SEVERANCE COMPENSATION AGREEMENT (CHANGE IN CONTROL)
Exhibit 10.9
SEVERANCE COMPENSATION AGREEMENT
(CHANGE IN CONTROL)
(CHANGE IN CONTROL)
SEVERANCE COMPENSATION AGREEMENT dated as of
_____, 20_____
between ACI Worldwide, Inc.,
formerly known as Transaction Systems Architects, Inc., a Delaware corporation (the “Company”), and
_____
(the “Executive”).
WHEREAS, the Company’s Board of Directors has determined that it is appropriate to reinforce
and encourage the continued attention and dedication of the Executive to his assigned duties
without distraction in potentially disturbing circumstances arising from the possibility of a
change in control of the Company.
NOW, THEREFORE, this Agreement sets forth the severance compensation which the Company agrees
it will pay to the Executive if the Executive’s employment with the Company terminates under
certain circumstances described herein following a Change in Control (as defined herein) and the
other benefits the Company will provide the Executive following a Change in Control.
1. TERM.
This Agreement shall terminate, except to the extent that any obligation of the Company
hereunder remains unpaid as of such time, upon the earlier of (i) the termination of Executive’s
employment for any reason prior to a Change in Control; and (ii) three years after the date of a
Change in Control.
2. CHANGE IN CONTROL.
For purposes of this Agreement, Change in Control shall mean:
(a) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”), becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities
of the Company entitled to vote generally in the election of directors (the “Outstanding Company
Voting Securities”); provided, however, that, for purposes of this Section 2(a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any company controlled by, controlling
or under common control with the Company (“Affiliated Company”), (iv) any acquisition by any Person
pursuant to a transaction that complies with Sections 2(c)(A) and 2(c)(B); or (v) any acquisition
of beneficial ownership of not more than 25% of the Outstanding
Company Voting Securities by any
Person that is entitled to and does report such beneficial ownership on Schedule 13G under the Exchange Act
(a “13G Filer”), provided, however, that this clause (v) shall cease to apply when a Person who is
a Schedule 13G Filer becomes required to file a Schedule 13D under the Exchange Act with respect to
beneficial ownership of 20% or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities. Notwithstanding any other provision hereof, if a Business Combination (as
defined below) is completed during the two year period following the occurrence of a Change in
Control and the Outstanding Company Voting Securities are converted into voting securities of the
Combined Company (as defined below), but such Business Combination does not constitute a “Change in
Control” under Section 2(c), “Outstanding Company Voting Securities” shall thereafter mean voting
securities of the Combined Company entitled to vote generally in the election of the members of the
Combined Company Board.; or
(b) Any time at which individuals who, as of the date hereof, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the
Board other than as a result of a Business Combination that does not constitute a “Change in
Control” under Section 2(c)(A); provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board (an “Election Contest”); or
(c) Consummation of a reorganization, merger, statutory share exchange or consolidation or
similar transaction involving the Company or any of its subsidiaries, a sale or other disposition
of all or substantially all of the assets of the Company, or the acquisition of assets or stock of
another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each
case unless, following such Business Combination, (A) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination (the “Combined Company”)))
beneficially owns, directly or indirectly, such number of the then-Outstanding Company Voting
Securities as would constitute a “Change in Control” under Section 2(a), and at least one-half of
the members of the board of directors (or, for a non-corporate entity, equivalent governing body)
of the entity resulting from such Business Combination (the “Combined Company Board”) were members
of the Incumbent Board at the time of the execution of the initial agreement or of the action of
the Board providing for such Business Combination (the “Business Combination Agreement”), or (B)
the Executive and the Company, each acting in his, her or its respective sole discretion, enter
into an amendment to this Agreement providing for the Executive’s continued employment for not less
than two years at levels of compensation and benefits that in the aggregate are not substantially
less favorable to the Executive than those to which he or she was entitled prior to such Business
Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company.
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3. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) The Executive shall be entitled to the compensation provided in Section 4 of this
Agreement if all of the following conditions are satisfied:
(i) there is a Change in Control of the Company while the Executive is still an
employee of the Company;
(ii) the Executive’s employment with the Company is terminated within two years after
the Change in Control; and
(iii) the Executive’s termination of employment is not a result of (A) the Executive’s
death; (B) the Executive’s Disability (as defined in section 3(b) below); (C) the
Executive’s Retirement (as defined in section 3(c) below); (D) the Executive’s termination
by the Company for Cause (as defined in Section 3(d) below); or (E) the Executive’s decision
to terminate employment other than for Good Reason (as defined in Section 3(e) below).
