epazz8k091212.htm

0001555699-12-000002.txt : 20120914 0001555699-12-000002.hdr.sgml : 20120914 20120914172025 ACCESSION NUMBER: 0001555699-12-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20120906 ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120914 DATE AS OF CHANGE: 20120914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Epazz Inc CENTRAL INDEX KEY: 0001335239 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 000000000 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-139117 FILM NUMBER: 121093459 BUSINESS ADDRESS: STREET 1: 27 N WACKER DR N261 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129558161 MAIL ADDRESS: STREET 1: 27 N WACKER DR N261 CITY: CHICAGO STATE: IL ZIP: 60606 8-K 1 epazz8k091212.htm FORM 8K FOR SEPTEMBER 6, 2012 epazz8k091212.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 6, 2012

EPAZZ, Inc.

(Exact name of Registrant as specified in its charter)

Illinois	333-139117	36-4313571
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

309 W. Washington St. Suite 1225

Chicago, IL 60606

(Address of principal executive offices)

Registrant’s telephone number, including area code: (312) 955-8161

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.

Effective September 6, 2012, Epazz, Inc., an Illinois corporation (the “Company”, “we” and “us”) agreed to issue the Company’s Chief Executive Officer, Chief Financial Officer, President, sole Director and majority shareholder, Shaun Passley an aggregate of 1,073,801,000 shares of the Company’s Class A common stock, subject to forfeiture as described below, in connection with Mr. Passley’s entry into the Employment Agreement with the Company as described in greater detail below under Item 5.02.

The shares were offered and sold in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) as the shares were issued as “restricted securities” and Mr. Passley is the Chief Executive Officer and President of the Company and has knowledge of information regarding the Company similar to what would be included in a Registration Statement under the Securities Act.

ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.

Effective September 6, 2012 (the “Effective Date”), the Company entered into an Executive Employment Agreement (the “Employment Agreement”) with Mr. Passley, pursuant to which Mr. Passley agreed to serve as Chief Executive Officer, Chief Financial Officer and President of the Company for a term of 10 years. Pursuant to the Employment Agreement, the Company agreed to pay Mr. Passley the following consideration:

(a)

Base salary equal to $180,000 per year (the “Salary”) of which $30,000 is payable in cash and $150,000 is payable yearly, on each anniversary of the Effective Date in shares of the Company’s Class A common stock (“Shares”), at the rate of $0.006 per share (the “Share Price”)(i.e., 25,000,000 Shares per year or 250,000,000 Shares in aggregate)(the “Salary Shares”), which were issued to Mr. Passley upon the parties’ entry into the Employment Agreement and vest to Mr. Passley at the rate of 1/10th of such Salary Shares per year during the term of the agreement, subject to the Vesting Date (defined below);

(b)

A bonus of $4,000,000 in Shares, equal to 666,666,667 Shares based on the Share Price (the “Bonus Shares”);

(c)

A bonus of $150,000 in Shares (25,000,000 Shares based on the Share Price), for each of the following acquisitions previously completed by the Company: (a) the acquisition of DeskFlex; (b) the acquisition of PRM; (c) the acquisition of AutoHire; (d) the acquisition of Intellisys; and (e) the acquisition of K9 Bytes (a total of $750,000 or 125,000,000 Shares); and a bonus of $200,000 or 33,333,333 Shares in connection with the Company’s acquisition of MsHealth. Mr. Passley is eligible to earn an additional $200,000 bonus (33,333,333 Shares) in the event the Company completes a future acquisition with a total value of at least $200,000 during the term of the agreement, subject to the Vesting Date; and

(d)

A bonus of $200,000 (33,333,333 Shares) in compensation for Mr. Passley providing his personal residence as collateral for various business loans and promissory notes of the Company (the “Collateral Bonus Shares”). The Company also agreed to pay Mr. Passley a bonus of $200,000 (33,333,333 Shares) per year that Mr. Passley continues to provide the collateral during the term of the agreement (up to an aggregate of $1,800,000 or 299,999,997 Shares)(the “Additional Collateral Bonus Shares”), which Additional Collateral Bonus Shares vest to Mr. Passley at the rate of 33,333,333 Shares on each anniversary of the Effective Date of the agreement, subject to the Vesting Date.

All Shares were issued to Mr. Passley in connection with the parties entry into the Employment Agreement and are subject to forfeiture upon the termination of Mr. Passley’s employment (for any reason other than by Mr. Passley for good reason (as described in the Employment Agreement) or without cause by the Company) or the expiration of the Employment Agreement prior to the Vesting Date. The “Vesting Date” is defined as the date that the Company reports revenues of at least $10 million in its audited financial statements for a fiscal year then ended as filed with the Securities and Exchange Commission. Additionally, certain of the Shares described above which are due for future services and as future consideration are subject to additional vesting requirements as described in greater detail in the Employment Agreement.

Mr. Passley’s Employment Agreement also contains confidentiality provisions, work-for-hire provisions, indemnification rights to Mr. Passley, and prohibits Mr. Passley from competing against the Company anywhere in the United Stated or soliciting any of the Company’s employees during the 12 month term following the termination of his employment with the Company for any reason other than good reason by Mr. Passley or by the Company without cause.

In the event of the termination of the Employment Agreement due to Mr. Passley’s death or disability he is entitled to the compensation earned by him as of the date of such termination plus eight (8) additional weeks of compensation at his then current salary and any Shares not vested by him as of the termination date are forfeited and must be returned to the Company for cancellation.

In the event of the termination the Employment Agreement by Mr. Passley for good reason (as described in the Employment Agreement) or the Company without cause, Mr. Passley is entitled to the compensation earned by him as of the date of such termination plus eight (8) additional weeks of compensation at his then current salary and any Shares not vested by Mr. Passley as of the termination date immediately vest to Mr. Passley.

In the event of the termination of the Employment Agreement by the Company for cause (as described in the Employment Agreement) or Mr. Passley without good reason, Mr. Passley is entitled only to the compensation earned by him as of the date of such termination and any Shares not vested as of the termination date are forfeited and must returned to the Company for cancellation.

The description of the Employment Agreement above is not complete and is qualified in its entirety by the full text of the Employment Agreement, a copy of which is filed herewith as Exhibit 10.1.

ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.

On September 12, 2012, Mr. Passley, the Company’s sole Director and majority shareholder, holding more than two-thirds voting power of the Company’s voting stock, voted to amend the Company’s Articles of Incorporation and increase the number of authorized shares of the Company’s Class A common stock from 300 million shares to 2 billion shares. Mr. Passley also approved an amendment to the Company’s Articles of Incorporation to increase the number of voting shares the Company’s Class B common stock are able to vote (which 5,500,000 shares of Class B common stock are solely owned by Mr. Passley) from 100 votes per share to 1,000 votes per share. Accordingly, the Articles of Incorporation were subsequently amended by the filing of Articles of Amendment on September 12, 2012.

ITEM 8.01 OTHER EVENTS.

As a result of the issuance of the Shares to Mr. Passley in connection with the Employment Agreement and the increase in the number of shares of voting stock that the Class B common stock can vote, Mr. Passley now holds an aggregate of 1,073,801,000 shares of Class A common stock; 5,500,000 shares of Class B common stock and 1,000 shares of the Company’s Convertible Series A Preferred Stock, which in aggregate provide him the right to vote 6,573,801,000 voting shares on any and all shareholder matters, representing 99% of the Company’s total outstanding voting shares as of the filing of this report.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit Number	Description
3.1*	Articles of Amendment Increasing Class A Common Stock to 2,000,000 shares
10.1*	Executive Employment Agreement

* Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	EPAZZ, INC.


Date: September 14, 2012	By: /s/ Shaun Passley
	Shaun Passley Chief Executive Officer

EX-3.1 2 ex3-1.htm ARTICLES ex3-1.htm

Exhibit 3.1

“The total number of shares of stock that the Corporation shall have authority to issue is 2,100,000,000, consisting of 2,060,000,000 shares of common stock, par value $0.01 per share (“Common Stock”), and 40,000,000 shares of “blank check” preferred stock par value $0.001 per share (“Preferred Stock”). The Common Stock shall include 2,000,000,000 shares of Series A Common Stock, $0.01 par value per share (the “Series A Common Stock”) and 60,000,000 shares of Series B Common Stock, $0.01 par value per share (the “Series B Common Stock”). Each holder of Class B Common Stock will be entitled to 1,000 votes per share on all matters submitted to a vote of the shareholders of the Corporation (including, but not limited to at every meeting of the stockholders of the Corporation and upon any action taken by stockholders of the Corporation with or without a meeting), and shall vote together with the Class A Common Stock on all shareholder matters as if they are a single class.

