EXHIBIT 10.21
eFUNDS CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), Dated May 9, 2000, by and between eFunds
Corporation, a Delaware corporation (the "Company"), and Xxxx X. Xxxxxxxxx III
(the "Executive").
WHEREAS, the Company and the Executive wish to enter into an employment
agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and the Executive set forth below, the Company and
the Executive agree as follows:
I. Certain Definitions.
A. "Affiliate" shall mean a company controlled directly or indirectly by
the Company where "control" shall mean the right, either directly or
indirectly, to elect a majority of the directors thereof without the
consent or acquiescence of any third party.
B. "Beneficial Owner" shall have the meaning defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
C. "Business Combination" shall mean the occurrence of either a Change of
Control or an Other Business Combination.
D. "Change of Control" shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been
satisfied:
1. any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding
securities, excluding, at the time of their original acquisition,
from the securities acquired directly or beneficially by such
Person any securities acquired directly from the Company or its
Affiliates or in connection with a transaction described in
clause (a) of paragraph 3 below; or
2. the individuals who at the date of this Agreement constitute the
Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination
for election by the Company's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors as of
the date of this Agreement or whose appointment, election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or
3. there is consummated a merger or consolidation of the Company or
any Affiliate with any other company, other than (a) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any Affiliate, at least 65% of the combined
voting power of the voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (b) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
4. the shareholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
5. Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately
following which the record holders of the common stock of the
Company immediately prior to such transaction or series of
transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
E. "Other Business Combination" shall mean the occurrence of any merger,
exchange, transfer, or other form of business combination or
acquisition (but not including dispositions), whether involving
assets, shares or any other form of ownership interest, by the Company
or any of its Affiliates of or with one or more other corporations,
partnerships or other entities in a single transaction or a series
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of related transactions for consideration aggregating more than 40% of
the Company's total outstanding equity capitalization (number of
shares outstanding immediately prior to the transaction multiplied by
the average closing price of the Company's shares during the 30 day
period preceding the announcement of the transaction) or more
(regardless of the form of consideration or the method or time of
payment).
F. "Person" shall have the meaning defined in Sections 3(a)(9) and 13(d)
of the Securities Exchange Act of 1934, as amended, except that such
term shall not include (I) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly,
by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
II. Employment Period. Upon the terms and conditions set forth herein, the
Company hereby employs the Executive, and the Executive accepts such employment,
commencing on the date (the "Start Date") Deluxe Corporation, a Minnesota
corporation, ("Deluxe"), completes an exchange offer pursuant to which Deluxe
distributes all of its shares of the Company's common stock to its shareholders
in exchange for shares of Deluxe common stock (the "Split Off"). The term of
this Agreement shall commence upon the Start Date and shall continue until
December 31, 2002 (the "Employment Period"), unless earlier terminated as
provided in this Agreement. Upon the expiration of the Employment Period, the
Executive's employment with the Company will cease. The parties specifically
agree that any expiration of the Employment Period is not a termination of
employment within the meaning of Section V. of this Agreement. The parties
further agree that this Agreement is contingent upon the occurrence of the Split
Off and that if the Split Off does not so occur, this Agreement shall be void
and of no further effect.
III. Terms of Employment.
A. Position and Duties.
1. During the Employment Period, the Executive agrees to serve as
Chairman and Chief Executive Officer of the Company and to
perform such other reasonable employment duties, consistent with
the Executive's position and as the Board of Directors of the
Company (the "Board") shall assign to him from time to time.
2. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable efforts to perform faithfully and efficiently such
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responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (c) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
B. Compensation.
1. Base Salary. During the Employment Period, the Company shall pay
the Executive an annual base salary ("Annual Base Salary") of
$680,000.00 (or such higher amount as may be determined at the
discretion of the Board), which Annual Base Salary shall be paid
in accordance with the Company's normal payroll procedures and
policies.
