Exhibit 10.39

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of November 7, 2014 (the
“Effective Date”), is made by and between ACI Merchant Systems, LLC (the
“Employer”) and Cathy Smith (“Executive”).

 

RECITALS

 

WHEREAS, on the Effective Date, pursuant to a Unit Purchase Agreement by and
among the Executive, and Michael Collester (“Sellers”) the Employer, and JetPay
Corporation (“JetPay”), JetPay has acquired all of the outstanding membership
interests of the Employer;

 

WHEREAS, Executive is currently employed as the Vice President of the Employer;
and

 

WHEREAS, the Employer desires to continue Executive’s employment with the
Employer as its Vice President, and Executive agrees to accept such continued
employment, in accordance with the terms and conditions set forth in this
Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement, intending to be legally
bound, hereby agree as follows:

 

1.          Employment. The Employer agrees to employ Executive, and Executive
accepts such employment hereunder, for a period of thirty-six (36) months
beginning on the Effective Date unless terminated sooner in accordance with
Section 1(c) (the “Employment Period”). Notwithstanding the foregoing, the
Employment Period shall be automatically extended for an additional one-year
period beginning on the thirty-sixth-month anniversary of the Effective Date and
on each subsequent anniversary of the Effective Date thereafter unless either
party notifies the other party in writing of its decision not to extend the
Employment Period at least 90 days prior to the automatic extension thereof or
the Employment Period is otherwise terminated in accordance with Section 1(c).

 

(a)          Position and Duties.

 

(i)          During the Employment Period, Executive shall serve as the Vice
President of the Employer and in such other positions with the Employer’s
Affiliates (for no additional compensation) as are determined by the Board and
shall have the normal duties, responsibilities and authority implied by such
position(s) and such other duties and responsibilities as are assigned by the
Board or its designee(s); provided that Executive’s principal place of
employment shall remain at the Employer’s offices in Bucks County, Pennsylvania,
and Executive shall consistently average no more than five (5) days per calendar
month in required domestic or international travel.

 

 

 

 

(ii)         During the Employment Period, Executive shall faithfully,
conscientiously and to the best of his ability devote Executive’s full business
time and attention to the business and affairs of the Employer and its
Affiliates. Executive shall not engage, directly or indirectly, in any other
business, investment or activity that (a) interferes with the performance of
Executive’s duties under this Agreement (which shall include, without
limitation, the preceding sentence), (b) is contrary to the interests of the
Employer or any of its Affiliates or (c) requires any portion of Executive’s
business time; provided, however, that, to the extent that the following does
not impair Executive’s ability to perform Executive’s duties pursuant to this
Agreement (which shall include, without limitation, the preceding sentence),
Executive may (1) serve on the board or committee of any charitable, religious,
or educational institution and (2) serve as a director of such other
organizations.

 

(b)          Salary, Bonus, Benefits and Expenses.

 

(i)          Salary. During the Employment Period, the Employer will pay
Executive an initial base salary of $170,000 per annum (the “Base Salary”).
Annually, commencing in 2015, the Board shall review the Base Salary of
Executive and may increase (but not decrease) the Base Salary by such amount as
the Board, in its sole discretion, shall deem appropriate, based upon the
performance of Executive. In addition, within [60 days] following the Effective
Date, the Board shall increase the Base Salary of Executive by the amount (if
any) of the annual difference between the health insurance premiums paid by
Executive prior to the Effective Date with respect to Executive and his or her
dependents (if any) and the health insurance premiums paid by Executive
immediately following the Effective Date with respect to Executive and his or
her dependents. The term “Base Salary” as used in this Agreement shall refer to
the Base Salary as it may be so increased.

 

(ii)         Annual Bonus. During the Employment Period, Executive shall be
eligible to receive an annual bonus as determined by the Board in its sole
discretion.

 

(iii)        Benefits. During the Employment Period, Executive shall be eligible
to participate in and be covered on the same basis as other similarly situated
senior management employees of the Employer, under all employee benefit plans
and programs of the Employer, including, without limitation, vacation, paid-time
off, retirement, health insurance and life insurance.

