<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended April 30, 1998
COMMISSION FILE NUMBER: 0-24420
PMT SERVICES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1215125
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
3841 GREEN HILLS VILLAGE DRIVE
NASHVILLE, TN 37215
(Address of principal executive offices)
(Zip Code)
(615) 254-1539
(Registrant's telephone number, including zip code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
----- _____
As of June 12, 1998, 48,911,156 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1998 1997
--------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 36,444,941 $ 23,810,173
Investments............................................. 13,679,645 49,167,521
Accounts receivable..................................... 31,692,948 18,303,296
Current portion of net investment in finance leases..... 10,333,536 9,249,753
Inventory............................................... 3,254,557 1,818,613
Deferred income taxes................................... 1,694,152 1,543,379
Other current assets.................................... 3,055,249 2,061,295
------------- -------------
Total current assets................................... 100,155,028 105,954,030
Purchased merchant portfolios, net of accumulated
amortization of $27,448,206 and $18,689,846............ 92,760,997 84,343,006
Long-term portion of net investment in finance leases... 29,665,147 24,636,881
Property and equipment, net............................. 13,623,698 9,379,056
Long-term note receivable............................... 13,300,000 8,773,330
Intangible and other assets............................. 19,646,283 17,989,726
------------- -------------
Total assets........................................... $ 269,151,153 $ 251,076,029
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....................... $14,092,415 $14,516,369
Accounts payable........................................ 11,938,164 9,608,347
Accrued liabilities..................................... 4,262,960 5,721,670
Deferred revenues....................................... 1,372,669 291,493
------------- -------------
Total current liabilities............................. 31,666,208 30,137,879
Long-term debt.......................................... 19,296,864 18,564,658
Deferred income taxes................................... 570,958 624,777
------------- -------------
Total liabilities...................................... 51,534,030 49,327,314
------------- -------------
Commitments and contingent liabilities (Note 3)
Shareholders' equity:
Preferred stock, $0.01 par value, authorized:
10,000,000 shares; no shares outstanding
Common stock, $0.01 par value, authorized:
100,000,000 shares; outstanding:
47,922,281 and 45,618,488 shares....................... 479,223 456,185
Additional paid-in capital.............................. 172,312,177 171,129,805
Accumulated earnings.................................... 44,825,723 30,162,725
------------- -------------
217,617,123 201,748,715
------------- -------------
Total liabilities and shareholders' equity.............. $ 269,151,153 $ 251,076,029
============= =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
April 30, April 30,
---------------------------- ---------------------------
(Unaudited) (Unaudited)
1998 1997 1998 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues.............................. $102,559,104 $75,865,581 $295,884,153 $230,266,479
Cost of revenues...................... 72,470,088 54,496,344 210,661,126 166,647,949
------------ ----------- ------------ ------------
Gross margin.......................... 30,089,016 21,369,237 85,223,027 63,618,530
------------ ----------- ------------ ------------
Selling, general and administrative
expenses............................. 14,089,243 9,933,856 40,404,929 30,358,441
Depreciation and amortization
expense.............................. 4,375,009 3,239,041 12,362,852 9,196,240
Provision for merchant losses and
bad debt expense..................... 1,303,106 1,337,467 3,541,306 3,263,295
Nonrecurring operating expense, net... -- 8,873 -- 593,626
------------ ----------- ------------ ------------
19,767,358 14,519,237 56,309,087 43,411,602
------------ ----------- ------------ ------------
Income from operations................ 10,321,658 6,850,000 28,913,940 20,206,928
Interest income, net.................. 439,427 352,722 1,445,920 766,532
Other expense, net.................... (177,374) (557,604) (933,158) (1,791,190)
------------ ----------- ------------ ------------
Income before provision for income
taxes................................ 10,583,711 6,645,118 29,426,702 19,182,270
Provision for income taxes............ 4,074,729 2,102,334 10,872,427 6,438,887
------------ ----------- ------------ ------------
Net income............................ $ 6,508,982 $ 4,542,784 $ 18,554,275 $ 12,743,383
============ =========== ============ ============
Earnings per share - Basic............ $ 0.14 $ 0.10 $ 0.40 $ 0.29
============ =========== ============ ============
Earnings per share - Diluted.......... $ 0.13 $ 0.10 $ 0.39 $ 0.29
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
-------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Balance at July 31, 1997.......... $456,185 $171,129,805 $30,162,725 $201,748,715
Stock warrants exercised......... 1,200 148,800 150,000
Stock options exercised.......... 798 478,251 479,049
September 1997 pooling........... 2,327 (143,994) (141,667)
November 1997 pooling............ 12,063 87,937 666,353 766,353
February 1998 pooling............ 6,650 159,350 (2,799,459) (2,633,459)
Tax benefit from non-qualified
stock options................... 308,034 308,034
Distributions to Subchapter S
corporations, prior to merger... (1,614,177) (1,614,177)
Net income for the period........ 18,554,275 18,554,275
-------- ------------ ----------- -------------
Balance at April 30, 1998
Unaudited........................ $479,223 $172,312,177 $44,825,723 $217,617,123
======== ============ =========== =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
APRIL 30,
-------------------------------
(UNAUDITED)
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 18,554,275 $ 12,743,383
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense......................... 12,498,339 9,715,745
Provision for merchant losses and bad debt expense............ 3,541,306 3,263,295
Deferred income taxes......................................... (204,592) 56,031
Changes in assets and liabilities, excluding the effects of
non-restated acquisitions:
Accounts receivable........................................ (11,079,523) (4,634,276)
Inventory.................................................. (1,219,526) (207,302)
Other assets............................................... (1,738,105) (4,077,016)
Accounts payable........................................... 239,797 (603,743)
Accrued liabilities........................................ (4,118,520) (2,212,441)
Deferred revenues.......................................... (89,213) 105,900
------------ -------------
Net cash provided by operating activities.................. 16,384,238 14,149,576
------------ -------------
Cash flows from investing activities:
Purchase of merchant portfolios............................... (13,524,148) (29,777,036)
Purchase of investments....................................... -- (68,040,264)
Proceeds from matured investments............................. 35,487,876 --
Purchase of property and equipment, net....................... (6,246,580) (3,328,029)
Purchase of equipment for leasing............................. (18,356,125) (14,913,443)
Proceeds from receivable securitization....................... -- 1,076,317
Amounts received on leases, net of amortized unearned
income...................................................... 10,646,687 10,921,368
------------ -------------
Net cash provided (used) by investing activities........... 8,007,710 (104,061,087)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt...................... 16,140,887 915,628
Payments on long-term debt.................................... (22,386,269) (967,071)
Issuance of note receivable................................... (4,526,670) (8,025,000)
Proceeds from sale of common stock............................ 629,049 624,640
Distributions of Subchapter S corporations.................... (1,614,177) (3,344,997)
------------ -------------
Net cash used by financing activities...................... (11,757,180) (10,796,800)
------------ -------------
Net increase (decrease) in cash and cash equivalents........... 12,634,768 (100,708,311)
Cash and cash equivalents at beginning of the period........... 23,810,173 109,351,788
------------ -------------
Cash and cash equivalents at end of the period................. $ 36,444,941 $ 8,643,477
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 12,114,224 $ 2,824,263
Cash paid for interest 1,876,556 2,656,089
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
</TABLE>
For the nine months ended April 30, 1997, in connection with an operating
business acquisition in August 1996, the Company issued 500,000 shares of common
stock. For the nine months ended April 30, 1998, in connection with three
separate operating business acquisitions in September 1997, November 1997 and
February 1998, the Company issued 2,104,076 shares of common stock. The
acquisitions were accounted for as poolings of interests, but were not
considered material for retroactive restatement.
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS:
The accompanying interim consolidated financial statements are
unaudited, except for the balance sheet at July 31, 1997. Certain information
and disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
although the Company believes the disclosures included herein are adequate to
make the information presented not misleading. These interim consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements for the fiscal year ended July 31, 1997.
The accompanying interim consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's financial position at April 30, 1998 and the
results of its operations, its changes in shareholders' equity and its cash
flows for the fiscal nine month periods ended April 30, 1998 and 1997. The
results of operations for the interim periods presented are not necessarily
indicative of results for the full fiscal year. The growth in the Company's
income and profitability from fiscal 1997 has resulted largely from mergers and
acquisitions, including the purchase of merchant portfolios. Future growth is
dependent upon, among other factors, the Company's ability to continue to
consummate such acquisitions of operating businesses and merchant portfolios.
The consolidated financial statements give retroactive effect to an
acquisition of an operating business consummated in the first quarter of fiscal
1998 which was accounted for as a pooling of interests (Note 2).
Earnings per share for the three month and nine month periods ended
April 30, 1998 and 1997 are calculated based on the following number of weighted
average shares:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic 47,693,850 43,471,097 46,881,345 43,235,947
Diluted 48,998,417 44,491,620 47,984,880 44,437,407
</TABLE>
NOTE 2 - ACQUISITIONS:
OPERATING BUSINESS ACQUISITIONS
In the first quarter of fiscal year 1998, the Company consummated two
operating business acquisitions by issuing common stock in exchange for all the
outstanding common stock of the companies acquired. These transactions were
accounted for as poolings of interest. One of these transactions was considered
material for restatement, as follows. On October 2, 1997 the Company issued
3,870,965 shares of its common stock in exchange for all the outstanding common
stock of Bancard, Inc. ("BCI").
6
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In each of the second and third quarters of fiscal 1998, the Company
consummated an operating business acquisition by issuing common stock in
exchange for all the outstanding common stock of the company acquired. These
transactions were accounted for as pooling of interests, but were not considered
material for restatement.
The Company's consolidated financial statements have been restated to
include the accounts of BCI for all periods presented by including the
historical results of BCI. The historical results of BCI reflect its actual
operating cost structures and, as a result, do not necessarily reflect the cost
structure of the newly combined entity.
BCI was a Subchapter S corporation for income tax purposes; therefore,
it did not pay U.S. federal income taxes. BCI will be included in the Company's
U.S. federal income tax return effective from the date of merger.
MERCHANT PORTFOLIO ACQUISITIONS
The Company purchases merchant portfolios which provide the Company
the right to service specific merchants under contract to processing banks for
electronic authorization and payment processing. In conjunction with the
purchase of merchant portfolios, the Company may enter into a noncompetition
agreement with the sellers of the portfolios. In such cases, a portion of the
purchase price of each merchant portfolio is allocated to the related
noncompetition agreement.
NOTE 3 - COMMITMENTS AND CONTINGENCIES:
In connection with the purchase of a merchant portfolio from Bankcard
America, Inc. ("ABC") in April 1995, the Company signed a guaranty for a
$1,000,000 note payable to the current processing bank by ABC. This guarantee
has subsequently been released. The Company received a security interest in
120,000 shares of the Company's common stock currently held by a shareholder of
ABC.
VISA and MasterCard require merchants accepting VISA and MasterCard
credit cards to contract directly with a processing bank that is a member bank
of the VISA or MasterCard associations. The Company is not the principal party
to the merchant processing agreements, and therefore, is dependent upon its
contractual arrangements with its processing banks and other service providers
in order to continue to service its merchant portfolio. The Company has a
contractual right to receive revenues derived from the discount rate and fees
earned on its merchant portfolio so long as the merchant continues to process
transactions on the processing bank's system and the Company provides adequate
service to the merchant and remains in compliance under its agreement with the
processing bank. Under the terms of the Company's agreements with its various
processing banks, the Company generally is permitted to transfer merchants to
another processing bank subject to time limitations and termination fees. The
agreements provide mobility for a majority of the Company's merchant base.
However, in order to transfer merchant contracts, the Company generally must pay
the processing banks a fee determined by a formula related to the annualized
aggregate transaction volume of the merchants transferred.
7
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 4 - SUBSEQUENT EVENT
On May 14, 1998, the Company consummated an operating business
acquisition pursuant to which it issued 987,500 shares of its common stock in
exchange for all the outstanding common stock of MBN National, Inc. ("MBN"). The
transaction will be accounted for as a pooling of interests in the Company's
fourth quarter, including restatement of all historical periods. The following
table presents selected condensed financial data of the Company on a
supplemental basis to illustrate the retroactive restatement effect on the
Company's results of operations resulting from the acquisition of MBN.
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
APRIL 30, APRIL 30,
--------------------------- --------------------------
(UNAUDITED) (UNAUDITED)
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $105,928,667 $ 79,011,378 $307,079,850 $239,184,681
Net Income $ 6,660,956 $ 4,568,550 $ 19,351,279 $ 11,908,040
Earnings per
share - Basic $ 0.14 $ 0.10 $ 0.40 $ 0.27
Earnings per
share - Diluted $ 0.13 $ 0.10 $ 0.40 $ 0.26
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
PMT Services, Inc. is an independent service organization which
directly and through its wholly owned subsidiaries, markets and services
electronic credit card authorization and payment systems, including sale and
leasing of related equipment, to retail merchants located throughout the United
States. The Company's principal sources of revenues are discounts collected and
merchant service fees. The remaining revenues consist of point-of-sale
processing equipment leases, commissions and sales relating to credit card
processing equipment and installation fees. The Company initiates the credit
card processing relationship with a merchant and negotiates a "discount rate"
and related fees, within the terms of the Company's agreements with processing
banks. The discount is a percentage of the dollar amount of each credit card
transaction.
Revenues derived from the electronic processing of transactions are
recognized at the time the merchants' transactions are processed. Revenues
related to the direct sale of credit card authorization equipment are recognized
when the equipment is shipped. Fees related to both the direct sale and
marketing of this equipment are recognized when installation is completed. Fees
received in advance of shipment or installation are deferred until realized.
Revenue related to finance leasing of point-of-sale processing equipment are
recognized over the term of the lease agreement using the interest method.
Acquisitions
In the third quarter of fiscal 1997, the Company consummated one
operating business acquisition and three merchant portfolio acquisitions. On
March 31, 1997 the Company consummated an acquisition pursuant to which it
issued shares of its common stock in exchange for all the outstanding common
stock of IMA Bancard, Inc. ("IMA"). The shares were issued to the shareholders
of IMA in reliance upon the exemption provided by Section 4(2) of the Securities
Act of 1933 (the "Act"). The acquisition was accounted for as an immaterial
pooling of interests. The three merchant portfolio acquisitions were accounted
for as purchase transactions, and their operating results have been included in
the Company's financial statements beginning March 1, 1997 and April 1, 1997,
the respective effective dates of the transactions.
In the fourth quarter of fiscal 1997, the Company consummated three
operating business acquisitions and one merchant portfolio acquisition. On April
30, 1997, the Company consummated an acquisition pursuant to which it issued
shares of its common stock in exchange for all the outstanding common stock of
CVE Corporation ("CVE"). The acquisition was accounted for as an immaterial
pooling of interests. On June 3, 1997 the Company consummated an acquisition
pursuant to which it issued 579,000 shares of its common stock in exchange for
all the outstanding common stock of Erik Krueger, Incorporated ("Krueger"). On
July 14, 1997, the Company consummated an acquisition pursuant to which it
issued 1,463,414 shares of its common stock in exchange for all the outstanding
common stock of Ladco Financial Group, Inc. ("LFG"). The Company's consolidated
financial statements have been restated to include the accounts of Krueger and
LFG for all periods prior to the merger. The above referenced shares were issued
to the shareholders of CVE, Krueger and LFG in reliance upon the exemption
provided by Section
9
<PAGE>
4(2) of the Act. The merchant portfolio acquisition was accounted for as a
purchase transaction and the operating results have been included in the
Company's financial statements beginning July 1, 1997, the effective date of the
transaction.
In the first quarter of fiscal 1998, the Company consummated two
operating business acquisitions. On September 17, 1997, the Company consummated
an acquisition pursuant to which it issued shares of its common stock in
exchange for all the outstanding common stock of Retail Systems Consulting, Inc.
("RSC"). The acquisition was accounted for as an immaterial pooling of
interests. On October 2, 1997, the Company consummated an acquisition pursuant
to which it issued 3,870,965 shares of its common stock in exchange for all the
outstanding common stock of Bancard, Inc. ("BCI"). The Company's consolidated
financial statements have been restated to include the accounts of BCI for all
periods prior to the merger. The above referenced shares were issued to the
shareholders of RSC and BCI in reliance upon the exemption provided by Section
4(2) of the Act.
In the second quarter of fiscal 1998, the Company consummated one
operating business acquisition. On November 12, 1997, the Company consummated an
acquisition pursuant to which it issued shares of its common stock in exchange
for all the outstanding common stock of Ferrante Financial Services, Inc.
("Ferrante"). The acquisition was accounted for as an immaterial pooling of
interests. The above referenced shares were issued to the shareholders of
Ferrante in reliance upon the exemption provided by Section 4(2) of the Act.
In the third quarter of fiscal 1998, the Company consummated one
operating business acquisition. On February 24, 1998, the Company consummated an
acquisition pursuant to which it issued shares of its common stock in exchange
for all the outstanding common stock of Money Transfer Systems, Inc. ("MTSI").
The acquisition was accounted for as an immaterial pooling of interests. The
above referenced shares were issued to the shareholders of MTSI in reliance upon
the exemption provided by Section 4(2) of the Act.
The growth in the Company's revenues and profitability from fiscal 1997
have resulted largely from the acquisition of operating businesses and merchant
portfolios. Future growth is dependent upon, among other factors, the Company's
ability to continue to consummate additional acquisitions of operating
businesses and merchant portfolios. There can be no assurance that the Company
will be able to make successful acquisitions, that the Company will be able to
successfully integrate operating business it acquires or that the attrition of
merchants from acquired portfolios will not exceed anticipated attrition, thus
resulting in lower revenues from the purchased portfolios.
10
<PAGE>
Results of Operations
The following table presents, for the periods indicated, the percentage
of revenues represented by certain line items in the Company's consolidated
statement of income:
<TABLE>
<CAPTION>
PERCENTAGE/ PERCENTAGE/
THREE MONTH PERIOD INCREASE NINE MONTH PERIOD INCREASE
ENDED APRIL 30, (DECREASE) ENDED APRIL 30, (DECREASE)
-------------------- ---------- ----------------- ----------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 35.2% 100.0% 100.0% 28.5%
Cost of revenues 70.7 71.8 33.0 71.2 72.4 26.4
----- ----- ----- -----
Gross margin 29.3 28.2 40.8 28.8 27.6 34.0
Selling, general and
administrative expenses 13.6 13.1 41.8 13.6 13.2 33.1
Depreciation and
amortization expense 4.3 4.3 35.1 4.2 4.0 34.4
Provision for merchant
loss and bad debt expense 1.3 1.8 (2.6) 1.2 1.4 8.5
Nonrecurring operating
expense -- -- (100.0) -- 0.2 (100.0)
----- ----- ----- -----
Income from operations 10.1 9.0 50.7 9.8 8.8 43.1
Interest income, net 0.4 0.5 24.6 0.5 0.3 88.6
Other expense, net (0.2) (0.7) (68.2) (0.3) (0.8) (47.9)
----- ----- ----- -----
Income before provision
for taxes 10.3 8.8 59.3 10.0 8.3 53.4
Provision for income taxes 4.0 2.8 93.8 3.7 2.8 68.9
----- ----- ----- -----
Net income 6.3% 6.0% 43.3 6.3% 5.5% 45.6
===== ===== ===== =====
</TABLE>
Revenues
Revenues for the third quarter of fiscal 1998 increased to $102.6
million, an increase of 35.2% over the same period last year. For the first nine
months of fiscal 1998, the Company reported revenues of $295.9 million, 28.5%
higher than revenues of $230.3 million for the same period in fiscal 1997. The
increase in revenues has resulted in an increase in the Company's accounts
receivable. The increase in revenues resulted primarily from acquisitions and
new merchant contracts generated through the Company's field sales and
telemarketing efforts, as well as revenue enhancements with existing merchants.