Shares of Preferred Stock of the Corporation may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by the Board of Directors of the Corporation (“Board of Directors”) prior to the issuance of any shares thereof. Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof.

The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of the directors (the “Voting Stock”), voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.

Rights of Our Class A Common Stock and Class B Common Stock

Rights to Dividends and on Liquidation. Each share of Class A Common Stock and Class B Common Stock is entitled to share equally in dividends (other than dividends declared with respect to any outstanding Preferred Stock) when and as declared by our Board of Directors. Upon liquidation, each share of Class A Common Stock and Class B Common Stock is entitled to share equally in our assets available for distribution to the holders of those shares. Any outstanding Preferred Stock would rank senior to the Class A Common Stock and Class B Common Stock in respect of liquidation rights and could rank senior to that stock in respect of dividend rights.

Voting--General. Each holder of Class A Common Stock is entitled to one vote per share, and each holder of Class B Common Stock is entitled to 1000 votes per share.

Non-Cumulative Voting Rights. Our Class A Common Stock and Class B Common Stock, do not have cumulative voting rights.

Voting by Class. Holders of our Class A Common Stock and Class B Common Stock shall vote as one class on any and all shareholder matters.

Miscellaneous Rights and Provisions. There are no preemptive rights, subscription rights, or redemption provisions relating to our Class A Common Stock and Class B Common Stock and none of the shares carries any liability for further calls.

Designation of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock:

The Corporation shall have two classes of Preferred Stock, Series A Preferred Stock and Series B Preferred Stock, with such powers and preferences, and the relative, participating, optional and other rights, and the qualifications, limitations, and restrictions thereon set forth below:

CERTIFICATE OF DESIGNATIONS

ESTABLISHING THE DESIGNATIONS, PREFERENCES,

LIMITATIONS AND RELATIVE RIGHTS OF THE

SERIES A CONVERTIBLE PREFERRED STOCK

Pursuant to Sections 6.10 and 10.20 of the Illinois Business Corporation Act of 1983, the Corporation has adopted a designation of One Thousand (1,000) shares of Series A Convertible Preferred Stock, par value $0.01 per share which have the powers and preferences, and the relative, participating, optional and other rights, and the qualifications, limitations, and restrictions thereon set forth below (the “Designation” or “Certificate of Designation”):

Section 1. DESIGNATION OF SERIES; RANK. The shares of such series shall be designated as the "Series A Convertible Preferred Stock" (the "Series A Preferred Stock") and the number of shares initially constituting such series shall be One Thousand (1,000) shares.

Section 2. DEFINITIONS.

For purposes of this Designation, the following definitions shall apply:

(a) “Business Day” means a day in which a majority of the banks in the State of Illinois in the United States of America are open for business.

(b) “Common Stock” means the Corporation’s $0.01 par value Class A Common Stock and Class B Common Stock.

(c) "Distribution" shall mean the transfer of cash, Common Stock or other property without consideration whether by way of dividend or otherwise to the shareholders of Common Stock.

(d) “First Dividend Date” means January 1st of any year following a calendar year in which the Corporation has generated revenue of over $2 million based on the Corporation’s audited statement of operations.

(e) “First Dividend Rate” means 1.5% of the Company’s revenues per quarter, based on the revenues set forth in the Company’s financial statements as filed with the Securities and Exchange Commission on Form 10-Q or Form 10-K.

(f) “Holder” shall mean the person or entity in which the Series A Preferred Stock is registered on the books of the Corporation, which shall initially be the person or entity which such Series A Preferred Stock is issued to, and shall thereafter be permitted and legal assigns which the Corporation is notified of by the Holder and which the Holder has provided a valid legal opinion in connection therewith to the Corporation.

(g) “Junior Stock” shall mean the Common Stock and each other class of capital stock or series of preferred stock of the Corporation established after the Original Issue Date, the terms of which do not expressly provide that such class or series ranks senior to or on parity with the Series A Preferred Stock upon the liquidation, winding-up or dissolution of the Corporation.

(h) "Market Price" means, for any security as of any date, the last sales price of such security on the principal trading market where such security is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Corporation if Bloomberg Financial Markets is not then reporting closing sales prices of such security) (collectively, "Bloomberg"), or if the foregoing does not apply, the last reported sales price of such security on a national exchange or in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no such price is reported for such security by Bloomberg, the average of the bid prices of all market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each case for such date or, if such date was not a trading day for such security, on the next preceding date that was a trading day. If the Market Price cannot be calculated for such security on any of the foregoing bases, the Market Price of such security on such date shall be the fair market value as reasonably determined by a valuation firm, with experience in the valuation of securities similar to the Corporation’s, chosen by the Board of Directors of the Corporation in its sole discretion, with the costs of such appraisal to be borne by the Corporation.

(i) “Original Issue Date” shall mean the date upon which the shares of Series A Preferred Stock are first issued.

(j) “Liquidation Preference” shall be equal to $.01 per share for the Series A Convertible Preferred Stock (as appropriately adjusted for any Recapitalizations).

(k) “Second Dividend Date” means January 1st of any year following a calendar year in which the Corporation has generated net income of over $2 million based on the Corporation’s audited statement of operations.

(l) “Second Dividend Rate” means 24% of the Corporation’s net income based on the Corporation’s audited statement of operations.

(m) “Senior Securities” shall mean any senior debt or other security holders of the Corporation, including certain banks and/or institutions, which hold security interests over the Corporation’s assets as of the Original Issue Date, or which the Corporation may agree in the future to provide such first priority security interests to, which shall not require the approval and/or consent of the Series A Preferred Stock Holders.

(n) “Class A Common Stock” means the Corporation’s Class A Common Stock, $0.001 par value per share.

(o) “Series A Preferred Stock Certificates” means the certificates, as replaced from time to time, evidencing the outstanding Series A Preferred Stock shares.

(p) "Recapitalization" shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event.

(q) “Restricted Shares” means shares of the Corporation’s Common Stock which are restricted from being transferred by the Holder thereof unless the transfer is effected in compliance with the Securities Act of 1933, as amended and applicable state securities laws (including investment suitability standards, which shares shall bear the following restrictive legend (or one substantially similar):

"The securities represented by this certificate have not been registered under the Securities Act of 1933 or any state securities act. The securities have been acquired for investment and may not be sold, transferred, pledged or hypothecated unless (i) they shall have been registered under the Securities Act of 1933 and any applicable state securities act, or (ii) the corporation shall have been furnished with an opinion of counsel, satisfactory to counsel for the corporation, that registration is not required under any such acts."

SECTION 3. DIVIDENDS.

(a) Dividends in General. Dividends shall accrue on the Series A Preferred Stock, Quarterly in arrears, for each Quarter that such Preferred Stock is outstanding, (a) beginning on the First Dividend Date, equal to the First Dividend Rate, and additional dividends (b) beginning effective on the Second Dividend Date, based on the Second Dividend Rate, until such dividends are paid in full as provided below (“Dividends”).

(b) Payment of Dividends. The Corporation shall pay the Holder of the Series A Preferred Stock the accrued Dividends in cash or shares of common stock based on the Market Price, at the option of the Corporation from time to time, provided that until paid in the sole discretion of the Corporation, such Dividends shall continue to accrue.

(i) In any calendar year, the Holders of outstanding shares of Series A Preferred Stock shall be entitled to receive dividends, when, as and only if declared by the Board of Directors, out of any assets at the time legally available therefor, payable in preference and priority to any declaration or payment of any Distribution on Common Stock of the Corporation in such calendar year. No Distributions shall be made with respect to the Common Stock until all declared Dividends on the Series A Preferred Stock have been paid or set aside for payment to the Series A Preferred Stock holders.

(ii) Non-Cash Distributions. Whenever a Distribution provided for in this Section 3 shall be payable in property other than cash, the value of such Distribution shall be deemed to be the fair market value of such property as determined in good faith by the Board of Directors.

