the Executive shall submit to
the Company a written request for payment (a "Claim"), which
includes a schedule setting forth in reasonable detail the dollar
amount expended (or incurred or expected to be expended or
incurred). Each item on such schedule shall be supported by the
bill, agreement or other documentation relating thereto, a copy of
which shall be appended to the schedule as an exhibit.
Where the Executive is requesting Advanced Amounts, the Executive
must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law
for indemnification, and (ii) a written undertaking to repay such
Advanced Amounts if a Final Determination is made that the Executive
is not entitled to indemnification hereunder.
(d) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the
Executive of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provisions of any state
statutory law or common law.
(e) All agreements and obligations of the Company contained herein shall
continue during the period the Executive is an officer of the
Company and shall continue thereafter so long as the Executive shall
be subject to any possible Proceeding by reason of the fact that the
Executive was an officer of the Company.
(f) Promptly after receipt by the Executive of notice of the
commencement of any Proceeding, the Executive shall, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but
failure to so notify the Company will not relieve the Company from
any liability which it may have to the Executive. With respect to
any such Proceeding:
<PAGE>
(i) The Company shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Executive, the
Company shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Company shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Executive
without the Executive's prior written consent. The Executive
shall not settle any Proceeding with respect to which the
Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the
Executive unreasonably withhold consent to any proposed
settlement.
11. NOTICE.
Any notice required hereunder shall (a) be delivered by hand or (b) sent by
registered or certified mail addressed to the other party hereto at its address
set forth above for Company and on Item 1 of the Schedule for Executive or at
such other address as notice thereof shall have been given in accordance with
the provisions of this Section 12. Any such notice shall become effective (i) if
mailed, on the date indicated on the receipt or if not accepted, the date
indicated that delivery was attempted, and (ii) in the case of delivery by hand,
upon delivery or attempted delivery as shown on the records of the deliveries.
12. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement which is
executed by both parties to this Agreement. Any waiver of any breach of this
Agreement shall not be construed to be a continuing waiver or consent to any
subsequent breach by any party hereto.
13. SEVERABILITY.
In the event of the invalidity or unenforceability of any one or more provisions
of this Agreement, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall be deemed to remain in full force and effect.
14. ASSIGNMENT; BINDING EFFECT.
This Agreement is not assignable by Executive or the Company without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Executive and the Company and their successors
and assigns. It is agreed that in the event of the termination under this
Agreement for any reason, except as expressly provided in this Agreement, all
salary and benefits shall cease as of the date of termination provided that all
accrued salary, bonus and expenses shall be paid to Executive or Executive's
successors, assigns, estate or legal representative as the case may be.
15. SECTION HEADINGS.
<PAGE>
The Section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
16. GOVERNING LAW; VENUE.
This Agreement shall be construed and governed in accordance with the laws of
the State of Texas. The parties hereto agree that any actions or proceedings
instituted to enforce rights hereunder shall be initiated in Bexar County,
Texas.
17. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instruments.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
"Company"
BILLSERV.COM INC.
By:
- -------------------------------------
Name:
Title: CFO
"EXECUTIVE"
- -----------------------------------------
Name:
<PAGE>
SCHEDULE 1
EMPLOYMENT CONTRACT
1. Executive: Randy Kauftheil
2. Position: Vice President-Business Development
3. Duties: Management, sales, operations and administration as
appropriate for the Vice President-Business Development of the
Company.
SCHEDULE 4(A)(I)
100,000 per annum, plus 2% of gross margin on all product and
service lines (gross margin = selling price minus all direct
costs), and an additional 8% for sales that are made directly
by Executive that are not subject to commissions to any other
party.
<PAGE>
SCHEDULE 1
EMPLOYMENT CONTRACT
SCHEDULE 4(B)
BONUS: Not to exceed 40% of the then-current annual salary, as
authorized by the Board of Directors.
EXHIBIT 12
CONSULTING AGREEMENT
THIS AGREEMENT dated for reference November 1, 1998
BETWEEN:
RICHARD N. JEFFS, JAMES R. KING AND ROBERT D. SMITH,
of Suite 420, 1090 West Pender Street, Vancouver, B.C., V6E 2N7
(the "Consulting Group")
AND:
BILLSERV.COM, INC.
of Suite 100, 14607 San Pedro Avenue, San Antonio, Texas, 78233
(the "Company")
WHEREAS the Consulting Group has agreed to provide financing, public
relations, advertising and investor relations services to the Company, IN
CONSIDERATION of the following mutual promises, the parties agree that:
1. ENGAGEMENT. The Company engages the Consulting Group to provide the services
described in section 2 of this Agreement and the Consulting Group accepts the
engagement.