Merchant portfolio purchases and operating business acquisitions not included in
full prior periods accounted for 61.5% of the increase in revenues in the third
quarter of fiscal 1998 and 58.6% of the increase in the first nine months of
fiscal 1998.
Cost of Revenues
Cost of revenues increased from $54.5 million in the third quarter of
fiscal 1997 to $72.5 million in the third quarter of fiscal 1998. Additionally,
for the nine month period ended April 30, 1998, cost of revenues increased to
$210.7 million from $166.6 million for the same period in fiscal 1997. Cost
decreased as a percentage of revenues for both the three month and nine month
periods ended April 30, 1998 by 1.1 and 1.2 percentage points, respectively,
compared to the corresponding periods in fiscal 1997.
11
<PAGE>
Cost of revenues as a percentage of revenues decreased during these
periods primarily as a result of negotiated price reductions and rebates from
major vendors and revenue enhancement programs. The decrease also resulted from
acquisitions of operating businesses during the past year whose cost of revenues
as a percentage of revenues are proportionately lower than those historically
experienced by the Company. These benefits were partially offset by the higher
cost of revenues from purchased bank portfolios and LFG's decline in revenues as
a percentage of the Company's total consolidated revenues.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $14.1 million in the
third quarter of fiscal 1998 and $9.9 million for the third quarter of fiscal
1997. For the first nine months of fiscal 1998, selling, general and
administrative expenses increased to $40.4 million from $30.4 million for the
same period in fiscal 1997. As a percentage of revenues, selling, general and
administrative expenses increased for the nine month period ended April 30, 1998
to 13.6% from 13.2% in fiscal 1997. The increase in selling, general and
administrative expenses as a percentage of revenues includes proportionately
higher agent compensation and other expenses associated with the sales programs
of certain operating businesses acquired during the past year and expenses
associated with expanding the customer service center in Nashville, Tennessee.
Depreciation and Amortization
Depreciation and amortization expense increased 35.1% from $3.2 million
for the quarter ended April 30, 1997 to $4.4 million for the quarter ended April
30, 1998. For the first nine months of fiscal 1998, depreciation and
amortization increased to $12.4 million from $9.2 million for the same period in
fiscal 1997. The increase in depreciation and amortization was primarily the
result of purchased merchant portfolios and additional expenditures related to
the Company's management information systems and new customer service center.
Provision for Merchant Losses and Bad Debt Expense
For the first nine months of fiscal 1998, the provision for merchant
losses and bad debt expense increased to $3.5 million from $3.3 million for the
same period in fiscal 1997. As a percentage of revenues, the provision for
merchant losses and bad debt expense declined to 1.3% in the third quarter of
fiscal 1998 from 1.8% in the third quarter of fiscal 1997. The decrease in
merchant losses and bad debt expense as a percentage of revenues related to
proportionately higher fraud losses incurred in fiscal 1997 compared to fiscal
1998.
Non-recurring Operating Expense
During the first nine months of fiscal 1997, the Company incurred
nonrecurring duplicative net costs of $594,000 relating to a sales force
acquired as a result of a merchant portfolio acquisition.
Interest Income, Net
For the first nine months of fiscal 1998, net interest income increased
to $1.4 million from $767,000 in fiscal 1997. The interest expense of PMT's LFG
subsidiary has declined from the first nine months of fiscal 1997 principally as
a result of refinancing certain indebtedness with more favorable interest rates.
12
<PAGE>
Other Expense
In the third quarter of fiscal 1998 and the nine months year to date,
the Company incurred other expenses of $177,000 and $933,000, respectively. For
the same periods in fiscal 1997, the Company incurred other expenses of $558,000
and $1.8 million, respectively. The Company has included in this line item all
non-recurring transaction costs such as legal and accounting fees related to
acquisitions of operating businesses, which were accounted for as poolings of
interests.
Other expense in the nine months ended April 30, 1997 also includes a
non-recurring charge of approximately $690,000 related to the settlement of
litigation with a former officer of an entity with which PMT merged subsequent
to the resolution of the dispute. In addition, LFG recorded a charge of $367,000
related to the buyout of a consulting agreement resulting from the death of its
former Chief Financial Officer. This charge occurred prior to the effective date
of the merger. Because these mergers were accounted for as poolings of
interests, these expense charges are included in the Company's results of
operations on a restated basis.
Income Tax
Income tax expense increased in the third quarter and year to date
periods of fiscal 1998 in relation to the comparable periods in fiscal 1997,
principally as a result of the Company's increased profitability in fiscal 1998.
For the nine months ended April 30, 1998, income tax expense of $10.9 million
represented an effective income tax rate of 36.9% as compared to income tax
expense of $6.4 million or 33.6% in the first nine months of fiscal 1997. These
effective tax rates are below the expected effective tax rate for fiscal 1998
because of the impact of certain acquired entities which were Subchapter S
corporations prior to the effective dates of the mergers.
Liquidity and Capital Resources
The Company's cash flow is generated by collecting monthly revenues
from merchants. Payments to suppliers and vendors are typically paid within 30
days, except for interchange which is paid daily to the card-issuing banks and
dues and assessments which are paid quarterly to Visa and MasterCard
Associations. Historically, the Company's primary uses of its capital resources
have included debt service, acquisitions of merchant portfolios, capital
expenditures and working capital. The Company's management invests excess cash
in overnight investments and U.S. Government Treasury notes and bills.
The Company expects that cash generated from operations and excess cash
on hand will be adequate to meet the Company's immediate cash needs. In
addition, on January 31, 1997 the Company amended and restated its credit
facility with First Union National Bank of Tennessee to provide a $20.0 million
revolving line of credit. This credit facility expired on January 31, 1998 with
no outstanding balance. The Company is currently negotiating a new or amended
line of credit. The Company has an additional revolving line of credit, through
its LFG subsidiary, with an aggregate available balance of $3.0 million. The
facility bears interest at a variable rate based on the prime rate. There was no
outstanding balance at April 30, 1998 under the LFG facility.
Working Capital
Net cash flow provided by operating activities was approximately $16.4
million for the first nine months of fiscal 1998 as compared to $14.1 million
for the first nine months of fiscal 1997. The increase in cash flow from
operating activities resulted from the increase in net income
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obtained principally through acquisitions of operating businesses and merchant
portfolios and internal generation of new merchant accounts partially offset by
increases in working capital needs.
Capital Expenditures and Investing Activities
Net cash provided by investing activities was approximately $8.0
million for the nine month period ended April 30, 1998 as compared to net cash
used by investing activities of $104.1 million for the same period in fiscal
1997. In fiscal 1998, a portion of the Company's investment in securities
matured on April 30, 1998 and were reinvested in overnight investments. In the
first nine months of fiscal 1997, the Company reinvested in U.S. Treasury
securities approximately $68.0 million of the net proceeds received in the
Company's third public offering.
Net capital expenditures were approximately $24.6 million for the first
nine months of fiscal 1998 as compared to $18.2 million for the same period of
fiscal 1997. The overall increase in capital expenditures resulted primarily
from additional expenditures related to the Company's management information
systems, the relocation of its customer service center in Nashville, Tennessee,
the purchase of additional credit card terminals and accessories for operating
and financing leases to merchants. In addition to the increase in capital
expenditures, the Company used $13.5 million and $29.8 million for the purchase
of merchant portfolios and agents' residual rights in the nine month periods
ended April 30, 1998 and 1997, respectively.
Financing Activities
Net cash used by financing activities for the first nine months of
fiscal 1998 was approximately $11.8 million, as compared to $10.8 million for
the same period in fiscal 1997.
The overall increase of net cash used by financing activities for the
first nine months of fiscal 1998 reflects the issuance of $4.5 million in
additional funds on a note receivable and payments to decrease the Company's
indebtedness which were partially offset by the issuance of additional long-term
debt of $16.1 million through its LFG subsidiary.
Future Capital Needs
Management believes that significant expenditures for the purchase of
additional merchant portfolios may be required for the Company to sustain its
growth in the future. Management expects to fund such purchases through cash on
hand, cash generated from operations and bank borrowings. Purchases of
additional merchant portfolios may require additional capital, and the Company
may incur, from time to time, additional short-term and long-term indebtedness
or issue, in public or private transactions, equity or debt securities, the
availability in terms of which will depend upon then prevailing market and other
conditions. There can be no assurance that any such financing will be obtained
on terms acceptable to the Company. Management believes that the combination of
these sources will be sufficient to meet the Company's anticipated liquidity
needs and its growth plans through fiscal 1998. The Company, however, may pursue
additional expansion opportunities, including acquisitions of operating
businesses accounted for as poolings requiring the issuance of additional shares
of stock.
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The Company's revolving credit facility with First Union National Bank
of Tennessee was amended and restated during fiscal 1997 to increase the
facility to $20.0 million. This credit facility expired January 31, 1998. The
Company is currently negotiating a new or amended line of credit.
The Company has developed a plan to ensure its systems are compliant
with the requirements to process transactions in the year 2000. The majority of
the Company's internal information systems are in the process of being replaced
with fully-compliant new systems. The total cost of the software and
implementation is estimated to be $1,000,000 which will be capitalized as
incurred. This new system implementation is expected to be completed by July 1,
1999. Each of the Company's merchants utilize equipment to capture and transmit
financial transactions. The Company is in the process of completing all
necessary updates to this equipment to ensure it will continue to be effective
in the year 2000. The total future costs of this transition is estimated to be
less than $300,000. The Company is also working with its processing banks and
network providers to ensure their systems are year 2000 compliant. All of these
costs will be borne by the processors and network companies. In the event some
of the processors are unable to convert their systems appropriately, the Company
plans to move its merchant accounts to third parties who are able to perform the
processing.
This report contains certain forward-looking statements. Specifically,
the forward-looking statements relate to future growth through portfolio
acquisitions, the availability of capital to support such acquisitions and the
Company's year 2000 compliance program. The ability of the Company to achieve
the expectations expressed in these forward-looking statements will be subject
to several factors that could cause actual results to differ materially from
those expressed in the forward-looking statements, such as merchant attrition,
difficulties in integrating newly acquired businesses and portfolios, the
availability of capital, the cost of acquired businesses and portfolios, the
Company's continued ability to account for acquisitions as poolings of
interests, industry price increases and the ability of the Company's processing
banks to process merchant transactions effectively. In addition, in reference to
the year 2000 compliance program, there is no assurance that the Company will be
able to move the merchant accounts efficiently or in a cost effective manner.
Results actually achieved thus may differ materially from the expectations
expressed in such statements.
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PART II. OTHER INFORMATION
Item 2. Changes in Securities
On February 24, 1998, the Company consummated an acquisition pursuant
to which it issued 665,000 shares of its common stock in exchange for
all the outstanding common stock of Money Transfer Systems, Inc.
("MTSI"). The above referenced shares were issued to the shareholders
of MTSI in reliance upon the exemption provided by Section 4(2) of the
Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1(a) Employee Agreement, dated February 2, 1998, between the
Registrant and Richardson M. Roberts.
10.1(b) Employee Agreement, dated February 2, 1998, between the
Registrant and Joseph T. Stewart, Jr.
10.1(c) Employee Agreement, dated February 2, 1998, between the
Registrant and Clay M. Whitson.
10.1(d) Employee Agreement, dated February 2, 1998, between the
Registrant and Vickie G. Johnson.
10.1(e) Employee Agreement, dated February 2, 1998, between the
Registrant and Gregory S. Daily.
10.1(f) Employee Agreement, dated February 2, 1998, between the
Registrant and Tony VanBrackle.
27.0 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PMT SERVICES, INC.
By:/s/Vickie G. Johnson
--------------------
Vickie G. Johnson
Chief Accounting Officer
(principal accounting officer)
Date: June 15, 1998
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 2,
1998 (the "Effective Date") by and between PMT Services, Inc., a Tennessee
Corporation (the "Company") and RICHARDSON M. ROBERTS ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as the chief executive officer of the
Company;
WHEREAS, the Company and Employee wish to memorialize their understanding
of the terms of the Employee's employment with the Company, the financial
obligations of the Company to the Employee, and to specify certain rights,
responsibilities and duties of Employee;
WHEREAS, the Company and Employee desire to memorialize their understanding
of the rights, duties and responsibilities of the parties;
NOW, THEREFORE, based upon the premises set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
Employee is employed by Company to serve as chief executive officer of the
Company with the powers and responsibilities set forth for such position in the
Bylaws of the Company and such other duties as be delegated or assigned by the
Board of Directors of the Company. Employee accepts employment upon the terms
set forth in this Agreement and will perform diligently to the best of his
abilities those duties set forth in the Bylaws and in this Agreement in a manner
that promotes the interests and goodwill of the Company. Employee will
faithfully devote his best efforts and all his working time to and for the
benefit of the Company; provided, however, that Employee may, at his option,
devote reasonable time and attention to civic, charitable, business or social
organizations or speaking engagements as he deems appropriate. Notwithstanding
the foregoing, Employee may engage in passive investments so long as the same
are passive and are not inconsistent with Employee's duty hereunder and do not
involve the development, ownership, management or provision of merchant credit
card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than any current investment in any
company that provides as its principle business electronic payment processing
equipment.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS.
(a) Base compensation. For the twelve-month period beginning August 1,
1997, the Company shall provide basic compensation to the Employee at the rate
of $200,000 payable in accordance with the Company's ordinary payroll policies.
Thereafter, base compensation shall be continued for the term of Employee's
employment, but the rate thereof shall be reviewed annually by the board of
directors of the Company (the "Board") or the compensation committee of the
<PAGE>
Board. Any increases that are memorialized in the minutes of the Board shall be
incorporated herein by reference without further action by the Employee or
Company.
(b) Bonus. Employee shall be paid each year a bonus of 145% of the amount
specified in Section 2.1(a), provided that Employee has satisfactorily achieved
the objective performance criteria that is established for Employee for each
fiscal year of the Company. The Board shall reasonably determine whether
Employee has achieved such performance objectives and shall authorize payment of
the bonus no later than the January 31 following the end of the fiscal year for
which the bonus applies. The Board may, in its sole discretion, authorize
payment of a pro rata bonus for performance which is greater or lesser than the
performance objectives that had been prescribed for any year, considering the
actual performance of Employee, the business and financial condition of the
Company and the operating results achieved. Upon the occurrence of a Change in
Control (as defined in Section 7.2), however, the bonus amount paid for each
fiscal year of the Company shall in all events be at least the amount of highest
bonus that had been determined by the Board (whether or not paid to Employee
prior to the Change in Control) during any of the three fiscal years that
precede the Change in Control.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 EMPLOYEE BENEFITS.
(a) General. During the term of this Agreement, Company shall provide
Employee with employee and fringe benefits under any and all employee benefit
plans and programs which are from time to time generally made available to the
executive employees of the Company, including, without limitation, health and
disability benefits. Provided, however, that nothing in this Agreement shall
require the Company to maintain such plans or programs nor prohibit the Company
from terminating, amending or modifying such plans and programs, as the Company,
in its sole discretion, may deem advisable. In all events, including but not
limited to, the funding, operation, management, participation, vesting,
termination, amendment or modification of such plans and programs, the rights
and benefits of Employee shall be governed solely by the terms of the plans and
programs, as provided in such plans, programs or any contract or agreement
related thereto. Nothing in this Agreement shall be deemed to amend or modify
any such plan or program.
To the extent required by any plan, Employee's participation in the plan or
its benefits may be contingent upon an employee contribution or salary reduction
agreement. Failure of Employee to make such required contribution or execute a
salary reduction agreement will result in Employee not participating or
benefiting under said plan for the applicable plan year. Any employee
contribution, through a salary reduction agreement or otherwise, which Employee
is required or permitted to make shall be paid out of Employee's salary or if
the plan so permits, his bonus, if any.
(b) Life Insurance Death Benefits. Company shall provide Employee with an
appropriate life insurance policy that pays a death benefit to the beneficiaries
named by Employee in an amount equal to $20,000. Such life insurance shall be,
at the Company's sole discretion, either an
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individual policy or group policy, as reasonably available. The Company's
obligation to provide such life insurance policy is contingent upon the
Employee's insurability. Employee agrees to submit to any physical examination
by a physician if required as part of life insurance application process. In the
event of Employee's death during the term of this Agreement, the Company shall
provide to Employee's spouse and dependent children, at the expense of the
Company and for a period of 12 months after Employee's death, medical and dental
benefits comparable to those provided by the terms and conditions of the
Company's then existing medical and dental benefit plans, if any. Thereafter,
the Company will extend continuation coverage benefits to Employee's spouse and
dependent children, as required under federal or state law (i.e., COBRA) upon
the loss of coverage occurring at the expiration of the 12 month term.
(c) Vacation Leave. The Company and Employee acknowledge and agree that
Employee shall be entitled to receive five weeks' paid vacation time during the
calendar year for the term of this Agreement. The Company and Employee further
acknowledge and agree that subsequent vacation levels may be modified by the
mutual agreement of the parties to this Agreement.
ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 DEFINITIONS. For purposes of this Agreement, "Confidential
Information" is any data or information that is unique to the Company,
proprietary, competitively sensitive, and not generally known by the public,
including, but not limited to, the Company's business plan, customers,
prospective customers ("prospective customers" is understood to mean those
potential customers with whom or with which the Company is engaged in active
discussion about a business relationship), training manuals, product development
plans, bidding and pricing procedures, market plans and strategies, business
plans and projections, internal performance statistics, financial data,
confidential information concerning employees of the Company, operational or
administrative plans, policy manuals, terms and conditions of contracts and
agreements, and all similar information related to the business of the Company's
customers or potential customers or suppliers, other than information that is
publicly available. The term "Confidential Information" shall not apply to
information which is (i) already in Employee's possession (unless such
information was obtained by Employee from the Company in the course of
Employee's employment by the Company); (ii) received by Employee from a third
party with no restriction on disclosure or (iii) required to be disclosed by any
applicable law or by an order of a court of competent jurisdiction.
SECTION 3.2 USE AND DISCLOSURE. Employee recognizes and acknowledges that
the Confidential Information constitutes valuable, special and unique assets of
the Company and its affiliates. Except as required to perform Employee's duties
as an employee of the Company, and during the period that Employee is employed
by the Company, or until such sooner time that any item described in Section 3.1
ceases to be Confidential Information through no act of Employee in violation of
this Agreement, Employee will not use or disclose any Confidential Information
of the Company.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 RESTRICTION. In consideration for the benefits Employee is
receiving hereunder, Employee hereby acknowledges, and for other good and
valuable consideration, agrees that during the period beginning on the date
hereof and ending with the termination of Employee's employment with the Company
under any of the circumstances described in Section 6.1, Employee directly or
indirectly, shall not (i) compete with the Company to provide merchant
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credit card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than through any current passive
investment in any company that provides as its principle business electronic
payment processing equipment to any of the customers or clients of the Company
wherever located who are either customers or clients of the Company or who have
been identified as potential customers or clients of the Company as of the
termination of Employee's employment; (ii) solicit or hire any employee of the
Company; or (iii) interfere with, disrupt or attempt to disrupt any past,
present or prospective business relationship, contractual or otherwise related
to or arising from any merchant account or any agreement, relationship or
contractual arrangement between the Company and any merchant provided, however,
nothing herein shall prevent Employee from contracting with any such merchant in
a manner that does not interfere with, disrupt or attempt to disrupt any
contractual relationship between such person and the Company.
SECTION 4.2 REMEDIES. Employee agrees and acknowledges that the violation
of the covenants in this Section 4.1 would cause irreparable injury to the
Company and that the remedy at law for any violation or threatened violation
would be inadequate and that the Company shall be entitled to temporary and
permanent injunctive relief or other equitable relief without the necessity of
proving actual damages. Employee represents that enforcement of a remedy by way
of injunction will not prevent him from earning a livelihood. Employee further
represents and admits that time periods contained in Section 4.1 are reasonably
necessary to protect the interests of the Company and would not unfairly or
unreasonably restrict Employee. Such relief shall be in addition to any other
remedies available to Company, including specifically without intending any
limitation, the recovery of damages.