 

(iv)        Expenses. Employer shall pay or reimburse Executive for reasonable
and necessary expenses directly incurred by Executive in the course of
Executive’s employment by Employer in accordance with Employer’s standard
policies and practices as in effect from time to time. All reimbursements under
this Section 1(b)(iv) shall be made as soon as practicable following submission
of a reimbursement request, but no later than the end of the calendar quarter
following the month during which the underlying expense was incurred. No right
of Executive to reimbursement of expenses under this Agreement shall be subject
to liquidation or exchange for another benefit.

 

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(c)          Separation. The Employment Period will terminate immediately upon
Executive’s death. In addition, the Employer may, at any time, terminate the
Executive’s employment and the Employment Period with or without Cause, or due
to Executive’s Disability, in each case, upon written notice to Executive of
such termination, and Executive may terminate the Employment Period with or
without Good Reason upon 60 days’ advance written notice to the Employer.
Effective immediately upon any Separation, Executive shall resign, and shall be
deemed to have resigned, from all officer, employee and director positions held
by Executive with the Employer or any of its Affiliates.

 

(d)          Severance.

 

(i)          Termination Without Cause or for Good Reason. If Executive’s
employment with the Employer and its Affiliates is terminated during the
Employment Period by the Employer without Cause (other than by notice of
nonrenewal of the Employment Period) or by Executive for Good Reason, the
Employer shall provide Executive with the following payments and benefits:

 

(1)contingent upon the effectiveness of a reasonable general release of claims
in form and substance satisfactory to the Employer which is executed within
forty-five (45) days of the date of such termination, (A) Base Salary
continuation during the period commencing on the sixtieth (60th) date following
such Separation and ending sixty (60) days following the last day of the
then-current Employment Period without giving effect to any automatic extension
thereof (the “Severance Period”); (B) provided that such Separation occurs on or
after July 1 of the applicable calendar year, the annual bonus, if any,
Executive would have received for such calendar year had Executive remained
employed through the date on which such bonuses are paid to eligible employees
generally, which annual bonus shall be paid at the time the Employer pays such
bonuses to eligible employees generally but in no event later than March 15 of
the calendar year following the calendar year in which such Separation occurs
and (C) payment of Executive’s premiums for continuation coverage pursuant to
the Consolidated Omnibus Budget Act of 1985, as amended (“COBRA”), less the
amount that an active employee would be required to pay for such coverage, for
the Employer’s medical insurance plan during the Severance Period (if eligible
for COBRA and COBRA is timely elected), or until Executive obtains replacement
medical coverage, whichever occurs first;

 

(2)immediate vesting of all unvested equity incentives granted to Executive
under the Employer’s equity incentive plan;

 

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(3)any accrued but unpaid Base Salary and unreimbursed expense due Executive
under Section 1(b)(iv) together with any earned but unpaid annual bonus with
respect to the year prior to the year of Separation and accrued but unused
vacation time; and

 

(4)any accrued and vested benefits under any employee benefit plan of the
Employer or its Affiliates in which Executive was participating immediately
prior to such termination, such benefits to be provided in accordance with the
terms of the applicable employee benefit plan.

 

In addition, if Executive’s employment is terminated by the Employer without
Cause and in bad faith with the intention of thwarting Executive’s ability to
earn the Contingency Consideration as a “Seller” under the Purchase Agreement
(each as defined in the Purchase Agreement), Employer shall pay to Executive an
amount equal to Executive’s share of the Contingency Consideration in his
capacity as a Seller equal to the product of (i) Executive’s percentage
ownership of Employer immediately prior to the Closing (as defined in the
Purchase Agreement) multiplied by (ii) the difference of (x) 500,000.00, minus
(y) the amount of Contingency Consideration earned and paid to the Sellers, if
any, under the Purchase Agreement as of the date of such termination (provided
that in no event shall there be any duplication of Contingency Consideration
payments).