2. SERVICES. The Consulting Group will provide the following services
(collectively the "Services") to the Company during the Term.
(A) FINANCING SERVICES
The Consulting Group will introduce the Company to institutional
investors, lending institutions and high net worth individual investors
and will assist in negotiating the terms of debt, equity or convertible
debt financings as required by the Company.
(B) PUBLIC RELATIONS SERVICES
The Consulting Group will design and implement a public relations program
for the Company to broaden exposure to the Company's products and
services. The Consulting
<PAGE>
Page 2 of 5
Group may retain the services of qualified professional public relations
firms or persons to assist with or to provide the required services.
(C) INVESTOR RELATIONS SERVICES
The Consulting Group will design and implement an investor relations
program to broaden the Company's exposure to financial industry analysts,
financial institutions, brokerage firms, individual brokers and the
investing public. The Consulting Group may retain a qualified professional
investor relations firm to assist with or to provide the required
services.
(D) ADVERTISING SERVICES
The Consulting Group will develop an advertising strategy for the Company
which may involve electronic, print or broadcast advertising to promote
the development and marketing of the Company's products and services. The
Consulting Group may retain the services of a qualified professional
advertising firm to assist with or to provide the required services.
3. PROVISION OF SERVICES. The Consulting Group will provide the Services upon
the terms and conditions contained in this Agreement and will provide a monthly
written report describing its activities for each month. The Company
acknowledges that the Consulting Group maintains similar consulting
relationships with other public and private companies. All costs associated with
the Consulting Group's delivery of the Services will be borne by the Consulting
Group.
4. COVENANTS OF THE COMPANY
(1) The Company will provide administrative, technical and managerial
support to the Consulting Group in the delivery of the Services. The
Company will ensure that members of its executive and management
teams designated by the Consulting
<PAGE>
Page 3 of 5
Group are available to meet with members of the Consulting Group or
agents of Consulting Group as required to provide the Services.
(2) The Company will provide all corporate information, documentation
and material required by the Consulting Group in the delivery of the
Services.
5. TERM. The term of this Agreement (the "Term") commences on November 1, 1998
and ends October 31, 1999.
6. REMUNERATION. The Company will pay the Consulting Group $1,200,000 (the
"Remuneration Proceeds") during the Term of this Agreement. The Remuneration
Proceeds will be raised by the Company through a financing under Regulation S of
the Securities and Exchange Act of 1933 (the "Reg S Financing"). The
Remuneration Proceeds will be paid into trust with Jeffs & Company, Barristers
and Solicitors on behalf of the Consulting Group immediately upon completion of
the Reg S Financing. The Consulting Group will be entitled to receive $750,000
of the Remuneration Proceeds within three months of receipt of the Remuneration
Proceeds in trust. The balance of the Remuneration Proceeds will be paid out to
the Consulting Group over the balance of the term of this Agreement as accounts
for services are rendered to the Company by the Consulting Group. The Consulting
Group will simultaneously submit invoices to the Company and to Jeffs & Company
for services rendered under this Agreement. Jeffs & Company shall automatically
make payments to the Consulting Group upon receipt of copies of the Consulting
Group's invoices for services rendered to the Company.
7. EXPENSES. The Company will pay all of its own costs associated with travel
and attendance at meetings specifically organized by the Consulting Group to
raise financing for the Company.
8. DIRECTION. The Consulting Group shall report to the C.E.O. of the Company.
9. TERMINATION. Either party may terminate this Agreement on 10 days written
notice If the Company terminates this Agreement, the unpaid balance of the
Remuneration
<PAGE>
Page 4 of 5
Proceeds will become due and payable to the Consulting Group. If the Consulting
Group terminates this Agreement, the Consulting Group will forego the unpaid
balance of the Remuneration Proceeds.
10. CURRENCY. All monetary amounts expressed in this Agreement and all payments
made will be in U.S. dollars.
