THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Third Amended and Restated Employment Agreement ("Agreement") is
made as of September 28, 2004, by and between Transaction Systems Architects,
Inc., a Delaware corporation, ("Employer") and Gregory D. Derkacht ("Employee").
A. Employer and Employee have entered into that certain employment agreement
dated as of December 3, 2001 pertaining to the terms of the employment of
Employee by Employer, which agreement was amended and restated as of April 28,
2003 and December 15, 2003 (as amended and restated, the "Second Amended and
Restated Employment Agreement").
B. Employer and Employee desire to amend and restate the Second Amended and
Restated Employment Agreement as provided herein.
The parties to this Agreement, intending to be legally bound, agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
Employer hereby agrees to employ Employee, and Employee hereby accepts and
agrees to such employment, upon the terms and conditions set forth herein and
with such duties attendant to Employee's position as a senior executive officer
of Employer and such other duties as shall be determined by the Board of
Directors of Employer (the "Board").
2. Term. The term of this Agreement, and Employee's employment
hereunder, shall commence on September 28, 2004 and, unless earlier terminated,
continue through June 30, 2006 (the "Term").
3. Duties. Employee shall, during the Term:
(a) Execute Duties. Execute the duties attendant to his
position as president and CEO of Employer, or such other position as the Board
shall designate, and such additional duties as shall be determined and directed
by the Board from time to time.
(b) Board Service. Unless otherwise requested by the Board, serve as
a member of the Board, subject to nomination by the Board and election by
(c) Full Efforts and Time. Consistent with the foregoing, Employee
shall devote full business time, energy, and skill to the businesses of
Employer, and to the promotion of Employer's best interests; provided, however,
that this Agreement shall not preclude Employee from participating in the
affairs of any governmental, educational or other charitable institution, from
engaging in professional speaking and writing activities, and from serving as a
member of the board of directors of other corporations or entities (subject to
the approval by the Chairman of the Board) so long as such activities do not
unreasonably interfere with the businesses of Employer or conflict with
Employee's obligations under this Agreement.
(d) Successor Planning; Transition Services. Without limiting the
foregoing, as directed by the Board from time to time, Employee shall execute
certain duties related to CEO successor planning. Nothing in this Agreement
shall be construed to prohibit or otherwise limit Employer's ability to appoint
a successor president or CEO (in each case, a "successor CEO") during the Term,
and Employee acknowledges that he may be replaced as president and CEO of
Employer at any time during the Term or thereafter. If Employer appoints a
successor CEO, Employee acknowledges that he will thereafter no longer serve in
the capacity of president and CEO of Employer but will continue to perform
specified transition services for Employer as may be determined by the Board.
A change in Employee's title or offices, or a significant diminution of
Employee's duties and responsibilities, position or status with Employer shall
not constitute a termination, actual or constructive, of Employee's employment.
(a) Base. Effective January 1, 2003, Employer shall pay Employee for
all services to be performed by Employee during the Term a base salary (the
"Base Salary") at the rate of $360,000 per year, payable in substantially equal
semi-monthly payments in accordance with Employer's customary practice for
other employees, as such practice may be determined from time to time. The
Board may increase such Base Salary in its reasonable business judgment. The
Board may decrease such Base Salary (i) as a result of a pro-rata
across-the-board salary reduction for all executive level management employees
of Employer, or (ii) to a rate of $180,000 per year if Employer appoints a
successor CEO during the Term and the Board directs Employee to provide
transition services on less than a full-time basis.
(b) Management Incentive Compensation. In addition to the Base
Salary, Employee shall be entitled to participate in Employer's annual
Management Incentive Compensation Program approved by the Board ("MICP"),
subject to the provisions of this Agreement. Employee's "on target" incentive
compensation will be $150,000 per fiscal year prorated over the number of
periods established under the MICP. The amount of incentive compensation
payable to Employee with respect to a particular period will depend upon the
achievement of (i) the financial results set forth in the MICP with respect to
the fiscal period and (ii) such additional objectives as the Board may
reasonably establish from time to time. The Board may increase or decrease the
incentive compensation payable to Employee. In the event that Employer hires a
successor CEO during the Term, Employee's participation in the MICP shall cease
commencing with the fiscal quarter immediately succeeding the fiscal quarter in
which a successor CEO is appointed.