SECTION 4.3 REFORMATION AND SEVERANCE. If a judicial determination is made
that any of the provisions of the above restriction constitutes an unreasonable
or otherwise unenforceable restriction against Employee, it shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the prohibited business activity from the
coverage of this restriction and to apply the restriction to the remaining
portion of the business activities not so severed by such judicial authority.
ARTICLE V. TERM OF AGREEMENT
This Agreement shall continue in full force and effect for a period of one
year commencing on the Effective Date. At the beginning of each month after the
Effective Date, the term of this Agreement shall automatically be extended for
an additional month so that the term of the Agreement on such date is a period
of 12 months.
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
prior to the time set forth in Article V hereof upon the occurrence of the
following events:
(a) By Company Without Cause. The Company may terminate this Agreement at
any time prior to a Change in Control (as defined in Section 7.2) without cause
upon written notice to Employee. At the time of such termination, Company will
pay to Employee the amount of compensation determined under Section 2.1 for the
term of the Agreement, as determined under
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<PAGE>
Article V, provided that any partial month remaining in the term of the
Agreement shall be treated as a full month. In addition, Employee shall receive
any bonuses that have been earned under Section 2.1(b) but have not been paid.
Employee also shall be entitled to receive expense reimbursements under Section
2.2 hereof for expenses incurred in the performance of his duties prior to
termination. After the occurrence of a Change in Control, Employee will receive
the amounts specified in Section 7.1 upon termination of this Agreement by the
Company without cause. A termination of this Agreement without cause will be
deemed to occur if the Company provides written notice of such to the Employee,
or otherwise prevents the Employee from performing his duties hereunder, unless
termination of this Agreement is due to the circumstances described in any other
paragraph of this Section 6.1.
(b) By Employee Without Cause. Employee may terminate this Agreement at
any time without cause upon written notice. At the time of such termination,
Company will pay to Employee the amount of compensation determined under Section
2.1, such amounts to be adjusted pro rata for the portion of the term of the
Agreement completed on the date of termination. Employee shall also be entitled
to reimbursement pursuant to Section 2.2 for expenses incurred in the
performance of his duties hereunder prior to termination.
(c) By Company With Cause. This Agreement may be terminated by Company at
any time upon written notice for any of the following reasons:
I. conviction of the Employee for a felony which in the reasonable
judgment of the Board materially affects Employee's ability to perform his
duties pursuant to this Agreement;
II. commission by Employee of an act of fraud, embezzlement, or material
dishonesty against the Company or its affiliates; or
III. intentional neglect of or material inattention to Employee's duties,
which neglect or inattention remains uncorrected for more than 30 days following
written notice from the Board detailing the Board's concern.
At the time of such termination, Company will pay to Employee the amount of
compensation determined under Section 2.1(a), such amounts to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(d) Termination on Death. In the event of Employee's death, this Agreement
will be deemed to have terminated on the date of his death. At the time of such
termination, Company will pay to the testamentary trusts created by Employee's
will, or if there are no such trusts, to his estate, the amount of compensation
determined under Section 2.1 that is in effect at the time of termination, such
amount to be adjusted pro rata for the portion of the term of the Agreement
completed on the date of termination. Company will additionally make a one-time
payment in an amount equal to 145% of the annual amount payable under Section
2.1(a) at the time of Employee's death. Company shall also pay to such
testamentary trusts or Employee's estate reimbursement pursuant to Section 2.2
for expenses incurred in the performance of his duties hereunder prior to
termination.
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(e) Termination on Disability. This Agreement will terminate immediately
in the event Employee becomes physically or mentally disabled. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days. At the time of such
termination, Company will pay to Employee the amount of compensation determined
under Section 2.1 that is in effect at the time of termination, such amount to
be adjusted pro rata for the portion of the term of the Agreement completed on
the date of termination. In addition, Employee shall, on the date of such
termination, be entitled to receive a one-time payment in an amount equal to
145% of the annual amount payable under Section 2.1(a) at the time of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(f) By Employee With Cause. Employee may upon 10 days prior written notice
terminate this Agreement for reason of cause. At the time of such termination,
Company shall continue to pay salary to Employee at the periodic rate that is in
effect at the time of notice pursuant to Section 2.1 for the term of the
Agreement until the effective date of termination. In addition, Company will
pay to Employee the payments described in Section 7.1 and all expense
reimbursements under Section 2.2 for expenses incurred in the performance of his
duties prior to and contemporaneously with termination. Termination for "cause"
for purposes of this Section 6.1(f), is a termination of employment following a
Change in Control (defined in Section 7.2) under any of the following
circumstances:
I. A material adverse alteration in Employee's position, responsibilities
or status from that which was in effect immediately prior to the
Change in Control.
II. A reduction in Employee's compensation that is payable pursuant to
Section 2.1 or a substantial reduction in benefits provided to
Employee that are described in Section 2.3, as such amounts are in
effect immediately prior to the Change in Control.
III. Relocation of Employee to a location that is more than 35 miles from
the location of the Company's headquarters on the date this Agreement
is executed.
SECTION 6.2 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(a) Gross Up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by or on behalf of the Company to or for the benefit of Employee as
a result of a Change In Control (as defined in Section 7.2) (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 6.2 (a "Payment")) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by Employee 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 Employee shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Employee 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, Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
6
<PAGE>
(b) Tax Opinion. Subject to the provisions of Section 6.2(c), all
determinations required to be made under this Section 6.2, 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 a nationally recognized accounting firm or law firm selected by the Company
(the "Tax Firm"); provided, however, that the Tax Firm shall not determine that
no Excise Tax is payable by Employee unless it delivers to Employee a written
opinion (the "Accounting Opinion") that failure to pay the Excise Tax and to
report the Excise Tax and the payments potentially subject thereto on or with
Employee's applicable federal income tax return will not result in the
imposition of an accuracy-related or other penalty on Employee. All fees and
expenses of the Tax Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company, the Tax Firm shall
make all determinations required under this Section 6.2, shall provide to the
Company and Employee a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm determines
that no Excise Tax is payable, shall deliver the Accounting Opinion to Employee.
Any Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid
by the Company to Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section 6.2, any determination
by the Tax Firm shall be binding upon the Company and Employee; provided,
however, that Employee shall only be bound to the extent that the determinations
of the Tax Firm hereunder, including the determinations made in the Accounting
Opinion, are reasonable and reasonably supported by applicable law. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Tax Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 6.2(c) that Employee is required to make a
payment of any Excise Tax, the Tax Firm shall reasonably 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 Employee. In determining the
reasonableness of Tax Firm's determinations hereunder, and the effect thereof,
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and Employee's tax counsel. Tax Firm's
determinations hereunder, and the Accounting Opinion, shall not be deemed
reasonable until Employee's reasonable objections and comments thereto have been
satisfactorily accommodated by Tax Firm.
(c) Notice of IRS Claim. Employee shall notify the Company in writing of
any claims 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 30 calendar days after Employee
actually receives notice 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; provided, however, that the failure of Employee to notify the Company of
such claim (or to provide any required information with respect thereto) shall
not affect any rights granted to Employee under this Section 6.2 except to the
extent that the Company is materially prejudiced in the defense of such claim as
a direct result of such failure. Employee 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 Employee in
writing prior to the expiration of such period that it desires to contest such
claim, Employee shall do all of the following:
I. give the Company any information reasonably requested by the Company
relating to such claim;
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II. 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 selected by the Company and
reasonably acceptable to Employee;
III. cooperate with the Company in good faith in order effectively to
contest such claim;
IV. if the Company elects not to assume and control the defense of such
claim, 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 Employee 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 limiting the foregoing provisions of this Section
6.2, the Company shall have the right, at its sole option, to assume the defense
of and control all proceedings in connection with such contest, in which case it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Employee, on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or 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 Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee 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) Right to Tax Refund. If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 6.2 Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 6.2(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 Employee of
an amount advanced by the Company pursuant to Section 6.2(c), a determination is
made that Employee is not entitled to a refund with respect to such claim and
the Company does not notify Employee 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, to the extent of such denial, be forgiven and shall not
be required to be repaid and the amount of forgiven advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT.
(a) Amount. Notwithstanding anything to the contrary contained in Article
VI hereof, if within the 36 month period following a Change in Control (as
defined in Section 7.2), Employee's employment with the Company terminates for
any reason, other than the circumstances described in Section 6.1(b), Company
will pay Employee the Gross-up Payment as described in Section 6.2, and a lump
sum payment (the "Termination Payment") which is the sum of the following:
I. Three times Employee's annual base compensation determined by
reference to his base salary in effect at the time of Change In
Control.
II. Three times the highest annual bonus described in Section 2.1(b).
III. Continuation of benefits described in Section 2.3 for a period of
three years following termination of employment.
IV. A one time severance payment of $700,000.
(b) Time for Payment; Interest. The Termination Payment made under this
Section 7.1 shall be paid to Employee in a single lump sum within ten days
following the date of termination. The Company's obligation to pay to Employee
any amounts under this Section 7.1, including without limitation the Termination
Payment and any Gross-Up Payment due under Section 6.2, will bear interest at
the prime rate as quoted in The Wall Street Journal plus 2%, and all accrued and
unpaid interest will bear interest at the same rate, all of which interest will
be compounded annually.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation controlling the Company or owned directly or indirectly by the
stockholders of Company in substantially the same proportions as their ownership
of Company stock, becomes the "beneficial owner" (as defined in SEC Rule 13d-3),
directly or indirectly, of securities of Company representing more than 40% of
the total voting power represented by Company's then outstanding Voting
Securities (as defined below), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in
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the Voting Securities outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities) more than 65% of the total voting power represented by the Voting
Securities outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by Company of all or
substantially all of its assets. For purposes of this section "Voting
Securities" shall mean any securities of Company or its survivor which vote
generally in the election of its directors.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Company and Employee acknowledge and agree that any
claim or controversy arising out of or relating to Article VII of this Agreement
shall be settled by non-binding arbitration in Nashville, Tennessee, in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect on the date of the event giving
rise to the claim or controversy. The Company and Employee further acknowledge
and agree that either party must request arbitration of any claim or controversy
within 60 days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure to
give notice of any claim or controversy within 60 days of the event giving rise
to the claim or controversy shall constitute waiver of the claim or controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six months from the date that a written
notice of request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three arbitrators who are licensed to practice
law in the State of Tennessee and who are experienced in the arbitration of
labor and employment disputes. These arbitrators shall be selected in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect at the time the claim or
controversy arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The arbitrators
shall issue a written decision with respect to all claims or controversies
within 30 days from the date the claims or controversies are submitted to
arbitration. The parties shall be entitled to be represented by legal counsel
at any arbitration proceedings. Employee and the Company acknowledge and agree
that the Company will bear the cost of the arbitration proceeding, including any
stenographic recording, and each party shall be responsible for paying its own
attorneys' fees, if any, unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Company and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Company and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Company acknowledge and agree that nothing in
this Agreement shall be
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construed to require the arbitration of any claim or controversy arising under
Articles III or IV of this Agreement, nor shall anything in this Agreement be
construed to require the arbitration of any claim or controversy arising under
Section 6.2 of this Agreement, as the Accounting Opinion provided pursuant to
such section is final and binding upon the parties. These provisions shall be
enforceable by any court of competent jurisdiction and shall not be subject to
arbitration except by mutual written consent of the parties signed after the
dispute arises, any such consent, and the terms and conditions thereof, then
becoming binding on the parties. Employee and the Company further acknowledge
and agree that nothing in this Agreement shall be construed to require
arbitration of any claim for workers' compensation or unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Company to:
PMT Services, Inc.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With copy to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
Attn: Howard W. Herndon, Esq.
If to Employee, to:
Richardson M. Roberts
2048 Timberwood Drive
Nashville, TN 37215
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person, except as required by law. Nothing in this Section shall be
construed to reduce Employee's right to payments described in Section 6.2.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this
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Agreement based upon the express terms and provisions set forth herein and have
not relied on any communications or representations, oral or written, which are
not set forth in this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Company by an officer of the
Company other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Tennessee,
without regard to its choice of law principles.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement
shall be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.8 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties provided that the substance of the economic relationship created by
this Agreement remains materially unchanged.
SECTION 9.10 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief. No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
SECTION 9.12 COMPANY. The term Company shall mean PMT Services, Inc. and
any affiliate or other entity in which the Company owns, directly or indirectly,
more than a 50% interest.
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IN WITNESS WHEREOF, Company and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
- -----------------------------------
RICHARDSON M. ROBERTS
COMPANY:
PMT SERVICES, INC.
By:
--------------------------------
Its:
-------------------------------
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 2,
1998 (the "Effective Date") by and between PMT Services, Inc., a Tennessee
Corporation (the "Company") and JOSEPH T. STEWART, JR. ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as the chief operating officer of the
Company;
WHEREAS, the Company and Employee wish to memorialize their understanding
of the terms of the Employee's employment with the Company, the financial
obligations of the Company to the Employee, and to specify certain rights,
responsibilities and duties of Employee;
WHEREAS, the Company and Employee desire to memorialize their understanding
of the rights, duties and responsibilities of the parties;
NOW, THEREFORE, based upon the premises set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
Employee is employed by Company to serve as chief operating officer of the
Company with the powers and responsibilities set forth for such position in the
Bylaws of the Company and such other duties as be delegated or assigned by the
Board of Directors of the Company. Employee accepts employment upon the terms
set forth in this Agreement and will perform diligently to the best of his
abilities those duties set forth in the Bylaws and in this Agreement in a manner
that promotes the interests and goodwill of the Company. Employee will
faithfully devote his best efforts and all his working time to and for the
benefit of the Company; provided, however, that Employee may, at his option,
devote reasonable time and attention to civic, charitable, business or social
organizations or speaking engagements as he deems appropriate. Notwithstanding
the foregoing, Employee may engage in passive investments so long as the same
are passive and are not inconsistent with Employee's duty hereunder and do not
involve the development, ownership, management or provision of merchant credit
card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than any current investment in any
company that provides as its principle business electronic payment processing
equipment.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS.
(a) Base compensation. For the twelve-month period beginning August 1,
1997, the Company shall provide basic compensation to the Employee at the rate
of $164,300 payable in accordance with the Company's ordinary payroll policies.
Thereafter, base compensation shall be continued for the term of Employee's
employment, but the rate thereof shall be reviewed annually by the board of
directors of the Company (the "Board") or the compensation committee of the
<PAGE>
Board. Any increases that are memorialized in the minutes of the Board shall be
incorporated herein by reference without further action by the Employee or
Company.
(b) Bonus. Employee shall be paid each year a bonus of 50% of the amount
specified in Section 2.1(a), provided that Employee has satisfactorily achieved
the objective performance criteria that is established for Employee for each
fiscal year of the Company. The Board shall reasonably determine whether
Employee has achieved such performance objectives and shall authorize payment of
the bonus no later than the January 31 following the end of the fiscal year for
which the bonus applies. The Board may, in its sole discretion, authorize
payment of a pro rata bonus for performance which is greater or lesser than the
performance objectives that had been prescribed for any year, considering the
actual performance of Employee, the business and financial condition of the
Company and the operating results achieved. Upon the occurrence of a Change in
Control (as defined in Section 7.2), however, the bonus amount paid for each
fiscal year of the Company shall in all events be at least the amount of highest
bonus that had been determined by the Board (whether or not paid to Employee
prior to the Change in Control) during any of the three fiscal years that
precede the Change in Control.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 EMPLOYEE BENEFITS.
(a) General. During the term of this Agreement, Company shall provide
Employee with employee and fringe benefits under any and all employee benefit
plans and programs which are from time to time generally made available to the
executive employees of the Company, including, without limitation, health and
disability benefits. Provided, however, that nothing in this Agreement shall
require the Company to maintain such plans or programs nor prohibit the Company
from terminating, amending or modifying such plans and programs, as the Company,
in its sole discretion, may deem advisable. In all events, including but not
limited to, the funding, operation, management, participation, vesting,
termination, amendment or modification of such plans and programs, the rights
and benefits of Employee shall be governed solely by the terms of the plans and
programs, as provided in such plans, programs or any contract or agreement
related thereto. Nothing in this Agreement shall be deemed to amend or modify
any such plan or program.
To the extent required by any plan, Employee's participation in the plan or
its benefits may be contingent upon an employee contribution or salary reduction
agreement. Failure of Employee to make such required contribution or execute a
salary reduction agreement will result in Employee not participating or
benefiting under said plan for the applicable plan year. Any employee
contribution, through a salary reduction agreement or otherwise, which Employee
is required or permitted to make shall be paid out of Employee's salary or if
the plan so permits, his bonus, if any.
(b) Life Insurance Death Benefits. Company shall provide Employee with an
appropriate life insurance policy that pays a death benefit to the beneficiaries
named by Employee in an amount equal to $20,000. Such life insurance shall be,
at the Company's sole discretion, either an
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individual policy or group policy, as reasonably available. The Company's
obligation to provide such life insurance policy is contingent upon the
Employee's insurability. Employee agrees to submit to any physical examination
by a physician if required as part of life insurance application process. In the
event of Employee's death during the term of this Agreement, the Company shall
provide to Employee's spouse and dependent children, at the expense of the
Company and for a period of 12 months after Employee's death, medical and dental
benefits comparable to those provided by the terms and conditions of the
Company's then existing medical and dental benefit plans, if any. Thereafter,
the Company will extend continuation coverage benefits to Employee's spouse and
dependent children, as required under federal or state law (i.e., COBRA) upon
the loss of coverage occurring at the expiration of the 12 month term.
(c) Vacation Leave. The Company and Employee acknowledge and agree that
Employee shall be entitled to receive five weeks' paid vacation time during the
calendar year for the term of this Agreement. The Company and Employee further
acknowledge and agree that subsequent vacation levels may be modified by the
mutual agreement of the parties to this Agreement.
ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 DEFINITIONS. For purposes of this Agreement, "Confidential
Information" is any data or information that is unique to the Company,
proprietary, competitively sensitive, and not generally known by the public,
including, but not limited to, the Company's business plan, customers,
prospective customers ("prospective customers" is understood to mean those
potential customers with whom or with which the Company is engaged in active
discussion about a business relationship), training manuals, product development
plans, bidding and pricing procedures, market plans and strategies, business
plans and projections, internal performance statistics, financial data,
confidential information concerning employees of the Company, operational or
administrative plans, policy manuals, terms and conditions of contracts and
agreements, and all similar information related to the business of the Company's
customers or potential customers or suppliers, other than information that is
publicly available. The term "Confidential Information" shall not apply to
information which is (i) already in Employee's possession (unless such
information was obtained by Employee from the Company in the course of
Employee's employment by the Company); (ii) received by Employee from a third
party with no restriction on disclosure or (iii) required to be disclosed by any
applicable law or by an order of a court of competent jurisdiction.
SECTION 3.2 USE AND DISCLOSURE. Employee recognizes and acknowledges that
the Confidential Information constitutes valuable, special and unique assets of
the Company and its affiliates. Except as required to perform Employee's duties
as an employee of the Company, and during the period that Employee is employed
by the Company, or until such sooner time that any item described in Section 3.1
ceases to be Confidential Information through no act of Employee in violation of
this Agreement, Employee will not use or disclose any Confidential Information
of the Company.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 RESTRICTION. In consideration for the benefits Employee is
receiving hereunder, Employee hereby acknowledges, and for other good and
valuable consideration, agrees that during the period beginning on the date
hereof and ending with the termination of Employee's employment with the Company
under any of the circumstances described in Section 6.1, Employee directly or
indirectly, shall not (i) compete with the Company to provide merchant
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credit card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than through any current passive
investment in any company that provides as its principle business electronic
payment processing equipment to any of the customers or clients of the Company
wherever located who are either customers or clients of the Company or who have
been identified as potential customers or clients of the Company as of the
termination of Employee's employment; (ii) solicit or hire any employee of the
Company; or (iii) interfere with, disrupt or attempt to disrupt any past,
present or prospective business relationship, contractual or otherwise related
to or arising from any merchant account or any agreement, relationship or
contractual arrangement between the Company and any merchant provided, however,
nothing herein shall prevent Employee from contracting with any such merchant in
a manner that does not interfere with, disrupt or attempt to disrupt any
contractual relationship between such person and the Company.