2. Annual Bonus. In addition to Annual Base Salary, the Executive
shall be eligible to be paid, for each fiscal year ending during
the Employment Period (ratably apportioned in the case of any
fiscal year which is not included within the Employment Period in
its entirety) an annual bonus (the "Annual Bonus") in cash. The
Executive's target Annual Bonus for each fiscal year during the
Employment Period will be 100% of the Executive's Annual Base
Salary for that fiscal year, provided that the Annual Bonus paid
in each fiscal year during the Employment Period will be subject
to the terms and conditions of the Company's bonus plan
applicable to members of the Company's Executive Team. Each such
Annual Bonus shall be paid no later than the end of the third
month after the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus.
3. Stock Options. During the Employment Period, the Executive shall
be entitled to participate in the eFunds Corporation 2000 Stock
Incentive Plan on the same terms and conditions as other members
of the Company's Executive Team, it being understood and agreed
that Executive will be eligible for option grants commensurate
with his status as Chief Executive Officer.
4. Savings, Retirement and Other Incentive Plans. During the
Employment Period, the Executive shall be entitled to participate
in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other members of
the Company's Executive Team.
5. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under all welfare
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benefit plans, practices, policies and programs provided by the
Company (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the
Executive and/or the Executive's family, to the extent applicable
generally to other members of the Company's Executive Team.
6. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the
policies, practices and procedures of the Company.
7. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, use or
reimbursement for the use of an automobile, as the case may be,
and payment of related expenses, in accordance with the plans,
practices, programs and policies of the Company.
8. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and holidays in accordance with the
plans, policies, programs and practices of the Company.
9. Supplemental Retirement Payment. In recognition of the fact that
the Executive has terminated the October 11, 1995 memorandum from
Deluxe Corporation to the Executive (the "Memorandum"), which
Memorandum was designed to provide the Executive with
supplemental retirement benefits, and in recognition that,
effective as of the Start Date, the Executive has waived any and
all rights to receive any payments and benefits pursuant to the
Memorandum, the Company will pay to the Executive, on or about
January 2, 2003, the total sum of $490,768.00, less legally
required deductions and withholdings. The Executive may elect to
receive this payment in a lump sum or as an actuarially
equivalent annuity over a 15 year period.
IV. Business Combination; Expiration of Employment Period. In the event of a
business combination (as defined in Section I.C.), the Company shall take all
such action as may be required fully and immediately to vest all outstanding,
unvested options that may have been granted to the Executive under the Company's
Stock Incentive Plan and any successor or replacement plan and all other
restricted shares, restricted stock units, and SARs theretofore granted the
Executive under any stock based compensation plan, except as may be otherwise
specifically provided in any given award agreement. Similarly, all outstanding,
unvested options, restricted shares, restricted stock units and SARs theretofore
granted to the Executive under any such plan shall, except as may be otherwise
specifically provided in any given award agreement, fully and immediately vest
upon the expiration of the Employment Period if the Executive remains in the
employ of the Company through such date of expiration.
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V. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give a Notice of
Termination to the Executive in accordance with Sections V.D. and
XII.B. of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company
shall terminate effective on the 30th day after receipt of the Notice
of Termination by the Executive (unless such date is extended as
provided in Section V.F.), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
B. Cause. The Company may terminate the Executive's employment during the
Employment Period with or without Cause. For purposes of this
Agreement, "Cause" shall mean:
1. the willful and continued failure of the Executive to perform
substantially the Executive's material duties with the Company
(other than any such failure resulting from incapacity due to
physical or mental illness, or any such actual or anticipated
failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section V.D. hereof), after a
written demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner
in which the Board believes that the Executive has not
substantially performed the Executive's duties, or
2. the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, (a) no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in the
best interests of the Company and (b) in the event of a dispute
concerning the application of this provision, no claim by the Company
that Cause exists shall be given effect unless the Company establishes
to the Committee (as defined in Section XII.J.) by clear and
convincing evidence that
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Cause exists. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
C. Good Reason. The Executive's employment during the Employment Period
may be terminated by the Executive for Good Reason or without Good
Reason. For purposes of this Agreement, "Good Reason" shall mean:
1. except with Executive's written consent given in his discretion,
the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section III.A. of this
Agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
2. any failure by the Company to comply with any of the provisions
of Section III.B. of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
3. the Company's requiring the Executive to maintain his principal
residence at any location outside the metropolitan
Minneapolis-St. Xxxx, Minnesota area;
4. any purported termination by the Company of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section V.D. hereof
and otherwise expressly permitted by this Agreement. For purposes
of this Agreement, no such purported termination shall be
effective;
5. any failure by the Company to comply with and satisfy Section
XI.C. of this Agreement; or
6. any request or requirement by the Company that the Executive take
any action or omit to take any action that is inconsistent with
or in violation of the Company's ethical guidelines and policies
or any professional ethical guidelines or principles that may be
applicable to the Executive.
