Exhibit 10.3
 
December 23, 2008
 
Mr. Kevin Donovan
 
25 Susannah’s Crossing
 
Dover NH 03820
 
Dear Kevin:
 
Reference is made to your Executive Retention Agreement with Bottomline
Technologies (de), Inc. (the “Company”) dated as of November 16, 2006 (the
“Agreement”).  In all respects, the Agreement shall remain in full force and
effect, provided, however, that:
 
1.  
It is agreed that Section 1.4 is hereby amended and restated in its entirety to
read as follows:

 
“Good Reason” means:
 
(a)           a material diminution in the Employee's authority, duties or
responsibilities;
 
(b)           a material reduction in the Employee’s then base compensation;
 
(c)           a material diminution in the budget over which the Employee
retains authority;
 
(d)           the imposition of a requirement by the Company, any person in
control of the Company or any successor to the Company, that the location at
which the Executive performs his principal duties for the Company or any
successor to the Company be changed to a new location outside the radius of 50
miles from the then current location; or
 
(e)           any breach by the Company of any material provision of this
Agreement;
 
provided, however, that no such event or condition shall constitute a
termination for Good Reason unless (x) the Executive gives the Company a written
notice of termination no more than 90 days after the initial existence of such
condition; (y) the grounds for termination (if susceptible to correction) are
not corrected by the Company within 30 days of its receipt of such notice; and
(z) the Executive’s termination of employment occurs within two years following
the Company’s receipt of such notice.
 
The right of the Executive to terminate his at will employment as a result of
Good Reason shall not be affected by the Executive’s disability, or the fact
that the Executive at such time may have an offer of employment from another
employer or any other reason for terminating his employment with the Company.”
 
2.  
It is further agreed that Section 4.1(a)(v) is hereby amended to include the
following language at the end of the sentence: “; and provided further that any
benefits coverage provided by the Company that continues beyond the COBRA
coverage period shall be administered in accordance with the Company’s ordinary
payroll practices;”

 
3.  
It is further agreed that Section 4.1(a)(vi) is hereby amended to include the
following sentence at the end of the paragraph: “, and such amounts or benefits
shall be paid or provided to the Executive in a lump sum within ten (10)
business days following the date of termination;”

 
4.  
It is further agreed that Section 8.9 is hereby amended and restated in its
entirety to read as follows:

 
“Section 409A.   Subject to the provisions in this Section 8.9, any severance
payments or benefits under this Agreement shall begin only upon the date of the
Executive’s “separation from service” (determined as set forth below) which
occurs on or after the date of termination of the Executive’s employment.  The
following rules shall apply with respect to distribution of the payments and
benefits, if any, to be provided to the Executive under this Agreement:
 
(a)           It is intended that each installment of the severance payments and
benefits provided under this Agreement shall be treated as a separate “payment”
for purposes of Section 409A of the Code and the guidance issued thereunder
(“Section 409A”).  Neither the Company nor the Executive shall have the right to
accelerate or defer the delivery of any such payments or benefits except to the
extent specifically permitted or required by Section 409A.
 
(b)            If, as of the date of the Executive’s “separation from service”
from the Company, the Executive is not a “specified employee” (within the
meaning of Section 409A), then each installment of the severance payments and
benefits shall be made on the dates and terms set forth in this Agreement.
 
(c)           If, as of the date of the Executive’s “separation from service”
from the Company, the Executive is a “specified employee” (within the meaning of
Section 409A), then:
 
(i)  Each installment of the severance payments and benefits due under this
Agreement that, in accordance with the dates and terms set forth herein, will in
all circumstances, regardless of when the separation from service occurs, be
paid within the Short-Term Deferral Period (as hereinafter defined) shall be
treated as a short-term deferral within the meaning of Treasury Regulation
Section 1.409A-1(b)(4) to the maximum extent permissible under Section
409A.  For purposes of this Agreement, the “Short-Term Deferral Period” means
the period ending on the later of the fifteenth day of the third month following
the end of the Executive’s tax year in which the separation from service occurs
and the fifteenth day of the third month following the end of the Company’s tax
year in which the separation from service occurs; and
 
(ii)  Each installment of the severance payments and benefits due under this
Agreement that is not described in Section 8.9(c)(i) above and that would,
absent this subsection, be paid within the six-month period following the
Executive’s “separation from service” from the Company shall not be paid until
the date that is six months and one day after such separation from service (or,
if earlier, the Executive’s death), with any such installments that are required
to be delayed being accumulated during the six-month period and paid in a lump
sum on the date that is six months and one day following the Executive’s
separation from service and any subsequent installments, if any, being paid in
accordance with the dates and terms set forth herein; provided, however, that
the preceding provisions of this sentence shall not apply to any installment of
severance payments and benefits if and to the maximum extent that such
installment is deemed to be paid under a separation pay plan that does not
provide for a deferral of compensation by reason of the application of Treasury
Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary
separation from service).  Any installments that qualify for the exception under
Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the
last day of the Executive’s second taxable year following the taxable year in
which the separation from service occurs.
 
(d)            The determination of whether and when the Executive’s separation
from service from the Company has occurred shall be made and in a manner
consistent with, and based on the presumptions set forth in, Treasury Regulation
Section 1.409A-1(h).  Solely for purposes of this Section 8.9(d), “Company”
shall include all persons with whom the Company would be considered a single
employer under Section 414(b) and 414(c) of the Code.
 
(e)           All reimbursements and in-kind benefits provided under this
Agreement shall be made or provided in accordance with the requirements of
Section 409A to the extent that such reimbursements or in-kind benefits are
subject to Section 409A, including, where applicable, the requirements that (i)
any reimbursement is for expenses incurred during the Executive’s lifetime (or
during a shorter period of time specified in this Agreement), (ii) the amount of
expenses eligible for reimbursement during a calendar year may not affect the
expenses eligible for reimbursement in any other calendar year, (iii) the
reimbursement of an eligible expense will be made on or before the last day of
the calendar year following the year in which the expense is incurred and (iv)
the right to reimbursement is not subject to set off or liquidation or exchange
for any other benefit.”

 
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By execution of this letter, you hereby agree to the foregoing amendment of the
Agreement and reaffirm your obligations under the Agreement.
 
Very truly yours,
 
Bottomline Technologies (de), Inc.
 

             
December 23, 2008 
By:
/s/ Joseph L. Barry, Jr.       Joseph L. Barry, Jr.       Chairman of
Compensation Committee          

                                          

  Accepted and Agreed:          
December 23, 2008 
By:
/s/ Kevin M. Donovan       Kevin M. Donovan