Employment Agreement - Transaction Systems Architects Inc. and Philip G. Heasley
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of March 8,
2005 (the "Effective Date") between Transaction Systems Architects, Inc., a
Delaware corporation (the "Company"), and Philip G. Heasley ("Executive").
RECITALS:
WHEREAS, the Company desires to employ Executive as the President and
Chief Executive Officer of the Company, and Executive desires to accept
employment as the President and Chief Executive Officer of the Company;
WHEREAS, as of the Effective Date, the Company shall employ Executive
on the terms and conditions set forth in this Agreement, and Executive shall be
retained and employed by the Company to perform such services under the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions. Certain words or phrases with initial capital
letters not otherwise defined herein shall have the meanings set forth
in Section 8 hereof.
2. Employment. The Company shall employ Executive, and Executive accepts
employment with the Company as of the Effective Date, upon the terms
and conditions set forth in this Agreement for the period beginning on
the Effective Date and ending as provided in Section 5 hereof (the
"Employment Period").
3. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
President and Chief Executive Officer of the Company and shall
have the normal duties, responsibilities and authority of an
executive serving in such position, subject to the power of the
Board of Directors of the Company (the "Board") to provide
oversight and direction with respect to such duties,
responsibilities and authority, either generally or in specific
instances and consistent with such position. So long as Executive
is the President and Chief Executive Officer of the Company, the
Board will nominate Executive to serve as a member of the Board.
(b) Executive shall report to the Board.
(c) During the Employment Period, Executive shall devote Executive's
best efforts and Executive's full business time and attention
(except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the
Company, its subsidiaries and affiliates. Executive shall perform
Executive's duties and responsibilities to the best of
Executive's abilities in a diligent, trustworthy, business-like
and efficient manner. During the Employment Period, Executive may
not serve as a director or a principal of another company
without the Board's prior consent.
(d) Executive shall perform Executive's duties and responsibilities
principally in the metropolitan area of the Company's
headquarters.
(e) Within six months of entering into this Agreement (or within such
longer time period as may be determined by the Board under
compelling circumstances), Executive shall acquire through
purchase on the NASDAQ National Market System at least 100,000
shares (the "Threshold Ownership") of the Company's common
stock. Once Executive meets the Threshold Ownership, he shall at
all times during the Initial Employment Period (as defined in
Section 5 below) continue to meet the Threshold Ownership.
4. Compensation and Benefits.
(a) Salary. The Company agrees to pay Executive a salary during the
Employment Period in installments based on the Company's payroll
practices as may be in effect from time to time. Executive's
salary during the Initial Employment Period (as defined in
Section 5) shall be at the rate of $500,000 per year ("Base
Salary"). For any renewal periods as set forth in Section 5(b)
below, the amount of the Executive's Base Salary will be mutually
agreed to by the Board and Executive. Notwithstanding the
foregoing, the Board may decrease Executive's Base Salary only
if, as a result of a reasonable business judgement of the Board,
there is an across-the-board salary reduction for all executive
level management employees of the Company. If there is any
modification to the Base Salary as defined herein, "Base Salary"
in this Agreement will refer to such modified Base Salary.
(b) Bonus.
(i) Executive will be entitled to an annual targeted bonus of
$500,000, based on the achievement of performance criteria
to be mutually determined by Executive and the Board. This
bonus will be pro-rated based on the number of full fiscal
quarters that the Executive is employed with the Company
during fiscal year 2005 (i.e., Executive will be entitled
to a targeted bonus for fiscal year 2005 of $250,000) and
any earned bonus will be payable to Executive in a lump
sum after the end of the fiscal year.
(ii) Following fiscal year 2005 and during the Initial
Employment Period, Executive will be eligible for a bonus
under the Company's Management Incentive Compensation Plan
(or any successor plan), with a targeted annual bonus of
$500,000 and with such performance criteria as are
approved by the Board for each fiscal year. During any
renewal period as set forth in Section 5(b) below,
Executive's bonus will be mutually agreed to by the Board
and Executive.