(iii) Other Distributions. Subject to the terms of this Certificate of Designations, and to the fullest extent permitted by Illinois law, the Corporation shall be expressly permitted to redeem, repurchase or make distributions on the shares of its capital stock in all circumstances other than where doing so would cause the Corporation to be unable to pay its debts as they become due in the usual course of business.

SECTION 4. LIQUIDATION PREFERENCE.

(a) Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the Holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any Distribution of any of the assets of the Corporation to the Holders of the Junior Stock by reason of their ownership of such stock, but not prior to any holders of the Corporation’s Senior Securities, which holders shall have priority to the distribution of any assets of the Corporation, an amount per share for each share of Series A Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series A Preferred Stock, and (ii) all declared but unpaid Dividends (if any) on such shares of Series A Preferred Stock. If upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available for distribution to the Holders of the Series A Preferred Stock are insufficient to permit the payment to such Holders of the full amounts specified in this Section 4(a), subsequent to the payment to the Senior Securities then the entire remaining assets of the Corporation following the payment to the Senior Securities legally available for distribution shall be distributed with equal priority and pro rata among the Holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 4(a).

(b) Remaining Assets. After the payment to the Holders of Series A Preferred Stock of the full preferential amounts specified above, the entire remaining assets of the Corporation legally available for distribution by the Corporation shall be distributed with equal priority and pro rata among the Holders of the Junior Stock in proportion to the number of shares of Junior Stock, and the terms of such Junior Stock, held by them.

(c) Valuation of Non-Cash Consideration. If any assets of the Corporation distributed to shareholders in connection with any liquidation, dissolution, or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors. In the event of a merger or other acquisition of the Corporation by another entity, the Distribution date shall be deemed to be the date such transaction closes.

SECTION 5. CONVERSION RIGHTS. The Series A Preferred Stock shall be convertible into Common Stock as follows (the "Conversion Rights"):

(a) Holder’s Right to Convert.

(i) All shares Series A Preferred Stock shall be convertible, at the option of the Holder thereof, with five (5) Business Days written notice to the Corporation (a “Notice of Conversion“), at the office of the Corporation or any transfer agent for the Series A Preferred Stock, into that number of fully-paid, non-assessable shares of Class A Common Stock determined by multiplying the total number of shares of Class A Common Stock issued and outstanding by 0.60 (the “Shares”). The Holder may only affect a conversion of all of the Series A Preferred Stock shares which he, she or it owns pursuant to and in compliance with the restrictions on conversion set forth herein (each a “Conversion”).

(ii) Mechanics of Conversion. In order to effect a Conversion, a Holder shall: (i) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Corporation (Attention: Corporate Secretary), and (ii) surrender or cause to be surrendered the original Series A Preferred Stock Certificates being converted, duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Corporation which the Holder desires to convert. Upon receipt by the Corporation of a facsimile copy of a Notice of Conversion from a Holder, the Corporation shall promptly send, via facsimile, a confirmation to such Holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion and/or any deficiencies that exist in connection with such Notice of Conversion. The Corporation shall not be obligated to issue shares of Common Stock upon a conversion unless the original Series A Preferred Stock Certificates Converted are delivered to the Corporation as provided above. In the event the Holder has lost or misplaced the certificates evidencing the Series A Preferred Stock, the Holder shall be required to provide the Corporation or the Corporation’s Transfer Agent (as applicable) with whatever documentation and fees each may require to re-issue the Series A Preferred Stock Certificates and shall be required to provide such re-issued Series A Preferred Stock Certificates to the Corporation in connection with such Notice of Conversion. Unless the Notice of Conversion provided by the Holder includes a valid opinion from an attorney stating that such Shares of Common Stock issuable in connection with the Notice of Conversion can be issued free of restrictive legend, which shall be determined by the Corporation in its sole discretion, such shares shall be issued as Restricted Shares.

(iii) Delivery of Common Stock Upon Conversion. Upon the surrender of Series A Preferred Stock Certificates accompanied by a Notice of Conversion, the Corporation (itself, or through its transfer agent) shall, no later than the fifth (5th) Business Day following the date of such surrender (the "Delivery Period"), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the Holder or its nominee (x) that number of shares of Class A Common Stock issuable upon conversion of such shares of Series A Preferred Stock being converted and (y) the total amount of the accrued and unpaid Dividends.

(b) Taxes. The Corporation shall not be required to pay any tax which may be payable in respect to any transfer involved in the issue and delivery of shares of Common Stock upon conversion in a name other than that in which the shares of the Series A Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. The Corporation shall withhold from any payment due whatsoever in connection with the Series A Preferred Stock any and all required withholdings and/or taxes the Corporation, in its sole discretion deems reasonable or necessary, absent an opinion from Holder’s accountant or legal counsel, acceptable to the Corporation in its sole determination, that such withholdings and/or taxes are not required to be withheld by the Corporation.

(c) Adjustments for Reclassification, Exchange and Substitution. If the Common Stock issuable upon conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each Holder of such Series A Preferred Stock shall have the right thereafter to convert such shares of Series A Preferred Stock into a number of shares of such other class or classes of stock which a Holder of the number of shares of Common Stock deliverable upon conversion of such series of Series A Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

(d) No Impairment. The Corporation will not through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion rights of the holders of Series A Preferred Stock against impairment. Notwithstanding the foregoing, nothing in this Section 5(d) shall prohibit the Corporation from amending its Certificate of Incorporation with the requisite consent of its shareholders and the Board of Directors.

(e) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the Conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the Conversion of all then outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the Conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation will within a reasonable time period make a good faith effort to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(f) Effect of Conversion. On the date of any Conversion, all rights of any Holder with respect to the shares of the Series A Preferred Stock so converted, including the rights, if any, to receive distributions of the Corporation’s assets or notices from the Corporation, will terminate.

(g) Notices of Record Date. In the event that the Corporation shall propose at any time:

(i) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or

(ii) to voluntarily liquidate or dissolve or to enter into any transaction deemed to be a liquidation, dissolution or winding up of the Corporation;

then, in connection with each such event, the Corporation shall send to the holders of the Series A Preferred Stock at least ten (10) Business Days prior written notice of a record date for determining rights to vote in respect of the matters referred to above.

Such written notice shall be given by first class mail (or express courier), postage prepaid, addressed to the holders of Series A Preferred Stock at the address for each such Holder as shown on the books of the Corporation and shall be deemed given on the date such notice is mailed. The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the vote or written consent of the holders of a majority of the Series A Preferred Stock, voting together as a single class.

SECTION 6. VOTING. The Series A Preferred Stock shall have no voting rights and shall have no right to vote on any shareholder matters (other than as expressly stated below under Section 7) or as otherwise provided for by Illinois law.

SECTION 7. PROTECTIVE PROVISIONS.

Subject to the rights of series of Series A Preferred Stock which may from time to time come into existence, so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by written consent, as provided by law) of the holders of 2/3rds of the then outstanding shares of Series A Preferred Stock, voting together as a class:

(a) Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A Preferred Stock;

(b) Effect an exchange, reclassification, or cancellation of all or a part of the Series A Preferred Stock, but excluding a stock split, forward split or reverse stock split of the Corporation’s Common Stock or Series A Preferred Stock;

(c) Effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series A Preferred Stock; or

(d) Alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation.

PROVIDED, HOWEVER, that the Corporation may, by any means authorized by law and without any vote of the Holders of shares of the Series A Preferred Stock, make technical, corrective, administrative or similar changes in this Statement of Designations that do not, individually or in the aggregate, adversely affect the rights or preferences of the Holders of shares of the Series A Preferred Stock. The Corporation may also designate and issue additional series of preferred stock from time to time in the sole discretion of the Corporation’s Board of Directors, which such rights, privileges, preferences and limitations shall be determined by the Corporation’s Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the holders of the Series A Preferred Stock.

SECTION 8. PREEMPTIVE RIGHTS. Holders of Series A Preferred Stock and holders of Common Stock shall not be entitled to any preemptive, subscription or similar rights in respect to any securities of the Corporation, except as specifically set forth herein or in any other document agreed to by the Corporation.

SECTION 9. NOTICES. In addition to any other means of notice provided by law or in the Corporation's Bylaws, any notice required by the provisions of this Designation to be given to the holders of Series A Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each Holder of record at such Holder's address appearing on the books of the Corporation.