SECTION 4.2 REMEDIES. Employee agrees and acknowledges that the violation
of the covenants in this Section 4.1 would cause irreparable injury to the
Company and that the remedy at law for any violation or threatened violation
would be inadequate and that the Company shall be entitled to temporary and
permanent injunctive relief or other equitable relief without the necessity of
proving actual damages. Employee represents that enforcement of a remedy by way
of injunction will not prevent him from earning a livelihood. Employee further
represents and admits that time periods contained in Section 4.1 are reasonably
necessary to protect the interests of the Company and would not unfairly or
unreasonably restrict Employee. Such relief shall be in addition to any other
remedies available to Company, including specifically without intending any
limitation, the recovery of damages.
SECTION 4.3 REFORMATION AND SEVERANCE. If a judicial determination is made
that any of the provisions of the above restriction constitutes an unreasonable
or otherwise unenforceable restriction against Employee, it shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the prohibited business activity from the
coverage of this restriction and to apply the restriction to the remaining
portion of the business activities not so severed by such judicial authority.
ARTICLE V. TERM OF AGREEMENT
This Agreement shall continue in full force and effect for a period of one
year commencing on the Effective Date. At the beginning of each month after the
Effective Date, the term of this Agreement shall automatically be extended for
an additional month so that the term of the Agreement on such date is a period
of 12 months.
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
prior to the time set forth in Article V hereof upon the occurrence of the
following events:
(a) By Company Without Cause. The Company may terminate this Agreement at
any time prior to a Change in Control (as defined in Section 7.2) without cause
upon written notice to Employee. At the time of such termination, Company will
pay to Employee the amount of compensation determined under Section 2.1 for the
term of the Agreement, as determined under
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Article V, provided that any partial month remaining in the term of the
Agreement shall be treated as a full month. In addition, Employee shall receive
any bonuses that have been earned under Section 2.1(b) but have not been paid.
Employee also shall be entitled to receive expense reimbursements under Section
2.2 hereof for expenses incurred in the performance of his duties prior to
termination. After the occurrence of a Change in Control, Employee will receive
the amounts specified in Section 7.1 upon termination of this Agreement by the
Company without cause. A termination of this Agreement without cause will be
deemed to occur if the Company provides written notice of such to the Employee,
or otherwise prevents the Employee from performing his duties hereunder, unless
termination of this Agreement is due to the circumstances described in any other
paragraph of this Section 6.1.
(b) By Employee Without Cause. Employee may terminate this Agreement at
any time without cause upon written notice. At the time of such termination,
Company will pay to Employee the amount of compensation determined under Section
2.1, such amounts to be adjusted pro rata for the portion of the term of the
Agreement completed on the date of termination. Employee shall also be entitled
to reimbursement pursuant to Section 2.2 for expenses incurred in the
performance of his duties hereunder prior to termination.
(c) By Company With Cause. This Agreement may be terminated by Company at
any time upon written notice for any of the following reasons:
I. conviction of the Employee for a felony which in the reasonable
judgment of the Board materially affects Employee's ability to perform his
duties pursuant to this Agreement;
II. commission by Employee of an act of fraud, embezzlement, or material
dishonesty against the Company or its affiliates; or
III. intentional neglect of or material inattention to Employee's duties,
which neglect or inattention remains uncorrected for more than 30 days following
written notice from the Board detailing the Board's concern.
At the time of such termination, Company will pay to Employee the amount of
compensation determined under Section 2.1(a), such amounts to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(d) Termination on Death. In the event of Employee's death, this Agreement
will be deemed to have terminated on the date of his death. At the time of such
termination, Company will pay to the testamentary trusts created by Employee's
will, or if there are no such trusts, to his estate, the amount of compensation
determined under Section 2.1 that is in effect at the time of termination, such
amount to be adjusted pro rata for the portion of the term of the Agreement
completed on the date of termination. Company will additionally make a one-time
payment in an amount equal to 50% of the annual amount payable under Section
2.1(a) at the time of Employee's death. Company shall also pay to such
testamentary trusts or Employee's estate reimbursement pursuant to Section 2.2
for expenses incurred in the performance of his duties hereunder prior to
termination.
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(e) Termination on Disability. This Agreement will terminate immediately
in the event Employee becomes physically or mentally disabled. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days. At the time of such
termination, Company will pay to Employee the amount of compensation determined
under Section 2.1 that is in effect at the time of termination, such amount to
be adjusted pro rata for the portion of the term of the Agreement completed on
the date of termination. In addition, Employee shall, on the date of such
termination, be entitled to receive a one-time payment in an amount equal to 50%
of the annual amount payable under Section 2.1(a) at the time of termination.
Employee shall also be entitled to reimbursement pursuant to Section 2.2 for
expenses incurred in the performance of his duties hereunder prior to
termination.
(f) By Employee With Cause. Employee may upon 10 days prior written notice
terminate this Agreement for reason of cause. At the time of such termination,
Company shall continue to pay salary to Employee at the periodic rate that is in
effect at the time of notice pursuant to Section 2.1 for the term of the
Agreement until the effective date of termination. In addition, Company will
pay to Employee the payments described in Section 7.1 and all expense
reimbursements under Section 2.2 for expenses incurred in the performance of his
duties prior to and contemporaneously with termination. Termination for "cause"
for purposes of this Section 6.1(f), is a termination of employment following a
Change in Control (defined in Section 7.2) under any of the following
circumstances:
I. A material adverse alteration in Employee's position, responsibilities
or status from that which was in effect immediately prior to the
Change in Control.
II. A reduction in Employee's compensation that is payable pursuant to
Section 2.1 or a substantial reduction in benefits provided to
Employee that are described in Section 2.3, as such amounts are in
effect immediately prior to the Change in Control.
III. Relocation of Employee to a location that is more than 35 miles from
the location of the Company's headquarters on the date this Agreement
is executed.
SECTION 6.2 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(a) Gross Up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by or on behalf of the Company to or for the benefit of Employee as
a result of a Change In Control (as defined in Section 7.2) (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 6.2 (a "Payment")) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by Employee 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 Employee shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Employee 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, Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
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(b) Tax Opinion. Subject to the provisions of Section 6.2(c), all
determinations required to be made under this Section 6.2, 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 a nationally recognized accounting firm or law firm selected by the Company
(the "Tax Firm"); provided, however, that the Tax Firm shall not determine that
no Excise Tax is payable by Employee unless it delivers to Employee a written
opinion (the "Accounting Opinion") that failure to pay the Excise Tax and to
report the Excise Tax and the payments potentially subject thereto on or with
Employee's applicable federal income tax return will not result in the
imposition of an accuracy-related or other penalty on Employee. All fees and
expenses of the Tax Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company, the Tax Firm shall
make all determinations required under this Section 6.2, shall provide to the
Company and Employee a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm determines
that no Excise Tax is payable, shall deliver the Accounting Opinion to Employee.
Any Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid
by the Company to Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section 6.2, any determination
by the Tax Firm shall be binding upon the Company and Employee; provided,
however, that Employee shall only be bound to the extent that the determinations
of the Tax Firm hereunder, including the determinations made in the Accounting
Opinion, are reasonable and reasonably supported by applicable law. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Tax Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 6.2(c) that Employee is required to make a
payment of any Excise Tax, the Tax Firm shall reasonably 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 Employee. In determining the
reasonableness of Tax Firm's determinations hereunder, and the effect thereof,
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and Employee's tax counsel. Tax Firm's
determinations hereunder, and the Accounting Opinion, shall not be deemed
reasonable until Employee's reasonable objections and comments thereto have been
satisfactorily accommodated by Tax Firm.
(c) Notice of IRS Claim. Employee shall notify the Company in writing of
any claims 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 30 calendar days after Employee
actually receives notice 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; provided, however, that the failure of Employee to notify the Company of
such claim (or to provide any required information with respect thereto) shall
not affect any rights granted to Employee under this Section 6.2 except to the
extent that the Company is materially prejudiced in the defense of such claim as
a direct result of such failure. Employee 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 Employee in
writing prior to the expiration of such period that it desires to contest such
claim, Employee shall do all of the following:
I. give the Company any information reasonably requested by the Company
relating to such claim;
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II. 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 selected by the Company and
reasonably acceptable to Employee;
III. cooperate with the Company in good faith in order effectively to
contest such claim;
IV. if the Company elects not to assume and control the defense of such
claim, 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 Employee 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 limiting the foregoing provisions of this Section
6.2, the Company shall have the right, at its sole option, to assume the defense
of and control all proceedings in connection with such contest, in which case it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Employee, on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or 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 Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee 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) Right to Tax Refund. If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 6.2 Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 6.2(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 Employee of
an amount advanced by the Company pursuant to Section 6.2(c), a determination is
made that Employee is not entitled to a refund with respect to such claim and
the Company does not notify Employee 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, to the extent of such denial, be forgiven and shall not
be required to be repaid and the amount of forgiven advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT.
(a) Amount. Notwithstanding anything to the contrary contained in Article
VI hereof, if within the 24 month period following a Change in Control (as
defined in Section 7.2), Employee's employment with the Company terminates for
any reason, other than the circumstances described in Section 6.1(b), Company
will pay Employee the Gross-up Payment as described in Section 6.2, and a lump
sum payment (the "Termination Payment") which is the sum of the following:
I. Two times Employee's annual base compensation determined by reference
to his base salary in effect at the time of Change In Control.
II. Two times the highest annual bonus described in Section 2.1(b).
III. Continuation of benefits described in Section 2.3 for a period of two
years following termination of employment.
IV. A one time severance payment of $160,000.
(b) Time for Payment; Interest. The Termination Payment made under this
Section 7.1 shall be paid to Employee in a single lump sum within ten days
following the date of termination. The Company's obligation to pay to Employee
any amounts under this Section 7.1, including without limitation the Termination
Payment and any Gross-Up Payment due under Section 6.2, will bear interest at
the prime rate as quoted in The Wall Street Journal plus 2%, and all accrued and
unpaid interest will bear interest at the same rate, all of which interest will
be compounded annually.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation controlling the Company or owned directly or indirectly by the
stockholders of Company in substantially the same proportions as their ownership
of Company stock, becomes the "beneficial owner" (as defined in SEC Rule 13d-3),
directly or indirectly, of securities of Company representing more than 40% of
the total voting power represented by Company's then outstanding Voting
Securities (as defined below), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities outstanding immediately prior
thereto continuing to represent (either by
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remaining outstanding or by being converted into Voting Securities) more than
65% of the total voting power represented by the Voting Securities outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by Company of all or substantially all of its
assets. For purposes of this section "Voting Securities" shall mean any
securities of Company or its survivor which vote generally in the election of
its directors.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Company and Employee acknowledge and agree that any
claim or controversy arising out of or relating to Article VII of this Agreement
shall be settled by non-binding arbitration in Nashville, Tennessee, in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect on the date of the event giving
rise to the claim or controversy. The Company and Employee further acknowledge
and agree that either party must request arbitration of any claim or controversy
within 60 days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure to
give notice of any claim or controversy within 60 days of the event giving rise
to the claim or controversy shall constitute waiver of the claim or controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six months from the date that a written
notice of request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three arbitrators who are licensed to practice
law in the State of Tennessee and who are experienced in the arbitration of
labor and employment disputes. These arbitrators shall be selected in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect at the time the claim or
controversy arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The arbitrators
shall issue a written decision with respect to all claims or controversies
within 30 days from the date the claims or controversies are submitted to
arbitration. The parties shall be entitled to be represented by legal counsel
at any arbitration proceedings. Employee and the Company acknowledge and agree
that the Company will bear the cost of the arbitration proceeding, including any
stenographic recording, and each party shall be responsible for paying its own
attorneys' fees, if any, unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Company and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Company and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Company acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of
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this Agreement, nor shall anything in this Agreement be construed to require the
arbitration of any claim or controversy arising under Section 6.2 of this
Agreement, as the Accounting Opinion provided pursuant to such section is final
and binding upon the parties. These provisions shall be enforceable by any court
of competent jurisdiction and shall not be subject to arbitration except by
mutual written consent of the parties signed after the dispute arises, any such
consent, and the terms and conditions thereof, then becoming binding on the
parties. Employee and the Company further acknowledge and agree that nothing in
this Agreement shall be construed to require arbitration of any claim for
workers' compensation or unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Company to:
PMT Services, Inc.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With copy to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
Attn: Howard W. Herndon, Esq.
If to Employee, to:
Joseph T. Stewart, Jr.
1006 Wilson Pike
Brentwood, Tennessee 37027
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person, except as required by law. Nothing in this Section shall be
construed to reduce Employee's right to payments described in Section 6.2.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this
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Agreement based upon the express terms and provisions set forth herein and have
not relied on any communications or representations, oral or written, which are
not set forth in this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Company by an officer of the
Company other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Tennessee,
without regard to its choice of law principles.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement
shall be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.8 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties provided that the substance of the economic relationship created by
this Agreement remains materially unchanged.
SECTION 9.10 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief. No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
SECTION 9.12 COMPANY. The term Company shall mean PMT Services, Inc. and
any affiliate or other entity in which the Company owns, directly or indirectly,
more than a 50% interest.
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IN WITNESS WHEREOF, Company and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
- -----------------------------------
JOSEPH T. STEWART, JR.
COMPANY:
PMT SERVICES, INC.
By:
--------------------------------
Its:
-------------------------------
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 2,
1998 (the "Effective Date") by and between PMT Services, Inc., a Tennessee
Corporation (the "Company") and CLAY M. WHITSON ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as the chief financial officer and treasurer
of the Company;
WHEREAS, the Company and Employee wish to memorialize their understanding
of the terms of the Employee's employment with the Company, the financial
obligations of the Company to the Employee, and to specify certain rights,
responsibilities and duties of Employee;
WHEREAS, the Company and Employee desire to memorialize their understanding
of the rights, duties and responsibilities of the parties;
NOW, THEREFORE, based upon the premises set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
Employee is employed by Company to serve as chief financial officer and
treasurer of the Company with the powers and responsibilities set forth for such
position in the Bylaws of the Company and such other duties as be delegated or
assigned by the Board of Directors of the Company. Employee accepts employment
upon the terms set forth in this Agreement and will perform diligently to the
best of his abilities those duties set forth in the Bylaws and in this Agreement
in a manner that promotes the interests and goodwill of the Company. Employee
will faithfully devote his best efforts and all his working time to and for the
benefit of the Company; provided, however, that Employee may, at his option,
devote reasonable time and attention to civic, charitable, business or social
organizations or speaking engagements as he deems appropriate. Notwithstanding
the foregoing, Employee may engage in passive investments so long as the same
are passive and are not inconsistent with Employee's duty hereunder and do not
involve the development, ownership, management or provision of merchant credit
card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than any current investment in any
company that provides as its principle business electronic payment processing
equipment.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS.
(a) Base compensation. For the twelve-month period beginning August 1,
1997, the Company shall provide basic compensation to the Employee at the rate
of $159,000 payable in accordance with the Company's ordinary payroll policies.
Thereafter, base compensation shall be continued for the term of Employee's
employment, but the rate thereof shall be reviewed annually by the board of
directors of the Company (the "Board") or the compensation committee of the
<PAGE>
Board. Any increases that are memorialized in the minutes of the Board shall be
incorporated herein by reference without further action by the Employee or
Company.
(b) Bonus. Employee shall be paid each year a bonus of 50% of the amount
specified in Section 2.1(a), provided that Employee has satisfactorily achieved
the objective performance criteria that is established for Employee for each
fiscal year of the Company. The Board shall reasonably determine whether
Employee has achieved such performance objectives and shall authorize payment of
the bonus no later than the January 31 following the end of the fiscal year for
which the bonus applies. The Board may, in its sole discretion, authorize
payment of a pro rata bonus for performance which is greater or lesser than the
performance objectives that had been prescribed for any year, considering the
actual performance of Employee, the business and financial condition of the
Company and the operating results achieved. Upon the occurrence of a Change in
Control (as defined in Section 7.2), however, the bonus amount paid for each
fiscal year of the Company shall in all events be at least the amount of highest
bonus that had been determined by the Board (whether or not paid to Employee
prior to the Change in Control) during any of the three fiscal years that
precede the Change in Control.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 EMPLOYEE BENEFITS.
(a) General During the term of this Agreement, Company shall provide
Employee with employee and fringe benefits under any and all employee benefit
plans and programs which are from time to time generally made available to the
executive employees of the Company, including, without limitation, health and
disability benefits. Provided, however, that nothing in this Agreement shall
require the Company to maintain such plans or programs nor prohibit the Company
from terminating, amending or modifying such plans and programs, as the Company,
in its sole discretion, may deem advisable. In all events, including but not
limited to, the funding, operation, management, participation, vesting,
termination, amendment or modification of such plans and programs, the rights
and benefits of Employee shall be governed solely by the terms of the plans and
programs, as provided in such plans, programs or any contract or agreement
related thereto. Nothing in this Agreement shall be deemed to amend or modify
any such plan or program.
To the extent required by any plan, Employee's participation in the plan or
its benefits may be contingent upon an employee contribution or salary reduction
agreement. Failure of Employee to make such required contribution or execute a
salary reduction agreement will result in Employee not participating or
benefiting under said plan for the applicable plan year. Any employee
contribution, through a salary reduction agreement or otherwise, which Employee
is required or permitted to make shall be paid out of Employee's salary or if
the plan so permits, his bonus, if any.
(b) Life Insurance Death Benefits. Company shall provide Employee with an
appropriate life insurance policy that pays a death benefit to the beneficiaries
named by Employee in an amount equal to $20,000. Such life insurance shall be,
at the Company's sole discretion, either an
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individual policy or group policy, as reasonably available. The Company's
obligation to provide such life insurance policy is contingent upon the
Employee's insurability. Employee agrees to submit to any physical examination
by a physician if required as part of life insurance application process. In the
event of Employee's death during the term of this Agreement, the Company shall
provide to Employee's spouse and dependent children, at the expense of the
Company and for a period of 12 months after Employee's death, medical and dental
benefits comparable to those provided by the terms and conditions of the
Company's then existing medical and dental benefit plans, if any. Thereafter,
the Company will extend continuation coverage benefits to Employee's spouse and
dependent children, as required under federal or state law (i.e., COBRA) upon
the loss of coverage occurring at the expiration of the 12 month term.
(c) Vacation Leave. The Company and Employee acknowledge and agree that
Employee shall be entitled to receive five weeks' paid vacation time during the
calendar year for the term of this Agreement. The Company and Employee further
acknowledge and agree that subsequent vacation levels may be modified by the
mutual agreement of the parties to this Agreement.
ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 DEFINITIONS. For purposes of this Agreement, "Confidential
Information" is any data or information that is unique to the Company,
proprietary, competitively sensitive, and not generally known by the public,
including, but not limited to, the Company's business plan, customers,
prospective customers ("prospective customers" is understood to mean those
potential customers with whom or with which the Company is engaged in active
discussion about a business relationship), training manuals, product development
plans, bidding and pricing procedures, market plans and strategies, business
plans and projections, internal performance statistics, financial data,
confidential information concerning employees of the Company, operational or
administrative plans, policy manuals, terms and conditions of contracts and
agreements, and all similar information related to the business of the Company's
customers or potential customers or suppliers, other than information that is
publicly available. The term "Confidential Information" shall not apply to
information which is (i) already in Employee's possession (unless such
information was obtained by Employee from the Company in the course of
Employee's employment by the Company); (ii) received by Employee from a third
party with no restriction on disclosure or (iii) required to be disclosed by any
applicable law or by an order of a court of competent jurisdiction.