11. NOTICES. Any notice or other communication required or permitted to be given
will be in writing and will be deemed to have been given if delivered by hand,
courier or if faxed to the following facsimile numbers:
If to the Company:
billserv.com, Inc.
Suite 100
14607 San Pedro Avenue
San Antonio, Texas 78233
Attention: Mr. Michael Long
Facsimile No.: (210)402-5155
If to the Consulting Group:
Mr. Richard N. Jeffs
Mr. James R. King
Mr. Robert D. Smith
Suite 420
1090 West Pender Street
Vancouver, B.C.
V6E 2N7
Facsimile No.: (604)682-6509
12. GOVERNING LAW. This Agreement will be governed by the laws and adjudicated
by the courts of the Province of British Columbia.
13. ASSIGNMENT. The Consulting Group may assign its interest in this Agreement
to a company formed for the purpose of providing the Services.
<PAGE>
Page 5 of 5
14. ENUREMENT. This Agreement enures to the benefit of and is binding upon the
parties and their respective successors and permitted assigns.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all previous agreements, negotiations, and
discussions between the parties. This Agreement may only be amended or varied by
written agreement executed by all of the parties.
16. COUNTERPARTS. This Agreement may be executed in counterparts and/or by
facsimile, each of which will constitute an original and all counterparts will
together constitute one agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of
the date of reference of this Agreement.
BILLSERV.COM, INC.
Per:___________________________________
Authorized Signatory
___________________________________ ________________________________
Richard N. Jeffs Witness
___________________________________ ________________________________
James R. King Witness
___________________________________ ________________________________
Robert D. Smith Witness
BUSINESS DEVELOPMENT AGREEMENT
This Business Development Agreement (the "Agreement") is dated May 7, 1999,
by and between billserv.com, Inc. ("billserv.com) and Southwest Business
Corp. ("SWBC").
RECITALS
1. billserv.com, a corporation in the business of Electronic Bill Presentment
and Payment ("EBPP"), desires to increase its sales force and sales
channels with the assistance of SWBC pursuant to the terms and conditions
set forth in this Agreement.
2. SWBC, a corporation with an established business base, sales force and
sales channels, desires to assist billserv.com in increasing its sales
force and sales channels pursuant to the terms and conditions set forth in
this Agreement.
AGREEMENT
1. SERVICES PROVIDED BY SWBC:
a. Support billserv.com in its business development of EBPP.
b. Provide leads and sales opportunities through SWBC's customer base
and contacts.
c. Supply sales and marketing personnel at training to be provided
by billserv.com at reasonably scheduled times and intervals.
d. Provide monthly status report to billserv.com regarding current
business developments.
e. Supervise and implement the Independent Sales Agreement, in the form of
Exhibit A, attached hereto and incorporated herein. SWBC will be the
Agent in the Independent Sales Agreement and will implement the
agreement through its sales force.
2. COMPENSATION FOR SWBC SERVICES:
billserv.com shall issue to SWBC a stock warrant to purchase 250,000
shares of billserv.com common stock at the closing price on May 7, 1999.
The term of the warrant shall be three (3) years. The warrant shall be
non-transferable. The Warrant will be in the form of Exhibit B,
incorporated herein by reference.
The shares of billserv.com common stock underlying the warrant shall vest
and be exercisable depending on the number and size of billing customers
<PAGE>
secured by SWBC, and depending on whether such billing customers are
secured in the 1999, 2000 or 2001-2002. The option to purchase the shares
shall vest and be exercisable according to the following schedule:
Options vested/ea new customer
# bills/mo ----------------------------------
from to 1999 2000 2001 FF
----------------------------------
50,000 150,000 1000 800 400
151,000 500,000 2000 1600 800
500,001 1,000,000 3000 2400 1200
1,000,001 2,000,000 6000 4800 2400
Examples of various hypothetical vesting schedules are set forth in
Exhibit C.
The minimum acceptable terms for a biller agreement will include a three
(3) year term, a minimum $10,000 implementation fee, and a minimum of
50,000 paper bills per month. A sample Internet Billing Services Agreement
is attached hereto as Exhibit D.
3. ADDITIONAL BONUS COMPENSATION:
In the event SWBC earns vesting rights to all of the 250,000 shares of the
warrant before December 31, 1999, then billserv.com will issue a second
warrant to SWBC in the amount of 250,000 shares. This second warrant will
be issued on terms similar to the first warrant and will have an exercise
price at the then-current fair market value of billserv.com's common
stock.