SECTION 10. MISCELLANEOUS.

(a) The headings of the various sections and subsections of this Certificate of Designation are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate of Designation.

(b) Whenever possible, each provision of this Certificate of Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Certificate of Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Certificate of Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

(c) Except as may otherwise be required by law, the shares of the Series A Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.

CERTIFICATE OF DESIGNATIONS

ESTABLISHING THE DESIGNATIONS, PREFERENCES,

LIMITATIONS AND RELATIVE RIGHTS OF THE

SERIES B CONVERTIBLE PREFERRED STOCK

Pursuant to Sections 6.10 and 10.20 of the Illinois Business Corporation Act of 1983, the Corporation has adopted a designation of One Thousand (1,000) shares of Series B Convertible Preferred Stock, par value $0.01 per share which have the powers and preferences, and the relative, participating, optional and other rights, and the qualifications, limitations, and restrictions thereon set forth below (the “Designation” or “Certificate of Designation”):

Section 1. DESIGNATION OF SERIES; RANK. The shares of such series shall be designated as the "Series B Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of shares initially constituting such series shall be One Thousand (1,000) shares.

Section 2. DEFINITIONS.

For purposes of this Designation, the following definitions shall apply:

(a) “Business Day” means a day in which a majority of the banks in the State of Illinois in the United States of America are open for business.

(b) “Common Stock” means the Corporation’s $0.01 par value Class A Common Stock and Class B Common Stock.

(c) "Distribution" shall mean the transfer of cash, Common Stock or other property without consideration whether by way of dividend or otherwise to the shareholders of Common Stock.

(d) “First Dividend Date” means January 1st of any year following a calendar year in which the Corporation has generated revenue of over $1 million based on the Corporation’s audited statement of operations.

(f) “Holder” shall mean the person or entity in which the Series B Preferred Stock is registered on the books of the Corporation, which shall initially be the person or entity which such Series B Preferred Stock is issued to, and shall thereafter be permitted and legal assigns which the Corporation is notified of by the Holder and which the Holder has provided a valid legal opinion in connection therewith to the Corporation.

(g) “Junior Stock” shall mean the Common Stock and each other class of capital stock or series of preferred stock of the Corporation established after the Original Issue Date, the terms of which do not expressly provide that such class or series ranks senior to or on parity with the Series B Preferred Stock upon the liquidation, winding-up or dissolution of the Corporation.

(i) “Original Issue Date” shall mean the date upon which the shares of Series B Preferred Stock are first issued.

(j) ““Liquidation Preference” shall be equal to $.01 per share for the Series A Convertible Preferred Stock (as appropriately adjusted for any Recapitalizations).

(l) “Second Dividend Rate” means 6% of the Corporation’s net income based on the Corporation’s audited statement of operations.

(m) “Senior Securities” shall mean (a) the Series A Convertible Preferred Stock of the Corporation; and (b) any senior debt or other security holders of the Corporation, including certain banks and/or institutions, which hold security interests over the Corporation’s assets as of the Original Issue Date, or which the Corporation may agree in the future to provide such first priority security interests to, which shall not require the approval and/or consent of the Series B Preferred Stock Holders.

(n) “Class A Common Stock” means the Corporation’s Class A Common Stock, $0.001 par value per share.

(o) “Series B Preferred Stock Certificates” means the certificates, as replaced from time to time, evidencing the outstanding Series B Preferred Stock shares.

(p) "Recapitalization" shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event.

SECTION 3. DIVIDENDS.

(a) Dividends in General. Dividends shall accrue on the Series B Preferred Stock, Quarterly in arrears, for each Quarter that such Preferred Stock is outstanding, (a) beginning on the First Dividend Date, equal to the First Dividend Rate, and additional dividends (b) beginning effective on the Second Dividend Date, based on the Second Dividend Rate, until such dividends are paid in full as provided below (“Dividends”).

(b) Payment of Dividends. The Corporation shall pay the Holder of the Series B Preferred Stock the accrued Dividends in cash or shares of common stock based on the Market Price, at the option of the Corporation from time to time, provided that until paid in the sole discretion of the Corporation, such Dividends shall continue to accrue.

(i) In any calendar year, the Holders of outstanding shares of Series B Preferred Stock shall be entitled to receive dividends, when, as and only if declared by the Board of Directors, out of any assets at the time legally available therefor, payable in preference and priority to any declaration or payment of any Distribution on Common Stock of the Corporation in such calendar year. No Distributions shall be made with respect to the Common Stock until all declared Dividends on the Series B Preferred Stock have been paid or set aside for payment to the Series B Preferred Stock holders.

SECTION 4. LIQUIDATION PREFERENCE.

(a) Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the Holders of the Series B Preferred Stock shall be entitled to receive, prior and in preference to any Distribution of any of the assets of the Corporation to the Holders of the Junior Stock by reason of their ownership of such stock, but not prior to any holders of the Corporation’s Senior Securities, which holders shall have priority to the distribution of any assets of the Corporation, an amount per share for each share of Series B Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series B Preferred Stock, and (ii) all declared but unpaid Dividends (if any) on such shares of Series B Preferred Stock. If upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available for distribution to the Holders of the Series B Preferred Stock are insufficient to permit the payment to such Holders of the full amounts specified in this Section 4(a), subsequent to the payment to the Senior Securities then the entire remaining assets of the Corporation following the payment to the Senior Securities legally available for distribution shall be distributed with equal priority and pro rata among the Holders of the Series B Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 4(a).

(b) Remaining Assets. After the payment to the Holders of Series B Preferred Stock of the full preferential amounts specified above, the entire remaining assets of the Corporation legally available for distribution by the Corporation shall be distributed with equal priority and pro rata among the Holders of the Junior Stock in proportion to the number of shares of Junior Stock, and the terms of such Junior Stock, held by them.

(d) Valuation of Non-Cash Consideration. If any assets of the Corporation distributed to shareholders in connection with any liquidation, dissolution, or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors. In the event of a merger or other acquisition of the Corporation by another entity, the Distribution date shall be deemed to be the date such transaction closes.

SECTION 5. CONVERSION RIGHTS. The Series B Preferred Stock shall be convertible into Common Stock as follows (the "Conversion Rights"):

(a) Holder’s Right to Convert.

(i) All shares Series B Preferred Stock shall be convertible, at the option of the Holder thereof, with five (5) Business Days written notice to the Corporation (a “Notice of Conversion“), at the office of the Corporation or any transfer agent for the Series B Preferred Stock, into that number of fully-paid, non-assessable shares of Class A Common Stock determined by multiplying the total number of shares of Class A Common Stock issued and outstanding by 0.10 (the “Shares”). The Holder may only affect a conversion of all of the Series B Preferred Stock shares which he, she or it owns pursuant to and in compliance with the restrictions on conversion set forth herein and only at such time as all other Holders of Series B Preferred Stock desire to convert such shares of Series B Preferred Stock which they hold as provided in this Section 5(b)(i.e., no Conversion shall take place unless all outstanding shares of Series B Preferred Stock are Converted at the same time)(each a “Conversion”).

(ii) Mechanics of Conversion. In order to effect a Conversion, a Holder shall: (i) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Corporation (Attention: Corporate Secretary), and (ii) surrender or cause to be surrendered the original Series B Preferred Stock Certificates being converted, duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Corporation which the Holder desires to convert. Upon receipt by the Corporation of a facsimile copy of a Notice of Conversion from a Holder, the Corporation shall promptly send, via facsimile, a confirmation to such Holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion and/or any deficiencies that exist in connection with such Notice of Conversion. The Corporation shall not be obligated to issue shares of Common Stock upon a conversion unless the original Series B Preferred Stock Certificates Converted are delivered to the Corporation as provided above. In the event the Holder has lost or misplaced the certificates evidencing the Series B Preferred Stock, the Holder shall be required to provide the Corporation or the Corporation’s Transfer Agent (as applicable) with whatever documentation and fees each may require to re-issue the Series B Preferred Stock Certificates and shall be required to provide such re-issued Series B Preferred Stock Certificates to the Corporation in connection with such Notice of Conversion. Unless the Notice of Conversion provided by the Holder includes a valid opinion from an attorney stating that such Shares of Common Stock issuable in connection with the Notice of Conversion can be issued free of restrictive legend, which shall be determined by the Corporation in its sole discretion, such shares shall be issued as Restricted Shares.