(c) Stock Options. In connection with Executive's entering into
employment with the Company, Executive will receive a stock
option grant with respect to 1,000,000 shares of the Company's
common stock under the Company's 2005 Equity and Performance
Incentive Plan. The terms and conditions for the grant shall be
as set forth in the stock option agreement attached hereto as
Exhibit A.
(d) Prior Equity Awards. To the extent that Executive is required to
forfeit unvested equity awards (the "Prior Awards") granted to
him by Fidelity National Financial, Inc. ("FNF") as a result of
his resignation from the Board of Directors of FNF, the
Company shall pay to Executive the lost economic value of such
Prior Awards, as such value is mutually agreed to by the parties,
but in no event shall the payment under this Section 4(d) exceed
$150,000.
(e) Expense Reimbursement. The Company shall reimburse Executive for
all reasonable expenses incurred by Executive during the
Employment Period in the course of performing Executive's duties
under this Agreement that are consistent with the Company's
policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the
Company's requirements applicable generally with respect to
reporting and documentation of such expenses.
(f) Relocation. Executive agrees to relocate his residence to a
location reasonably proximate to the Company's headquarters in
Omaha, Nebraska as soon as reasonably practicable following the
Effective Date. In connection with the relocation, Executive will
be entitled to the relocation benefits available to senior
executives of the Company, but no event will reimbursement of
real estate commissions on the sale of Executive's home be in
excess of $160,000.
(g) Standard Executive Benefits Package. Executive shall be entitled
during the Employment Period to participate, on the same basis as
other executives of the Company, in the Company's Standard
Executive Benefits Package. The Company's "Standard Executive
Benefits Package" means those benefits (including insurance and
other benefits, but excluding, except as hereinafter provided in
Section 6, any severance pay program or policy of the Company)
for which substantially all of the executives of the Company
are from time to time generally eligible, as determined from time
to time by the Board. Notwithstanding the foregoing, Executive
shall be entitled to four weeks of paid vacation per calendar
year.
(h) Professional Fees. The Company shall be responsible for the
payment of Executive's legal fees and costs (and related
disbursements) incurred in connection with Executive's initial
employment and matters relating to the negotiation and execution
of this Agreement, in an amount not to exceed $15,000.
(i) Change in Control Compensation. Notwithstanding anything to the
contrary contained herein, Executive shall be entitled to the
compensation provided in the Change in Control Severance
Compensation Agreement, attached hereto as Exhibit B (the "Change
in Control Agreement"), pursuant to the terms stated in such
agreement.
(j) Additional Compensation/Benefits. Any compensation or benefits to
be provided to Executive during the Employment Period other than
as set forth in this Agreement, including, without limitation,
any future grant of stock options or other equity awards, shall
be determined by the Board in its sole discretion.
5. Employment Period.
(a) Except as hereinafter provided, the Employment Period shall
commence on the Effective Date and shall continue until, and
shall end upon, the fourth anniversary of the Effective Date
(the "Initial Employment Period").
(b) On the fourth anniversary of the Effective Date and on each
anniversary thereafter, unless the Employment Period shall have
ended pursuant to Section 5(c) below or the Company shall have
given Executive 30 days written notice that the extension
provision in this sentence shall not apply, the Employment Period
shall be extended for an additional year.
(c) Notwithstanding (a) or (b) above, the Employment Period shall end
early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) the Company's termination of Executive's employment on
account of Disability;
(iii) the Company's termination of Executive's employment for
Cause (a "Termination for Cause");
(iv) the Company's termination of Executive's employment
without Cause (a "Termination without Cause");
(v) Executive's termination of Executive's employment for
Good Reason (a "Termination for Good Reason"); or
(vi) Executive's termination of Executive's employment for any
reason other than Good Reason (a "Voluntary Termination").