(b) If, as a result of the Executive’s incapacity due to physical or mental illness, the
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 Notice of
Termination (as defined in Section 3(f) below) is thereafter given by the Company, the Executive
shall not have returned to the full-time performance of the Executive’s duties, the Company may
terminate the Executive’s employment for “Disability”. If there is a Change in Control of the
Company while the Executive is still an employee and if the Executive’s employment with the Company
is terminated for Disability within two years after the Change in Control, the Executive shall be
entitled to receive in a lump sum cash payment within five days after his Date of Termination (as
defined in section 3(g) below) the following:
(i) one times the Base Amount (as defined in Section 4(b)(i)) determined with respect
to the Base Period (as defined in Section 4(b)(ii)); plus
(ii) his earned but unpaid base salary through his Date of Termination; plus
(iii) a quarterly incentive award for the current fiscal quarter prorated through the
Date of Termination equal to the greater of (A) the quarterly incentive award (whether paid
or payable in cash or in securities of the Company) awarded to the Executive with respect to
the Company’s most recent fiscal quarter ending prior to the Date of Termination or (B) the
average quarterly incentive award (whether paid or payable in cash or in securities of the
Company) made to the Executive with respect to the Company’s most recent three fiscal years
ending prior to the Date of Termination; plus
(iv) interest on the amounts payable pursuant to clauses (i), (ii) and (iii) above
calculated from the Date of Termination until paid at a rate equal to the prime rate as
published in The Wall Street Journal on the Date of Termination plus three percentage
points.
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(c) For purposes of this Agreement only, “Retirement” shall mean termination by the Company or
the Executive of the Executive’s employment based on the Executive’s having reached age 65 or such
other age as shall have been fixed in any arrangement established pursuant to this Agreement with
the Executive’s consent with respect to the Executive.
(d) For purposes of this Agreement only, “Cause” shall mean: (i) the Executive’s conviction of
a felony involving moral turpitude; (ii) the Executive’s serious, willful gross misconduct or
willful gross neglect of duties (other than any such neglect resulting from the Executive’s
incapacity due to physical or mental illness or any such neglect after the issuance of a Notice of
Termination by the Executive for Good Reason, as such terms are defined in subsections (e) and (f)
below), which, in either case, has resulted, or in all probability is likely to result, in material
economic damage to the Company; provided no act or failure to act by the Executive will constitute
Cause under this clause (ii) if the Executive believed in good faith that such act or failure to
act was in the best interest of the Company; or (iii) the Executive’s violation of any provision of
(A) the Company’s Code of Business Conduct and Ethics, as the same may be amended from time to
time, or (B) the Company’s Code of Ethics for the Chief Executive Officer and Senior Financial
Officers, as the same may be amended from time to time (the “Code of Ethics”). For purposes of
clause (iii) of this subsection (d), the Executive shall be deemed to be subject to the provisions
of the Code of Ethics regardless of whether the Executive is a Senior Officer as defined in the
Code of Ethics or otherwise subject to the Code of Ethics.
For purposes of this Agreement only, any termination of the 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 of Directors of the Company (the “Board”) within 12 months of a majority of such
non-employee members of the Board having actual knowledge of the event or circumstances providing a
basis for such termination. In the case of clause (ii) of the second sentence of this subsection
(d), the Executive shall be given notice by the Board specifying in detail the particular act or
failure to act on which the Board is relying in proposing to terminate him for cause and offering
the Executive an opportunity, on a date at least 14 days after receipt of such notice, to have a
hearing, with counsel, before a majority of the non-employee members of the Board, including each
of the members of the Board who authorized the termination for Cause. The Executive shall not be
terminated for Cause if, within 30 days after the date of the Executive’s hearing before the Board
(or if the Executive waives a hearing, within 30 days after receiving notice of the proposed
termination), he has corrected the particular act or failure to act specified in the notice and by
so correcting such act or failure to act he has reduced the economic damage his act or failure to
act has allegedly caused the Company to a level which is no longer material or has eliminated the
probability that such act or failure to act is likely to result in material economic damage to the
Company. No termination for Cause shall take effect until the expiration of the correction period
described in the preceding sentence and the determination by a majority of the non-employee members
of the Board that the Executive has failed to correct the act or failure to act in accordance with
the terms of the preceding sentence.
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Anything herein to the contrary notwithstanding, if, following a termination of the
Executive’s employment by the Company for Cause based upon the conviction of the Executive for a
felony involving moral turpitude such conviction is finally overturned on appeal, the Executive
shall be entitled to the compensation provided in Sections 4(a) and 4(c). In lieu of the interest
provided in clause (iv) of the first sentence of Section 4(a) and the interest provided in the
second sentence of Section 4(c), however, the compensation provided in Sections 4(a) and 4(c) shall
be increased by a ten percent rate of interest, compounded annually, calculated from the date such
compensation would have been paid if the Executive’s employment had been terminated without Cause.