(iii) Delivery of Common Stock Upon Conversion. Upon the surrender of Series B Preferred Stock Certificates accompanied by a Notice of Conversion, the Corporation (itself, or through its transfer agent) shall, no later than the fifth (5th) Business Day following the date of such surrender (the "Delivery Period"), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the Holder or its nominee (x) that number of shares of Class A Common Stock issuable upon conversion of such shares of Series B Preferred Stock being converted and (y) the total amount of the accrued and unpaid Dividends.

(b) Taxes. The Corporation shall not be required to pay any tax which may be payable in respect to any transfer involved in the issue and delivery of shares of Common Stock upon conversion in a name other than that in which the shares of the Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. The Corporation shall withhold from any payment due whatsoever in connection with the Series B Preferred Stock any and all required withholdings and/or taxes the Corporation, in its sole discretion deems reasonable or necessary, absent an opinion from Holder’s accountant or legal counsel, acceptable to the Corporation in its sole determination, that such withholdings and/or taxes are not required to be withheld by the Corporation.

(c) Adjustments for Reclassification, Exchange and Substitution. If the Common Stock issuable upon conversion of the Series B Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each Holder of such Series B Preferred Stock shall have the right thereafter to convert such shares of Series B Preferred Stock into a number of shares of such other class or classes of stock which a Holder of the number of shares of Common Stock deliverable upon conversion of such series of Series B Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

(d) No Impairment. The Corporation will not through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion rights of the holders of Series B Preferred Stock against impairment. Notwithstanding the foregoing, nothing in this Section 5(d) shall prohibit the Corporation from amending its Certificate of Incorporation with the requisite consent of its shareholders and the Board of Directors.

(e) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the Conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the Conversion of all then outstanding shares of the Series B Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the Conversion of all then outstanding shares of the Series B Preferred Stock, the Corporation will within a reasonable time period make a good faith effort to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(f) Effect of Conversion. On the date of any Conversion, all rights of any Holder with respect to the shares of the Series B Preferred Stock so converted, including the rights, if any, to receive distributions of the Corporation’s assets or notices from the Corporation, will terminate.

(g) Notices of Record Date. In the event that the Corporation shall propose at any time:

(i) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or

(ii) to voluntarily liquidate or dissolve or to enter into any transaction deemed to be a liquidation, dissolution or winding up of the Corporation;

then, in connection with each such event, the Corporation shall send to the holders of the Series B Preferred Stock at least ten (10) Business Days prior written notice of a record date for determining rights to vote in respect of the matters referred to above.

Such written notice shall be given by first class mail (or express courier), postage prepaid, addressed to the holders of Series B Preferred Stock at the address for each such Holder as shown on the books of the Corporation and shall be deemed given on the date such notice is mailed. The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the vote or written consent of the holders of a majority of the Series B Preferred Stock, voting together as a single class.

SECTION 6. VOTING. The Series B Preferred Stock shall have no voting rights and shall have no right to vote on any shareholder matters (other than as expressly stated below under Section 7) or as otherwise provided for by Illinois law.

SECTION 7. PROTECTIVE PROVISIONS.

Subject to the rights of series of Series B Preferred Stock which may from time to time come into existence, so long as any shares of Series B Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by written consent, as provided by law) of the holders of 2/3rds of the then outstanding shares of Series B Preferred Stock, voting together as a class:

(a) Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series B Preferred Stock;

(b) Effect an exchange, reclassification, or cancellation of all or a part of the Series B Preferred Stock, but excluding a stock split, forward split or reverse stock split of the Corporation’s Common Stock or Series B Preferred Stock;

(c) Effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series B Preferred Stock; or

(d) Alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Designation.

PROVIDED, HOWEVER, that the Corporation may, by any means authorized by law and without any vote of the Holders of shares of the Series B Preferred Stock, make technical, corrective, administrative or similar changes in this Statement of Designations that do not, individually or in the aggregate, adversely affect the rights or preferences of the Holders of shares of the Series B Preferred Stock. The Corporation may also designate and issue additional series of preferred stock from time to time in the sole discretion of the Corporation’s Board of Directors, which such rights, privileges, preferences and limitations shall be determined by the Corporation’s Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the holders of the Series B Preferred Stock.

SECTION 8. PREEMPTIVE RIGHTS. Holders of Series B Preferred Stock and holders of Common Stock shall not be entitled to any preemptive, subscription or similar rights in respect to any securities of the Corporation, except as specifically set forth herein or in any other document agreed to by the Corporation.

SECTION 9. NOTICES. In addition to any other means of notice provided by law or in the Corporation's Bylaws, any notice required by the provisions of this Designation to be given to the holders of Series B Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each Holder of record at such Holder's address appearing on the books of the Corporation.

SECTION 10. MISCELLANEOUS.

(c) Except as may otherwise be required by law, the shares of the Series B Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.”

EX-10.1 3 ex10-1.htm EXECUTIVE EMPLOYEE AGREEMENT ex10-1.htm

Exhibit 10-1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made between Epazz, Inc., an Illinois corporation (the “Company"), and Shaun Passley (“Executive”) (collectively sometimes referred to as the “Parties” and individually sometimes referred to as a “Party”). Unless otherwise indicated, all references to Sections are to Sections in this Agreement. This Agreement is effective as of the “Effective Date” set forth below.

W I T N E S S E T H:

WHEREAS, the Company desires to obtain the services of Executive, and Executive desires to be employed by the Company upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises, the agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as of the date hereof as follows:

1. Employment. The Company hereby agrees to employ Executive, and Executive hereby agrees to serve the Company as its Chief Executive Officer, President and Chief Financial Officer or any other titles or lesser titles as the Company’s Board of Directors elects (the “Employment”) for a term of ten (10) years, beginning on the Effective Date (the “Term”). The “Effective Date” of the Employment shall be September __, 2012.

2. Scope of Employment. During the Employment, Executive will (i) devote his full-time (i.e, an average minimum of 40 hours per week), attention, and energies to the business of the Company and will diligently and to the best of his ability perform all duties incident to his employment hereunder; (ii) use his best efforts to promote the interests and goodwill of the Company; and (iii) perform such other duties commensurate with his office as his superiors at the Company may from time-to-time assign to him. Executive must work in the Company’s principal office location for at least three day per week.

3. Compensation and Benefits During Employment. During the Employment, the Company shall provide compensation to Executive as follows.

(a) Base Salary - The Company shall pay Executive a minimum base salary, as may be adjusted from time to time, equal to $180,000 per year (the “Salary”), beginning on the Effective Date of this Agreement and ending at the end of the Term or upon the termination of this Agreement as provided below. A total of $30,000 of the Salary shall be payable yearly on the anniversary date of the Effective Date in cash. A total of $150,000 of the Salary shall be payable yearly, on each anniversary of the Effective Date in shares of the Company’s Class A Common Stock (“Shares”), at the rate of $0.006 per share (the “Share Price”)(i.e., 25,000,000 Shares per year or 250,000,000 Shares in aggregate)(the “Salary Shares”), which shall be issued to Executive upon the Parties entry into this Agreement and shall vest to Executive pursuant to the schedule above each year that Executive continues to be employed hereunder, subject in all cases to the Vesting Date (i.e., final vesting shall not occur until both the Vesting Date has occurred and the shares have vested pursuant to this Section 3(a)).

(b) Bonus. The Company shall pay the Executive a bonus of $4,000,000 in Shares, equal to 666,666,667 Shares based on the Share Price (the “Bonus Shares”), upon the Parties entry into this Agreement, which Bonus Shares shall be considered earned and vested immediately on the Vesting Date.

