UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
Commission file number 1-7945.
DELUXE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-0216800
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3680 Victoria St. N., Shoreview Minnesota 55126-2966
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 483-7111.
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1.00 per share New York Stock Exchange
(Title of Class) (Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the Act: None.
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. _X_ Yes __ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of 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]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $2,807,237,100 based on the last sales price of the registrant's
common stock on the New York Stock Exchange on March 9, 1998. The number of
outstanding shares of the registrant's common stock as of March 9, 1998, was
80,595,391.
<PAGE>
Documents Incorporated by Reference:
1. Portions of the registrant's annual report to shareholders for the fiscal
year ended December 31, 1997 are incorporated by reference in Parts I and
II.
2. The registrant's proxy statement, dated March 31, 1998, is incorporated by
reference in Part III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Deluxe Corporation (collectively with its subsidiaries, the "Company") is a
leading supplier of paper-based and electronic payment and information solutions
services to the financial and retail industries. The Company also provides
integrated payment protection services to the financial and retail markets. The
Company is headquartered in Shoreview, Minnesota, and has facilities in the
United States, Puerto Rico, Canada and the United Kingdom. The Company's
products and services are sold primarily in the United States.
The Company's operations are conducted by Deluxe Corporation and 25
subsidiaries. The Company has classified its operations into three business
segments: Deluxe Financial Services, Deluxe Electronic Payment Systems and
Deluxe Direct. The Company is also a party to a Joint Venture with HCL
Corporation of India.
The Company was incorporated under the laws of the State of Minnesota in
1920. From 1920 until 1988, the Company was named Deluxe Check Printers,
Incorporated. The Company's principal executive offices are located at 3680
Victoria St. N., Shoreview, Minnesota 55126-2966, telephone (612) 483-7111.
DELUXE FINANCIAL SERVICES
Deluxe Financial Services provides check printing, direct marketing,
customer database management and related services to financial institutions.
Deluxe Financial Services also provides checks directly to households and small
businesses and payment protection and collections services to financial
institutions and retailers, primarily in the United States. Deluxe Financial
Services had net sales of approximately $1.5 billion in 1997, accounting for
approximately 80.4 percent of the Company's total sales. Deluxe Financial
Services has divided its operations into three business units: Deluxe Paper
Payment Systems, Deluxe Payment Protection Systems and Deluxe Direct Response.
Each of these business units is discussed below.
Deluxe Paper Payment Systems
Deluxe Paper Payment Systems ("DPPS") prints and sells checks to financial
institutions and depositors. DPPS sold checks to more than 10,000 financial
institutions and fulfilled approximately 112 million check order units in 1997.
Depositors commonly submit initial check orders and reorders to their financial
institutions, which forward them to one of DPPS'
<PAGE>
printing plants. Printed checks are shipped directly by DPPS to the depositors
and DPPS' charges are typically paid directly from the depositors' accounts.
DPPS, through a separate subsidiary, also provides direct mail checks to
households and small businesses. DPPS endeavors to produce and ship all check
orders within two days after receipt of the order. DPPS generated revenues of
approximately $1.3 billion in 1997.
Payment systems and methods have been changing in the United States in
recent years as banking and other industries have introduced alternatives to the
traditional check, including, among others, charge cards, credit cards, debit
cards and electronic payment systems. Sales of checks have also been subject to
increased competition and consequent pressure on prices. In addition, the direct
mail segment of the check market is growing as a lower-priced alternative to
financial institution checks and, in 1997, represented an estimated 18 percent
of the personal check industry. These developments have produced a mature market
for checks and have created pricing pressure on DPPS' check sales.
The Company believes that checks will likely remain an important part of
consumers' payment options for many years. To stabilize its check printing
operations and improve profitability, the Company has focused in recent years on
controlling expenses and increasing efficiency (see "Recent Developments"). The
Company has also focused on higher margin products and services, such as
specially designed checks and licensed check designs. At the same time, the
growing direct mail check segment has been an opportunity for DPPS' direct mail
personal check operations.
In addition, Deluxe Business Forms & Supplies, a business unit of DPPS,
produces and markets short-run computer and business forms and checks. Both
product lines are sold primarily through direct mail, telephone marketing and
new account referrals from financial institutions.
Deluxe Payment Protection Systems
The Company offers integrated payment protection services through the
subsidiaries which comprise its Deluxe Payment Protection Systems division: Chex
Systems, Inc. ("ChexSystems"); Deluxe Payment ProtectionSystems , Inc.; and NRC
Holding Corporation ("NRC") and its subsidiaries. ChexSystems is the leader in
the account verification business, providing risk management information to
approximately 74,000 financial institution offices. Through its Shared Check
Authorization Network ("SCAN"), Deluxe Payment Protection Systems, Inc. operates
one of the nation's leading check verification service with a network consisting
of thousands of retail locations that share risk-management information. NRC is
one of the five largest U.S. collections agencies, processing $4.5 billion in
placements in 1997 for approximately 30,000 credit grantors. Deluxe Payment
Protection Systems also offers employee screening services through ESP
Employment Screening Partners, Inc. Deluxe Payment Protection Systems had
revenues of $193 million in 1997.
<PAGE>
Deluxe Direct Response
Deluxe Direct Response develops targeted direct mail marketing campaigns
for financial institutions and it also sells personalized plastic automated
teller machine (ATM) cards and credit and debit cards to financial institutions
and retailers and driver's licenses and other identification cards to government
agencies. Deluxe Direct Response provides database products from the Company's
Deluxe Data Resources, FUSION Marketing(SM) and Deluxe MarketWise businesses and
fulfillment services that include printing and mailing direct mail marketing
pieces (including letter checks offered to credit card holders) and tracking
customer response rates. Deluxe Data Resources provides financial institutions
with a comprehensive database of proprietary homeowner, consumer, and market
research information. Deluxe MarketWise offers software that enables financial
institutions to develop customer profiles from their separate databases -
including checking, savings, credit card and loans - and from Deluxe-provided
databases. FUSION Marketing(SM) provides financial institutions with normative
database information and direct mail campaign development and tracking. The
Deluxe Direct Response business unit contributed $53 million in revenues in
1997.
DELUXE ELECTRONIC PAYMENT SYSTEMS
The Deluxe Electronic Payment Systems ("DEPS") business segment is
comprised of Deluxe Electronic Payment Systems, Inc., which provides electronic
funds transfer processing and software and is the nation's largest third-party
transaction processor for regional ATM networks. DEPS also provides services in
emerging debit markets, including electronic benefit transfer ("EBT") and retail
point-of-sale ("POS") transaction processing. EBT programs use ATM and POS
terminals to deliver food stamps and welfare assistance. DEPS currently supports
EBT programs for the state governments of Louisiana, Maryland, Minnesota,
Oregon, New Jersey, Utah, Kansas and two counties in California. DEPS also
provides Medicaid verification services in New York and is part of coalitions
that are supporting or will support EBT programs in Oklahoma, Pennsylvania, the
Northeast Coalition of States, the Western States EBT Alliance and the Southern
Alliance of States. DEPS processed approximately 3.55 billion transactions in
1997 and had net sales of approximately $144 million in 1997, representing
approximately 7.5% of the Company's total sales.
In 1997, the Company formed a joint venture with HCL Corporation ("HCL") of
New Delhi, India, to help modernize India's banking industry. The joint venture
provides software and programming capabilities available to the Company and U.S.
financial institutions. The results of the joint venture did not have a material
effect on the Company's operations in 1997.
<PAGE>
DELUXE DIRECT
Deluxe Direct markets specialty papers, and other products to small
businesses, and sells direct mail greeting cards, gift wrap and related products
to households. Deluxe Direct had net sales of approximately $233 million in 1997
(such amount includes revenues attributable to businesses that were divested in
1997, see "Recent Developments"), accounting for approximately 12.1% of the
Company's total sales. Deluxe Direct markets its products primarily through the
Social Expressions division of Current, Inc. ("Current") and PaperDirect, Inc.
("PaperDirect").
Current is a direct mail supplier of social expression products, including
greeting cards, gift wrap, small gifts and related products. Current's social
expression business is seasonal and holiday-related. Historically, more than
one-third of Current's annual sales have been made in the fourth quarter.
Current's direct mail check business is included in "Deluxe Financial Services
- -- Deluxe Paper Payment Systems". PaperDirect is a direct mail marketer of
specialty papers, presentation products and pre-designed forms for laser
printing and desktop publishing.
The Company has determined that the businesses in the Deluxe Direct segment
do not fit into the Company's long-term plans. During 1996, 1997 and the first
quarter of 1998 a number of businesses in this segment were sold and the
remaining portions of this business segment are expected to be sold in 1998.
RECENT DEVELOPMENTS
In late 1995 and early 1996, the Company announced that it had initiated a
major consolidation program, which includes the closing of 26 of the Company's
41 financial institution check printing facilities and reducing the number of
its staff and production employees. Twelve plants were closed in 1996, 10
additional plants were closed in 1997 and an additional plant was recently
converted to the production of business checks and forms. The balance of the
closings announced in 1996 are scheduled to occur during 1998 and the first half
of 1999. Some of the closings were delayed due to software problems encountered
in the development and implementation of the Company's new check order entry and
customer service system.
In 1997, the Company divested Nelco, Inc., a supplier of tax forms, tax
forms software and electronic tax filing services, its Printovation and World's
Easiest businesses and its installment loan coupon business. The Company also
divested its cheque printing business in the United Kingdom. In 1998, the
Company sold the assets of its PaperDirect (UK) Limited subsidiary to an entity
that now acts as the exclusive European distributor for PaperDirect. In 1997,
the Company also purchased the assets of Fusion Marketing Group, Inc. a
consulting firm that assists financial institutions with direct mail database
marketing campaigns. These divestitures and acquisitions did not have a material
impact on the Company's results of operations in 1997.
<PAGE>
The Company has also entered into agreements with unrelated third parties
to create a data warehouse, or debit bureau, that will offer financial
institutions and retailers decisional support for direct debit-based products.
EMPLOYEES
The Company has approximately 18,900 full- and part-time employees. It has
a number of employee benefit plans, including a 401(k) plan, retirement and
profit sharing plans and medical and hospitalization plans. The Company has
never experienced a work stoppage or strike and considers its employee relations
to be good.
FINANCIAL INFORMATION
The information appearing under the caption "Note 13. Business Segment
Information" on pages 31-32 of the Company's Annual Report (the "Annual Report")
for the year ended December 31, 1997 is incorporated by reference.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected by the Board of Directors
each year. The term of office of each executive officer will expire at the
annual meeting of the Board of Directors which will be held after the regular
shareholders meeting on May 5, 1998. The principal occupation of each executive
officer is with the Company, and their positions are as follows:
Officer
Name Position Age Since
---- -------- --- -----
John A. Blanchard III Chairman of the Board, President 55 1995
and Chief Executive Officer
Lawrence J. Mosner Executive Vice President 55 1995
Thomas W. VanHimbergen Senior Vice President and Chief 49 1997
Financial Officer
Gregory J. Bjorndahl Senior Vice President, Sales and 47 1995
Marketing
Ronald E. Eilers Senior Vice President and 50 1996
General Manager, Deluxe
Paper Payment Systems
John H. LeFevre Senior Vice President, Secretary 54 1994
and General Counsel
Michael F. Reeves Vice President, Human 48 1987
Resources
Warner F. Schlais Vice President and Chief 45 1997
Information Officer
<PAGE>
MR. BLANCHARD has served as President and Chief Executive Officer of the
Company since May 1, 1995 and as Chairman of the Board of Directors since May 6,
1996. From January 1994 to April 1995, Mr. Blanchard was executive vice
president of General Instrument Corporation, a supplier of systems and equipment
to the cable and satellite television industry. From 1991 to 1993, Mr. Blanchard
was chairman and chief executive officer of Harbridge Merchant Services, a
national credit card processing company. Previously, Mr. Blanchard was employed
by American Telephone & Telegraph Company for 25 years, most recently as senior
vice president responsible for national business sales. Mr. Blanchard also
serves as a director of Norwest Corporation and Saville Systems PLC.
MR. MOSNER has served as Executive Vice President of the Company with
overall responsibility for all of its day-to-day operations since July 1997. Mr.
Mosner served as Senior Vice President of the Company from November 1995 until
October 1996, when he became President of Deluxe Direct, Inc. ("DDI") a
subsidiary of the Company that provided management services to the companies
comprising its Deluxe Direct business unit. As a Senior Vice President of the
Company and President of DDI, Mr. Mosner served as the Principal Executive
Officer of Deluxe Direct. In February 1997, Mr. Mosner returned to the office of
Senior Vice President of the Company and he served as President of its Deluxe
Financial Services business unit until he became Executive Vice President of the
Company. . Mr. Mosner was Executive Vice President and Chief Operating Officer
of Hanover Direct, a direct marketing company, with responsibility for
non-apparel products, from 1993 until he joined the Company. Previously, he was
employed for 28 years by Sears, Roebuck and Company, where he was Vice President
of catalog merchandising from 1991 to 1993.
MR. VANHIMBERGEN became Senior Vice President and Chief Financial Officer
of the Company in May 1997. From 1996 until he joined the Company, Mr.
VanHimbergen served as senior vice president and chief financial officer of
Federal-Mogul Corporation ("Federal-Mogul") and from 1994 until 1996, Mr.
VanHimbergen served as Vice President and Chief Financial Officer of Allied
Signal Automotive, Inc. ("Allied Signal"). Prior to joining Allied Signal, Mr.
