-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
LUL0DbYwWDizblohpobKl92Vcgy+U7QijB7btNOe3uuc9J2hllZ4FUSmVDA68gdO
fmQl5/Q+saL/K4LtY+5pfg==
<SEC-DOCUMENT>0000950131-02-000697.txt : 20020414
<SEC-HEADER>0000950131-02-000697.hdr.sgml : 20020414
ACCESSION NUMBER: 0000950131-02-000697
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020227
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FISERV INC
CENTRAL INDEX KEY: 0000798354
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
IRS NUMBER: 391506125
STATE OF INCORPORATION: WI
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-14948
FILM NUMBER: 02559256
BUSINESS ADDRESS:
STREET 1: 255 FISERV DR
STREET 2: PO BOX 979
CITY: BROOKFIELD
STATE: WI
ZIP: 53045
BUSINESS PHONE: 4148795000
MAIL ADDRESS:
STREET 1: 255 FISERV DRIVE
CITY: BROOKFIELD
STATE: WI
ZIP: 53045
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d10k405.txt
<DESCRIPTION>FORM 10-K (FISCAL YEAR DECEMBER 31, 2001)
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001
Commission file no. 0-14948
FISERV, INC.
------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1506125
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 FISERV DRIVE, BROOKFIELD, WISCONSIN 53045
- --------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (262) 879-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
----
(Title of Class)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.01 Par Value
-----------------------------
(Title of Class)
Preferred Stock Purchase Rights
-------------------------------
(Title of Class)
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant as of January 31, 2002: $8,087,000,000
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 2002: 190,545,290
DOCUMENTS INCORPORATED BY REFERENCE:
2001 Annual Report to Shareholders - Parts II, IV
Proxy Statement for March 28, 2002, Annual Meeting of Shareholders - Part III
<PAGE>
Fiserv, Inc. and Subsidiaries
Form 10-K
December 31, 2001
PART I Page
- ------ ----
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 9
PART II
- -------
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7a. Quantitative and Qualitative Disclosure about Market Risk 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
PART III
- --------
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners and
Management 12
Item 13. Certain Relationships and Related Transactions 12
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 12
<PAGE>
================================================================================
PART I
================================================================================
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as "believes," "anticipates" or
"expects," or words of similar import. Similarly, statements that describe
future plans, objectives or goals of Fiserv, Inc. ("Fiserv" or the "Company")
are also forward-looking statements. Such forward-looking statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those currently anticipated. Factors that could affect results
include, among others, economic, competitive, governmental and technological
factors affecting the Company's operations, markets, services and related
products, prices and other factors discussed in the Company's prior filings with
the Securities and Exchange Commission. Shareholders, potential investors and
other readers are urged to consider these factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking statements.
Item 1. Business
Fiserv is a leading technology resource for information management
systems used by the financial industry. The Company was formed on July 31, 1984,
through the combination of two major regional data processing firms located in
Milwaukee, Wisconsin, and Tampa, Florida. These firms--First Data Processing of
Milwaukee and Sunshine State Systems of Tampa--began their operations in 1964
and 1971, respectively, as the data processing operations of their parent
financial institutions. Historically, operations were expanded by developing a
range of services for these parent organizations as well as other financial
institutions. Since its organization in 1984, Fiserv has grown through the
continuing development of highly specialized services and product enhancements,
the addition of new clients and the acquisition of firms complementing the
Fiserv organization.
Headquartered in Brookfield, Wisconsin, Fiserv provides information
management technology and related services to banks, broker-dealers, credit
unions, financial planners and investment advisers, insurance agents and
companies, leasing companies, mortgage lenders and savings institutions. The
Company operates centers nationwide for full-service financial data processing,
software system development, item processing and check imaging, technology
support and related product businesses. In addition, the Company has business
support centers in Argentina, Australia, Colombia, Indonesia, the Philippines,
Poland, Singapore and the United Kingdom.
Business Strategy
- -----------------
The market for products and services offered by financial institutions
continues to undergo change. New alternative lending and investment products are
being introduced and implemented by the financial industry with great frequency;
the distinctions among financial services traditionally offered by banking and
thrift organizations as well as by securities and insurance firms continue to
narrow; and financial institutions diversify and consolidate on an ongoing basis
in response to market pressures, as well as under the auspices of regulatory
agencies.
Although such market changes have led to consolidations that have
reduced the number of financial institutions in the United States, such
consolidations have not resulted in a material reduction of the number of
customers or financial accounts serviced by the financial industry as a whole.
New organizations entering the once limited financial services industry have
opened new markets for Fiserv services.
1
<PAGE>
To stay competitive in this changing marketplace, financial institutions
are finding they must aggressively meet the growing needs of their customers
for a broad variety of new products and services that are typically
transaction-oriented and fee-based. The growing volume and types of transactions
and accounts have increased the data processing requirements of these
institutions. As a consequence, Fiserv management believes that the financial
services industry is one of the largest users of data processing products and
services.
Moreover, Fiserv expects that the industry will continue to require
significant commitments of capital and human resources to the information
systems requirements, to require application of more specialized systems and to
require development, maintenance and enhancement of applications software.
Fiserv believes that economies of scale in data processing operations are
essential to justify the required level of expenditures and commitment of human
resources.
In response to these market dynamics, the means by which financial
institutions obtain data processing services have changed. Many smaller, local
and regional third-party data processors are leaving the business or
consolidating with larger providers. A number of large financial institutions
previously providing third-party processing services for other institutions have
withdrawn from the business to concentrate on their primary, core businesses.
Similarly, an increasing number of financial institutions that previously
developed their own software systems and maintained their own data processing
operations have outsourced their data processing requirements by licensing their
software from a third party or by contracting with third-party processors to
reduce costs and enhance their products and services. Outsourcing can involve
simply the licensing of software, thereby eliminating the costly technical
expertise within the financial institution, or the utilization of service
bureaus, facilities management or resource management capabilities. Fiserv
provides all of these options to the financial industry.
To capitalize on these industry trends and to become the premier
provider of data processing products and related services, Fiserv has
implemented a strategy of continuing to develop new products, improving the cost
effectiveness of services provided to clients, aggressively soliciting new
clients, and making both opportunistic and strategic acquisitions.
Acquisition History
- -------------------
<TABLE>
<CAPTION>
Formed Acquired Company Service
================================================================================================================
<S> <C> <C> <C>
1964 July 1984 First Data Processing, Milwaukee, WI Data processing
1971 July 1984 Sunshine State Systems, Tampa, FL Data processing
1966 Nov. 1984 San Antonio, Inc., San Antonio, TX Data processing
1982 Oct. 1985 Sendero Corporation, Scottsdale, AZ Asset/liability management
1962 Oct. 1985 First Trust Corporation, Denver, CO Retirement plans
1962 Oct. 1985 First Retirement Marketing, Denver, CO Retirement plan marketing
1973 Jan. 1986 On-Line, Inc., Seattle, WA Data processing, forms
1966 May 1986 First City Financial Systems, Inc., Beaumont, TX Data processing
1962 Feb. 1987 Pamico, Inc., Milwaukee, WI Specialized forms
1975 Apr. 1987 Midwest Commerce Data Corp., Elkhart, IN Data processing
1969 Apr. 1987 Fidelity Financial Services, Inc., Spokane, WA Data processing
1965 Oct. 1987 Capbanc Computer Corp., Baton Rouge, LA (sold 1991) Data processing
1971 Feb. 1988 Minnesota On-Line Inc., Minneapolis, MN Data processing
1965 May 1988 Citizens Financial Corporation, Cleveland, OH Data processing
1980 May 1988 ZFC Electronic Data Services, Inc., Bowling Green, KY Data processing
1969 June 1988 GESCO Corporation, Fresno, CA Data processing
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Formed Acquired Company Service
=====================================================================================================================
<S> <C> <C> <C>
1967 Nov. 1988 Valley Federal Data Services, Los Angeles, CA Data processing
1984 Dec. 1988 Northeast Savings Data Services, Hartford, CT Data processing
1982 May 1989 Triad Software Network, Ltd., Chicago, IL (sold 1996) Data processing
1969 Aug. 1989 Northeast Datacom, Inc., New Haven, CT Data processing
1978 Feb. 1990 Financial Accounting Services Inc., Pittsburgh, PA Data processing
1974 June 1990 Accurate Data On Line, Inc., Titusville, FL Data processing
1982 June 1990 GTE EFT Services Money Network, Fresno, CA EFT networks
1968 July 1990 First Interstate Management, Milwaukee, WI Data processing
1982 Oct. 1990 GTE ATM Networks, Fresno, CA EFT networks
1867 Nov. 1990 Boston Safe Deposit & Trust Co. IP services, MA Item processing
1968 Dec. 1990 First Bank, N.A. IP services, Milwaukee, WI Item processing
1979 Apr. 1991 Citicorp Information Resources, Inc., Stamford, CT Data processing
1980 Apr. 1991 BMS Processing, Inc., Randolph, MA Item processing
1979 May 1991 FHLB of Dallas IP services, Dallas, TX Item processing
1980 Nov. 1991 FHLB of Chicago IP services, Chicago, IL Item processing
1977 Feb. 1992 Data Holdings, Inc., Indianapolis, IN Automated card services
1980 Feb. 1992 BMS On-Line Services, Inc. (assets), Randolph, MA Data processing
1982 Mar. 1992 First American Information Services, St. Paul, MN Data processing
1981 July 1992 Cadre, Inc., Avon, CT (sold 1996) Disaster recovery
1992 July 1992 Performance Analysis, Inc., Cincinnati, OH Asset/liability management
1986 Oct. 1992 Chase Manhattan Bank, REALM Software, NY Asset/liability management
1984 Dec. 1992 Dakota Data Processing, Inc., Fargo, ND Data processing
1983 Dec. 1992 Banking Group Services, Inc., Somerville, MA Item processing
1968 Feb. 1993 Basis Information Technologies, Atlanta, GA Data processing, EFT
1986 Mar. 1993 IPC Service Corporation (assets), Denver, CO Item processing
1973 May 1993 EDS' FHLB Seattle (assets), Seattle, WA Item processing
1982 June 1993 Datatronix Financial Services, San Diego, CA Item processing
1966 July 1993 Data Line Service, Covina, CA Data processing
1978 Nov. 1993 Financial Processors, Inc., Miami, FL Data processing
1974 Nov. 1993 Financial Data Systems, Jacksonville, FL Item processing
1961 Nov. 1993 Financial Institutions Outsourcing, Pittsburgh, PA Data processing
1972 Nov. 1993 Data-Link Systems, South Bend, IN Mortgage banking services
1985 Apr. 1994 National Embossing Company, Inc., Houston, TX Automated card services
1962 May 1994 Boatmen's Information Systems of Iowa, Des Moines Data processing
1981 Aug. 1994 FHLB of Atlanta IP services, Atlanta, GA Item processing
1989 Nov. 1994 CBIS Imaging Technology Banking Unit, Maitland, FL Imaging technology
1987 Dec. 1994 RECOM Associates, Inc., Tampa, FL (sold 1998) Network integration
1970 Jan. 1995 Integrated Business Systems, Glendale, CA Specialized forms
1977 Feb. 1995 BankLink, Inc., New York, NY Cash management
1976 May 1995 Information Technology, Inc., Lincoln, NE Software and services
1957 Aug. 1995 Lincoln Holdings, Inc., Denver, CO DP for retirement planning
1993 Sept. 1995 SRS, Inc., Austin, TX Data processing
1992 Sept. 1995 ALLTEL's Document Management Services, CA, NJ Item processing
1978 Nov. 1995 Financial Information Trust, Des Moines, IA Data processing
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Formed Acquired Company Service
===========================================================================================================================
<S> <C> <C> <C>
1983 Jan. 1996 UniFi, Inc., Fort Lauderdale, FL Software and services
1982 Nov. 1996 Bankers Pension Services, Inc., Tustin, CA DP for retirement planning
1992 Apr. 1997 AdminaStar Communications, Indianapolis, IN Laser print/mailing services
1982 May 1997 Interactive Planning Systems, Atlanta, GA PC-based financial systems
1983 May 1997 BHC Financial, Inc., Philadelphia, PA Securities services
1968 Sept. 1997 FIS, Inc., Orlando, FL, and Baton Rouge, LA Data processing
n/a Sept. 1997 Stephens Inc. clearing business, Little Rock, AR Securities services
1986 Oct. 1997 Emerald Publications, San Diego, CA Financial seminars and training
1968 Oct. 1997 Central Service Corp., Greensboro, NC Data and item processing
1993 Oct. 1997 Savoy Discount Brokerage, Seattle, WA Securities services
1990 Dec. 1997 Hanifen, Imhoff Holdings, Inc., Denver, CO Securities services
1980 Jan. 1998 Automated Financial Technology, Inc., Malvern, PA Data processing
1981 Feb. 1998 The LeMans Group, King of Prussia, PA Automobile leasing software
n/a Feb. 1998 PSI Group, Seattle, WA Laser printing
1956 Apr. 1998 Network Data Processing Corporation, Cedar Rapids, IA Insurance data processing
1977 Apr. 1998 CUSA Technologies, Inc., Salt Lake City, UT Software and services
1982 May 1998 Specialty Insurance Service, Orange, CA Insurance data processing
1985 Aug. 1998 Deluxe Card Services, St. Paul, MN Automated card services
1981 Oct. 1998 FHLB of Topeka IP services, Topeka, KS Item processing
n/a Oct. 1998 FiCATS, Norristown, PA Item processing
1984 Oct. 1998 Life Instructors, Inc., New Providence, NJ Insurance/securities training
1994 Nov. 1998 ASI Financial, Inc., New Jersey and New York PC-based financial systems
1986 Dec. 1998 The FREEDOM Group, Inc., Cedar Rapids, IA Insurance data processing
1994 Jan. 1999 QuestPoint, Philadelphia, PA Item processing
1981 Feb. 1999 Eldridge & Associates, Lafayette, CA PC-based financial systems
1984 Feb. 1999 RF/Spectrum Decision Science Corporation, Oakland, CA Software and services
1978 Mar. 1999 FIPSCO, Inc., Des Plaines, IL Insurance marketing systems
1987 Apr. 1999 Progressive Data Solutions, Inc./Infinity Software Insurance software systems
Systems, Inc., Orlando, FL
1973 June 1999 JWGenesis Clearing Corporation, Boca Raton, FL Securities services
1987 June 1999 Alliance ADS, Redwood Shores, CA Imaging technology
1962 Aug. 1999 Envision Financial Technologies, Inc., Chicago, IL Data processing
1995 Oct. 1999 Pinehurst Analytics, Inc., Chapel Hill, NC PC-based financial systems
1982 Dec. 1999 Humanic Design Corporation, Mahwah, NJ (sold 2001) Software and services
1983 Jan. 2000 Patterson Press, Inc., Nashville, TN Card services
1982 May 2000 Resources Trust Company, Denver, CO DP for retirement planning
1986 Sept. 2000 National Flood Services, Inc., Kalispell, MT Insurance data processing
1982 Jan. 2001 Benefit Planners, Boerne, TX Insurance data processing
n/a Feb. 2001 Marshall & Ilsley IP services, IA, MN, MO Item processing
1972 Mar. 2001 Facilities and Services Corp., Agoura Hills, Novato, CA Insurance software systems
1991 Mar. 2001 Remarketing Services of America, Inc., Amherst, NY Automobile leasing services
1982 July 2001 EPSIIA Corporation, Austin, TX Data processing
1996 July 2001 Catapult Technology Limited, London, England Software and services
1985 Sept. 2001 FHLB of Pittsburgh IP services, Pittsburgh, PA Item processing
1959 Nov. 2001 NCR bank processing operations, Dayton, OH Data and item processing
1972 Nov. 2001 NCSI, Rockville, MD Insurance data processing
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Formed Acquired Company Service
===================================================================================================================
<S> <C> <C> <C>
1940 Nov. 2001 Integrated Loan Services, Rocky Hill, CT Loan services
1954 Nov. 2001 Trewit Inc., Minneapolis, MN Insurance data processing
n/a Nov. 2001 FACT 400 credit card solution, Bogota, Colombia Software and services
</TABLE>
Information Technology Services
- -------------------------------
Fiserv is a technology company focused on helping financial services
providers meet the challenges and opportunities of today's dynamic financial
marketplace. The Company's core business is serving the needs of banking,
lending, insurance, financial planners and securities providers. With its wide
array of industry-specific products, Fiserv clients can satisfy their customers'
growing desire for anywhere, anytime financial services. The Company's
operations have been classified into three business segments: Financial
institution outsourcing, systems and services; Securities processing and trust
services; and All other and corporate. The Financial institution outsourcing,
systems and services business segment provides account and transaction
processing solutions and services to financial institutions and other financial
intermediaries. The Securities processing and trust services business segment
provides securities processing solutions and retirement plan administration
services to brokerage firms, investment advisors and financial institutions. The
All other and corporate business segment provides plastic card services and
document solutions, and includes general corporate expenses. The following
discussion covers the two major operating segments:
Financial Institution Outsourcing, Systems and Services. Account
processing is a core requirement of every financial institution. It's also vital
to the operations of brokerage firms and insurance companies. No matter how the
industry may consolidate and evolve, Fiserv expects that the need for account
processing will always remain. That's where Fiserv is positioned--as a leader in
financial information management.
Fiserv provides comprehensive solutions designed to meet the
information processing requirements of financial institutions, including account
and transaction processing services, item processing, loan servicing and lending
systems. The Company offers its clients service bureau and in-house processing
systems, e-commerce solutions and complementary products. In essence, Fiserv
provides all the technology a bank, credit union, mortgage lender, savings or
financing institution needs to run its operations--from deposit accounts to
loans to general ledger to check processing.
Fiserv products, services and software solutions are available through
multiple delivery channels to financial institutions in the United States, and
many of its systems have applications designed for the unique requirements of
financial institutions operating outside of North America. Fiserv international
teams develop, sell, install and support core banking and delivery channel
integration solutions for a wide range of international banks and financial
services companies located in over 65 countries.
All Fiserv core systems can be complemented with a number of other
products that allow clients to create a total servicing solution, depending on
their requirements. These complementary products and back-office solutions
include treasury and investment management, decision support and performance
measurement solutions, electronic funds transfer services, imaging systems, call
center systems, loan origination and tracking, auto leasing software, data
warehousing/data mining and credit services.
The insurance industry, like banking, has requirements for basic
administration services and information processing systems. Fiserv brings
expertise in information management technology and related administration
processing services to the insurance and banking industries. The products and
solutions offered by the Company automate the full range of insurance services.
Fiserv insurance solutions include administration services and software
for life, annuity, health insurance, property & casualty, flood and workers
compensation; award-winning claims workstation software; comprehensive financial
accounting systems; computer-based training for insurance and securities;
administrative services for employee benefit programs; and electronic sales
platforms that can be delivered over the Internet.
5
<PAGE>
Securities Processing and Trust Services. The securities business is
about transactions and volume; advanced technology that makes executing and
clearing trades faster, easier and more economical; and service excellence and
customer satisfaction. Fiserv has accumulated the technology resources and
industry knowledge required to meet the needs of brokerage firms and financial
institutions that are expanding into this business.
The Company provides comprehensive clearing, execution and brokerage
services. With Fiserv, brokerage firms and financial institutions gain a
technology resource with the volumes, management expertise, products and service
necessary to help satisfy customer needs.
The administration of self-directed retirement plans is also a highly
specialized business that benefits, as do all financial services applications,
from technology. Fiserv has built a trusted reputation in this field by applying
its expertise to technology for administration of business and self-directed
retirement plans and related services.
The Fiserv Trust Services Group is a leading provider of retirement
plan products and back-office services to financial advisors.
Financial information concerning the Company's industry segments is
included in Note 8 to the Consolidated Financial Statements contained in the
Company's Annual Report to Shareholders included in this Annual Report on Form
10-K as Exhibit 13 and such information is incorporated herein by reference.
Servicing the Market
- --------------------
The market for Fiserv account and transaction processing services and
products has specific needs and requirements, with strong emphasis placed by
clients on software flexibility, product quality, reliability of service,
comprehensiveness and integration of product lines, timely introduction of new
products and features, cost effectiveness and demand for service excellence.
Through its multiple product offerings, the Company successfully services these
market needs for clients ranging in size from start-ups to some of the largest
financial services providers in the world.
Fiserv believes that the position it holds as an independent,
growth-oriented company dedicated to its business is an advantage to its
clients. The Company differs from many of the account and transaction processing
resources currently available since it isn't a regional or local cooperatively
owned organization, nor a data processing subsidiary, an affiliate of a
financial institution or a hardware vendor. Due to the economies of scale gained
through its broad market presence, Fiserv offers clients a selection of
information management and data processing solutions designed to meet the
specific needs of the ever-changing financial industry.
The Company believes this independence and primary focus on the
financial industry helps its business development and related client service and
product support teams remain responsive to the technology needs of its market,
now and for the future.
"The Client Comes First" is one of the Company's founding principles.
It is a belief backed by a dedication to providing ongoing client service and
support--no matter the client size.
The Company believes its commitment of substantial resources to
training and technical support helps retain Fiserv clients. Fiserv conducts the
majority of its new and ongoing client training in its technology centers, where
the Company maintains fully equipped demonstration and training facilities
containing equipment used in the delivery of Fiserv services. Fiserv also
provides local and on-site training services.
Fiserv has been an international company since 1986, when its retail
banking products were first launched throughout Europe, Asia and Latin America.