For purposes of this Section V.C., any good faith claim of "Good
Reason" made by the Executive shall be presumed to be correct unless
the Company establishes to the Committee by clear and convincing
evidence that Good Reason does not
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exist. The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued
employment shall not constitute a consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason
hereunder.
D. Notice of Termination. Any purported termination of the Executive's
employment during the Employment Period (other than by reason of
death) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section XII.B. of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) indicates the specific termination
provision in this Agreement relied upon (or that Executive's
employment is being terminated by the Company without Cause or by the
Executive without Good Reason), (2) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under
the provision so indicated and (3) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). Further, a Notice of
Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph B.1. or B.2. above, and specifying the
particulars thereof in detail. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Disability, Good Reason
or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder;
E. Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or any other reason, the date of receipt
of the Notice of Termination or any later date specified therein, as
the case may be, (2) if the Executive's employment is terminated
during the term of this Agreement by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination, (3) if the
Executive's employment is terminated by reason of death during the
Employment Period, the Date of Termination shall be the date of death
of the Executive and (4) if the Executive's employment is terminated
by the Company for Disability, the date Executive's employment is
terminated as provided in Section V.A.; provided,
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however, the Date of Termination specified in this Section E. may be
extended to the date of termination (if applicable) provided in
Section V.F.
F. Dispute Concerning Termination. If within fifteen (15) days after any
Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section V.F.), the
party receiving such Notice of Termination notifies the other party
that a dispute exists concerning whether a termination has properly
been characterized as for Cause, Good Reason or Disability, the Date
of Termination shall be extended until the earlier of (i) the date on
which the Employment Period ends or (ii) the date on which the dispute
is finally resolved, either by mutual written agreement of the parties
or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given -------- ------- by the
Executive only if such notice is given in good faith and the Executive
pursues the resolution of such dispute with reasonable diligence.
G. Compensation During Dispute. If a purported termination occurs during
the Employment Period and the Date of Termination is extended in
accordance with Section V.F. hereof, the Company shall continue to pay
the Executive the full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, salary)
and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating
when the notice giving rise to the dispute was given, until the Date
of Termination, as determined in accordance with Section V.F. hereof.
VI. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for
Cause or Disability or by reason of the death of the Executive or if
the Executive shall terminate employment for Good Reason:
1. the Company shall pay to the Executive in a lump sum in cash
within 5 days after the Date of Termination the aggregate of the
following amounts:
(a) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid,
(ii) any Annual Bonus paid or payable in respect of the most
recently completed fiscal year of the Company, to the extent
such amount is determinable and not theretofore paid, and
(iii) unless otherwise specified by Executive or prhibited
by the terms of any deferral agreement, any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any
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accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in
clauses (i), (ii) and (iii) shall be hereinafter referred to
as the "Accrued Obligations"). In the event Executive's
Annual Bonus for the most recently completed fiscal year of
the Company is not determinable on the Date of Termination,
such Annual Bonus shall be paid to Executive in a lump sum,
in cash, within five days after the date the amount of such
Annual Bonus is determinable; and
(b) an amount equal to the remainder of the Annual Base Salary
that would have been earned by the Executive had the
Executive remained continuously employed throughout the
Employment Period; and
(c) an amount equal to the higher of (i) any Annual Bonus paid
or payable to the Executive in respect of any fiscal year
completed prior to the Date of Termination, including any
portion thereof which has been earned but deferred, or (ii)
the amount of the Annual Bonus(es) that would have been
earned by the Executive had the Executive remained
continuously employed throughout the Employment Period and
had the Executive been awarded a target Annual Bonus of 100%
of the Executive's Annual Base Salary for each remaining
fiscal year in the Employment Period, multiplied, in each
case, by the remaining number of fiscal years which will end
during the remaining portion of the Employment Period.