VanHimbergen was employed by Tenneco Corporation ("Tenneco") from 1988 through
1994, where he served in a variety of capacities, including vice president and
chief financial officer for Tenneco Automotive from 1993 to 1994. Tenneco,
Allied Signal and Federal Mogul are global manufacturers and distributors of
automotive parts. From 1971 through 1988, Mr. VanHimbergen served in various
financial, human resource and treasury positions for A.O. Smith Corporation, a
diversified manufacturer and distributor and a provider of electronic payment
systems and information services.
MR. BJORNDAHL joined the Company in 1995 as a Vice President, and he was
initially responsible for Sales and Marketing for Deluxe Financial Services and
DEPS. In August 1997, Mr. Bjorndahl was promoted to Senior Vice President and he
now has overall responsibility for the Company's sales and marketing efforts.
Prior to joining the Company, Mr. Bjorndahl was vice president of marketing for
Citicorp Credit Services, Inc.'s ("Citicorp"), Master Card and Visa operations
from January 1994 to July 1995. Citicorp is a credit card issuer. From 1991
until he joined Citicorp, Mr. Bjorndahl served as senior vice president, product
development, for Visa International, a credit card processing company.
<PAGE>
MR. EILERS joined the Company in March 1988 when it purchased Current. From
1990 to 1995, Mr. Eilers served as Vice President and General Manager of
Current's direct mail check business. In 1995, Mr. Eilers became President of
PaperDirect, Inc. and the manager of the Company's business forms division. Mr.
Eilers became a Vice President of DDI in October 1996 and he succeeded Mr.
Mosner as the President of DDI in February 1997. In August 1997, Mr. Eilers
became a Senior Vice President of the Company and he now manages its Deluxe
Paper Payment Systems business.
MR. LEFEVRE has served as Senior Vice President, General Counsel and
Secretary of the Company since February 1994. From 1978 to February 1994, Mr.
LeFevre was employed by Wang Laboratories, Inc. From 1988 until February 1994,
he held various positions in Wang Laboratories' law department, including
corporate counsel, vice president, general counsel and secretary. Wang
Laboratories was in the business of manufacturing and selling computer hardware
and software and related services.
MR. REEVES has been employed by the Company since 1970 and has been a Vice
President since 1987. From 1987 to 1992, Mr. Reeves was regional manager of the
Company's Northeastern region's printing operations. From 1992 to 1994, Mr.
Reeves was the manager of the Company's financial institution forms business
unit, and since July 1994, Mr. Reeves has had principal responsibility for the
Company's human resources function.
MR. SCHLAIS became Vice President and Chief Information Officer of the
Company in December 1997. Mr. Schlais joined the Company in 1995 as vice
president of applications development supporting the Company's Deluxe Financial
Services business unit. Prior to joining the Company, Mr. Schlais was employed
by United Airlines, Inc. ("United Airlines") for 21 years, most recently as its
Director, I.T., planning and technology. United Airlines is a provider of air
transportation.
ITEM 2. PROPERTIES
The Company conducts production and service operations in 68 facilities
located in 29 states, Puerto Rico, Canada and the United Kingdom. These
facilities total approximately 4,763,000 square feet. The Company's headquarters
occupies a 160,000-square-foot building in Shoreview, Minnesota. Deluxe
Financial Services has two principal facilities in Shoreview, Minnesota,
totaling approximately 251,700 square feet. These sites are devoted to sales,
administration, and marketing. Deluxe Direct's principal office facilities are a
156,000-square-foot marketing building in Shoreview, Minnesota, and a
148,000-square-foot sales and product design building in Colorado Springs,
Colorado. Deluxe Electronic Payment System's primary administrative facility
occupies a 171,000 square foot building in Milwaukee, Wisconsin and its
principal data processing centers are located in New Berlin, Wisconsin and
Scottsdale, Arizona. All but four of the Company's production facilities are one
story buildings and most were constructed and equipped in accordance with the
Company's plans and specifications.
<PAGE>
More than half of the Company's total production area has been constructed
during the past 20 years. The Company owns 40 of its facilities and leases the
remainder for terms expiring from 1998 to 2009. Depending upon the
circumstances, when a lease expires, the Company either renews the lease or
constructs a new facility to replace the leased facility.
In late 1995 and early 1996, the Company announced a plan to close 26 of
its financial institution check printing plants. These plant closings were made
possible by advancements in the Company's telecommunications, order processing
and printing technologies. Upon the completion of this restructuring, the
Company's 15 remaining plants will be equipped with sufficient capacity to
produce at or above current order volumes. As of December 31, 1997, 22 of the 26
plants had been closed and an additional plant was converted to the production
of business checks and forms in the first quarter of 1998. The three remaining
plants are scheduled for closing in 1998 and the first half of 1999. The Company
also moved the warehousing and administrative facilities of one of its direct
mail businesses from New Jersey to Colorado in 1997.
ITEM 3. LEGAL PROCEEDINGS
In October, 1997, the jury in the action Mellon Bank, N.A. v. Deluxe Data
Systems, Inc. and Deluxe Corporation pending in the Western District of
Pennsylvania reached a $30 million verdict against Deluxe Data Systems,
Inc.(Deluxe Electronic Payment Systems, Inc. ("DEPS")) in litigation pertaining
to DEP's participation in a contract to provide electronic benefits transfer
services to a number of southeastern states. No liability was found against
Deluxe Corporation. The Company and DEPS believe that numerous errors were made
by the court during trial and that the verdict against DEPS is excessive and
unsupported by the law or the evidence introduced at trial. The Company and DEPS
plan to pursue the remedies available to seek its reversal, although there can
be no assurances that their efforts to vacate or reduce this judgment will be
successful.
Other than the above-described action and other routine litigation
incidental to its business, there are no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which any of the
Company's property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information appearing under the caption "Financial Highlights" on page 1,
and "Shareholder Information" on page 36 of the Annual Report is incorporated by
reference.
ITEM 6. SELECTED FINANCIAL DATA
<PAGE>
The information appearing under the caption "Six-Year Summary" on page 19 of the
Annual Report is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis" on pages 14 through 18 of the Annual Report is incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, notes and independent auditors' report on pages 20
through 33 of the Annual Report and the information appearing under the caption
"Summarized Quarterly Financial Data" (unaudited) on page 34 of the Annual
Report is incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's proxy statement, filed with the Securities and Exchange Commission
on March 31, 1998, is incorporated by reference, other than Sections entitled
"Compensation Committee Report on Executive Compensation" and "Total
Shareholders Return."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following financial statements, schedules and independent auditors'
report and consent are filed with or incorporated by reference in this report:
<TABLE>
<CAPTION>
Financial Statements Page in
-------------------- Annual Report
-------------
<S> <C>
Consolidated Balance Sheets at December 31, 1997 and 1996......................20
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1997..........................................21
<PAGE>
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1997......................................22
Notes to Consolidated Financial Statements.....................................23-32
Independent Auditors' Report ..................................................33
Supplemental Financial Information (Unaudited):
Summarized Quarterly Financial Data ...........................................34
Independent Auditors' Consent to the incorporation by reference of
its reports in the Company's registration statements numbered
2-96963, 33-53585, 33-57261, 33-32279, 33-58510 and 33-62041...................F-1
</TABLE>
Schedules other than those listed above are not required or are not
applicable, or the required information is shown in the consolidated financial
statements or notes.
(b) Reports on Form 8-K
None
(c) The following exhibits are filed as part of or are incorporated in
this report by reference:
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
3.1 Articles of Incorporation ( incorporated by reference to *
the Company's Annual Report on Form 10-K for the year
ended December 31, 1990).
3.2 Bylaws. Filed
herewith
4.1 Amended and Restated Rights Agreement, dated as of January 31, 1997, by *
and between the Company and Norwest Bank Minnesota, National Association,
as Rights Agent, which includes as Exhibit A thereto, the form of Rights
Certificate (incorporated by reference to Exhibit 4.1 to the Company's
Amendment No. 1 on Form 8-A/A-1 (File No. 001-07945) filed with the
Securities and Exchange Commission (the "Commission") on February 7,
1997).
4.2 Indenture, relating to up to $150,000,000 of debt securities *
(incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (33-32279) filed with the Commission on November
24, 1989).
4.3 Amended and Restated Credit Agreement, dated as of July 8, Filed
<PAGE>
1997, among the Company, Bank of America National Trust and Savings herewith
Association, as agent, and the other financial institutions party
thereto, related to a $150,000,000 committed line of credit.
10.1 Deluxe Corporation 1996 Annual Incentive Plan (as amended August 9, 1996) *
(incorporated by reference to Exhibit 10.4 to the Company's report on
Form 10-Q for the Quarter ended September 30, 1996 (the "September 1996
10-Q), filed with the Commission on November 14, 1996").
10.2 Deluxe Corporation Stock Incentive Plan (as amended October 31, 1997), Filed
including the Deluxe Corporation Non-Employee Director Stock and Deferral herewith
Plan attached as Annex 1 thereto.
10.3 Deluxe Corporation Performance Share Plan (incorporated by reference to *
Exhibit 10.6 to the September 1996 10-Q).
10.4 Deluxe Corporation Employee Stock Purchase Plan (incorporated by *
reference to Exhibit 10.7 to the September 1996 10-Q).
10.5 Deluxe Corporation Deferred Compensation Plan (incorporated by reference *
to Exhibit (10)(A) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 (the "1995 10-K")).
10.6 Deluxe Corporation Supplemental Benefit Plan (incorporated by reference *
to Exhibit (10)(B) to the 1995 10-K).
10.7 Description of Deluxe Corporation Non-employee Director Retirement and *
Deferred Compensation Plan (incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended December 31,
1996 (the "1996 10-K").
10.8 Description of Initial Compensation and Employment Arrangement with John *
A. Blanchard III (incorporated by reference to Exhibit 10(G) to the 1995
10-K).
10.9 Deluxe Corporation 1998 DeluxeSHARES Plan Filed
herewith
10.10 Description of modification to the Deluxe Corporation Non-Employee Filed
Director Retirement and Deferred Compensation herewith
<PAGE>
Plan
10.11 Description of John A. Blanchard III Supplemental Pension *
Plan (incorporated by reference to Exhibit 10(H) in the
1995 10-K).
10.12 Description of Compensation Agreement with Harold V. *
Haverty (incorporated by reference to Exhibit 10(J) to
the 1995 10-K).
10.13 Consulting Agreement, made and entered into as of *
November 1, 1996, between the Company and Donald R. Hollis
(incorporated by reference to Exhibit 10.21 to the 1996 10-K).
10.14 Agreement, dated as of October 24, 1994, between the *
Company and Michael R. Schwab (incorporated by reference to Exhibit 10.22
to the 1996 10-K).
10.15 Description of Severance Arrangement with Thomas W. VanHimbergen. Filed
herewith
10.16 Separation Agreement, dated December 23, 1997, between the Company and Filed
Michael R. Schwab. herewith
10.17 Separation Agreement, dated as of April 25, 1997, by and between the Filed
Company and Charles M. Osborne. herewith
10.18 Retention Agreement, dated as of October 29, 1997, by and between Deluxe Filed
Electronic Payment Systems, Inc., Robert H. Rosseau and the Company (as herewith+
guarantor).
10.19 Description of Severance Arrangement with Lawrence J. Mosner. Filed
herewith
10.20 Description of non-employee Director Compensation Arrangements. Filed
herewith
12.4 Statement re: computation of ratios. Filed
herewith
13.1 1997 Annual Report to shareholders. Filed
herewith
21.1 Subsidiaries of the Registrant. Filed
herewith
23 Consent of Experts and Counsel (incorporated by reference to page F-1 of *
this Annual Report on Form 10-K).
24.1 Power of attorney. Filed
<PAGE>
herewith
27.1 Financial Data Schedule for the year ended December 31, 1997. Filed
herewith
27.2 Financial Data Schedule for the years ended December 31, 1996 and 1995. Filed
herewith
27.3 Financial Data Schedule for the first, second and third fiscal quarters Filed
of the year ended December 31, 1996. herewith
27.4 Financial Data Schedule for the first, second and third fiscal quarters Filed
of the year ended December 31, 1997. herewith
99.1 Risk Factors and Cautionary Statements. Filed
herewith
</TABLE>
--------------------
* Incorporated by reference
+ Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended,
confidential portions of Exhibit 10.18 have been deleted and filed
separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment.
<PAGE>
Note to recipients of Form 10-K: Copies of exhibits will be furnished upon
written request and payment of the Company's reasonable expenses ($.25 per page)
in furnishing such copies.
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, in the City of St.
Paul, State of Minnesota on March 31, 1998.
DELUXE CORPORATION
Date: March 31, 1998 By /s/ John A. Blanchard III
---------------------------------------
John A. Blanchard III
Chairman of the Board of Directors,
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 persons in the capacities
indicated on March 31, 1997.
SIGNATURE TITLE
- --------- -----
By /s/ John A. Blanchard III Chairman of the Board of Directors,
------------------------------ President and Chief Executive Officer
John A. Blanchard III (Principal Executive Officer)
By /s/ Thomas W. VanHimbergen Senior Vice President and Chief Financial
------------------------------ Officer (Principal Financial Officer and
Thomas W. VanHimbergen Principal Accounting Officer)
*
------------------------------
Whitney MacMillan Director
*
------------------------------
James J. Renier Director
*
------------------------------
Barbara B. Grogan Director
------------------------------
Allen F. Jacobson Director
*
------------------------------
Stephen P. Nachtsheim Director
<PAGE>
*
------------------------------
Calvin W. Aurand, Jr. Director
*
------------------------------
Donald R. Hollis Director
*
------------------------------
Robert C. Salipante Director
*
------------------------------
Jack Robinson Director
*
------------------------------
Hatim A. Tyabji Director
*By: /s/ John A. Blanchard III
-------------------------
John A. Blanchard III
Attorney-in-Fact
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
Nos. 2-96963, 33-53585 and 33-57261 on Form S-8 and 33-32279, 33-58510 and
33-62041 on Form S-3 of our report dated February 10, 1997, incorporated by
reference in this Annual Report on Form 10-K of Deluxe Corporation for the year
ended December 31, 1997.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
March 31, 1998
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this report:
Exhibit Page
Number Description Number
------ ----------- ------
3.2 Bylaws.
4.3 Amended and Restated Credit Agreement, dated as of July 8,
1997, Among the Company, Bank of America National Trust and
Savings Association, as agent, and the other financial
institutions party thereto, related to a $150,000,000
committed line of credit.