In the event SWBC earns vesting rights to all of the 250,000 shares of the
first warrant before December 31, 2000, then billserv.com will issue a
second warrant to SWBC in the amount of 125,000 shares. This second
warrant will be issued on terms similar to the first warrant and will have
an exercise price at the then-current fair market value of billserv.com's
common stock.
4. NO WARRANTIES: BILLSERV.COM MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SERVICES PROVIDED HEREUNDER OR PURSUANT TO THE INTERNET
BILLING SERVICES AGREEMENT AND EXPRESSLY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY, DESCRIPTION OR FITNESS FOR ANY PARTICULAR PURPOSE OR
FUNCTION.
<PAGE>
5. WAIVER OF LIABILITY: SWBC agrees that billserv.com shall in no event be
liable for any loss, expense or damage for (i) loss of revenue, profits,
savings, business or goodwill, and (ii) exemplary, proximate,
consequential, or incidental damages and expenses of any type or nature on
account of any breach or default hereunder by billserv.com or on account
of the use or non-use of Internet billing services by customers.
6. Indemnity: SWBC shall indemnify and hold harmless billserv.com, its
stockholders, officers, directors, employees and agents from any and all
loss, cost, damage, expense or liability, including, without limitation,
court costs and reasonable attorneys' fees arising out of, in whole or in
part, directly or indirectly, claims made by third parties arising out of
this Agreement, except when caused by the negligence or gross negligence
of billserv.com or the violation of any applicable law or governmental
regulation by billserv.com.
Billserv.com shall indemnify and hold harmless SWBC, its stockholders,
officers, directors, employees and agents from any and all loss, cost,
damage, expense or liability, including, without limitation, court costs
and reasonable attorneys' fees arising out of, in whole or in part,
directly or indirectly, claims made by third parties arising out of this
Agreement, except when caused by the negligence or gross negligence of
SWBC or the violation of any applicable law or governmental regulation by
SWBC.
7. LEGAL COMPLIANCE: This Agreement is made expressly subject to all present
and future valid orders and regulations of any regulatory body having
jurisdiction over the subject matter hereof and to the laws of the United
States of America, any of its states, or any foreign governmental agency
having jurisdiction. In the event this Agreement, or any of its
provisions, shall be found contrary to or in conflict with any such order,
rule, regulation or law, this Agreement shall be deemed modified to the
extent necessary to comply with any such order, rule, regulation or law
and shall be modified in such a way as is consistent with the form, intent
and purpose of this Agreement.
8. NO AGENCY: Except as provided in this Agreement, neither party is
authorized to act as an agent for, or legal representative of, the other
party and neither party shall have the authority to assume or create any
obligation on behalf of, in the name of, or binding upon the other party.
<PAGE>
9. NO WAIVER: The failure of either party to enforce or insist upon
compliance with any of the provisions of this Agreement or the waiver
thereof, in any instance, shall not be construed as a general waiver or
relinquishment of any other provision of this Agreement.
10. BINDING EFFECT: This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns. Neither party shall voluntarily or by operation of law assign,
transfer, license, or otherwise transfer all or any part of its right,
duties or other interests in this Agreement or the proceeds thereof
(collectively, "Assignment"), without the other party's prior written
consent, which consent shall not be unreasonably withheld or delayed. Any
attempt to make an Assignment in violation of this provision shall be null
and void. SWBC shall provide written notice to billserv.com of any
material change in ownership of SWBC. SWBC's failure to comply with the
assignment provisions, as contained in this paragraph, shall give
billserv.com, at its sole discretion, the option to either accept SWBC's
assignee or terminate this Agreement. No assignment shall release SWBC of
its obligations hereunder.
11. AMENDMENT: This Agreement may not be amended except by an instrument in
writing, executed by the parties. No modification or amendment hereto
shall be effected by the acknowledgement or acceptance by either party of
any purchaser order, sales acknowledgment or other similar form from the
other party.
12. ENTIRE AGREEMENT: This Agreement (including its exhibits) supersedes and
merges all prior agreements, promises, understandings, statements,
representations, warranties, indemnities and covenants and all inducements
to the making of this Agreement relied upon by either party herein,
whether written or oral, and embodies the parties' complete and entire
agreement with respect to the subject matter hereof. No statement or
agreement, oral or written, made before the execution of this Agreement
shall vary or modify the written terms hereof in any way whatsoever.