(e) For purposes of this Agreement, “Good Reason” shall mean, after any Change in Control and
without the Executive’s express written consent, any of the following:
(i) a significant diminution in the Executive’s duties and responsibilities, or the
assignment to the Executive by the Company of duties inconsistent with the Executive’s
position, duties, responsibilities or status with the Company immediately prior to a Change
in Control of the Company, or a change in the Executive’s titles or offices as in effect
immediately prior to a Change in Control of the Company, or any removal of the Executive
from or any failure to re-elect the Executive to any of such positions, except in connection
with the termination of his employment for Disability, Retirement or Cause or as a result of
the Executive’s death or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive’s annual rate of base salary as in
effect on the date hereof or as the same may be increased from time to time during the term
of this Agreement or the Company’s failure to increase (within 12 months of the Executive’s
last increase in his annual rate of base salary) the Executive’s annual rate of base salary
after a Change in Control of the Company in an amount which at least equals, on a percentage
basis, the greater of (A) the average percentage increase in the annual rate of base salary
for all officers of the Company effected in the preceding 12 months; or (B) the Consumer
Price Index as published by the United States Government (or, in the event such index is
discontinued, any similar index published by the United States Government as designated in
good faith by the Executive); provided, however, that nothing contained in this clause (ii)
shall he construed under any circumstances as permitting the Company to decrease the
Executive’s annual rate of base salary;
(iii) (A) any failure by the Company to continue in effect any benefit plan or
arrangement (including, without limitation, the life insurance, medical, dental, accident
and disability plans) in which the Executive is participating at the time of a Change in
Control of the Company, or any other plan or arrangement providing the Executive with
benefits that are no less favorable (hereinafter referred to as “Benefit Plans”), (B) the
taking of any action by the Company which would adversely affect the Executive’s
participation in or materially reduce the Executive’s benefits under any such Benefit Plan
or deprive the Executive of any material fringe benefit or perquisite of office enjoyed by
the Executive at the time of a Change in Control of the Company, unless in the case of
either sub-clause (A) or (B) above, there is substituted a comparable plan or program that
is economically equivalent or superior, in terms of the benefit offered to the
Executive, to the Benefit Plan being altered, reduced, affected or ended;
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(iv) (A) any failure by the Company to continue in effect any incentive plan or
arrangement (including, without limitation, the Company’s bonus arrangements, the
Transaction Systems Architects, Inc., Deferred Compensation Plan, the Transaction Systems
Architects, Inc. 401(k) Plan, the sales incentive plans, and the management incentive plans)
in which the Executive is participating at the time of a Change in Control of the Company,
or any other plans or arrangements providing him with substantially similar benefits,
(hereinafter referred to as “Incentive Plans”), (B) the taking of any action by the Company
which would adversely affect the Executive’s participation in any such Incentive Plan or
reduce the Executive’s benefits under any such Incentive Plan, unless in the case of either
sub-clause (A) or (B) above, there is substituted a comparable plan or program that is
economically equivalent or superior, in terms of the benefit offered to the Executive, to
the Incentive Plan being altered, reduced, affected or ended, or (C) any failure by the
Company with respect to any fiscal year to make an award to the Executive pursuant to each
such Incentive Plan or such substituted comparable plan or program equal to or greater than
the greater of (1) the award (whether paid or payable in cash or in securities of the
Company) made to the Executive pursuant to such Incentive Plan or such substituted
comparable plan or program with respect to the immediately preceding fiscal year or (2) the
average annual award (whether paid or payable in cash or in securities of the Company) made
to the Executive pursuant to such Incentive Plan or such substituted comparable plan with
respect to the prior three fiscal years (or such lesser number of prior fiscal years that
the Executive was employed by the Company or that the Incentive Plan (together with any
substituted comparable plan) was maintained);
(v) (A) any failure by the Company to continue in effect any plan or arrangement to
receive securities of the Company (including, without limitation, the Transaction Systems
Architects, Inc. 1999 Employee Stock Purchase Plan and the Transaction Systems Architects
Inc. 1999 Stock Option Plan) in which the Executive is participating at the time of a Change
in Control of the Company, or any other plan or arrangement providing him with substantially
similar benefits, (hereinafter referred to as “Securities Plans”), (B) the taking of any
action by the Company which would adversely affect the Executive’s participation in or
materially reduce the Executive’s benefits under any such Securities Plan, unless in the
case of either sub-clause (A) or (B) above, there is substituted a comparable plan or
program that is economically equivalent or superior, in terms of the benefit offered to the
Executive, to the Securities Plan being altered, reduced, affected or ended, or (C) any
failure by the Company in any fiscal year to grant stock options, stock appreciation rights
or securities awards to the Executive pursuant to such Securities Plans with respect to an
aggregate number of securities of the Company of each kind that is equal to or greater than
the greater of (1) the aggregate number of securities of the Company of that kind covered by
stock options, stock appreciation rights, or securities awards granted to the Executive
pursuant to such Securities Plans in the immediately preceding fiscal year; or (2) the
average annual aggregate number of securities of the Company of that kind covered by stock
options, stock appreciation rights, or securities awards granted to the Executive pursuant
to such Securities Plans in
the prior three fiscal years; and provided further the material terms and conditions of
such stock options, stock appreciation rights, and securities awards granted to the
Executive after the Change in Control (including, but not limited to, the exercise price,
vesting schedule, period and methods of exercise, expiration date, forfeiture provisions and
other restrictions) are substantially similar to the material terms and conditions of the
stock options, stock appreciation rights, and securities awards granted to the Executive
under the Securities Plans immediately prior to the Change in Control of the Company;
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(vi) the Executive’s relocation more than 50 miles from the location at which the
Executive performed the Executive’s duties prior to a Change in Control of the Company,
except for required travel by the Executive on the Company’s business to an extent
substantially consistent with the Executive’s business travel obligations at the time of a
Change in Control of the Company;
(vii) any failure by the Company to provide the Executive with the number of annual
paid vacation days to which the Executive is entitled for the year in which a Change in
Control of the Company occurs;
(viii) any material breach by the Company of any provision of this Agreement;
(ix) any failure by the Company to obtain the assumption of this Agreement by any
successor or assign of the Company prior to such succession or assignment;
(x) any failure by the Company or its successor to enter into an agreement with the
Executive that is substantially similar to this Agreement with respect to a Change in
Control of the Company or its successor occurring thereafter; or
(xi) any purported termination of the Executive’s employment by the Company pursuant to
Section 3(b), 3(c) or 3(d) above which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3(f) below (and, if applicable, Section 3(d) above),
and for purposes of this Agreement, no such purported termination shall be effective.