 

Notwithstanding the foregoing, if Executive breaches any of the provisions of
Section 3, Section 4 or Section 5 hereof, any and all remaining payments and
benefits payable under this Agreement shall be immediately forfeited.

 

(ii)         Other Terminations. If Executive’s employment with the Employer and
its Affiliates is terminated during the Employment Period by the Employer for
Cause or due to nonrenewal of the Employment Period or by Executive without Good
Reason, the Employer’s and its Affiliates’ sole obligation to Executive shall be
to pay to Executive (x) any accrued but unpaid Base Salary and accrued but
unused vacation time and (y) any accrued and vested benefits under any employee
benefit plan of the Employer or its Affiliates in which Executive was
participating immediately prior to such termination, such benefits to be
provided in accordance with the terms of the applicable employee benefit plan.
If Executive’s employment with the Employer and its Affiliates is terminated
during the Employment Period due to Executive’s death or Disability, in addition
to (x) and (y) above, Employer or its Affiliates, as the case may be, shall also
pay to Executive (or his estate or beneficiaries, as the case may be) (z)
accrued but unused vacation time and any unreimbursed expense due Executive
under Section 1(b)(iv); (aa) any earned but unpaid annual bonus with respect to
the year prior to the year of termination; and (ab) a pro-rata bonus with
respect to the year of termination equal to a fraction where the numerator is
the number of completed calendar months of employment in such year and the
denominator is twelve (12), payable when such bonuses are paid to other
employees of the Employer or its Affiliates.

 

2.          Equity Participation. During the Employment Period, Executive shall
be eligible to participate in any equity-based compensation plan approved by the
Board of Directors of JetPay in its sole discretion for similarly situated
employees of JetPay and its Affiliates on the terms and conditions set forth in
such plan and the applicable award agreement.

 

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3.          Confidential Information.

 

(a)          Obligation to Maintain Confidentiality. Executive shall not, during
or after the Employment Period, without the prior express written consent of the
Employer, directly or indirectly use or divulge, disclose or make available or
accessible any Confidential Information (as defined below) to any Person (other
than when required to do so in good faith to perform Executive’s duties and
responsibilities under this Agreement or when required to do so by a lawful
order of a court of competent jurisdiction, any governmental authority or
agency, or any recognized subpoena power). In the event that Executive becomes
legally compelled (by oral questions, interrogatories, request for information
or documents, subpoena, criminal or civil investigative demand or similar
process) to disclose any of the Confidential Information, then, prior to such
disclosure, Executive will, if permissible under applicable law, provide the
Employer with prompt written notice so that the Employer may seek (with
Executive’s cooperation but at Employer’s sole expense) a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, then Executive will furnish only that portion of the Confidential
Information which he is advised by counsel is legally required, and will
cooperate with the Employer in the Employer’s efforts to obtain reliable
assurance that confidential treatment will be accorded to the Confidential
Information. Executive shall also proffer to the Employer, no later than the
effective date of any termination of Executive’s employment with the Employer
for any reason (or upon earlier request by the Employer), and without retaining
any copies, notes or excerpts thereof, all memoranda, computer disks or other
media, computer programs, diaries, notes, records, data, customer or client
lists, marketing plans and strategies, and any other documents consisting of or
containing Confidential Information that are in Executive’s actual or
constructive possession or which are subject to Executive’s control at such
time. For purposes of this Agreement, “Confidential Information” shall mean all
information respecting the business and activities of the Employer or any
Affiliate of the Employer, including, without limitation, the clients,
customers, suppliers, employees, consultants, computer or other files, projects,
products, computer disks or other media, computer hardware or computer software
programs, marketing plans, financial information, methodologies, know-how,
processes, practices, approaches, projections, forecasts, formats, systems,
trade secrets, data gathering methods and/or strategies of the Employer or any
Affiliate of the Employer. Notwithstanding the immediately preceding sentence,
Confidential Information shall not include (i) any information that is, or
becomes, generally available to the public (unless such availability occurs as a
result of Executive’s breach of any portion of this Agreement); (ii) any
information that became available to the public from a third party source which
was not bound by a confidentiality agreement; and (iii) any information not
otherwise considered by the Board to be confidential and proprietary.