(c) Transition Services Bonus. If Employee performs the duties
contemplated under this Agreement through June 30, 2006, including without
limitation transition services contemplated under Section 3(d), Employer will
pay Employee a one-time bonus (a "Transition Bonus") in the amount of $500,000
and, except as provided in Section 5(b), Employee shall not be entitled to any
other compensation under this Agreement. The Transition Bonus will be paid in a
lump sum in accordance with Employer's payroll practices in effect on June 30,
(d) Business Expenses. In addition to the Base Salary set forth
above, Employer agrees that during the Term Employee shall be entitled to
reimbursement by Employer for all reasonable and documented business expenses
incurred by him on Employer's behalf in the course of his employment hereunder
in accordance with Employer's policy concerning the same.
(e) Board Service. No separate or additional compensation will
be paid to Employee with respect to service on the Board.
(f) Stock Options. Employee has received three stock option
grants from the Employer's existing stock option plans. The first grant was in
the amount of 100,000 shares and was made on January 2, 2002. The second and
third grants were in the amount of 200,000 shares each and were made February
19, 2002. The terms and conditions for each of the grants are set forth in
separate stock option agreements. The stock option agreements for each of the
grants are attached hereto as Exhibits B, C and D, respectively.
(g) Legal Fees. Employer shall reimburse Employee for reasonable and
documented fees incurred by Employee for legal advice and counsel obtained in
connection with entering into this Agreement; provided, however, Employer's
reimbursements hereunder shall be limited to an aggregate amount of $10,000.
5. Additional Benefits.
(a) Participation in Benefit Plans. During the Term, Employee
and his dependents shall be entitled to participate in and receive health
insurance and other benefits ("Benefit Plans") under Employer's Benefit Plans,
whether qualified plans or non-qualified plans, subject to and on a basis
consistent with the terms, conditions, including eligibility requirements, and
overall administration of such Benefit Plans as provided to similarly situated
employees of Employer, as changed from time to time. Employee shall be entitled
to a minimum of four weeks of paid vacation and holidays in accordance with
Employer's policies in effect from time to time for its employees.
(b) Continuation of Certain Benefits. If Employee performs the
duties contemplated under this Agreement through June 30, 2006, Employee will be
entitled to continued participation in Employer's group health plan until the
earlier of (A) the date he becomes eligible to receive coverage and benefits
under the health plan of a subsequent employer, or (B) June 30 2011; provided
(1) if Employee is precluded from continuing his participation in Employer's
group health plan as provided herein, he shall be paid, in a lump sum cash
payment, within 30 days following the date it is determined he is unable to
participate in the group health plan, an amount equal to the after-tax economic
equivalent of the benefits (net of Employee's contribution) provided under the
plan; (2) the economic equivalent of any benefit foregone shall be deemed to be
an amount equal to (i) the lowest cost that would be incurred by Employee in
obtaining such benefit for himself (including family or dependent coverage, if
applicable) on an individual basis, minus (ii) the amount Employee would
reasonably have been expected to contribute under Employer's group health plan;
and (3) in no event shall the lump sum cash payment contemplated by this Section
5(b) exceed $30,000. Employee shall be eligible for group health plan
continuation coverage under, and in accordance with, the Consolidated Omnibus
Budget Reconciliation Act of 1965, as amended, when he ceases to be eligible for
continued participation in Employer's group health plan.
(a) Types of Termination.
(i) For Cause by Employer. Any termination of Employee's
employment by Employer for Cause (as defined in Exhibit A attached hereto)
shall be authorized by a vote of at least a majority of the non-employee
members of 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 (4) of the definition of
Cause, Employee 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 Employee 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. Employee shall not be
terminated for Cause if, within 30 days after the date of Employee's hearing
before the Board (or if Employee 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 Employer 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 Employer. 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 Employee has failed to correct the act or failure to act in
accordance with the terms of the preceding sentence.
Anything herein to the contrary notwithstanding, if, following a
termination of Employee's employment by Employer for Cause based upon the
conviction of Employee for a felony involving moral turpitude such conviction
is finally overturned on appeal, Employee shall be entitled to the compensation
provided in Sections 4(a) and 4(c) of the Severance Compensation Agreement. In
lieu of the interest provided in clause (iv) of the first sentence of Section
4(a) of the Severance Compensation Agreement and the interest provided in the
second sentence of Section 4(c) of the Severance Compensation Agreement,
however, the compensation provided in Sections 4(a) and 4(c) of the Severance
Compensation Agreement shall be increased by a 10% rate of interest, compounded
annually, calculated from the date such compensation would have been paid if
Employee's employment had been terminated without Cause.