For purposes of this subsection (e), an isolated, immaterial, and inadvertent action not taken in
bad faith by the Company in violation of clause (ii), (iii), (iv), (v) or (vii) of this subsection
that is remedied by the Company promptly after receipt of notice thereof given by the Executive
shall not be considered Good Reason for the Executive’s termination of employment with the Company.
In the event the Executive terminates his employment for Good Reason hereunder, then
notwithstanding that the Executive may also retire for purposes of the Benefit Plans, Incentive
Plans or Securities Plans, the Executive shall be deemed to have terminated his employment for Good
Reason for purposes of this Agreement.
(f) Any termination of the Executive by the Company pursuant to Section 3(b), 3(c) or 3(d)
above, or by the Executive pursuant to Section 3(e) above, shall be communicated by a Notice of
Termination to the other party hereof. For purposes of this Agreement, a “Notice of Termination”
shall mean a written notice which shall indicate those specific termination
provisions in this Agreement relied upon and which 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. For purposes of this Agreement, no such purported termination by the
Company shall be effective without such Notice of Termination.
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(g) “Date of Termination” shall mean (i) if the Executive’s employment is terminated by the
Company for Disability, 30 days after Notice of Termination is given to the Executive (provided
that the Executive shall not have returned to the performance of the Executive’s duties on a
full-time basis during such 30-day period), (ii) if the Executive’s employment is terminated by the
Executive for Good Reason, the date specified in the Notice of Termination, and (iii) if the
Executive’s employment is terminated by the Company for any other reason, the date on which a
Notice of Termination is given; provided, however, that if within 30 days after any Notice of
Termination is given to the Executive by the Company, the Executive notifies the Company that a
dispute exists concerning the termination, the Date of Termination shall be the date the dispute is
finally determined, whether by mutual written agreement of the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
4. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT.
(a) If pursuant to Section 3(a) above the Executive is entitled to the compensation provided
in this Section 4, then the Company shall pay to the Executive in a lump sum cash payment within
five days after the Date of Termination the following:
(i) the Severance Amount as defined in Section 4(b) below; plus
(ii) his earned but unpaid base salary through his Date of Termination; plus
(iii) a quarterly incentive award for the current fiscal quarter prorated through the
Date of Termination equal to the greater of (A) the quarterly incentive award (whether paid
or payable in cash or in securities of the Company) awarded to the Executive with respect to
the Company’s most recent fiscal quarter ending prior to the Date of Termination or (B) the
average quarterly incentive award (whether paid or payable in cash or in securities of the
Company) made to the Executive with respect to the Company’s most recent three fiscal years
ending prior to the Date of Termination; plus
(iv) interest on the amounts payable pursuant to clauses (i), (ii) and (iii) above
calculated from the Date of Termination until paid at a rate equal to the prime rate as
published in The Wall Street Journal on the Date of Termination plus three percentage
points, compounded annually.
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(b) “Severance Amount” shall mean an amount equal to one times the Base Amount (as defined
below) determined with respect to the Base Period (as defined below); provided, however, in no
event shall the Severance Amount be less than two times the Executive’s annual rate of base salary
at the higher of the annual rate in effect (i) immediately prior to the Date of
Termination or (ii) on the date six months prior to the Date of Termination. For purposes of
this subsection (b):
(i) “Base Amount” means the Executive’s average fiscal-year Compensation (as
defined below) for fiscal years of the Company in the Base Period. Such average
shall be computed by dividing the total of the Executive’s Compensation for the Base
Period by the number of fiscal years in the Base Period. If the Executive’s Base
Period includes a portion of a fiscal year during which he was not an employee of
the Company (or a predecessor entity or a related entity, as such terms are defined
in clause (iii) below), the Executive’s Compensation for such fiscal year shall be
annualized before determining the average fiscal-year Compensation for the Base
Period. In annualizing Compensation, the frequency with which payments are expected
to be made over a fiscal year shall be taken into account; thus, any amount of
Compensation that represents a payment that will not be made more often than once
per fiscal year is not annualized. Set forth on Appendix A, which is attached
hereto and made a part hereof, are three examples illustrating the calculation of
the Base Amount.