(c) Acquisition Bonuses. The Company shall pay the Executive a bonus of $150,000 in Shares (25,000,000 Shares based on the Share Price), for each of the following acquisitions previously completed by the Company: (a) the acquisition of DeskFlex; (b) the acquisition of PRM; (c) the acquisition of AutoHire; (d) the acquisition of Intellisys; and (e) the acquisition of K9 Bytes (a total of $750,000 or 125,000,000 Shares)(the “First Acquisition Shares”); and a bonus of $200,000 or 33,333,333 Shares (the “Second Acquisition Shares” and together with the First Acquisition Shares, the “Acquisition Shares”) in connection with the Company’s acquisition of MsHealth. The Acquisition Shares shall be issued to Executive on the Effective Date and considered earned and vested on the Vesting Date. Executive shall also be eligible to earn an additional $200,000 bonus (33,333,333 Shares) in the event the Company completes a future acquisition with a total value of at least $200,000 during the Term of the Agreement (a “Future Acquisition” and the “Future Acquisition Shares”), provided that the Future Acquisition Shares shall be issued to Executive on the Effective Date and considered earned and vested on the date that both the Vesting Date has occurred and the completion of such Future Acquisition has occurred

(d) Continuing Collateral Bonus. The Company shall pay the Executive a bonus of $200,000 (33,333,333 Shares) in compensation to Executive for Executive providing his personal residence (the “Collateral”) as collateral for various business loans and promissory notes of the Company (the “Collateral Bonus Shares”) which Collateral Bonus Shares shall be considered earned and vested immediately upon the Effective Date. The Company shall also pay the Executive a bonus of $200,000 (33,333,333 Shares) per year that Executive continues to provide the Collateral during the Term of this Agreement (up to an aggregate of $1,800,000 or 299,999,997 Shares)(the “Additional Collateral Bonus Shares”), which Additional Collateral Bonus Shares shall be issuable to Executive on the Effective Date and vest to Executive at the rate of 33,333,333 Shares on each anniversary of the Effective Date of this Agreement during the Term, subject in all cases to the Vesting Date (i.e., final vesting shall not occur until both the Vesting Date has occurred and the shares have vested pursuant to this Section 3(d)).

(e) Vesting and Forfeiture. All Shares issuable to Executive pursuant to this Agreement shall be subject to forfeiture upon termination of Executive’s employment as provided below in Sections 11 and 12 of this Agreement prior to vesting (as provided above in Sections 3(a), 3(c) and 3(d)) and prior to the Vesting Date (“Vesting”). The “Vesting Date” shall be the date that the Company reports revenues of at least $10 million in its audited financial statements for a fiscal year then ended as filed with the Securities and Exchange Commission. In the event (a) that this Agreement is terminated; or (b) the Term of the Agreement expires, prior to the Vesting Date, all Shares issuable to Executive as provided above shall be forfeited by the Executive and returned to the Company for cancellation, subject in all cases to Section 12(b), below.

(f) Expenses - So long as this Agreement is in effect, the Company shall reimburse Executive for all reasonable, out-of-pocket business expenses incurred in the performance of his duties hereunder consistent with the Company’s policies and procedures, in effect from time to time, with respect to travel, entertainment and other business expenses customarily reimbursed to employees of the Company in connection with the performance of their duties on behalf of the Company.

(g) PTO - Executive will be entitled to two (2) weeks annually of paid time off (“PTO”) during the Term, not including holidays. Unused PTO days shall not roll-over into any extension of the Term. Other than the use of PTO days for illness or personal emergencies, PTO days must be pre-approved by the Company.

(h) Benefits - Executive shall be entitled to participate in all Company employee benefit plans and programs (excluding severance plans, if any) as Company generally maintains from time to time during the Term for the benefit of its senior employees, in each case, subject to the eligibility requirements, enrollment criteria and other terms and provisions of such plans or programs. Company may amend, modify or rescind any employee benefit plan or program and change employee contribution amounts to benefit costs without notice in its discretion.

4. Confidential Information.

(a) Executive acknowledges that the law provides the Company with protection for its trade secrets and confidential information. Executive will not disclose, directly or indirectly, any of the Company’s confidential business information or confidential technical information to anyone without authorization from the Company’s management. Executive will not use any of the Company’s confidential business information or confidential technical information in any way, either during or after the Employment with the Company, except as required in the course of the Employment.

(b) Executive will strictly adhere to any obligations that may be owed to former employers insofar as Executive’s use or disclosure of his confidential information is concerned.

(c) Information will not be deemed part of the confidential information restricted by this Section 4 if Executive can show that: (i) the information was in Executive’s possession or within Executive’s knowledge before the Company disclosed it to Executive (provided that any information provided to the Executive by entities which the Company is considered successor entities to (collectively the “Company Parties”) shall be considered confidential information for the purposes of this Agreement); (ii) the information was or became generally known to those who could take economic advantage of it through no action of Executive; (iii) Executive obtained the information from a party having the right to disclose it to Executive without violation of any obligation to the Company or any Company Party, or (iv) Executive is required to disclose the information pursuant to legal process (e.g., a subpoena), provided that Executive notifies the Company immediately upon receiving or becoming aware of the legal process in question. No combination of information will be deemed to be within any of the four exceptions in the previous sentence, however, whether or not the component parts of the combination are within one or more exceptions, unless the combination itself and its economic value and principles of operation are themselves within such an exception or exceptions.

(d) All originals and all copies of any drawings, blueprints, manuals, reports, computer programs or data, notebooks, notes, photographs, and all other recorded, written, or printed matter relating to research, manufacturing operations, or business of the Company or the Company Parties made or received by Executive during the Employment are the property of the Company. Upon termination of the Employment, Executive will immediately deliver to the Company all property of the Company or the Company Parties which may still be in Executive’s possession. Executive will not remove or assist in removing such property from the Company’s premises under any circumstances, either during the Employment or after termination thereof, except as authorized by the Company’s management.

(e) For a period of one (1) year after the date of termination of the Employment, Executive will not, either directly or indirectly, hire or employ or offer or participate in offering employment to any person who at the time of such termination or at any time during such one year period following the time of such termination was an Executive of the Company or the Company Parties without the prior written consent of the Company.

5. Ownership of Intellectual Property.

(a) The Company will be the sole owner of any and all of Executive’s Inventions that are related to the Company’s business with respect to software, as defined in more detail below.

(b) For purposes of this Agreement, “Inventions” means all inventions, discoveries, and improvements (including, without limitation, any information relating to manufacturing techniques, processes, formulas, developments or experimental work, work in progress, or business trade secrets), along with any and all other work product relating thereto.

(c) An Invention is “related to the Company’s business” (“Company-Related Invention”) if it is made, conceived, or reduced to practice by Executive (in whole or in part, either alone or jointly with others, whether or not during regular working hours), whether or not potentially patentable or copyrightable in the U.S. or elsewhere, and it either: (i) involves equipment, supplies, facilities, or trade secret information of the Company; (ii) involves the time for which Executive was or is to be compensated by the Company; (iii) relates to the business of the Company or to its actual or demonstrably anticipated research and development; or (iv) results, in whole or in part, from work performed by Executive for the Company.

(d) Executive will promptly disclose to the Company, or its nominee(s), without additional compensation, all Company-Related Inventions.

(e) Executive will assist the Company, at the Company’s expense, in protecting any intellectual property rights that may be available anywhere in the world for such Company-Related Inventions, including signing U.S. or foreign patent applications, oaths or declarations relating to such patent applications, and similar documents.

(f) To the extent that any Company-Related Invention is eligible under applicable law to be deemed a “work made for hire,” or otherwise to be owned automatically by the Company, it will be deemed as such, without additional compensation to Executive. In some jurisdictions, Executive may have a right, title, or interest (“Right,” including without limitation all right, title, and interest arising under patent law, copyright law, trade-secret law, or otherwise, anywhere in the world, including the right to sue for present or past infringement) in certain Company-Related Inventions that cannot be automatically owned by the Company. In that case, if applicable law permits Executive to assign Executive’s Right(s) in future Company-Related Inventions at this time, then Executive hereby assigns any and all such Right(s) to the Company, without additional compensation to Executive; if not, then Executive agrees to assign any and all such Right(s) in any such future Company-Related Inventions to the Company or its nominee(s) upon request, without additional compensation to Executive.