6. Post-Employment Period Payments.
(a) At the end of the Employment Period for any reason, Executive
shall cease to have any rights to salary, bonus, expense
reimbursements or other benefits and Executive shall be entitled
to (i) any Base Salary which has accrued but is unpaid, any
reimbursable expenses which have been incurred but are unpaid,
and any unexpired vacation days which have accrued under the
Company's vacation policy but are unused, as of the end of the
Employment Period, (ii) any plan benefits which by their terms
extend beyond termination of Executive's employment (but only to
the extent provided in any such benefit plan in which Executive
has participated as an employee of the Company and excluding,
except as hereinafter provided in Section 6, any severance pay
program or policy of the Company) and (iii) any benefits to which
Executive is entitled under Part 6 of Subtitle B of Title I of
the Employee Retirement Income Security Act of 1974, as amended
("COBRA"). In addition, Executive shall be entitled to the
additional benefits and amounts described in the succeeding
subsections of this Section 6, in the circumstances described in
such subsections.
(b) If the Employment Period ends pursuant to Section 5 hereof on
account of Executive's death, Disability or Voluntary
Termination, or on account of a Termination for Cause, the
Company shall make no further payments to Executive except as
contemplated in subsection (a) above.
(c) If the Employment Period ends early pursuant to Section 5 hereof
on account of a Termination without Cause or a Termination for
Good Reason, Executive shall be entitled to the following:
(i) a lump sum payment equal to Executive's bonus for the
quarter in which the Employment Period ends; provided,
however, that if such Termination without Cause or
Termination for Good Reason occurs at any time during
fiscal year 2005, this Section 6(c) shall not apply and
Executive shall not be entitled to any portion of the
bonus for fiscal year 2005;
(ii) a lump sum payment equal to two times the sum of (A)
Executive's Base Salary at the time of such termination,
plus (B) the Bonus Amount in effect at the time of such
termination; and
(iii) Executive shall be entitled to continue to participate, on
the same basis as active employees participate in such
plans, in the Company's medical and dental plans until the
earlier of (A) Executive's eligibility for any such
coverage under another employer's or any other medical or
dental insurance plans or (B) two years from the date of
termination of Executive's employment. In the event that
participation in any such plan is barred, the Company
shall reimburse Executive on a monthly basis for any
premiums paid by Executive to obtain benefits (for
Executive and his dependents) equivalent to the benefits
he is entitled to receive under the Company's benefit
plans. Executive agrees that the period of coverage under
such plans (or the period of reimbursement if
participation is barred) shall count against the plans'
obligation to provide continuation coverage pursuant to
COBRA.
(d) Notwithstanding the provisions of Section 6(c), no payments shall
be made under Section 6(c) if Executive declines to sign and
return a Release Agreement or revokes such Release Agreement
within the time provided therein. The Company shall make all
payments required to be made under Section 6(c) within 30 days
of the end of any revocation period relating to such Release
Agreement.
(e) Except as provided in Section 6(c)(iii) above, Executive shall
not be required to mitigate the amount of any payment or benefit
provided for in this Agreement by seeking other employment or
otherwise.
(f) Notwithstanding any other provision of this Agreement, no payment
will be made pursuant to this Agreement if Executive is entitled
to, and receives, payments or other benefits pursuant to the
Change in Control Agreement.
7. Competitive Activity; Confidentiality; Nonsolicitation.
(a) Acknowledgements and Agreements. Executive hereby acknowledges
and agrees that in the performance of Executive's duties to the
Company during the Employment Period, Executive will be brought
into frequent contact, either in person, by telephone or through
the mails, with existing and potential customers of the Company.
Executive also agrees that trade secrets and confidential
information of the Company, more fully described in Section 7(j)
of this Agreement, gained by Executive during Executive's
association with the Company, have been developed by the Company
through substantial expenditures of time, effort and money and
constitute valuable and unique property of the Company. Executive
further understands and agrees that the foregoing makes it
necessary for the protection of the business of the Company that
Executive not compete with the Company during the Employment
Period and not compete with the Company for a reasonable period
thereafter, as further provided in the following subsections.
(b) Covenants During the Employment Period. During the Employment
Period, Executive will not compete with the Company anywhere
within the United States. In accordance with this restriction,
but without limiting its terms, during the Employment Period,
Executive will not:
(i) enter into or engage in any business which competes with
the business of the Company;
(ii) solicit customers, business, patronage or orders for, or
sell, any products and services in competition with, or
for any business that competes with, the business of the
Company;
(iii) divert, entice or otherwise take away any customers,
business, patronage or orders of the Company or attempt to
do so; or
(iv) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other
entity engaged in any business which competes with the
business of the Company.