 

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(b)          Ownership of Property. Executive acknowledges that all discoveries,
concepts, ideas, inventions, innovations, improvements, developments, methods,
processes, programs, designs, analyses, drawings, reports, patent applications,
copyrightable work and mask work (whether or not including any Confidential
Information) and all registrations or applications related thereto, all other
proprietary information and all similar or related information (whether or not
patentable) that relate to the Employer’s or any Affiliate of the Employer’s
actual or anticipated business, research and development, or existing or future
products or services and that are conceived, developed, contributed to, made, or
reduced to practice by Executive (either solely or jointly with others) while
employed by Employer (including any of the foregoing that constitutes any
proprietary information or records) (“Work Product”) belong to the Employer or
any Affiliate of the Employer designated by the Employer, and Executive hereby
assigns, and agrees to assign, all of the above Work Product to the Employer or
such Affiliate of the Employer. Any copyrightable work prepared in whole or in
part by Executive in the course of Executive’s work for any of the foregoing
entities shall be deemed a “work made for hire” under the copyright laws, and
the Employer or such Affiliate of the Employer shall own all rights therein. To
the extent that any such copyrightable work is not a “work made for hire,”
Executive hereby assigns and agrees to assign to the Employer or such Affiliate
of the Employer all right, title, and interest, including without limitation,
copyright in and to such copyrightable work. Executive shall promptly disclose
such Work Product and copyrightable work to the Board and perform all actions
reasonably requested by the Board (whether during or after the Employment
Period) to establish and confirm the ownership of the Employer or such Affiliate
of the Employer (including, without limitation, assignments, consents, powers of
attorney and other instruments).

 

(c)          Third Party Information. Executive understands that the Employer
and its Affiliates will receive from third parties confidential or proprietary
information (“Third Party Information”) subject to a duty on the Employer’s and
its Affiliates’ part to maintain the confidentiality of such information and to
use it only for certain limited purposes. During the Employment Period and
thereafter, and without in any way limiting the provisions of Section 3(a)
above, Executive will hold Third Party Information in the strictest confidence
and will not disclose to anyone (other than (i) personnel and consultants of the
Employer or its Affiliates who need to know such information in connection with
their work for the Employer or any of its Affiliates; and (ii) as required by a
lawful order of a court of competent jurisdiction, any governmental authority or
agency, or any recognized subpoena power) or use, except in connection with his
work for the Employer or any of its Affiliates, Third Party Information unless
expressly authorized by a member of the Board (other than Executive if Executive
is on the Board) in writing.

 

(d)          Use of Information of Prior Employers. During the Employment Period
and thereafter, Executive will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employers or any other
Person to whom Executive has an obligation of confidentiality, and will not
bring onto the premises of the Employer or any of its Affiliates any unpublished
documents or any property belonging to any former employer or any other Person
to whom Executive has an obligation of confidentiality unless consented to in
writing by the former employer or Person. Executive will use in the performance
of Executive’s duties only information which is (i) generally known and used by
persons with training and experience comparable to Executive’s and which is (x)
common knowledge in the industry or (y) otherwise legally in the public domain,
(ii) otherwise provided or developed by the Employer or any of its Affiliates or
(iii) in the case of materials, property or information belonging to any former
employer or other Person to whom Executive has an obligation of confidentiality,
approved for such use in writing by such former employer or Person.

 

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4.          Non-Disparagement. Except as required by applicable law, rule or
regulation or any recognized subpoena power, Executive agrees that, during and
after the Employment Period, he shall not at any time make any statement or
representation, written or oral, which Executive knows or should know will, or
which he knows or should know is reasonably likely to, impair or adversely
affect in any way the reputation, goodwill, business, customer or supplier
relationships, or public relations of the Employer and/or any of its Affiliates,
and/or any of their respective shareholders, owners, customers, suppliers,
directors, employees or officers. In the event that Executive becomes legally
compelled (by oral questions, interrogatories, request for information or
documents, subpoena, criminal or civil investigative demand or similar process)
to make any such statements or representations, then prior thereto, Executive
will, if permitted by law, provide the Employer with prompt written notice so
that the Employer may seek (with Executive’s cooperation but at Employer’s sole
expense) a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. In the event that such protective order
or other remedy is not obtained, then Executive will only make such statements
or representations which he is advised by counsel is legally required, and will
cooperate with the Employer in the Employer’s efforts to obtain reliable
assurance that confidential treatment will be accorded to any such statements or
representations.