(ii) “Base Period” means the most recent two consecutive fiscal years of the
Company ending prior to the Date of Termination. However, if the Executive was not
an employee of the Company (or a predecessor entity or a related entity, as such
terms are defined in clause (iii) below) at any time during one of such two fiscal
years, the Executive’s Base Period is the one fiscal year of such two-fiscal-year
period during which the Executive performed personal services for the Company or a
predecessor entity or a related entity.
(iii) “Compensation” means the compensation which was payable by the Company,
by a predecessor entity, or by a related entity and which was includible in the
gross income of the Executive (or either was excludible from such gross income as
“foreign earned income” within the meaning of Section 911 of the Internal Revenue
Code of 1986, as amended (the “Code”), or would have been includible in such gross
income if the Executive had been a United States citizen or resident), but excluding
the following: (A) amounts realized from the exercise of a non-qualified stock
option; and (B) amounts realized from the sale, exchange or other disposition of
stock acquired under an incentive stock option described in Code Section 422 (b) or
under an employee stock purchase plan described in code Section 423 (b).
Notwithstanding the preceding sentence, Compensation shall be determined without
regard to any compensation deferral election under any plan, program or arrangement,
qualified or non-qualified, maintained or contributed to by the Company, a
predecessor entity or a related entity, including but not limited to a
cash-or-deferred arrangement described in Code Section 401(k), a cafeteria plan
described in Code Section 125 or a non-qualified deferred compensation plan. A
“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. The term “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.
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(c) If pursuant to Section 3(a) above the Executive is entitled to the compensation provided
in this Section 4, then the Executive will be entitled to continued participation in all employee
benefit plans or programs available to Company employees generally in which the Executive was
participating on the Date of Termination, such continued participation to be at Company cost and
otherwise on the same basis as Company employees generally, until the earlier of (i) the date, or
dates, he receives equivalent coverage and benefits under the plans and programs of a subsequent
employer (such coverage and benefits to be determined on a coverage-by-coverage or
benefit-by-benefit basis) or (ii) one year from the Date of Termination (the “Benefit Continuation
Period”) but only to the extent that Executive makes a payment to the Company in an amount equal to
the monthly premium payments (both the employee and employer portion) required to maintain such
coverage on the first day of each calendar month commencing with the first calendar month following
the Date of Termination and the Company shall reimburse Executive on an after-tax basis for the
amount of such premiums, if any, in excess of any employee contributions necessary to maintain such
coverage for the Benefit Continuation Period and such reimbursement shall comply with the
Reimbursement Rules set forth below. The Executive shall be eligible for group health plan
continuation coverage under and in accordance with COBRA, when he ceases to be eligible for
continued participation in the Company’s group health plan under this subsection (c).
(d) Without limiting the applicability of Section 4, if the Company terminates the Executive’s
employment without Cause or Disability and a notice of termination is given or such termination is
effective within 15 months after the election of one or more individuals to the Board who were
first nominated or recommended for election to the Board by any Person other than the Board or its
Nominating and Governance Committee (or any Board committee performing similar functions (together
with the Board, the “N&G Committee”)) and such nomination was not recommended by the N&G
Committee before such nomination or recommendation was first publicly announced by such Person or
following the institution of an Election Contest proposing the election of one or more directors to
the Board who, at the time such proposal is first publicly announced, were not recommended for
election to the Board by the Board or the N&G Committee, then a Change in Control of the Company
shall be deemed to have occurred on the date immediately preceding such termination and such
termination shall be deemed to have occurred during the term of this Agreement for purposes of this
Agreement. For the avoidance of doubt, this Section 4(d) will not apply if the Executive’s
employment is terminated by the Executive (whether or not Good Reason exists) or the Executive
terminates employment for death or Disability.