2. to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided to the Executive or
which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section VI.B.
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable benefits provided by the Company to the estates and
beneficiaries of members of the Company's Executive Team under such
plans, programs, practices and policies relating to death benefits, if
any, as in
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effect with respect to other members of the Company's Executive Team
and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section VI.C.
shall include, and the Executive shall be entitled after the Date of
Termination to receive, disability and other benefits at least equal
to the most favorable of those generally provided by the Company to
disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other members of the
Company's Executive Team and their families.
D. Cause; Other than for Good Reason. If the Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other
than the obligation to pay to or provide the Executive with (1) his
Annual Base Salary through the Date of Termination, (2) the amount of
any compensation previously deferred by the Executive, and (3) Other
Benefits, in each case to the extent theretofore unpaid. If the
Executive terminates employment during the Employment Period,
excluding a termination for Good Reason or Disability, this Agreement
shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of
Other Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
VII. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any plan, program, policy
or practice provided by the Company and for which the Executive may qualify,
nor, shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contact or
agreement with the Company or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
VIII. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
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Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may incur in good faith as a result
of any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"). Such payments shall be
made within five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
IX. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any
payment or benefit received or to be received by the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, but determined without regard to any
additional payments required under this Section IX.) (collectively, a
"Payment") would be subject to the excise tax imposed by Section 4999
of the Code (or any successor section) or any interest or penalties
are incurred by the Executive with respect to such or any other excise
tax (any such tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of
this Section IX.A., if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Executive, after taking
into account the Payments and the Gross-Up Payment, would not receive
a net after-tax benefit of at least $50,000 (taking into account both
income taxes and any Excise Tax) as compared to the net after-tax
benefit the Executive would receive if the Gross-Up Payment were
eliminated and the Payments were reduced, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to the Executive and the Payments, in the aggregate, shall be
reduced to the Reduced Amount. For purposes of determining whether any
of the Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) all of the Payments shall be treated as
"parachute payments" (within the meaning of Section 280G(b) of the
Code (or any successor section)) unless, in the opinion of tax
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counsel ("Tax Counsel") reasonably acceptable to the Executive and
selected by the Accounting Firm (as defined below), such payments or
benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (ii) all
"excess parachute payments" within the meaning of Section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax unless, in
the opinion of Tax Counsel, such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount" (as defined in Section 280G(b)(3) of the
Code) allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Accounting Firm in accordance with the principals of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made
(determined by giving affect to the maximum loss of itemized
deductions that could be suffered by the Executive by virtue of his
receipt of the Gross-Up Payment) and state and local income taxes at
the highest marginal rate of taxation in the state and locality of
Executive's residence on the Date of Termination (or if there is no
Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section IX.A.), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
B. Subject to the provisions of Section IX.C., all determinations
required to be made under this Section IX., including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by Ernst & Young or such other certified public
accounting firm as may be designated by the Executive (the "Accounting
Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt
of notice from the Executive that a Payment has been made or will be
required, as the case may be, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting a
Business Combination, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section VII., shall be paid by the Company
to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been
13
made ("Underpayment") consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its remedies
pursuant to Section IX.C. and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
C. The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the
date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such
claim, the Executive shall:
1. give the Company any information reasonably requested by the
Company relating to such claim,
2. take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
3. cooperate with the Company in good faith in order to effectively
contest such claim, and
4. permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section IX.C., the Company shall control all proceedings taken in
connection with such contest 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 and
may, at its sole option, either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination
14
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall 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.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section IX.C., the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
IX.C.) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of any amount
advanced by the Company pursuant to Section IX.C., a determination is
made that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
E. The Gross-Up Payment shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amount of such Gross-Up Payment, and the limitation on such payments
set forth in Section IX.A. hereof, cannot be finally determined on or
before such day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Accounting Firm, of the
minimum amount of such Gross-Up Payment to which the Executive is
clearly entitled and shall pay the remainder of such payments
(together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when
due) at 120% of the rate provided in
15
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at 120% of the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from
Tax Counsel, the Accounting Firm or other advisors or consultants (and
any such opinions or advice which are in writing shall be attached to
the statement).