6. Non-competition/Non-Solicitation. As a condition to, and in consideration of, the Company’s entering into this Agreement, and giving Executive access to certain confidential and proprietary information, which Executive recognizes is valuable to the Company and, therefore, its protection and maintenance constitutes a legitimate interest to be protected by the provisions of this Section 6 as applied to Executive and other employees similarly situated to Executive, and for ten dollars ($10) and other good and valuable consideration, the receipt and sufficiency of which Executive hereby acknowledges, Executive acknowledges and hereby agrees as follows:

(a) that Executive is and will be engaged in the business of the Company;

(b) that during the period of Executive’s Employment under this Agreement, Executive will become familiar with the Company’s trade secrets and with other proprietary and confidential information concerning the Company;

(c) that the obligations of this Agreement are directly related to the Employment and are necessary to protect the Company’s legitimate business interests; and that the Company’s need for the covenants set forth in this Agreement is based on the following: (i) the substantial time, money and effort expended and to be expended by the Company in developing technical designs, technology, processes, materials, equipment, marketing plans and similar confidential information; (ii) the fact that Executive will be personally entrusted with the Company’s confidential and proprietary information; (iii) the fact that, after having access to the Company’s technology and other confidential information, Executive could become a competitor of the Company; and (iv) the highly competitive nature of the Company’s industry, including the premium that competitors of the Company place on acquiring proprietary and competitive information; and

(d) that for a period commencing on the Effective Date and ending twelve (12) months following termination as provided in Section 11, Executive will not, directly or indirectly, serve as an employee, agent, consultant, stockholder, director, co-partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as consultant or advisor to, render services for (alone or in association with any person, firm, corporation or entity), or otherwise assist any person or entity that directly or indirectly engages or proposes to engage in (i) the same, or a substantially similar, type of business as that in which the Company engages; or (ii) the business of distribution or sale of (A) products and services distributed, sold or license by the Company at the time of termination; or (B) products and services proposed at the time of termination to be distributed, sold or licensed by the Company, anywhere in the United States (collectively, the “Territory”); provided, however

(e) that nothing contained herein shall be construed to prevent Executive from investing in the stock or securities of any competing corporation listed on any recognized national securities exchange or traded in the over the counter market in the United States, but only if (i) such investment is of a totally passive nature and does not involve Executive devoting time to the management or operations of such corporation and Executive is not otherwise involved in the business of such corporation; and if (ii) Executive and his associates (as such term is defined in Regulation 14(A) promulgated under the Securities Exchange Act of 1934, as amended, as in effect on the Effective Date), collectively, do not own, directly or indirectly, more than an aggregate of two percent (2%) of the outstanding stock or securities of such corporation.

(f) The Parties acknowledge that the foregoing restrictions, as well as the duration and the territorial scope thereof as set above, are under all of the circumstances reasonable and necessary for the protection of the Company and its business.

(g) The Parties agree that the restrictions set forth in Section 6(a) through (f) above shall not be applicable if this Agreement is terminated by Executive for good reason or by the Company without cause.

(h) Executive agrees that at no time after his employment with the Company will he engage in competition with the Company while making any use of the Company’s confidential information (as described in Section 4)(the “Confidential/Trade Secret Information”), or otherwise exploit or make use of the Confidential/Trade Secret Information. Executive agrees that during the twelve month period following the date his employment with the Company is terminated, he will not directly or indirectly accept or solicit, in any capacity, the business of any customer of the Company with whom Executive worked or otherwise had access to the Confidential/Trade Secret Information pertaining to the Company’s business with such customer during the last year of Executive’s employment with the Company, or solicit, directly or indirectly, or encourage any of the Company’s customers or suppliers to terminate their business relationship with the Company, or otherwise interfere with such business relationships.

(i) Executive agrees that during the twelve month period following the termination date of Executive’s employment with the Company, he shall not, directly or indirectly, solicit or otherwise encourage any employees of the Company to leave the employ of the Company, or solicit, directly or indirectly, any of the Company’s employees for employment. The Parties agree that the restrictions set forth in this Section 6(i) shall not be applicable if this Agreement is terminated by Executive for good reason or by the Company without cause.

(j) During his employment with the Company, Executive shall not: (a) interfere with the Company’s business relationship with its customers or suppliers, (b) solicit, directly or indirectly, or otherwise encourage any of the Company’s customers or suppliers to terminate their business relationship with the Company, or (c) solicit, directly or indirectly, or otherwise encourage any employees of the Company to leave the employ of the Company, or solicit any of the Company’s employees for employment.

(k) For the purposes of this Section 6, the term “Company” shall be deemed to include the Company Parties.

7. Legal Fees and Expenses. In the event of a lawsuit, arbitration, or other dispute-resolution proceeding between the Company and Executive arising out of or relating to this Agreement, the prevailing party, in the proceeding as a whole and/or in any interim or ancillary proceedings (e.g., opposed motions, including without limitation motions for preliminary or temporary injunctive relief) will be entitled to recover its reasonable attorneys’ fees and expenses unless the court or other forum determines that such a recovery would not serve the interests of justice.

8. Successors.

(a) This Agreement shall inure to the benefit of and be binding upon (i) the Company and its successors and assigns; (ii) Executive and Executive’s heirs and legal representatives, except that Executive’s duties and responsibilities under this Agreement are of a personal nature and will not be assignable or delegable in whole or in part; and (iii) the Executive Parties as provided in Section 10.

(b) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, Acquisition or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the “Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

9. Arbitration.

(a) Except as set forth in paragraph (b) of this Section 9 or to the extent prohibited by applicable law, any dispute, controversy or claim arising out of or relating to this Agreement will be submitted to binding arbitration before a single arbitrator in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect on the date of the demand for arbitration. The arbitration shall take place before a single arbitrator, who will be a lawyer. Unless otherwise agreed by the parties, the arbitration shall take place in Chicago, Illinois. The arbitrator is hereby directed to take all reasonable measures not inconsistent with the interests of justice to expedite, and minimize the cost of, the arbitration proceedings.

(b) To protect inventions, trade secrets, or other confidential information of Section 4, and/or to enforce the non-competition provisions of Section 6, the Company may seek temporary, preliminary, and/or permanent injunctive relief in a court of competent jurisdiction, in each case, without waiving its right to arbitration.

(c) At the request of either party, the arbitrator may take any interim measures he/she deems necessary with respect to the subject matter of the dispute, including measures for the preservation of confidentiality set forth in this Agreement.

(d) Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.

10. Indemnification.

(a) The Company agrees to indemnify and hold harmless Executive, his nominees and/or assigns (a reference in this Section 10 to Executive also includes a reference to Executive’s nominees and/or assigns) against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements (incurred in any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise), including without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any such action, suit, proceeding or investigation that is in any way related to the Executive’s employment with the Company (whether or not in connection with any action in which the Executive is a party). Such indemnification does not apply to acts performed by Executive, which are criminal in nature or a violation of law. The Company also agrees that Executive shall not have any liability (whether direct or indirect, in contract or tort, or otherwise) to the Company, for, or in connection with, the engagement of the Executive under the Agreement, except to the extent that any such liability resulted primarily and directly from Executive’s gross negligence and willful misconduct.

(b) These indemnification provisions shall be in addition to any liability which the Company may otherwise have to Executive or the persons indemnified below in this sentence and shall extend to the following: the Executive, his affiliated entities, partners, employees, legal counsel, agents, and controlling persons (within the meaning of the federal securities laws), and the officers, directors, employees, legal counsel, agents, and controlling persons of any of them (collectively, the “Executive Parties”).

(c) If any action, suit, proceeding or investigation is commenced, as to which any of the Executive parties propose indemnification under the Agreement, they shall notify the Company with reasonable promptness; provided however, that any failure to so notify the Company shall not relieve the Company from its obligations hereunder. The Executive Parties shall have the right to retain counsel of their own choice (which shall be reasonably acceptable by the Company) to represent them, and the Company shall pay fees, expenses and disbursements of such counsel; and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against the Executive Parties made with the Company’s written consent, which consent shall not be unreasonably withheld. The Company shall not, without the prior written consent of the party seeking indemnification, which shall not be unreasonably withheld, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to the party seeking indemnification of an unconditional release from all liability in respect of such claim.

(d) The indemnification provided by this Section 10 shall not be deemed exclusive of, or to preclude, any other rights to which those seeking indemnification may at any time be entitled under the Company's organizational documents, any law, agreement or vote of shareholders or disinterested Directors, or otherwise, or under any policy or policies of insurance purchased and maintained by the Company on behalf of Executive, both as to action in his Employment and as to action in any other capacity.

(f) Neither termination nor completion of the Employment shall effect these indemnification provisions which shall then remain operative and in full force and effect.