10.2 Deluxe Corporation Stock Incentive Plan (as amended October
31, 1997), including the Deluxe Corporation Non-Employee
Director Stock and Deferral Plan attached as Annex 1 thereto.
10.9 Deluxe Corporation 1998 DeluxeSHARES Plan
10.10 Description of modification to the Deluxe Corporation
Non-Employee Director Retirement and Deferred Compensation
Plan
10.15 Description of Severance Arrangement with Thomas W.
VanHimbergen.
10.16 Separation Agreement, dated December 23, 1997, between the
Company and Michael R. Schwab.
10.17 Separation Agreement, dated as of April 25, 1997, by and
between the Company and Charles M. Osborne.
10.18 Retention Agreement, dated as of October 29, 1997, by and +
between Deluxe Electronic Payment Systems, Inc., Robert H.
Rosseau and the Company (as guarantor).
10.19 Description of Severance Arrangement with Lawrence J. Mosner.
10.20 Description of non-employee Director Compensation
Arrangements.
12.4 Statement re: computation of ratios.
13.1 1997 Annual Report to shareholders.
21.1 Subsidiaries of the Registrant.
24.1 Power of attorney.
<PAGE>
27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Financial Data Schedule for the years ended December 31, 1996
and 1995.
27.3 Financial Data Schedule for the first, second and third fiscal
quarters of the year ended December 31, 1996.
27.4 Financial Data Schedule for the first, second and third fiscal
quarters of the year ended December 31, 1997.
99.1 Risk Factors and Cautionary Statements
- -------------------
+ Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended, confidential portions of Exhibit 10.18 have been deleted and
filed separately with the Securities and Exchange Commission pursuant
to a request for confidential treatment.
Exhibit 3.2
BYLAWS
OF
DELUXE CORPORATION
(AS AMENDED JANUARY 30, 1998)
ARTICLE I
OFFICES, CORPORATE SEAL
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in the
State of Minnesota shall be as set forth in the articles of incorporation as
amended from time to time (the "articles of incorporation") or the most recent
resolution of the board of directors of the corporation (the "board of
directors") filed with the secretary of state of Minnesota changing the
registered office.
SECTION 2. SEAL. The corporation shall not have a corporate seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. REGULAR MEETINGS OF SHAREHOLDERS.
(a) Regular meetings of the shareholders of the corporation shall be held on
such date and at such time and place as the board of directors shall designate.
(b) At a regular meeting of shareholders, the shareholders of the corporation,
voting as provided in the articles of incorporation and these bylaws, shall
elect a board of directors and shall transact such other business as may
properly come before them.
(c) At any regular meeting of shareholders, a person may be a candidate for
election to the board of directors only if such person is nominated (i) by the
board of directors, (ii) by any nominating committee or person appointed by the
board of directors and authorized to make nominations for
<PAGE>
election to the board of directors, or (iii) by a shareholder, who complies with
the procedures set forth in this paragraph. To properly nominate a candidate, a
shareholder shall give written notice of such nomination to the chief executive
officer or secretary of the corporation not later than the date specified by
Rule 14a-8 (as amended from time to time and any successor rule or regulation,
"Rule 14a-8") promulgated under the Securities Exchange Act of 1934 (as amended
from time to time, the "Exchange Act") as the last date for receipt by the
corporation of shareholder proposals; shall attend the meeting with the
candidate whom the shareholder wishes to nominate; and shall propose the
candidate's nomination for election to the board of directors at the meeting.
The notice by a shareholder shall set forth as to each person whom the
shareholder recommends for nomination (v) the name, age, business address and
residence address of the person; (w) the principal occupation or employment of
the person; (x) the number of shares of stock of the corporation owned by the
person; (y) the written and acknowledged statement of the person that such
person is willing to serve as a director of the corporation; and (z) any other
information relating to the person that would be required to be disclosed in a
solicitation of proxies for election of directors pursuant to Regulation 14A (as
amended from time to time) under the Exchange Act had the election of the person
been solicited by or behalf of the corporation.
(d) To be properly brought before a regular meeting of shareholders, business
must be (i) directed to be brought before the meeting by the board of directors
or (ii) proposed to be considered at the meeting by a shareholder by giving
written notice of the proposal containing the information required by Rule 14a-8
to the chief executive officer or secretary of the corporation not later than
the date specified by Rule 14a-8 as the last date for receipt by the corporation
of shareholder proposals and shall be presented at the meeting by the proposing
shareholder.
(e) No business shall be conducted at a regular meeting of shareholders of the
corporation except business brought before the meeting in accordance with the
procedures set forth in this Section; provided, however, that once business has
been properly brought before the meeting in accordance with such procedures,
nothing in this Section shall be deemed to preclude discussion by any
shareholder of any such business. If the introduction of any business at a
regular meeting of shareholders does not comply with the procedures specified in
this Section, the chair of the meeting shall declare that such business is not
properly before the meeting and shall not be considered at the meeting.
SECTION 2. QUORUM AT REGULAR MEETINGS OF SHAREHOLDERS. The holders of a majority
of shares outstanding, entitled to vote for the election of directors at a
regular meeting of shareholders, represented either in person or by proxy, shall
constitute a quorum for the transaction of business.
SECTION 3. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the
shareholders of the corporation may be called and held as provided in the
Minnesota Business Corporation Act (as amended from time to time, the "MBCA").
SECTION 4. ADJOURNED MEETINGS. Regardless of whether a quorum shall be present
at a meeting of the shareholders of the corporation, the meeting may be
adjourned from time to time for up to 120 days after the date fixed for the
original meeting without notice other than announcement at the time of
adjournment of the date, time and place of the adjourned meeting.
<PAGE>
SECTION 5. VOTING. At each meeting of the shareholders of the corporation, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Unless otherwise provided by the MBCA or the articles of
incorporation, each shareholder shall have one vote for each share having voting
power registered in such shareholder's name on the books of the corporation as
of the record date. Jointly owned shares may be voted by any joint owner unless
the corporation receives written notice from any one of them denying the
authority of that person to vote such shares. Except as otherwise required by
the MBCA, the articles of incorporation or these bylaws, all questions properly
before a meeting of shareholders shall be decided by a vote of the number of the
greater of (i) a majority of the shares entitled to vote on the question and
represented at the meeting at the time of the vote, or (ii) a majority of the
minimum number of shares entitled to vote that would constitute a quorum for the
transaction of business at the meeting.
SECTION 6. RECORD DATE. The board of directors may fix a date, not less than 20
days nor more than 60 days preceding the date of any meeting of the shareholders
of the corporation, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, such meeting, notwithstanding any
transfer of shares on the books of the corporation after any record date so
fixed. If the board of directors fails to fix a record date for determination of
the shareholders entitled to notice of, and to vote at, any meeting of
shareholders, the record date shall be the 30th day preceding the date of such
meeting. Unless the board of directors sets another time on the record date for
the determination of the shareholders of record, such determination shall be
made as of the close of business on the record date.
SECTION 7. NOTICE. There shall be mailed to each shareholder, shown on the books
of the corporation to be a holder of record of voting shares, at his or her
address as shown on the books of the corporation, a notice setting out the date,
time and place of each regular and special meeting. Notice of each meeting of
the shareholders of the corporation shall be mailed at least seven days and not
more than 60 days prior thereto except as otherwise provided by the MBCA. Every
notice of any special meeting of the shareholders of the corporation called
pursuant to Section 3 hereof shall state the purpose or purposes for which the
meeting has been called and shall otherwise conform to the requirements of the
MBCA.
SECTION 8. WAIVER OF NOTICE. Notice of any regular or special meeting of the
shareholders of the corporation may be waived by any shareholder either before,
at or after such meeting orally or in a writing signed by such shareholder or a
representative entitled to vote the shares of such shareholder. A shareholder,
by attending any meeting of shareholders, shall be deemed to have waived notice
of such meeting, except where the shareholder objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened, or objects before a vote on an item of business because the
item may not lawfully be considered at that meeting and does not participate in
the consideration of the item at that meeting.
<PAGE>
SECTION 9. CONDUCT OF MEETING. The chairman of the board of directors, or if
there shall be none or in his or her absence, the highest ranking officer of the
corporation, determined in accordance with Article IV among a group consisting
of the chief executive officer, president and the vice presidents, who is
present at the meeting, shall call to order and act as the chair of any meeting
of the shareholders of the corporation. The secretary of the corporation shall
serve as the secretary of the meeting or, if there shall be none or in his or
her absence, the secretary of the meeting shall be such person as the chair of
the meeting appoints. The chair of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to take or
refrain from taking such actions as, in the judgment of the chair of the
meeting, are appropriate for the conduct of the meeting. To the extent not
prohibited by the MBCA, such rules, regulations and procedures may include,
without limitation, establishment of (i) an agenda or order of business for the
meeting, (ii) the method by which business may be proposed and procedures for
determining whether business has been properly (or not properly) introduced
before the meeting, (iii) procedures for casting and the form of ballots to be
used by shareholders in attendance at the meeting and the procedures to be
followed for counting shareholder votes, (iv) rules, regulations and procedures
for maintaining order at the meeting and the safety of those present, (v)
limitations on attendance at or participation in the meeting to shareholders of
record of the corporation, their duly authorized proxies or such other persons
as the chair of the meeting shall determine, (vi) restrictions on entry to the
meeting after the time fixed for commencement thereof and (vii) limitations on
the time allotted to questions or comments by participants. Any proposed
business properly before the meeting shall be deemed to be on the agenda. Unless
and to the extent otherwise determined by the chair of the meeting, it shall not
be necessary to follow Robert's Rules of Order or any other rules of
parliamentary procedure at the meeting of shareholders. Following completion of
the business of the meeting as determined by the chair of the meeting, the chair
of the meeting shall have the exclusive authority to adjourn the meeting.
ARTICLE III
DIRECTORS
SECTION 1. RESPONSIBILITIES AND TERM. The business and affairs of the
corporation shall be managed by or under the direction of the board of
directors. The number of directors shall be determined in accordance with the
articles of incorporation. The term of each director shall continue until the
next succeeding regular meeting of the shareholders of the corporation, and
until his successor is elected and qualified.
SECTION 2. QUORUM AND VACANCIES. A majority of the board of directors shall
constitute a quorum for the transaction of business; provided, that if any
vacancies exist by reason of death, resignation, or otherwise, a majority of the
remaining directors shall constitute a quorum for the filling of such vacancies.
<PAGE>
SECTION 3. VOTING. Except where otherwise required by the MBCA, the articles of
incorporation or these bylaws, the board of directors shall take action by
affirmative vote of the greater of (i) a majority of the directors present at a
duly held meeting at the time the action is taken or (ii) a majority of the
minimum number of directors that would constitute a quorum for the transaction
of business at the meeting of directors.
SECTION 4. MEETINGS OF THE BOARD OF DIRECTORS. Meetings of the board of
directors may be held from time to time within or without the state of
Minnesota.
SECTION 5. NOTICE. Meetings of the board of directors shall be held on such
dates and at such times and places as the board of directors may establish and
may be called by the chairman of the board of directors or chief executive
officer by giving at least twenty-four hours notice of the meeting, if the
meeting is to be held at the registered office of the corporation or by
telephone conference conducted as permitted by the MBCA or at least five days
notice if the meeting is to be held elsewhere, or by any other director by
giving at least five days notice of the meeting. Notice of each meeting shall
specify the date, time and place thereof and shall be given to each director by
mail, telephone, facsimile message or in person. Notice shall not be required if
the date, time and place of a meeting of the board of directors has been set by
resolution of the board of directors or otherwise announced at a previous
meeting of the board of directors or if the meeting is an adjourned meeting of
the board of directors if the date, time and place of the adjourned meeting was
announced at the meeting at which adjournment is taken.
SECTION 7. WAIVER OF NOTICE. Notice of any meeting of the board of directors may
be waived by any director either before, at, or after such meeting orally or in
a writing signed by such director. A director, by attending any meeting of the
board of directors, shall be deemed to have waived notice of such meeting,
except where the director objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened
and does not participate thereafter in the meeting.
SECTION 8. WRITTEN CONSENT OR OPPOSITION. A director may give advance written
consent or opposition to a proposal to be acted on at a meeting of the board of
directors. If such director is not present at the meeting, such written consent
or opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but such written consent or opposition
shall be counted as a vote in favor of or against the proposal and shall be
entered in the minutes or other record of action at the meeting, if the proposal
acted on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected.
SECTION 9. COMPENSATION. Directors who are not employees of the corporation
shall receive such compensation as shall be set from time to time by the chief
<PAGE>
executive officer, subject to the power of the board of directors or a committee
thereof to change or terminate any such compensation. The chief executive
officer shall also determine whether directors shall receive their expenses, if
any, of attendance at meetings of the board of directors or any committee
thereof and procedures for the reimbursement of such expenses, subject to the
power of the board of directors or a committee thereof to change or terminate
any such reimbursements or procedures. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving proper compensation therefor.