(ii) Death, Disability or Retirement of Employee. If Employee's
employment is terminated during the Term due to the death, Disability (as
defined below) or Retirement (as defined in Exhibit A) of Employee, then an
amount equal to Employee's Base Salary (at the rate most recently in effect)
shall be paid through the date of his death, Disability or Retirement, plus an
amount in respect of any accrued but unused vacation days; provided, however,
that if Employee's employment is terminated due to death, Disability or
Retirement subsequent to a Change in Control, then the applicable provisions
of the Severance Compensation Agreement shall govern, provided the Severance
Compensation Agreement has not been earlier terminated.
In addition to any other compensation provided for under this
Agreement or the Severance Compensation Agreement, Employee's beneficiaries
shall also receive any insurance benefits under the Benefit Plans to which
Employee or his beneficiaries are entitled on the date of his death or
Disability. Furthermore, if Employee's employment is terminated during the Term
due to Disability, then Employee will be entitled to continued participation in
all Benefit Plans or programs available to Employer's employees generally, until
the earlier of (A) the date, or dates, he becomes eligible to receive coverage
and benefits under the plans and programs of a subsequent employer (such
coverages and benefits to be determined on a coverage-by-coverage or
benefit-by-benefit basis) or (B) two years from the Termination Date; provided
(1) if Employee is precluded from continuing his participation in any Benefit
Plan or program as provided in the preceding sentence, he shall be paid, in a
lump sum cash payment, within 30 days following the date it is determined he is
unable to participate in any Benefit Plan or program, the after-tax economic
equivalent of the benefits (net of Employee's contribution) provided under the
plan or program in which he is unable to participate for the period specified in
the preceding sentence; and (2) the economic equivalent of any benefit foregone
shall be deemed to be an amount equal to (i) the lowest cost that would be
incurred by Employee in obtaining such benefit for himself (including family or
dependent coverage, if applicable) on an individual basis, minus (ii) the amount
Employee would reasonably have been expected to contribute under Employer's
group health plan. Employee shall be eligible for group health plan continuation
coverage under and in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1965, as amended, when he ceases to be eligible for
continued participation in Employer's group health plan under this Section
As used in this Agreement, the term "Disability" shall mean the
inability of Employee, due to physical or mental illness, with or without a
reasonable accommodation, to perform his duties with Employer on a full-time
basis for six months and, within 30 days after a notice of termination is
thereafter given by Employer, Employee's failure to return to the full-time
performance of Employee's duties as set forth in Section 3.
In the case of the Disability or Retirement of Employee, the
Noncompetition and Confidentiality and other provisions of Sections 7 and 8
hereof shall remain in effect.
(iii) Without Cause by Employer. Employer may terminate the
employment of Employee at any time without Cause after providing Employee with
30 days' prior written notice setting forth its intention to do so.
(iv) Expiration of Term. The expiration of this Agreement is by
its own term, as set forth in Section 2.
(b) Compensation on Termination. Except as otherwise provided
in the Severance Compensation Agreement, if Employee is terminated for Cause,
death, Disability, Retirement, or voluntarily terminates his employment,
Employee shall not be entitled to any compensation following the date of
termination as defined below (the "Termination Date"):
(i) for Cause by Employer - immediately upon the vote of a
majority of the non-employee Board members as provided in Section 6(a)(i);
(ii) for death, Disability or Retirement - for death or
Retirement, immediately upon the date of such occurrence; for Disability,
immediately upon expiration of the notice period described in Section 6(a)(ii)
if Employee fails to return to the full-time performance of Employee's duties
as set forth in Section 3; and
(iv) by its own term - on the date set forth in Section 2.
(c) Compensation for Termination Without Cause. Subject to the
provisions of this Agreement, in the event Employee is terminated by Employer
without Cause prior to June 30, 2006, Employer shall pay to Employee $500,000.
(d) Change in Control Compensation. Subject to the provisions
of this Agreement, including without limitation Section 6(g), Employee shall be
entitled to the compensation provided in the Severance Compensation Agreement
pursuant to the terms stated in such agreement.
(e) Expiration of Term. Subject to the provisions of this
Agreement, including without limitation Sections 4(b), 5(b) and 6(g), if this
Agreement remains in effect through the Term, Employee shall be entitled to the
Transition Bonus and compensation provided under Section 5(b).
(f) Notice of Termination. Any termination of Employee's employment
by Employer pursuant to Section 6(a)(i) or 6(a)(iii) above shall be communicated
by a written notice of termination to Employee.
