EMPLOYMENT
AGREEMENT
THIS AGREEMENT (the “Agreement”)
effective the first day of December 2001 entered into by and
between RICHARD WADE (“Executive”) and VERTICAL
COMPUTER SYSTEMS, INC., a Delaware corporation (“the
Company”) or any of its affiliates, with its principal place
of business at 6336 Wilshire Blvd. Los Angeles, California 90048.
This Agreement may be unilaterally transferred to an affiliate of
the Company, without economic detriment to the Employee.
BACKGROUND
A. The Company has been established for the
purpose of e-commerce development and related Internet business
operations;
B. The Company desires to employ Executive as
Chief Executive Officer and President and Executive desires to be
so employed and;
NOW, THEREFORE, the parties desire to
memorialize herein the terms and conditions of Executive’s
employment. In consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the
parties hereby acknowledge the receipt and sufficiency of which
hereto, the parties agree as follows:
Executive shall serve as Chief Executive Officer
and President upon the terms set forth in this Agreement. Executive
shall have the responsibilities inherent in this position and shall
report to the Board of Directors and Executive shall perform any
other duties reasonably required by Board of Directors.
Subject to the provisions of this Agreement, the
term of Executive’s employment under this Agreement shall
commence on December 1, 2001 and shall continue up to December31,
2004 (the “Initial Term”). This Agreement may be
renewed for an additional two (2) year term at Executive’s
option and the Board’s approval. However, the Executive shall
have the option to renew the agreement for two years provided the
Company achieves a minimum profitability of $5,000,000 in 2002 with
a 50% minimum increase in net profit in 2003 and 2004 respectively
upon the good faith concurrence of the Board in the achievement of
the performance criteria or validation of "profitability" by
independent auditors. Unless either party elects to terminate this
Agreement at the end of the initial or any renewal term by giving
the other party written notice of such election at least ninety
(90) days before the expiration of the then current term, this
Agreement shall be deemed to have been renewed for an additional
term of two (2 year commencing on the day after the expiration of
the then current term. Either party may elect not to renew this
Agreement with or without cause, in which case this Section 2 shall
govern Executive’s termination, and not Section 5. Upon
expiration of this Agreement after notice of non-renewal, Company
shall provide Executive all compensation and benefits to which
Executive is entitled through the date of termination and
thereafter Company’s obligation hereunder shall
cease.
Notwithstanding what is contained in this
agreement, the Executive will sign and abide by the employee
handbook and all other company’s policies.
3. Compensation and Bonus .
3.1 Salary . The Company shall pay Executive an annual base
salary of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) during the
term of Executive’s employment, payable in accordance with
the Company’s semi-monthly payroll disbursement cycle
(“Base Compensation”). Executive’s Base
Compensation shall be reviewed and increased each year during the
term of Executive’s employment, provided that the
Company’s performance criteria are achieved as set forth by
the Board each year; and
3.2 Bonus . Executive shall receive an annual bonus One
Hundred Twenty (120) days after the end of the Company’s
fiscal year from a pool equal to five (5) percent of the Company
taxable income from the federal tax return filed before
depreciation. Executive’s share of the bonus pool is equal to
the percentage of his annual base compensation to the total
combined annual base compensation of all executives of Company in
bonus pool;
3.3 Warrants. Executive will receive 20,000,000 warrants at a
strike price of $0.10 and 600,000 non-dilutable warrants at a
strike price of $0.10 piggyback registration rights in the form
attached. The Executive will be vested monthly in equal amounts
over three (3) years, so long as Executive remains employed by the
Company or as otherwise set forth herein in this
Agreement.
3.4 Service with the Company . During the term of this Agreement, Executive
shall perform such reasonable employment duties, commensurate with
Executive’s position, as the Board of Directors, shall, from
time to time, assign to Executive;
3.5 Performance of Duties . Executive shall serve the Company faithfully
and to the best of his ability and devote full business time,
attention, skill and effort exclusively to the performance of the
duties described in this Agreement. Executive shall comply with all
policies, procedures and budgets established by the Company in the
performance of his duties and responsibilities. During the Period
of Employment, (i) Executive’s working time, energy, skill
and best efforts shall be devoted to the performance of
Executive’s duties hereunder in a manner which will
faithfully and diligently further the business and interests of
Company; and (ii) Executive shall not accept any other employment,
or engage, directly or indirectly, in any other business,
commercial, or professional activity (whether or not providing
compensation) that is or may be competitive with Company or any
Affiliate that might create a conflict of interest with Company or
any Affiliate or that otherwise might interfere with the business
of Company or any Affiliate. Executive may engage in charitable,
civic, fraternal, professional and trade association activities
that do not interfere materially with Executive’s obligations
to Company;
3.6 Vacation and Sick Leave . Executive will be entitled to Four (4) weeks
of vacation and sick leave equal to six (6) days per year. Vacation
time and sick leave shall not be accumulated after the end of any
year. Sick leave shall accumulate at the rate of one half day per
month;
3.7 Expenses . The Company shall reimburse Executive for all
expenses incurred in connection with his duties on behalf of the
Company, provided that Executive shall keep, and present to the
Company, records and receipts relating to reimbursable expenses
incurred by her. Such records and receipts shall be maintained and
presented in a format, and with such regularity, as the Company
reasonably may require in order to substantiate the Company’s
right to claim income tax deductions for such expenses. Without
limiting the generality of the foregoing, Executive shall be
entitled to reimbursement for any business-related travel,
business-related entertainment, whether at his residence or
otherwise, or other costs and customary business expenses
reasonably incident to the performance of his duties on behalf of
the Company. Executive will be entitled to reimbursement of all
reasonable, customary business expenses incurred by his in the
performance of his duties.