SECTION 10. STOCK OWNERSHIP. Directors shall be shareholders of the corporation.
SECTION 11. EXECUTIVE COMMITTEE. The board of directors may, by unanimous
affirmative action of all of the directors, designate two or more of their
number to constitute an executive committee, which, to the extent determined by
unanimous affirmative action of all of the directors, shall have and exercise
the authority of the board of directors in the management of the business of the
corporation subject to such limitations and procedures as may be established by
the board of directors in connection with any such action; provided, however,
that the board of directors shall not delegate to such committee any power to
amend the bylaws, declare dividends, fill vacancies on the board of directors or
on the executive committee, or elect or remove officers of the corporation. Any
such executive committee may meet at stated times or on notice given by any of
their own number, however, it may act only during the interval between meetings
of the board of directors. Vacancies in the membership of the executive
committee shall be filled by the board of directors at a regular meeting or at a
special meeting called for that purpose.
ARTICLE IV
OFFICERS
SECTION 1. CORPORATE OFFICERS. The officers of the corporation shall consist of
a chief executive officer and a chief financial officer elected by the board of
directors and, if elected by the board of directors, a president, secretary, one
or more assistant secretaries, a treasurer and one or more assistant treasurers.
The board of directors may also elect and designate as an officer of the
corporation one or more vice presidents and such other officers and agents as
the board of directors may from time to time determine. The chairman of the
board of directors, if one is elected, may be designated by the board of
directors as an officer of the corporation. Any number of offices may be held by
the same person.
SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman of the board
directors, if one is elected, shall preside at all meetings of the shareholders
and directors and shall have such other duties as may be prescribed from time to
time by the board of directors.
<PAGE>
SECTION 3. CHIEF EXECUTIVE OFFICER. The chief executive officer of the
corporation shall have general active management of the business and affairs of
the corporation. In the absence of the chairman of the board of directors, or if
one is not elected, the chief executive officer shall preside at all meetings of
the shareholders and directors. The chief executive officer shall see that all
orders and resolutions of the board of directors are carried into effect. The
chief executive officer may execute and deliver, in the name of the corporation,
any deeds, mortgages, bonds, contracts or other instruments pertaining to the
business of the corporation unless the authority to execute and deliver is
required by the MBCA to be exercised by another person or is expressly delegated
by the articles of incorporation, these bylaws or by the board of directors to
some other officer or agent of the corporation. In the absence of the secretary
and assistant secretary, or if none shall be elected, the chief executive
officer shall maintain records of and, whenever necessary, certify all
proceedings of the board of directors and the shareholders. The chief executive
officer shall have such other duties as may, from time to time, be prescribed by
the board of directors. The powers and duties specified herein may be modified
or limited at any time by the board of directors.
SECTION 4. PRESIDENT. The president, if one is elected, shall have such power
and duties regarding the management and daily conduct of the business of the
corporation as shall be determined by the board of directors, and, unless
otherwise provided by the board of directors, such power and duties of the chief
executive officer as may be delegated to the president by the chief executive
officer. Unless otherwise provided by the board of directors, in the absence of
the chairman of the board of directors (or if one is not elected) and the chief
executive officer, the president shall preside at all meetings of the
shareholders and directors. In the absence of the chief executive officer, the
president shall succeed to the chief executive officer's powers and duties
unless otherwise directed by the chief executive officer or the board of
directors.
SECTION 5. CHIEF FINANCIAL OFFICER. The chief financial officer shall (i) keep
accurate financial records for the corporation; (ii) deposit all moneys, drafts
and checks in the name of, and to the credit of, the corporation in such banks
and depositories as the board of directors shall, from time to time, designate
or otherwise authorize; (iii) have the power to endorse, for deposit, all notes,
checks and drafts received by the corporation; (iv) disburse the funds of the
corporation, making or causing to be made proper vouchers therefor; (v) render
to the chief executive officer and the board of directors, whenever requested,
an account of all of his or her transactions as chief financial officer and of
the financial condition of the corporation, and (vi) perform such other duties
as may, from time to time, be prescribed by the board of directors or by the
chief executive officer. The powers and duties specified herein may be modified
or limited at any time by the board of directors.
SECTION 6. VICE PRESIDENTS. Each vice president shall have such powers and
duties as may be prescribed by the board of directors and, unless otherwise
provided by the board of directors, such power and duties of the chief executive
officer or president as
<PAGE>
may be delegated from time to time to each vice president by the chief executive
officer or president, as the case may be. In the event of the absence of the
president, the vice presidents shall succeed to the duties and powers of such
office in the order in which they are elected, as appears from the minutes of
the meeting or meetings at which such elections shall have taken place, unless
otherwise provided by the board of directors, chief executive officer or
president.
SECTION 7. SECRETARY. The secretary, if one shall be elected by the board of
directors, shall be secretary of and shall attend all meetings of the
shareholders and board of directors. The secretary shall act as clerk thereof
and shall record all proceedings of such meetings in the minute book of the
corporation and, whenever necessary, certify all proceedings of the board of
directors and the shareholders. The secretary shall give proper notices of
meetings of shareholders and directors. The secretary shall, with the chairman
of the board of directors, president or any vice president, sign or cause to be
signed by facsimile signature all certificates for shares of the corporation and
shall have such other powers and shall perform such other duties as may be
prescribed from time to time by the board of directors.
SECTION 8. TREASURER. The treasurer, if one shall be elected by the board of
directors, shall have such powers and duties as may be prescribed by the board
of directors and, unless otherwise provided by the board of directors, such
power and duties of the chief financial officer as may be delegated from time to
time to the treasurer by the chief financial officer. In the absence of the
chief financial officer, the treasurer shall succeed to the duties and powers of
the chief financial officer unless otherwise directed by the board of directors,
chief executive officer or chief financial officer.
SECTION 9. ASSISTANT SECRETARY AND ASSISTANT TREASURER. Any assistant secretary
or assistant treasurer, who may from time to time be elected by the board of
directors, may perform the duties of the secretary or of the treasurer, as the
case may be, under the supervision and subject to the control of the secretary
or of the treasurer, respectively. Unless otherwise provided by the board of
directors, the chief executive officer or the secretary, in the event of the
absence of the secretary, an assistant secretary shall have the powers and
perform the duties of the office of secretary. If there shall be more than one
assistant secretary, the assistant secretary appearing as first elected in the
minutes of the meeting at which such elections shall have taken place shall
exercise such powers and have such duties. Unless otherwise provided by the
board of directors, the chief executive officer or the treasurer, in the event
of the absence of the treasurer, an assistant treasurer shall have the powers
and perform the duties of the office of treasurer. If there shall be more than
one assistant treasurer, the assistant treasurer appearing as first elected in
the minutes of the meeting or meetings at which such elections shall have taken
place, shall exercise such powers and have such duties. Each assistant secretary
and each assistant treasurer shall also have such powers and duties of the
secretary or the treasurer as the secretary or the treasurer respectively may
delegate to such assistant and shall also have such other powers and
<PAGE>
perform such other duties as may be prescribed from time to time by the board of
directors.
SECTION 10. VACANCY. If there shall occur a vacancy in the office of chief
executive officer or chief financial officer, such vacancy shall be filled by
the board of directors as expeditiously as practicable. If there shall occur a
vacancy in the position of chairman of the board of directors or, subject to the
foregoing, in any other office of the corporation by reason of death,
resignation, or otherwise, such vacancy may, but need not, be filled by the
board of directors.
SECTION 11. REMOVAL, REPLACEMENT AND REASSIGNMENT. The board of directors may at
any time and for any reason, with or without cause (i) remove or replace the
chairman of the board of directors, whether or not such action results in a
vacancy in such chairmanship, provided that such action shall in no event
terminate the directorship of such person unless such action is effective in
accordance with the MBCA to remove such person as a director; (ii) remove,
replace or reassign the incumbent chief executive officer or chief financial
officer, provided that if such action results in a vacancy in such office, the
board of directors shall act to fill that vacancy as provided in Section 10
hereof; (iii) remove, replace or reassign the incumbent in any other office of
the corporation whether or not such action results in a vacancy in any such
office; and (iv) reduce, add to, reassign or otherwise change the powers and
duties specifically conferred upon any officer of the corporation by these
bylaws or by any action of the board of directors, or any officer acting by
authority conferred by these bylaws or action of the board of directors or
otherwise. Any officer of the corporation to whom such authority shall have been
delegated by the board of directors and, unless otherwise provided by the board
of directors, the chief executive officer, may at any time and for any reason,
with or without cause, remove, replace or reassign the incumbent in any office
of the corporation other than the chairman of the board of directors, the chief
executive officer, the president and the chief financial officer.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. INDEMNIFICATION. The corporation shall indemnify all officers and
directors of the corporation for such expenses and liabilities, in such manner,
under such circumstances and to the fullest extent permitted by the MBCA. Unless
otherwise approved by the board of directors, the corporation shall not
indemnify any officer or director of the corporation who is not otherwise
entitled to indemnification pursuant to the prior sentence of this Section.
<PAGE>
ARTICLE VI
AMENDMENT OF BYLAWS
SECTION 1. AMENDMENTS. Except as otherwise provided by the MBCA, these bylaws
may be amended in whole or in part by a vote of a two thirds majority of all of
the directors. Such authority of the board of directors is subject to the power
of the shareholders, exercisable in the manner provided in the MBCA, to adopt,
amend, or repeal bylaws adopted, amended, or repealed by the board of directors.
Exhibit 4.3
CONFORMED COPY
AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF JULY 8, 1997
AMONG
DELUXE CORPORATION,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS.............................. 2
1.01 Certain Defined Terms................................................. 2
1.02 Other Interpretive Provisions......................................... 32
(a) Defined Terms................................................. 32
(b) The Agreement................................................. 32
(c) Certain Common Terms.......................................... 32
(d) Performance; Time............................................. 33
(e) Contracts..................................................... 33
(f) Laws.......................................................... 33
(g) Captions...................................................... 34
(h) Independence of Provisions.................................... 34
1.03 Accounting Principles................................................. 34
THE CREDITS.............................. 35
2.01 The Revolving Credit.................................................. 35
2.02 Loan Accounts; Bid Loan Notes......................................... 35
2.03 Procedure for Committed Borrowing..................................... 36
2.04 Conversion and Continuation Elections for Committed
Borrowings............................................................ 39
2.05 Bid Borrowings........................................................ 42
2.06 Procedure for Bid Borrowings.......................................... 42
2.07 Voluntary Termination or Reduction of Commitments..................... 52
2.08 Optional Prepayments.................................................. 52
2.09 Optional Increase in Commitments...................................... 54
2.10 Repayment............................................................. 55
2.11 Interest.............................................................. 55
2.12 Fees ................................................................. 57
(a) Arrangement, Agency Fees...................................... 57
(b) Facility Fees................................................. 57
2.13 Computation of Fees and Interest...................................... 58
2.14 Payments by the Company............................................... 60
2.15 Payments by the Banks to the Agent.................................... 62
2.16 Sharing of Payments, Etc.............................................. 63
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY.................65
3.01 Taxes.................................................................65
3.02 Illegality............................................................72
3.03 Increased Costs and Reduction of Return...............................74
3.04 Funding Losses........................................................76
3.05 Inability to Determine Rates..........................................77
3.06 Reserves on Offshore Rate Committed Loans.............................78
3.07 Certificates of Banks.................................................79
3.08 Substitution of Banks.................................................79
3.09 Survival..............................................................80
<PAGE>
Section Page
ARTICLE IV
CONDITIONS PRECEDENT.......................... 80
4.01 Conditions of Initial Loans........................................... 80
(a) Credit Agreement; Notes....................................... 80
(b) Resolutions; Incumbency....................................... 81
(c) Organization Documents; Good Standing......................... 81
(d) Legal Opinions................................................ 82
(e) Payment of Fees............................................... 82
(f) Certificate................................................... 82
(g) Existing Agreement............................................ 83
(h) Other Documents............................................... 83
4.02 Conditions to All Borrowings.......................................... 83
(a) Notice of Borrowing or Conversion/Continuation................ 83
(b) Continuation of Representations and Warranties................ 83
(c) No Existing Default........................................... 84
ARTICLE V
REPRESENTATIONS AND WARRANTIES.................... 84
5.01 Corporate Existence and Power......................................... 84
5.02 Corporate Authorization; No Contravention............................. 86
5.03 Governmental Authorization............................................ 86
5.04 Binding Effect........................................................ 87
5.05 Litigation............................................................ 87
5.06 No Default............................................................ 88
5.07 ERISA Compliance...................................................... 88
5.08 Use of Proceeds; Margin Regulations................................... 90
5.09 Title to Properties................................................... 90
5.10 Taxes................................................................. 91
5.11 Financial Condition................................................... 91
5.12 Environmental Matters................................................. 92
5.13 Regulated Entities.................................................... 93
5.14 No Burdensome Restrictions............................................ 93
5.15 Copyrights, Patents, Trademarks and Licenses, etc..................... 93
5.16 Subsidiaries.......................................................... 94
5.17 Insurance............................................................. 94
5.18 Full Disclosure....................................................... 94
ARTICLE VI
AFFIRMATIVE COVENANTS.......................... 95
6.01 Financial Statements.................................................. 95
6.02 Certificates; Other Information....................................... 96
6.03 Notices............................................................... 97
6.04 Preservation of Corporate Existence, Etc..............................100
6.05 Maintenance of Property...............................................101
6.06 Insurance.............................................................101
6.07 Payment of Obligations................................................102
6.08 Compliance with Laws..................................................103
6.09 Compliance with ERISA.................................................103
6.10 Inspection of Property and Books and Records..........................103
6.11 Environmental Laws....................................................104
6.12 Use of Proceeds.......................................................105
<PAGE>
Section Page
ARTICLE VII
NEGATIVE COVENANTS...........................105
7.01 Limitation on Liens...................................................105
7.02 Disposition of Assets.................................................109
7.03 Consolidations and Mergers............................................110
7.04 Transactions with Affiliates..........................................111
7.05 Use of Proceeds.......................................................111
7.06 Restricted Payments...................................................111
7.07 ERISA.................................................................112
7.08 Change in Business....................................................113
7.09 Accounting Changes....................................................113
7.10 Interest Coverage.....................................................113
7.11 Leverage..............................................................114
7.12 Subsidiary Indebtedness...............................................114
ARTICLE VIII
EVENTS OF DEFAULT............................115
8.01 Event of Default......................................................115
(a) Non-Payment......................................................115
(b) Representation or Warranty.......................................115
(c) Specific Defaults................................................116
(d) Other Defaults...................................................116
(e) Cross-Default....................................................116
(f) Insolvency; Voluntary Proceedings................................117
(g) Involuntary Proceedings..........................................117
(h) ERISA............................................................118
(i) Monetary Judgments...............................................119
(j) Non-Monetary Judgments...........................................119
(k) Change of Control................................................119
8.02 Remedies..............................................................120
8.03 Rights Not Exclusive..................................................121
ARTICLE IX
THE AGENT...............................121
9.01 Appointment and Authorization.........................................121
9.02 Delegation of Duties..................................................122
9.03 Liability of Agent....................................................122
9.04 Reliance by Agent.....................................................123
9.05 Notice of Default.....................................................124
9.06 Credit Decision.......................................................125
9.07 Indemnification.......................................................126
9.08 Agent in Individual Capacity..........................................127
9.09 Successor Agent.......................................................128
9.10 Withholding Tax.......................................................129
ARTICLE X
MISCELLANEOUS.............................130
10.01 Amendments and Waivers................................................130
10.02 Notices...............................................................132
10.03 No Waiver; Cumulative Remedies........................................134
10.04 Costs and Expenses....................................................134
10.05 Indemnity.............................................................135
<PAGE>
Section Page
10.06 Payments Set Aside...............................................137
10.07 Successors and Assigns...........................................138
10.08 Assignments, Participations, etc.................................138
10.09 Set-off..........................................................144
10.10 Notification of Addresses, Lending Offices, Etc..................145
10.11 Counterparts.....................................................145
10.12 Severability.....................................................145
10.13 No Third Parties Benefited.......................................146
10.14 Governing Law and Jurisdiction...................................146
10.15 Waiver of Jury Trial.............................................147
10.16 Entire Agreement.................................................148
SCHEDULES
Schedule 2.01 List of Commitments and Pro Rata Shares
Schedule 5.05 Litigation Schedule
Schedule 5.12 Environmental Schedule
Schedule 5.16 List of Subsidiaries and Material Equity
Investments
Schedule 7.01 Existing Liens
Schedule 10.02 Offshore and Domestic Lending Offices,
Addresses for Notices
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Invitation for Competitive Bids
Exhibit E Form of Competitive Bid Request
Exhibit F Form of Competitive Bid
Exhibit G Form of Bid Loan Note
Exhibit H Form of Bank's Response to Pro Rata Commitment
Increase Request
Exhibit I Form of Supplement for Non-Pro Rata Commitment
Increase (Existing Bank)
Exhibit J Form of Supplement for Commitment Increase (New
Bank)
Exhibit K Form of Opinion of Counsel to the Company
Exhibit L Form of Assignment and Acceptance
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of July
8, 1997, among Deluxe Corporation, a Minnesota corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), and Bank of America
National Trust and Savings Association, as agent for the Banks.