 

5.          Non-Competition and Non-Solicitation. Executive acknowledges that in
the course of Executive’s employment with Employer, Executive has or will become
familiar with the Employer’s and its Affiliates’ trade secrets and with other
Confidential Information concerning the Employer and/or its Affiliates and that
Executive’s services have been and will be of special, unique and extraordinary
value to the Employer and its Affiliates. In consideration of the foregoing and
for other good and valuable consideration and as a material inducement to the
Employer to enter into this Agreement, Executive agrees that:

 

(a)          Non-Competition. Executive shall not, while Executive is employed
by the Employer and for (x) 24 months after the date of any Separation by
Executive without Good Reason or by Employer for Cause and (y) 12 months after
the date of any other Separation (the “Restricted Period”), engage directly or
indirectly anywhere in the United States, without the prior express written
consent of the Employer, in any business or activity, whether as an employee,
consultant, partner, principal, agent, representative, director, stockholder,
investor or in any other individual, corporate or representative capacity, or
render any services or provide any advice to any business, activity, service or
Person, if such business, activity, service or Person competes with the Business
(as defined below). For purposes of this Agreement, the “Business” shall mean
(i) the business of providing merchant credit card processing services and
directly related products and services to businesses and (ii) any other business
activity that is competitive with the business, activities, products or services
of the type conducted, authorized, offered, or provided by the Employer or any
of its Affiliates, or, to the knowledge of the Employee, with respect to which
the Employer or any of its Affiliates has spent significant time or resources
analyzing for the purposes of assessing expansion opportunities by the Employer
or any of its Affiliates, during the twenty-four (24) month period prior to date
of Executive’s Separation. In addition, Executive shall not, during the
Restricted Period, assist, help or otherwise support, without the prior express
written consent of the Employer, any Person, business or other activity, whether
as an employee, consultant, partner, principal, agent, representative, director,
stockholder, investor or in any other individual, corporate or representative
capacity, to create, commence or otherwise initiate, or to develop, enhance or
otherwise further, any business or activity if such business or activity
competes with the Business. Notwithstanding the foregoing, Executive shall not
be prohibited during the Restricted Period from being a passive investor where
Executive owns less than five percent (5%) of the outstanding capital stock of
any publicly-held company.

 

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(b)          Non-Solicitation. Executive shall not during the Restricted Period,
(a) take any action to solicit or divert any business, clients or customers (or
potential business, clients or customers) away from the Employer or any of its
Affiliates, (b) induce customers, clients, business partners, suppliers, agents
or other Persons under contract or otherwise associated or doing business with
the Employer or any of its Affiliates to terminate, reduce or alter any such
association or business with or from the Employer or such Affiliate or (c)
contact, solicit, approach or induce any person who is an employee or consultant
of the Employer or any of its Affiliates or who was an employee or consultant of
the Employer or any of its Affiliates during the one (1) year period prior to
such contact, solicitation, approach or inducement to leave the employment or
other service of the Company or any of its Affiliates for any reason or to
otherwise accept employment with or provide services to any other Person. For
purposes of this Section 5(b), “potential business” shall mean any current or
reasonably foreseeable commercial activity or any current or reasonably
foreseeable commercial opportunities associated with Business.