(c) Covenants Following Termination. For a period of one year
following the termination of Executive's employment for any
reason, Executive will not:
(i) enter into or engage in any business which competes with
the Company's business within the Restricted Territory
(as defined in Section 7(g));
(ii) solicit customers, business, patronage or orders for, or
sell, any products and services in competition with, or
for any business, wherever located, that competes with,
the Company's business within the Restricted Territory;
(iii) divert, entice or otherwise take away any customers,
business, patronage or orders of the Company within the
Restricted Territory, or attempt to do so; or
(iv) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other
entity engaged in any business which competes with the
Company's business within the Restricted Territory.
(d) Indirect Competition. For the purposes of Sections 7(b) and 7(c),
but without limitation thereof, Executive will be in violation
thereof if Executive engages in any or all of the activities set
forth therein directly as an individual on Executive's own
account, or indirectly as a partner, joint venturer, employee,
agent, salesperson, consultant, officer and/or director of any
firm, association, partnership, corporation or other entity, or
as a stockholder of any corporation or the owner of the interests
in any other entity, in which Executive or Executive's spouse,
child or parent owns, directly or indirectly, individually or in
the aggregate, more than five percent (5%) of the outstanding
stock or other ownership interests.
(e) The Company. For purposes of this Section 7, the Company shall
include any and all direct and indirect subsidiary, parent,
affiliated, or related companies of the Company.
(f) The Company's Business. For the purposes of Sections 7(b), 7(c),
7(k) and 7(l), the Company's business is defined to be the
development and sale of software products that facilitate
electronic payments, as further described in any and all
manufacturing, marketing and sales manuals and materials of the
Company as the same may be altered, amended, supplemented or
otherwise changed from time to time, or of any other products or
services substantially similar to or readily suitable for any
such described products and services.
(g) Restricted Territory. For the purposes of Section 7(c), the
Restricted Territory shall be defined as and limited to:
(i) the geographic area(s) within a 100 mile radius of any and
all Company location(s) in, to, or for which Executive
worked, to which Executive was assigned or had any
responsibility (either direct or supervisory) at the time
of termination of Executive's employment and at any time
during the one (1) year period prior to such termination;
and
(ii) all of the specific customer accounts, whether within or
outside of the geographic area described in (i) above,
with which Executive had any contact or for which
Executive had any responsibility (either direct or
supervisory) at the time of termination of Executive's
employment and at any time during the one (1) year period
prior to such termination.
(h) Extension. If it shall be judicially determined that Executive
has violated any of Executive's obligations under Section 7(c),
then the period applicable to each obligation that Executive
shall have been determined to have violated shall automatically
be extended by a period of time equal in length to the period
during which such violation(s) occurred.
(i) Non-Solicitation. For a period of two years following the
termination of Executive's employment for any reason, Executive
will not directly or indirectly solicit or induce or attempt to
solicit or induce any employee(s), sales representative(s),
agent(s) or consultant(s) of the Company and/or of its parent, or
its other subsidiary, affiliated or related companies to
terminate their employment, representation or other association
with the Company and/or its parent or its other subsidiary,
affiliated or related companies.
(j) Further Covenants.
(i) Executive will keep in strict confidence, and will not,
directly or indirectly, at any time during or after
Executive's employment with the Company, disclose,
furnish, disseminate, make available or, except in the
course of performing Executive's duties of employment, use
any trade secrets or confidential business and technical
information of the Company or its customers or vendors,
including without limitation as to when or how Executive
may have acquired such information. Such confidential
information shall include, without limitation, the
Company's unique selling, manufacturing and servicing
methods and business techniques, training, service and
business manuals, promotional materials, training courses
and other training and instructional materials, vendor and
product information, customer and prospective customer
lists, other customer and prospective customer information
and other business information. Executive specifically
acknowledges that all such confidential information,
whether reduced to writing, maintained on any form of
electronic media, or maintained in Executive's mind or
memory and whether compiled by the Company, and/or
Executive, derives independent economic value from not
being readily known to or ascertainable by proper means by
others who can obtain economic value from its disclosure
or use, that reasonable efforts have been made by the
Company to maintain the secrecy of such information, that
such information is the sole property of the Company and
that any retention and use of such information by
Executive during Executive's employment with the Company
(except in the course of performing Executive's duties and
obligations to the Company) or after the termination of
Executive's employment shall constitute a misappropriation
of the Company's trade secrets.