WHEREAS, the Company, the Banks and the Agent are parties to that
certain Credit Agreement dated as of December 2, 1994 (the "Existing
Agreement");
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree that the Existing Agreement
shall, effective as of the Closing Date, be amended and restated in its entirety
as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Absolute Rate" has the meaning specified in subsection
2.06(c).
"Absolute Rate Auction" means a solicitation of Competitive
Bids setting forth Absolute Rates pursuant to Section 2.06.
"Absolute Rate Bid Loan" means a Bid Loan that bears interest
at a rate determined with reference to the Absolute Rate.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any material part of the business and operations or
division of a Person, (b) the acquisition of in excess of 50% of the
capital stock, partnership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person
<PAGE>
(other than a Person that is a Subsidiary) provided that the Company or
a Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.09.
"Agent-Related Persons" means BofA in its capacity as agent
and any successor agent arising under Section 9.09, together with their
respective Affiliates (including, in the case of BofA, the Arranger),
and the officers, directors, employees, agents and attorneys-in-fact of
such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 10.02 hereto in relation to the Agent, or such other
address as the Agent may from time to time specify.
<PAGE>
"Agreement" means this Credit Agreement.
"Applicable Margin" means
(i) with respect to Base Rate Committed Loans,
0%; and
(ii) with respect to Offshore Rate Committed
Loans,
(A) 0.115% if Level I Status exists on
any day,
(B) 0.135% if Level II Status exists on
any day,
(C) 0.150% if Level III Status exists
on any day,
(D) 0.200% if Level IV Status exists on
any day,
(E) 0.275% if Level V Status exists on
any day, and
(F) 0.425% if Level VI Status exists on
any day.
<PAGE>
"Arranger" means BancAmerica Securities, Inc., a Delaware
corporation.
"Assignee" has the meaning specified in subsection
10.08(a).
"Assignment and Acceptance" has the meaning specified in
Section 10.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable
disbursements of internal counsel.
"Bank" has the meaning specified in the introductory
clause hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. ss.101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired
<PAGE>
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above,
or below such announced rate. Any change in the reference rate
announced by BofA shall take effect at the opening of business on the
day specified in the public announcement of such change.
"Base Rate Committed Loan" means a Committed Loan that bears
interest based on the Base Rate.
"Bid Borrowing" means a Borrowing hereunder consisting of one
or more Bid Loans made to the Company on the same day by one or more
Banks.
"Bid Loan" means a Loan by a Bank to the Company under Section
2.05, which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan.
"Bid Loan Lender" means, in respect of any Bid Loan, the Bank
making such Bid Loan to the Company.
"Bid Loan Note" has the meaning specified in Section
2.02.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
<PAGE>
"Borrowing" means a borrowing hereunder consisting of Loans of
the same Type (in the case of Committed Loans) made to the Company on
the same day by one or more of the Banks under Article II, and may be a
Committed Borrowing or a Bid Borrowing and, other than in the case of
Base Rate Committed Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco
are authorized or required by law to close and, if the applicable
Business Day relates to any Offshore Rate Loan, means such a day on
which dealings are carried on in the applicable offshore dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.01 are satisfied or waived by
<PAGE>
all Banks (or, in the case of subsection 4.01(e), waived by the Person
entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.01.
"Committed Borrowing" means a Borrowing hereunder consisting
of Committed Loans made on the same day by the Banks ratably according
to their respective Pro Rata Shares and, in the case of Offshore Rate
Committed Loans, having the same Interest Periods.
"Committed Loan" means a Loan by a Bank to the Company under
Section 2.01, and may be an Offshore Rate Committed Loan or a Base Rate
Committed Loan (each, a "Type" of Committed Loan).
"Competitive Bid" means an offer by a Bank to make a Bid Loan
in accordance with subsection 2.06(c).
"Competitive Bid Request" has the meaning specified in
subsection 2.06(a).
<PAGE>
"Compliance Certificate" means a certificate substantially in
the form of Exhibit A.
"Contingent Obligation" means, as applied to any Person, any
material direct or indirect liability of that Person with respect to
any Indebtedness, lease, dividend, Surety Instrument or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect
security therefor, or (b) to advance or provide funds (i) for the
payment or discharge of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, or
(c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the holder of
any such primary obligation against loss in respect thereof; in each
case (a), (b), (c) or (d), including arrangements wherein the rights
and remedies of the holder of the primary obligation are limited to
repossession or sale of certain property of such Person. The amount of
any Contingent
<PAGE>
Obligation shall be deemed equal to the lesser of (x) the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or if indeterminable,
the maximum reasonably anticipated liability in respect thereof, or (y)
any limitation of such Contingent Obligation contained in the
instrument or agreement creating such Contingent Obligation.
"Contractual Obligation" means, as to any Person, any
provision either of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of trust or
other instrument, document or agreement to which such Person is a party
or by which it or any of its property is bound and which in either case
is material to such Person.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Company (a) converts Committed Loans of one Type to
another Type, or (b) continues Committed Loans of the same Type, but
with a new Interest Period, in the case of Committed Loans having
Interest Periods expiring on such date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not
<PAGE>
cured or otherwise remedied during such time) constitute an Event of
Default.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $500,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $500,000,000,
provided that such bank is acting through a branch or agency located in
the United States; or (iii) a Person that is primarily engaged in the
business of commercial banking and that is (A) a Subsidiary of a Bank,
(B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a
Person of which a Bank is a Subsidiary; provided that any such bank or
Person shall also have senior unsecured long-term debt ratings which
are rated at least A- (or the equivalent) as publicly announced by S&P
or A3 (or the equivalent) as publicly announced by Moody's.
<PAGE>
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of
<PAGE>
ERISA during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA) or a cessation of operations
which is treated as such a withdrawal under Section 4062(e) of ERISA;
(c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA of, or the commencement of
proceedings by the PBGC to terminate, a Pension Plan or Multiemployer
Plan; (e) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title
IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Company or any ERISA Affiliate.
"Event of Default" means any of the events or circumstances
specified in Section 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and regulations promulgated thereunder.
<PAGE>
"Existing Agreement" has the meaning specified in the
introductory clause hereto.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.12(a).
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Debt" means as of the date of any determination all
outstanding Indebtedness of the Company and its
<PAGE>
consolidated Subsidiaries which matures more than one (1) year after
the incurrence thereof or is extendable, renewable or refundable, at
the option of the obligor, to a date more than one (1) year after the
incurrence thereof.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession).
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
governmental regulatory authority or agency such as the FDIC, FRB, IRS
or SEC.
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course
of business on ordinary terms);
<PAGE>
(c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property,
assets or businesses; (e) all recourse indebtedness created or arising
under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to property acquired
by the Person; and (f) all obligations with respect to capital leases;
provided, however, that the term "Indebtedness" shall not include
non-recourse obligations or indebtedness of any kind; and provided
further, however, that the term "Indebtedness" shall not include any
such obligations or indebtedness owing by the Company or any Subsidiary
to the Company or any Subsidiary.
"Indemnified Liabilities" has the meaning specified in Section
10.05. "Indemnified Person" has the meaning specified in Section 10.05.
"Independent Auditor" has the meaning specified in subsection
6.01(a).
"Insolvency Proceeding" means with respect to a Person (a) any
case, action or proceeding before any court or other
<PAGE>
Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or
relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each case undertaken under
U.S. Federal, state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Committed Loan, the last day of each Interest Period
applicable to such Loan and, as to any Base Rate Committed Loan, the
last Business Day of each calendar quarter and each date such Committed
Loan is converted into another Type of Committed Loan, provided,
however, that (a) if any Interest Period for an Offshore Rate Committed
Loan exceeds three months, the date that falls three months after the
beginning of such Interest Period and after each Interest Payment Date
thereafter is also an Interest Payment Date, and (b) as to any Bid
Loan, such intervening dates prior to the maturity thereof as may be
specified by the Company and agreed to by the applicable Bid Loan
Lender in the applicable Competitive Bid shall also be Interest Payment
Dates.
"Interest Period" means, (a) as to any Offshore Rate Committed
Loan, the period commencing on the Business Day such
<PAGE>
Loan is disbursed, or on the Conversion/Continuation Date on which the
Loan is converted into or continued as an Offshore Rate Committed Loan,
and ending on the date one, two, three or six months thereafter, as
selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be; (b) as to any LIBOR Bid
Loan, the period commencing on the Business Day such Loan is disbursed
and ending on the date one, two, three, six, nine or twelve months
thereafter as selected by the Company in the applicable Competitive Bid
Request and agreed to by the applicable Bid Loan Lender(s); and (c) as
to any Absolute Rate Bid Loan, a period of not less than 7 days and not
more than 365 days as selected by the Company in the applicable
Competitive Bid Request and agreed to by the applicable Bid Loan
Lender(s);
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
<PAGE>
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"Invitation for Competitive Bids" means a solicitation for
Competitive Bids, substantially in the form of Exhibit D.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
10.02, or such other office or offices as such Bank may from time to
time notify the Company and the Agent.
<PAGE>
"Knowledge" means the actual knowledge of the Company's
Responsible Officer.
"Level I Status" exists at any date if, at such date the
Company's senior unsecured long-term debt ratings are rated either AA-
or higher (or the equivalent) as publicly announced by S&P or Aa3 or
higher (or the equivalent) as publicly announced by Moody's.
"Level II Status" exists at any date if, at such date (i) the
Company's senior unsecured long-term debt ratings are rated either A+
(or the equivalent) as publicly announced by S&P or A1 (or the
equivalent) as publicly announced by Moody's and (ii) Level I Status
does not exist.
"Level III Status" exists at any date if, at such date (i) the
Company's senior unsecured long-term debt ratings are rated either A-
or higher (or the equivalent) as publicly announced by S&P or A3 or
higher (or the equivalent) as publicly announced by Moody's and (ii)
Level I Status and Level II Status do not exist.