Since then, the Company has grown an impressive infrastructure for supporting
clients in international markets. Fiserv currently maintains international
support staffs in Argentina, Australia, Colombia, Indonesia, the Philippines,
Poland, Singapore and the United Kingdom.
6
<PAGE>
Product Development
- -------------------
In order to meet the changing technology needs of the clients served by
Fiserv, the Company continually develops, maintains and enhances its systems.
Resources applied to product development and maintenance are believed to be
approximately 8% to 10% of Company revenues, about half of which is dedicated to
software development.
The Fiserv network of development and financial information technology
centers applies the shared expertise of multiple Fiserv teams to design, develop
and maintain specialized processing systems around the leading technology
platforms. The applications of its account processing systems meet the
preferences and diverse requirements of the various international, national,
regional or local market-specific financial service environments of the
Company's many clients.
Though multiple Fiserv centers share the Company's variety of
nationally developed and supported software, each center has specialized
capabilities that enable it to offer system application features and functions
unique to its client base. Where the client's requirements warrant, Fiserv
purchases software programs from third parties that are interfaced with existing
Fiserv systems. In developing its products, Fiserv stresses interaction with and
responsiveness to the needs of its clients.
Fiserv provides a dedicated solution that is designed, developed,
maintained and enhanced according to each client's goals for service quality,
business development, asset/liability mix, local market positioning and other
user-defined parameters.
Fiserv regards its software as proprietary and utilizes a combination
of trade secrecy laws, internal security practices and employee non-disclosure
agreements for protection. The Company believes that legal protection of its
software, while important, is less significant than the knowledge and experience
of the Company's management and personnel and their ability to develop, enhance
and market new products and services. The Company believes that it holds all
proprietary rights necessary for the conduct of its business.
Competition
- -----------
The market for information technology products and services within the
financial industry is highly competitive. The Company's principal competitors
include internal data processing departments, data processing affiliates of
large companies or large computer hardware manufacturers, independent computer
service firms and processing centers owned and operated as user cooperatives.
Certain competitors possess substantially greater financial, sales and marketing
resources than the Company. Competition for in-house data processing and
software departments is intensified by the efforts of computer hardware vendors
who encourage the growth of internal data centers.
Competitive factors for processing services include product quality,
reliability of service, comprehensiveness and integration of product lines,
timely introduction of new products and features, and price. The Company
believes that it competes favorably in each of these categories. In addition,
the Company believes that its position as an independent vendor, rather than as
a cooperative, an affiliate of a larger corporation or a hardware vendor, is a
competitive advantage.
Government Regulation
- ---------------------
The Company's data processing subsidiaries are not themselves directly
subject to federal or state regulations specifically applicable to financial
institutions such as banks, thrifts and credit unions. As a provider of services
to these entities, however, the data processing operations are observed from
time to time by the Federal Deposit Insurance Corporation, the National Credit
Union Association, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency and various state regulatory authorities. In
addition, several of the Company's operations are reviewed annually by
independent auditors to provide internal control evaluations for its clients'
auditors and regulators.
As trust companies under Colorado law, First Trust, Lincoln Trust,
Resources Trust and Trust Industrial Bank are subject to the regulations of the
Colorado Division of Banking. First Trust, Lincoln
7
<PAGE>
Trust, Resources Trust and Trust Industrial Bank historically have complied with
such regulations and although no assurance can be given, the Company believes
First Trust, Lincoln Trust, Resources Trust and Trust Industrial Bank will
continue to be able to comply with such regulations. Commencing in 1991, First
Trust received approval of its application for Federal Deposit Insurance
Corporation coverage of its customer deposits.
The Company's securities business, Fiserv Securities, Inc. (formerly
BHC Financial, Inc., Hanifen, Imhoff Clearing Corporation and JWGenesis Clearing
Corporation), is subject to the broker-dealer rules of the Securities and
Exchange Commission and the New York Stock Exchange, as well as the National
Association of Securities Dealers and other stock exchanges of which it is a
member.
Employees
- ---------
Fiserv employs approximately 18,200 specialists in its information
management centers and related product and service companies. This service
support network includes employees with backgrounds in computer science and the
financial industry, often complemented by management and other direct experience
in banks, credit unions, mortgage firms, savings and other financial services
business environments.
Fiserv employees provide expertise in sales and marketing; account
management and client services; computer operations, network control and
technical support; programming, software development, modification and
maintenance; conversions and client training; financial planning and related
support services.
In supporting international markets, Fiserv works closely with its
clients to help ensure their continued success. Fiserv employees speak the same
language as their clients, they also understand the differences in the style of
doing business, as well as the financial products requirements and regulations
unique to each client and its specific market.
Fiserv employees are not represented by a union, and there have been no
work stoppages, strikes or organizational attempts. The service nature of the
Fiserv business makes its employees an important corporate asset, and while the
market for qualified personnel is competitive, the Company does not experience
significant difficulty with hiring or retaining its staff of top industry
professionals. In assessing companies to acquire, the quality and stability of
the prospective company's staff are emphasized.
Management attributes its ability to attract and keep quality employees
to, among other things, the Company's growth and dedication to state-of-the-art
software development tools and hardware technologies.
Item 2. Properties
Fiserv currently operates full-service data centers, software system
development centers, and item processing and back-office support centers in 164
cities (153 in the United States): Birmingham, Alabama; Phoenix and Scottsdale,
Arizona; Agoura Hills, Diamond Bar, Foster City, Fresno, Marina del Rey,
Moorpark, Novato, Oakland, Ontario, Orange, Redwood Shores, Sacramento, San
Diego, San Leandro, Torrance, Van Nuys and Walnut, California; Denver,
Englewood, Greenwood Village and Pueblo, Colorado; East Hartford, Fairfield,
Glastonbury, North Haven, Rocky Hill, Wallingford and Windsor, Connecticut;
Deerfield Beach, Jacksonville, Lake Mary, Lake Wales, Maitland, Melbourne,
Miami, Miami Lakes, Orlando, Plantation, Tampa and Titusville, Florida; Atlanta,
Duluth, Macon, Marietta and Norcross, Georgia; Honolulu, Hawaii; Cedar Rapids
and West Des Moines, Iowa; Arlington Heights, Chicago, Des Plaines, Marion,
Naperville, Mt. Prospect, Rock Island, Rockford and Schaumburg, Illinois;
Indianapolis and South Bend, Indiana; Topeka, Kansas; Bowling Green and
Louisville, Kentucky; Kenner and Shreveport, Louisiana; Bangor and Scarborough,
Maine; Columbia, Gaithersburg, and Rockville, Maryland; Auburn, Braintree,
Charlestown, Framingham, Mansfield, Quincy and Somerville, Massachusetts; Flint,
Northville and Troy, Michigan; Brooklyn Center, Eagan, Edina, Mendota Heights,
8
<PAGE>
Minnetonka, Shoreview and Wayzata, Minnesota; Kansas City and St. Louis,
Missouri; Kalispell, Montana; Lincoln and Omaha, Nebraska; New Providence,
Secaucus and South Plainfield, New Jersey; Santa Fe, New Mexico; Amherst,
Fayetteville, New Hartford, New York, Utica and White Plains, New York; Chapel
Hill and Greensboro, North Carolina; Fargo, North Dakota; Cleveland, Dayton,
Milford, Westerville and Youngstown, Ohio; Duncan and Oklahoma City, Oklahoma;
Corvallis and Portland, Oregon; Bryn Mawr, Conshohoken, Erie, Malvern,
Norristown, King of Prussia, Philadelphia, Pittsburgh, Valley Forge and
Williamsport, Pennsylvania; Newberry, South Carolina; Brentwood and Nashville,
Tennessee; Addison, Arlington, Austin, Boerne, Beaumont, Dallas, Houston,
Irving, San Antonio, South Lake and Stafford, Texas; Salt Lake City and
Taylorsville, Utah; Norfolk and Williamsburg, Virginia; Bellevue, Kent, Lynnwood
and Seattle, Washington; Brookfield, Milwaukee, New Berlin, Sheboygan and
Waukesha, Wisconsin. International business centers are located in Buenos Aires,
Argentina; North Sydney, New South Wales, Australia; Bogota, Colombia; London,
Slough (Berkshire) and Uxbridge (Middlesex), England; Jakarta, Indonesia;
Manila, Philippines; Warsaw, Poland; and Singapore, Singapore.
The Company owns facilities in Brookfield, Columbia, Corvallis,
Glastonbury, Greensboro, Kalispell, Lincoln, Marion, Moorpark, South Bend and
Valley Forge; all other buildings in which centers are located are subject to
leases expiring through 2003 and beyond. The Company owns or leases
approximately 170 mainframe computers (Compaq Alpha, Data General, Hewlett
Packard, IBM, NCR, SUN, Tandem and Unisys). In addition, the Company maintains
its own national data communication network consisting of communications
processors and leased lines.
Fiserv believes its facilities and equipment are generally well
maintained and are in good operating condition. The Company believes that the
computer equipment it owns and its various facilities are adequate for its
present and foreseeable business. Fiserv periodically upgrades its mainframe
capability as needed. Fiserv contracts with multiple sites to provide processing
back-up in the event of a disaster and maintains duplicate tapes of data
collected and software used in its business in locations away from the Company's
facilities.
Item 3. Legal Proceedings
In the normal course of business, the Company and its subsidiaries are
named as defendants in various lawsuits in which claims are asserted against the
Company. In the opinion of management, the liabilities, if any, which may
ultimately result from such lawsuits are not expected to have a material adverse
effect on the consolidated financial statements of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders of the Company.
Executive Officers of the Registrant
- ------------------------------------
The executive officers and other officers of the Company as of February
26, 2002, together with their ages, positions and business experience are
described below:
Name Age Position
Leslie M. Muma 57 President and Chief Executive Officer
Donald F. Dillon 61 Chairman of the Board and Chairman of
Information Technology, Inc.
Kenneth R. Jensen 58 Senior Executive Vice President, Chief
Financial Officer and Treasurer
9
<PAGE>
Norman J. Balthasar 55 President and Chief Operating Officer,
Financial Institution Group
Robert H. Beriault 50 President and Chief Operating Officer,
Securities Group
Michael D. Gantt 50 President and Chief Operating Officer,
Insurance Solutions Group
Thomas A. Neill 52 President and Chief Operating Officer,
Credit Union and Industry Products Group
Gordon G. Rockafellow 65 President and Chief Operating Officer,
Trust Services Group
Dean C. Schmelzer 51 Executive Vice President - Marketing &
Sales
Charles W. Sprague 52 Executive Vice President, General
Counsel, Chief Administrative Officer
and Secretary
Mr. Muma has been a Director of the Company since it was established in
1984. He has served as President and Chief Operating Officer of the Company from
1984 to 1999, when he was named President and Chief Executive Officer.
Mr. Dillon was named Chairman of the Board of Directors in July 2000.
He served as Vice Chairman from 1995 to 2000. From 1976 to 1995, Mr. Dillon was
co-founder and President of Information Technology, Inc. ("ITI"), a software and
services organization that was acquired by the Company in 1995. Mr. Dillon also
serves as Chairman of ITI.
Mr. Jensen has been Executive Vice President, Chief Financial Officer,
Treasurer, Assistant Secretary and a Director of the Company since it was
established in 1984. He was named Senior Executive Vice President in 1986.
Mr. Balthasar was named President and Chief Operating Officer of the
Fiserv Financial Institution Group in 2000. He served as Corporate Executive
Vice President and President-Savings and Community Bank Group from 1996 to 1999,
when he was named President and Chief Operating Officer of the Fiserv Financial
Institution Outsourcing Group. Mr. Balthasar has been with Fiserv and its
predecessor company since 1974.
Mr. Beriault was named President and Chief Operating Officer of the
Fiserv Securities Group in 1999. He served as Corporate Executive Vice President
and President-Securities Processing Group from 1998 to 1999. From 1986 to 1998,
Mr. Beriault was President of Lincoln Trust Company, which was acquired by the
Company in 1995.
Mr. Gantt was named President and Chief Operating Officer of the Fiserv
Insurance Solutions Group in 2001. He joined Fiserv in 2000 and served as
Executive Vice President and Chief Operating Officer of the Group. Prior to
joining Fiserv, he was Senior Vice President and Group Manager for PMSC's
(Policy Management Systems Corporation) Claims and Risk Management Group.
Mr. Neill was named President and Chief Operating Officer of the Fiserv
Credit Union and Industry Products Group in 2000. He served as President of the
Products & Services Division and Group President of the Industry Products and
Services Group from 1993 to 2000.
Mr. Rockafellow was named President and Chief Operating Officer of the
Fiserv Trust Services Group in 1999. He has served as Corporate Executive Vice
President and President-Trust Group since 1998. Mr. Rockafellow was the
President and CEO of First Trust Corporation from 1982 to 1985, when it was
acquired by the Company, and served in that capacity until 1999.
Mr. Schmelzer was named Corporate Executive Vice President, Marketing &
Sales for the Company in 1992. Prior to joining Fiserv, he was Director of
Commercial Analysis for IBM.
Mr. Sprague has been Corporate Executive Vice President, General
Counsel and Secretary since 1994, and Chief Administrative Officer of the
Company since 1999. He has been involved with the Company's corporate and legal
concerns since it was formed in 1984.
10
<PAGE>
================================================================================
PART II
================================================================================
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The information required by this item under Item 201 of Regulation S-K
is incorporated by reference to the information pertaining thereto set forth
under the caption "Quarterly Financial Information" in the Company's 2001 Annual
Report to Shareholders (the "Annual Report").
In connection with the Company's acquisition of Trewit Inc. on November
30, 2001, the Company issued 2,721,615 shares of its common stock to the
shareholders of Trewit. In connection with the Company's acquisition of Benefit
Planners, Ltd., L.L.P. on January 2, 2001, the Company issued 330,155 shares of
its common stock, as adjusted to reflect a three-for-two stock split effective
in August 2001, to the shareholders of Benefit Planners. For each of these
transactions, the Company relied on the exemption from registration under
Section 4(2) of the Securities Act of 1933, based upon the number and
sophistication of recipients of the shares, their positions and the aggregate
value of the transactions. No underwriter was involved in any of these
transactions.
Item 6. Selected Financial Information
The information required by this item is incorporated by reference to
the information set forth under the caption "Selected Financial Data" in the
Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
The information required by this item is incorporated by reference to
the information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated by reference to
the information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Market Risk Factors"
in the Annual Report.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated by reference to
the information set forth under the captions "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of
Shareholders' Equity," "Consolidated Statements of Cash Flows," "Notes to
Consolidated Financial Statements," "Quarterly Financial Information" and
"Independent Auditors' Report" in the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
11
<PAGE>
================================================================================
PART III
================================================================================
Item 10. Directors and Executive Officers
The information required by this item with respect to directors is
incorporated by reference to the information set forth under the captions
"Matter 1. Election of Directors" and "Information with Respect to Continuing
Directors" in the definitive proxy statement for the Company's 2002 annual
meeting of shareholders (the "Proxy Statement"). The information required by
this item with respect to executive officers appears at the end of Part I of
this Form 10-K. The information required by this item with respect to compliance
with Section 16(a) of the Securities Exchange Act of 1934 by directors and
officers is incorporated by reference to the information set forth under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement.
Item 11. Executive Compensation
The information required by this item is incorporated herein by
reference to the information set forth under the captions "Compensation of
Directors," "Compensation of Executive Officers," "Agreements with Executive
Officers" and "Stock Price Performance Graph" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by
reference to the information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Not applicable.
================================================================================
PART IV
================================================================================
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements:
The consolidated financial statements of the Company as of December 31,
2001 and 2000 and for each of the three years in the period ended December 31,
2001, together with the report thereon of Deloitte & Touche LLP, dated January
25, 2002, appear on pages 23 through 44 of the Company's Annual Report to
Shareholders and Exhibit 13 to this Form 10-K Annual Report, and are
incorporated herein by reference.
12
<PAGE>
(a) (2) Financial Statement Schedule:
The following financial statement schedule of the Company and related
independent auditors' report are included in this Report on Form 10-K:
Page
----
Independent Auditors' Report 15
Schedule II-Valuation and Qualifying Accounts 15
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
2001.
(c) Exhibits:
The exhibits listed in the accompanying exhibit index are filed as part
of this Annual Report on Form 10-K.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: February 26, 2002
FISERV, INC.
By /s/ Leslie M. Muma
-------------------------------------
Leslie M. Muma
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
registrant and in the capacities indicated on February 26, 2002.
<TABLE>
<CAPTION>
Signature Capacity
<S> <C>
/s/ Leslie M. Muma
- ---------------------------------------
Leslie M. Muma Director, President and Chief Executive Officer
/s/ Donald F. Dillon
- ---------------------------------------
Donald F. Dillon Chairman of the Board,
Chairman-Information Technology, Inc.
/s/ Kenneth R. Jensen
- --------------------------------------
Kenneth R. Jensen Director, Senior Executive Vice President,
Chief Financial Officer, Treasurer
/s/ Daniel P. Kearney
- ---------------------------------------
Daniel P. Kearney Director
/s/ Gerald J. Levy
- ---------------------------------------
Gerald J. Levy Director
/s/ Glenn M. Renwick
- ---------------------------------------
Glenn M. Renwick Director
/s/ L. William Seidman
- ---------------------------------------
L. William Seidman Director
/s/ Thekla R. Shackelford
- ---------------------------------------
Thekla R. Shackelford Director
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Fiserv, Inc.:
We have audited the consolidated financial statements of Fiserv, Inc. and
subsidiaries as of December 31, 2001 and 2000, and for each of the three years
in the period ended December 31, 2001, and have issued our report thereon dated
January 25, 2002; such consolidated financial statements and report are included
in your 2001 Annual Report to Shareholders and are incorporated herein by
reference. Our audits also included the consolidated financial statement
schedule of Fiserv, Inc., listed in Item 14. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
January 25, 2002
SCHEDULE II
Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Year Ended Beginning Charged
December 31, Balance to Expense Write-offs Balance
------------ ------- ---------- ---------- -------
<S> <C> <C> <C> <C>
2001 $16,001,000 $1,101,000 ($2,399,000) $14,703,000
2000 11,606,000 6,803,000 (2,408,000) 16,001,000
1999 8,041,000 7,028,000 (3,463,000) 11,606,000
</TABLE>
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------ -------------------
3.1 Restated Articles of Incorporation, as amended (filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K dated February 28, 2000, and
incorporated herein by reference (File No. 0-14948)).
3.2 By-laws, as amended (filed as Exhibit 3.2 to the Company's Annual Report
on Form 10-K dated February 28, 2000, and incorporated herein by
reference (File No. 0-14948)).
4.1 Shareholder Rights Agreement (filed as Exhibit 4 to the Company's
Current Report on Form 8-K dated February 23, 1998, and incorporated
herein by reference (File No. 0-14948)).
4.2 First Amendment to the Shareholder Rights Agreement (filed as Exhibit
4.3 to the Company's Form S-8 dated April 7, 2000, and incorporated
herein by reference (File No. 333-34310)).
4.3 Second Amendment to the Shareholder Rights Agreement (filed as Exhibit
4.6 to the Company's Form 10-K dated February 27, 2001, and incorporated
herein by reference (File No. 0-14948)).
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company agrees to
furnish to the Securities and Exchange Commission, upon request, any
instrument defining the rights of holders of long-term debt that is not
filed as an exhibit to this Form 10-K.
10.1 Fiserv, Inc. Stock Option Plan, as amended (filed as Exhibit 4.1 to the
Company's Form S-8 Registration Statement dated April 7, 2000, and
incorporated herein by reference (File No. 333-34310)).
10.2 Fiserv, Inc. Executive Incentive Compensation Plan (filed as Exhibit A
to the Company's Proxy Statement for the 2001 Annual Meeting of
Shareholders).
10.3 Form of Key Executive Employment and Severance Agreement, between
Fiserv, Inc. and each of Donald F. Dillon, Leslie M. Muma and Kenneth R.
Jensen.
10.4 Form of Key Executive Employment and Severance Agreement, between
Fiserv, Inc. and each of Norman J. Balthasar, Robert H. Beriault,
Michael D. Gantt, Thomas A. Neill, Gordon G. Rockafellow, Dean C.
Schmelzer and Charles W. Sprague.
13 2001 Annual Report to Shareholders (to the extent incorporated by
reference herein).