 

(c)          Injunctive Relief. The provisions of Section 3, Section 4 and
Section 5 are material inducements to the Employer entering into and performing
this Agreement. Executive acknowledges and agrees that the Employer and its
Affiliates will have no adequate remedy at law, and would be irreparably harmed,
if Executive breaches or threatens to breach any of the provisions of Section 3,
Section 4 or Section 5 of this Agreement. Executive agrees that the Employer and
its Affiliates shall be entitled to equitable and/or injunctive relief to
prevent any breach or threatened breach of Section 3, Section 4 and/or Section 5
of this Agreement, and to specific performance of each of the terms of such
Sections in addition to any other legal or equitable remedies that the Employer
or its Affiliates may have. Executive further agrees that he shall not, in any
equity proceeding relating to the enforcement of the terms of Section 3, Section
4 and/or Section 5 of this Agreement, raise the defense that the Employer has an
adequate remedy at law. Each Affiliate of the Employer is a third party
beneficiary of Sections 3, 4 and 5 and may enforce their terms as if it were
party hereto.  Executive further acknowledges and agrees that (i) any breach or
claimed breach of the provisions set forth in this Agreement, or any other
claims Executive may have against the Employer or any of its Affiliates, will
not be a defense to enforcement of the restrictions set forth in Sections 3, 4
and 5 and (ii) the circumstances of Executive’s termination of employment with
the Employer will have no impact on the Executive’s obligations under Sections
3, 4 and 5.

 

(d)          Special Severability. The terms and provisions of Section 3,
Section 4 and Section 5 of this Agreement are intended to be separate and
divisible provisions and if, for any reason, any one or more of them is held to
be invalid or unenforceable, neither the validity nor the enforceability of any
other provision of this Agreement shall thereby be affected. It is the intention
of the parties to this Agreement that the potential restrictions on Executive’s
future employment imposed by such Sections be reasonable in both duration and
geographic scope and in all other respects. If for any reason any court of
competent jurisdiction shall find any provisions of Section 3, Section 4 and/or
Section 5 of this Agreement unreasonable in duration or geographic scope or
otherwise, Executive and the Employer agree that the restrictions and
prohibitions contained herein shall be effective to the fullest extent allowed
under applicable law in such jurisdiction.

 

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(e)          Extension of Restricted Period. If Executive breaches any of the
covenants contained in Section 5(a) or Section 5(b), then the Restricted Period
shall be extended for a period of time equal to the period of time during which
Executive is in breach of such restrictive covenant.

 

(f)          Additional Acknowledgments. Executive acknowledges that the
provisions of this Section 5 are in consideration of employment with Employer
and additional good and valuable consideration. In addition, Executive agrees
and acknowledges that the restrictions contained in Sections 3, 4 and 5 do not
preclude Executive from earning a livelihood, nor do they unreasonably impose
limitations on Executive’s ability to earn a living. The covenants in Sections
3, 4 and 5 of this Agreement are independent of the covenants in any other
agreement between the parties.

 

6.          Definitions.

 

“Affiliate” means, with respect to any Person, any Person that controls, is
controlled by or is under common control with such Person or an Affiliate of
such Person.

 

“Board” means the Employer’s board of directors.

 

“Cause” means: (A) Executive’s conviction of or plea of guilty or nolo
contendere to a felony or any crime involving moral turpitude; (B) a
determination by the Board that Executive committed fraud, misappropriation or
embezzlement against any Person; (C) Executive’s breach of any material term of
this Agreement or Executive’s material breach of any other agreement with the
Employer or any of its Affiliates; (D) Executive’s willful or gross neglect of
Executive’s duties or willful or gross misconduct in performance of Executive’s
duties; (E) Executive’s failure or refusal to carry out Executive’s assigned
responsibilities; or (F) Executive’s material breach of a fiduciary duty owed to
the Employer or any of its Affiliates; provided, however, that with respect to
subsections (C), (D), (E) and (F) above, Cause will only be deemed to occur
after written notice to Executive of such failure, neglect or misconduct giving
rise to Cause and the failure by Executive to cure such failure, neglect or
misconduct (which is capable of cure) within thirty (30) days after written
notice, provided that Executive shall be entitled to no more than one
opportunity to cure with respect to subsections (C), (D), (E) and (F).

 

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations
and other guidance promulgated thereunder.