(ii) Executive agrees that upon termination of Executive's
employment with the Company, for any reason, Executive
shall return to the Company, in good condition, all
property of the Company, including without limitation, the
originals and all copies of any materials which contain,
reflect, summarize, describe, analyze or refer or relate
to any items of information listed in Section 7(j)(i) of
this Agreement. In the event that such items are not so
returned, the Company will have the right to charge
Executive for all reasonable damages, costs, attorneys'
fees and other expenses incurred in searching for, taking,
removing and/or recovering such property.
(k) Discoveries and Inventions; Work Made for Hire.
(i) Executive hereby assigns and agrees to assign to the
Company, its successors, assigns or nominees, all of
Executive's rights to any discoveries, inventions and
improvements, whether patentable or not, made, conceived
or suggested, either solely or jointly with others, by
Executive while in the Company's employ, whether in the
course of Executive's employment with the use of the
Company's time, material or facilities or that is in any
way within or related to the existing or contemplated
scope of the Company's business. Any discovery, invention
or improvement relating to any subject matter with which
the Company was concerned during Executive's employment
and made, conceived or suggested by Executive, either
solely or jointly with others, within one (1) year
following termination of Executive's employment under this
Agreement or any successor agreements shall be
irrebuttably presumed to have been so made, conceived or
suggested in the course of such employment with the use of
the Company's time, materials or facilities. Upon request
by the Company with respect to any such discoveries,
inventions or improvements, Executive will execute and
deliver to the Company, at any time during or after
Executive's employment, all appropriate documents for use
in applying for, obtaining and maintaining such domestic
and foreign patents as the Company may desire, and all
proper assignments therefor, when so requested, at the
expense of the Company, but without further or additional
consideration.
(ii) Executive acknowledges that, to the extent permitted by
law, all work papers, reports, documentation, drawings,
photographs, negatives, tapes and masters therefor,
prototypes and other materials (hereinafter, "items"),
including without limitation, any and all such items
generated and maintained on any form of electronic media,
generated by Executive during Executive's employment with
the Company shall be considered a "work made for hire" and
that ownership of any and all copyrights in any and all
such items shall belong to the Company. The item will
recognize the Company as the copyright owner, will contain
all proper copyright notices, e.g., "(creation date)
[Company Name], All Rights Reserved," and will be in
condition to be registered or otherwise placed in
compliance with registration or other statutory
requirements throughout the world.
(l) Communication of Contents of Agreement. During Executive's
employment and for one (1) year thereafter, Executive will
communicate the contents of this Agreement to any person, firm,
association, partnership, corporation or other entity which
Executive intends to be employed by, associated with, or
represent.
(m) Relief. Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of Executive's
obligations under this Agreement would be inadequate. Executive
therefore agrees that, in addition to any other rights or
remedies that the Company may have at law or in equity, temporary
and permanent injunctive relief may be granted in any proceeding
which may be brought to enforce any provision contained in
Sections 7(b), 7(c), 7(d), 7(h), 7(i), 7(j), 7(k) and 7(l) of
this Agreement, without the necessity of proof of actual damage.
(n) Reasonableness. Executive acknowledges that Executive's
obligations under this Section 7 are reasonable in the context of
the nature of the Company's business and the competitive injuries
likely to be sustained by the Company if Executive was to violate
such obligations. Executive further acknowledges that this
Agreement is made in consideration of, and is adequately
supported by the agreement of the Company to perform its
obligations under this Agreement and by other consideration,
which Executive acknowledges constitutes good, valuable and
sufficient consideration.