"Level IV Status" exists at any date if, at such date (i) the
Company's senior unsecured long-term debt ratings are rated either BBB
or higher (or the equivalent) as publicly announced by S&P or Baa2 or
higher (or the equivalent) as
<PAGE>
publicly announced by Moody's and (ii) Level I Status, Level II Status
and Level III Status do not exist.
"Level V Status" exists at any date if, at such date (i) the
Company's senior unsecured long-term debt ratings are rated either BBB-
(or the equivalent) as publicly announced by S&P or Baa3 (or the
equivalent) as publicly announced by Moody's and (ii) Level I Status,
Level II Status, Level III Status and Level IV Status do not exist.
"Level VI Status" exists at any date if, at such date (i) the
Company's senior unsecured long-term debt ratings are both rated lower
than BBB- (or the equivalent) as publicly announced by S&P and lower
than Baa3 (or the equivalent) as publicly announced by Moody's, or (ii)
the Company's senior unsecured long-term debt is unrated by both S&P
and Moody's.
"LIBO Rate" means, for any Interest Period with respect to a
LIBOR Bid Loan or Offshore Rate Committed Loan the average of the per
annum LIBO rates displayed on the Reuters Screen LIBO Page for the
relevant Interest Period, on the day which is two Business Days prior
to the first day of the proposed Interest Period; provided that in the
event the Reuters Screen LIBO Page is not available on any day, then
"LIBO Rate" shall mean the rate of interest per annum determined by the
Agent to be the arithmetic mean (rounded
<PAGE>
upward to the nearest 1/16th of 1%) of the rates of interest per annum
notified to the Agent by each Reference Bank as the rate of interest at
which dollar deposits in the approximate amount of, in the case of
LIBOR Bid Loans, the LIBOR Bid Loans to be borrowed in such Bid Loan
Borrowing, and, in the case of Offshore Rate Committed Loans, the
Offshore Rate Committed Loan to be made, continued or converted, and
having a maturity comparable to such Interest Period, would be offered
by such Reference Bank to major banks in the London interbank market at
their request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period.
"LIBOR Auction" means a solicitation of Competitive Bids
setting forth a LIBOR Bid Margin pursuant to Section 2.06.
"LIBOR Bid Loan" means any Bid Loan that bears interest at a
rate based upon the LIBO Rate.
"LIBOR Bid Margin" has the meaning specified in subsection
2.06(c)(ii)(C).
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential
<PAGE>
arrangement of any kind or nature whatsoever in respect of any property
(including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a
lessor under a capital lease, any financing lease having substantially
the same economic effect as any of the foregoing, or the filing of any
financing statement signed by and naming the owner of the asset to
which such lien relates as debtor, under the Uniform Commercial Code or
any comparable law), but not including the interest of a lessor under
an operating lease.
"Loan" means an extension of credit by a Bank to the Company
under Article II, and may be a Committed Loan or a Bid Loan.
"Loan Documents" means this Agreement, any Notes, the Fee
Letter and all other documents delivered to the Agent or any Bank in
connection herewith.
"Majority Banks" means (a) at any time prior to the Revolving
Termination Date, Banks then holding at least 51% of the Commitments,
and (b) otherwise, Banks then holding at least 51% of the then
aggregate unpaid principal amount of the Loans.
<PAGE>
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the financial condition of the
Company and its Subsidiaries taken as a whole; or (b) a material
adverse effect upon the legality, validity, binding effect or
enforceability against the Company of this Agreement or the Notes.
"Material Subsidiary" means, at any time, any Subsidiary
having at such time either (i) total (gross) revenues for the preceding
four fiscal quarter period in excess of 20% of total (gross) revenues
of the Company and its consolidated Subsidiaries for such period or
(ii) total assets, as of the last day of the preceding fiscal quarter,
having a net book value in excess of 20% of the total assets of the
Company and its consolidated Subsidiaries as of such day, in each case,
based upon the Company's most recent annual or quarterly financial
statements delivered to the Agent under Section 6.01.
"Moody's" means Moody's Investors Service, a division of Dun &
Bradstreet Corporation.
<PAGE>
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"Notes" means the Bid Loan Notes.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit B.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit C.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement and the
Notes, owing by the Company to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing
or hereafter arising.
"Offshore Rate Committed Loan" means any Committed Loan that
bears interest based on the LIBO Rate.
<PAGE>
"Offshore Rate Loan" means any LIBOR Bid Loan or any Offshore
Rate Committed Loan.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
10.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
<PAGE>
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.01.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
<PAGE>
"Reference Banks" means BofA, The Bank of New York and
Wachovia Bank, N.A.
"Replacement Bank" has the meaning specified in Section 3.08.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means any of the following officers of
the Company: the chief executive officer, the chief operating officer,
the president, the chief financial officer, the treasurer, the
assistant treasurer, or any other officer of the Company having similar
authority and responsibility to any of the foregoing.
<PAGE>
"Reuters Screen LIBO Page" means the display designated as
"LIBO" on the Reuters Monitor Money Rates Service (or such other page
as may replace the LIBO Page on that service for the purpose of
displaying London interbank offered quotations of major banks).
"Revolving Termination Date" means the earlier to occur of:
(a) July 7, 2002; and
(b) the date on which the Commitments terminate in
accordance with Section 2.07 or 8.02 of this Agreement.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
60% of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the
<PAGE>
Person, or a combination thereof. Unless the context otherwise clearly
requires, references herein to a "Subsidiary" refer to a Subsidiary of
the Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Bank's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Bank or the
Agent, as the case may be, is organized or maintains a lending office;
provided, however, that "Taxes" shall be limited to taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, which are imposed by U.S. Governmental Authorities
unless the Company makes any payments hereunder with funds derived from
sources outside the United States.
"Total Capitalization" means, as of any date of determination,
the sum of (i) Funded Debt, and (ii) the sum of
<PAGE>
the amounts set forth on the consolidated balance sheet of the Company
and its consolidated Subsidiaries as shareholders' equity as determined
in accordance with GAAP.
"Type" has the meaning specified in the definition of
"Committed Loan."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares or similar nominal shares
required by law) 100% of the capital stock of each class having
ordinary voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which any determination is being
made, is owned, beneficially and of record, by the Company, or by one
or more of the other Wholly-Owned Subsidiaries, or both.
<PAGE>
1.02 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or
therein, all terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or
delivered pursuant hereto. The meaning of defined terms shall be
equally applicable to the singular and plural forms of the defined
terms. Terms (including uncapitalized terms) not otherwise defined
herein and that are defined in the UCC shall have the meanings therein
described.
(b) The Agreement. The words "hereof", "herein", "hereunder"
and words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, section, schedule and exhibit references are
to this Agreement unless otherwise specified.
(c) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
<PAGE>
(ii) The term "including" is not limiting and means
"including without limitation."
(d) Performance; Time. Whenever any performance obligation
hereunder shall be stated to be due or required to be satisfied on a
day other than a Business Day, such performance shall be made or
satisfied on the next succeeding Business Day. In the computation of
periods of time from a specified date to a later specified date, the
word "from" means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and
including." If any provision of this Agreement refers to any action
taken or to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be interpreted to encompass any and
all reasonable means, direct or indirect, of taking, or not taking,
such action.
(e) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications
are not prohibited by the terms of any Loan Document.
(f) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory
<PAGE>
provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(g) Captions. The captions and headings of this Agreement are
for convenience of reference only and shall not affect the
interpretation of this Agreement.
(h) Independence of Provisions. The parties acknowledge that
this Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar
matters, and that such limitations, tests and measurements are
cumulative and must each be performed, except as expressly stated to
the contrary in this Agreement.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and
all financial computations required under this Agreement shall be made,
in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
<PAGE>
THE CREDITS
2.01 The Revolving Credit. Each Bank severally agrees, on the terms and
conditions set forth herein, to make Committed Loans to the Company from time to
time on any Business Day during the period from the Closing Date to the
Revolving Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth on Schedule 2.01 (such amount as the same may
be increased under Section 2.09 or reduced under Section 2.07 or changed as a
result of one or more assignments under Section 10.08, the Bank's "Commitment");
provided, however, that, the aggregate principal amount of all outstanding
Committed Loans, together with the aggregate principal amount of all Bid Loans
outstanding, shall not at any time exceed the combined Commitments. Within the
limits of each Bank's Commitment, and subject to the other terms and conditions
hereof, the Company may borrow under this Section 2.01, prepay under Section
2.08 and reborrow under this Section 2.01.
2.02 Loan Accounts; Bid Loan Notes.
(a) The Committed Loans made by each Bank shall be evidenced
by one or more loan accounts or records maintained by such Bank in the
ordinary course of business. The loan accounts or records maintained by
the Agent and each Bank shall be prima facie evidence of the amount of
the Loans made
<PAGE>
by the Banks to the Company and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however, limit
or otherwise affect the obligation of the Company hereunder to pay any
amount owing with respect to the Loans.
(b) The Bid Loans made by any Bank shall be evidenced by a
promissory note executed by the Company (a "Bid Loan Note") (each such
Note to be substantially in the form of Exhibit G). Each Bank shall
endorse on the schedule annexed to its Note the date, amount and
maturity of each Loan made by it and the amount of each payment of
principal made by the Company with respect thereto. Each such Bank is
irrevocably authorized by the Company to endorse its Note and each
Bank's record shall be prima facie evidence of the amount of each such
Loan; provided, however, that the failure of a Bank to make, or an
error in making, a notation thereon with respect to any Loan shall not
limit or otherwise affect the obligations of the Company hereunder or
under any such Note to such Bank.
2.03 Procedure for Committed Borrowing.
(a) Each Committed Borrowing shall be made upon the Company's
irrevocable written notice delivered to the Agent in the form of a
Notice of Borrowing (which notice must be received by the Agent (i)
prior to 9:00 a.m. (San Francisco
<PAGE>
time) three Business Days prior to the requested Borrowing Date, in the
case of Offshore Rate Committed Loans; and (ii) prior to 9:30 a.m. (San
Francisco time) on the requested Borrowing Date, in the case of Base
Rate Committed Loans, specifying:
(A) the amount of the Committed Borrowing,
which shall be in an aggregate minimum amount of
$5,000,000 or any multiple of $1,000,000 in excess
thereof;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Committed Loans comprising
the Committed Borrowing; and
(D) if the Committed Loans consist of
Offshore Rate Committed Loans, the duration of the
Interest Period applicable to such Committed Loans
included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period
for any Committed Borrowing comprised of Offshore
Rate Committed Loans, such Interest Period shall be
one month.
<PAGE>
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank's Pro Rata Share
of that Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
each Committed Borrowing available to the Agent for the account of the
Company at the Agent's Payment Office by 11:00 a.m. (San Francisco
time) on the Borrowing Date requested by the Company in funds
immediately available to the Agent. Any such amount which is received
later than 11:00 a.m. (San Francisco time) shall be deemed to have been
received on the immediately succeeding Business Day. The proceeds of
all such Committed Loans will then be made available to the Company by
the Agent by wire transfer in accordance with written instructions
provided to the Agent by the Company of like funds as received by the
Agent.
(d) After giving effect to any Committed Borrowing, there may
not be more than eight (8) different Interest Periods in effect in
respect of all Committed Loans and Bid Loans together then outstanding.
<PAGE>
2.04 Conversion and Continuation Elections for Committed Borrowings.
(a) The Company may, upon irrevocable written notice to the
Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Committed Loans, or as of the last day of the
applicable Interest Period, in the case of Offshore Rate
Committed Loans, to convert any such Committed Borrowings (or
any part thereof in an amount not less than $5,000,000, or
that is in an integral multiple of $1,000,000 in excess
thereof) into Committed Borrowings of the other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Committed Borrowings having
Interest Periods expiring on such day (or any part thereof in
an amount not less than $5,000,000, or that is in an integral
multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate
Committed Loans in respect of any Committed Borrowing is reduced, by
payment, prepayment, or conversion of part thereof to be less than
$1,000,000, such Offshore Rate Committed Loans shall automatically
convert into Base Rate Committed Loans,
<PAGE>
and on and after such date the right of the Company to continue such
Committed Loans as, and convert such Committed Loans into, Offshore
Rate Committed Loans shall terminate.
(b) The Company shall deliver a Notice of Conversion/
Continuation to be received by the Agent not later than (i) 9:00 a.m.
(San Francisco time) at least three Business Days in advance of the
Conversion/Continuation Date, if the Committed Borrowings are to be
converted into or continued as Offshore Rate Committed Loans; and (ii)
9:30 a.m. (San Francisco time) on the Conversion/Continuation Date, if
the Loans are to be converted into Base Rate Committed Loans,
specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Committed Loans
to be converted or continued;
(C) the Type of Committed Loans resulting
from the proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Committed Loans, the duration of the
requested Interest Period.
<PAGE>
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Committed Loans, the Company has failed to select
timely a new Interest Period to be applicable to such Loans in
accordance with Section 2.04(b), or if any Event of Default then
exists, the Company shall be deemed to have elected to convert such
Offshore Rate Committed Loans into Base Rate Committed Loans effective
as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a Notice of Conversion/ Continuation, or, if no timely notice is
provided by the Company, the Agent will promptly notify each Bank of
the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective
outstanding principal amounts of the Committed Loans with respect to
which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the
existence of an Event of Default, the Company may not elect to have a
Committed Loan made as, converted into or continued as, an Offshore
Rate Committed Loan.
(f) After giving effect to any conversion or continuation of
Committed Loans, there may not be more than
<PAGE>
eight (8) different Interest Periods in effect in respect of all
Committed Loans and Bid Loans together then outstanding.