13. INTERPRETATION: This Agreement shall be construed in accordance with its
fair meaning and not for or against either party on account of which party
drafted this Agreement.
<PAGE>
14. THIRD PARTY BENEFICIARIES: This Agreement has been made and is made solely
for the benefit of the billserv.com and SWBC, and their respective
successors and permitted assigns. Nothing in this Agreement is intended to
confer any rights/remedies under or by reason of this Agreement on any
third party.
15. SEVERABILITY: If any term or provision of this Agreement is determined to
be illegal, unenforceable, or invalid in whole or in part for any reason,
such illegal, unenforceable, or invalid provisions or part(s) thereof
shall be stricken from this Agreement and such provision shall not affect
the legality, enforceability, or validity of the remainder of this
Agreement. If any provision or part thereof of this Agreement is stricken
in accordance with the provisions of this section, then the stricken
provision shall be replaced, to the extent possible, with a legal,
enforceable, and valid provision that is as similar in tenor to the
stricken provision as is legally possible.
16. REPRESENTATION OF AUTHORITY: Each party represents and warrants to the
other that the execution and delivery of this Agreement and the
performance of such party's obligations hereunder have been duly
authorized and that the Agreement is a valid and legal agreement binding
on such parties and enforceable in accordance with its terms.
17. FURTHER ASSURANCES: The parties shall at their own cost and expense
execute and deliver such further documents and instruments and shall take
such other actions as may be reasonably required or appropriate to carry
out the intent and purposes of this Agreement.
18. GOVERNING LAW, VENUE AND ATTORNEYS' FEES: This Agreement shall be in all
respects governed by and construed and enforced in accordance with the
laws of the State of Texas, including all matters of construction,
validity and performance. Any action to enforce or interpret the terms of
this Agreement shall be instituted and maintained in the District Courts
of Bexar County, Texas. SWBC hereby consents to the jurisdiction of such
court and waives any objections to such jurisdiction. In any action or
proceeding arising out of this Agreement, the party prevailing in such
action shall be entitled to recover its reasonable attorneys' fees and
costs.
19. COUNTERPARTS: This Agreement may be executed in several counterparts, each
of which shall constitute an original, but all of which shall constitute
one and the same instrument.
<PAGE>
20. NOTICES: All notices, demands, requests and other communications required
or permitted hereunder shall be in writing and shall be deemed to be
delivered when actually received, or, if earlier and regardless of whether
actually received on the day following the date of mailing, first class
mail, duly addressed and with proper postage to the last known place of
business of either party.
21. CONFIDENTIAL INFORMATION: As used herein, "Confidential Information" shall
mean (a) proprietary information, (b) information marked or designated as
confidential, (c) information otherwise disclosed in a manner consistent
with its confidential nature, (d) information of one party, whether or not
in written form and whether or not designated as confidential, that is
known or should reasonably be known by the other party as being treated as
confidential, and (e) information submitted by one party to the second
party where the second party knows or reasonably should know that the
first party is obligated to keep the information confidential. The parties
hereto expressly recognize and acknowledge that, as a result of the
provision of the services pursuant to this Agreement, Confidential
Information which may be proprietary to each party must or may be
disclosed to the other. Each party hereby agrees that it will make no
disclosure of Confidential Information provided under this Agreement
without the prior written consent of the other party. Additionally, each
party shall restrict disclosure of said information to its own employees,
agents or independent contractors to whom disclosure is necessary and who
have agreed to be bound by the obligations of confidentiality hereunder.
Such employees, agents or independent contractors shall use reasonable
care, but not less care than they use with respect to their own
information of like character, to prevent disclosure of any Confidential
Information. Nothing contained in this Agreement shall be considered as
granting or conferring rights by license or otherwise in any Confidential
Information disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
BILLSERV.COM, INC. SOUTHWESTERN BUSINESS CORP.