8. Definitions.
(a) "Base Period" means the two most recent fiscal years of the
Company ending prior to the date of Executive's termination of
employment; provided, however that if Executive was not an
employee of the Company (or a Predecessor Entity or a Related
Entity, as such terms are defined in Section 8 hereof) at any
time during one of such two fiscal years, the Base Period is the
one fiscal year of such two-fiscal year period during which
Executive performed personal services for the Company or a
Predecessor Entity or a Related Entity.
(b) "Bonus Amount" means the quotient of (i) the total of the annual
bonus amounts described in Section 4(b) of this Agreement
received by Executive during the fiscal year or years comprising
the Base Period, divided by (ii) the number of the Company's
fiscal years in the Base Period.
(c) "Cause" means the occurrence of any of the following events prior
to the termination of the Employment Period:
(i) Executive's conviction of a felony involving moral
turpitude;
(ii) Executive's serious, willful gross misconduct or
Executive's repeated failure or refusal to perform or
observe Executive's material duties, responsibilities and
obligations as an employee or officer of the Company for
reasons other than Disability, if such misconduct, failure
or refusal continues ten days following written notice
thereof by the Company to Executive identifying the same
and specifying that Executive's employment may be
terminated if the same continues;
(iii) Executive's breach of any provision of Section 7 of this
Agreement, which is not cured within three days after
written notice thereof to Executive; or
(iv) Executive's violation of any provision of the Company's
Code of Business Conduct and Ethics or the Company' Code
of Ethics for the Chief Executive Officer and Senior
Financial Officers, as the same may be amended from time
to time.
For purposes of this Agreement, any termination of Executive's
employment by the Company for Cause shall be authorized by a vote
of at least a majority of the non-employee members of the Board.
No termination for Cause shall take effect until the expiration
of the correction period, if any, described above and the
determination by a majority of the non-employee members of the
Board that Executive has failed to correct the act or failure to
act.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Disability" means, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been unable,
with or without a reasonable accommodation, to perform his
duties with the Company on a full-time basis for six months and,
within 30 days after a written notice of termination of
employment is thereafter given by the Company, Executive shall
not have returned to the full-time performance of Executive's
duties.
(f) "Good Reason" means a material adverse change in Executive's
title, duties, authority or reporting relationship, without
Executive's consent, excluding any inadvertent change that is
remedied by the Company promptly after receipt of a written
notice thereof from Executive or any other material breach of
this Agreement that is not remedied by the Company promptly after
receipt of a written notice thereof from Executive; provided,
however, that during the two year period following a Change in
Control (as such phrase is defined in the Change in Control
Agreement), no Good Reason for termination shall have occurred
under this Agreement unless Good Reason for termination exists
under the terms of the Change in Control Agreement.
(g) "Predecessor Entity" is any entity which, as a result of a
merger, consolidation, purchase or acquisition of property or
stock, corporate separation, or other similar business
transaction transfers some or all of its employees to the Company
or to a Related Entity or to a Predecessor Entity of the Company.
(h) "Related Entity" includes any entity treated as a single employer
with the Company in accordance with subsections (b), (c), (m)
and (o) of Code Section 414.
(i) "Release Agreement" means an agreement, substantially in a form
approved by the Company, pursuant to which Executive releases all
current or future claims, known or unknown, arising on or before
the date of the release against the Company, its subsidiaries and
its officers.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that this Agreement becomes operative and it is
determined (as hereafter provided) that any payment (other than
the Gross-Up payments provided for in this Section 9 and Annex A)
or distribution by the Company or any of its affiliates to or for
the benefit of Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without
limitation any stock option, performance share, performance unit,
stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code
(or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of
the Company, within the meaning of Section 280G of the Code (or
any successor provision thereto) or to any similar tax imposed by
state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the
"Excise Tax"), then Executive will be entitled to receive an
additional payment or payments (collectively, a "Gross-Up
Payment"). The Gross-Up Payment will be in an amount such that,
after payment by Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including any
Excise Tax imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payment. For purposes of determining the amount of the
Gross-Up Payment, Executive will be considered to pay (x) federal
income taxes at the highest rate in effect in the year in which
the Gross-Up Payment will be made and (y) state and local income
taxes at the highest rate in effect in the state or locality in
which the Gross-Up Payment would be subject to state or local
tax, net of the maximum reduction in federal income tax that
could be obtained from deduction of such state and local taxes.