(g) Conflict in Benefits. To the extent that Employee is entitled to
severance compensation pursuant to the terms of that certain amended and
restated severance compensation agreement (the "Severance Compensation
Agreement") dated as of the date hereof, a copy of which is attached hereto as
Exhibit E, Employee's entitlement to any severance compensation (including the
Transition Bonus) shall be determined under the Severance Compensation
Agreement. Without limiting the foregoing, the parties expressly understand and
agree that, if Employee is entitled to compensation under the Severance
Compensation Agreement, Employee shall in no event be entitled to compensation
pursuant to Section 4(c), 5(b) , 6(c) or 6(e) of this Agreement.
7. Noncompetition, Noninducement, Nonsolicitation, Release.
(a) Employee hereby agrees that commencing on the date of this
Agreement and continuing through 180 days after the termination date (the
"Non-Compete Period"), he shall not singly, jointly, or as a member, employee,
or agent of any partnership or as an officer, agent, employee, director or
stockholder, or investor of any other corporation or entity, or in any other
capacity, which is engaged in a similar business to that of Employer during the
period of non-competition:
(i) solicit, contact and/or service any person, firm,
corporation, partnership, or entity of any kind whatsoever for purposes which
are competitive to that of Employer, and for purposes similar to those performed
by Employee for Employer, a client of Employer for which Employee performed
service or had personal contact with on behalf of Employer during the last one
year of Employee's employment with Employer; provided, that Employee shall be
able to acquire and hold up to 1% of the outstanding shares of any publicly
traded stock of any company, and an unlimited percentage of outstanding shares
in the Employer, its parent, affiliates, or subsidiaries; and
(ii) directly or indirectly induce or attempt to induce any
person who, during the term of Employee's employment hereunder, was an employee,
representative or agent of Employer or any of its affiliates to terminate his
employment with Employer or any of its affiliates, or to violate the terms of
any agreement between said employee, representative or agent and Employer or
any of its affiliates.
(b) It is understood and agreed by Employer and Employee that the time
periods of the restrictions set forth in Section 7(a) of this Agreement are
intended by Employer and Employee to be extended by any time period during
which Employee violates the terms and conditions of Section 7(a).
Notwithstanding anything which could be construed to the contrary, this Section
7(b) is not intended to and shall not be deemed to permit Employee to violate
any term or condition of Section 7(a).
(c) Prior to Employer providing any compensation under Section 4(c),
5(b) or 6(c) of this Agreement or under the Severance Compensation Agreement,
Employee shall execute and deliver to Employer a release and waiver (the
"Release") in substantially the form attached hereto as Exhibit F, with such
changes therein and modifications thereto as Employer, in the exercise of its
reasonable judgment, may determine to be required by applicable law or rule in
any jurisdiction. Employer's obligation to provide any compensation under
Section 4(c), 5(b) or 6(c) under this Agreement, or under the Severance
Compensation Agreement is expressly conditioned on Employee's prior execution
and delivery of the Release.
(d) In the event any of the provisions of this Agreement shall be
held to be invalid or unenforceable, the remaining portions thereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included herein.
(e) Employer and Employee specifically agree that the provisions of
Sections 7, 8, 9 ,10 and 15 shall survive the termination of this Agreement.
(f) Employer and Employee agree that the provisions of this Section 7
may be waived in whole or in part by mutual agreement in writing by Employer and
8. Confidentiality. Without the consent of Employer, Employee will not,
during his Employment or after termination of this Agreement, (a) disclose any
trade secret or proprietary or confidential knowledge or information of Employer
or any affiliate of Employer to any person or entity (other than to Employer or
stockholders, directors, officers or employees of Employer or representatives
thereof), or (b) otherwise make use of any such secret, knowledge or information
for other than Employers purposes, unless in the case of (a) or (b) above such
secret, knowledge or information is readily ascertainable from publicly
available information. Employee will hold confidential, on behalf of Employer as
the property of Employer, all memoranda, manuals, books, papers, letters,
documents, computer software and other similar property obtained during the
course of performing duties under this Agreement, and will return such property
to Employer at any time upon demand by Employer and, in any event, within three
calendar days after termination of his employment under this Agreement or after
the end of the Term.
(a) As used in this Agreement, the term "Employee Developments" shall
mean all technological, financial, operating and training ideas, processes,
methods and materials, specifically including, but not limited to, all
inventions, discoveries, improvements, devices, apparatus, designs, practices,
processes, methods, formulas, know-how, products, enhancements and all software,
computer programs (including source code, object code, documentation and
programmer's notes) and other works of authorship, whether or not patentable or
copyrightable, developed, written, conceived or reduced to practice during
Employee's employment by Employer or within a period of 90 days thereafter
(i) which result from any work performed by Employee for the Employer, or
(ii) which relate to the Employer's business or research or development of the
Employer at the time Employee develops, writes, conceives or reduces to practice
any of the foregoing, alone or with others.