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(e) Notwithstanding any other provisions of the Existing Agreement or this Amendment to the
contrary, including the provisions of Sections 4(a), 4(c) or 4(d), in the event that the Executive
is a “specified employee” within the meaning of Section 409A (as determined in accordance with the
methodology established by the Company as in effect on the Date of Termination) and if any portion
of the payments or benefits to be received by the Executive under this Agreement upon his or her
separation from service, including Sections 4(a), 4(c) or
4(d) would be considered deferred compensation under Section 409A, amounts that would
otherwise be payable under Sections 4(a), 4(c) or 4(d) during the six-month period immediately
following the Date of Termination shall instead be paid, with interest on any delayed payment at
the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code, on the earlier of
(i) the first business day after the date that is six months following the Executive’s “separation
from service” within the meaning of Section 409A and (ii) the Executive’s death. Each payment and
benefit to be made or provided to the Executive under the Existing Agreement and this Amendment
shall be considered to be a separate payment and not one of a series of payments for purposes of
Section 409A. A termination of employment shall not be deemed to have occurred for purposes of any
provision of the Existing Agreement or this Amendment providing for the payment of any amounts or
benefits subject to Section 409A upon or following a termination of employment unless such
termination is also a “separation from service” within the meaning of Section 409A.
Notwithstanding any other provision to the contrary in this Section 4, the welfare benefits
provided pursuant to Section 4(c) that are not non-taxable medical benefits, “disability pay” or
“death benefit plans” within the meaning of Treasury Regulation Section 1.409A-1(a)(5), and the
reimbursement or in-kind benefits provided under the Existing Agreement and this Amendment, shall
be treated as follows (the “Reimbursement Rules”): (i) the amount of such benefits provided during
one taxable year shall not affect the amount of such benefits provided in any other taxable year,
except that to the extent such benefits consist of the reimbursement of expenses referred to in
Section 105(b) of the Code, a limitation may be imposed on the amount of such reimbursements over
some or all of the Benefit Continuation Period, as described in Treasury Regulation Section
1.409A-3(i)(1)(iv)(B), (ii) to the extent that any such benefits consist of reimbursement of
eligible expenses, such reimbursement must be made on or before the last day of the calendar year
following the calendar year in which the expense was incurred, and (iii) no such benefit may be
liquidated or exchanged for another benefit.
5. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL RIGHTS.
(a) The Executive shall not be required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of
any payment provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer after the Date of Termination or
otherwise.
(b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce
any amounts otherwise payable, or in any way diminish the Executive’s existing rights, or rights
which would accrue solely as a result of the passage of time, under any Benefit Plan, Incentive
Plan or Securities Plan, employment agreement or other contract, plan or agreement with or of the
Company.
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6. INCENTIVE AWARDS.
In the event of a Change in Control of the Company, then notwithstanding the terms and
conditions of any Incentive Plan, the Company agrees (i) to immediately and fully vest all unvested
awards, units, and benefits (other than options to acquire securities of the Company or
awards of securities of the Company) which have been awarded or allocated to the Executive
under the Incentive Plans; and (ii) upon the exercise of such awards or units or the distribution
of such benefits, to pay all amounts due under the Incentive Plans solely in cash provided,
however, in the event that the Change in Control does not constitute a “change in control event”
within the meaning of Section 409A, the delivery of shares of common stock or cash (as applicable)
in settlement of any such stock-based awards that constitute “nonqualified deferred compensation”
within the meaning of Section 409A shall be made on upon the first permissible payment event under
Section 409A on which the shares or cash would otherwise be delivered or paid.
7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required under this Section 7)
(a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such excise tax (such excise
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.
(b) All determinations required to be made under this Section 7, including whether and when 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 the Accounting Firm which shall
provide detailed supporting calculations both to the Company and the Executive within 15 business
days after the receipt of notice from the Executive that there has been a Payment, or such earlier
time as is requested by the Company. The determination of tax liability made by the Accounting
Firm shall be subject to review by the Executive’s tax advisor, and, if the Executive’s tax advisor
does not agree with the determination reached by the Accounting Firm, then the Accounting Firm and
the Executive’s tax advisor shall jointly designate a nationally recognized public accounting firm
which shall make the determination. All fees and expenses of the accountants and tax advisors
retained by both the Executive and the Company shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 7, shall be paid by the Company within five days of
the receipt of the Accounting Firm’s determination; provided that, the Gross-Up Payment shall in
all events be paid no later than the end of the Executive’s taxable year next following the
Executive’s taxable year in which the Excise Tax (and any income or other related taxes or interest
or penalties thereon) on a Payment are remitted to the Internal Revenue Service or any other
applicable taxing authority or, in the case of amounts relating to a claim that does not result in
the remittance of any federal, state, local and foreign income, excise, social security and other
taxes, the calendar year in which the claim is finally settled or otherwise resolved. The Gross-Up
Payment shall be paid to the
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Executive; provided that, the Company, in its sole discretion, may withhold and pay over to the Internal Revenue Service or any other applicable taxing
authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding and the Company’s obligation to make Gross-Up
Payments under this Section 7 shall not be conditioned upon the Executive’s termination of
employment. Any determination by such jointly designated public 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 hereunder, it is possible that Gross-Up
Payments will not have been made by the Company that should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event that the Executive
hereafter is required to make a payment of any Excise Tax, any such underpayment shall be promptly
paid by the Company to or for the benefit of the Executive. Upon notice by the Executive of any
audit or other proceeding that may result in a liability to the Company hereunder, the Executive
shall promptly notify the Company of such audit or other proceeding; and the Company may, at its
option, but solely with respect to the item or items that relate to such potential liability,
choose to assume the defense of such audit or other proceeding at its own cost, provided that (i)
the Executive shall cooperate with the Company in such defense and (ii) the Company will not settle
such audit or other proceeding without the consent of the Executive (such consent not to be
unreasonably withheld). The highest effective marginal tax rate (determined by taking into account
any reduction in itemized deductions and/or exemptions attributable to the inclusion of the
additional amounts payable under this Section 7 in the Executive’s adjusted gross or taxable
income) based upon the state and locality where the Executive is resident at the time of payment of
such amounts will be used for purposes of determining the federal and state income and other taxes
with respect thereto.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify the Executive to the fullest extent permitted by law if
the Executive is a party or threatened to be made a party to any Proceeding (as defined below).