3.8 Benefits . Executive will be entitled to participate in
the employee benefit plans or programs of the Company, including
medical and life insurance and profit sharing, to the fullest
extent possible, subject to the rules and regulations applicable
hereto and to standard eligibility and vesting requirements of any
coverage and shall be furnished with other services and perquisites
appropriate to his position. Without limiting the generality of the
foregoing, Executive shall be entitled to the following
benefits:
(a) Comprehensive medical insurance for Executive,
his spouse, and his dependent children with TWENTY PERCENT (20%)
deductibles;
(b) Dental insurance for Executive,
Executive’s spouse, and his dependent children;
(c) Group term life insurance with death benefits
equal to one hundred percent (100%) of base salary;
(d) Annual physical examination;
(e) Long-term disability.
(a) If Executive becomes unable to perform the
duties specified hereunder due to partial or total disability or
incapacity resulting from a mental or physical illness, injury or
any other cause, Company will continue the payment of
Executive’s base salary at its then current rate for a period
of TWENTY-SIX (26) weeks following the date Executive is first
unable to perform such duties due to such disability or incapacity.
Thereafter, Company shall have no obligation for base salary, bonus
or other compensation payments to Executive during the continuance
of such disability or incapacity. Company will continue to provide
benefits to Executive so long as Executive remains
employed;
(b) If Executive is unable to perform the duties
specified hereunder due to partial or total disability or
incapacity resulting from a mental or physical illness, injury or
any other cause for a period of TEN (10) consecutive weeks or for a
cumulative period of SEVENTY (70) business days during any FIVE (5)
month period (“Disability”), then, to the extent
permitted by law, Company shall have the right to terminate this
Agreement thereafter, in which event Company shall have no further
obligations or liabilities hereunder after the date of such
termination except Executive will be deemed disabled and eligible
for the payments outlined in paragraph 4.1 (a). EXECUTIVE
REPRESENTS THAT TO THE BEST OF HIS KNOWLEDGE HE HAS NO MEDICAL
CONDITION THAT COULD CAUSE PARTIAL OR TOTAL DISABILITY THAT WOULD
RENDER HER UNABLE TO PERFORM THE DUTIES SPECIFIED IN THIS AGREEMENT
OTHERWISE THE BENEFITS IN PARAGRAPH 4.1(a) SHALL BE NULL AND
VOID.
4.2 Due to Death . If Executive dies during the period of
employment, Executive’s employment with Company shall
terminate as of the end of the calendar month in which the death
occurs. Company shall have no obligation to Executive or
Executive’s estate for Base Compensation or other form of
compensation or benefit other than amounts accrued through the date
of Executive’s death, except as otherwise required by law or
by benefit plans provided at Company expense.
In the event of the termination of
Executive’s employment due to Executive’s death or
Disability, Executive or Executive’s legal representatives,
as the case may be, shall be entitled to:
(a) In the case of death, unpaid Base Compensation
earned or accrued through Executive’s date of death and
continued Base Compensation at a rate in effect at the time of
death, for a period of (3) three months after which
Executive’s death occurs, or the end of the employment term,
which ever is the lesser amount.
(b) Any performance or special incentive bonus
earned but not yet paid;
(c) A pro rata performance bonus for the year in
which employment terminates due to death or Disability based on the
performance of Company for the year during which such termination
occurs or, if performance results are not available, based on the
performance bonus paid to Executive for the prior year;
and
(d) Any other compensation and benefits to which
Executive or Executive’s legal representatives may be
entitled under applicable plans, programs and agreements of Company
to the extent permitted under the terms thereof, including, without
limitation, life insurance as provided in Section 3.8
above.
4.3 For Cause . Company may terminate Executive’s
employment relationship with Company for "cause" by action of at
least a majority of the Company's Board of Directors, at a meeting
duly called and held upon at least 30 days written notice to the
Executive specifying the particulars of the action or inaction
alleged to constitute "cause" and at which meeting Executive and
his counsel were entitled to be present and given adequate
opportunity to be heard..
(a) For purposes of this Agreement, termination of
employment of Executive by the Company for “cause”
means termination for the following reasons: (i) frequent and
unjustifiable absenteeism, other than solely by reason of his
illness or physical or mental disability; (ii) failing to follow
the reasonable instructions of the Chairman; (iii) proven
dishonesty materially injurious to the Company or to its business,
operations, assets or condition (an “Adverse Effect”);
or gross violation of Company policy or procedure after being
warned, notified, or Executive’s acknowledged, gross or
willful misconduct, or willful neglect to act, which misconduct or
neglect is committed or omitted by Executive in bad faith and had
an Adverse Effect; or (iv) a failure by Executive to comply with
any material provision of this Agreement, which failure is not
cured (if capable of cure) within 30 days after receipt of written
notice of such non-compliance by Executive. Action or inaction by
Executive shall not be considered "willful" unless done or omitted
by him intentionally or not in good faith and without reasonable
belief that his action or inaction was in the best interest of the
Company, and shall not include failure to act by reason of total or
partial incapacity due to physical or mental
illness.
(b) Company shall have no obligation to
Executive for Base Compensation or other form of compensation or
benefits, except as otherwise required by law, other than (i)
amounts accrued through the date of termination, and (ii)
reimbursement of appropriately documented expenses incurred by
Executive before the termination of employment, to the extent that
Executive would have been entitled to such reimbursement but for
the termination of employment.
4.4 Termination of Employment by the
Executive
(a) The Executive may terminate his employment for
Good Reason and receive the payments and benefits specified in
Section 4.4 (a)(iii)(B)). For purposes of this Agreement,
“Good Reason” will exist if any one or more of the
following occur:
(i) Failure by the Company to honor any of its
obligations under this Agreement, including, without limitation,
its obligations under Sections 1 and 3.4 (Employment
Capa