SECTION 3.2 USE AND DISCLOSURE. Employee recognizes and acknowledges that
the Confidential Information constitutes valuable, special and unique assets of
the Company and its affiliates. Except as required to perform Employee's duties
as an employee of the Company, and during the period that Employee is employed
by the Company, or until such sooner time that any item described in Section 3.1
ceases to be Confidential Information through no act of Employee in violation of
this Agreement, Employee will not use or disclose any Confidential Information
of the Company.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 RESTRICTION. In consideration for the benefits Employee is
receiving hereunder, Employee hereby acknowledges, and for other good and
valuable consideration, agrees that during the period beginning on the date
hereof and ending with the termination of Employee's employment with the Company
under any of the circumstances described in Section 6.1, Employee directly or
indirectly, shall not (i) compete with the Company to provide merchant
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credit card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than through any current passive
investment in any company that provides as its principle business electronic
payment processing equipment to any of the customers or clients of the Company
wherever located who are either customers or clients of the Company or who have
been identified as potential customers or clients of the Company as of the
termination of Employee's employment; (ii) solicit or hire any employee of the
Company; or (iii) interfere with, disrupt or attempt to disrupt any past,
present or prospective business relationship, contractual or otherwise related
to or arising from any merchant account or any agreement, relationship or
contractual arrangement between the Company and any merchant provided, however,
nothing herein shall prevent Employee from contracting with any such merchant in
a manner that does not interfere with, disrupt or attempt to disrupt any
contractual relationship between such person and the Company.
SECTION 4.2 REMEDIES. Employee agrees and acknowledges that the violation
of the covenants in this Section 4.1 would cause irreparable injury to the
Company and that the remedy at law for any violation or threatened violation
would be inadequate and that the Company shall be entitled to temporary and
permanent injunctive relief or other equitable relief without the necessity of
proving actual damages. Employee represents that enforcement of a remedy by way
of injunction will not prevent him from earning a livelihood. Employee further
represents and admits that time periods contained in Section 4.1 are reasonably
necessary to protect the interests of the Company and would not unfairly or
unreasonably restrict Employee. Such relief shall be in addition to any other
remedies available to Company, including specifically without intending any
limitation, the recovery of damages.
SECTION 4.3 REFORMATION AND SEVERANCE. If a judicial determination is made
that any of the provisions of the above restriction constitutes an unreasonable
or otherwise unenforceable restriction against Employee, it shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the prohibited business activity from the
coverage of this restriction and to apply the restriction to the remaining
portion of the business activities not so severed by such judicial authority.
ARTICLE V. TERM OF AGREEMENT
This Agreement shall continue in full force and effect for a period of one
year commencing on the Effective Date. At the beginning of each month after the
Effective Date, the term of this Agreement shall automatically be extended for
an additional month so that the term of the Agreement on such date is a period
of 12 months.
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
prior to the time set forth in Article V hereof upon the occurrence of the
following events:
(a) By Company Without Cause. The Company may terminate this Agreement at
any time prior to a Change in Control (as defined in Section 7.2) without cause
upon written notice to Employee. At the time of such termination, Company will
pay to Employee the amount of compensation determined under Section 2.1 for the
term of the Agreement, as determined under
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Article V, provided that any partial month remaining in the term of the
Agreement shall be treated as a full month. In addition, Employee shall receive
any bonuses that have been earned under Section 2.1(b) but have not been paid.
Employee also shall be entitled to receive expense reimbursements under Section
2.2 hereof for expenses incurred in the performance of his duties prior to
termination. After the occurrence of a Change in Control, Employee will receive
the amounts specified in Section 7.1 upon termination of this Agreement by the
Company without cause. A termination of this Agreement without cause will be
deemed to occur if the Company provides written notice of such to the Employee,
or otherwise prevents the Employee from performing his duties hereunder, unless
termination of this Agreement is due to the circumstances described in any other
paragraph of this Section 6.1.
(b) By Employee Without Cause. Employee may terminate this Agreement at
any time without cause upon written notice. At the time of such termination,
Company will pay to Employee the amount of compensation determined under Section
2.1, such amounts to be adjusted pro rata for the portion of the term of the
Agreement completed on the date of termination. Employee shall also be entitled
to reimbursement pursuant to Section 2.2 for expenses incurred in the
performance of his duties hereunder prior to termination.
(c) By Company With Cause. This Agreement may be terminated by Company at
any time upon written notice for any of the following reasons:
I. conviction of the Employee for a felony which in the reasonable
judgment of the Board materially affects Employee's ability to perform his
duties pursuant to this Agreement;
II. commission by Employee of an act of fraud, embezzlement, or material
dishonesty against the Company or its affiliates; or
III. intentional neglect of or material inattention to Employee's duties,
which neglect or inattention remains uncorrected for more than 30 days following
written notice from the Board detailing the Board's concern.
At the time of such termination, Company will pay to Employee the amount of
compensation determined under Section 2.1(a), such amounts to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(d) Termination on Death. In the event of Employee's death, this Agreement
will be deemed to have terminated on the date of his death. At the time of such
termination, Company will pay to the testamentary trusts created by Employee's
will, or if there are no such trusts, to his estate, the amount of compensation
determined under Section 2.1 that is in effect at the time of termination, such
amount to be adjusted pro rata for the portion of the term of the Agreement
completed on the date of termination. Company will additionally make a one-time
payment in an amount equal to 50% of the annual amount payable under Section
2.1(a) at the time of Employee's death. Company shall also pay to such
testamentary trusts or Employee's estate reimbursement pursuant to Section 2.2
for expenses incurred in the performance of his duties hereunder prior to
termination.
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(e) Termination on Disability. This Agreement will terminate immediately
in the event Employee becomes physically or mentally disabled. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days. At the time of such
termination, Company will pay to Employee the amount of compensation determined
under Section 2.1 that is in effect at the time of termination, such amount to
be adjusted pro rata for the portion of the term of the Agreement completed on
the date of termination. In addition, Employee shall, on the date of such
termination, be entitled to receive a one-time payment in an amount equal to 50%
of the annual amount payable under Section 2.1(a) at the time of termination.
Employee shall also be entitled to reimbursement pursuant to Section 2.2 for
expenses incurred in the performance of his duties hereunder prior to
termination.
(f) By Employee With Cause. Employee may upon 10 days prior written notice
terminate this Agreement for reason of cause. At the time of such termination,
Company shall continue to pay salary to Employee at the periodic rate that is in
effect at the time of notice pursuant to Section 2.1 for the term of the
Agreement until the effective date of termination. In addition, Company will
pay to Employee the payments described in Section 7.1 and all expense
reimbursements under Section 2.2 for expenses incurred in the performance of his
duties prior to and contemporaneously with termination. Termination for "cause"
for purposes of this Section 6.1(f), is a termination of employment following a
Change in Control (defined in Section 7.2) under any of the following
circumstances:
I. A material adverse alteration in Employee's position, responsibilities
or status from that which was in effect immediately prior to the
Change in Control.
II. A reduction in Employee's compensation that is payable pursuant to
Section 2.1 or a substantial reduction in benefits provided to
Employee that are described in Section 2.3, as such amounts are in
effect immediately prior to the Change in Control.
III. Relocation of Employee to a location that is more than 35 miles from
the location of the Company's headquarters on the date this Agreement
is executed.
SECTION 6.2 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(a) Gross Up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by or on behalf of the Company to or for the benefit of Employee as
a result of a Change In Control (as defined in Section 7.2) (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 6.2 (a "Payment")) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by Employee 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 Employee shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Employee 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, Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
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(b) Tax Opinion. Subject to the provisions of Section 6.2(c), all
determinations required to be made under this Section 6.2, 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 a nationally recognized accounting firm or law firm selected by the Company
(the "Tax Firm"); provided, however, that the Tax Firm shall not determine that
no Excise Tax is payable by Employee unless it delivers to Employee a written
opinion (the "Accounting Opinion") that failure to pay the Excise Tax and to
report the Excise Tax and the payments potentially subject thereto on or with
Employee's applicable federal income tax return will not result in the
imposition of an accuracy-related or other penalty on Employee. All fees and
expenses of the Tax Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company, the Tax Firm shall
make all determinations required under this Section 6.2, shall provide to the
Company and Employee a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm determines
that no Excise Tax is payable, shall deliver the Accounting Opinion to Employee.
Any Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid
by the Company to Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section 6.2, any determination
by the Tax Firm shall be binding upon the Company and Employee; provided,
however, that Employee shall only be bound to the extent that the determinations
of the Tax Firm hereunder, including the determinations made in the Accounting
Opinion, are reasonable and reasonably supported by applicable law. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Tax Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 6.2(c) that Employee is required to make a
payment of any Excise Tax, the Tax Firm shall reasonably 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 Employee. In determining the
reasonableness of Tax Firm's determinations hereunder, and the effect thereof,
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and Employee's tax counsel. Tax Firm's
determinations hereunder, and the Accounting Opinion, shall not be deemed
reasonable until Employee's reasonable objections and comments thereto have been
satisfactorily accommodated by Tax Firm.
(c) Notice of IRS Claim. Employee shall notify the Company in writing of
any claims 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 30 calendar days after Employee
actually receives notice 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; provided, however, that the failure of Employee to notify the Company of
such claim (or to provide any required information with respect thereto) shall
not affect any rights granted to Employee under this Section 6.2 except to the
extent that the Company is materially prejudiced in the defense of such claim as
a direct result of such failure. Employee 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 Employee in
writing prior to the expiration of such period that it desires to contest such
claim, Employee shall do all of the following:
I. give the Company any information reasonably requested by the Company
relating to such claim;
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II. 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 selected by the Company and
reasonably acceptable to Employee;
III. cooperate with the Company in good faith in order effectively to
contest such claim;
IV. if the Company elects not to assume and control the defense of such
claim, 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 Employee 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 limiting the foregoing provisions of this Section
6.2, the Company shall have the right, at its sole option, to assume the defense
of and control all proceedings in connection with such contest, in which case it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Employee, on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or 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 Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee 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) Right to Tax Refund. If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 6.2 Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 6.2(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 Employee of
an amount advanced by the Company pursuant to Section 6.2(c), a determination is
made that Employee is not entitled to a refund with respect to such claim and
the Company does not notify Employee 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, to the extent of such denial, be forgiven and shall not
be required to be repaid and the amount of forgiven advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT.
(a) Amount. Notwithstanding anything to the contrary contained in Article
VI hereof, if within the 36 month period following a Change in Control (as
defined in Section 7.2), Employee's employment with the Company terminates for
any reason, other than the circumstances described in Section 6.1(b), Company
will pay Employee the Gross-up Payment as described in Section 6.2, and a lump
sum payment (the "Termination Payment") which is the sum of the following:
I. Three times Employee's annual base compensation determined by
reference to his base salary in effect at the time of Change In
Control.
II. Three times the highest annual bonus described in Section 2.1(b).
III. Continuation of benefits described in Section 2.3 for a period of
three years following termination of employment.
IV. A one time severance payment of $80,000.
(b) Time for Payment; Interest. The Termination Payment made under this
Section 7.1 shall be paid to Employee in a single lump sum within ten days
following the date of termination. The Company's obligation to pay to Employee
any amounts under this Section 7.1, including without limitation the Termination
Payment and any Gross-Up Payment due under Section 6.2, will bear interest at
the prime rate as quoted in The Wall Street Journal plus 2%, and all accrued and
unpaid interest will bear interest at the same rate, all of which interest will
be compounded annually.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation controlling the Company or owned directly or indirectly by the
stockholders of Company in substantially the same proportions as their ownership
of Company stock, becomes the "beneficial owner" (as defined in SEC Rule 13d-3),
directly or indirectly, of securities of Company representing more than 40% of
the total voting power represented by Company's then outstanding Voting
Securities (as defined below), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities outstanding immediately prior
thereto continuing to represent (either by
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remaining outstanding or by being converted into Voting Securities) more than
65% of the total voting power represented by the Voting Securities outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by Company of all or substantially all of its
assets. For purposes of this section "Voting Securities" shall mean any
securities of Company or its survivor which vote generally in the election of
its directors.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Company and Employee acknowledge and agree that any
claim or controversy arising out of or relating to Article VII of this Agreement
shall be settled by non-binding arbitration in Nashville, Tennessee, in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect on the date of the event giving
rise to the claim or controversy. The Company and Employee further acknowledge
and agree that either party must request arbitration of any claim or controversy
within 60 days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure to
give notice of any claim or controversy within 60 days of the event giving rise
to the claim or controversy shall constitute waiver of the claim or controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six months from the date that a written
notice of request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three arbitrators who are licensed to practice
law in the State of Tennessee and who are experienced in the arbitration of
labor and employment disputes. These arbitrators shall be selected in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect at the time the claim or
controversy arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The arbitrators
shall issue a written decision with respect to all claims or controversies
within 30 days from the date the claims or controversies are submitted to
arbitration. The parties shall be entitled to be represented by legal counsel
at any arbitration proceedings. Employee and the Company acknowledge and agree
that the Company will bear the cost of the arbitration proceeding, including any
stenographic recording, and each party shall be responsible for paying its own
attorneys' fees, if any, unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Company and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Company and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Company acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of
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this Agreement, nor shall anything in this Agreement be construed to require the
arbitration of any claim or controversy arising under Section 6.2 of this
Agreement, as the Accounting Opinion provided pursuant to such section is final
and binding upon the parties. These provisions shall be enforceable by any court
of competent jurisdiction and shall not be subject to arbitration except by
mutual written consent of the parties signed after the dispute arises, any such
consent, and the terms and conditions thereof, then becoming binding on the
parties. Employee and the Company further acknowledge and agree that nothing in
this Agreement shall be construed to require arbitration of any claim for
workers' compensation or unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Company to:
PMT Services, Inc.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With copy to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
Attn: Howard W. Herndon, Esq.
If to Employee, to:
Clay M. Whitson
1701 Graybar Lane
Nashville, Tennessee 37215
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person, except as required by law. Nothing in this Section shall be
construed to reduce Employee's right to payments described in Section 6.2.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this
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Agreement based upon the express terms and provisions set forth herein and have
not relied on any communications or representations, oral or written, which are
not set forth in this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Company by an officer of the
Company other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Tennessee,
without regard to its choice of law principles.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement
shall be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.8 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties provided that the substance of the economic relationship created by
this Agreement remains materially unchanged.
SECTION 9.10 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief. No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
SECTION 9.12 COMPANY. The term Company shall mean PMT Services, Inc. and
any affiliate or other entity in which the Company owns, directly or indirectly,
more than a 50% interest.
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IN WITNESS WHEREOF, Company and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
- -----------------------------------
CLAY M. WHITSON
COMPANY:
PMT SERVICES, INC.
By:
--------------------------------
Its:
-------------------------------
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 2,
1998 (the "Effective Date") by and between PMT Services, Inc., a Tennessee
Corporation (the "Company") and VICKIE G. JOHNSON ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as the chief accounting officer and secretary
of the Company;
WHEREAS, the Company and Employee wish to memorialize their understanding
of the terms of the Employee's employment with the Company, the financial
obligations of the Company to the Employee, and to specify certain rights,
responsibilities and duties of Employee;
WHEREAS, the Company and Employee desire to memorialize their understanding
of the rights, duties and responsibilities of the parties;
NOW, THEREFORE, based upon the premises set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
Employee is employed by Company to serve as chief accounting officer and
secretary of the Company with the powers and responsibilities set forth for such
position in the Bylaws of the Company and such other duties as be delegated or
assigned by the Board of Directors of the Company. Employee accepts employment
upon the terms set forth in this Agreement and will perform diligently to the
best of his abilities those duties set forth in the Bylaws and in this Agreement
in a manner that promotes the interests and goodwill of the Company. Employee
will faithfully devote his best efforts and all his working time to and for the
benefit of the Company; provided, however, that Employee may, at his option,
devote reasonable time and attention to civic, charitable, business or social
organizations or speaking engagements as he deems appropriate. Notwithstanding
the foregoing, Employee may engage in passive investments so long as the same
are passive and are not inconsistent with Employee's duty hereunder and do not
involve the development, ownership, management or provision of merchant credit
card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than any current investment in any
company that provides as its principle business electronic payment processing
equipment.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS.
(a) Base compensation. For the twelve-month period beginning August 1,
1997, the Company shall provide basic compensation to the Employee at the rate
of $100,000 payable in accordance with the Company's ordinary payroll policies.
Thereafter, base compensation shall be continued for the term of Employee's
employment, but the rate thereof shall be reviewed annually by the board of
directors of the Company (the "Board") or the compensation committee of the
<PAGE>
Board. Any increases that are memorialized in the minutes of the Board shall be
incorporated herein by reference without further action by the Employee or
Company.
(b) Bonus. Employee shall be paid each year a bonus of 25% of the amount
specified in Section 2.1(a), provided that Employee has satisfactorily achieved
the objective performance criteria that is established for Employee for each
fiscal year of the Company. The Board shall reasonably determine whether
Employee has achieved such performance objectives and shall authorize payment of
the bonus no later than the January 31 following the end of the fiscal year for
which the bonus applies. The Board may, in its sole discretion, authorize
payment of a pro rata bonus for performance which is greater or lesser than the
performance objectives that had been prescribed for any year, considering the
actual performance of Employee, the business and financial condition of the
Company and the operating results achieved. Upon the occurrence of a Change in
Control (as defined in Section 7.2), however, the bonus amount paid for each
fiscal year of the Company shall in all events be at least the amount of highest
bonus that had been determined by the Board (whether or not paid to Employee
prior to the Change in Control) during any of the three fiscal years that
precede the Change in Control.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 EMPLOYEE BENEFITS.
(a) General During the term of this Agreement, Company shall provide
Employee with employee and fringe benefits under any and all employee benefit
plans and programs which are from time to time generally made available to the
executive employees of the Company, including, without limitation, health and
disability benefits. Provided, however, that nothing in this Agreement shall
require the Company to maintain such plans or programs nor prohibit the Company
from terminating, amending or modifying such plans and programs, as the Company,
in its sole discretion, may deem advisable. In all events, including but not
limited to, the funding, operation, management, participation, vesting,
termination, amendment or modification of such plans and programs, the rights
and benefits of Employee shall be governed solely by the terms of the plans and
programs, as provided in such plans, programs or any contract or agreement
related thereto. Nothing in this Agreement shall be deemed to amend or modify
any such plan or program.
To the extent required by any plan, Employee's participation in the plan or
its benefits may be contingent upon an employee contribution or salary reduction
agreement. Failure of Employee to make such required contribution or execute a
salary reduction agreement will result in Employee
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not participating or benefiting under said plan for the applicable plan year.
Any employee contribution, through a salary reduction agreement or otherwise,
which Employee is required or permitted to make shall be paid out of Employee's
salary or if the plan so permits, his bonus, if any.
(b) Life Insurance Death Benefits. Company shall provide Employee with an
appropriate life insurance policy that pays a death benefit to the beneficiaries
named by Employee in an amount equal to $20,000. Such life insurance shall be,
at the Company's sole discretion, either an individual policy or group policy,
as reasonably available. The Company's obligation to provide such life
insurance policy is contingent upon the Employee's insurability. Employee
agrees to submit to any physical examination by a physician if required as part
of life insurance application process. In the event of Employee's death during
the term of this Agreement, the Company shall provide to Employee's spouse and
dependent children, at the expense of the Company and for a period of 12 months
after Employee's death, medical and dental benefits comparable to those provided
by the terms and conditions of the Company's then existing medical and dental
benefit plans, if any. Thereafter, the Company will extend continuation
coverage benefits to Employee's spouse and dependent children, as required under
federal or state law (i.e., COBRA) upon the loss of coverage occurring at the
expiration of the 12 month term.
(c) Vacation Leave. The Company and Employee acknowledge and agree that
Employee shall be entitled to receive four weeks' paid vacation time during the
calendar year for the term of this Agreement. The Company and Employee further
acknowledge and agree that subsequent vacation levels may be modified by the
mutual agreement of the parties to this Agreement.
ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 DEFINITIONS. For purposes of this Agreement, "Confidential
Information" is any data or information that is unique to the Company,
proprietary, competitively sensitive, and not generally known by the public,
including, but not limited to, the Company's business plan, customers,
prospective customers ("prospective customers" is understood to mean those
potential customers with whom or with which the Company is engaged in active
discussion about a business relationship), training manuals, product development
plans, bidding and pricing procedures, market plans and strategies, business
plans and projections, internal performance statistics, financial data,
confidential information concerning employees of the Company, operational or
administrative plans, policy manuals, terms and conditions of contracts and
agreements, and all similar information related to the business of the Company's
customers or potential customers or suppliers, other than information that is
publicly available. The term "Confidential Information" shall not apply to
information which is (i) already in Employee's possession (unless such
information was obtained by Employee from the Company in the course of
Employee's employment by the Company); (ii) received by Employee from a third
party with no restriction on disclosure or (iii) required to be disclosed by any
applicable law or by an order of a court of competent jurisdiction.
SECTION 3.2 USE AND DISCLOSURE. Employee recognizes and acknowledges that
the Confidential Information constitutes valuable, special and unique assets of
the Company and its affiliates. Except as required to perform Employee's duties
as an employee of the Company, and during the period that Employee is employed
by the Company, or until such sooner time that any item described in Section 3.1
ceases to be Confidential Information through no act of Employee in violation of
this Agreement, Employee will not use or disclose any Confidential Information
of the Company.
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ARTICLE IV. NONCOMPETITION
SECTION 4.1 RESTRICTION. In consideration for the benefits Employee is
receiving hereunder, Employee hereby acknowledges, and for other good and
valuable consideration, agrees that during the period beginning on the date
hereof and ending with the termination of Employee's employment with the Company
under any of the circumstances described in Section 6.1, Employee directly or
indirectly, shall not (i) compete with the Company to provide merchant credit
card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than through any current passive
investment in any company that provides as its principle business electronic
payment processing equipment to any of the customers or clients of the Company
wherever located who are either customers or clients of the Company or who have
been identified as potential customers or clients of the Company as of the
termination of Employee's employment; (ii) solicit or hire any employee of the
Company; or (iii) interfere with, disrupt or attempt to disrupt any past,
present or prospective business relationship, contractual or otherwise related
to or arising from any merchant account or any agreement, relationship or
contractual arrangement between the Company and any merchant provided, however,
nothing herein shall prevent Employee from contracting with any such merchant in
a manner that does not interfere with, disrupt or attempt to disrupt any
contractual relationship between such person and the Company.
SECTION 4.2 REMEDIES. Employee agrees and acknowledges that the violation
of the covenants in this Section 4.1 would cause irreparable injury to the
Company and that the remedy at law for any violation or threatened violation
would be inadequate and that the Company shall be entitled to temporary and
permanent injunctive relief or other equitable relief without the necessity of
proving actual damages. Employee represents that enforcement of a remedy by way
of injunction will not prevent him from earning a livelihood. Employee further
represents and admits that time periods contained in Section 4.1 are reasonably
necessary to protect the interests of the Company and would not unfairly or
unreasonably restrict Employee. Such relief shall be in addition to any other
remedies available to Company, including specifically without intending any
limitation, the recovery of damages.
SECTION 4.3 REFORMATION AND SEVERANCE. If a judicial determination is made
that any of the provisions of the above restriction constitutes an unreasonable
or otherwise unenforceable restriction against Employee, it shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the prohibited business activity from the
coverage of this restriction and to apply the restriction to the remaining
portion of the business activities not so severed by such judicial authority.
ARTICLE V. TERM OF AGREEMENT
This Agreement shall continue in full force and effect for a period of one
year commencing on the Effective Date. At the beginning of each month after the
Effective Date, the term of this Agreement shall automatically be extended for
an additional month so that the term of the Agreement on such date is a period
of 12 months.
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ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
prior to the time set forth in Article V hereof upon the occurrence of the
following events:
(a) By Company Without Cause. The Company may terminate this Agreement at
any time prior to a Change in Control (as defined in Section 7.2) without cause
upon written notice to Employee. At the time of such termination, Company will
pay to Employee the amount of compensation determined under Section 2.1 for the
term of the Agreement, as determined under Article V, provided that any partial
month remaining in the term of the Agreement shall be treated as a full month.
In addition, Employee shall receive any bonuses that have been earned under
Section 2.1(b) but have not been paid. Employee also shall be entitled to
receive expense reimbursements under Section 2.2 hereof for expenses incurred in
the performance of his duties prior to termination. After the occurrence of a
Change in Control, Employee will receive the amounts specified in Section 7.1
upon termination of this Agreement by the Company without cause. A termination
of this Agreement without cause will be deemed to occur if the Company provides
written notice of such to the Employee, or otherwise prevents the Employee from
performing his duties hereunder, unless termination of this Agreement is due to
the circumstances described in any other paragraph of this Section 6.1.
(b) By Employee Without Cause. Employee may terminate this Agreement at
any time without cause upon written notice. At the time of such termination,
Company will pay to Employee the amount of compensation determined under Section
2.1, such amounts to be adjusted pro rata for the portion of the term of the
Agreement completed on the date of termination. Employee shall also be entitled
to reimbursement pursuant to Section 2.2 for expenses incurred in the
performance of his duties hereunder prior to termination.
(c) By Company With Cause. This Agreement may be terminated by Company at
any time upon written notice for any of the following reasons:
I. conviction of the Employee for a felony which in the reasonable
judgment of the Board materially affects Employee's ability to perform his
duties pursuant to this Agreement;
II. commission by Employee of an act of fraud, embezzlement, or material
dishonesty against the Company or its affiliates; or
III. intentional neglect of or material inattention to Employee's duties,
which neglect or inattention remains uncorrected for more than 30 days following
written notice from the Board detailing the Board's concern.
At the time of such termination, Company will pay to Employee the amount of
compensation determined under Section 2.1(a), such amounts to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(d) Termination on Death. In the event of Employee's death, this Agreement
will be deemed to have terminated on the date of his death. At the time of such
termination, Company will
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pay to the testamentary trusts created by Employee's will, or if there are no
such trusts, to his estate, the amount of compensation determined under Section
2.1 that is in effect at the time of termination, such amount to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Company will additionally make a one-time payment in an amount
equal to 25% of the annual amount payable under Section 2.1(a) at the time of
Employee's death. Company shall also pay to such testamentary trusts or
Employee's estate reimbursement pursuant to Section 2.2 for expenses incurred in
the performance of his duties hereunder prior to termination.
(e) Termination on Disability. This Agreement will terminate immediately
in the event Employee becomes physically or mentally disabled. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days. At the time of such
termination, Company will pay to Employee the amount of compensation determined
under Section 2.1 that is in effect at the time of termination, such amount to
be adjusted pro rata for the portion of the term of the Agreement completed on
the date of termination. In addition, Employee shall, on the date of such
termination, be entitled to receive a one-time payment in an amount equal to 25%
of the annual amount payable under Section 2.1(a) at the time of termination.
Employee shall also be entitled to reimbursement pursuant to Section 2.2 for
expenses incurred in the performance of his duties hereunder prior to
termination.
(f) By Employee With Cause. Employee may upon 10 days prior written notice
terminate this Agreement for reason of cause. At the time of such termination,
Company shall continue to pay salary to Employee at the periodic rate that is in
effect at the time of notice pursuant to Section 2.1 for the term of the
Agreement until the effective date of termination. In addition, Company will
pay to Employee the payments described in Section 7.1 and all expense
reimbursements under Section 2.2 for expenses incurred in the performance of his
duties prior to and contemporaneously with termination. Termination for "cause"
for purposes of this Section 6.1(f), is a termination of employment following a
Change in Control (defined in Section 7.2) under any of the following
circumstances:
I. A material adverse alteration in Employee's position, responsibilities
or status from that which was in effect immediately prior to the
Change in Control.
II. A reduction in Employee's compensation that is payable pursuant to
Section 2.1 or a substantial reduction in benefits provided to
Employee that are described in Section 2.3, as such amounts are in
effect immediately prior to the Change in Control.
III. Relocation of Employee to a location that is more than 35 miles from
the location of the Company's headquarters on the date this Agreement
is executed.
SECTION 6.2 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(a) Gross Up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by or on behalf of the Company to or for the benefit of Employee as
a result of a Change In Control (as defined in Section 7.2) (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 6.2 (a
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"Payment")) would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by Employee 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 Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Employee 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, Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(b) Tax Opinion. Subject to the provisions of Section 6.2(c), all
determinations required to be made under this Section 6.2, 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 a nationally recognized accounting firm or law firm selected by the Company
(the "Tax Firm"); provided, however, that the Tax Firm shall not determine that
no Excise Tax is payable by Employee unless it delivers to Employee a written
opinion (the "Accounting Opinion") that failure to pay the Excise Tax and to
report the Excise Tax and the payments potentially subject thereto on or with
Employee's applicable federal income tax return will not result in the
imposition of an accuracy-related or other penalty on Employee. All fees and
expenses of the Tax Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company, the Tax Firm shall
make all determinations required under this Section 6.2, shall provide to the
Company and Employee a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm determines
that no Excise Tax is payable, shall deliver the Accounting Opinion to Employee.
Any Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid
by the Company to Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section 6.2, any determination
by the Tax Firm shall be binding upon the Company and Employee; provided,
however, that Employee shall only be bound to the extent that the determinations
of the Tax Firm hereunder, including the determinations made in the Accounting
Opinion, are reasonable and reasonably supported by applicable law. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Tax Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 6.2(c) that Employee is required to make a
payment of any Excise Tax, the Tax Firm shall reasonably 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 Employee. In determining the
reasonableness of Tax Firm's determinations hereunder, and the effect thereof,
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and Employee's tax counsel. Tax Firm's
determinations hereunder, and the Accounting Opinion, shall not be deemed
reasonable until Employee's reasonable objections and comments thereto have been
satisfactorily accommodated by Tax Firm.
(c) Notice of IRS Claim. Employee shall notify the Company in writing of
any claims 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 30 calendar days after Employee
actually receives notice 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; provided, however, that the failure of Employee to notify the Company of
such claim (or to provide
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any required information with respect thereto) shall not affect any rights
granted to Employee under this Section 6.2 except to the extent that the Company
is materially prejudiced in the defense of such claim as a direct result of such
failure. Employee 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 Employee in writing prior to the
expiration of such period that it desires to contest such claim, Employee shall
do all of the following:
I. give the Company any information reasonably requested by the Company
relating to such claim;
II. 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 selected by the Company and
reasonably acceptable to Employee;
III. cooperate with the Company in good faith in order effectively to
contest such claim;
IV. if the Company elects not to assume and control the defense of such
claim, 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 Employee 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 limiting the foregoing provisions of this Section
6.2, the Company shall have the right, at its sole option, to assume the defense
of and control all proceedings in connection with such contest, in which case it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Employee, on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or 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 Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee 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) Right to Tax Refund. If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 6.2 Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 6.2(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 Employee of
an amount advanced by the Company pursuant to Section 6.2(c), a determination is
made that Employee is not
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entitled to a refund with respect to such claim and the Company does not notify
Employee 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, to the
extent of such denial, be forgiven and shall not be required to be repaid and
the amount of forgiven advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT.
(a) Amount. Notwithstanding anything to the contrary contained in Article
VI hereof, if within the 12 month period following a Change in Control (as
defined in Section 7.2), Employee's employment with the Company terminates for
any reason, other than the circumstances described in Section 6.1(b), Company
will pay Employee the Gross-up Payment as described in Section 6.2, and a lump
sum payment (the "Termination Payment") which is the sum of the following:
I. One times Employee's annual base compensation determined by reference
to his base salary in effect at the time of Change In Control.
II. One times the highest annual bonus described in Section 2.1(b).
III. Continuation of benefits described in Section 2.3 for a period of one
year following termination of employment.
(b) Time for Payment; Interest. The Termination Payment made under this
Section 7.1 shall be paid to Employee in a single lump sum within ten days
following the date of termination. The Company's obligation to pay to Employee
any amounts under this Section 7.1, including without limitation the Termination
Payment and any Gross-Up Payment due under Section 6.2, will bear interest at
the prime rate as quoted in The Wall Street Journal plus 2%, and all accrued and
unpaid interest will bear interest at the same rate, all of which interest will
be compounded annually.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation controlling the Company or owned directly or indirectly by the
stockholders of Company in substantially the same proportions as their ownership
of Company stock, becomes the "beneficial owner" (as defined in SEC Rule 13d-3),
directly or indirectly, of securities of Company representing more than 40% of
the total voting power represented by Company's then outstanding Voting
Securities (as defined below), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or
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(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities) more than 65% of the total voting power
represented by the Voting Securities outstanding immediately after such merger
or consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
Company of all or substantially all of its assets. For purposes of this section
"Voting Securities" shall mean any securities of Company or its survivor which
vote generally in the election of its directors.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Company and Employee acknowledge and agree that any
claim or controversy arising out of or relating to Article VII of this Agreement
shall be settled by non-binding arbitration in Nashville, Tennessee, in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect on the date of the event giving
rise to the claim or controversy. The Company and Employee further acknowledge
and agree that either party must request arbitration of any claim or controversy
within 60 days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure to
give notice of any claim or controversy within 60 days of the event giving rise
to the claim or controversy shall constitute waiver of the claim or controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six months from the date that a written
notice of request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three arbitrators who are licensed to practice
law in the State of Tennessee and who are experienced in the arbitration of
labor and employment disputes. These arbitrators shall be selected in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect at the time the claim or
controversy arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The arbitrators
shall issue a written decision with respect to all claims or controversies
within 30 days from the date the claims or controversies are submitted to
arbitration. The parties shall be entitled to be represented by legal counsel
at any arbitration proceedings. Employee and the Company acknowledge and agree
that the Company will bear the cost of the arbitration proceeding, including any
stenographic recording, and each party shall be responsible for paying its own
attorneys' fees, if any, unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Company and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Company and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
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SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Company acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of this Agreement, nor shall
anything in this Agreement be construed to require the arbitration of any claim
or controversy arising under Section 6.2 of this Agreement, as the Accounting
Opinion provided pursuant to such section is final and binding upon the parties.
These provisions shall be enforceable by any court of competent jurisdiction and
shall not be subject to arbitration except by mutual written consent of the
parties signed after the dispute arises, any such consent, and the terms and
conditions thereof, then becoming binding on the parties. Employee and the
Company further acknowledge and agree that nothing in this Agreement shall be
construed to require arbitration of any claim for workers' compensation or
unemployment compensation.
ARTICLE IX. GENERAL TERMS
Section 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Company to:
PMT Services, Inc.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With copy to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
Attn: Howard W. Herndon, Esq.
If to Employee, to:
Vickie G. Johnson
100 Lakeside Circle
Hendersonville, Tennessee 37075
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person, except as required by law. Nothing in this Section shall be
construed to reduce Employee's right to payments described in Section 6.2.
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SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this Agreement based upon the
express terms and provisions set forth herein and have not relied on any
communications or representations, oral or written, which are not set forth in
this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Company by an officer of the
Company other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Tennessee,
without regard to its choice of law principles.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement
shall be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.8 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties provided that the substance of the economic relationship created by
this Agreement remains materially unchanged.
SECTION 9.10 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief. No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
SECTION 9.12 COMPANY. The term Company shall mean PMT Services, Inc. and
any affiliate or other entity in which the Company owns, directly or indirectly,
more than a 50% interest.
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IN WITNESS WHEREOF, Company and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
- -----------------------------
VICKIE G. JOHNSON
COMPANY:
PMT SERVICES, INC.
By: __________________________
Its:__________________________
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 2,
1998 (the "Effective Date") by and between PMT Services, Inc., a Tennessee
Corporation (the "Company") and GREGORY S. DAILY ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as the president of the Company;
WHEREAS, the Company and Employee wish to memorialize their understanding
of the terms of the Employee's employment with the Company, the financial
obligations of the Company to the Employee, and to specify certain rights,
responsibilities and duties of Employee;
WHEREAS, the Company and Employee desire to memorialize their understanding
of the rights, duties and responsibilities of the parties;
NOW, THEREFORE, based upon the premises set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
Employee is employed by Company to serve as president of the Company with
the powers and responsibilities set forth for such position in the Bylaws of the
Company and such other duties as be delegated or assigned by the Board of
Directors of the Company. Employee accepts employment upon the terms set forth
in this Agreement and will perform diligently to the best of his abilities those
duties set forth in the Bylaws and in this Agreement in a manner that promotes
the interests and goodwill of the Company. Employee will faithfully devote his
best efforts and all his working time to and for the benefit of the Company;
provided, however, that Employee may, at his option, devote reasonable time and
attention to civic, charitable, business or social organizations or speaking
engagements as he deems appropriate. Notwithstanding the foregoing, Employee
may engage in passive investments so long as the same are passive and are not
inconsistent with Employee's duty hereunder and do not involve the development,
ownership, management or provision of merchant credit card authorization
processing and settlement services, Automated Teller Machines, debit services,
check guarantee services, payroll processing services, payment systems and
related commerce, other than any current investment in any company that provides
as its principle business electronic payment processing equipment.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS.
(a) Base compensation. For the twelve-month period beginning August 1,
1997, the Company shall provide basic compensation to the Employee at the rate
of $200,000 payable in accordance with the Company's ordinary payroll policies.
Thereafter, base compensation shall be continued for the term of Employee's
employment, but the rate thereof shall be reviewed annually by the board of
directors of the Company (the "Board") or the compensation committee of the
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Board. Any increases that are memorialized in the minutes of the Board shall be
incorporated herein by reference without further action by the Employee or
Company.
(b) Bonus. Employee shall be paid each year a bonus of 145% of the amount
specified in Section 2.1(a), provided that Employee has satisfactorily achieved
the objective performance criteria that is established for Employee for each
fiscal year of the Company. The Board shall reasonably determine whether
Employee has achieved such performance objectives and shall authorize payment of
the bonus no later than the January 31 following the end of the fiscal year for
which the bonus applies. The Board may, in its sole discretion, authorize
payment of a pro rata bonus for performance which is greater or lesser than the
performance objectives that had been prescribed for any year, considering the
actual performance of Employee, the business and financial condition of the
Company and the operating results achieved. Upon the occurrence of a Change in
Control (as defined in Section 7.2), however, the bonus amount paid for each
fiscal year of the Company shall in all events be at least the amount of highest
bonus that had been determined by the Board (whether or not paid to Employee
prior to the Change in Control) during any of the three fiscal years that
precede the Change in Control.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 EMPLOYEE BENEFITS.
(a) General. During the term of this Agreement, Company shall provide
Employee with employee and fringe benefits under any and all employee benefit
plans and programs which are from time to time generally made available to the
executive employees of the Company, including, without limitation, health and
disability benefits. Provided, however, that nothing in this Agreement shall
require the Company to maintain such plans or programs nor prohibit the Company
from terminating, amending or modifying such plans and programs, as the Company,
in its sole discretion, may deem advisable. In all events, including but not
limited to, the funding, operation, management, participation, vesting,
termination, amendment or modification of such plans and programs, the rights
and benefits of Employee shall be governed solely by the terms of the plans and
programs, as provided in such plans, programs or any contract or agreement
related thereto. Nothing in this Agreement shall be deemed to amend or modify
any such plan or program.
To the extent required by any plan, Employee's participation in the plan or
its benefits may be contingent upon an employee contribution or salary reduction
agreement. Failure of Employee to make such required contribution or execute a
salary reduction agreement will result in Employee not participating or
benefiting under said plan for the applicable plan year. Any employee
contribution, through a salary reduction agreement or otherwise, which Employee
is required or permitted to make shall be paid out of Employee's salary or if
the plan so permits, his bonus, if any.