(b) If requested by the Executive, the Company shall advance (within two business days of such
request) any and all Expenses, as defined below, relating to a Proceeding to the Executive (an
“Expense Advance”), upon the receipt of a written undertaking by or on behalf of the Executive to
repay such Expense Advance if a judgment or other final adjudication adverse to the Executive (as
to which all rights of appeal therefrom have been exhausted or lapsed) establishes that the
Executive is not entitled to indemnification by the Company. Expenses shall include attorney’s
fees and all other costs, charges and expenses paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in any Proceeding.
(c) The Company agrees to obtain a directors’ and officers’ liability insurance policy
covering the Executive and to continue and maintain such policy. The amount of coverage shall be
reasonable in relation to the Executive’s position and responsibilities during his employment by
the Company.
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(d) This Section 8 is a supplement to and in furtherance of the Certificate of Incorporation
and Bylaws of the Company and shall not be deemed a substitute therefor, or diminish or abrogate
any rights of the Executive thereunder.
(e) For purposes of Section 8(a), the meaning of the phrase “to the fullest extent permitted
by law” shall include but not be limited to:
(i) to the fullest extent permitted by the provision of the Delaware General
Corporation Law (“DGCL”) that authorizes or contemplates additional indemnification by
agreement, or the corresponding provision of any amendment to or replacement of the DGCL,
and
(ii) to the fullest extent authorized or permitted by any amendments to or replacements
of the DGCL adopted after the date of this Agreement that increase the extent to which a
corporation may indemnify its officers and directors.
(f) For purposes of Sections 8(a) and 8(b), “Proceeding” shall mean any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism, investigation,
inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether
brought in the right of the Company or otherwise and whether of a civil, criminal, administrative
or investigative nature, in which the Executive was, is or will be involved as a party or otherwise
by reason of the fact that the Executive is or was a director or officer of the Company, by reason
of any action taken by him or of any action on his part while acting as director or officer of the
Company, or by reason of the fact that he is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, in each case whether or not serving in such capacity at the time any liability or
expense is incurred for which indemnification, reimbursement, or advancement of expenses can be
provided under this Agreement.
9. SUCCESSORS.
(a) The Company will require any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or assets of
the Company, by agreement in form and substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such succession or
assignment had taken place. Any failure of the Company to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material breach of this Agreement and
shall entitle the Executive to terminate the Executive’s employment for Good Reason and receive the
compensation provided for in Section 4 hereof. As used in this Agreement, “Company” shall mean the
Company as hereinbefore defined and any successor or assign to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.
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(b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amounts are still payable to him
hereunder, all such amounts, unless otherwise provided herein, shall he paid in accordance with the
terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there be no
such designee, to the Executive’s estate.
10. NOTICE.
For purposes of this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
If to the Executive:
_________
_________
_________
or to such other address as either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.
11. MISCELLANEOUS.
No provisions of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the Executive and the Company. No
waiver by either party hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent time. No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed in accordance with
the laws of the State of Nebraska, without giving effect to any principles of conflicts of law.
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12. CONFLICT IN BENEFITS.
Except as otherwise provided in the preceding sentences, this Agreement is not intended to and
shall not limit or terminate any other agreement or arrangement between the Executive and the
Company presently in effect or hereafter entered into.
13. VALIDITY.
The invalidity or unenforceability of any provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall remain in full
force and effect.
14. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall survive any termination
of this Agreement to the extent necessary to the intended preservation of such rights and
obligations and to the extent that any performance is required following termination of this
Agreement. Without limiting the foregoing, Sections 7, 8 and 15 shall expressly survive the
termination of this Agreement.