X. Confidential Information. During the term of this Agreement and for a period
of three (3) years thereafter, Executive will retain in confidence all
proprietary and confidential information concerning the Company, including,
without limitation, customer lists, cost and pricing information, employee data,
trade secrets and software and, shall return to the Company or destroy all
copies and extracts thereof (however and on whatever medium recorded), without
keeping any copies thereof. The foregoing obligation with respect to the
protection of confidential information shall not apply to (A) any information
which was known to the Executive prior to disclosure to the Executive by the
Company or Deluxe; (B) any information which was in the public domain prior to
its disclosure to the Executive; (C) any information which comes into the public
domain through no fault of the Executive; (D) any information which the
Executive is required to disclose by a court or similar authority or under
subpoena, provided that the Executive provides the Company with notice thereof
and assists, at the Company's sole expense, any reasonable endeavor by the
Company, using appropriate means, to obtain a protective order limiting the
disclosure of such information; and (E) any information which is disclosed to
the Executive by a third party which has a legal right to make such disclosure.
In no event shall an asserted violation of the provisions of this Section X.
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
XI. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives. If the Executive
shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon
the death of the Executive) if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume expressly
and agree to perform this
16
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.
Failure of the Company to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "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.
XII. Miscellaneous.
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
B. All notices and other communications hereunder shall be in writing and
shall be, addressed as follows:
If to the Executive:
Xxxx X. Xxxxxxxxx III
0000 Xxxxxx Xxxxx Xxxx
Xxxxx Xxxx Xxxx, XX 00000
If to the Company:
eFunds Corporation
Attn: General Counsel
000 Xxxx Xxxxxx Xxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, XX 00000
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be in writing and shall be effective five days after mailing, if
sent by first class, postage prepaid to the address set forth above,
two business days after mailing if sent by priority or overnight
courier (next business day delivery) or upon transmission if sent by
telecopy, with receipt of the correct answer back.
17
C. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
D. The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section V.C. of this Agreement,
shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
F. From and after the Start Date, this Agreement shall supersede any
other agreement between the parties with respect to the subject matter
hereof provided, including without limitation the Memorandum.
G. The obligations of the Company and the Executive under this Agreement
which by their nature may require either partial or total performance
after the expiration of the term of this Agreement (including, without
limitation, those under Section VI. hereof) shall survive such
expiration.
H. In the event that the Company is a party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (B) to the
extent that the application of clause (A) of this Section XII.H. does
not preserve the availability of such accounting treatment, then, the
Company may modify or limit the effect of the provisions of this
Agreement to the extent necessary to qualify the transactions as a
"pooling transaction" and provide the Executive with payments or
benefits as nearly equivalent as possible to those the Executive would
have received absent such modification or limitation; provided,
however, to the extent that any provision of this Agreement would
disqualify the transaction as a "pooling transaction" (including, if
applicable, the entire Agreement) and cannot otherwise be modified or
limited, such provision shall be null and void as of the date hereof.
All determinations under this Section XII.H. shall be made by the
accounting firm whose opinion with respect to "pooling of interests"
is required as a condition to the consummation of such transaction.
I. All claims by the Executive for benefits under this Agreement shall be
directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the
18
specific provisions of this Agreement relied upon. The Committee shall
afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty (60)
days after notification by the Committee that the Executive's claim
has been denied.
J. Notwithstanding any other provision in this Agreement to the contrary,
the Board of Directors of the Company shall delegate the
responsibilities, duties and powers specified under this Agreement to
be observed or performed by the "Committee" to a committee (the
"Committee") consisting of not less than three individuals who are
members of the Board of Directors of the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
eFunds Corporation Executive
By: /s/ Xxxxxx X. Xxxxxx, Xx. /s/ Xxxx X. Xxxxxxxxx III
------------------------------ -----------------------------------------
Xxxxxx X. Xxxxxx, Xx. Xxxx X. Xxxxxxxxx III
Chairman of the Compensation
Committee of the Board
of Directors of Deluxe
Corporation
19