11. Termination.

This Agreement and the employment relationship created hereby will terminate (i) upon the disability or death of Executive under Section 11(a) or 11(b); (ii) with cause under Section 11(c); (iii) for good reason under Section 11(d); (iv) without good reason under Section 11(e); or (v) without cause under Section 11(f).

(a)

Disability. The Company shall have the right to terminate the employment of Executive under this Agreement for disability in the event Executive suffers an injury, illness, or incapacity of such character as to substantially disable him from performing his duties without reasonable accommodation by Executive hereunder for a period of more than thirty (30) consecutive days upon Company giving at least thirty (30) days written notice of termination.

(b)

Death. This Agreement will terminate immediately on the Death of the Executive.

(c)

With Cause. The Company may terminate this Agreement immediately, and without providing any prior written notice to Executive, at any time because of, (i) the indictment of Executive of an act or acts constituting a felony or other crime involving moral turpitude, dishonesty or theft or fraud; (ii) Executive’s negligence or insubordination in the performance of his duties hereunder, after having been given written notice with reasonable detail and an opportunity to cure within 15 days, unless the Company has experienced a material loss due to such negligence or insubordination, in which case Executive shall be terminated immediately without any opportunity to cure; (iii) Executive’s lack of performance of his duties hereunder, after having been given written notice with reasonable detail and an opportunity to cure within 15 days, unless the Company has experienced a material loss due to Executive’s lack of performance, in which case Executive shall be terminated immediately without any opportunity to cure; or (iv) Executive’s breach of any material provision of this Agreement (each “With Cause”).

(d)

Good Reason. The Executive may terminate his employment for “Good Reason” by giving Company ten (10) days written notice if:

(i)

he is assigned, without his express written consent, any duties materially inconsistent with his positions, duties, responsibilities, or status with the Company as of the date hereof, or a change in his reporting responsibilities or titles as in effect as of the date hereof;

(ii) his compensation is materially reduced;

(iii)

the Company does not pay any material amount of compensation due hereunder and then fails either to pay such amount within the ten (10) day notice period required for termination hereunder or to contest in good faith such notice. Further, if such contest is not resolved within thirty (30) days, the Company shall submit such dispute to arbitration under Section 8; or

(iv)

the requirement that Executive relocate to another location of the Company outside a thirty (30) mile radius from the location of Executive’s office as of the date hereof.

(e)

Without Good Reason. The Executive can terminate this Agreement at any time for any reason provided that he gives the Company thirty (30) days prior written notice of such intent to terminate.

(f)

Without Cause. The Company can terminate this Agreement at any time without cause.

12. Obligations of Company Upon Termination.

(a) In the event of the termination of Executive’s employment pursuant to Section 11 (a) or (b), Executive will be entitled only to the compensation earned by him hereunder as of the date of such termination plus eight (8) additional weeks of compensation at his then current salary, provided that the Executive executes and delivers to the Company a written release in form and substance satisfactory to the Company, of any and all claims against the Company and all directors and officers of the Company with respect to all matters arising out of Executive’s Employment hereunder, or the termination thereof (other than claims for entitlements under the terms of this Agreement or plans or programs of the Company in which Executive has accrued a benefit); and Executive does not breach any of his covenants and agreements which continue following the date of termination of this Agreement. Any Shares not Vested by Executive as of the termination date shall be forfeited and returned to the Company for cancellation.

(b) In the event of the termination of Executive’s employment pursuant to Section 11 (d) or (f), Executive will be entitled only to the compensation earned by him hereunder as of the date of such termination plus eight (8) additional weeks of compensation at his then current salary, provided that the Executive executes and delivers to the Company a written release in form and substance satisfactory to the Company, of any and all claims against the Company and all directors and officers of the Company with respect to all matters arising out of Executive’s Employment hereunder, or the termination thereof (other than claims for entitlements under the terms of this Agreement or plans or programs of the Company in which Executive has accrued a benefit); and Executive does not breach any of his covenants and agreements which continue following the date of termination of this Agreement. Any Shares not Vested by Executive as of the termination date shall immediately vest to Executive.

(c) In the event of the termination of Executive’s employment pursuant to Section 11(c) or 11(e), Executive will be entitled only to the compensation earned by him hereunder as of the date of such termination. Any Shares not Vested by Executive as of the termination date shall be forfeited and returned to the Company for cancellation.

(d) Upon termination of Executive’s Employment hereunder, or on demand by the Company during the Term of this Agreement, Executive will immediately deliver to the Company, and will not keep in his possession, recreate or deliver to anyone else, any and all Company property, as well as all devices and equipment belonging to the Company (including computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings blueprints, sketches, materials, photographs, charts, all documents and property, and reproductions of any of the aforementioned items that were developed by Executive pursuant to his employment with the Company, obtained by Executive in connection with his Employment with the Company, or otherwise belonging to the Company, its successors or assigns, including, without limitation, those records maintained pursuant to this Agreement.

13. Other Provisions.

(a) All notices and statements with respect to this Agreement must be in writing. Notices to the Company shall be delivered to the President of the Company. Notices to Executive may be delivered to Executive in person or sent to Executive’s then-current mailing address as indicated in the Company’s records.

(b) This Agreement sets forth the entire agreement of the parties concerning the subjects covered herein; there are no promises, understandings, representations, or warranties of any kind concerning those subjects except as expressly set forth in this Agreement.

(c) Any modification of this Agreement must be in writing and signed by all parties; any attempt to modify this Agreement, orally or in writing, not executed by all parties will be void.

(d) If any provision of this Agreement, or its application to anyone or under any circumstances, is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability will not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and will not invalidate or render unenforceable such provision or application in any other jurisdiction.

(e) This Agreement will be governed and interpreted under the laws of the United States of America and the laws of the State of Illinois.

(f) No failure on the part of any party to enforce any provisions of this Agreement will act as a waiver of the right to enforce that provision.

(g) Section headings are for convenience only and shall not define or limit the provisions of this Agreement.

(h) This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. A copy of this Agreement signed by one party and faxed to another party shall be deemed to have been executed and delivered by the signing party as though an original. A photocopy of this Agreement shall be effective as an original for all purposes.

(i) Non-Disparagement. Executive will not at any time (during or after Executive’s employment with Company) disparage the reputation of Company, its affiliates and their respective customers and merchants and its or their respective officers, managers, directors, agents or employees.

(j) Cooperation. Executive agrees to cooperate both during and after Executive's employment with the Company, at the Company's sole cost and expense, with the investigation by the Company involving the Company or any employee or agent of the Company.

(k) No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

(l) Limitation as to Amounts Payable. In the event that any payment, coverage or benefit provided under this Agreement would, in the opinion of counsel for the Company, not be deemed to be deductible in whole or in part in the calculation of the Federal income tax of Company, or any other person making such payment or providing such coverage or benefit, by reason of Section 280G of Internal Revenue Code of 1986, as amended (the “Code”), the aggregate payments, coverages or benefits provided under this Agreement shall be reduced to the "safe harbor" level under Section 280G so that the entire amount which is paid to Executive shall be deductible notwithstanding the provisions of Section 280G of the Code.

(m) Executive Withholdings and Deductions. All payments to Executive hereunder shall be subject to such withholding and other Executive deductions as may be required by law.

(n) Legal Counsel. Executive acknowledges and warrants that (A) he has been advised that Executive's interests may be different from the Company's interests, (B) he has been afforded a reasonable opportunity to review this Agreement, to understand its terms and to discuss it with an attorney and/or financial advisor of his choice and (C) he knowingly and voluntarily entered into this Agreement. The Company and Executive shall each bear their own costs and expenses in connection with the negotiation and execution of this Agreement.

[Remainder of page left intentionally blank.]

This Agreement contains provisions requiring binding arbitration of disputes. By signing this Agreement, Executive acknowledges that he (i) has read and understood the entire Agreement; (ii) has received a copy of it (iii) has had the opportunity to ask questions and consult counsel or other advisors about its terms; and (iv) agrees to be bound by it. Executed on the Effective Date.

EPAZZ, INC.:

EXECUTIVE:

By: /s/ Shaun Passley

/s/ Shaun Passley

Its: Sole Director and President

Shaun Passley

Printed Name: Shaun Passley

Date: 09/14/2012