S1 (SONE)

notice of intent not to renew is given by either party. Under the terms of the employment agreement, Mr. Dreyer is entitled to an annual base salary of $375,000 and an annual bonus of up to $225,000 based on the attainment of specific performance targets. In the event that the performance targets are not achieved in full, the bonus payment may be correspondingly reduced. Mr. Dreyer’s base salary is subject to annual review and may be increased at the discretion of the Board.

 

We may grant Mr. Dreyer options to purchase shares of our common stock in accordance with the terms of our stock option plans and we may grant Mr. Dreyer other stock awards. If we terminate Mr. Dreyer’s employment without cause during the term of his employment agreement or if he resigns with good reason, all of his unvested options will immediately vest effective on the date of termination if such termination occurs within two years after a change in control. If a change of control has not occurred, then all options scheduled to vest within 24 months of the date of termination will immediately vest effective on the date of termination. Additionally, Mr. Dreyer is entitled to receive a cash payment equal to one year of his then current annual salary payable over one year, an annual bonus equal to the average of the prior three years bonus and continued participation in the Company’s medical benefit plan for 12 months. Pursuant to the terms of Mr. Dreyer’s November 2006 grants, if we terminate his employment without cause or if he resigns with good reason, 50% of the November 2006 grants will vest if the termination date is on or prior to June 30, 2007 and 100% would vest if the termination date is after such date.

 

Employment Agreement with Meigan Putnam

 

We entered into an employment agreement with Ms. Putnam in December 2006. The employment agreement is for a three-year term and is subject to annual renewals for a period of 12 months unless either party gives 90 days notice of an intention not to renew. Under the terms of the agreement, Ms. Putnam receives an annual salary of $200,000 and is eligible to receive a target annual bonus amount of $200,000. We have also agreed to reimburse Ms. Putnam for her golf club initiation fee of $20,000. In the event of termination without cause or resignation for good reason, Ms. Putnam is entitled to receive a cash payment equal to one year of her then current annual salary payable over one year, a one time payment equal to the average of the prior three years bonus and continued participation in the Company’s medical benefit plan for 12 months. Additionally, all unvested options will immediately vest effective on the date of termination if such termination occurs within two years after a change in control. If a change of control has not occurred, then all options scheduled to vest within 24 months of the date of termination will immediately vest effective on the date of termination. Pursuant to the terms of Ms. Putnam’s November 2006 grants, if we terminate her employment without cause or if she resigns with good reason, 50% of the November 2006 grants will vest if the termination date is on or prior to October 30, 2007 and 100% would vest if the termination date is after such date.

 

Employment Agreement with Neil Underwood

 

We entered into an employment agreement with Mr. Underwood in December 2006. The employment agreement is for a three-year term and is subject to annual renewals for a period of 12 months unless either party gives 90 days notice of an intention not to renew. Under the terms of the agreement, Mr. Underwood receives an annual salary of $200,000 and is eligible to receive a target annual bonus amount of $200,000. In the event of termination without cause or resignation for good reason, Mr. Underwood is entitled to receive a cash payment equal to one year of his then current annual salary payable over one year and continued participation in the Company’s medical benefit plan for 12 months. Additionally, all unvested options will immediately vest effective on the date of termination if such termination occurs within two years after a change in control. Pursuant to the terms of Mr. Underwood’s November 2006 grants, if we terminate his employment without cause or if he resigns with good reason, 50% of the November 2006 grants will vest if the termination date is on or prior to October 30, 2007 and 100% would vest if the termination date is after such date.

 

Employment Agreement with Jan Kruger

 

As of December 31, 2006, Jan Kruger was employed by S1 pursuant to an agreement he signed when he joined Mosaic in 2001. Under the terms of his agreement, Mr. Kruger receives an annual salary of $255,400 and is eligible to receive a target annual bonus amount of $132,620. In the event of termination without cause or resignation for good reason within one year after a change in control, Mr. Kruger is entitled to receive a cash payment equal to one year of his then current annual salary payable over one year and continued participation in the Company’s medical benefit plan for 12 months. Pursuant to the terms of Mr. Kruger’s November 2006 grants, if we terminate his employment without cause or if he resigns with good reason, 50% of the November 2006 grants will vest if the termination date is on or prior to October 30, 2007 and 100% would vest if the termination date is after such date.

 

Severance Agreement with John A. Stone

 

On November 30, 2006 we entered into an agreement with John Stone, Chief Financial Officer of the Company, pursuant to which we will pay Mr. Stone severance payments equal to 12 months of base salary in the event he is terminated by the Company without cause and reimburse his COBRA premiums under our major medical group health plan for a period of 12 months.

 

Separation Agreements with Former Executives

 

James S. Mahan, III served as our Chief Executive Officer from July 2005 until October 2006. At that time, his employment was terminated and we entered into a separation agreement with him. Under the terms of the separation agreement, Mr. Mahan will receive payments totaling $800,000. The first payment of $200,000 will occur six months after the date of separation. The remainder will be paid in 36 semi-monthly payments of $16,667. The Company will also reimburse Mr. Mahan for the payment of his COBRA premiums, life insurance cost and long-term disability cost for a period of 24 months. Mr. Mahan’s options that would have otherwise become fully vested within the next 24 months had he remained employed by the Company, immediately vested and became exercisable. The Company also agreed to repurchase all shares of Company common stock beneficially owned by Mr. Mahan, however, he instead sold his shares in the open market.

 

Matt Hale served as President of the Company’s Enterprise segment until his resignation in December 2006. In connection with his resignation, we agreed to pay Mr. Hale $23,000 for consulting services performed in December 2006 and any unpaid bonus earned in 2006. Additionally, we agreed to reimburse Mr. Hale for his golf club initiation fee of $30,000.

 

Jaime W. Ellertson served as our Chief Executive Officer from November 2000 until July 2005. At that time, his employment agreement was terminated. In connection with Mr. Ellertson’s termination, he was entitled to continued salary of $600,000 and benefits for 24 months after his termination. Additionally, we agreed to pay Mr. Ellertson an annual bonus of $233,687 during such 24-month period which was equal to the average annual bonus paid to him during the preceding 36 months. During 2006, Mr. Ellertson received payments of $853,846 under this arrangement. Remaining payments under the arrangement as of December 31, 2006 total $597,208 which will be paid in 2007. Additionally, we accelerated vesting on 392,277 stock options previously granted to Mr. Ellertson. During 2006, Mr. Ellertson exercised 344,000 stock options. The total value realized upon exercise was $355,283.

 

In addition, if any payment or distribution by us (including accelerated vesting of stock options) would constitute an excess parachute payment under the Internal Revenue Code, as amended, we will make a “gross-up” payment, in an amount, after taxes, sufficient to pay the excise tax that is imposed on excess parachute payments so that, after paying the excise tax, Mr. Ellertson would receive a net after-tax amount that is the same as the amount he would have received if no excise tax had been imposed. We have not made any such gross-up payments and we do not anticipate making any in the future.

 

Agreements with Other Employees

 

In 2006, the Board of Directors, upon the recommendation of the Compensation Committee, approved and adopted an employee change of control severance plan (the “Plan”) which will expire in May 2008. Under the Plan, executive officers without employment agreements are entitled to 12 months of severance pay and 12 months of continued health benefits in the event they are constructively terminated within one year following a change in control of the Company. Mr. Kruger is the only named executive officer who has an employment agreement with us who is eligible to participate in this Plan. We expect to enter into an employment agreement in 2007 with Mr. Kruger similar in nature to our other senior executives.