BY:/s/ MICHAEL R. LONG BY: /s/ GARY DUDLEY
NAME: Michael R. Long NAME: Gary Dudley
TITLE: Chief Executive Officer TITLE: President
<PAGE>
EXHIBIT A
INDEPENDENT SALES AGENT AGREEMENT
This agreement is made on ___________________ by and between Southwest Business
Corp., Independent Sales Agent (hereinafter referred to as Agent) located at
9311 San Pedro Ave., San Antonio, TX 78216 and billserv.com, Inc., a Nevada
corporation with offices at 14607 San Pedro Ave., Suite 100, San Antonio, TX
78232 (hereinafter referred to as billserv) under the following provisions. This
replaces any prior Independent Contractor or Sales Agent Agreement. The Agent
agrees to contract for services as an Independent Sales Agent to billserv as
follows:
1. GENERAL
1.1 THE AGENT WILL:
o Be responsible for payment of any federal and state payroll and
self-employment taxes attributable to payments received for
services performed for billserv and will not be considered an
employee for federal or state payroll tax purposes.
o Be responsible for payment and provide certificate of all
necessary insurance.
o Not work under any supervision by billserv and will set its own
work hours and routine.
o Provide its own materials, tools, and equipment, and will expect
no reimbursement for any out-of-pocket expenses incurred in the
performance of services, unless authorized in writing by special
prior arrangement for specific sales and marketing tasks.
1.2 INVOLVEMENT
o Level One - Agent agrees to remain involved with the new customers
following contract signing through the final implementation of the
initially contracted work effort. The intent of this is to ensure that
customer satisfaction is maintained at the highest possible level through
high quality communication. The Agent will attend and participate in all
project status meetings and key presentations.
o Level Two - Agent will have no regular involvement with the new customers
following contract signing through the final implementation of the
initially contracted work effort. The Agent will attend and participate in
some meetings and presentations if requested by billserv or the customer.
1.3 RECORD KEEPING. Agent will record a prospect form, which will be
completed for each new prospective customer. (See Attachment A). The
form will be completed by Agent and forwarded to billserv for
acceptance. The accepted copy of the form will be returned to Agent
within 15 business days. If the prospective customer is one that is
currently engaged with billserv, Agent will be notified and no
commission will be paid to the Agent for that customer. The Agent
involvement level (one or two) will be noted on the Prospect Form.
1.4 BILLSERV WILL:
o Keep Agent apprised of all project status meetings and
presentations as referenced in section 1.2 and will not withhold
information regarding any contract with which Agent is involved.
o Forward to Agent copies of all relevant invoices, documents, and
correspondence sent to customer.
2. PAYMENT AND TERMS
2.1 COMMISSION. Payment will be made at a rate of four-percent (4%) of the
Gross Margin on billserv Service Fees charged to a customer that was
the direct result of Agent's Level One involvement. Payment will be
made at a rate of two-percent (2%) of the Gross Margin on billserv
Service Fees charged to a customer that was the direct result of
Agent's Level Two involvement. Any subsequent sales between billserv
and customer shall not require a payment to the Agent unless the Agent
has a Level One or Level Two involvement directly resulting in the
subsequent sale other than the initial involvement. Commission will be
paid within 30 days after the end of the month for which there was
eligible receipts.
2.2 TERM. The initial term of this agreement shall be for one year
commencing on the date first set forth above. Thereafter, renewal of
the term of this agreement will be automatic unless written notice of
the termination is received by either party at least 30 days prior to
expiration. This agreement shall continue in effect as set forth
herein unless otherwise modified or terminated.
2.3 TERMINATION. Either party may terminate this agreement with or without
cause upon 30 days prior written notice without liability of any kind
to the other party. If the agreement is so terminated, all commissions
otherwise due to Agent will be paid to Agent for a period of twelve
(12) months from the termination date.
<PAGE>
billserv.com may terminate this agreement immediately without
liability if Agent engages in any act which billserv.com determines to
be unethical, defamatory or subversive to billserv.com.
3. GENERAL PROVISIONS
3.1 TRADEMARKS AND TRADE NAMES. The Agent is hereby granted permission to
use, during the term of this agreement, the trademarks and trade names
used by billserv in the connection with the services covered by this
agreement. Such permission is expressly limited to uses by the Agent
necessary to the performance of the Agent's obligations under this
agreement. The Agent hereby acknowledges billserv's exclusive
ownership of such marks and names. Reproductions of the billserv
trademarks, logos, symbols, etc., shall be true photographic
reproductions.
3.2 LABELS. The Agent will not remove, make or permit any alterations in
any labels or other identifying markings placed by billserv on any of
its services covered by this agreement.