21 List of Subsidiaries of the Registrant.
23 Independent Auditors' Consent.
16
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>3
<FILENAME>dex103.txt
<DESCRIPTION>SINGLE TRIGGER KEESA
<TEXT>
<PAGE>
EXHIBIT 10.3
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
------------------------------------------------
THIS AGREEMENT, made and entered into as of the ____ day of ______,
2001, by and between Fiserv, Inc., a Wisconsin corporation (hereinafter referred
to as the "Company"), and _____________________ (hereinafter referred to as the
"Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Executive is employed by the Company and/or a subsidiary
of the Company (hereinafter referred to collectively as the "Employer") in a key
executive capacity and the Executive's services are valuable to the conduct of
the business of the Company;
WHEREAS, the Company desires to continue to attract and retain
dedicated and skilled management employees in a period of industry
consolidation, consistent with achieving the best possible value for its
shareholders in any change in control of the Company;
WHEREAS, the Company recognizes that circumstances may arise in which
a change in control of the Company occurs, through acquisition or otherwise,
thereby causing a potential conflict of interest between the Company's needs for
the Executive to remain focused on the Company's business and for the necessary
continuity in management prior to and following a change in control, and the
Executive's reasonable personal concerns regarding future employment with the
Employer and economic protection in the event of loss of employment as a
consequence of a change in control;
WHEREAS, the Company and the Executive are desirous that any proposal
for a change in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests of the
Company and its shareholders;
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable economic
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition;
WHEREAS, the Executive possesses intimate knowledge of the business
and affairs of the Company and has acquired certain confidential information and
data with respect to the Company; and
WHEREAS, the Company desires to insure, insofar as possible, that it
will continue to have the benefit of the Executive's services and to protect its
confidential information and goodwill.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
<PAGE>
1. Definitions.
-----------
(a) Accrued Benefits. The term "Accrued Benefits" shall include the
----------------
following amounts, payable as described herein: (i) all base salary for the time
period ending with the Termination Date; (ii) reimbursement for any and all
monies advanced in connection with the Executive's employment for reasonable and
necessary expenses incurred by the Executive on behalf of the Employer for the
time period ending with the Termination Date; (iii) any and all other cash
earned through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plan then in effect; (iv)
notwithstanding any provision of any bonus or incentive compensation plan
applicable to the Executive, a lump sum amount, in cash, equal to the sum of (A)
any bonus or incentive compensation that has been allocated or awarded to the
Executive for a fiscal year or other measuring period under the plan that ends
prior to the Termination Date but has not yet been paid (pursuant to Section
-------
5(f) or otherwise) and (B) a pro rata portion to the Termination Date of the
- ----
aggregate value of all contingent bonus or incentive compensation awards to the
Executive for all uncompleted periods under the plan calculated as to each such
award as if the Goals with respect to such bonus or incentive compensation award
had been attained; and (v) all other payments and benefits to which the
Executive (or in the event of the Executive's death, the Executive's surviving
spouse or other beneficiary) may be entitled on the Termination Date as
compensatory fringe benefits or under the terms of any benefit plan of the
Employer, excluding severance payments under any Employer severance policy,
practice or agreement in effect on the Termination Date. Payment of Accrued
Benefits shall be made promptly in accordance with the Company's prevailing
practice with respect to clauses (i) and (ii) or, with respect to clauses (iii),
----------- ---- -------------
(iv) and (v), pursuant to the terms of the benefit plan or practice establishing
- ---- ---
such benefits.
(b) Act. The term "Act" means the Securities Exchange Act of 1934, as
---
amended.
(c) Affiliate and Associate. The terms "Affiliate" and "Associate"
-----------------------
shall have the respective meanings ascribed to such terms in Rule l2b-2 of the
General Rules and Regulations under the Act.
(d) Annual Cash Compensation. The term "Annual Cash Compensation"
------------------------
shall mean the sum of (i) the Executive's Annual Base Salary (determined as of
the time of the Change in Control of the Company or, if higher, immediately
prior to the date the Notice of Termination is given) plus (ii) an amount equal
to (A) if the Executive has been employed by the Company for three or more years
prior to the Change in Control of the Company, the highest annual incentive
bonus the Executive received for any of the three fiscal years prior to the
Change in Control of the Company, or (B) if the Executive has not been employed
by the Company for three or more years prior to the Change in Control of the
Company, the greater of (x) 60% of the Executive's Annual Base Salary as of the
time of the Change in Control of the Company or (y) the highest annual incentive
bonus the Executive received for any of the two fiscal years prior to the Change
in Control of the Company in which the Executive was employed by the Company
(the aggregate amount set forth in clause (i) and clause (ii) shall hereafter be
---------- -----------
referred to as the "Annual Cash Compensation").
-2-
<PAGE>
(e) Beneficial Owner. A Person shall be deemed to be the "Beneficial
----------------
Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, or (B) securities issuable upon exercise of Rights issued
pursuant to the terms of the Company's Shareholder Rights Agreement, dated
as of February 24, 1998, between the Company and Equiserve Limited
Partnership, as amended from time to time (or any successor to such Rights
Agreement), at any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule l3d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this clause (ii) as a result of an agreement, arrangement
-----------
or understanding to vote such security if the agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
under the Act and (B) is not also then reportable on a Schedule l3D under
the Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in clause (ii) above) or disposing of any voting securities of
-----------
the Company.
(f) Cause. "Cause" for termination by the Employer of the Executive's
-----
employment in connection with a Change in Control of the Company shall be
limited to (i) the engaging by the Executive in intentional conduct not taken in
good faith that the Company establishes, by clear and convincing evidence, has
caused demonstrable and serious financial injury to the Employer, as evidenced
by a determination in a binding and final judgment, order or decree of a court
or administrative agency of competent jurisdiction, in effect after exhaustion
or lapse of all rights of appeal, in an action, suit or proceeding, whether
civil, criminal, administrative or investigative; (ii) conviction of a felony
(as evidenced by binding and final judgment, order or decree of a court of
competent jurisdiction, in effect after exhaustion of all rights of appeal),
which substantially impairs the Executive's ability to perform his duties or
responsibilities; or
-3-
<PAGE>
(iii) continuing willful and unreasonable refusal by the Executive to perform
the Executive's duties or responsibilities (unless significantly changed without
the Executive's consent).
(g) Change in Control of the Company. A "Change in Control of the
--------------------------------
Company" shall be deemed to have occurred if an event set forth in any one of
the following paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under any
employee benefit plan of the Company or any of its subsidiaries, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock in the Company ("Excluded Persons")) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
November 14, 2001, pursuant to express authorization by the Board that
refers to this exception) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting
power of the Company's then outstanding voting securities; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors of the Company then serving: (A)
individuals who, on November 14, 2001 constituted the Board and (B) any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on November 14, 2001, or whose appointment, election or
nomination for election was previously so approved (collectively the
"Continuing Directors"); provided, however, that individuals who are
appointed to the Board pursuant to or in accordance with the terms of an
agreement relating to a merger, consolidation, or share exchange involving
the Company (or any direct or indirect subsidiary of the Company) shall not
be Continuing Directors for purposes of this Agreement until after such
individuals are first nominated for election by a vote of at least
two-thirds (2/3) of the then Continuing Directors and are thereafter
elected as directors by the shareholders of the Company at a meeting of
shareholders held following consummation of such merger, consolidation, or
share exchange; and, provided further, that in the event the failure of any
such persons appointed to the Board to be Continuing Directors results in a
Change in Control of the Company, the subsequent qualification of such
persons as Continuing Directors shall not alter the fact that a Change in
Control of the Company occurred; or
(iii) the shareholders of the Company approve a merger,
consolidation or share exchange of the Company with any other corporation
or approve the issuance of voting securities of the Company in connection
with a
-4-
<PAGE>
merger, consolidation or share exchange of the Company (or any direct or
indirect subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (A) a merger, consolidation or share exchange
which would result in the voting securities of the Company outstanding
immediately prior to such merger, consolidation or share exchange
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the voting securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger, consolidation or share exchange, or (B) a
merger, consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
(other than an Excluded Person) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after November 14, 2001,
pursuant to express authorization by the Board that refers to this
exception) representing 20% or more of either the then outstanding shares
of common stock of the Company or the combined voting power of the
Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve of a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets (in one transaction or a series of related transactions within any
period of 24 consecutive months), other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an entity at
least 75% of the combined voting power of the voting securities of which
are owned by Persons in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control of the Company" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to own, directly or indirectly, in the same proportions as
their ownership in the Company, an entity that owns all or substantially all of
the assets or voting securities of the Company immediately following such
transaction or series of transactions.
(h) Code. The term "Code" means the Internal Revenue Code of 1986,
----
including any amendments thereto or successor tax codes thereof.
(i) Covered Termination. Subject to Section 2(b), the term "Covered
------------------- ------------
Termination" means any termination of the Executive's employment during the
Employment Period where the Termination Date, or the date Notice of Termination
is delivered, is any date prior to the end of the Employment Period.
-5-
<PAGE>
(j) Employment Period. Subject to Section 2(b), the term "Employment
----------------- ------------
Period" means a period commencing on the date of a Change in Control of the
Company, and ending at 11:59 p.m. Central Time on the third anniversary of such
date.
(k) Good Reason. The Executive shall have "Good Reason" for
-----------
termination of employment in connection with a Change in Control of the Company
in the event of:
(i) any breach of this Agreement by the Employer, including
specifically any breach by the Employer of the agreements contained in
Section 3(b), Section 4, Section 5, or Section 6, other than an isolated
------------ --------- --------- ---------
insubstantial and inadvertent failure not occurring in bad faith that the
Employer remedies promptly after receipt of notice thereof given by the
Executive;
(ii) any reduction in the Executive's base salary, percentage
of base salary available as incentive compensation or bonus opportunity or
benefits, in each case relative to those most favorable to the Executive in
effect at any time during the 180-day period prior to the Change in Control
of the Company or, to the extent more favorable to the Executive, those in
effect at any time during the Employment Period;
(iii) the removal of the Executive from, or any failure to
reelect or reappoint the Executive to, any of the positions held with the
Employer on the date of the Change in Control of the Company or any other
positions with the Employer to which the Executive shall thereafter be
elected, appointed or assigned, except in the event that such removal or
failure to reelect or reappoint relates to the termination by the Employer
of the Executive's employment for Cause or by reason of disability pursuant
to Section 12;
----------
(iv) a good faith determination by the Executive that there has
been a material adverse change, without the Executive's written consent, in
the Executive's working conditions or status with the Employer relative to
the most favorable working conditions or status in effect during the
180-day period prior to the Change in Control of the Company, or, to the
extent more favorable to the Executive, those in effect at any time during
the Employment Period, including but not limited to (A) a significant
change in the nature or scope of the Executive's authority, powers,
functions, duties or responsibilities, or (B) a significant reduction in
the level of support services, staff, secretarial and other assistance,
office space and accoutrements, but in each case excluding for this purpose
an isolated, insubstantial and inadvertent event not occurring in bad faith
that the Employer remedies within ten (10) days after receipt of notice
thereof given by the Executive;
(v) the relocation of the Executive's principal place of
employment to a location more than 35 miles from the Executive's principal
place of employment on the date 180 days prior to the Change in Control of
the Company;
-6-
<PAGE>
(vi) the Employer requires the Executive to travel on Employer
business 20% in excess of the average number of days per month the
Executive was required to travel during the 180-day period prior to the
Change in Control of the Company;
(vii) failure by the Company to obtain the Agreement referred to
in Section 17(a) as provided therein; or
-------------
(viii) any voluntary termination of employment by the Executive
where the Notice of Termination is delivered during the six months
following the first six months after the Change in Control of the Company.
(l) Person. The term "Person" shall mean any individual, firm,
------
partnership, corporation or other entity, including any successor (by merger or
otherwise) of such entity, or a group of any of the foregoing acting in concert.
(m) Termination Date. Except as otherwise provided in Section 2(b),
---------------- ------------
Section 10(b), and Section 17(a), the term "Termination Date" means (i) if the
- ------------- -------------
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Employer and the Executive, the
date of such early retirement which is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this Agreement
by reason of disability pursuant to Section 12, the earlier of thirty days after
----------
the Notice of Termination is given or one day prior to the end of the Employment
Period; (iv) if the Executive's employment is terminated by the Executive
voluntarily (other than for Good Reason), the date the Notice of Termination is
given; and (v) if the Executive's employment is terminated by the Employer
(other than by reason of disability pursuant to Section 12) or by the Executive
----------
for Good Reason, the earlier of thirty days after the Notice of Termination is
given or one day prior to the end of the Employment Period. Notwithstanding the
foregoing,
(A) If termination is for Cause pursuant to Section 1(f)(iii)
----------------
and if the Executive has cured the conduct constituting such Cause as
described by the Employer in its Notice of Termination within such
thirty-day or shorter period, then the Executive's employment hereunder
shall continue as if the Employer had not delivered its Notice of
Termination.
(B) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Employer notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue his or
her employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that Good Reason did exist, the Termination Date
shall be the earliest of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 22, (2) the date of the Executive's death or (3)
----------
one day prior to the end of the Employment Period. If the Executive so
elects and it is thereafter determined that Good Reason did not exist, then
the employment
-7-
<PAGE>
of the Executive hereunder shall continue after such determination as if
the Executive had not delivered the Notice of Termination asserting Good
Reason and there shall be no Termination Date arising out of such Notice.
In either case, this Agreement continues, until the Termination Date, if
any, as if the Executive had not delivered the Notice of Termination except
that, if it is finally determined that Good Reason did exist, the Executive
shall in no case be denied the benefits described in Section 9 (including a
---------
Termination Payment) based on events occurring after the Executive
delivered his Notice of Termination.
(C) Except as provided in Section 1(m)(B), if the party receiving
--------------
the Notice of Termination notifies the other party that a dispute exists
concerning the termination within the appropriate period following receipt
thereof and it is finally determined that the reason asserted in such
Notice of Termination did not exist, then (1) if such Notice was delivered
by the Executive, the Executive will be deemed to have voluntarily
terminated his employment and the Termination Date shall be the earlier of
the date fifteen days after the Notice of Termination is given or one day
prior to the end of the Employment Period and (2) if delivered by the
Company, the Company will be deemed to have terminated the Executive other
than by reason of death, disability or Cause.
2. Termination or Cancellation Prior to Change in Control.
------------------------------------------------------
(a) Subject to Section 2(b), the Employer and the Executive shall
------------
each retain the right to terminate the employment of the Executive at any time
prior to a Change in Control of the Company. Subject to Section 2(b), in the
------------
event the Executive's employment is terminated prior to a Change in Control of
the Company, this Agreement shall be terminated and cancelled and of no further
force and effect, and any and all rights and obligations of the parties
hereunder shall cease.
(b) Anything in this Agreement to the contrary notwithstanding, if a
Change in Control of the Company occurs and if the Executive's employment with
the Employer is terminated (other than a termination due to the Executive's
death or as a result of the Executive's disability) during the period of 180
days prior to the date on which the Change in Control of the Company occurs, and
if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control of the Company or (ii)
otherwise arose in connection with or in anticipation of a Change in Control of
the Company, then for all purposes of this Agreement such termination of
employment shall be deemed a "Covered Termination," "Notice of Termination"
shall be deemed to have been given, and the "Employment Period" shall be deemed
to have begun on the date of such termination which shall be deemed to be the
"Termination Date" and the date of the Change of Control of the Company for
purposes of this Agreement.
3. Employment Period; Vesting of Certain Benefits.
-----------------------------------------------
(a) If a Change in Control of the Company occurs when the Executive
is employed by the Employer, the Employer will continue thereafter to employ the
Executive during the Employment Period, and the Executive will remain in the
employ of the Employer in
-8-
<PAGE>
accordance with and subject to the terms and provisions of this Agreement. Any
termination of the Executive's employment during the Employment Period, whether
by the Company or the Employer, shall be deemed a termination by the Company for
purposes of this Agreement.
(b) If a Change in Control of the Company occurs when the Executive is
employed by the Employer, (i) the Company shall cause all restrictions on
restricted stock awards made to the Executive prior to the Change in Control of
the Company to lapse such that the Executive is fully and immediately vested in
the Executive's restricted stock upon such a Change in Control of the Company;
and (ii) the Company shall cause all stock options granted to the Executive
prior to the Change in Control of the Company pursuant to the Company's stock
option plan(s) to be fully and immediately vested upon such a Change in Control
of the Company.
4. Duties. During the Employment Period, the Executive shall, in the
------
same capacities and positions held by the Executive at the time of the Change in
Control of the Company or in such other capacities and positions as may be
agreed to by the Employer and the Executive in writing, devote the Executive's
best efforts and all of the Executive's business time, attention and skill to
the business and affairs of the Employer, as such business and affairs now exist
and as they may hereafter be conducted; provided, however, that the Executive
shall be entitled (a) to serve as director of other corporations and (b) to
devote time to personal and financial activities, in each case so long as such
activities do not materially affect the Executive's ability to perform the
Executive's duties hereunder.
5. Compensation. During the Employment Period, the Executive shall be
------------
compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies as may be in
effect immediately prior to the Change in Control of the Company, an annual base
salary in cash equivalent of not less than twelve times the Executive's highest
monthly base salary for the twelve-month period immediately preceding the month
in which the Change in Control of the Company occurs or, if higher, an annual
base salary at the rate in effect immediately prior to the Change in Control of
the Company (which base salary shall, unless otherwise agreed in writing by the
Executive, include the current receipt by the Executive of any amounts which,
prior to the Change in Control of the Company, the Executive had elected to
defer, whether such compensation is deferred under Section 401(k) of the Code or
otherwise), subject to adjustment as hereinafter provided in Section 6 (such
---------
salary amount as adjusted upward from time to time is hereafter referred to as
the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least equal in
value to the highest value of such benefits provided for the Executive at any
time during the 180-day period immediately prior to the Change in Control of the
Company or, if more favorable to the Executive, those provided generally at any
time during the Employment Period to any executives of the Employer of
comparable status and position to the Executive; and shall be reimbursed, at
such intervals and in accordance with such standard policies that are most
favorable to the Executive that were in effect at any time during the 180-day
period immediately prior to the Change in Control of the Company, for any and
all monies advanced in connection with the Executive's employment for reasonable
and necessary expenses incurred by the Executive on behalf of the Employer,
including travel expenses.
-9-
<PAGE>
(c) The Executive and/or the Executive's family, as the case may be,
shall be included, to the extent eligible thereunder (which eligibility shall
not be conditioned on the Executive's salary grade or on any other requirement
which excludes persons of comparable status to the Executive unless such
exclusion was in effect for such plan or an equivalent plan at any time during
the 180-day period immediately prior to the Change in Control of the Company),
in any and all plans providing benefits for the Employer's salaried employees in
general, including but not limited to group life insurance, hospitalization,
medical, dental, profit sharing and stock bonus plans; provided, that, (i) in no
event shall the aggregate level of benefits under such plans in which the
Executive is included be less than the aggregate level of benefits under plans
of the Employer of the type referred to in this Section 5(c) in which the
-----------
Executive was participating at any time during the 180-day period immediately
prior to the Change in Control of the Company and (ii) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level of
benefits under plans of the type referred to in this Section 5(c) provided at
-----------
any time after the Change in Control of the Company to any executive of the
Employer of comparable status and position to the Executive.
(d) The Executive shall annually be entitled to not less than the
amount of paid vacation and not fewer than the highest number of paid holidays
to which the Executive was entitled annually at any time during the 180-day
period immediately prior to the Change in Control of the Company or such greater
amount of paid vacation and number of paid holidays as may be made available
annually to other executives of the Employer of comparable status and position
to the Executive at any time during the Employment Period.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Employer of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus and similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the highest aggregate
level of benefits under plans of the Employer of the type referred to in this
Section 5(e) in which the Executive was participating at any time during the
- -----------
180-day period immediately prior to the Change in Control of the Company; (ii)
in no event shall the aggregate level of benefits under such plans be less than
the aggregate levels of benefits under plans of the type referred to in this
Section 5(e) provided at any time after the Change in Control of the Company to
- -----------
any executive of the Employer comparable in status and position to the
Executive; and (iii) the Employer's obligation to include the Executive in bonus
or incentive compensation plans shall be determined by Section 5(f).
-----------
(f) To assure that the Executive will have an opportunity to earn
incentive compensation after a Change in Control of the Company, the Executive
shall be included in a bonus plan of the Employer which shall satisfy the
standards described below (such plan, the "Bonus Plan"). Bonuses under the Bonus
Plan shall be payable with respect to achieving such financial or other goals
reasonably related to the business of the Employer as the Employer shall
establish (the "Goals"), all of which Goals shall be attainable, prior to the
end of the Employment Period, with approximately the same degree of probability
as the most attainable goals under the Employer's bonus plan or plans as in
effect at any time during the 180-day period immediately prior to the Change in
Control of the Company (whether one or more, the "Company Bonus Plan") and in
view of the Employer's existing and projected financial and business
circumstances applicable at the time. The amount of the bonus (the "Bonus
Amount") that the Executive is
-10-
<PAGE>
eligible to earn under the Bonus Plan shall be no less than the amount of the
Executive's maximum award provided in such Company Bonus Plan (such bonus amount
herein referred to as the "Targeted Bonus"), and in the event the Goals are not
achieved such that the entire Targeted Bonus is not payable, the Bonus Plan
shall provide for a payment of a Bonus Amount equal to a portion of the Targeted
Bonus reasonably related to that portion of the Goals which were achieved.
Payment of the Bonus Amount shall not be affected by any circumstance occurring
subsequent to the end of the Employment Period, including termination of the
Executive's employment.
6. Annual Compensation Adjustments. During the Employment Period,
-------------------------------
the Board of Directors of the Company (or an appropriate committee thereof)
will consider and appraise, at least annually, the contributions of the
Executive to the Company, and in accordance with the Company's practice prior to
the Change in Control of the Company, due consideration shall be given to the
upward adjustment of the Executive's Annual Base Salary, at least annually, (a)
commensurate with increases generally given to other executives of the Company
of comparable status and position to the Executive, and (b) as the scope of the
Company's operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a
--------------------------------------------
Covered Termination for Cause or due to the Executive's voluntarily terminating
his or her employment other than for Good Reason (any such terminations to be
subject to the procedures set forth in Section 13), then the Executive shall be
----------
entitled to receive only Accrued Benefits.