15. LEGAL FEES AND EXPENSES.
If a claim or dispute arises concerning the rights of the Executive under this Agreement,
regardless of the party by whom such claim or dispute is initiated, the Company shall, upon
presentation of appropriate vouchers, pay all legal expenses, including reasonable attorneys’ fees,
court costs and ordinary and necessary out-of-pocket costs of attorneys, billed to and payable by
the Executive or by anyone claiming under or through the Executive, in connection with the
bringing, prosecuting, arbitrating, defending, litigating, negotiating, or settling such claim or
dispute. In no event shall the Executive be required to reimburse the Company for any of the costs
of expenses incurred by the Company relating to arbitration or litigation. Pending the outcome or
resolution of any claim or dispute, the Company shall continue payment of all amounts due the
Executive without regard to any dispute. Payments contemplated by this Section 15 will be made
within five business days (but in any event no later than the last day of the Executive’s tax year
following the Executive’s tax year in which the Executive incurs the expense) after delivery of the
Executive’s written requests for payment, accompanied by such evidence of fees and expenses
incurred as the Company may reasonably require. The reimbursement contemplated by this Section 15
shall comply with the Reimbursement Rules.
16. EFFECTIVE DATE.
This Agreement shall become effective upon execution.
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17. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to
be an original but all of which together will constitute one and the same instrument.
18. NO GUARANTEE OF EMPLOYMENT.
Neither this Agreement nor any action taken hereunder shall be construed as giving the
Executive the right to be retained in employment with the Company, nor shall it interfere with
either the Company’s right to terminate the employment of the Executive at any time or the
Executive’s right to terminate his employment at any time.
19. NO ASSIGNMENT BY EXECUTIVE.
Except as otherwise provided in Section 9(b), the Executive’s rights and interests under this
Agreement shall not be assignable (in law or in equity) or subject to any manner of alienation,
sale, transfer, claims of creditors, pledge, attachment, garnishment, levy, execution or
encumbrances of any kind.
20. WAIVER.
The Executive’s or the Company’s failure to insist upon strict compliance with any provision
of this Agreement shall not he deemed a waiver of such provision or any other provision of this
Agreement. Any waiver of any provision of this Agreement shall not be deemed to be a waiver of any
other provision, and any waiver of default in any provision of this Agreement shall not be deemed
to be a waiver of any later default thereof or of any other provision.
21. WITHHOLDING OF TAXES; COMPLIANCE WITH SECTION 409A.
(a) 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 law or government
regulation or ruling.
(b) To the extent applicable, it is intended that this Agreement comply with the provisions of
Section 409A. This Agreement will be administered in a manner consistent with this intent. To the
extent that there is a material risk that any payments under this Agreement may result in the
imposition of an additional tax to the Executive under Section 409A, the Company will reasonably
cooperate with the Executive to amend this Agreement such that payments hereunder comply with
Section 409A without materially changing the economic value of this Agreement to either party
22. HEADINGS.
The headings of this Agreement have been inserted for convenience of reference only and are to
be ignored in the construction of the provisions hereof.
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23. NUMBERS AND GENDER.
The use of the singular shall be interpreted to include the plural and the plural the
singular, as the context requires. The use of the masculine, feminine or neuter shall be
interpreted to include the masculine, feminine or neuter as the context shall require.
24. Executive acknowledges and agrees that no change in control, as defined under this Amendment or
the Existing Agreement, has occurred prior to the Contract Date.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.
| ACI WORLDWIDE, INC. | |||||||||||
| By: | |||||||||||
| Title: | |||||||||||
| EXECUTIVE: | |||||||||||
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APPENDIX A
EXAMPLE 1 — Executive was employed by the Company for 1-1/3 fiscal years preceding the fiscal year
in which a Change in Control of the Company occurs. The Executive’s Compensation from the Company
was $30,000 for the 4-month period and $120,000 for the full fiscal year. The Executive’s Base
Amount is $105,000.
Year 1: 3 x $30,000 = $90,000
Year 2: $120,000
[90,000 + 120,000] DIVIDED BY 2 = $105,000
Year 2: $120,000
[90,000 + 120,000] DIVIDED BY 2 = $105,000
$105,000 is the average fiscal-year Compensation for the Base Period.
EXAMPLE 2 — Assume the same facts as in Example 1, except that the Executive also received a
$70,000 sign-on bonus when his employment with the Company commenced at the beginning of the
4-month period. The Executive’$ Base Amount is $140,000
Year 1: [3 X $30,000] + $70,000 = $160,000
Year 2: $120,000
[160,000 + 120,0001 DIVIDED BY 2 = $140,000
Year 2: $120,000
[160,000 + 120,0001 DIVIDED BY 2 = $140,000
Since the sign-on bonus will not be paid more often than once per fiscal year, the amount of the
bonus is not increased in annualizing the Executive’s Compensation for the 4-month period.
EXAMPLE 3 — Executive was employed by the Company for the last 4 months of the fiscal year
preceding the fiscal year in which a Change in Control of the Company occurs. The Executive’s
Compensation from the Company was $30,000 for the 4-month period. The Executive’s Base Amount is
$90,000.
Year 1: 3 x $30,000 = $90,000
$90,000 DIVIDED BY 1 = $90,000
$90,000 DIVIDED BY 1 = $90,000
$90,000 is the average fiscal-year Compensation for the Base Period.
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