(b) Employee shall promptly disclose all Employee Developments
to the Employer and make available to the Employer any work papers, drawings,
designs, schematics, specifications, descriptions, models, diskettes, computer
tapes, source codes or other tangible incidents of Employee Developments.
Employee agrees that all Employee Developments shall be considered work made by
Employee for the Employer and prepared within the scope of Employee's employment
and that all right, title and ownership interest in and to Employee
Developments, including, without limitation, copyright, trade secret, patent or
other intellectual property rights, shall exclusively vest in and be retained by
the Employer, both during and following the term of employment. Employee agrees
to perform upon request of the Employer any acts that may be necessary or
convenient during his term of employment or thereafter to establish, perfect,
evidence, register, transfer, assign or convey ownership of Employee
Developments in or to the Employer, to the fullest extent possible, including
without limitation, assignment to the Employer of all ownership, copyright,
trade secret, patent and other intellectual property rights without any further
(a) Employer shall be entitled, if it elects, to enjoin any breach or
threatened breach of, or enforce the specific performance of, the obligations
of Employee under Sections 7 and 8, without showing any actual damage or that
monetary damages would be inadequate. Any such equitable remedy will not be the
sole and exclusive remedy for any such breach, and Employer may pursue other
remedies for such a breach.
(b) Any court proceeding to enforce the specific performance
provisions of this Agreement may be commenced in the federal courts located in
the State of Nebraska, or in the absence of federal jurisdiction, the state
courts of Nebraska having jurisdiction. Employer and Employee submit to the
jurisdiction of such courts and waive any objection which they may have to the
pursuit of any such proceeding in any such court for purposes of specific
11. Employer Assignment. Employer may assign this Agreement, provided,
however, that in the event of such assignment by the Employer, Employer's
obligations hereunder shall be binding legal obligations and shall inure to the
benefit of any successor.
12. Location. Employee agrees to reside in Omaha, Nebraska during the
Term. In the event that a successor CEO is appointed during the Term, Employee's
obligation to reside in Omaha, Nebraska shall terminate upon the earlier of (i)
120 days after the appointment of the successor CEO, or such longer period as
the Board may request, and (ii) June 30, 2006.
13. Benefits Unfunded. All rights of Employee and his spouse or other
beneficiary under this Agreement shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
Employer for payment of any amounts due hereunder. Neither Employee nor his
spouse or other beneficiary shall have any interest in or rights against any
specific assets of Employer.
14. Waiver. No waiver by any party at any time of any breach by any
other party of, or compliance with, any condition or provision of this Agreement
to be performed by any other party shall be deemed a waiver of any other
provisions or conditions at the same time or at any prior or subsequent time.
15. Applicable Law. This Agreement shall be construed and interpreted
pursuant to the laws of the State of Nebraska without giving effect to the
conflict of laws provisions thereof.
16. Entire Agreement. This Agreement and the Severance Compensation
Agreement contain the entire agreement between Employer and Employee and
supersede any and all previous agreements, written or oral, between the parties
relating to the subject matter hereof and thereof including, without limitation,
the Second Amended and Restated Employment Agreement. In the event of a conflict
between the provisions of this Agreement and the provisions contained in the
Severance Compensation Agreement, the provisions of this Agreement shall govern.
No amendment or modification of the terms of this Agreement shall be binding
upon the parties hereto unless reduced to writing and signed by Employer and
17. Counterparts. This Agreement may be executed in counterparts and by
facsimile signatures, each of which shall be deemed an original, and all of
which taken together shall constitute one instrument.
18. Severability. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be
19. Notice. Notices under this Agreement shall be in writing and sent
by registered mail, return receipt requested, to the following addresses or to
such other addresses as the party being notified may have previously furnished
to the others by written notice.
If to Employer or its Board of Directors:
Transaction Systems Architects, Inc.
Attn: Chairman of the Board
224 South 108th Avenue
Omaha, NE 68154
with a copy to:
Transaction Systems Architects, Inc.
Attn: General Counsel
224 South 108th Avenue
Omaha, Nebraska 68154
If to Employee:
Gregory D. Derkacht
Such notices shall be deemed received three business days after they are so
IN WITNESS WHEREOF, the parties have executed this Agreement, on the
day and year first above written.
Transaction Systems Architects, Inc.
By: /s/ Dennis P. Byrnes
Its: Senior Vice President
Gregory D. Derkacht
/s/ Gregory D. Derkacht