8. Termination Giving Rise to a Termination Payment. If there is a
------------------------------------------------
Covered Termination by the Executive for Good Reason, or by the Company other
than by reason of (i) death, (ii) disability pursuant to Section 12, or (iii)
----------
Cause (any such terminations to be subject to the procedures set forth in
Section 13), then the Executive shall be entitled to receive, and the Company
- -----------
shall promptly pay, Accrued Benefits and, in lieu of further base salary for
periods following the Termination Date, as liquidated damages and additional
severance pay and in consideration of the covenant of the Executive set forth in
Section 14(a), the Termination Payment pursuant to Section 9(a).
- ------------- ------------
9. Payments Upon Termination.
-------------------------
(a) Termination Payment.
-------------------
(i) Subject to Section 9(a)(ii), the "Termination Payment" shall
----------------
be an amount equal to the Annual Cash Compensation times two (2). The
Termination Payment shall be paid to the Executive in cash equivalent
ten (10) business days after the Termination Date. Such lump sum
payment shall not be reduced by any present value or similar factor,
and the Executive shall not be required to mitigate the amount of the
Termination Payment by securing other employment or otherwise, nor
will such Termination Payment be reduced by reason of the Executive
securing other employment or for any other reason. The Termination
Payment shall be in lieu of, and acceptance by the Executive of the
Termination Payment shall constitute the Executive's release of any
rights of the Executive to, any other cash severance payments under
any Company severance policy, practice or agreement.
-11-
<PAGE>
(ii) Notwithstanding any other provision of this Agreement, if any
portion of the Termination Payment or any other payment under this
Agreement, or under any other agreement with or plan of the Employer (in
the aggregate, "Total Payments"), would constitute an "excess parachute
payment," then the Executive shall have the option to have the Total
Payments to be made to the Executive reduced such that the value of the
aggregate Total Payments that the Executive is entitled to receive shall be
One Dollar ($1) less than the maximum amount which the Executive may
receive without becoming subject to the tax imposed under Section 4999 of
the Code (or any successor provision). For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall have the
meanings assigned to them in Section 280G of the Code (or any successor
provision) and such "parachute payments" shall be valued as provided
therein. Present value for purposes of this Agreement shall be calculated
in accordance with Section 1274(b)(2) of the Code (or any successor
provision). Within forty days following a Covered Termination or notice by
one party to the other of its belief that there is a payment or benefit due
the Executive that will result in an "excess parachute payment" as defined
in Section 280G of the Code (or any successor provision), the Executive and
the Company, at the Company's expense, shall obtain the opinion (which need
not be unqualified) of nationally recognized tax counsel ("National Tax
Counsel") selected by the Company's independent auditors and reasonably
acceptable to the Executive (which may be regular outside counsel to the
Company), which opinion sets forth (A) the amount of the Base Period
Income, (B) the amount and present value of Total Payments, (C) the amount
and present value of any excess parachute payments determined without
regard to any reduction of Total Payments pursuant to this Section 9(a)(ii)
----------------
and (D) the net after-tax proceeds to the Executive, taking into account
the tax imposed under Section 4999 of the Code if (x) the Total Payments
were reduced in accordance with the first sentence of this Section 9(a)(ii)
----------------
or (y) the Total Payments were not so reduced. As used in this Agreement,
the term "Base Period Income" means an amount equal to the Executive's
"annualized includable compensation for the base period" as defined in
Section 280G(d)(1) of the Code. For purposes of such opinion, the value of
any noncash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles of
Section 280G(d)(3) and (4) of the Code (or any successor provisions), which
determination shall be evidenced in a certificate of such auditors
addressed to the Company and the Executive. The opinion of National Tax
Counsel shall be addressed to the Company and the Executive and shall be
binding upon the Company and the Executive. If such National Tax Counsel
opinion determines that there would be an excess parachute payment, then,
at the Executive's option, then, at the Executive's sole discretion, the
Termination Payment hereunder or any other payment or benefit determined by
such counsel to be includable in Total Payments may be reduced or
eliminated as specified by the Executive in writing delivered to the
Company within thirty days of his receipt of such opinion so that under the
bases of calculations set forth in such opinion there will be no excess
parachute payment. If such National Tax Counsel so requests in connection
with the opinion required by this Section 9(a), the Executive and the
------------
-12-
<PAGE>
Company shall obtain, at the Company's expense, and the National Tax
Counsel may rely on, the advice of a firm of recognized executive
compensation consultants as to the reasonableness of any item of
compensation to be received by the Executive solely with respect to its
status under Section 280G of the Code and the regulations thereunder.
(iii) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from any and
all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Section 9(a), except for claims, damages or
------------
expenses resulting from the gross negligence or willful misconduct of such
firm.
(b) Additional Benefits. If there is a Covered Termination and the
-------------------
Executive is entitled to Accrued Benefits and the Termination Payment, then the
Company shall provide to the Executive the following additional benefits:
(i) The Executive shall receive, at the expense of the Company,
outplacement services, on an individualized basis at a level of service
commensurate with the Executive's status with the Company immediately prior
to the date of the Change in Control of the Company (or, if higher,
immediately prior to the termination of the Executive's employment),
provided by a nationally recognized executive placement firm selected by
the Company; provided that the cost to the Company of such services shall
not exceed 10% of the Executive's Annual Base Salary.
(ii) Until the earlier of the end of the Employment Period or
such time as the Executive has obtained new employment and is covered by
benefits which in the aggregate are at least equal in value to the
following benefits, the Executive shall continue to be covered, at the
expense of the Company, by the same or equivalent life insurance,
hospitalization, medical and dental coverage as was required hereunder with
respect to the Executive immediately prior to the date the Notice of
Termination is given.
(iii) The Company shall reimburse the Executive for up to $15,000
in the aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive as to
matters relating to the computation of benefits due and payable under this
Section 9.
---------
(iv) The Company shall cause all performance plan awards granted
to the Executive pursuant to any long-term incentive plan maintained by the
Company to be paid out at target, as if all performance requirements had
been satisfied, on a pro rata basis based on the completed portion of each
award cycle.
10. Death.
-----
(a) Except as provided in Section 10(b), in the event of a Covered
-------------
Termination due to the Executive's death, the Executive's estate, heirs and
beneficiaries shall receive all the Executive's Accrued Benefits through the
Termination Date.
-13-
<PAGE>
(b) In the event the Executive dies after a Notice of Termination is
given (i) by the Company or (ii) by the Executive for Good Reason, the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 10(a) and, subject to the provisions of this Agreement, to
-------------
such Termination Payment as the Executive would have been entitled to had the
Executive lived. For purposes of this Section 10(b), the Termination Date shall
-------------
be the earlier of thirty days following the giving of the Notice of Termination,
subject to extension pursuant to Section 1(m), or one day prior to the end of
------------
the Employment Period.
11. Retirement. If, during the Employment Period, the Executive and
the Employer shall execute an agreement providing for the early retirement of
the Executive from the Employer, or the Executive shall otherwise give notice
that he is voluntarily choosing to retire early from the Employer, the Executive
shall receive Accrued Benefits through the Termination Date; provided, that if
the Executive's employment is terminated by the Executive for Good Reason or by
the Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Section 8.
---------
12. Termination for Disability. If, during the Employment Period, as a
--------------------------
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive's duties hereunder on a full-time
basis for a period of six consecutive months and, within thirty days after the
Company notifies the Executive in writing that it intends to terminate the
Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive's duties hereunder on a full-time basis, the
Company may terminate the Executive's employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 13. If the
----------
Executive's employment is terminated on account of the Executive's disability in
accordance with this Section, the Executive shall receive Accrued Benefits
through the Termination Date and shall remain eligible for all benefits provided
by any long term disability programs of the Company in effect at the time of
such termination.
13. Termination Notice and Procedure. Any Covered Termination by the
--------------------------------
Company or the Executive (other than a termination of the Executive's employment
that is a Covered Termination by virtue of Section 2(b)) shall be communicated
-------------
by a written notice of termination ("Notice of Termination") to the Executive,
if such Notice is given by the Company, and to the Company, if such Notice is
given by the Executive, all in accordance with the following procedures and
those set forth in Section 23:
----------
(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly adopted by a
majority of the directors of the Company (or any successor corporation) then in
office.
-14-
<PAGE>
(c) If the Notice is given by the Executive for Good Reason, the
Executive may cease performing his duties hereunder on or after the date fifteen
days after the delivery of Notice of Termination and shall in any event cease
employment on the Termination Date. If the Notice is given by the Company, then
the Executive may cease performing his duties hereunder on the date of receipt
of the Notice of Termination, subject to the Executive's rights hereunder.
(d) The Executive shall have thirty days, or such longer period as the
Company may determine to be appropriate, to cure any conduct or act, if curable,
alleged to provide grounds for termination of the Executive's employment for
Cause under this Agreement pursuant to Section 1(f)(iii).
-----------------
(e) The recipient of any Notice of Termination shall personally
deliver or mail in accordance with Section 23 written notice of any dispute
----------
relating to such Notice of Termination to the party giving such Notice within
fifteen days after receipt thereof; provided, however, that if the Executive's
conduct or act alleged to provide grounds for termination by the Company for
Cause is curable, then such period shall be thirty days. After the expiration of
such period, the contents of the Notice of Termination shall become final and
not subject to dispute.
14. Further Obligations of the Executive.
------------------------------------
(a) Competition. The Executive agrees that, in the event of any
-----------
Covered Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, for a period expiring six months
after the Termination Date, without the prior written approval of the Company's
Board of Directors, participate in the management of, be employed by or own any
business enterprise at a location within the United States that engages in
substantial competition with the Company or its subsidiaries, where such
enterprise's revenues from any competitive activities amount to 10% or more of
such enterprise's net revenues and sales for its most recently completed fiscal
year; provided, however, that nothing in this Section 14(a) shall prohibit the
-------------
Executive from owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor.
(b) Confidentiality. During and following the Executive's employment
---------------
by the Company, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Company (including that of the Employer), except to
the extent authorized in writing by the Board of Directors of the Company or
required by any court or administrative agency, other than to an employee of the
Company or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of duties as an executive of
the Company. Confidential information shall not include any information known
generally to the public or any information of a type not otherwise considered
confidential by persons engaged in the same business or a business similar to
that of the Company. All records, files, documents and materials, or copies
thereof, relating to the business of the Company which the Executive shall
prepare, or use, or come into contact with, shall be and remain the sole
property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.
(c) No Solicitation. The Executive agrees that, in the event of any
---------------
Covered Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the
-15-
<PAGE>
Executive shall not, for a period expiring two years after the Termination Date,
without the prior written approval of the Company's Board of Directors, hire or
solicit for employment any person who is or was employed by the Company during
the then immediately preceding twelve months, other than pursuant to a general
published solicitation of employment.
15. Expenses and Interest. If, after a Change in Control of the
---------------------
Company, (a) a dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or (b) any legal or arbitration proceeding shall be
brought to enforce or interpret any provision contained herein or to recover
damages for breach hereof, in either case so long as the Executive is not acting
in bad faith, then the Company shall reimburse the Executive for any reasonable
attorneys' fees and necessary costs and disbursements incurred as a result of
the dispute, legal or arbitration proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by The Bank of New York, from time
to time at its prime or base lending rate from the date that payments to him or
her should have been made under this Agreement. Within ten days after the
Executive's written request therefor, the Company shall pay to the Executive, or
such other person or entity as the Executive may designate in writing to the
Company, the Executive's reasonable Expenses in advance of the final disposition
or conclusion of any such dispute, legal or arbitration proceeding.
16. Payment Obligations Absolute. The Company's obligation during and
----------------------------
after the Employment Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
-------
15, all amounts payable by the Company hereunder shall be paid without notice or
- --
demand. Each and every payment made hereunder by the Company shall be final, and
the Company will not seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.
17. Successors.
----------
(a) If the Company sells, assigns or transfers all or substantially
all of its business and assets to any Person or if the Company merges into or
consolidates or otherwise combines (where the Company does not survive such
combination) with any Person (any such event, a "Sale of Business"), then the
Company shall assign all of its right, title and interest in this Agreement as
of the date of such event to such Person, and the Company shall cause such
Person, by written agreement in form and substance reasonably satisfactory to
the Executive, to expressly assume and agree to perform from and after the date
of such assignment all of the terms, conditions and provisions imposed by this
Agreement upon the Company. Failure of the Company to obtain such agreement
prior to the effective date of such Sale of Business shall be a breach of this
Agreement constituting "Good Reason" hereunder, except that for purposes of
implementing the foregoing the date upon which such Sale of Business becomes
effective shall be deemed the Termination Date. In case of such assignment by
the Company and of assumption and agreement by such Person, as used in this
Agreement, "Company" shall thereafter mean such Person which executes and
delivers the agreement provided for in this Section 17 or which otherwise
----------
becomes bound by all the terms and provisions of this Agreement by operation of
law, and this Agreement shall inure to the benefit of, and be enforceable by,
such Person. The Executive shall, in his or
-16-
<PAGE>
her discretion, be entitled to proceed against any or all of such Persons, any
Person which theretofore was such a successor to the Company and the Company (as
so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Section 17(a), this Agreement shall not be assignable
-------------
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15 if the
-----------------------------------
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms are in effect on the date of the Change in Control of
the Company, that expressly govern benefits under such plan in the event of the
Executive's death.
18. Severability. The provisions of this Agreement shall be regarded
------------
as divisible, and if any of said provisions or any part hereof are declared
invalid or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
19. Contents of Agreement; Waiver of Rights; Amendment. This Agreement
--------------------------------------------------
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof, and the Executive hereby waives all rights under, any
prior or other agreement or understanding between the parties with respect to
such subject matter. This Agreement may not be amended or modified at any time
except by written instrument executed by the Company and the Executive.
20. Withholding. The Company shall be entitled to withhold from
-----------
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; provided, that the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of the National Tax Counsel if any question as to the amount or
requirement of any such withholding shall arise.
21. Certain Rules of Construction. No party shall be considered as
-----------------------------
being responsible for the drafting of this Agreement for the purpose of applying
any rule construing ambiguities against the drafter or otherwise. No draft of
this Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an agreement in writing shall be
deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
22. Governing Law; Resolution of Disputes. This Agreement and the
-------------------------------------
rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Wisconsin. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect (in which
case both parties shall be bound by the arbitration award) or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be
-17-
<PAGE>
Milwaukee, Wisconsin or, at the Executive's election, if the Executive is not
then residing or working in the Milwaukee, Wisconsin metropolitan area, in the
judicial district encompassing the city in which the Executive resides;
provided, that, if the Executive is not then residing in the United States, the
election of the Executive with respect to such venue shall be either Milwaukee,
Wisconsin or in the judicial district encompassing that city in the United
States among the thirty cities having the largest population (as determined by
the most recent United States Census data available at the Termination Date)
which is closest to the Executive's residence. The parties consent to personal
jurisdiction in each trial court in the selected venue having subject matter
jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.
23. Notice. Notices given pursuant to this Agreement shall be in
------
writing and, except as otherwise provided by Section 13(d), shall be deemed
-------------
given when actually received by the Executive or actually received by the
Company's Secretary or any officer of the Company other than the Executive. If
mailed, such notices shall be mailed by United States registered or certified
mail, return receipt requested, addressee only, postage prepaid, if to the
Company, to Fiserv, Inc., Attention: Secretary (or President, if the Executive
is then Secretary), 255 Fiserv Drive, Brookfield, Wisconsin 53045, or if to the
Executive, at the address set forth below the Executive's signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
24. No Waiver. No waiver by either party at any time of any breach by
---------
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
25. Headings. The headings herein contained are for reference only
--------
and shall not affect the meaning or interpretation of any provision of this
Agreement.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
FISERV, INC.
By: ________________________________________
Its: ___________________________________
Attest:_____________________________________
Its:____________________________________
EXECUTIVE:
______________________________________(SEAL)
Address: ___________________________________
___________________________________
-19-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>4
<FILENAME>dex104.txt
<DESCRIPTION>DOUBLE TRIGGER KEESA
<TEXT>
<PAGE>
EXHIBIT 10.4
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
------------------------------------------------
THIS AGREEMENT, made and entered into as of the ____ day of
______, 2001, by and between Fiserv, Inc., a Wisconsin corporation (hereinafter
referred to as the "Company"), and _____________________ (hereinafter referred
to as the "Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Executive is employed by the Company and/or a
subsidiary of the Company (hereinafter referred to collectively as the
"Employer") in a key executive capacity and the Executive's services are
valuable to the conduct of the business of the Company;
WHEREAS, the Company desires to continue to attract and retain
dedicated and skilled management employees in a period of industry
consolidation, consistent with achieving the best possible value for its
shareholders in any change in control of the Company;
WHEREAS, the Company recognizes that circumstances may arise
in which a change in control of the Company occurs, through acquisition or
otherwise, thereby causing a potential conflict of interest between the
Company's needs for the Executive to remain focused on the Company's business
and for the necessary continuity in management prior to and following a change
in control, and the Executive's reasonable personal concerns regarding future
employment with the Employer and economic protection in the event of loss of
employment as a consequence of a change in control;
WHEREAS, the Company and the Executive are desirous that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders;
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
economic security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition;
WHEREAS, the Executive possesses intimate knowledge of the
business and affairs of the Company and has acquired certain confidential
information and data with respect to the Company; and
WHEREAS, the Company desires to insure, insofar as possible,
that it will continue to have the benefit of the Executive's services and to
protect its confidential information and goodwill.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE>
1. Definitions.
-----------
(a) Accrued Benefits. The term "Accrued Benefits" shall include the
----------------
following amounts, payable as described herein: (i) all base salary for the time
period ending with the Termination Date; (ii) reimbursement for any and all
monies advanced in connection with the (a) Executive's employment for reasonable
and necessary expenses incurred by the Executive on behalf of the Employer for
the time period ending with the Termination Date; (iii) any and all other cash
earned through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plan then in effect; (iv)
notwithstanding any provision of any bonus or incentive compensation plan
applicable to the Executive, a lump sum amount, in cash, equal to the sum of (A)
any bonus or incentive compensation that has been allocated or awarded to the
Executive for a fiscal year or other measuring period under the plan that ends
prior to the Termination Date but has not yet been paid (pursuant to Section
-------
5(f) or otherwise) and (B) a pro rata portion to the Termination Date of the
- ----
aggregate value of all contingent bonus or incentive compensation awards to the
Executive for all uncompleted periods under the plan calculated as to each such
award as if the Goals with respect to such bonus or incentive compensation award
had been attained; and (v) all other payments and benefits to which the
Executive (or in the event of the Executive's death, the Executive's surviving
spouse or other beneficiary) may be entitled on the Termination Date as
compensatory fringe benefits or under the terms of any benefit plan of the
Employer, excluding severance payments under any Employer severance policy,
practice or agreement in effect on the Termination Date. Payment of Accrued
Benefits shall be made promptly in accordance with the Company's prevailing
practice with respect to clauses (i) and (ii) or, with respect to clauses (iii),
----------- --- -------------
(iv) and (v), pursuant to the terms of the benefit plan or practice establishing
- ---- ---
such benefits.
(b) Act. The term "Act" means the Securities Exchange Act of 1934, as
---
amended.
(c) Affiliate and Associate. The terms "Affiliate" and "Associate"
-----------------------
shall have the respective meanings ascribed to such terms in Rule l2b-2 of the
General Rules and Regulations under the Act.
(d) Annual Cash Compensation. The term "Annual Cash Compensation"
------------------------
shall mean the sum of (i) the Executive's Annual Base Salary (determined as of
the time of the Change in Control of the Company or, if higher, immediately
prior to the date the Notice of Termination is given) plus (ii) an amount equal
to (A) if the Executive has been employed by the Company for three or more years
prior to the Change in Control of the Company, the highest annual incentive
bonus the Executive received for any of the three fiscal years prior to the
Change in Control of the Company, or (B) if the Executive has not been employed
by the Company for three or more years prior to the Change in Control of the
Company, the greater of (x) 60% of the Executive's Annual Base Salary as of the
time of the Change in Control of the Company or (y) the highest annual incentive
bonus the Executive received for any of the two fiscal years prior to the Change
in Control of the Company in which the Executive was employed by the Company
(the aggregate amount set forth in clause (i) and clause (ii) shall hereafter be
---------- -----------
referred to as the "Annual Cash Compensation").
-2-
<PAGE>
(e) Beneficial Owner. A Person shall be deemed to be the "Beneficial
----------------
Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (A) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, or (B) securities issuable upon exercise of Rights issued
pursuant to the terms of the Company's Shareholder Rights Agreement, dated
as of February 24, 1998, between the Company and Equiserve Limited
Partnership, as amended from time to time (or any successor to such Rights
Agreement), at any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule l3d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this clause (ii) as a result of an agreement, arrangement or
----------
understanding to vote such security if the agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
under the Act and (B) is not also then reportable on a Schedule l3D under
the Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in clause (ii) above) or disposing of any voting securities of
-----------
the Company.
(f) Cause. "Cause" for termination by the Employer of the Executive's
-----
employment in connection with a Change in Control of the Company shall be
limited to (i) the engaging by the Executive in intentional conduct not taken in
good faith that the Company establishes, by clear and convincing evidence, has
caused demonstrable and serious financial injury to the Employer, as evidenced
by a determination in a binding and final judgment, order or decree of a court
or administrative agency of competent jurisdiction, in effect after exhaustion
or lapse of all rights of appeal, in an action, suit or proceeding, whether
civil, criminal, administrative or investigative; (ii) conviction of a felony
(as evidenced by binding and final judgment, order or decree of a court of
competent jurisdiction, in effect after exhaustion of all rights of appeal),
which substantially impairs the Executive's ability to perform his duties or
responsibilities; or
-3-
<PAGE>
(iii) continuing willful and unreasonable refusal by the Executive to perform
the Executive's duties or responsibilities (unless significantly changed without
the Executive's consent).
