EMPLOYMENT
AGREEMENT
This Agreement,
dated as of December 1, 2006, is between Legacy Systems, Inc., a
California corporation ("Employer"), and Robert R Matthews
("Employee"). Employer and Employee agree to the
following terms and conditions of employment.
(a) Basic Term. Employer
shall employ Employee to render services to Employer in the
position and with the duties and responsibilities described in
Section 2 and except as set forth in Paragraph 19 for the period
(the "Period of Employment") commencing December 1, 2006 and ending
upon the earlier of (i) December 1, 2009 (the "Term Date"), as, and
to the extent, extended under Section 1(b); or (ii) the date upon
which the Period of Employment is terminated in accordance with
Section 4.
(b) Renewal. Subject to
Section 4, Employee's employment will be renewed automatically for
an additional one (1) year period (without any action by either
party) on the Term Date and on each anniversary thereof, unless one
party gives to the other written notice sixty (60) days in advance
of the beginning of any one-year renewal period that the Period of
Employment is to be terminated. Either party may elect
not to renew this Agreement, with or without cause, in which case
Section 4 and 5 will apply along with Employer’s obligations
under Section 3. Nothing stated in this Agreement
or represented orally or in writing to either party shall create an
obligation to renew this Agreement.
2. Position and
Responsibilities.
(a)
Position. Employee accepts employment with Employer as
Chief Executive Officer (CEO) and President. Employee
shall perform all services appropriate to such position, as well as
such other services as may be assigned by Employer’s Board of
Directors, and Employee has full responsibility for the overall
operation of Employer, subject to the direction of Employer's Board
of Directors. Employee shall have such additional
duties, responsibilities, and powers, subject to the review and
approval of the Board and shall carry out such policies and
directives and performs such acts and administrative functions and
duties as may be prescribed from time to time by the Board
including the following: (i) selecting, training, assigning,
evaluating, and managing subordinate personnel; (ii) performing
related responsibilities as required or directed by the
Board.
Employee shall
perform the services and manage the operations of Employer to the
very best of his ability and in compliance with the policies and
procedures set forth by the Board of Directors for the term of
Employee's employment. Subject to Section 2(b),
Employee shall devote his best efforts and full-time attention to
the performance of his duties. Employee shall be
expected to travel in reasonable amounts if necessary or advisable
in order to meet the obligations of his position.
(b) Other Activity. Except
as provided in this Section 2(b) or upon the prior written consent
of Employer, Employee (during the Period of Employment) shall not
(i) accept any other employment; or (ii) engage, directly or
indirectly, in any other business except as described below,
commercial, or professional activity (whether or not pursued for
pecuniary advantage) that is or may be competitive with Employer,
that might create a conflict of interest with Employer, or that
otherwise might interfere with the business of Employer, or any
Affiliate. An "Affiliate" shall mean any person or
entity that directly or indirectly controls, is controlled by, or
is under common control with Employer. Employee may sit
on Employer’s Board and any two Board of Directors of
companies who are not in competition with Employer, spend such time
as is customary for sitting on such boards, and devote such time as
a director as is reasonably required to meet his fiduciary duties.
Employee may sit on additional Boards only with the written consent
of a majority of the Board of Directors of
Employer. Under no circumstances will Employee spend
more than 10% of his time providing consulting services and sitting
on the Boards.
(c) Representations and
Warranties. Employee represents and warrants that his
execution of this Agreement, his employment with Employer, and the
performance of his proposed duties under this Agreement shall not
violate any obligations he may have to any former employer (or
other person or entity), including any obligations with respect to
proprietary or confidential information of any other person or
entity. Employee agrees that he will not use for the
benefit of, or disclose to, Employer any confidential information
belonging to any former employer or other entity unless he has
written permission from the employer or entity to do so (or unless
Employer has been granted such permission).
3. Compensation and
Benefits.
(a) Compensation. In
consideration of the services to be rendered under this Agreement,
Employer shall pay Employee as base compensation a salary of
$150,000 each year or Twelve Thousand Five Hundred Dollars
($12,500.00) per month, payable monthly, pursuant to the
Employer’s payroll procedures regularly established and as
they may be amended. The Employee’s base
salary shall be reviewed annually by the Board of Directors of
Employer.
(b) Benefits. Except as
otherwise provided in this Section, upon eligibility, Employee
shall be entitled to four (4) weeks of vacation, in addition to
approved holidays during each 12-month period earned pro-rata
throughout the year, in accordance with Employer’s standard
policies. As Employee becomes eligible, he shall have
the right to participate in and to receive benefits from all
present and future benefit plans adopted by Employer, specified in
Employer's policies and generally made available to similarly
situated employees of Employer. The amount and extent of
benefits to which Employee is entitled shall be governed by the
specific benefit plan, as amended. No statement
concerning benefits or compensation to which Employee is entitled
shall alter in any way the term of this Agreement, any renewal
thereof, or its termination.
(c) Medical,
Dental, Life and Disability Insurance. During the term
of this Agreement, the Corporation will pay all scheduled premiums
on the insurance and disability policies currently maintained by
the Employee and identified on Exhibit A attached
hereto.
(d) Expenses. Employer
shall reimburse Employee for reasonable travel and other business
expenses incurred by Employee in the performance of his duties, in
accordance with Employer's policies, as they may be amended in
Employer's sole discretion.