(b) The obligations set forth in Section 9(a) will be subject to the
procedural provisions described in Annex A.
10. Executive Representations. Executive represents and warrants to the
Company that (a) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument,
order, judgment or decree to which Executive is a party or by which
Executive is bound, (b) Executive is not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement
with any other person or entity and (c) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and
binding obligation of Executive, enforceable in accordance with its
terms.
11. Survival. Subject to any limits on applicability contained therein,
Section 7 hereof shall survive and continue in full force in accordance
with its terms notwithstanding any termination of the Employment
Period.
12. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any applicable law,
regulation or ruling.
13. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, sent by reputable overnight
carrier or mailed by first class mail, return receipt requested, to the
recipient at the address below indicated:
Notices to Executive:
Philip G. Heasley
c/o Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, NE 68154
Notices to the Company:
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, NE 68154
Attn: General Counsel
or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the
sending party. Any notice under this Agreement will be deemed to have
been given when so delivered, sent or mailed.
14. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
15. Complete Agreement. This Agreement embodies the complete agreement and
understanding between the parties with respect to the subject matter
hereof and effective as of its date supersedes and preempts any prior
understandings, agreements or representations by or between the
parties, written or oral, which may have related to the subject matter
hereof in any way.
16. Counterparts. This Agreement may be executed in separate counterparts,
each of which shall be deemed to be an original and both of which taken
together shall constitute one and the same agreement.
17. Successors and Assigns. This Agreement shall bind and inure to the
benefit of and be enforceable by Executive, the Company and their
respective heirs, executors, personal representatives, successors and
assigns, except that neither party may assign any rights or delegate
any obligations hereunder without the prior written consent of the
other party. Executive hereby consents to the assignment by the Company
of all of its rights and obligations hereunder to any successor to the
Company by merger or consolidation or purchase of all or substantially
all of the Company's assets, provided such transferee or successor
assumes the liabilities of the Company hereunder.
18. Choice of Law. This Agreement shall be governed by the internal law,
and not the laws of conflicts, of the State of Nebraska.
19. Amendment and Waiver. The provisions of this Agreement may be amended
or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing
the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
20. American Jobs Creation Act. Notwithstanding anything to the contrary in
this Agreement, in the event that it is determined that any payment to
be made under this Agreement is considered "nonqualified deferred
compensation" subject to Section 409A of the American Jobs Creation Act
of 2004, payment under this Agreement will be delayed for six months
following termination of employment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Transaction Systems Architects, Inc.
By: /s/ Dennis P. Byrnes
------------------------------------
Name: Dennis P. Byrnes
Title: Senior Vice President and
General Counsel
/s/ Philip G. Heasley
---------------------------------------
Executive
Annex A - Procedural provisions regarding the Gross Up Payment
Exhibit A - Stock Option Agreement (2005 Equity and Performance Incentive Plan)
Exhibit B - Change in Control Severance Compensation Agreement
<PAGE>
Annex A
Excise Tax Gross-Up Procedural Provisions
(1) Subject to the provisions of Paragraph 5, all determinations required to be
made under Section 9 and Annex A, including whether an Excise Tax is
payable by Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to Executive and the
amount of such Gross-Up Payment, if any, will be made by a nationally
recognized accounting firm (the "National Firm") selected by Executive in
Executive's sole discretion. Executive will direct the National Firm to
submit its determination and detailed supporting calculations to both the
Company and Executive within 30 calendar days after the date of termination
of Executive's employment, if applicable, and any such other time or times
as may be requested by the Company or Executive. If the National Firm
determines that any Excise Tax is payable by Executive, the Company will
pay the required Gross-Up Payment to Executive within five business days
after receipt of such determination and calculations with respect to any
Payment to Executive. If the National Firm determines that no Excise Tax is
payable by Executive with respect to any material benefit or amount (or
portion thereof), it will, at the same time as it makes such determination,
furnish the Company and Executive with an opinion that Executive has
substantial authority not to report any Excise Tax on Executive's federal,
state or local income or other tax return with respect to such benefit or
amount. As a result of the uncertainty in the application of Section 4999
of the Code and the possibility of similar uncertainty regarding applicable
state or local tax law at the time of any determination by the National
Firm hereunder, it is possible that Gross-Up Payments that will not have
been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies pursuant to
Paragraph 5 and Executive thereafter is required to make a payment of any
Excise Tax, Executive will direct the National Firm to determine the amount
of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and Executive as
promptly as possible. Any such Underpayment will be promptly paid by the
Company to, or for the benefit of, Executive within five business days
after receipt of such determination and calculations.