(g) Change in Control of the Company. A "Change in Control of the
--------------------------------
Company" shall be deemed to have occurred if an event set forth in any one of
the following paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under any
employee benefit plan of the Company or any of its subsidiaries, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock in the Company ("Excluded Persons")) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
November 14, 2001, pursuant to express authorization by the Board that
refers to this exception) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting
power of the Company's then outstanding voting securities; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors of the Company then serving: (A)
individuals who, on November 14, 2001 constituted the Board and (B) any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on November 14, 2001, or whose appointment, election or
nomination for election was previously so approved (collectively the
"Continuing Directors"); provided, however, that individuals who are
appointed to the Board pursuant to or in accordance with the terms of an
agreement relating to a merger, consolidation, or share exchange involving
the Company (or any direct or indirect subsidiary of the Company) shall not
be Continuing Directors for purposes of this Agreement until after such
individuals are first nominated for election by a vote of at least
two-thirds (2/3) of the then Continuing Directors and are thereafter
elected as directors by the shareholders of the Company at a meeting of
shareholders held following consummation of such merger, consolidation, or
share exchange; and, provided further, that in the event the failure of any
such persons appointed to the Board to be Continuing Directors results in a
Change in Control of the Company, the subsequent qualification of such
persons as Continuing Directors shall not alter the fact that a Change in
Control of the Company occurred; or
(iii) the shareholders of the Company approve a merger,
consolidation or share exchange of the Company with any other corporation
or approve the issuance of voting securities of the Company in connection
with a
-4-
<PAGE>
merger, consolidation or share exchange of the Company (or any direct or
indirect subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (A) a merger, consolidation or share exchange
which would result in the voting securities of the Company outstanding
immediately prior to such merger, consolidation or share exchange
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the voting securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger, consolidation or share exchange, or (B) a
merger, consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
(other than an Excluded Person) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after November 14, 2001,
pursuant to express authorization by the Board that refers to this
exception) representing 20% or more of either the then outstanding shares
of common stock of the Company or the combined voting power of the
Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve of a plan of
complete liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets (in one transaction or a series of related transactions
within any period of 24 consecutive months), other than a sale or
disposition by the Company of all or substantially all of the Company's
assets to an entity at least 75% of the combined voting power of the voting
securities of which are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
Notwithstanding the foregoing, no "Change in Control of the Company" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to own, directly or indirectly, in the same proportions as
their ownership in the Company, an entity that owns all or substantially all of
the assets or voting securities of the Company immediately following such
transaction or series of transactions.
(h) Code. The term "Code" means the Internal Revenue Code of 1986,
----
including any amendments thereto or successor tax codes thereof.
(i) Covered Termination. Subject to Section 2(b), the term "Covered
------------------- ------------
Termination" means any termination of the Executive's employment during the
Employment Period where the Termination Date, or the date Notice of Termination
is delivered, is any date prior to the end of the Employment Period.
-5-
<PAGE>
(j) Employment Period. Subject to Section 2(b), the term "Employment
----------------- ------------
Period" means a period commencing on the date of a Change in Control of the
Company, and ending at 11:59 p.m. Central Time on the third anniversary of such
date.
(k) Good Reason. The Executive shall have "Good Reason" for
-----------
termination of employment in connection with a Change in Control of the Company
in the event of:
(i) any breach of this Agreement by the Employer, including
specifically any breach by the Employer of the agreements contained in
Section 3(b), Section 4, Section 5, or Section 6, other than an isolated,
------------ --------- ---------
insubstantial and inadvertent failure not occurring in bad faith that
the Employer remedies promptly after receipt of notice thereof given by
the Executive;
(ii) any reduction in the Executive's base salary, percentage
of base salary available as incentive compensation or bonus opportunity or
benefits, in each case relative to those most favorable to the Executive in
effect at any time during the 180-day period prior to the Change in Control
of the Company or, to the extent more favorable to the Executive, those in
effect at any time during the Employment Period;
(iii) the removal of the Executive from, or any failure to
reelect or reappoint the Executive to, any of the positions held with the
Employer on the date of the Change in Control of the Company or any other
positions with the Employer to which the Executive shall thereafter be
elected, appointed or assigned, except in the event that such removal or
failure to reelect or reappoint relates to the termination by the Employer
of the Executive's employment for Cause or by reason of disability pursuant
to Section 12;
----------
(iv) a good faith determination by the Executive that there has
been a material adverse change, without the Executive's written consent, in
the Executive's working conditions or status with the Employer relative to
the most favorable working conditions or status in effect during the 180-
day period prior to the Change in Control of the Company, or, to the
extent more favorable to the Executive, those in effect at any time during
the Employment Period, including but not limited to (A) a significant
change in the nature or scope of the Executive's authority, powers,
functions, duties or responsibilities, or (B) a significant reduction in
the level of support services, staff, secretarial and other assistance,
office space and accoutrements, but in each case excluding for this purpose
an isolated, insubstantial and inadvertent event not occurring in bad faith
that the Employer remedies within ten (10) days after receipt of notice
thereof given by the Executive;
(v) the relocation of the Executive's principal place of
employment to a location more than 35 miles from the Executive's principal
place of employment on the date 180 days prior to the Change in Control of
the Company;
-6-
<PAGE>
(vi) the Employer requires the Executive to travel on Employer
business 20% in excess of the average number of days per month the
Executive was required to travel during the 180-day period prior to the
Change in Control of the Company; or
(vii) failure by the Company to obtain the Agreement referred to
in Section 17(a) as provided therein.
-------------
(l) Person. The term "Person" shall mean any individual, firm,
------
partnership, corporation or other entity, including any successor (by merger or
otherwise) of such entity, or a group of any of the foregoing acting in concert.
(m) Termination Date. Except as otherwise provided in Section 2(b),
---------------- ------------
Section 10(b), and Section 17(a), the term "Termination Date" means (i) if the
- ------------- -------------
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Employer and the Executive, the
date of such early retirement which is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this Agreement
by reason of disability pursuant to Section 12, the earlier of thirty days after
----------
the Notice of Termination is given or one day prior to the end of the Employment
Period; (iv) if the Executive's employment is terminated by the Executive
voluntarily (other than for Good Reason), the date the Notice of Termination is
given; and (v) if the Executive's employment is terminated by the Employer
(other than by reason of disability pursuant to Section 12) or by the Executive
----------
for Good Reason, the earlier of thirty days after the Notice of Termination is
given or one day prior to the end of the Employment Period. Notwithstanding the
foregoing,
(A) If termination is for Cause pursuant to Section 1(f)(iii)
-----------------
and if the Executive has cured the conduct constituting such Cause as
described by the Employer in its Notice of Termination within such thirty-
day or shorter period, then the Executive's employment hereunder shall
continue as if the Employer had not delivered its Notice of Termination.
(B) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Employer notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue his or
her employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that Good Reason did exist, the Termination Date
shall be the earliest of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 22, (2) the date of the Executive's death or (3)
----------
one day prior to the end of the Employment Period. If the Executive so
elects and it is thereafter determined that Good Reason did not exist, then
the employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had
-7-
<PAGE>
not delivered the Notice of Termination except that, if it is finally
determined that Good Reason did exist, the Executive shall in no case be
denied the benefits described in Section 9 (including a Termination
---------
Payment) based on events occurring after the Executive delivered his Notice
of Termination.
(C) Except as provided in Section 1(m)(B), if the party receiving
---------------
the Notice of Termination notifies the other party that a dispute exists
concerning the termination within the appropriate period following receipt
thereof and it is finally determined that the reason asserted in such
Notice of Termination did not exist, then (1) if such Notice was delivered
by the Executive, the Executive will be deemed to have voluntarily
terminated his employment and the Termination Date shall be the earlier of
the date fifteen days after the Notice of Termination is given or one day
prior to the end of the Employment Period and (2) if delivered by the
Company, the Company will be deemed to have terminated the Executive other
than by reason of death, disability or Cause.
2. Termination or Cancellation Prior to Change in Control.
------------------------------------------------------
(a) Subject to Section 2(b), the Employer and the Executive shall each
-----------
retain the right to terminate the employment of the Executive at any time prior
to a Change in Control of the Company. Subject to Section 2(b), in the event the
-----------
Executive's employment is terminated prior to a Change in Control of the
Company, this Agreement shall be terminated and cancelled and of no further
force and effect, and any and all rights and obligations of the parties
hereunder shall cease.
(b) Anything in this Agreement to the contrary notwithstanding, if a
Change in Control of the Company occurs and if the Executive's employment with
the Employer is terminated (other than a termination due to the Executive's
death or as a result of the Executive's disability) during the period of 180
days prior to the date on which the Change in Control of the Company occurs, and
if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control of the Company or (ii)
otherwise arose in connection with or in anticipation of a Change in Control of
the Company, then for all purposes of this Agreement such termination of
employment shall be deemed a "Covered Termination," "Notice of Termination"
shall be deemed to have been given, and the "Employment Period" shall be deemed
to have begun on the date of such termination which shall be deemed to be the
"Termination Date" and the date of the Change of Control of the Company for
purposes of this Agreement.
3. Employment Period; Vesting of Certain Benefits.
----------------------------------------------
(a) If a Change in Control of the Company occurs when the Executive is
employed by the Employer, the Employer will continue thereafter to employ the
Executive during the Employment Period, and the Executive will remain in the
employ of the Employer in accordance with and subject to the terms and
provisions of this Agreement. Any termination of the Executive's employment
during the Employment Period, whether by the Company or the Employer, shall be
deemed a termination by the Company for purposes of this Agreement.
-8-
<PAGE>
(b) If a Change in Control of the Company occurs when the Executive is
employed by the Employer, (i) the Company shall cause all restrictions on
restricted stock awards made to the Executive prior to the Change in Control of
the Company to lapse such that the Executive is fully and immediately vested in
the Executive's restricted stock upon such a Change in Control of the Company;
and (ii) the Company shall cause all stock options granted to the Executive
prior to the Change in Control of the Company pursuant to the Company's stock
option plan(s) to be fully and immediately vested upon such a Change in Control
of the Company.
4. Duties. During the Employment Period, the Executive shall, in the
------
same capacities and positions held by the Executive at the time of the Change in
Control of the Company or in such other capacities and positions as may be
agreed to by the Employer and the Executive in writing, devote the Executive's
best efforts and all of the Executive's business time, attention and skill to
the business and affairs of the Employer, as such business and affairs now exist
and as they may hereafter be conducted; provided, however, that the Executive
shall be entitled (a) to serve as director of other corporations and (b) to
devote time to personal and financial activities, in each case so long as such
activities do not materially affect the Executive's ability to perform the
Executive's duties hereunder.
5. Compensation. During the Employment Period, the Executive shall be
------------
compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies as may be in
effect immediately prior to the Change in Control of the Company, an annual base
salary in cash equivalent of not less than twelve times the Executive's highest
monthly base salary for the twelve-month period immediately preceding the month
in which the Change in Control of the Company occurs or, if higher, an annual
base salary at the rate in effect immediately prior to the Change in Control of
the Company (which base salary shall, unless otherwise agreed in writing by the
Executive, include the current receipt by the Executive of any amounts which,
prior to the Change in Control of the Company, the Executive had elected to
defer, whether such compensation is deferred under Section 401(k) of the Code or
otherwise), subject to adjustment as hereinafter provided in Section 6 (such
---------
salary amount as adjusted upward from time to time is hereafter referred to as
the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least equal in value
to the highest value of such benefits provided for the Executive at any time
during the 180-day period immediately prior to the Change in Control of the
Company or, if more favorable to the Executive, those provided generally at any
time during the Employment Period to any executives of the Employer of
comparable status and position to the Executive; and shall be reimbursed, at
such intervals and in accordance with such standard policies that are most
favorable to the Executive that were in effect at any time during the 180-day
period immediately prior to the Change in Control of the Company, for any and
all monies advanced in connection with the Executive's employment for reasonable
and necessary expenses incurred by the Executive on behalf of the Employer,
including travel expenses.
(c) The Executive and/or the Executive's family, as the case may be,
shall be included, to the extent eligible thereunder (which eligibility shall
not be conditioned on the Executive's salary grade or on any other requirement
which excludes persons of comparable status
-9-
<PAGE>
to the Executive unless such exclusion was in effect for such plan or an
equivalent plan at any time during the 180-day period immediately prior to the
Change in Control of the Company), in any and all plans providing benefits for
the Employer's salaried employees in general, including but not limited to group
life insurance, hospitalization, medical, dental, profit sharing and stock bonus
plans; provided, that, (i) in no event shall the aggregate level of benefits
under such plans in which the Executive is included be less than the aggregate
level of benefits under plans of the Employer of the type referred to in this
Section 5(c) in which the Executive was participating at any time during the
- ------------
180-day period immediately prior to the Change in Control of the Company and
(ii) in no event shall the aggregate level of benefits under such plans be less
than the aggregate level of benefits under plans of the type referred to in this
Section 5(c) provided at any time after the Change in Control of the Company to
- ------------
any executive of the Employer of comparable status and position to the
Executive.
(d) The Executive shall annually be entitled to not less than the
amount of paid vacation and not fewer than the highest number of paid holidays
to which the Executive was entitled annually at any time during the 180-day
period immediately prior to the Change in Control of the Company or such greater
amount of paid vacation and number of paid holidays as may be made available
annually to other executives of the Employer of comparable status and position
to the Executive at any time during the Employment Period.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Employer of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus and similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the highest aggregate
level of benefits under plans of the Employer of the type referred to in this
Section 5(e) in which the Executive was participating at any time during the
- ------------
180-day period immediately prior to the Change in Control of the Company; (ii)
in no event shall the aggregate level of benefits under such plans be less than
the aggregate levels of benefits under plans of the type referred to in this
Section 5(e) provided at any time after the Change in Control of the Company to
- ------------
any executive of the Employer comparable in status and position to the
Executive; and (iii) the Employer's obligation to include the Executive in bonus
or incentive compensation plans shall be determined by Section 5(f).
------------
(f) To assure that the Executive will have an opportunity to earn
incentive compensation after a Change in Control of the Company, the Executive
shall be included in a bonus plan of the Employer which shall satisfy the
standards described below (such plan, the "Bonus Plan"). Bonuses under the Bonus
Plan shall be payable with respect to achieving such financial or other goals
reasonably related to the business of the Employer as the Employer shall
establish (the "Goals"), all of which Goals shall be attainable, prior to the
end of the Employment Period, with approximately the same degree of probability
as the most attainable goals under the Employer's bonus plan or plans as in
effect at any time during the 180-day period immediately prior to the Change in
Control of the Company (whether one or more, the "Company Bonus Plan") and in
view of the Employer's existing and projected financial and business
circumstances applicable at the time. The amount of the bonus (the "Bonus
Amount") that the Executive is eligible to earn under the Bonus Plan shall be no
less than the amount of the Executive's maximum award provided in such Company
Bonus Plan (such bonus amount herein referred to as the "Targeted Bonus"), and
in the event the Goals are not achieved such that the entire Targeted Bonus
-10-
<PAGE>
is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount
equal to a portion of the Targeted Bonus reasonably related to that portion of
the Goals which were achieved. Payment of the Bonus Amount shall not be affected
by any circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
6. Annual Compensation Adjustments. During the Employment Period,
-------------------------------
the Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Company, and in accordance with the Company's practice prior to the Change
in Control of the Company, due consideration shall be given to the upward
adjustment of the Executive's Annual Base Salary, at least annually, (a)
commensurate with increases generally given to other executives of the Company
of comparable status and position to the Executive, and (b) as the scope of the
Company's operations or the Executive's duties expand.
7. Termination For Cause or Without Good Reason. If there is a
--------------------------------------------
Covered Termination for Cause or due to the Executive's voluntarily terminating
his or her employment other than for Good Reason (any such terminations to be
subject to the procedures set forth in Section 13), then the Executive shall be
----------
entitled to receive only Accrued Benefits.
8. Termination Giving Rise to a Termination Payment. If there is a
------------------------------------------------
Covered Termination by the Executive for Good Reason, or by the Company other
than by reason of (i) death, (ii) disability pursuant to Section 12, or (iii)
----------
Cause (any such terminations to be subject to the procedures set forth in
Section 13), then the Executive shall be entitled to receive, and the Company
- ----------
shall promptly pay, Accrued Benefits and, in lieu of further base salary for
periods following the Termination Date, as liquidated damages and additional
severance pay and in consideration of the covenant of the Executive set forth in
Section 14(a), the Termination Payment pursuant to Section 9(a).
- ------------- ------------
9. Payments Upon Termination.
-------------------------
(a) Termination Payment.
-------------------
(i) Subject to Section 9(a)(ii), the "Termination Payment" shall
----------------
be an amount equal to the Annual Cash Compensation times two (2). The
Termination Payment shall be paid to the Executive in cash equivalent ten
(10) business days after the Termination Date. Such lump sum payment shall
not be reduced by any present value or similar factor, and the Executive
shall not be required to mitigate the amount of the Termination Payment by
securing other employment or otherwise, nor will such Termination Payment
be reduced by reason of the Executive securing other employment or for any
other reason. The Termination Payment shall be in lieu of, and acceptance
by the Executive of the Termination Payment shall constitute the
Executive's release of any rights of the Executive to, any other cash
severance payments under any Company severance policy, practice or
agreement.
(ii) Notwithstanding any other provision of this Agreement, if
any portion of the Termination Payment or any other payment under this
-11-
<PAGE>
Agreement, or under any other agreement with or plan of the Employer (in
the aggregate, "Total Payments"), would constitute an "excess parachute
payment," then the Executive shall have the option to have the Total
Payments to be made to the Executive reduced such that the value of the
aggregate Total Payments that the Executive is entitled to receive shall be
One Dollar ($1) less than the maximum amount which the Executive may
receive without becoming subject to the tax imposed under Section 4999 of
the Code (or any successor provision). For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall have the
meanings assigned to them in Section 280G of the Code (or any successor
provision) and such "parachute payments" shall be valued as provided
therein. Present value for purposes of this Agreement shall be calculated
in accordance with Section 1274(b)(2) of the Code (or any successor
provision). Within forty days following a Covered Termination or notice by
one party to the other of its belief that there is a payment or benefit due
the Executive that will result in an "excess parachute payment" as defined
in Section 280G of the Code (or any successor provision), the Executive and
the Company, at the Company's expense, shall obtain the opinion (which need
not be unqualified) of nationally recognized tax counsel ("National Tax
Counsel") selected by the Company's independent auditors and reasonably
acceptable to the Executive (which may be regular outside counsel to the
Company), which opinion sets forth (A) the amount of the Base Period
Income, (B) the amount and present value of Total Payments, (C) the amount
and present value of any excess parachute payments determined without
regard to any reduction of Total Payments pursuant to this Section 9(a)(ii)
----------------
and (D) the net after-tax proceeds to the Executive, taking into account
the tax imposed under Section 4999 of the Code if (x) the Total Payments
were reduced in accordance with the first sentence of this Section 9(a)(ii)
----------------
or (y) the Total Payments were not so reduced. As used in this Agreement,
the term "Base Period Income" means an amount equal to the Executive's
"annualized includable compensation for the base period" as defined in
Section 280G(d)(1) of the Code. For purposes of such opinion, the value of
any noncash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles of
Section 280G(d)(3) and (4) of the Code (or any successor provisions), which
determination shall be evidenced in a certificate of such auditors
addressed to the Company and the Executive. The opinion of National Tax
Counsel shall be addressed to the Company and the Executive and shall be
binding upon the Company and the Executive. If such National Tax Counsel
opinion determines that there would be an excess parachute payment, then,
at the Executive's option, then, at the Executive's sole discretion, the
Termination Payment hereunder or any other payment or benefit determined by
such counsel to be includable in Total Payments may be reduced or
eliminated as specified by the Executive in writing delivered to the
Company within thirty days of his receipt of such opinion so that under the
bases of calculations set forth in such opinion there will be no excess
parachute payment. If such National Tax Counsel so requests in connection
with the opinion required by this Section 9(a), the Executive and the
------------
Company shall obtain, at the Company's expense, and the National Tax
Counsel may rely on, the advice of a firm of recognized executive
compensation consultants as to the reasonableness of
-12-
<PAGE>
any item of compensation to be received by the Executive solely with
respect to its status under Section 280G of the Code and the regulations
thereunder.
(iii) The Company agrees to bear all costs associated with, and
to indemnify and hold harmless, the National Tax Counsel of and from any
and all claims, damages, and expenses resulting from or relating to its
determinations pursuant to this Section 9(a), except for claims, damages or
------------
expenses resulting from the gross negligence or willful misconduct of such
firm.
(b) Additional Benefits. If there is a Covered Termination and the
-------------------
Executive is entitled to Accrued Benefits and the Termination Payment, then the
Company shall provide to the Executive the following additional benefits:
(i) The Executive shall receive, at the expense of the Company,
outplacement services, on an individualized basis at a level of service
commensurate with the Executive's status with the Company immediately prior
to the date of the Change in Control of the Company (or, if higher,
immediately prior to the termination of the Executive's employment),
provided by a nationally recognized executive placement firm selected by
the Company; provided that the cost to the Company of such services shall
not exceed 10% of the Executive's Annual Base Salary.