3.3 NO JOINT VENTURE. This agreement is not intended to create, nor shall
it be construed as, a joint venture, association, partnership,
franchise or other form of business or relationship. Neither party
shall have nor hold itself out as having any right or power or
authority to assume, create, or incur any expense, liability or
obligation, expressed or implied, on behalf of the other party, except
as expressly provided herein.
NON-DISCLOSURE OF INFORMATION
3.4 CONFIDENTIALITY. Any document, customer information or other
information disclosed by one party to the other that the disclosing
party considers proprietary, as defined by a non-disclosure agreement,
shall not be disclosed without prior written agreement by the
disclosing party. Such information may include, but is not limited to,
engineering, hardware, software, or other information that is not
generally know relating to the products and/or services, and other
information concerning financial, accounting or marketing reports,
analysis, forecasts, predictions or projections relating to the
products and services and/or the business of either billserv or the
Agent.
3.5 DISCLOSURE OF INFORMATION. In the event a party to whom information
has been disclosed proposes to disclose that information to an outside
Agent or agent, it shall obtain the consent of the party from whom the
information was originally received and arrange for the execution by
the Agent or agent of a nondisclosure agreement which has been
approved by the party from whom the information was originally
received. Such approval shall not be unreasonably withheld.
3.6 RETURN OF INFORMATION. The information shall be deemed the property of
the disclosing party and, upon request or by termination of this
agreement, the other party will return all information that is in
tangible form to the disclosing party.
3.7 DISCLOSURE TO AGENTS. Except as specifically provided in this
agreement, the parties agree not to provide information to any of
their affiliated companies, without the prior written consent of the
party disclosing the information.
3.8 SURVIVAL. The obligations of the parties relative to the protection,
disclosure, and return and/or destruction of proprietary information,
shall survive and continue beyond the expiration of the agreement for
a period of three (3) years.
Agent billserv.com, Inc.
/s/ GARY DUDLEY /s/ MICHAEL R. LONG
Authorized Signature Authorized Signature
Gary Dudley, President Michael R. Long, CEO
Printed Name & Title Printed Name & Title
5/2/99 May 7, 1999
Date Date
<PAGE>
Attachment A
PROSPECT FORM
Customer: [ ] New [ ] Update [ ] Extension Prospect Form Date:____________
Prospect No: __________________
Company Name: __________________________________________________________
Contact Person: ________________________________________________________
Company Address: _______________________________________________________
_______________________________________________________
_______________________________________________________
Company Phone: ___________________ Contact Person Phone: ___________________
Fax: ____________________________ Email: ______________________
Prospect Needs Specifications: ______________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Probability of Sale: ________% Estimated Date of Contract Signing: _________
Expected Involvement Level: [ ] One [ ] Two
Submitted by: Accepted by:
____________________________________ billserv.com, Inc.
Agent
____________________________________ ___________________________________
Signed by Signed by
____________________________________ ___________________________________
Print Name & Title Print Name & Title
____________________________________ ___________________________________
Date Date
_____________________________________________________________________________
billserv Comments:___________________________________________________________
_____________________________________________________________________________
This form shall remain in force for a period of 180 days from date of signing. A
new form must be submitted to apply for an extension.
<PAGE>
EXHIBIT B
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER APPLICABLE STATE SECURITIES
LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH
RESPECT THERETO UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF billserv.com Inc.'s COUNSEL THAT SUCH
REGISTRATION AND QUALIFICATION IS NOT REQUIRED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM.
NOTWITHSTANDING THE FOREGOING, THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
ARE SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN THAT CERTAIN SUBSCRIPTION
AND PURCHASE AGREEMENT BETWEEN THE HOLDER HEREOF AND THE COMPANY, A COPY OF
WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICE.
billserv.com, Inc.
STOCK PURCHASE WARRANT
COMMON STOCK
Warrant No. ______________ No. of Shares to be
Determined at Exercise
This certifies that, for value received,
---------------------
is entitled, subject to the terms and conditions hereinafter set forth, to
purchase shares of common stock ("Common Stock"), par value $0.001 per share, of
billserv.com, Inc., a Nevada corporation, and its successors or assigns (the
"Company"), such number of shares being subject to adjustment upon the
occurrence of the contingencies set forth in this Warrant. The purchase price
payable upon the exercise of this Warrant shall be fixed in accordance with and
subject to adjustments upon the occurrence of the contingencies set forth in
this Warrant (the "Warrant Price").