2.05 Bid Borrowings. In addition to Committed Borrowings, each Bank
severally agrees that the Company may, as set forth in Section 2.06, from time
to time request the Banks prior to the Revolving Termination Date to submit
offers to make Bid Loans to the Company; provided, however, that the Banks may,
but shall have no obligation to, submit such offers and the Company may, but
shall have no obligation to, accept any such offers; and provided, further, that
at no time shall (a) the outstanding aggregate principal amount of all Bid Loans
made by all Banks, plus the outstanding aggregate principal amount of all
Committed Loans made by all Banks exceed the combined Commitments; or (b) the
number of Interest Periods for Bid Loans then outstanding plus the number of
Interest Periods for Committed Loans then outstanding exceed eight (8).
2.06 Procedure for Bid Borrowings. The Company may, as set forth in
this Section, request the Agent to, or itself may, solicit offers from all the
Banks to make Bid Loans.
(a) When the Company wishes to request the Banks to submit
offers to make Bid Loans hereunder and have the Agent solicit such
offers, it shall transmit to the Agent by telephone call followed
promptly by facsimile transmission a
<PAGE>
notice in substantially the form of Exhibit E (a "Competitive Bid
Request") so as to be received no later than 8:30 a.m. (San Francisco
time) (x) four Business Days prior to the date of a proposed Bid
Borrowing in the case of a LIBOR Auction, or (y) one Business Day prior
to the date of a proposed Bid Borrowing in the case of an Absolute Rate
Auction, specifying:
(i) the date of such Bid Borrowing, which shall be a
Business Day;
(ii) the aggregate amount of such Bid Borrowing,
which shall be a minimum amount of $5,000,000 or in multiples
of $1,000,000 in excess thereof;
(iii) whether the Competitive Bids requested are to
be for LIBOR Bid Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
"Interest Period" herein.
Subject to subsection 2.06(c), the Company may not itself request (and
may not request the Agent to solicit offers for) Competitive Bids for
more than three Interest Periods in a
<PAGE>
single Competitive Bid Request and may not request Competitive Bids
more than once in any period of five Business Days.
(b) Upon receipt of a Competitive Bid Request, the Agent will
promptly send to the Banks by facsimile transmission an Invitation for
Competitive Bids, which shall constitute an invitation by the Company
to each Bank to submit Competitive Bids offering to make the Bid Loans
to which such Competitive Bid Request relates in accordance with this
Section 2.06. If the Company itself is soliciting offers to make
Competitive Bids, the Company shall send to the Banks (with a copy to
the Agent) by facsimile transmission an Invitation for Competitive
Bids, so as to be received by each Bank no later than the times
specified in Section 2.06(a) for transmission of a Competitive Bid
Request from the Company to the Agent.
(c) (i) Each Bank may at its discretion submit a Competitive
Bid containing an offer or offers to make Bid Loans in response to any
Invitation for Competitive Bids. Each Competitive Bid must comply with
the requirements of this subsection 2.06(c) and must be submitted to
the Agent or the Company, as the case may be, by facsimile transmission
at its offices specified in or pursuant to Section 10.02 not later than
(1) 6:30 a.m. (San Francisco time) three Business Days prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (2) 6:30
a.m. (San Francisco time) on the
<PAGE>
proposed date of Borrowing, in the case of an Absolute Rate Auction;
provided that in any instance where the Agent has received a
Competitive Bid Request, Competitive Bids submitted by BofA (or any
Affiliate of BofA) may only be submitted if BofA or such Affiliate
notifies the Company of the terms of the offer or offers contained
therein not later than (A) 6:15 a.m. (San Francisco time) three
Business Days prior to the proposed date of Borrowing, in the case of a
LIBOR Auction or (B) 6:15 a.m. (San Francisco time) on the proposed
date of Borrowing, in the case of an Absolute Rate Auction. In the case
where the Company itself has solicited offers for Competitive Bids, the
Company shall promptly send to the Agent, by facsimile transmission, a
copy of each Competitive Bid received by it (including any that are to
be disregarded pursuant to Section 2.06(c)(iii)).
(ii) Each Competitive Bid shall be in substantially
the form of Exhibit F, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which
principal amount (x) may be equal to, greater than or
less than the Commitment of the quoting Bank, (y)
must be $5,000,000 or in multiples of
<PAGE>
$1,000,000 in excess thereof, and (z) may not exceed
the principal amount of Bid Loans for which
Competitive Bids were requested;
(C) in case the Company elects a LIBOR
Auction, the margin above or below the LIBO Rate (the
"LIBOR Bid Margin") offered for each such Bid Loan,
expressed in multiples of 1/1000th of one basis point
to be added to or subtracted from the applicable LIBO
Rate and the Interest Period applicable thereto;
(D) in case the Company elects an Absolute
Rate Auction, the rate of interest per annum
expressed in multiples of 1/1000th of one basis point
(the "Absolute Rate") offered for each such Bid Loan
and the Interest Period applicable thereto; and
(E) the identity of the quoting Bank.
A Competitive Bid may contain up to three separate offers by the
quoting Bank with respect to each Interest Period specified in the
related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
<PAGE>
(A) is not substantially in conformity with
Exhibit F or does not specify all of the information
required by subsection (c)(ii) of this Section;
(B) contains qualifying, conditional or
similar language;
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
(D) arrives after the time set forth in
subsection (c)(i).
(d) In any instance where the Agent has sent Competitive Bid
Requests, promptly on receipt and not later than 7:00 a.m. (San
Francisco time) three Business Days prior to the proposed date of
Borrowing, in the case of a LIBOR Auction, or 7:00 a.m. (San Francisco
time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction, the Agent will notify the Company of the terms (i) of any
Competitive Bid submitted by a Bank that is in accordance with
subsection 2.06(c), and (ii) of any Competitive Bid that amends,
modifies or is otherwise inconsistent with a previous Competitive Bid
submitted by such Bank with respect to the same Competitive
<PAGE>
Bid Request. Any such subsequent Competitive Bid shall be disregarded
by the Agent unless such subsequent Competitive Bid is submitted solely
to correct a manifest error in such former Competitive Bid and only if
received within the times set forth in subsection 2.06(c). The Agent's
notice to the Company shall specify (1) the aggregate principal amount
of Bid Loans for which offers have been received for each Interest
Period specified in the related Competitive Bid Request; (2) the
respective principal amounts and LIBOR Bid Margins or Absolute Rates,
as the case may be, so offered; and (3) any other information regarding
such Competitive Bid reasonably requested by the Company. Subject only
to the provisions of Sections 3.02, 3.05 and 4.02 hereof and the
provisions of this subsection (d), any Competitive Bid shall be
irrevocable except with the written consent of, where the Agent has
solicited offers to make Bid Loans, the Agent given on the written
instructions of the Company or, otherwise, the Company.
(e) Not later than 7:45 a.m. (San Francisco time) three
Business Days prior to the proposed date of Borrowing, in the case of a
LIBOR Auction, or 7:45 a.m. (San Francisco time) on the proposed date
of Borrowing, in the case of an Absolute Rate Auction, the Company
(whether or not it has directly solicited offers to make Competitive
Bids) shall notify the Agent, in writing and in a form reasonably
acceptable to the
<PAGE>
Agent, of its acceptance or non-acceptance of the offers received by it
pursuant to subsection 2.06(c) or notified to it pursuant to subsection
2.06(d). The Company shall be under no obligation to accept any offer
and may choose to accept or reject some or all offers. In the case of
acceptance, such notice shall specify the aggregate principal amount of
offers for each Interest Period that is accepted. The Company may
accept any Competitive Bid in whole or in part; provided that:
(i) the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in
the related Competitive Bid Request or, if the Company
solicited the related offers, the related Invitation for
Competitive Bids;
(ii) the principal amount of each Bid Borrowing must
be $5,000,000 or in any multiple of $1,000,000 in excess
thereof;
(iii) acceptance of offers may only be made on the
basis of ascending LIBOR Bid Margins or Absolute Rates within
each Interest Period, as the case may be; and
(iv) the Company may not accept any offer that is
described in subsection 2.06(c)(iii) or that otherwise fails
to comply with the requirements of this Agreement.
<PAGE>
(f) If offers are made by two or more Banks with the same
LIBOR Bid Margins or Absolute Rates, as the case may be, for a greater
aggregate principal amount than the amount in respect of which such
offers are accepted for the related Interest Period, the principal
amount of Bid Loans in respect of which such offers are accepted shall
be allocated by the Agent or the Company, as the case may be, among
such Banks (in such multiples, not less than $1,000,000, as the Agent
or the Company, as the case may be, may deem appropriate) as nearly as
practicable in proportion to the aggregate principal amounts of such
offers. Determination by the Agent or the Company, as the case may be,
of the amounts of Bid Loans shall be conclusive in the absence of
manifest error.
(g) (i) The Agent will promptly notify each Bank
having submitted a Competitive Bid if its offer has been
accepted and, if its offer has been accepted, of the amount of
the Bid Loan or Bid Loans to be made by it on the date of the
Bid Borrowing.
(ii) Each Bank, which has received notice pursuant to
subsection 2.06(g)(i) that its Competitive Bid has been
accepted, shall make the amounts of such Bid Loans available
to the Agent for the account of the Company at the Agent's
Payment Office, by 11:00 a.m. (San Francisco time) in the case
of Absolute Rate Bid Loans, and by
<PAGE>
11:00 a.m. (San Francisco time) in the case of LIBOR Bid
Loans, on such date of Bid Borrowing, in funds immediately
available to the Agent for the account of the Company at the
Agent's Payment Office.
(iii) Promptly following each Bid Borrowing, the
Agent shall notify each Bank of the ranges of bids submitted
and the highest and lowest bids accepted for each Interest
Period requested by the Company and the aggregate amount
borrowed pursuant to such Bid Borrowing.
(iv) From time to time, the Company and the Banks
shall furnish such information to the Agent as the Agent may
request relating to the making of Bid Loans, including the
amounts, interest rates, dates of borrowings and maturities
thereof, for purposes of the allocation of amounts received
from the Company for payment of all amounts owing hereunder.
(h) If, on or prior to the proposed date of Borrowing, the
Commitments have not been terminated and if, on such proposed date of
Borrowing all applicable conditions to funding referenced in Sections
3.02, 3.05 and 4.02 hereof are satisfied, the Bank or Banks whose
offers the Company has accepted will fund each Bid Loan so accepted.
Nothing in this Section 2.06 shall be construed as a right of first
offer in
<PAGE>
favor of the Banks or to otherwise limit the ability of the Company to
request and accept credit facilities from any Person (including any of
the Banks), provided that no Default or Event of Default would
otherwise arise or exist as a result of the Company executing,
delivering or performing under such credit facilities.
2.07 Voluntary Termination or Reduction of Commitments. The Company
may, upon not less than three Business Days' prior notice to the Agent,
terminate the Commitments, or permanently reduce the Commitments by an aggregate
minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof;
unless, after giving effect thereto and to any payments or prepayments of
Committed Loans made on the effective date thereof, the then-outstanding
principal amount of the Loans would exceed the amount of the combined
Commitments then in effect. The Agent shall promptly notify the Banks of any
such termination or reduction. Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Commitments shall be
applied to each Bank according to its Pro Rata Share. All accrued commitment
fees to, but not including the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such reduction or
termination.
2.08 Optional Prepayments. (a) Subject to Section 3.04, the Company
may, at any time or from time to time, upon not less than
<PAGE>
three Business Days' irrevocable notice to the Agent, in the case of Offshore
Rate Committed Loans, or upon not less than one Business Day's irrevocable
notice to the Agent, in the case of Base Rate Committed Loans, ratably prepay
such Loans in whole or in part, in minimum amounts of $5,000,000 or any multiple
of $1,000,000 in excess thereof. Such notice of prepayment shall specify the
date and amount of such prepayment and the Type(s) of Committed Loans to be
prepaid. The Agent will promptly notify each Bank of its receipt of any such
notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is
given by the Company, the Company shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount prepaid
and any amounts required pursuant to Section 3.04; provided that if the Company
shall fail to make any such payment on the date specified therein, such failure
shall not constitute an Event of Default hereunder, and if the Committed Loan is
a Base Rate Committed Loan such Loan shall continue as if such prepayment notice
had not been given, and if the Committed Loan is an Offshore Rate Committed Loan
such Loan shall be automatically converted to a Base Rate Committed Loan as of
the date specified in such notice.
(b) Bid Loans may not be voluntarily prepaid.
<PAGE>
2.09 Optional Increase in Commitments. At any time the Company may
request the Banks by written notice to the Agent, to increase the aggregate
Commitments, which notice shall be accompanied by the resolutions of the board
of directors of the Company approving such increase and certified by the
Secretary or an Assistant Secretary of the Company, provided that in no event
shall the aggregate Commitments exceed $300,000,000 without the written consent
of all the Banks. The Agent shall transmit such request to each Bank within one
Business Day. Each Bank will have the option, in its sole discretion, to
subscribe for its proportionate share of such requested increase, according to
its then existing Pro Rata Share. The Banks shall respond in writing to the
Company's request through the Agent within fifteen (15) Business Days by
submitting a supplement in the form of Exhibit H. Any Bank not responding within
fifteen (15) Business Days shall be deemed to have declined the request. At the
option of the Company, any part of the increase not so subscribed may be
assumed, within ten (10) Business Days of the Banks' response, by one or more
existing Banks or assumed by other banks meeting the qualifications of an
Eligible Assignee acceptable to the Agent and the Company, which consent of the
Agent shall not be unreasonably withheld, upon submission of a supplement in the
form of Exhibit I, in the case of an existing Bank, or Exhibit J, in the case of
a new party to this Agreement, and Schedule 2.01 shall be amended accordingly.