 

“Disability” means the disability of Executive caused by any physical or mental
injury, illness or incapacity as a result of which Executive is unable to
effectively perform the essential functions of Executive’s duties,
notwithstanding reasonable accommodation, for a period of 120 consecutive days
or a total of 120 non-consecutive days within a 365-day period, as determined by
the Board in good faith.

 

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“Good Reason” means, without Executive’s consent, (i) a significant diminution
in Executive’s level of responsibilities; (ii) the permanent relocation or
transfer of Executive’s principal work address to a location more than 50 miles
beyond Executive’s then current work address; (iii) a material reduction in
Executive’s Base Salary or benefits; or (iv) the breach by Employer of any
material term of this Agreement or any other agreement with the Employer or any
of its Affiliates during the Employment Period. Notwithstanding the foregoing,
Good Reason shall not be deemed to exist unless Executive notifies the Employer
within ninety (90) days after the occurrence of the event which Executive
believes constitutes the basis for Good Reason, specifying the particular act or
failure to act which Executive believes constitutes the basis for Good Reason
and the Employer does not cure such act or failure to act within sixty (60) days
after receipt of such notice.

 

“Person” means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, investment fund, any other business entity and a
governmental entity or any department, agency or political subdivision thereof.

 

“Separation” means the cessation of employment of Executive with the Employer or
any successor thereto for any reason that meets the definition of a “separation
from service,” as defined in Treasury Regulation Section 1.409A-1(h).

 

7.          Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated and shall be effective upon receipt:

 

  To the Employer:       ACI Merchant Systems, LLC     c/o JetPay Corporation  
  Suite 200     1175 Lancaster Avenue     Berwyn, PA  19312    
Attention:  Chief Executive Officer     Facsimile:  215-741-6974         With a
copy to Employer’s     counsel at: Dechert LLP     Cira Centre     2929 Arch
Street     Philadelphia, PA  19104     Attention:  James A. Lebovitz, Esq.    
Facsimile:  (215) 994-2222         To Executive: at the address listed in the
Employer’s personnel records

 

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8.          General Provisions.

 

(a)          Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will (except
as otherwise expressly provided herein) be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

(b)          Entire Agreement. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto, including,
without limitation, any term sheets addressing potential provisions of this
Agreement and the Bonus and Stock Appreciation Agreement entered into between
the Employer and Executive dated November 19, 2012 (provided that Section 3 of
such agreement shall remain effective).

 

(c)          No Strict Construction; Headings. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any party. The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

 

(d)          Counterparts. This Agreement may be executed and delivered in
separate counterparts (including by means of facsimile), each of which is deemed
to be an original and all of which taken together constitute one and the same
agreement. This Agreement shall become effective only when counterparts have
been executed and delivered by all parties whose names are set forth on the
signature page(s) hereof.

 

(e)          Successors and Assigns. This Agreement may be assigned by the
Employer to one of its Affiliates or to a successor to the Employer or one of
its Affiliates, but shall not be assignable by Executive. Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by Executive, the Employer and their respective successors and
assigns.

 

(f)          Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Pennsylvania, applied without
reference to principles of conflicts of law.  Both the Employer and Executive
agree to appear before and submit exclusively to the jurisdiction of the federal
courts with authority over Allentown, Pennsylvania with respect to any
controversy, dispute, or claim arising out of or relating to this Agreement (or
if such controversy, dispute or claim may not be brought in federal court, to
the state courts located in Lehigh, Pennsylvania).  Both the Employer and
Executive also agree to waive, to the fullest possible extent, the defense of an
inconvenient forum.  THE EMPLOYER AND EXECUTIVE HEREBY WAIVE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.