(ii) Until the earlier of the end of the Employment Period or
such time as the Executive has obtained new employment and is covered by
benefits which in the aggregate are at least equal in value to the
following benefits, the Executive shall continue to be covered, at the
expense of the Company, by the same or equivalent life insurance,
hospitalization, medical and dental coverage as was required hereunder with
respect to the Executive immediately prior to the date the Notice of
Termination is given.
(iii) The Company shall reimburse the Executive for up to $15,000
in the aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive as to
matters relating to the computation of benefits due and payable under this
Section 9.
---------
(iv) The Company shall cause all performance plan awards granted
to the Executive pursuant to any long-term incentive plan maintained by the
Company to be paid out at target, as if all performance requirements had
been satisfied, on a pro rata basis based on the completed portion of each
award cycle.
10. Death.
-----
(a) Except as provided in Section 10(b), in the event of a Covered
-------------
Termination due to the Executive's death, the Executive's estate, heirs and
beneficiaries shall receive all the Executive's Accrued Benefits through the
Termination Date.
(b) In the event the Executive dies after a Notice of Termination is
given (i) by the Company or (ii) by the Executive for Good Reason, the
Executive's estate, heirs and
-13-
<PAGE>
beneficiaries shall be entitled to the benefits described in Section 10(a) and,
-------------
subject to the provisions of this Agreement, to such Termination Payment as the
Executive would have been entitled to had the Executive lived. For purposes of
this Section 10(b), the Termination Date shall be the earlier of thirty days
-------------
following the giving of the Notice of Termination, subject to extension pursuant
to Section 1(m), or one day prior to the end of the Employment Period.
------------
11. Retirement. If, during the Employment Period, the Executive and
----------
the Employer shall execute an agreement providing for the early retirement of
the Executive from the Employer, or the Executive shall otherwise give notice
that he is voluntarily choosing to retire early from the Employer, the Executive
shall receive Accrued Benefits through the Termination Date; provided, that if
the Executive's employment is terminated by the Executive for Good Reason or by
the Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Section 8.
---------
12. Termination for Disability. If, during the Employment Period, as a
--------------------------
result of the Executive's disability due to physical or mental illness or injury
(regardless of whether such illness or injury is job-related), the Executive
shall have been absent from the Executive's duties hereunder on a full-time
basis for a period of six consecutive months and, within thirty days after the
Company notifies the Executive in writing that it intends to terminate the
Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the Executive's duties hereunder on a full-time basis, the
Company may terminate the Executive's employment for purposes of this Agreement
pursuant to a Notice of Termination given in accordance with Section 13. If the
----------
Executive's employment is terminated on account of the Executive's disability in
accordance with this Section, the Executive shall receive Accrued Benefits
through the Termination Date and shall remain eligible for all benefits provided
by any long term disability programs of the Company in effect at the time of
such termination.
13. Termination Notice and Procedure. Any Covered Termination by the
--------------------------------
Company or the Executive (other than a termination of the Executive's employment
that is a Covered Termination by virtue of Section 2(b)) shall be communicated
------------
by a written notice of termination ("Notice of Termination") to the Executive,
if such Notice is given by the Company, and to the Company, if such Notice is
given by the Executive, all in accordance with the following procedures and
those set forth in Section 23:
----------
(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly adopted by a
majority of the directors of the Company (or any successor corporation) then in
office.
(c) If the Notice is given by the Executive for Good Reason, the
Executive may cease performing his duties hereunder on or after the date fifteen
days after the delivery of Notice of Termination and shall in any event cease
employment on the Termination Date. If the Notice is
-14-
<PAGE>
given by the Company, then the Executive may cease performing his duties
hereunder on the date of receipt of the Notice of Termination, subject to the
Executive's rights hereunder.
(d) The Executive shall have thirty days, or such longer period as the
Company may determine to be appropriate, to cure any conduct or act, if curable,
alleged to provide grounds for termination of the Executive's employment for
Cause under this Agreement pursuant to Section 1(f)(iii).
-----------------
(e) The recipient of any Notice of Termination shall personally
deliver or mail in accordance with Section 23 written notice of any dispute
----------
relating to such Notice of Termination to the party giving such Notice within
fifteen days after receipt thereof; provided, however, that if the Executive's
conduct or act alleged to provide grounds for termination by the Company for
Cause is curable, then such period shall be thirty days. After the expiration of
such period, the contents of the Notice of Termination shall become final and
not subject to dispute.
14. Further Obligations of the Executive.
------------------------------------
(a) Competition. The Executive agrees that, in the event of any
-----------
Covered Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, for a period expiring six months
after the Termination Date, without the prior written approval of the Company's
Board of Directors, participate in the management of, be employed by or own any
business enterprise at a location within the United States that engages in
substantial competition with the Company or its subsidiaries, where such
enterprise's revenues from any competitive activities amount to 10% or more of
such enterprise's net revenues and sales for its most recently completed fiscal
year; provided, however, that nothing in this Section 14(a) shall prohibit the
-------------
Executive from owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor.
(b) Confidentiality. During and following the Executive's employment
---------------
by the Company, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Company (including that of the Employer), except to
the extent authorized in writing by the Board of Directors of the Company or
required by any court or administrative agency, other than to an employee of the
Company or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of duties as an executive of
the Company. Confidential information shall not include any information known
generally to the public or any information of a type not otherwise considered
confidential by persons engaged in the same business or a business similar to
that of the Company. All records, files, documents and materials, or copies
thereof, relating to the business of the Company which the Executive shall
prepare, or use, or come into contact with, shall be and remain the sole
property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.
(c) No Solicitation. The Executive agrees that, in the event of any
---------------
Covered Termination where the Executive is entitled to Accrued Benefits and the
Termination Payment, the Executive shall not, for a period expiring two years
after the Termination Date, without the prior written approval of the Company's
Board of Directors, hire or solicit for employment any person
-15-
<PAGE>
who is or was employed by the Company during the then immediately preceding
twelve months, other than pursuant to a general published solicitation of
employment.
15. Expenses and Interest. If, after a Change in Control of the
---------------------
Company, (a) a dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or (b) any legal or arbitration proceeding shall be
brought to enforce or interpret any provision contained herein or to recover
damages for breach hereof, in either case so long as the Executive is not acting
in bad faith, then the Company shall reimburse the Executive for any reasonable
attorneys' fees and necessary costs and disbursements incurred as a result of
the dispute, legal or arbitration proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by The Bank of New York, from time
to time at its prime or base lending rate from the date that payments to him or
her should have been made under this Agreement. Within ten days after the
Executive's written request therefor, the Company shall pay to the Executive, or
such other person or entity as the Executive may designate in writing to the
Company, the Executive's reasonable Expenses in advance of the final disposition
or conclusion of any such dispute, legal or arbitration proceeding.
16. Payment Obligations Absolute. The Company's obligation during and
----------------------------
after the Employment Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
-------
15, all amounts payable by the Company hereunder shall be paid without notice or
- --
demand. Each and every payment made hereunder by the Company shall be final, and
the Company will not seek to recover all or any part of such payment from the
Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.
17. Successors.
----------
(a) If the Company sells, assigns or transfers all or substantially
all of its business and assets to any Person or if the Company merges into or
consolidates or otherwise combines (where the Company does not survive such
combination) with any Person (any such event, a "Sale of Business"), then the
Company shall assign all of its right, title and interest in this Agreement as
of the date of such event to such Person, and the Company shall cause such
Person, by written agreement in form and substance reasonably satisfactory to
the Executive, to expressly assume and agree to perform from and after the date
of such assignment all of the terms, conditions and provisions imposed by this
Agreement upon the Company. Failure of the Company to obtain such agreement
prior to the effective date of such Sale of Business shall be a breach of this
Agreement constituting "Good Reason" hereunder, except that for purposes of
implementing the foregoing the date upon which such Sale of Business becomes
effective shall be deemed the Termination Date. In case of such assignment by
the Company and of assumption and agreement by such Person, as used in this
Agreement, "Company" shall thereafter mean such Person which executes and
delivers the agreement provided for in this Section 17 or which otherwise
----------
becomes bound by all the terms and provisions of this Agreement by operation of
law, and this Agreement shall inure to the benefit of, and be enforceable by,
such Person. The Executive shall, in his or her discretion, be entitled to
proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company and the Company (as so defined) in any action to
-16-
<PAGE>
enforce any rights of the Executive hereunder. Except as provided in this
Section 17(a), this Agreement shall not be assignable by the Company. This
- -------------
Agreement shall not be terminated by the voluntary or involuntary dissolution of
the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15 if the
-----------------------------------
Executive had lived shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms are in effect on the date of the Change in Control of
the Company, that expressly govern benefits under such plan in the event of the
Executive's death.
18. Severability. The provisions of this Agreement shall be regarded
------------
as divisible, and if any of said provisions or any part hereof are declared
invalid or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
19. Contents of Agreement; Waiver of Rights; Amendment. This Agreement
--------------------------------------------------
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof, and the Executive hereby waives all rights under, any
prior or other agreement or understanding between the parties with respect to
such subject matter. This Agreement may not be amended or modified at any time
except by written instrument executed by the Company and the Executive.
20. Withholding. The Company shall be entitled to withhold from
-----------
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; provided, that the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of the National Tax Counsel if any question as to the amount or
requirement of any such withholding shall arise.
21. Certain Rules of Construction. No party shall be considered as
-----------------------------
being responsible for the drafting of this Agreement for the purpose of applying
any rule construing ambiguities against the drafter or otherwise. No draft of
this Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an agreement in writing shall be
deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
22. Governing Law; Resolution of Disputes. This Agreement and the
-------------------------------------
rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Wisconsin. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect (in which
case both parties shall be bound by the arbitration award) or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be Milwaukee, Wisconsin or, at the
Executive's election, if the Executive is not then residing or working in the
Milwaukee, Wisconsin metropolitan area, in the judicial district encompassing
the
-17-
<PAGE>
city in which the Executive resides; provided, that, if the Executive is not
then residing in the United States, the election of the Executive with respect
to such venue shall be either Milwaukee, Wisconsin or in the judicial district
encompassing that city in the United States among the thirty cities having the
largest population (as determined by the most recent United States Census data
available at the Termination Date) which is closest to the Executive's
residence. The parties consent to personal jurisdiction in each trial court in
the selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process in
the manner provided hereunder for the giving of notices.
23. Notice. Notices given pursuant to this Agreement shall be in
------
writing and, except as otherwise provided by Section 13(d), shall be deemed
-------------
given when actually received by the Executive or actually received by the
Company's Secretary or any officer of the Company other than the Executive. If
mailed, such notices shall be mailed by United States registered or certified
mail, return receipt requested, addressee only, postage prepaid, if to the
Company, to Fiserv, Inc., Attention: Secretary (or President, if the Executive
is then Secretary), 255 Fiserv Drive, Brookfield, Wisconsin 53045, or if to the
Executive, at the address set forth below the Executive's signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
24. No Waiver. No waiver by either party at any time of any breach by
---------
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
25. Headings. The headings herein contained are for reference only and
--------
shall not affect the meaning or interpretation of any provision of this
Agreement.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
FISERV, INC.
By:________________________________________
Its:____________________________________
Attest:
Its:___________________________________
EXECUTIVE:
______________________________________(SEAL)
Address:___________________________________
___________________________________
-19-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>dex13.txt
<DESCRIPTION>2001 ANNUAL REPORT
<TEXT>
<PAGE>
EXHIBIT 13
2001 ANNUAL REPORT
FISERV, INC. AND SUBSIDIARIES
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share data)
Years ended December 31, 2001 2000 1999
-------------------------------------
<S> <C> <C> <C>
REVENUES $1,890,467 $1,653,606 $1,407,545
-------------------------------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs 921,779 792,799 677,226
Data processing expenses, rentals and
telecommunication costs 126,360 115,029 111,163
Other operating expenses 377,570 316,638 272,616
Depreciation and amortization of
property and equipment 76,701 70,147 63,713
Amortization of intangible assets 35,532 42,812 22,600
Amortization (capitalization) of internally
generated computer software-net (1,172) 1,875 7,142
-------------------------------------
TOTAL COST OF REVENUES 1,536,770 1,339,300 1,154,460
-------------------------------------
OPERATING INCOME 353,697 314,306 253,085
Interest expense - net (12,073) (22,089) (19,410)
Realized gain from sale of investment 5,404 7,818 -
-------------------------------------
INCOME BEFORE INCOME TAXES 347,028 300,035 233,675
Income tax provision 138,811 123,014 95,807
-------------------------------------
NET INCOME $ 208,217 $ 177,021 $ 137,868
=====================================
NET INCOME PER SHARE:
Basic $ 1.11 $ 0.96 $ 0.75
=====================================
Diluted $ 1.09 $ 0.93 $ 0.73
=====================================
SHARES USED IN COMPUTING NET INCOME
PER SHARE:
Basic 186,929 184,788 184,714
=====================================
Diluted 191,584 189,804 190,018
=====================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, 2001 2000
------------- -----------
ASSETS
Cash and cash equivalents $136,088 $98,856
Accounts receivable-net 311,217 265,640
Securities processing receivables 1,427,051 2,193,291
Prepaid expenses and other assets 108,003 91,077
Investments 1,885,063 1,796,899
Property and equipment-net 247,748 205,555
Internally generated computer software-net 97,250 88,263
Intangible assets-net 1,109,822 846,739
------------- -----------
TOTAL $5,322,242 $5,586,320
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $83,303 $80,633
Securities processing payables 1,289,479 1,977,323
Short-term borrowings 112,800 19,725
Accrued expenses 241,904 182,090
Accrued income taxes 15,373 22,207
Deferred revenues 171,101 156,668
Customer retirement account deposits 1,420,956 1,525,652
Deferred income taxes 39,407 34,992
Long-term debt 343,093 334,958
------------- -----------
TOTAL LIABILITIES 3,717,416 4,334,248
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock issued, 190,281,000 and 188,078,000
shares, respectively 1,903 1,881
Additional paid-in capital 564,959 454,817
Accumulated other comprehensive income 76,216 78,869
Accumulated earnings 961,748 753,531
Treasury stock, at cost, 2,372,900 shares in 2000 - (37,026)
------------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,604,826 1,252,072
------------- -----------
TOTAL $5,322,242 $5,586,320
============= ===========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Years ended December 31,
<TABLE>
<CAPTION>
2001 2000
------------------ --------------
<S> <C> <C>
SHARES ISSUED-300,000 AUTHORIZED:
Balance at beginning of year 125,388 125,388
Shares issued under stock plans-net 248 -
Shares issued for acquired companies 1,955 -
Three-for-two stock split 62,690 -
----------------- --------------
Balance at end of year 190,281 125,388
================= ==============
COMMON STOCK-PAR VALUE $0.01 PER SHARE:
Balance at beginning of year $1,254 $1,254
Shares issued under stock plans-net 2 -
Shares issued for acquired companies 20 -
Three-for-two stock split 627 -
----------------- --------------
Balance at end of year 1,903 1,254
----------------- --------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 455,444 458,550
Shares issued under stock plans-net of income tax benefit 9,442 (3,106)
Shares issued for acquired companies 100,700 -
Three-for-two stock split (627) -
----------------- --------------
Balance at end of year 564,959 455,444
----------------- --------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of year 78,869 125,026
Unrealized gains (losses) on investments-net of tax 9,710 $ 9,710 (39,765) $(39,765)
Reclassification adjustment for realized gains
included in net income (3,513) (3,513) (5,082) (5,082)
Fair market value adjustment on derivatives-net of tax (5,272) (5,272) - -
Foreign currency translation adjustment (881) (881) (1,310) (1,310)
Other (2,697) -
----------------- --------------
76,216 78,869
----------------- --------------
ACCUMULATED EARNINGS:
Balance at beginning of year 753,531 576,510
Net income 208,217 208,217 177,021 177,021
---------------- ------------- -------------- ---------------
961,748 753,531
Balance at end of year ---------------- --------------
TREASURY STOCK, AT COST:
Balance at beginning of year (37,026) (70,324)
Purchase of treasury stock - (9,884)
Shares issued under stock plans-net 20,655 43,182
Shares issued for acquired companies 16,371 -
----------------- --------------
Balance at end of year - (37,026)
----------------- --------------
TOTAL COMPREHENSIVE INCOME $208,261 $130,864
============== ===============
TOTAL SHAREHOLDERS' EQUITY $1,604,826 $1,252,072
================= ==============
<CAPTION>
(In thousands)
Years ended December 31, 1999
----------
<S> <C>
SHARES ISSUED-300,000 AUTHORIZED:
Balance at beginning of year 83,253
Shares issued under stock plans-net 394
Shares issued for acquired companies -
Three-for-two stock split 41,741
--------------
Balance at end of year 125,388
==============
COMMON STOCK-PAR VALUE $0.01 PER SHARE:
Balance at beginning of year $833
Shares issued under stock plans-net 4
Shares issued for acquired companies -
Three-for-two stock split 417
--------------
Balance at end of year 1,254
--------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 448,877
Shares issued under stock plans-net of income tax benefit 10,090
Shares issued for acquired companies -
Three-for-two stock split (417)
--------------
Balance at end of year 458,550
--------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of year 39,875
Unrealized gains (losses) on investments-net of tax 85,496 $85,496
Reclassification adjustment for realized gains
included in net income - -
Fair market value adjustment on derivatives-net of tax - -
Foreign currency translation adjustment (345) (345)
Other -
--------------
Balance at end of year 125,026
--------------
ACCUMULATED EARNINGS:
Balance at beginning of year 438,642
Net income 137,868 137,868
--------------- -----------
Balance at end of year 576,510
--------------
TREASURY STOCK, AT COST:
Balance at beginning of year (42,430)
Purchase of treasury stock (28,713)
Shares issued under stock plans-net 819
Shares issued for acquired companies -
--------------
Balance at end of year (70,324)
--------------
TOTAL COMPREHENSIVE INCOME $223,019
============
TOTAL SHAREHOLDERS' EQUITY $1,091,016
==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
Years ended December 31, 2001 2000 1999
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 208,217 $ 177,021 $ 137,868
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized gain from sale of investment (5,404) (7,818) -
Deferred income taxes 11,700 4,813 14,183
Depreciation and amortization of
property and equipment 76,701 70,147 63,713
Amortization of intangible assets 35,532 42,812 22,600
Amortization of internally generated computer software 35,463 35,883 33,194
-----------------------------------
362,209 322,858 271,558
Changes in assets and liabilities-net of effects from
acquisitions of businesses:
Accounts receivable (1,656) (21,153) 18,853
Prepaid expenses and other assets (10,694) (179) (3,299)
Accounts payable and accrued expenses (7,669) 9,706 14,394
Deferred revenues 6,422 24,844 17,210
Accrued income taxes 15,127 32,674 (1)
Securities processing receivables and payables - net 78,396 215,718 (140,878)
-----------------------------------
Net cash provided by operating activities 442,135 584,468 177,837
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (67,974) (72,979) (69,697)
Capitalization of internally generated computer software (36,635) (34,008) (26,052)
Payment for acquisitions of businesses-
net of cash acquired (224,842) (88,764) (210,587)
Investments (72,571) 136,726 (209,011)
-----------------------------------
Net cash used in investing activities (402,022) (59,025) (515,347)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term borrowings-net 93,075 (214,625) 119,226
Proceeds from long-term debt 1,800 5,004 103,523
Repayments of long-term debt (8,113) (143,899) (52,790)
Issuance of common stock 15,053 20,576 5,913
Purchases of treasury stock - (9,884) (28,713)
Customer retirement account deposits (104,696) (164,313) 199,347
-----------------------------------
Net cash (used in) provided by financing activities (2,881) (507,141) 346,506
-----------------------------------
Change in cash and cash equivalents 37,232 18,302 8,996
Beginning balance 98,856 80,554 71,558
-----------------------------------
Ending balance $ 136,088 $ 98,856 $ 80,554
===================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2001, 2000 and 1999
NOTE 1. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Fiserv, Inc. and
all majority owned subsidiaries (the "Company"). All significant intercompany
transactions and balances have been eliminated in consolidation. Certain amounts
reported in prior periods have been reclassified to conform to the 2001
presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FAIR VALUES
The fair values of cash equivalents, accounts receivable, accounts payable,
securities processing receivables and payables, customer retirement account
deposits, short-term borrowings and accrued expenses approximate the carrying
value due to the short period of time to maturity. The fair value of investments
is determined based on quoted market prices. The fair value of long-term
borrowings is estimated using discounted cash flows based on the Company's
current incremental borrowing rates and the fair value of derivative instruments
is determined based on dealer quotes (see Note 3).
DERIVATIVE INSTRUMENTS
The Company uses interest rate swaps to hedge its exposure to interest rate
changes. Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value. If the derivative
instrument is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative instrument are either recognized in net income or in
other comprehensive income until the hedged item is recognized in net income.
The adoption of SFAS No. 133 on January 1, 2001, did not have a significant
effect on the consolidated financial statements. The Company's accounting method
for derivative financial instruments is based upon the designation of such
instruments as hedges under accounting principles generally accepted in the
United States of America. It is the policy of the Company to execute such
instruments with creditworthy banks and not to enter into derivative financial
instruments for speculative purposes.