(b) Life Insurance Death Benefits. Company shall provide Employee with an
appropriate life insurance policy that pays a death benefit to the beneficiaries
named by Employee in an amount equal to $20,000. Such life insurance shall be,
at the Company's sole discretion, either an
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individual policy or group policy, as reasonably available. The Company's
obligation to provide such life insurance policy is contingent upon the
Employee's insurability. Employee agrees to submit to any physical examination
by a physician if required as part of life insurance application process. In the
event of Employee's death during the term of this Agreement, the Company shall
provide to Employee's spouse and dependent children, at the expense of the
Company and for a period of 12 months after Employee's death, medical and dental
benefits comparable to those provided by the terms and conditions of the
Company's then existing medical and dental benefit plans, if any. Thereafter,
the Company will extend continuation coverage benefits to Employee's spouse and
dependent children, as required under federal or state law (i.e., COBRA) upon
the loss of coverage occurring at the expiration of the 12 month term.
(c) Vacation Leave. The Company and Employee acknowledge and agree that
Employee shall be entitled to receive five weeks' paid vacation time during the
calendar year for the term of this Agreement. The Company and Employee further
acknowledge and agree that subsequent vacation levels may be modified by the
mutual agreement of the parties to this Agreement.
ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 DEFINITIONS. For purposes of this Agreement, "Confidential
Information" is any data or information that is unique to the Company,
proprietary, competitively sensitive, and not generally known by the public,
including, but not limited to, the Company's business plan, customers,
prospective customers ("prospective customers" is understood to mean those
potential customers with whom or with which the Company is engaged in active
discussion about a business relationship), training manuals, product development
plans, bidding and pricing procedures, market plans and strategies, business
plans and projections, internal performance statistics, financial data,
confidential information concerning employees of the Company, operational or
administrative plans, policy manuals, terms and conditions of contracts and
agreements, and all similar information related to the business of the Company's
customers or potential customers or suppliers, other than information that is
publicly available. The term "Confidential Information" shall not apply to
information which is (i) already in Employee's possession (unless such
information was obtained by Employee from the Company in the course of
Employee's employment by the Company); (ii) received by Employee from a third
party with no restriction on disclosure or (iii) required to be disclosed by any
applicable law or by an order of a court of competent jurisdiction.
SECTION 3.2 USE AND DISCLOSURE. Employee recognizes and acknowledges that
the Confidential Information constitutes valuable, special and unique assets of
the Company and its affiliates. Except as required to perform Employee's duties
as an employee of the Company, and during the period that Employee is employed
by the Company, or until such sooner time that any item described in Section 3.1
ceases to be Confidential Information through no act of Employee in violation of
this Agreement, Employee will not use or disclose any Confidential Information
of the Company.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 RESTRICTION. In consideration for the benefits Employee is
receiving hereunder, Employee hereby acknowledges, and for other good and
valuable consideration, agrees that during the period beginning on the date
hereof and ending with the termination of Employee's employment with the Company
under any of the circumstances described in Section 6.1, Employee directly or
indirectly, shall not (i) compete with the Company to provide merchant
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credit card authorization processing and settlement services, Automated Teller
Machines, debit services, check guarantee services, payroll processing services,
payment systems and related commerce, other than through any current passive
investment in any company that provides as its principle business electronic
payment processing equipment to any of the customers or clients of the Company
wherever located who are either customers or clients of the Company or who have
been identified as potential customers or clients of the Company as of the
termination of Employee's employment; (ii) solicit or hire any employee of the
Company; or (iii) interfere with, disrupt or attempt to disrupt any past,
present or prospective business relationship, contractual or otherwise related
to or arising from any merchant account or any agreement, relationship or
contractual arrangement between the Company and any merchant provided, however,
nothing herein shall prevent Employee from contracting with any such merchant in
a manner that does not interfere with, disrupt or attempt to disrupt any
contractual relationship between such person and the Company.
SECTION 4.2 REMEDIES. Employee agrees and acknowledges that the violation
of the covenants in this Section 4.1 would cause irreparable injury to the
Company and that the remedy at law for any violation or threatened violation
would be inadequate and that the Company shall be entitled to temporary and
permanent injunctive relief or other equitable relief without the necessity of
proving actual damages. Employee represents that enforcement of a remedy by way
of injunction will not prevent him from earning a livelihood. Employee further
represents and admits that time periods contained in Section 4.1 are reasonably
necessary to protect the interests of the Company and would not unfairly or
unreasonably restrict Employee. Such relief shall be in addition to any other
remedies available to Company, including specifically without intending any
limitation, the recovery of damages.
SECTION 4.3 REFORMATION AND SEVERANCE. If a judicial determination is made
that any of the provisions of the above restriction constitutes an unreasonable
or otherwise unenforceable restriction against Employee, it shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the prohibited business activity from the
coverage of this restriction and to apply the restriction to the remaining
portion of the business activities not so severed by such judicial authority.
ARTICLE V. TERM OF AGREEMENT
This Agreement shall continue in full force and effect for a period of one
year commencing on the Effective Date. At the beginning of each month after the
Effective Date, the term of this Agreement shall automatically be extended for
an additional month so that the term of the Agreement on such date is a period
of 12 months.
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
prior to the time set forth in Article V hereof upon the occurrence of the
following events:
(a) By Company Without Cause. The Company may terminate this Agreement at
any time prior to a Change in Control (as defined in Section 7.2) without cause
upon written notice to Employee. At the time of such termination, Company will
pay to Employee the amount of compensation determined under Section 2.1 for the
term of the Agreement, as determined under
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Article V, provided that any partial month remaining in the term of the
Agreement shall be treated as a full month. In addition, Employee shall receive
any bonuses that have been earned under Section 2.1(b) but have not been paid.
Employee also shall be entitled to receive expense reimbursements under Section
2.2 hereof for expenses incurred in the performance of his duties prior to
termination. After the occurrence of a Change in Control, Employee will receive
the amounts specified in Section 7.1 upon termination of this Agreement by the
Company without cause. A termination of this Agreement without cause will be
deemed to occur if the Company provides written notice of such to the Employee,
or otherwise prevents the Employee from performing his duties hereunder, unless
termination of this Agreement is due to the circumstances described in any other
paragraph of this Section 6.1.
(b) By Employee Without Cause. Employee may terminate this Agreement at
any time without cause upon written notice. At the time of such termination,
Company will pay to Employee the amount of compensation determined under Section
2.1, such amounts to be adjusted pro rata for the portion of the term of the
Agreement completed on the date of termination. Employee shall also be entitled
to reimbursement pursuant to Section 2.2 for expenses incurred in the
performance of his duties hereunder prior to termination.
(c) By Company With Cause. This Agreement may be terminated by Company at
any time upon written notice for any of the following reasons:
I. conviction of the Employee for a felony which in the reasonable
judgment of the Board materially affects Employee's ability to perform his
duties pursuant to this Agreement;
II. commission by Employee of an act of fraud, embezzlement, or material
dishonesty against the Company or its affiliates; or
III. intentional neglect of or material inattention to Employee's duties,
which neglect or inattention remains uncorrected for more than 30 days following
written notice from the Board detailing the Board's concern.
At the time of such termination, Company will pay to Employee the amount of
compensation determined under Section 2.1(a), such amounts to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(d) Termination on Death. In the event of Employee's death, this Agreement
will be deemed to have terminated on the date of his death. At the time of such
termination, Company will pay to the testamentary trusts created by Employee's
will, or if there are no such trusts, to his estate, the amount of compensation
determined under Section 2.1 that is in effect at the time of termination, such
amount to be adjusted pro rata for the portion of the term of the Agreement
completed on the date of termination. Company will additionally make a one-time
payment in an amount equal to 145% of the annual amount payable under Section
2.1(a) at the time of Employee's death. Company shall also pay to such
testamentary trusts or Employee's estate reimbursement pursuant to Section 2.2
for expenses incurred in the performance of his duties hereunder prior to
termination.
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(e) Termination on Disability. This Agreement will terminate immediately
in the event Employee becomes physically or mentally disabled. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days. At the time of such
termination, Company will pay to Employee the amount of compensation determined
under Section 2.1 that is in effect at the time of termination, such amount to
be adjusted pro rata for the portion of the term of the Agreement completed on
the date of termination. In addition, Employee shall, on the date of such
termination, be entitled to receive a one-time payment in an amount equal to
145% of the annual amount payable under Section 2.1(a) at the time of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(f) By Employee With Cause. Employee may upon 10 days prior written notice
terminate this Agreement for reason of cause. At the time of such termination,
Company shall continue to pay salary to Employee at the periodic rate that is in
effect at the time of notice pursuant to Section 2.1 for the term of the
Agreement until the effective date of termination. In addition, Company will
pay to Employee the payments described in Section 7.1 and all expense
reimbursements under Section 2.2 for expenses incurred in the performance of his
duties prior to and contemporaneously with termination. Termination for "cause"
for purposes of this Section 6.1(f), is a termination of employment following a
Change in Control (defined in Section 7.2) under any of the following
circumstances:
I. A material adverse alteration in Employee's position, responsibilities
or status from that which was in effect immediately prior to the
Change in Control.
II. A reduction in Employee's compensation that is payable pursuant to
Section 2.1 or a substantial reduction in benefits provided to
Employee that are described in Section 2.3, as such amounts are in
effect immediately prior to the Change in Control.
III. Relocation of Employee to a location that is more than 35 miles from
the location of the Company's headquarters on the date this Agreement
is executed.
SECTION 6.2 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(a) Gross Up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by or on behalf of the Company to or for the benefit of Employee as
a result of a Change In Control (as defined in Section 7.2) (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 6.2 (a "Payment")) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by Employee 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 Employee shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Employee 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, Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
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(b) Tax Opinion. Subject to the provisions of Section 6.2(c), all
determinations required to be made under this Section 6.2, 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 a nationally recognized accounting firm or law firm selected by the Company
(the "Tax Firm"); provided, however, that the Tax Firm shall not determine that
no Excise Tax is payable by Employee unless it delivers to Employee a written
opinion (the "Accounting Opinion") that failure to pay the Excise Tax and to
report the Excise Tax and the payments potentially subject thereto on or with
Employee's applicable federal income tax return will not result in the
imposition of an accuracy-related or other penalty on Employee. All fees and
expenses of the Tax Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company, the Tax Firm shall
make all determinations required under this Section 6.2, shall provide to the
Company and Employee a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm determines
that no Excise Tax is payable, shall deliver the Accounting Opinion to Employee.
Any Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid
by the Company to Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section 6.2, any determination
by the Tax Firm shall be binding upon the Company and Employee; provided,
however, that Employee shall only be bound to the extent that the determinations
of the Tax Firm hereunder, including the determinations made in the Accounting
Opinion, are reasonable and reasonably supported by applicable law. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Tax Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 6.2(c) that Employee is required to make a
payment of any Excise Tax, the Tax Firm shall reasonably 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 Employee. In determining the
reasonableness of Tax Firm's determinations hereunder, and the effect thereof,
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and Employee's tax counsel. Tax Firm's
determinations hereunder, and the Accounting Opinion, shall not be deemed
reasonable until Employee's reasonable objections and comments thereto have been
satisfactorily accommodated by Tax Firm.
(c) Notice of IRS Claim. Employee shall notify the Company in writing of
any claims 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 30 calendar days after Employee
actually receives notice 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; provided, however, that the failure of Employee to notify the Company of
such claim (or to provide any required information with respect thereto) shall
not affect any rights granted to Employee under this Section 6.2 except to the
extent that the Company is materially prejudiced in the defense of such claim as
a direct result of such failure. Employee 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 Employee in
writing prior to the expiration of such period that it desires to contest such
claim, Employee shall do all of the following:
I. give the Company any information reasonably requested by the Company
relating to such claim;
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II. 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 selected by the Company and
reasonably acceptable to Employee;
III. cooperate with the Company in good faith in order effectively to
contest such claim;
IV. if the Company elects not to assume and control the defense of such
claim, 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 Employee 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 limiting the foregoing provisions of this Section
6.2, the Company shall have the right, at its sole option, to assume the defense
of and control all proceedings in connection with such contest, in which case it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Employee, on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or 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 Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee 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) Right to Tax Refund. If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 6.2 Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 6.2(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 Employee of
an amount advanced by the Company pursuant to Section 6.2(c), a determination is
made that Employee is not entitled to a refund with respect to such claim and
the Company does not notify Employee 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, to the extent of such denial, be forgiven and shall not
be required to be repaid and the amount of forgiven advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT.
(a) Amount. Notwithstanding anything to the contrary contained in Article
VI hereof, if within the 36 month period following a Change in Control (as
defined in Section 7.2), Employee's employment with the Company terminates for
any reason, other than the circumstances described in Section 6.1(b), Company
will pay Employee the Gross-up Payment as described in Section 6.2, and a lump
sum payment (the "Termination Payment") which is the sum of the following:
I. Three times Employee's annual base compensation determined by
reference to his base salary in effect at the time of Change In
Control.
II. Three times the highest annual bonus described in Section 2.1(b).
III. Continuation of benefits described in Section 2.3 for a period of
three years following termination of employment.
IV. A one time severance payment of $700,000.
(b) Time for Payment; Interest. The Termination Payment made under this
Section 7.1 shall be paid to Employee in a single lump sum within ten days
following the date of termination. The Company's obligation to pay to Employee
any amounts under this Section 7.1, including without limitation the Termination
Payment and any Gross-Up Payment due under Section 6.2, will bear interest at
the prime rate as quoted in The Wall Street Journal plus 2%, and all accrued and
unpaid interest will bear interest at the same rate, all of which interest will
be compounded annually.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation controlling the Company or owned directly or indirectly by the
stockholders of Company in substantially the same proportions as their ownership
of Company stock, becomes the "beneficial owner" (as defined in SEC Rule 13d-3),
directly or indirectly, of securities of Company representing more than 40% of
the total voting power represented by Company's then outstanding Voting
Securities (as defined below), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities outstanding immediately prior
thereto continuing to represent (either by
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remaining outstanding or by being converted into Voting Securities) more than
65% of the total voting power represented by the Voting Securities outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by Company of all or substantially all of its
assets. For purposes of this section "Voting Securities" shall mean any
securities of Company or its survivor which vote generally in the election of
its directors.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Company and Employee acknowledge and agree that any
claim or controversy arising out of or relating to Article VII of this Agreement
shall be settled by non-binding arbitration in Nashville, Tennessee, in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect on the date of the event giving
rise to the claim or controversy. The Company and Employee further acknowledge
and agree that either party must request arbitration of any claim or controversy
within 60 days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure to
give notice of any claim or controversy within 60 days of the event giving rise
to the claim or controversy shall constitute waiver of the claim or controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six months from the date that a written
notice of request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three arbitrators who are licensed to practice
law in the State of Tennessee and who are experienced in the arbitration of
labor and employment disputes. These arbitrators shall be selected in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect at the time the claim or
controversy arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The arbitrators
shall issue a written decision with respect to all claims or controversies
within 30 days from the date the claims or controversies are submitted to
arbitration. The parties shall be entitled to be represented by legal counsel
at any arbitration proceedings. Employee and the Company acknowledge and agree
that the Company will bear the cost of the arbitration proceeding, including any
stenographic recording, and each party shall be responsible for paying its own
attorneys' fees, if any, unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Company and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Company and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Company acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of
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this Agreement, nor shall anything in this Agreement be construed to require the
arbitration of any claim or controversy arising under Section 6.2 of this
Agreement, as the Accounting Opinion provided pursuant to such section is final
and binding upon the parties. These provisions shall be enforceable by any court
of competent jurisdiction and shall not be subject to arbitration except by
mutual written consent of the parties signed after the dispute arises, any such
consent, and the terms and conditions thereof, then becoming binding on the
parties. Employee and the Company further acknowledge and agree that nothing in
this Agreement shall be construed to require arbitration of any claim for
workers' compensation or unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Company to:
PMT Services, Inc.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With copy to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
Attn: Howard W. Herndon, Esq.
If to Employee, to:
Gregory S. Daily
5353 Hillsboro Road
Nashville, TN 37215
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person, except as required by law. Nothing in this Section shall be
construed to reduce Employee's right to payments described in Section 6.2.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this
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Agreement based upon the express terms and provisions set forth herein and have
not relied on any communications or representations, oral or written, which are
not set forth in this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Company by an officer of the
Company other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Tennessee,
without regard to its choice of law principles.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement
shall be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.8 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties provided that the substance of the economic relationship created by
this Agreement remains materially unchanged.
SECTION 9.10 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief. No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
SECTION 9.12 COMPANY. The term Company shall mean PMT Services, Inc. and
any affiliate or other entity in which the Company owns, directly or indirectly,
more than a 50% interest.
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IN WITNESS WHEREOF, Company and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
- -----------------------------------
GREGORY S. DAILY
COMPANY:
PMT SERVICES, INC.
By:
-------------------------------
Its:
-------------------------------
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 2,
1998 (the "Effective Date") by and between PMT Services, Inc., a Tennessee
Corporation (the "Company") and TONY VANBRACKLE ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is employed as the vice president for business
development of the Company;
WHEREAS, the Company and Employee wish to memorialize their understanding
of the terms of the Employee's employment with the Company, the financial
obligations of the Company to the Employee, and to specify certain rights,
responsibilities and duties of Employee;
WHEREAS, the Company and Employee desire to memorialize their understanding
of the rights, duties and responsibilities of the parties;
NOW, THEREFORE, based upon the premises set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
Employee is employed by Company to serve as vice president for business
development of the Company with the powers and responsibilities set forth for
such position in the Bylaws of the Company and such other duties as be delegated
or assigned by the Board of Directors of the Company. Employee accepts
employment upon the terms set forth in this Agreement and will perform
diligently to the best of his abilities those duties set forth in the Bylaws and
in this Agreement in a manner that promotes the interests and goodwill of the
Company. Employee will faithfully devote his best efforts and all his working
time to and for the benefit of the Company; provided, however, that Employee
may, at his option, devote reasonable time and attention to civic, charitable,
business or social organizations or speaking engagements as he deems
appropriate. Notwithstanding the foregoing, Employee may engage in passive
investments so long as the same are passive and are not inconsistent with
Employee's duty hereunder and do not involve the development, ownership,
management or provision of merchant credit card authorization processing and
settlement services, Automated Teller Machines, debit services, check guarantee
services, payroll processing services, payment systems and related commerce,
other than any current investment in any company that provides as its principle
business electronic payment processing equipment.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS.
(a) Base compensation. For the twelve-month period beginning August 1,
1997, the Company shall provide basic compensation to the Employee at the rate
of $110,000 payable in accordance with the Company's ordinary payroll policies.
Thereafter, base compensation shall be continued for the term of Employee's
employment, but the rate thereof shall be reviewed annually
<PAGE>
by the board of directors of the Company (the "Board") or the compensation
committee of the Board. Any increases that are memorialized in the minutes of
the Board shall be incorporated herein by reference without further action by
the Employee or Company.
(b) Bonus. Employee shall be paid each year a bonus of 25% of the amount
specified in Section 2.1(a), provided that Employee has satisfactorily achieved
the objective performance criteria that is established for Employee for each
fiscal year of the Company. The Board shall reasonably determine whether
Employee has achieved such performance objectives and shall authorize payment of
the bonus no later than the January 31 following the end of the fiscal year for
which the bonus applies. The Board may, in its sole discretion, authorize
payment of a pro rata bonus for performance which is greater or lesser than the
performance objectives that had been prescribed for any year, considering the
actual performance of Employee, the business and financial condition of the
Company and the operating results achieved. Upon the occurrence of a Change in
Control (as defined in Section 7.2), however, the bonus amount paid for each
fiscal year of the Company shall in all events be at least the amount of highest
bonus that had been determined by the Board (whether or not paid to Employee
prior to the Change in Control) during any of the three fiscal years that
precede the Change in Control.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Company will reimburse Employee for all reasonable, documented expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Company may establish
from time to time.