 

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(g)          Executive’s Cooperation. During the Employment Period and
thereafter, Executive shall cooperate with the Employer and its Affiliates, at
the Employer or its Affiliates’ sole expense, in any disputes with third
parties, internal investigations or administrative, regulatory or judicial
proceedings as reasonably requested by the Employer (including, without
limitation, Executive being available to the Employer upon reasonable notice and
at a reasonable location for interviews and factual investigations, appearing at
the Employer’s request to give testimony without requiring service of a subpoena
or other legal process, volunteering to the Employer all pertinent information
and turning over to the Employer all relevant documents which are or may come
into Executive’s possession, all at times and on schedules that are reasonably
consistent with Executive’s other permitted activities and commitments). In the
event the Employer requires Executive’s cooperation in accordance with this
Section after Executive’s Separation, the Employer shall reimburse Executive
solely for reasonable travel expenses (including lodging and meals, upon
submission of receipts).

 

(h)          Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Employer and
Executive.

 

(i)          Insurance. The Employer, at its sole discretion, may apply for and
procure in its own name and for its own benefit life and/or disability insurance
with respect to Executive in any amount or amounts considered advisable by
Employer. Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and deliver any applications or other
instruments in writing as may be reasonably necessary to obtain and continue
such insurance.

 

(j)          Withholding. All payments and benefits due to Executive under this
Agreement or otherwise shall be subject to withholding on account of federal,
state and local taxes, as determined by the Employer.

 

(k)          Survival. Sections 3 through 8 shall survive a Separation and the
termination of the Employment Period and shall remain in full force and effect
after such Separation or termination.

 

(l)          Code Section 409A.

 

(i)          It is the intent of the parties that this Agreement be interpreted
and administered in a manner so that any amount or benefit payable hereunder
shall be paid or provided in a manner that is either exempt from or compliant
with the requirements of Code Section 409A. Notwithstanding the foregoing,
neither the Employer, its Affiliates nor any of their respective directors,
officers, employees or advisors shall be held liable for any taxes, interest,
penalties or other monetary amounts owed by Executive as a result of the
application of Code Section 409A.

 

(ii)         Notwithstanding anything in this Agreement to the contrary, any
severance payments due hereunder, and any other amount or benefit that would
constitute non-exempt “deferred compensation” for purposes of Code Section 409A
and that would otherwise be payable or distributable hereunder by reason of
Executive’s termination of employment, will not be payable or distributable to
Executive unless the circumstances giving rise to such termination of employment
meet any description or definition of “separation from service” within the
meaning of Code Section 409A. If this provision prevents the payment or
distribution of any amount or benefit, such payment or distribution shall be
made on the date on which an event occurs that constitutes a Code Section
409A-compliant “separation from service.”

 

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(iii)        Executive’s right to receive any installment payments under this
Agreement, including without limitation any salary continuation payments
following Executive’s Separation, shall be treated as a right to receive a
series of separate payments and, accordingly, each such installment payment
shall at all times be considered a separate and distinct payment as permitted
under Code Section 409A.

 

(m)          Code Section 280G. Notwithstanding anything in this Agreement to
the contrary, if any of the payments and benefits provided for under this
Agreement or any other agreement or arrangement between the Employer or its
Affiliates and the Executive (collectively, the “Payments”) constitute a
“parachute payment’ within the meaning of Code Section 280G and, but for the
reduction specified in this Section 8(m), would be subject to the excise tax
imposed by Code Section 4999 or would otherwise not be deductible by reason of
Code Section 280G, then the Payments shall be reduced by the least amount
necessary to result in no portion of such Payments being subject to the excise
tax under Code Section 4999 and no portion of such Payments being non-deductible
by reason of Code Section 280G. Any reduction in the Payments pursuant to the
preceding sentence shall be applied first against the Payments that are payable
in cash, with amounts that are payable last reduced first; then against Payments
due in respect of any equity or equity derivatives that are included under Code
Section 280G at full value; then against Payments due in respect of any equity
or equity derivatives included under Code Section 280G at an accelerated value;
and, finally, against any other non-cash benefits.

 

(n)          Indemnification. Employer shall provide indemnification to the
Executive in accordance with the letter agreement between Employer and the
Executive dated on the date hereof.

 

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.

 

  ACI Merchant Systems, LLC         /s/ Michael Collester   By:     Name:
Michael Collester   Title:  Chief Executive Officer         EXECUTIVE:          
/s/ Cathy Smith