REVENUE RECOGNITION
Revenues from the sale of data processing services, plastic card services,
document solutions and administration fees on trust accounts are recognized as
the related services are provided or when the product is shipped. Revenues from
the sale of securities processing services are recognized as securities
transactions are processed on a trade-date basis. Revenues from securities
processing and trust services include net investment income of $101,610,000,
$124,338,000 and $88,458,000, net of direct credits to customer accounts of
$45,154,000, $94,133,000 and $63,519,000 in 2001, 2000 and 1999, respectively.
Revenues from software license fees are recognized when written contracts are
signed, delivery of the product has occurred, the fee is fixed or determinable
and collection is probable. Maintenance fee revenues are recognized ratably over
the term of the related support period, generally 12 months. Consulting revenues
are recognized as the related services are provided.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and investments with original
maturities of 90 days or less.
SECURITIES PROCESSING RECEIVABLES AND PAYABLES
The Company's securities processing subsidiaries had receivables from and
payables to brokers or dealers and clearing organizations related to the
following at December 31:
(In thousands) 2001 2000
-----------------------
RECEIVABLES:
Securities failed to deliver $ 39,611 $ 17,974
Securities borrowed 706,918 1,101,261
Receivables from customers 649,252 1,036,114
Other 31,270 37,942
-----------------------
TOTAL $1,427,051 $2,193,291
=======================
PAYABLES:
Securities failed to receive $ 50,563 $ 19,558
Securities loaned 797,619 1,405,107
Payables to customers 354,515 462,485
Other 86,782 90,173
-----------------------
TOTAL $1,289,479 $1,977,323
========================
Securities failed to deliver and failed to receive represent the contract value
of securities that have not been delivered or received as of the settlement
date. Securities borrowed and loaned represent deposits made to or received from
other broker-dealers. Receivables from and payables to customers represent
amounts due on cash and margin transactions.
<PAGE>
INVESTMENTS
The Company's trust administration subsidiaries accept money market deposits
from trust customers and invest the funds in securities. Such amounts due trust
depositors represent the primary source of funds for the Company's investment
securities and amounted to $1,420,956,000 and $1,525,652,000 as of December 31,
2001 and 2000, respectively. Trust account investments in government agency and
certain fixed income obligations have an average duration of approximately two
years and three months at December 31, 2001. These investments are held to
maturity and carried at amortized cost as the Company has the ability and intent
to hold these investments to maturity.
Available for sale equity investments are carried at market, based upon quoted
market prices. Unrealized gains or losses on available for sale equity
investments are accumulated in shareholders' equity as other comprehensive
income, net of related deferred income taxes. Related gross unrealized gains
were $142,224,000 and $134,270,000 as of December 31, 2001 and 2000,
respectively. Realized gains or losses are computed based on specific
identification of the equity investments sold.
The following summarizes the Company's investments at December 31:
<TABLE>
<CAPTION>
2001 2000
------------------------------ ------------------------
Carrying Estimated Carrying Estimated
(In thousands) Value Fair Value Value Fair Value
------------------------------ ------------------------
<S> <C> <C> <C> <C>
U.S. Government and government
agency obligations $ 986,531 $ 998,026 $ 737,291 $ 741,699
Other fixed income obligations 600,156 613,621 760,824 766,278
------------------------------ ------------------------
Total held to maturity investments 1,586,687 1,611,647 1,498,115 1,507,977
Available for sale equity investments 145,417 145,417 137,100 137,100
Money market mutual funds 115,901 115,901 142,467 142,467
Other investments 37,058 37,058 19,217 19,217
------------------------------ ------------------------
TOTAL $1,885,063 $1,910,023 $1,796,899 $1,806,761
============================== ========================
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed primarily using the straight-line method over the estimated useful
lives of the assets, ranging from three to 40 years. Property and equipment
consist of the following at December 31:
(In thousands) 2001 2000
-------------------------------
Data processing equipment $279,714 $232,597
Purchased software 113,205 98,033
Buildings and leasehold improvements 105,416 89,799
Furniture and equipment 134,494 111,615
-------------------------------
632,829 532,044
Less accumulated depreciation and amortization 385,081 326,489
-------------------------------
TOTAL $247,748 $205,555
===============================
INTERNALLY GENERATED COMPUTER SOFTWARE
The Company capitalizes certain costs incurred to develop new software or
enhance existing software which is marketed externally or utilized by the
Company to process customer transactions. Costs are capitalized commencing when
the technological feasibility of the software has been established. Amortization
of capitalized costs is computed on a straight-line basis over the expected
useful life of the product, generally three to five years. Routine maintenance
of software products, design costs and development costs incurred prior to
establishment of a product's technological feasibility are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
(In thousands) 2001 2000
---------------------------------------
Goodwill $1,146,112 $843,658
Other 156,825 151,299
---------------------------------------
1,302,937 994,957
Less accumulated amortization 193,115 148,218
---------------------------------------
TOTAL $1,109,822 $846,739
=======================================
The excess of the purchase price over the estimated fair value of tangible and
identifiable intangible assets acquired is recorded as goodwill and is generally
amortized over 40 years using the straight-line method prior to the adoption of
recent accounting pronouncements. Other intangible assets consist primarily of
computer software, contract rights, customer bases and trademarks applicable to
acquired businesses. These assets are generally amortized using the
straight-line method over their estimated useful lives, ranging from three to 35
years.
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the likelihood of recovering the cost of
long-lived assets based on current and projected operating results and cash
flows of the related business operations using undiscounted cash flow analyses.
These factors, along with management's plans with respect to the operations, are
considered in assessing the recoverability of property, equipment and intangible
assets. Measurement of any impairment loss is based on discounted operating cash
flows. During 2000, the Company recorded a charge of $11,000,000 for impairment
of goodwill associated with the consolidation of certain ancillary product lines
in the Company's software businesses. This charge was recorded in the Financial
institution outsourcing, systems and services segment as additional amortization
of intangible assets.
SHORT-TERM BORROWINGS
The Company's securities and trust processing subsidiaries had short-term loans
payable of $112,800,000 and $19,725,000 as of December 31, 2001 and 2000,
respectively, which bear interest at an average rate of 1.8% as of December 31,
2001, and were collateralized by investments and customers' margin account
securities.
INCOME TAXES
The consolidated financial statements are prepared on the accrual method of
accounting. Deferred income taxes are provided for temporary differences between
the Company's income for accounting and tax purposes.
NET INCOME PER SHARE
Basic net income per share is computed using the weighted average number of
common shares outstanding during the periods. Diluted net income per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the periods. Common equivalent shares
consist of stock options and are computed using the treasury stock method. Net
income per share for prior years has been restated to reflect a three-for-two
stock split effective in August 2001.
SHAREHOLDER RIGHTS PLAN
The Company has a shareholder rights plan. Under this plan, each shareholder
holds one preferred stock purchase right for each outstanding share of the
Company common stock held. The stock purchase rights are not exercisable until
certain events occur.
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
-------------------------------------------------
<S> <C> <C> <C>
Interest paid $ 19,469 $ 29,346 $ 26,075
Income taxes paid 117,443 87,633 81,499
Liabilities assumed in acquisitions
of businesses 68,833 401,129 246,120
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually. The
Company will adopt SFAS No. 142 on January 1, 2002. The Company anticipates that
the effect of adopting SFAS No. 142 will increase diluted net income per share
by approximately $0.09 in 2002, due to eliminating the annual amortization
expense and related tax effects associated with existing goodwill and intangible
assets with indefinite lives. The Company has not yet completed its assessment
of the additional effects of adopting SFAS No. 142, but anticipates that there
will not be a material impact on the consolidated financial statements, other
than the elimination of amortization expense and related tax effects discussed
above.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets," which addresses the financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. The Company will adopt SFAS No. 144 on January 1, 2002. The
Company anticipates that the adoption of this statement will not have a material
impact on the consolidated financial statements.
<PAGE>
NOTE 2. Acquisitions
During 2001, 2000 and 1999 the Company completed the following acquisitions:
<TABLE>
<CAPTION>
Month
Company Acquired Service Consideration
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2001:
Benefit Planners Jan. Insurance data processing Cash and
stock for stock
Marshall & Ilsley IP services Feb. Item processing Cash for assets
Facilities and Services Corp. Mar. Insurance software systems Cash for stock
Remarketing Services of America, Inc. Mar. Automobile leasing services Cash for stock
EPSIIA Corporation July Data processing Cash for stock
Catapult Technology Limited July Software and services Cash for stock
FHLB of Pittsburgh IP services Sept. Item processing Cash for assets
NCR bank processing operations Nov. Data and item processing Cash for assets
NCSI Nov. Insurance data processing Cash for stock
Integrated Loan Services Nov. Loan services Cash for assets
Trewit Inc. Nov. Insurance data processing Cash and
stock for stock
FACT 400 credit card solution Nov. Software and services Cash for assets
2000:
Patterson Press, Inc. Jan. Card services Cash for stock
Resources Trust Company May Data processing for retirement Cash for assets
planning
National Flood Services, Inc. Sept. Insurance data processing Cash for stock
1999:
QuestPoint Jan. Item processing Cash for assets
Eldridge & Associates Feb. PC-based financial systems Cash for assets
RF/Spectrum Decision Science Corp. Feb. Software and services Cash for stock
FIPSCO, Inc. Mar. Insurance marketing systems Cash for stock
Progressive Data Solutions, Inc./ Apr. Insurance software systems Cash for stock
Infinity Software Systems, Inc.
JWGenesis Clearing Corporation June Securities services Cash for stock
Alliance ADS June Imaging technology Cash for assets
Envision Financial Technologies, Inc. Aug. Data processing Cash for stock
Pinehurst Analytics, Inc. Oct. PC-based financial systems Cash for assets
Humanic Design Corporation Dec. Software and services Cash for stock
</TABLE>
The acquisitions were accounted for as purchases and, accordingly, the
operations of the acquired companies were included in the consolidated financial
statements since their respective dates of acquisition as set forth above. Net
cash paid in connection with these acquisitions was $224,842,000, $88,764,000
and $210,587,000 in 2001, 2000 and 1999, respectively, subject to certain
adjustments and contingent payments. The Company may be required to pay
additional cash and common stock consideration for the 2001 acquisitions, if
certain of the acquired entities achieve specific escalating operating income
targets during the next four years, up to a maximum cumulative payment of
$190,000,000. Any additional consideration will be treated as additional
purchase price. In addition to cash consideration, the Company also issued in
conjunction with two of the acquisitions in 2001 approximately 3,050,000
unregistered shares of its common stock, valued at approximately $117,000,000.
The Company has made preliminary purchase price allocations for its 2001
acquisitions resulting in the recording of goodwill of approximately
$300,000,000, however, these initial estimates need to be refined. The Company
anticipates finalizing the purchase price allocations within one year of each
acquisition.
If the acquisitions completed in 2001 had been completed on January 1, 2000, the
Company's unaudited pro forma revenues would have approximated $2,177,000,000
and $1,973,000,000 in 2001 and 2000, respectively. The Company's unaudited pro
forma net income and net income per share - diluted would not have been
significantly different from the amounts originally reported.
<PAGE>
NOTE 3. Long-term debt
The Company has available a $497,500,000 unsecured line of credit and commercial
paper facility with a group of banks, of which $214,000,000 was in use at
December 31, 2001. The credit facilities, which expire in May 2004, are
comprised of a $250,000,000 five-year revolving credit facility and a
$247,500,000 364-day revolving credit facility which is renewable annually
through 2004. There were no significant commitment fees or compensating balance
requirements under these facilities. The loan agreements covering the Company's
long-term borrowings contain certain restrictive covenants with which the
Company was in compliance at December 31, 2001. As of December 31, 2001, the
Company had interest rate swap agreements to fix the interest rates on certain
floating rate debt at an average rate approximating 6.75% (based on current bank
fees and spreads) for a principal amount of $200,000,000 until 2005.
As of December 31, 2001, the Company has available $100,000,000 in additional
unsecured lines of credit, of which $52,000,000 was in use at an average
variable rate of 2.3%.
The carrying value and estimated fair values of the Company's long-term debt and
interest rate swap agreements at December 31, 2001 and 2000, are as follows:
<TABLE>
<CAPTION>
2001 2000
-----------------------------------------------------------------------
Carrying Estimated Carrying Estimated
(In thousands) Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
8.00% senior notes payable, due 2002-2005 $ 51,428 $ 56,871 $ 64,286 $ 65,692
Bank notes and commercial paper, at short-term rates 291,665 291,665 270,672 270,672
-----------------------------------------------------------------------
Long-term debt $343,093 $348,536 $334,958 $336,364
=======================================================================
Interest rate swap agreements $ 13,062 $ 13,062 - $ 4,493
=======================================================================
</TABLE>
Annual principal payments required under the terms of the long-term debt
agreements were as follows at December 31, 2001: (In thousands)
Years ending December 31,
2002 $ 48,409
2003 15,660
2004 265,169
2005 13,855
-----------
TOTAL $343,093
===========
Interest expense with respect to long-term debt was approximately $20,159,000,
$28,823,000 and $25,111,000 in 2001, 2000 and 1999, respectively.
NOTE 4. Income taxes
A reconciliation of recorded income tax expense with income tax computed at the
statutory federal tax rates for the three years ended December 31, 2001, is as
follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
-------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate 35% 35% 35%
Tax computed at statutory rate $121,460 $105,012 $81,786
State income taxes net of federal effect 12,033 11,156 9,375
Non-deductible amortization 4,219 3,887 3,161
Other 1,099 2,959 1,485
-------------------------------------------------------------
TOTAL $138,811 $123,014 $95,807
=============================================================
<CAPTION>
The provision for income taxes consisted of the following:
(In thousands) 2001 2000 1999
-------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $108,993 $101,906 $69,250
State 18,118 16,295 12,374
-------------------------------------------------------------
127,111 118,201 81,624
-------------------------------------------------------------
Deferred:
Federal 10,752 4,425 11,833
State 948 388 2,350
-------------------------------------------------------------
11,700 4,813 14,183
-------------------------------------------------------------
TOTAL $138,811 $123,014 $95,807
=============================================================
</TABLE>
<PAGE>
Significant components of the Company's net deferred tax (liability) asset
consisted of the following at December 31:
<TABLE>
<CAPTION>
(In thousands) 2001 2000
--------------------------------------
<S> <C> <C>
Purchased incomplete software technology $ 37,477 $ 43,051
Accrued expenses not currently deductible 33,671 27,380
Deferred revenues 11,916 15,494
Internally generated capitalized software (31,641) (30,373)
Excess of tax over book depreciation
and amortization (29,739) (25,413)
Unrealized gains on investments (55,467) (53,722)
Other (5,624) (11,409)
--------------------------------------
TOTAL $(39,407) ($34,992)
======================================
</TABLE>
Tax benefits associated with the exercise of non-qualified employee stock
options were credited directly to additional paid-in capital and amounted to
$15,000,000, $19,500,000 and $5,000,000 in 2001, 2000 and 1999, respectively.
NOTE 5. Employee Benefit Plans
STOCK OPTION PLAN
The Company's Stock Option Plan (the "Plan") provides for the granting to its
employees and directors of either incentive or non-qualified options to purchase
shares of the Company's common stock for a price not less than 100% of the fair
value of the shares at the date of grant. In general, 20% of the shares awarded
under the Plan may be purchased annually and expire 10 years from the date of
the award. Changes in stock options outstanding are as follows:
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
------------------------------------
<S> <C> <C>
Outstanding, December 31, 1998 12,685,310 $ 9.71
Granted 2,302,904 20.63
Forfeited (525,140) 18.28
Exercised (868,647) 8.32
------------------------------------
Outstanding, December 31, 1999 13,594,427 11.26
Granted 1,791,981 21.48
Forfeited (625,236) 19.18
Exercised (2,303,616) 8.85
------------------------------------
Outstanding, December 31, 2000 12,457,556 12.76
Granted 2,277,308 36.99
Forfeited (386,366) 18.18
Exercised (1,345,341) 8.68
------------------------------------
Outstanding, December 31, 2001 13,003,157 $17.18
====================================
</TABLE>
The following summarizes information about the Company's stock options
outstanding and exercisable at December 31, 2001:
<TABLE>
<CAPTION>
Options Outstanding
Options Outstanding and Exercisable
------------------------------------------------------------------- ------------------------------------
Weighted Weighted Average Weighted
Range of Number of Average Remaining Number of Average
Exercise Prices Shares Exercise Price Contractual Life Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.84 - $ 9.04 3,965,650 $ 6.48 2.6 3,965,650 $ 6.48
9.32 - 19.67 3,862,265 14.16 5.7 3,150,325 13.82
20.14 - 40.34 5,175,242 27.63 8.3 1,912,961 24.22
- ---------------------------------------------------------------------------------------------------------------------------------
$ 1.84 - $40.34 13,003,157 $17.18 5.8 9,028,936 $12.80
=================================================================================================================================
</TABLE>
<PAGE>
At December 31, 2001, options to purchase 9,943,900 shares were available for
grant under the Plan. The Company has accounted for its stock-based compensation
plans in accordance with the provisions of Accounting Principles Board Opinion
25, "Accounting for Stock Issued to Employees." Accordingly, the Company did not
record any compensation expense in the accompanying consolidated financial
statements for its stock-based compensation plans. Had compensation expense been
recognized consistent with SFAS No.123, "Accounting for Stock-Based
Compensation," the Company's net income and net income per share - diluted would
have been changed to the pro forma amounts indicated below:
(In thousands, except per share data)
<TABLE>
<CAPTION>
2001 2000 1999
---------- ----------- ----------
<S> <C> <C> <C>
Net income:
As reported $208,217 $177,021 $137,868
Pro forma 194,817 167,321 131,868
Net income per share-diluted:
As reported $ 1.09 $ 0.93 $ 0.73
Pro forma 1.02 0.88 0.69
</TABLE>
The fair value of each stock option granted in 2001, 2000 and 1999 was estimated
on the date of grant using the Black-Scholes pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
2001 2000 1999
--------- --------- ----------
<S> <C> <C> <C>
Expected life (in years) 5.0 5.0 5.0
Risk-free interest rate 4.6% 5.0% 6.0%
Volatility 49.8% 48.6% 41.8%
Dividend yield 0.0% 0.0% 0.0%
</TABLE>
The weighted-average estimated fair value of stock options granted during 2001,
2000 and 1999 was $18.02, $10.72 and $8.79 per share, respectively.
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 2000, the Company adopted an employee stock purchase plan
under which eligible employees may purchase a limited number of shares of common
stock each quarter through payroll deductions, at a purchase price equal to 85%
of the closing price of the Company's common stock on the last business day of
each calendar quarter. As of January 1, 2002, there were 999,600 shares
available for grant under this plan.
EMPLOYEE SAVINGS PLAN
The Company and its subsidiaries have contributory savings plans covering
substantially all employees, under which eligible participants may elect to
contribute a specified percentage of their salaries, subject to certain
limitations. The Company makes matching contributions, subject to certain
limitations, and makes discretionary contributions based upon the attainment of
certain profit goals. Company contributions vest ratably at 20% for each year of
service. Contributions charged to operations under these plans approximated
$35,300,000, $30,400,000 and $24,000,000 in 2001, 2000 and 1999, respectively.
NOTE 6. Restructuring and Other Charges
In the second quarter of 2001, the Company recorded $12,300,000 of pre-tax
charges consisting of severance and related termination benefits ($3,800,000),
future lease and other contractual obligations ($6,200,000), and the disposal
and write-down of assets ($2,300,000). These charges relate to management's plan
to improve overall business efficiencies by consolidating the Company's
securities processing operations and eliminating duplicate operational
functions. As of December 31, 2001, the remaining accrued expenses related to
these charges were $6,200,000.
<PAGE>
NOTE 7. Leases, other commitments and contingencies
LEASES
Future minimum rental payments on various operating leases for office facilities
and equipment were due as follows as of December 31, 2001:
(In thousands)
Years Ending December 31,
2002 $ 77,087
2003 66,838
2004 55,208
2005 41,763
2006 30,323
Thereafter 68,135
--------------
TOTAL $339,354
==============
Rent expense applicable to all operating leases was approximately $87,100,000,
$83,100,000 and $78,600,000 in 2001, 2000 and 1999, respectively.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's trust administration subsidiaries had fiduciary responsibility for
the administration of approximately $29 billion in trust funds as of December
31, 2001. With the exception of the trust account investments discussed in Note
1, such amounts are not included in the accompanying consolidated balance
sheets.
The Company's securities processing subsidiaries are subject to the Uniform Net
Capital Rule of the Securities and Exchange Commission. At December 31, 2001,
the aggregate net capital of such subsidiaries was $143,825,000, exceeding the
net capital requirement by $128,944,000.
In the normal course of business, the Company and its subsidiaries are named as
defendants in various lawsuits in which claims are asserted against the Company.
In the opinion of management, the liabilities, if any, which may ultimately
result from such lawsuits are not expected to have a material adverse effect on
the consolidated financial statements of the Company.
<PAGE>
NOTE 8. Business Segment Information
The Company is a leading independent provider of data processing systems and
related information management services and products to financial institutions
and other financial intermediaries. The Company has three business segments:
Financial institution outsourcing, systems and services; Securities processing
and trust services; and All other and corporate. The Financial institution
outsourcing, systems and services segment provides account and transaction
processing solutions and services to financial institutions and other financial
intermediaries. The Securities processing and trust services segment provides
securities processing solutions and retirement plan administration services to
brokerage firms, financial planners and financial institutions. The All other
and corporate segment provides plastic card services and document solutions, and
includes general corporate expenses. The plastic card and document solutions
businesses provide plastic card issuance services, card design, personalization
and mailing, along with electronic document delivery and print-related
solutions.