(e) Automobile. While
employed by Employer, the Employer shall pay reasonable related
costs of operating and maintaining a vehicle, and shall reimburse
the Employee for any other automobile related costs if paid by
Employee within ten days of the Employer’s receipt of an
itemized statement with respect thereto.
(f) Post-Termination
Payments. In the event of the involuntary termination by
the Employer of the Employee’s employment hereunder, under
the initial term or any renewal period, other than (a) termination
in the event of the death or disability of the Employee, or (b) for
cause pursuant to the Section 5, then the Employee shall be
entitled to post-termination payment equal to 100% of his base
salary at the time of such termination for a period of 36 months
minus the months actually employed and paid under the initial term,
and, for any renewal period, for a period of 12 months minus the
months actually employed and paid during such renewal
period. Post-termination payments shall be paid
monthly commencing the month after the month in which the
termination occurs.
(g) Change in Control
Benefits.
(a) If,
during the term of this Agreement, (x) there shall occur a Change
of Control of the Employer (as defined in Section 3(j)(b)), and (y)
the Employee is not employed by the Employer after the Change
of Control in a position of responsibility, with a level of
compensation at least as favorable as immediately prior to the
Change of Control, the Employee may terminate his employment
hereunder at any time during the term of this Agreement in which
case he shall be entitled to receive post-termination payments as
set forth in Section 3(i), including any bonuses, if
any. In addition, if during the term of this Agreement
there shall occur a Change of Control (as defined in Section
3(j)(b)) and the Employee’s employment is terminated
involuntarily by the person or persons who cause the Change of
Control, the Employee shall become entitled to receive the
post-termination payments as set forth in Section 3(i), including
any bonus, if any.
(b) For purposes
hereof, the term "Change of Control" shall be deemed to occur
upon:
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the sale of all
or substantially all of the Employer’s assets:
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a merger or
consolidation of Employer with one or more corporations or entities
as a result of which the Employer’s voting securities
outstanding immediately before such merger or consolidation
represent less than 50% of the combined voting power of
voting
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securities of
the Employer or the surviving entity outstanding immediately after
such merger or consolidation; or
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any
“person”, as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) or persons acting in concert (other
than Robert Matthews, Employee;) become the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act, or
any successor rule or regulation thereto as in effect from time to
time), directly or indirectly, of the Employer’s securities
representing 50% or more of the combined voting power of the
Employer’s then outstanding securities, whether pursuant to a
merger of the Employer in which the Employer is the surviving
corporation, an acquisition of securities or otherwise; provided,
however, that no Change in Control shall be deemed to occur as a
result of the issuance of securities to any person solely in
connection with a financing of the Employer.
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(C) All compensation and
comparable payments in any form to be paid to Employee under this
Agreement shall be less withholdings required by law.
4. Termination of
Employment.
(a) By Death. The Period
of Employment shall terminate automatically upon the death of
Employee. Employer shall pay to Employee's beneficiaries
or estate, as appropriate, any compensation then due and owing,
including payment for accrued unused vacation, expense
reimbursement, if any, and any other benefits provided hereunder,
including without limitation the exercisability of any exercisable
options held by the Employee. Thereafter, all
obligations of Employer under this Agreement shall
cease. Nothing in this Section shall affect any
entitlement of Employee's heirs to the benefits of any life
insurance plan or other applicable benefits.
(b) By Disability. If, by
reason of any physical or mental incapacity, Employee has been or
will be prevented from properly performing his duties under this
Agreement for more than sixty (60) consecutive business days in any
one (1) year period, then, to the extent permitted by law, Employer
may terminate the Period of Employment upon ten (10) days' advance
written notice. Termination by disability shall be
determined by a physician selected by the Board of
Directors. If such physician is unable to schedule an
appointment with Employee within ten days of physician’s
written request, the Board of Directors is authorized to determine
whether disability of Employee has occurred at its sole
discretion. Employer shall pay Employee all compensation
to which he is entitled up through the last business day of the
notice period, including payment for accrued unused vacation,
expense reimbursement, if any, and any other benefits provided
hereunder, including without limitation the exercisability of any
exercisable option held by the Employee; thereafter, all
obligations of Employer under this Agreement shall
cease. Nothing in this Section shall affect Employee's
rights under any applicable Employer disability plan.
(c) By Employer Not For
Cause. At any time, Employer may terminate Employee
without Cause (as defined below) by providing Employee sixty (60)
days' advance written notice. Employer shall have the
option, in its complete discretion, to terminate Employee at any
time prior to the end of such notice period, provided Employer pays
Employee all compensation and benefits due and owing, including
payment for accrued unused vacation, expense reimbursement, and any
other benefits through the last day actually worked, plus an amount
equal to the base salary Employee would have earned through the
balance of the above notice period and all post-termination
payments due as set forth in Sections 3(k); thereafter, all of
Employer's obligations under this Agreement shall cease.
(d) By Employer For
Cause. At any time, and upon ten days written
notification to Employee, and if curable and not cured within such
ten-day notification period, Employer may terminate Employee for
Cause. Employer shall pay Employee all compensation then
due and owing, including payment for accrued unused vacation,
expense reimbursement, if any, and any other benefits provided
hereunder, thereafter, all of Employer's obligations under this
Agreement shall cease. Termination shall be for "Cause"
if: (i) Employee acts in bad faith, which causes
material damage or potential material damage to the Employer, and
to the detriment of Employer; (ii) Employee refuses or fails to act
in accordance with any specific written direction or order of the
Board more than once; (iii) Employee exhibits in regard to his
employment material m
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