-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FtK5TeUpDV/pIp0DzZ/UDt2WgOdEdw4yuNZbugZ8PgqUhDS9EMg3mQu8Dwcqs06o IONFUwEqe32gkL6G4EbAgA== 0000890566-99-000763.txt : 20030213 0000890566-99-000763.hdr.sgml : 20030213 19990611172342 ACCESSION NUMBER: 0000890566-99-000763 CONFORMED SUBMISSION TYPE: 10-12G PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19990611 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BILLSERV COM INC CENTRAL INDEX KEY: 0001088034 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 980190072 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12G SEC ACT: 1934 Act SEC FILE NUMBER: 000-30152 FILM NUMBER: 99645262 BUSINESS ADDRESS: STREET 1: 14607 SAN PEDRO SUITE 100 CITY: SAN ANTONIO STATE: TX ZIP: 78232 BUSINESS PHONE: 2104025000 MAIL ADDRESS: STREET 1: 14607 SAN PEDRO SUITE 100 CITY: SAN ANTONIO STATE: TX ZIP: 78232 10-12B 1 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 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 ii 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. 3 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. 4 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. 5 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 6 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 7 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. 8 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 9 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 10 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 11 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. 12 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. 13 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 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 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 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 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 18 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: 19 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 20 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. 21 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 22 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 23 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: 24 SHARES OWNED BENEFICIALLY AND OF RECORD PERCENT OF CLASS
AMOUNT & NATURE TITLE OF OF BENEFICIAL PERCENT OF OWNERSHIP CLASS NAME AND ADDRESS OWNERSHIP AS OF JUNE 11, 1999 (1) - -------------------------------------------------------------------------------------------- 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%
(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. 25 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:
NAME OF DIRECTOR/ AGE POSITION HELD POSITION HELD OFFICER SINCE - -------------------------------------------------------------------------------------------- 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
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. 26 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 27 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 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 (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 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 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 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 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 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 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 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 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 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 billserv.com, Inc. (a development stage company) Statement of Shareholders' Equity (Deficit)
DEFICIT ACCUMULATED TOTAL ADDITIONAL DURING THE SHAREHOLDERS' COMMON STOCK PAID-IN DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL STAGE (DEFICIT) ---------------------------------------------------------------------------------- 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) ==================================================================================
SEE ACCOMPANYING NOTES. 4 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 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 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 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 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 billserv.com, Inc. (a development stage company) Financial Statements (Unaudited) PERIOD ENDED MARCH 31, 1999 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 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 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 billserv.com, Inc. (a development stage company) Statement of Shareholders' Equity (Deficit) (Unaudited)
DEFICIT ACCUMULATED TOTAL ADDITIONAL DURING THE SHAREHOLDERS' COMMON STOCK PAID-IN DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL STAGE (DEFICIT) ------------------------------------------------------------------ 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) ==================================================================
SEE ACCOMPANYING NOTES. 3 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 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 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 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 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 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 EX-2 2 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 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 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 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 EX-3 3 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 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 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 EX-4 4 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 -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. -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. -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. -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 -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. -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 -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 EX-5 5 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 EX-6 6 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 -1- 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 -2- 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 -3- 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 -4- 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 -5- 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. -6- (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 -7- $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 -8- 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, -9- 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: -10- (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 -11- (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 -12- 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. -13- 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. -14- 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 -15- 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: -16- 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 -17- 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 -18- EX-7 7 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 -1- 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 -2- 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 -3- 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 -4- 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 -5- 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. -6- (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 -7- $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 -8- 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, -9- 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: -10- (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 -11- (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 -12- 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. -13- 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. -14- 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 -15- 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: -16- 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 -17- 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 -18- EX-8 8 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 -1- 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 -2- 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 -3- 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 -4- 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 -5- 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. -6- (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 -7- $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 -8- 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, -9- 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: -10- (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 -11- (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 -12- 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. -13- 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. -14- 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 -15- 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: -16- 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 -17- 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 -18- EX-9 9 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 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 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 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. (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 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. (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, 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. (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 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.) (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. 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 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: (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. 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: - ------------------------------------- Name: Title: Chief Executive Officer "EXECUTIVE" - ----------------------------------------- Name: 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 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. EX-10 10 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 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 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 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. (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 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. (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, 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. (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 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.) (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. 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 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: (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. 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: - ------------------------------------- Name: Title: Chief Executive Officer "EXECUTIVE" - ----------------------------------------- Name: 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 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. EX-11 11 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 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 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. (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: (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 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. (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 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 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 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: (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. 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: 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. 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. EX-12 12 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 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 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 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 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 EX-13 13 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 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. 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. 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. 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. 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 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. 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 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. 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 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 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 EXHIBIT C VARIOUS HYPOTHETICAL VESTING SCHEDULES HYPOTHETICALS TO BE PROVIDED UNDER SEPARATE COVER 13 -----END PRIVACY-ENHANCED MESSAGE-----