(2) The Company and Executive will each provide the National Firm access to and
copies of any books, records and documents in the possession of the Company
or Executive, as the case may be, reasonably requested by the National
Firm, and otherwise cooperate with the National Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by Paragraph 1. Any determination by the National Firm as to
the amount of the Gross-Up Payment will be binding upon the Company and
Executive.
(3) The federal, state and local income or other tax returns filed by Executive
will be prepared and filed on a consistent basis with the determination of
the National Firm with respect to the Excise Tax payable by Executive.
Executive will report and make proper payment of the amount of any Excise
Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of Executive's federal income tax
return as filed with the Internal Revenue Service and corresponding state
and local tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of Executive's federal
income tax return, or corresponding state or local tax return, if
relevant, the National Firm determines that the amount of the Gross-Up
Payment should be reduced, Executive will within five business days pay to
the Company the amount of such reduction.
(4) The fees and expenses of the National Firm for its services in connection
with the determinations and calculations contemplated by Paragraph 1 will
be borne by the Company. If such fees and expenses are initially paid by
Executive, the Company will reimburse Executive the full amount of such
fees and expenses within five business days after receipt from Executive of
a statement therefor and reasonable evidence of Executive's payment
thereof.
(5) Executive will notify the Company in writing of any claim by the Internal
Revenue Service or any other taxing authority that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10 business days
after Executive actually receives notice of such claim and Executive will
further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent
known by Executive). Executive will not pay such claim prior to the
expiration of the 30-calendar-day period following the date on which
Executive gives such notice to the Company or, if earlier, the date that
any payment of amount with respect to such claim is due. If the Company
notifies Executive in writing prior to the expiration of such period that
it desires to contest such claim, Executive will:
(a) provide the Company with any written records or documents in
Executive's possession relating to such claim reasonably requested by
the Company;
(b) take such action in connection with contesting such claim as the
Company reasonably requests in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(c) cooperate with the Company in good faith in order effectively to
contest such claim; and
(d) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company will bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection with
such contest and will indemnify and hold harmless Executive, on an
after-tax basis, for and against any Excise Tax or income or other tax,
including interest and penalties with respect thereto, imposed as a result
of such representation and payment of costs and expenses. Without limiting
the foregoing provisions of this Paragraph 5, the Company will control all
proceedings taken in connection with the contest of any claim contemplated
by this Paragraph 5 and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that
Executive may participate therein at Executive's own cost and expense) and
may, at its option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company determines; provided, however, that
if the Company directs Executive to pay the tax claimed and sue for a
refund, the Company will advance the amount of such payment to Executive
on an interest-free basis and will indemnify and hold Executive harmless,
on an after-tax basis, from any Excise Tax or income or other tax,
including interest or penalties with respect thereto, imposed with respect
to such advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for the taxable year
of Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim will be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and Executive will
be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(6) If, after the receipt by Executive of an amount advanced by the Company
pursuant to Paragraph 5, Executive receives any refund with respect to such
claim, Executive will (subject to the Company's complying with the
requirements of Paragraph 5) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Paragraph 5, a determination is made
that Executive is not entitled to any refund with respect to such claim and
the Company does not notify Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after
such determination, then such advance will be forgiven and will not be
required to be repaid and the amount of any such advance will offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid by
the Company to Executive pursuant to Section 9 and this Annex A.
<PAGE>
Exhibit A
Stock Option Agreement (2005 Equity and Performance Incentive Plan)
<PAGE>
Exhibit B
Change in Control Severance Compensation Agreement