Upon delivery of this Warrant duly executed, together with payment of the
Warrant Price, at the principal office of the Company at 14607 San Pedro Ave.,
Suite 100, San Antonio, Texas 778233, or at such other address as the Company
may designate by notice in writing to the holder hereof, the holder of this
Warrant shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased. All shares of Common Stock which may be
issued upon the exercise of this Warrant have been duly authorized and reserved
for issuance, and will, upon such issuance, be fully paid and nonassessable and
free from all taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. EXERCISE OF WARRANT. Subject to the terms of the Business Development
Agreement by and between billserv.com and Southwest Business Corp. dated May __,
1999, this Warrant may be exercised at any time within three (3) years after the
Common Stock or any other securities of the Company are offered in any way for
sale to the public on any recognized market for the sale of such securities. In
case of any partial exercise of this Warrant, the Company shall execute and
deliver a new Warrant of like tenor and date for the balance of the shares of
Common Stock purchasable hereunder.
2. THE WARRANT PRICE. The purchase price payable upon exercise of this
Warrant shall be any amount up to Two Million Five HundredThousand and No/100
Dollars ($2,500,000.00) to be applied per share at one
<PAGE>
hundred and ten percent (110%) of the price per share at which the Common Stock
is initially offered upon the recognized market described in paragraph 1 above.
3. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION OR MERGER. If at any
time while this Warrant is outstanding there shall be any reorganization or
reclassification of the Common Stock of the Company, or any consolidation or
merger of the Company with another corporation, the holder of this Warrant shall
thereafter be entitled to receive, at the Holder's sole option, during the term
hereof and upon payment of the Warrant Price, the number of shares of stock or
other securities or property of the Company or of the successor corporation
resulting from such consolidation or merger, as the case may be, to which a
holder of the Common Stock of the Company, deliverable upon the exercise of this
Warrant, would have been entitled in connection with such reorganization,
reclassification, consolidation or merger; and in any such case, appropriate
adjustment (as determined by agreement of the holder and the Board of Directors
of the Company) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holder of this
Warrant to the end that the provisions set forth herein (including the
adjustment of the Warrant Price and the number of shares issuable upon the
exercise of this Warrant) shall thereafter be applicable, as near as reasonably
may be, in relation to any shares or other property thereafter deliverable upon
the exercise hereof.
4. CHARGES, TAXES AND EXPENSES. The issuance of certificates for shares of
Common Stock upon any exercise of this Warrant shall be made without charge to
the holder hereof for any tax or other expense in respect of the issuance of
such certificates, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of, or in such name or names
as may be directed by, the holder of this Warrant; provided, however, that in
the event that certificates for shares of Common Stock are to be issued in a
name other than the name of the holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by an instrument of transfer in
form satisfactory to the Company, duly executed by the holder hereof in person
or by an attorney duly authorized in writing, and the holder shall pay all stock
transfer taxes payable upon issuance of such stock certificate.
5. CERTAIN OBLIGATIONS OF THE COMPANY. The Company agrees that it will
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Warrant Price.
6. MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or assigns of the Company and of Southwest Business
Corp.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose.
(c) This Warrant may be divided into separate Warrants covering one share
of the Common Stock or any whole multiple thereof, for the total number of
shares of Common Stock then subject to this Warrant at any time, or from time to
time, upon the request of the holder of this Warrant and the surrender of the
same to the Company for such purpose. Such subdivided Warrants shall be issued
promptly by the Company following any such request and shall be of the same form
and tenor as this Warrant, except for any requested change in the name of the
registered holder stated herein.
(d) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the holder hereof in person or by duly authorized
attorney on the books of the Company upon surrender of this Warrant, properly
endorsed, to the Company. The Company may deem and treat the registered holder
of this Warrant at any time as the absolute owner hereof for all purposes and
shall not be affected by any notice to the contrary.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officers and its corporate seal to be affixed hereto.
Dated: _______________________
__________________________________
ATTEST:
By:_______________________________
Name:_____________________________
______________________________
Secretary Title:______________________________
12
<PAGE>
EXHIBIT C
VARIOUS HYPOTHETICAL VESTING SCHEDULES
HYPOTHETICALS TO BE PROVIDED UNDER SEPARATE COVER
13