Summarized financial information by business segment for each of the three years
in the period ended December 31, 2001, is as follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
--------------------------------------
<S> <C> <C> <C>
Revenues:
Financial institution outsourcing, systems and services $ 1,544,721 $ 1,243,509 $ 1,066,514
Securities processing and trust services 273,504 341,155 276,215
All other and corporate 72,242 68,942 64,816
--------------------------------------
Total $ 1,890,467 $ 1,653,606 $ 1,407,545
--------------------------------------
Operating income:
Financial institution outsourcing, systems and services $ 321,193 $ 218,935 $ 175,194
Securities processing and trust services 35,673 97,125 80,125
All other and corporate (3,169) (1,754) (2,234)
--------------------------------------
Total $ 353,697 $ 314,306 $ 253,085
--------------------------------------
Identifiable assets:
Financial institution outsourcing, systems and services $ 1,648,196 $ 1,185,819 $ 1,169,666
Securities processing and trust services 3,417,789 4,160,939 3,832,868
All other and corporate 256,257 239,562 305,176
--------------------------------------
Total $ 5,322,242 $ 5,586,320 $ 5,307,710
--------------------------------------
Depreciation expense:
Financial institution outsourcing, systems and services $ 58,046 $ 52,191 $ 48,407
Securities processing and trust services 12,659 11,395 9,510
All other and corporate 5,996 6,561 5,796
--------------------------------------
Total $ 76,701 $ 70,147 $ 63,713
--------------------------------------
Amortization of intangible assets:
Financial institution outsourcing, systems and services $ 23,127 $ 32,847 $ 18,843
Securities processing and trust services 11,538 9,104 3,040
All other and corporate 867 861 717
--------------------------------------
Total $ 35,532 $ 42,812 $ 22,600
--------------------------------------
Capital expenditures:
Financial institution outsourcing, systems and services $ 55,648 $ 54,750 $ 52,724
Securities processing and trust services 8,234 12,836 12,119
All other and corporate 4,092 5,393 4,854
--------------------------------------
Total $67,974 $ 72,979 $ 69,697
======================================
</TABLE>
The revenues of each segment were principally domestic, and no single customer
accounted for 10% or more of consolidated revenues during the years ended
December 31, 2001, 2000 and 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the relative
percentage which certain items in the Company's consolidated statements of
income bear to revenues and the percentage change in those items from period to
period.
<TABLE>
<CAPTION>
Percentage of Revenues Period to Period Percentage
Years Ended December 31, Increase (Decrease)
2001 vs. 2000 vs.
2001 2000 1999 2000 1999
----------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 14% 17%
-----------------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 48.8 48.0 48.1 16 17
Data processing expenses, rentals
and telecommunication costs 6.7 7.0 7.9 10 3
Other operating expenses 20.0 19.1 19.4 19 16
Depreciation and amortization of
property and equipment 4.0 4.2 4.5 9 10
Amortization of intangible assets 1.9 2.6 1.6 (17) 89
Amortization (capitalization) of internally
generated computer software-net (0.1) 0.1 0.5
-----------------------------------
Total cost of revenues 81.3 81.0 82.0 15 16
-----------------------------------
Operating income 18.7% 19.0% 18.0% 13% 24%
===================================
Income before income taxes 18.4% 18.1% 16.6% 16% 28%
===================================
Net income 11.0% 10.7% 9.8% 18% 28%
===================================
</TABLE>
Revenues increased $236,861,000 in 2001 and $246,061,000 in 2000. In 2001 and
2000, approximately 50% and 60% of the revenue growth, respectively, was derived
from sales to new clients, cross-sales to existing clients, increases in
transaction volumes from existing clients and price increases, with the
remaining revenue growth from acquired businesses. Revenue growth in 2001 was
positively impacted by strong growth of $301,212,000 compared to 2000 in the
Financial institution outsourcing, systems and services segment, which is the
Company's main operating segment. In addition, revenue growth was negatively
impacted by the Securities processing and trust services segment, primarily due
to significantly lower transaction volumes due to overall weakness in the United
States retail financial markets in 2001. Revenues for the Securities processing
and trust services segment decreased $79,651,000 in 2001 compared to 2000,
excluding a $12,000,000 termination fee received in 2001 from a broker-dealer
customer acquired by a third party.
Cost of revenues increased $197,470,000 in 2001 and $184,840,000 in 2000. The
make-up of cost of revenues has been affected in all years by business
acquisitions, changes in the mix of the Company's business and operational
efficiencies. In 2001, the Company recorded charges of $12,300,000, as explained
in Note 6 of the accompanying consolidated financial statements.
Amortization of intangible assets decreased $7,280,000 in 2001 and increased
$20,212,000 in 2000. The decrease in amortization in 2001 compared to 2000 was
due primarily to an impairment charge recorded in the second quarter of 2000,
offset by amortization associated with acquisitions completed prior to June 30,
2001. The increase in amortization in 2000 compared to 1999 was due to
amortization associated with acquisitions and the goodwill impairment charge.
Operating income increased $39,391,000 in 2001 and $61,221,000 in 2000. The
Company's operating income and margins were negatively impacted in 2001
primarily due to reduced operating income and margins in the Company's
Securities processing and trust services segment.
The effective income tax rate was 40% in 2001 and 41% in 2000 and 1999. The
effective income tax rate for 2002 is expected to decline from 40% to 39% due to
the impact of adopting SFAS No. 142.
Net income per share - diluted (excluding realized gain from sale of investment)
was $1.07 in 2001 compared to $0.91 in 2000.
The Company's growth has been accomplished, to a significant degree, through the
acquisition of businesses which are complementary to its operations. Management
believes that a number of acquisition candidates are available which would
further enhance its competitive position and plans to pursue them vigorously.
Management is engaged in an ongoing program to reduce expenses related to
acquisitions by eliminating operating redundancies. The Company's approach has
been to move slowly in achieving this goal in order to minimize the amount of
disruption experienced by its clients and the potential loss of clients due to
this program.
<PAGE>
SEGMENT INFORMATION
The following table sets forth revenue and operating income by business segment
for the years ended December 31:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenues:
Financial institution outsourcing, systems
and services $1,544,721 $1,243,509 $1,066,514
Securities processing and trust services 273,504 341,155 276,215
All other and corporate 72,242 68,942 64,816
-------------- -------------- ---------------
Total $1,890,467 $1,653,606 $1,407,545
-------------- -------------- ---------------
Operating income:
Financial institution outsourcing, systems
and services $321,193 $218,935 $175,194
Securities processing and trust services 35,673 97,125 80,125
All other and corporate (3,169) (1,754) (2,234)
-------------- -------------- ---------------
Total $353,697 $314,306 $253,085
-------------- -------------- ---------------
</TABLE>
Revenues in the Financial institution outsourcing, systems and services business
segment increased $301,212,000 in 2001 and $176,995,000 in 2000. Revenue growth
in 2001 and 2000 was derived from sales to new clients, cross-sales to existing
clients, growth in the transaction volume experienced by existing clients, price
increases and revenues from acquired businesses. Operating income in the
Financial institution outsourcing, systems and services business segment
increased $102,258,000 and $43,741,000 in 2001 and 2000, respectively. Operating
income and margin increases in 2001 and 2000 over prior periods were primarily
due to continued revenue growth, operational efficiencies, increased operating
leverage of existing operations and the impact of certain acquisitions.
Revenues in the Securities processing and trust services business segment
decreased $67,651,000 in 2001 and increased $64,940,000 in 2000. The revenue
decrease in 2001 compared to 2000 was primarily related to significantly lower
transaction volumes in the Securities processing and trust services segment due
to overall weakness in the United States retail financial markets in 2001,
partially offset by a termination fee of $12,000,000 received in the second
quarter of 2001 from a broker-dealer customer acquired by a third party. Revenue
growth in 2000 compared to 1999 was derived primarily from increased transaction
volumes from existing clients, sales to new clients and revenues from acquired
businesses. Operating income in the Securities processing and trust services
business segment decreased $61,452,000 in 2001 and increased $17,000,000 in
2000. In the second quarter of 2001, the segment recorded charges of
$12,300,000, as previously explained. Operating income and margins were lower in
2001 when compared to 2000 due primarily to reduced transaction volumes for
securities processing services due to overall weakness in the United States
retail financial markets in 2001.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the Company's primary sources (uses) of funds
during the years ended December 31:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
--------------- ------------- ------------
<S> <C> <C> <C>
Cash provided by operating activities before changes in
securities processing receivables and payables-net $ 363,739 $ 368,750 $ 318,715
Securities processing receivables and payables-net 78,396 215,718 (140,878)
--------------- ------------- ------------
Cash provided by operating activities 442,135 584,468 177,837
Increase (decrease) in net borrowings 86,762 (353,520) 169,959
--------------- ------------- ------------
TOTAL $ 528,897 $ 230,948 $ 347,796
=============== ============= ============
</TABLE>
The Company has used a significant portion of its cash flow from operations for
acquisitions and capital expenditures with any remainder used to reduce
long-term debt.
The Company's strategy includes the acquisition of complementary businesses
financed by a combination of internally generated funds and borrowings from the
Company's credit facilities. The Company believes that its cash flow from
operations together with other available sources of funds will be adequate to
meet its funding requirements. In the event that the Company makes significant
future acquisitions, however, it may raise funds through additional borrowings
or the issuances of securities.
The Company's policy is to retain earnings to support future business
opportunities, rather than to pay dividends. During 1999, the Company's Board of
Directors authorized the repurchase of up to 4,875,000 shares of the Company's
common stock. Shares purchased under the authorization will be made through open
market transactions that may occur from time to time as market conditions
warrant. Shares acquired will be held for issuance in connection with
acquisitions and employee stock option and purchase plans. As of December 31,
2001, approximately 2,771,000 shares remained available under the repurchase
authorization.
<PAGE>
MARKET RISK FACTORS
Market risk refers to the risk that a change in the level of one or more market
prices, interest rates, indices, correlations or other market factors, such as
liquidity, will result in losses for a certain financial instrument or group of
financial instruments. The Company is exposed primarily to interest rate risk
and market price risk on investments and borrowings. The Company actively
monitors these risks through a variety of control procedures involving senior
management.
The Company's trust administration subsidiaries accept money market account
deposits from trust customers and invest those funds in marketable securities.
Substantially all of the investments are rated within the highest investment
grade categories for securities. The Company's trust administration subsidiaries
utilize simulation models for measuring and monitoring interest rate risk and
market value of portfolio equities. A formal Asset Liability Committee of the
Company meets quarterly to review interest rate risks, capital ratios, liquidity
levels, portfolio diversification, credit risk ratings and adherence to
investment policies and guidelines. Substantially all of the investments at
December 31, 2001, have contractual maturities of one year or less except for
government agency and certain fixed income mortgage backed obligations, which
have an average duration of approximately two years and three months.
The Company manages its debt structure and interest rate risk through the use of
fixed and floating-rate debt and through the use of interest rate swaps. The
Company uses interest rate swaps to partially hedge its exposure to interest
rate changes, and to control its financing costs. Generally, under these swaps,
the Company agrees with a counterparty to exchange the difference between
fixed-rate and floating-rate interest amounts based on an agreed principal
amount. Based on the controls in place, management believes the risks associated
with these financial instruments at December 31, 2001, will not have a material
effect on the Company's consolidated financial position or results of
operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed in
this Annual Report are forward-looking statements which involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, services
and related products, prices and other factors discussed in the Company's prior
filings with the Securities and Exchange Commission. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate.
Therefore, there can be no assurance that the forward-looking statements
included in this Annual Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
<PAGE>
Selected Financial Data
The following data, which has been affected by acquisitions, should be read in
conjunction with the consolidated financial statements and related notes thereto
included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
(In thousands, except per share data)
Years ended December 31, 2001 2000 1999 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $1,890,467 $1,653,606 $1,407,545 $1,233,670 $974,432
Income before income taxes 347,028 300,035 233,675 193,684 153,899
Income tax provision 138,811 123,014 95,807 79,410 63,099
Net income 208,217 177,021 137,868 114,274 90,800
Net income per share:
Basic $1.11 $0.96 $0.75 $0.62 $0.52
------------------------------------------------------------
Diluted $1.09 $0.93 $0.73 $0.60 $0.50
------------------------------------------------------------
Diluted (excluding realized gain from sale of investment) $1.07 $0.91 $0.73 $0.60 $0.50
------------------------------------------------------------
Total assets $5,322,242 $5,586,320 $5,307,710 $3,958,338 $3,636,491
Long-term debt 343,093 334,958 472,824 389,622 252,031
Shareholders' equity 1,604,826 1,252,072 1,091,016 885,797 769,255
</TABLE>
The above information has been restated to recognize three-for-two stock splits
effective in August 2001, April 1999 and May 1998.
<PAGE>
QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data) Quarters
------------------------------------------
2001 First Second Third Fourth Total
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $453,912 $472,646 $467,173 $496,736 $1,890,467
Cost of revenues 367,307 384,267 377,958 407,238 1,536,770
-----------------------------------------------------
Operating income 86,605 88,379 89,215 89,498 353,697
Interest expense - net (3,817) (3,237) (2,501) (2,518) (12,073)
Realized gain from sale of investment 1,821 1,506 1,000 1,077 5,404
-----------------------------------------------------
Income before income taxes 84,609 86,648 87,714 88,057 347,028
Income tax provision 33,844 34,659 35,085 35,223 138,811
-----------------------------------------------------
Net income $ 50,765 $51,989 $52,629 $52,834 $208,217
-----------------------------------------------------
Net income per share:
Basic $0.27 $0.28 $0.28 $0.28 $1.11
=====================================================
Diluted $0.27 $0.27 $0.27 $0.27 $1.09
=====================================================
Diluted (excluding realized gain from sale of investment) $0.26 $0.27 $0.27 $0.27 $1.07
=====================================================
<CAPTION>
2000
<S> <C> <C> <C> <C> <C>
Revenues $396,402 $416,434 $406,189 $434,581 $1,653,606
Cost of revenues 317,448 337,046 327,966 356,840 1,339,300
------------------------------------------------------
Operating income 78,954 79,388 78,223 77,741 314,306
Interest expense - net (5,806) (6,000) (5,295) (4,988) (22,089)
Realized gain from sale of investment - 2,928 2,907 1,983 7,818
------------------------------------------------------
Income before income taxes 73,148 76,316 75,835 74,736 300,035
Income tax provision 29,991 31,289 31,093 30,641 123,014
------------------------------------------------------
Net income $43,157 $45,027 $44,742 $44,095 $177,021
------------------------------------------------------
Net income per share:
Basic $0.23 $0.24 $0.24 $0.24 $0.96
======================================================
Diluted $0.23 $0.24 $0.23 $0.23 $0.93
======================================================
Diluted (excluding realized gain from sale of investment) $0.23 $0.23 $0.22 $0.22 $0.91
======================================================
</TABLE>
MARKET PRICE INFORMATION
The following information relates to the closing price of the Company's $.01 par
value common stock, which is traded on the Nasdaq Stock Market under the symbol
FISV. Information has been adjusted to recognize the three-for-two stock split
effective August 2001.
2001 2000
- ------------------------------------------------------------------
Quarter Ended High Low High Low
- ------------------------------------------------------------------
March 31 $38.00 $29.58 $25.67 $16.21
June 30 42.65 30.29 33.58 22.46
September 30 42.12 32.72 42.75 28.46
December 31 44.39 31.93 41.75 28.96
At December 31, 2001, the Company's common stock was held by 2,842 shareholders
of record. It is estimated that an additional 40,000 shareholders own the
Company's stock through nominee or street name accounts with brokers. The
closing sale price for the Company's stock on January 23, 2002, was $43.30 per
share.
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of Fiserv, Inc. assumes responsibility for the integrity and
objectivity of the information appearing in the 2001 Annual Report. This
information was prepared in conformity with accounting principles generally
accepted in the United States of America and necessarily reflects the best
estimates and judgment of management.
To provide reasonable assurance that transactions authorized by management are
recorded and reported properly and that assets are safeguarded, the Company
maintains a system of internal controls. The concept of reasonable assurance
implies that the cost of such a system is weighed against the benefits to be
derived therefrom.
The control environment is complemented by the Company's internal audit
function, which evaluates the adequacy of the controls, policies and procedures
in place, as well as adherence to them, and recommends improvements for
implementation when applicable. In addition, Deloitte & Touche LLP, certified
public accountants, audits the financial statements of the Company in accordance
with auditing standards generally accepted in the United States of America.
Their audit includes a review of the internal control system, and improvements
are made to the system based upon their recommendations.
The Audit Committee ensures that management and the independent auditors are
properly discharging their financial reporting responsibilities. In performing
this function, the Committee meets with management and the independent auditors
throughout the year. Additional access to the Committee is provided to Deloitte
& Touche LLP on an unrestricted basis, allowing discussion of audit results and
opinions on the adequacy of internal accounting controls and the quality of
financial reporting.
/s/ Leslie M. Muma
- ------------------
LESLIE M. MUMA
President and Chief Executive Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
SHAREHOLDERS AND DIRECTORS OF FISERV, INC.
We have audited the accompanying consolidated balance sheets of Fiserv, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Fiserv, Inc. and subsidiaries at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Milwaukee, Wisconsin
January 25, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>dex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name under which Subsidiary does Business State (Country) of Incorporation
<S> <C>
The Affinity Group, Inc. Colorado
Agio Insurance Agency, Inc. Montana
Aspen Investment Alliance, Inc. Colorado
Benefit Control Management, LLC Texas
Benefit Planners Limited, L.L.P. Texas
Benesight Insurance Agency of Massachusetts, Inc. Delaware
Benesight, Inc. Delaware
BHC Investments, Inc. Delaware
BHC Trading Corp. Delaware
BHCM Insurance Agency, Inc. Delaware
BP, Inc. Delaware
Catapult Technology Limited England
Cusick Enterprises Limited, L.L.P. Texas
Cusick Management, LLC Texas
Data-Chain Solutions, Inc. Delaware
Data-Link Systems, LLC Wisconsin
Employee Benefit Services, Inc. Louisiana
EPSIIA Corporation Texas
F.T. Agency, Inc. Ohio
First Trust Corporation Colorado
Fiserv (ASPAC) Pte. Ltd. Singapore
Fiserv (Europe) Ltd. England
Fiserv Argentina S.R.L. Argentina
Fiserv Australia Pty. Limited New South Wales
Fiserv BP, Inc. Wisconsin
Fiserv BPI, Inc. Texas
Fiserv CIR, Inc. Delaware
Fiserv Clearing, Inc. Delaware
Fiserv Colombia Limitada Colombia
Fiserv Connecticut Sub, Inc. Connecticut
Fiserv FSC, Inc. California
Fiserv Federal Systems, Inc. Delaware
FIserv Fresno, Inc. California
Fiserv Insurance Agency of Alabama, Inc. Alabama
Fiserv Investor Services, Inc. Delaware
Fiserv International (Barbados) Limited Barbados
Fiserv LeMans, Inc. Pennsylvania
Fiserv Mercosur, Inc. Delaware
Fiserv NCSI, Inc. Maryland
Fiserv Polska Sp. z.o.o. Poland
Fiserv San Juan, Inc. Puerto Rico
Fiserv Securities, Inc. Delaware
Fiserv Solutions of Canada Inc. Ontario
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name under which Subsidiary does Business State (Country) of Incorporation
<S> <C>
Fiserv Solutions, Inc. Wisconsin
The Freedom Group, Inc. Iowa
Harrington Benefit Services, Inc. Delaware
HEC Newbridge Insurance Services, Inc. Texas
HEPSIIAN LLC Delaware
ILS Title Agency, LLC Delaware
ILS Services, LLC Delaware
Information Technology, Inc. Nebraska
ITI of Nebraska, Inc. Nebraska
J.O. One, Ltd. Texas
Life Instructors, Inc. New Jersey
Lincoln Trust Company Colorado
National Flood Services, Inc. Montana
Precision Direct, Inc. Washington
Preferred Health Arrangement Limited, LLP Texas
PT Fiserv Indonesia Indonesia
Remarketing Services of America, Inc. Delaware
REH Agency, Inc. Ohio
RemitStream Solutions, LLC Delaware
RL Reserve, Inc. Colorado
Sheridan Re Cayman Islands
Specialty Insurance Service California
Tower Agency, Inc. Ohio
TPA.com, Inc. Delaware
TradeStar Investments, Inc. Delaware
Trewit Inc. Delaware
Trust Industrial Bank Colorado
USERS Incorporated Maryland
XP Systems Corporation Minnesota
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>dex23.txt
<DESCRIPTION>INDEPENDENT AUDITORS' CONSENT
<TEXT>
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-64353, 333-04417, 333-28121, 333-34310, 333-34396 and 333-89957 on Form S-8;
Registration Statement No. 333-44935 on Form S-4; and Registration Statement No.
333-74910 on Form S-3 of Fiserv, Inc. of our reports dated January 25, 2002,
appearing in and incorporated by reference in this Annual Report on Form 10-K of
Fiserv, Inc. for the year ended December 31, 2001.
/s/ Deloitte & Touche LLP
----------------------
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 26, 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----