SECTION 2.3 EMPLOYEE BENEFITS.
(a) General. During the term of this Agreement, Company shall provide
Employee with employee and fringe benefits under any and all employee benefit
plans and programs which are from time to time generally made available to the
executive employees of the Company, including, without limitation, health and
disability benefits. Provided, however, that nothing in this Agreement shall
require the Company to maintain such plans or programs nor prohibit the Company
from terminating, amending or modifying such plans and programs, as the Company,
in its sole discretion, may deem advisable. In all events, including but not
limited to, the funding, operation, management, participation, vesting,
termination, amendment or modification of such plans and programs, the rights
and benefits of Employee shall be governed solely by the terms of the plans and
programs, as provided in such plans, programs or any contract or agreement
related thereto. Nothing in this Agreement shall be deemed to amend or modify
any such plan or program.
To the extent required by any plan, Employee's participation in the plan or
its benefits may be contingent upon an employee contribution or salary reduction
agreement. Failure of Employee to make such required contribution or execute a
salary reduction agreement will result in Employee not participating or
benefiting under said plan for the applicable plan year. Any employee
contribution, through a salary reduction agreement or otherwise, which Employee
is required or permitted to make shall be paid out of Employee's salary or if
the plan so permits, his bonus, if any.
(b) Life Insurance Death Benefits. Company shall provide Employee with an
appropriate life insurance policy that pays a death benefit to the beneficiaries
named by Employee in an amount
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equal to $20,000. Such life insurance shall be, at the Company's sole
discretion, either an individual policy or group policy, as reasonably
available. The Company's obligation to provide such life insurance policy is
contingent upon the Employee's insurability. Employee agrees to submit to any
physical examination by a physician if required as part of life insurance
application process. In the event of Employee's death during the term of this
Agreement, the Company shall provide to Employee's spouse and dependent
children, at the expense of the Company and for a period of 12 months after
Employee's death, medical and dental benefits comparable to those provided by
the terms and conditions of the Company's then existing medical and dental
benefit plans, if any. Thereafter, the Company will extend continuation coverage
benefits to Employee's spouse and dependent children, as required under federal
or state law (i.e., COBRA) upon the loss of coverage occurring at the expiration
of the 12 month term.
(c) Vacation Leave. The Company and Employee acknowledge and agree that
Employee shall be entitled to receive four weeks' paid vacation time during the
calendar year for the term of this Agreement. The Company and Employee further
acknowledge and agree that subsequent vacation levels may be modified by the
mutual agreement of the parties to this Agreement.
ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 DEFINITIONS. For purposes of this Agreement, "Confidential
Information" is any data or information that is unique to the Company,
proprietary, competitively sensitive, and not generally known by the public,
including, but not limited to, the Company's business plan, customers,
prospective customers ("prospective customers" is understood to mean those
potential customers with whom or with which the Company is engaged in active
discussion about a business relationship), training manuals, product development
plans, bidding and pricing procedures, market plans and strategies, business
plans and projections, internal performance statistics, financial data,
confidential information concerning employees of the Company, operational or
administrative plans, policy manuals, terms and conditions of contracts and
agreements, and all similar information related to the business of the Company's
customers or potential customers or suppliers, other than information that is
publicly available. The term "Confidential Information" shall not apply to
information which is (i) already in Employee's possession (unless such
information was obtained by Employee from the Company in the course of
Employee's employment by the Company); (ii) received by Employee from a third
party with no restriction on disclosure or (iii) required to be disclosed by any
applicable law or by an order of a court of competent jurisdiction.
SECTION 3.2 USE AND DISCLOSURE. Employee recognizes and acknowledges that
the Confidential Information constitutes valuable, special and unique assets of
the Company and its affiliates. Except as required to perform Employee's duties
as an employee of the Company, and during the period that Employee is employed
by the Company, or until such sooner time that any item described in Section 3.1
ceases to be Confidential Information through no act of Employee in violation of
this Agreement, Employee will not use or disclose any Confidential Information
of the Company.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 RESTRICTION. In consideration for the benefits Employee is
receiving hereunder, Employee hereby acknowledges, and for other good and
valuable consideration, agrees that during the period beginning on the date
hereof and ending with the termination of Employee's employment with the Company
under any of the circumstances described in Section 6.1,
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<PAGE>
Employee directly or indirectly, shall not (i) compete with the Company to
provide merchant credit card authorization processing and settlement services,
Automated Teller Machines, debit services, check guarantee services, payroll
processing services, payment systems and related commerce, other than through
any current passive investment in any company that provides as its principle
business electronic payment processing equipment to any of the customers or
clients of the Company wherever located who are either customers or clients of
the Company or who have been identified as potential customers or clients of the
Company as of the termination of Employee's employment; (ii) solicit or hire any
employee of the Company; or (iii) interfere with, disrupt or attempt to disrupt
any past, present or prospective business relationship, contractual or otherwise
related to or arising from any merchant account or any agreement, relationship
or contractual arrangement between the Company and any merchant provided,
however, nothing herein shall prevent Employee from contracting with any such
merchant in a manner that does not interfere with, disrupt or attempt to disrupt
any contractual relationship between such person and the Company.
SECTION 4.2 REMEDIES. Employee agrees and acknowledges that the violation
of the covenants in this Section 4.1 would cause irreparable injury to the
Company and that the remedy at law for any violation or threatened violation
would be inadequate and that the Company shall be entitled to temporary and
permanent injunctive relief or other equitable relief without the necessity of
proving actual damages. Employee represents that enforcement of a remedy by way
of injunction will not prevent him from earning a livelihood. Employee further
represents and admits that time periods contained in Section 4.1 are reasonably
necessary to protect the interests of the Company and would not unfairly or
unreasonably restrict Employee. Such relief shall be in addition to any other
remedies available to Company, including specifically without intending any
limitation, the recovery of damages.
SECTION 4.3 REFORMATION AND SEVERANCE. If a judicial determination is made
that any of the provisions of the above restriction constitutes an unreasonable
or otherwise unenforceable restriction against Employee, it shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereby agree that any judicial authority construing this Agreement shall be
empowered to sever any portion of the prohibited business activity from the
coverage of this restriction and to apply the restriction to the remaining
portion of the business activities not so severed by such judicial authority.
ARTICLE V. TERM OF AGREEMENT
This Agreement shall continue in full force and effect for a period of one
year commencing on the Effective Date. At the beginning of each month after the
Effective Date, the term of this Agreement shall automatically be extended for
an additional month so that the term of the Agreement on such date is a period
of 12 months.
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
prior to the time set forth in Article V hereof upon the occurrence of the
following events:
(a) By Company Without Cause. The Company may terminate this Agreement at
any time prior to a Change in Control (as defined in Section 7.2) without cause
upon written notice to Employee. At the time of such termination, Company will
pay to Employee the amount of
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compensation determined under Section 2.1 for the term of the Agreement, as
determined under Article V, provided that any partial month remaining in the
term of the Agreement shall be treated as a full month. In addition, Employee
shall receive any bonuses that have been earned under Section 2.1(b) but have
not been paid. Employee also shall be entitled to receive expense reimbursements
under Section 2.2 hereof for expenses incurred in the performance of his duties
prior to termination. After the occurrence of a Change in Control, Employee will
receive the amounts specified in Section 7.1 upon termination of this Agreement
by the Company without cause. A termination of this Agreement without cause will
be deemed to occur if the Company provides written notice of such to the
Employee, or otherwise prevents the Employee from performing his duties
hereunder, unless termination of this Agreement is due to the circumstances
described in any other paragraph of this Section 6.1.
(b) By Employee Without Cause. Employee may terminate this Agreement at
any time without cause upon written notice. At the time of such termination,
Company will pay to Employee the amount of compensation determined under Section
2.1, such amounts to be adjusted pro rata for the portion of the term of the
Agreement completed on the date of termination. Employee shall also be entitled
to reimbursement pursuant to Section 2.2 for expenses incurred in the
performance of his duties hereunder prior to termination.
(c) By Company With Cause. This Agreement may be terminated by Company at
any time upon written notice for any of the following reasons:
I. conviction of the Employee for a felony which in the reasonable
judgment of the Board materially affects Employee's ability to perform his
duties pursuant to this Agreement;
II. commission by Employee of an act of fraud, embezzlement, or material
dishonesty against the Company or its affiliates; or
III. intentional neglect of or material inattention to Employee's duties,
which neglect or inattention remains uncorrected for more than 30 days following
written notice from the Board detailing the Board's concern.
At the time of such termination, Company will pay to Employee the amount of
compensation determined under Section 2.1(a), such amounts to be adjusted pro
rata for the portion of the term of the Agreement completed on the date of
termination. Employee shall also be entitled to reimbursement pursuant to
Section 2.2 for expenses incurred in the performance of his duties hereunder
prior to termination.
(d) Termination on Death. In the event of Employee's death, this Agreement
will be deemed to have terminated on the date of his death. At the time of such
termination, Company will pay to the testamentary trusts created by Employee's
will, or if there are no such trusts, to his estate, the amount of compensation
determined under Section 2.1 that is in effect at the time of termination, such
amount to be adjusted pro rata for the portion of the term of the Agreement
completed on the date of termination. Company will additionally make a one-time
payment in an amount equal to 25% of the annual amount payable under Section
2.1(a) at the time of Employee's death. Company shall also pay to such
testamentary trusts or Employee's estate reimbursement pursuant to Section 2.2
for expenses incurred in the performance of his duties hereunder prior to
termination.
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(e) Termination on Disability. This Agreement will terminate immediately
in the event Employee becomes physically or mentally disabled. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days. At the time of such
termination, Company will pay to Employee the amount of compensation determined
under Section 2.1 that is in effect at the time of termination, such amount to
be adjusted pro rata for the portion of the term of the Agreement completed on
the date of termination. In addition, Employee shall, on the date of such
termination, be entitled to receive a one-time payment in an amount equal to 25%
of the annual amount payable under Section 2.1(a) at the time of termination.
Employee shall also be entitled to reimbursement pursuant to Section 2.2 for
expenses incurred in the performance of his duties hereunder prior to
termination.
(f) By Employee With Cause. Employee may upon 10 days prior written notice
terminate this Agreement for reason of cause. At the time of such termination,
Company shall continue to pay salary to Employee at the periodic rate that is in
effect at the time of notice pursuant to Section 2.1 for the term of the
Agreement until the effective date of termination. In addition, Company will
pay to Employee the payments described in Section 7.1 and all expense
reimbursements under Section 2.2 for expenses incurred in the performance of his
duties prior to and contemporaneously with termination. Termination for "cause"
for purposes of this Section 6.1(f), is a termination of employment following a
Change in Control (defined in Section 7.2) under any of the following
circumstances:
I. A material adverse alteration in Employee's position, responsibilities
or status from that which was in effect immediately prior to the
Change in Control.
II. A reduction in Employee's compensation that is payable pursuant to
Section 2.1 or a substantial reduction in benefits provided to
Employee that are described in Section 2.3, as such amounts are in
effect immediately prior to the Change in Control.
III. Relocation of Employee to a location that is more than 35 miles from
the location of the Company's headquarters on the date this Agreement
is executed.
SECTION 6.2 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(a) Gross Up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by or on behalf of the Company to or for the benefit of Employee as
a result of a Change In Control (as defined in Section 7.2) (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 6.2 (a "Payment")) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by Employee 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 Employee shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Employee 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, Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
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(b) Tax Opinion. Subject to the provisions of Section 6.2(c), all
determinations required to be made under this Section 6.2, 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 a nationally recognized accounting firm or law firm selected by the Company
(the "Tax Firm"); provided, however, that the Tax Firm shall not determine that
no Excise Tax is payable by Employee unless it delivers to Employee a written
opinion (the "Accounting Opinion") that failure to pay the Excise Tax and to
report the Excise Tax and the payments potentially subject thereto on or with
Employee's applicable federal income tax return will not result in the
imposition of an accuracy-related or other penalty on Employee. All fees and
expenses of the Tax Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company, the Tax Firm shall
make all determinations required under this Section 6.2, shall provide to the
Company and Employee a written report setting forth such determinations,
together with detailed supporting calculations, and, if the Tax Firm determines
that no Excise Tax is payable, shall deliver the Accounting Opinion to Employee.
Any Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid
by the Company to Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section 6.2, any determination
by the Tax Firm shall be binding upon the Company and Employee; provided,
however, that Employee shall only be bound to the extent that the determinations
of the Tax Firm hereunder, including the determinations made in the Accounting
Opinion, are reasonable and reasonably supported by applicable law. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Tax Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 6.2(c) that Employee is required to make a
payment of any Excise Tax, the Tax Firm shall reasonably 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 Employee. In determining the
reasonableness of Tax Firm's determinations hereunder, and the effect thereof,
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and Employee's tax counsel. Tax Firm's
determinations hereunder, and the Accounting Opinion, shall not be deemed
reasonable until Employee's reasonable objections and comments thereto have been
satisfactorily accommodated by Tax Firm.
(c) Notice of IRS Claim. Employee shall notify the Company in writing of
any claims 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 30 calendar days after Employee
actually receives notice 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; provided, however, that the failure of Employee to notify the Company of
such claim (or to provide any required information with respect thereto) shall
not affect any rights granted to Employee under this Section 6.2 except to the
extent that the Company is materially prejudiced in the defense of such claim as
a direct result of such failure. Employee 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 Employee in
writing prior to the expiration of such period that it desires to contest such
claim, Employee shall do all of the following:
I. give the Company any information reasonably requested by the Company
relating to such claim;
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II. 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 selected by the Company and
reasonably acceptable to Employee;
III. cooperate with the Company in good faith in order effectively to
contest such claim;
IV. if the Company elects not to assume and control the defense of such
claim, 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 Employee 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 limiting the foregoing provisions of this Section
6.2, the Company shall have the right, at its sole option, to assume the defense
of and control all proceedings in connection with such contest, in which case it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Employee, on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or 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 Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee 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) Right to Tax Refund. If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 6.2 Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to the
Company's complying with the requirements of Section 6.2(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 Employee of
an amount advanced by the Company pursuant to Section 6.2(c), a determination is
made that Employee is not entitled to a refund with respect to such claim and
the Company does not notify Employee 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, to the extent of such denial, be forgiven and shall not
be required to be repaid and the amount of forgiven advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT.
(a) Amount. Notwithstanding anything to the contrary contained in Article
VI hereof, if within the 24 month period following a Change in Control (as
defined in Section 7.2), Employee's employment with the Company terminates for
any reason, other than the circumstances described in Section 6.1(b), Company
will pay Employee the Gross-up Payment as described in Section 6.2, and a lump
sum payment (the "Termination Payment") which is the sum of the following:
I. Two times Employee's annual base compensation determined by reference
to his base salary in effect at the time of Change In Control.
II. Two times the highest annual bonus described in Section 2.1(b).
III. Continuation of benefits described in Section 2.3 for a period of two
years following termination of employment.
(b) Time for Payment; Interest. The Termination Payment made under this
Section 7.1 shall be paid to Employee in a single lump sum within ten days
following the date of termination. The Company's obligation to pay to Employee
any amounts under this Section 7.1, including without limitation the Termination
Payment and any Gross-Up Payment due under Section 6.2, will bear interest at
the prime rate as quoted in The Wall Street Journal plus 2%, and all accrued and
unpaid interest will bear interest at the same rate, all of which interest will
be compounded annually.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation controlling the Company or owned directly or indirectly by the
stockholders of Company in substantially the same proportions as their ownership
of Company stock, becomes the "beneficial owner" (as defined in SEC Rule 13d-3),
directly or indirectly, of securities of Company representing more than 40% of
the total voting power represented by Company's then outstanding Voting
Securities (as defined below), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities) more than 65% of the total voting power
represented by the Voting Securities outstanding immediately after such merger
or
9
<PAGE>
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
Company of all or substantially all of its assets. For purposes of this section
"Voting Securities" shall mean any securities of Company or its survivor which
vote generally in the election of its directors.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Company and Employee acknowledge and agree that any
claim or controversy arising out of or relating to Article VII of this Agreement
shall be settled by non-binding arbitration in Nashville, Tennessee, in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect on the date of the event giving
rise to the claim or controversy. The Company and Employee further acknowledge
and agree that either party must request arbitration of any claim or controversy
within 60 days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure to
give notice of any claim or controversy within 60 days of the event giving rise
to the claim or controversy shall constitute waiver of the claim or controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six months from the date that a written
notice of request for arbitration is effective. All claims or controversies
shall be resolved by a panel of three arbitrators who are licensed to practice
law in the State of Tennessee and who are experienced in the arbitration of
labor and employment disputes. These arbitrators shall be selected in
accordance with the National Rules of the American Arbitration Association for
the Resolution of Employment Disputes in effect at the time the claim or
controversy arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The arbitrators
shall issue a written decision with respect to all claims or controversies
within 30 days from the date the claims or controversies are submitted to
arbitration. The parties shall be entitled to be represented by legal counsel
at any arbitration proceedings. Employee and the Company acknowledge and agree
that the Company will bear the cost of the arbitration proceeding, including any
stenographic recording, and each party shall be responsible for paying its own
attorneys' fees, if any, unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Company and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Company and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Company acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of this Agreement, nor shall
anything in this Agreement be construed to require the arbitration of any claim
or controversy arising under Section 6.2 of this Agreement, as the Accounting
Opinion
10
<PAGE>
provided pursuant to such section is final and binding upon the parties.
These provisions shall be enforceable by any court of competent jurisdiction and
shall not be subject to arbitration except by mutual written consent of the
parties signed after the dispute arises, any such consent, and the terms and
conditions thereof, then becoming binding on the parties. Employee and the
Company further acknowledge and agree that nothing in this Agreement shall be
construed to require arbitration of any claim for workers' compensation or
unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Company to:
PMT Services, Inc.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With copy to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
Attn: Howard W. Herndon, Esq.
If to Employee, to:
Tony VanBrackle
6210 Harding Road
Nashville, Tennessee 37205
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person, except as required by law. Nothing in this Section shall be
construed to reduce Employee's right to payments described in Section 6.2.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this Agreement based upon the
express terms and provisions set forth herein and have not relied on any
communications or representations, oral or written, which are not set forth in
this Agreement.
11
<PAGE>
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Company by an officer of the
Company other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Tennessee,
without regard to its choice of law principles.
SECTION 9.7 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement
shall be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.8 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties provided that the substance of the economic relationship created by
this Agreement remains materially unchanged.
SECTION 9.10 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief. No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
SECTION 9.12 COMPANY. The term Company shall mean PMT Services, Inc. and
any affiliate or other entity in which the Company owns, directly or indirectly,
more than a 50% interest.
12
<PAGE>
IN WITNESS WHEREOF, Company and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
- -----------------------------------
TONY VANBRACKLE
COMPANY:
PMT SERVICES, INC.
By:
--------------------------------
Its:
-------------------------------
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PMT SERVICES, INC. FOR THE QUARTER ENDED
APRIL 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<CASH> 36,444,941
<SECURITIES> 13,679,645
<RECEIVABLES> 42,026,484
<ALLOWANCES> 0
<INVENTORY> 3,254,557
<CURRENT-ASSETS> 100,155,028
<PP&E> 13,623,698
<DEPRECIATION> 8,084,300
<TOTAL-ASSETS> 269,151,153
<CURRENT-LIABILITIES> 31,666,208
<BONDS> 0
0
0
<COMMON> 479,223
<OTHER-SE> 217,137,900
<TOTAL-LIABILITY-AND-EQUITY> 269,151,153
<SALES> 295,884,153
<TOTAL-REVENUES> 295,884,153
<CGS> 210,661,126
<TOTAL-COSTS> 210,661,126
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,541,306
<INTEREST-EXPENSE> 1,995,463
<INCOME-PRETAX> 29,426,702
<INCOME-TAX> 10,872,427
<INCOME-CONTINUING> 18,554,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,554,275
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.39
</TABLE>