In order to maintain Committed Loans in accordance with each Bank's Pro Rata
Share at all times, a reallocation of Commitments as a
<PAGE>
result of a non-pro rata subscription to the increase in the Commitments may
require a prepayment of Loans by the Company (subject, without limitation, to
Section 3.04(d) hereof).
2.10 Repayment. The Company shall repay to the Banks on the Revolving
Termination Date the aggregate principal amount of Loans outstanding on such
date. The Company shall repay each Offshore Rate Committed Loan and each Bid
Loan on the last day of the relevant Interest Period.
2.11 Interest.
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate
per annum equal to the LIBO Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans
under Section 2.04), plus the Applicable Margin. Each Bid Loan shall
bear interest on the outstanding principal amount thereof from the
relevant Borrowing Date at a rate per annum equal to the LIBO Rate plus
(or minus) the LIBOR Bid Margin, or at the Absolute Rate, as the case
may be.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Committed Loans under Section
<PAGE>
2.08 for the portion of the Loans so prepaid and upon payment
(including prepayment) in full thereof.
(c) Notwithstanding subsection (a) of this Section, after
acceleration or the occurrence and continuation of an Event of Default
under Section 8.01(a) or (c), or commencing five (5) days after the
occurrence and continuation of any other Event of Default, the Company
shall pay interest (after as well as before entry of judgment thereon
to the extent permitted by law) on the principal amount of all
outstanding Obligations, at a rate per annum which is determined by
adding 2% per annum to the Applicable Margin then in effect for such
Loans and, in the case of Obligations not subject to an Applicable
Margin, at a rate per annum equal to the Base Rate plus 2%; provided,
however, that, on and after the expiration of any Interest Period
applicable to any Offshore Rate Loan outstanding on the date of
occurrence of such Event of Default or acceleration, the principal
amount of such Loan shall, after the expiration of such Interest Period
and during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base Rate
plus 2%. Interest payable under this subsection 2.11(c) shall be
payable on demand by the Majority Banks.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be
<PAGE>
subject to the limitation that payments of interest shall not be
required for any period for which interest is computed hereunder, to
the extent (but only to the extent) that contracting for or receiving
such payment by such Bank would be contrary to the provisions of any
law applicable to such Bank limiting the highest rate of interest that
may be lawfully contracted for, charged or received by such Bank, and
in such event the Company shall pay such Bank interest at the highest
rate permitted by applicable law.
2.12 Fees.
(a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and
shall pay agency (including bid agency) fees and other sums to the
Agent for the Agent's own account, as required by the letter agreement
("Fee Letter") between the Company and the Arranger and Agent dated
April 16, 1997.
(b) Facility Fees. The Company shall pay to the Agent for the
account of each Bank a facility fee on the entire portion of such
Bank's Commitment (whether utilized or unutilized), computed on a
quarterly basis in arrears on the last Business Day of each calendar
quarter, equal to (i) 0.060% per annum if Level I Status exists, (ii)
0.065% per annum if Level II Status exists, (iii) 0.075% per annum if
<PAGE>
Level III Status exists, (iv) 0.100% per annum if Level IV Status
exists, (v) 0.175% per annum if Level V Status exists, and (vi) 0.200%
per annum if Level VI Status exists. Such facility fee shall accrue
from the Closing Date to the Revolving Termination Date and shall be
due and payable quarterly in arrears on the last Business Day of each
calendar quarter commencing on September 30, 1997 through the Revolving
Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.07, the accrued facility fee
calculated for the period ending on such date shall also be paid on the
date of such reduction or termination, with the following quarterly
payment being calculated on the basis of the period from such reduction
or termination date to such quarterly payment date. The facility fees
provided in this subsection shall accrue at all times after the
above-mentioned commencement date, including at any time during which
one or more conditions in Article IV are not met.
2.13 Computation of Fees and Interest.
(a) All computations of facility fees under Section 2.12 (b)
and interest for Base Rate Committed Loans when the Base Rate is
determined by BofA's "reference rate" shall be made on the basis of a
year of 365 or 366 days, as the case may be,
<PAGE>
and actual days elapsed. All other computations of interest shall be
made on the basis of a 360-day year and actual days elapsed (which
results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during
which interest or such fees are computed from the first day thereof to
the last day thereof.
(b) Each determination of an interest rate by the Agent shall
be conclusive and binding on the Company and the Banks in the absence
of manifest error. The Agent will, at the request of the Company or any
Bank, deliver to the Company or the Bank, as the case may be, a
statement showing the quotations used by the Agent in determining any
interest rate.
(c) If any Reference Bank's Commitment terminates (other than
on termination of all the Commitments), or for any reason whatsoever
the Reference Bank ceases to be a Bank hereunder, that Reference Bank
shall thereupon cease to be a Reference Bank. In such event, the
Company shall promptly designate a replacement Reference Bank from
among the Banks with the consent of the Agent (which consent shall not
be unreasonably withheld).
(d) Each Reference Bank shall use its best efforts to furnish
quotations of rates to the Agent as contemplated
<PAGE>
hereby. If any of the Reference Banks fails to supply such rates to the
Agent upon its request, the rate of interest shall be determined on the
basis of the quotations of the remaining Reference Bank(s).
(e) The Agent will, with reasonable promptness, notify the
Company and the Banks of each determination of the LIBO Rate; provided
that any failure to do so shall not relieve the Company of any
liability hereunder or provide the basis for any Event of Default or
any claim against the Agent. Any change in the interest rate payable on
the Offshore Rate Committed Loans or in the facility fees payable under
Section 2.12(b) resulting from a change in the Company's senior
unsecured long-term debt ratings shall become effective and shall apply
to any such Loans then outstanding or to such fees as of the opening of
business on the day on which such change in the Company's debt ratings
becomes effective. The Agent will with reasonable promptness notify the
Company and the Banks of the effective date and the amount of each such
change, provided that any failure to do so shall not relieve the
Company of any liability hereunder or provide the basis for any Event
of Default or any claim against the Agent.
2.14 Payments by the Company.
(a) All payments to be made by the Company shall be made
without set-off, recoupment or counterclaim. Except as
<PAGE>
otherwise expressly provided herein, all payments by the Company shall
be made to the Agent for the account of the Banks at the Agent's
Payment Office, and shall be made in dollars and in immediately
available funds, no later than 12:00 noon (San Francisco time) on the
date specified herein. The Agent will promptly distribute to each Bank
its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received
by the Agent later than 12:00 noon (San Francisco time) shall be deemed
to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other
than a Business Day, such payment shall be made on the following
Business Day, and such extension of time shall in such case be included
in the computation of interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Banks that the Company will
not make such payment in full as and when required, the Agent may
assume that the Company has made such payment in full to the Agent on
such date in immediately available funds and the Agent may (but shall
not be so
<PAGE>
required), in reliance upon such assumption, distribute to each Bank on
such due date an amount equal to the amount then due such Bank. If and
to the extent the Company has not made such payment in full to the
Agent, each Bank shall repay to the Agent on demand such amount
distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to
such Bank until the date repaid.
2.15 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or prior
to the Closing Date or, with respect to any Borrowing after the Closing
Date, prior to 11:00 a.m. (San Francisco time) on the date of such
Borrowing, that such Bank will not make available as and when required
hereunder to the Agent for the account of the Company the amount of
that Bank's Loan comprising a Borrowing, the Agent may assume that each
Bank has made such amount available to the Agent in immediately
available funds on the Borrowing Date and the Agent may (but shall not
be so required), in reliance upon such assumption, make available to
the Company on such date a corresponding amount. If and to the extent
any Bank shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has
made available to the Company such amount, that Bank shall on the
Business
<PAGE>
Day following such Borrowing Date make such amount available to the
Agent, together with interest at the Federal Funds Rate for each day
during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be conclusive,
absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Bank's Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Borrowing
Date, the Agent will notify the Company of such failure to fund and,
upon demand by the Agent, the Company shall pay such amount to the
Agent for the Agent's account, together with interest thereon for each
day elapsed since the date of such Borrowing, at a rate per annum equal
to the interest rate applicable at the time to the Loans comprising
such Borrowing.
(b) The failure of any Bank to make any Committed Loan on any
Borrowing Date shall not relieve any other Bank of any obligation
hereunder to make a Committed Loan on such Borrowing Date, but no Bank
shall be responsible for the failure of any other Bank to make the
Committed Loan to be made by such other Bank on any Borrowing Date.
2.16 Sharing of Payments, Etc. If, other than as expressly provided in
Section 3.08 or 10.08 hereof, any Bank shall obtain on
<PAGE>
account of the Committed Loans made by it any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its Pro Rata Share, such Bank shall immediately (a) notify the Agent
of such fact, and (b) purchase from the other Banks such participations in the
Committed Loans made by them as shall be necessary to cause such purchasing Bank
to share the excess payment pro rata with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and each other
Bank shall repay to the purchasing Bank the purchase price paid therefor,
together with an amount equal to such paying Bank's ratable share (according to
the proportion of (i) the amount of such paying Bank's required repayment to
(ii) the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Company agrees that any Bank so purchasing a
participation from another Bank may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 10.09) with respect to such participation as fully as if such Bank
were the direct creditor of the Company in the amount of such participation. The
Agent will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and will in each
case notify the Banks following any such purchases or repayments. Any Bank
having outstanding both
<PAGE>
Committed Loans and Bid Loans at any time a right of set-off is exercised by
such Bank shall apply the proceeds of such set-off first to such Bank's
Committed Loans, until its Committed Loans are reduced to zero, and thereafter
to its Bid Loans.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes. (a) Subject to subsection 3.01(f), any and all payments by
the Company to each Bank or the Agent under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction or withholding
for, any Taxes. In addition, the Company shall pay all Other Taxes.
(b) Subject to subsection 3.01(f), the Company agrees to
indemnify and hold harmless each Bank and the Agent for the full amount
of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section) paid by the
Bank or the Agent and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Bank or the Agent makes written
demand therefor. If the Company in good faith determines that any such
Taxes or Other Taxes for which
<PAGE>
indemnification has been sought hereunder are not due or owing or
otherwise correctly assessed, the Bank or Agent at the request of the
Company, or the Company at the election of the Bank or Agent following
any such request, in either case at the expense of the Company, shall
by appropriate means file for a refund or otherwise contest the payment
of such Taxes or Other Taxes, provided that any such filing or contest
does not result in any penalty, lien or other liability to the Bank or
Agent for which the Company has not provided a satisfactory undertaking
to indemnify and hold the Bank or Agent harmless. The Bank and the
Agent agree to provide reasonable cooperation to the Company in
connection with any such filing or contest, at the Company's expense
and, if the Company has paid any such Tax or Other Tax or compensated
the Bank or Agent with respect thereto, any refund thereof shall belong
and be remitted to the Company.
(c) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then, subject to subsection
3.01(f):
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to
additional sums payable under this Section)
<PAGE>
such Bank or the Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions
or withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount deducted
or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is
paid, all additional amounts which the respective Bank
specifies as necessary to preserve the after-tax yield the
Bank would have received if such Taxes or Other Taxes had not
been imposed.
(d) Within 30 days after the date of any payment by the
Company of Taxes or Other Taxes, the Company shall furnish the Agent
the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Agent.
<PAGE>
(e) Each Bank which is a foreign person (i.e., a person other
than a United States person for United States Federal income tax
purposes) agrees that:
(i) it shall, no later than the Closing Date (or, in
the case of a Bank which becomes a party hereto pursuant to
Section 10.08 after the Closing Date, the date upon which the
Bank becomes a party hereto) deliver to the Company through
the Agent two accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224"), or two accurate and complete signed originals
of Internal Revenue Service Form 1001 or any successor thereto
("Form 1001"), as appropriate, in each case indicating that
the Bank is on the date of delivery thereof entitled to
receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal
income tax;
(ii) if at any time the Bank makes any changes
necessitating a new Form 4224 or Form 1001, it shall with
reasonable promptness deliver to the Company through the Agent
in replacement for, or in addition to, the forms previously
delivered by it hereunder, two accurate and complete signed
originals of Form 4224; or two accurate and complete signed
originals of Form 1001, as
<PAGE>
appropriate, in each case indicating that the Bank is on the
date of delivery thereof entitled to receive payments of
principal, interest and fees under this Agreement free from
withholding of United States Federal income tax;
(iii) it shall, before or promptly after the
occurrence of any event (including the passing of time but
excluding any event mentioned in (ii) above) requiring a
change in or renewal of the most recent Form 4224 or Form 1001
previously delivered by such Bank, deliver to the Company
through the Agent two accurate and complete original signed
copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Bank; and
(iv) it shall, promptly upon the Company's or the
Agent's reasonable request to that effect, deliver to the
Company or the Agent (as the case may be) such other forms or
similar documentation as may be required from time to time by
any applicable law, treaty, rule or regulation in order to
establish such Bank's tax status for withholding purposes.
(f) The Company will not be required to indemnify, hold
harmless or pay any additional amounts in respect of United
<PAGE>
States Federal income tax pursuant to subsection 3.01(c) to any Bank
for the account of any Lending Office of such Bank:
(i) if the obligation to indemnify, hold harmless or
pay such additional amounts would not have arisen but for a
failure by such Bank to comply with its obligations (if any)
under subsection 3.01(e) in respect of such Lending Office;
(ii) if such Bank shall have delivered to the Company
a Form 4224 in respect of such Lending Office pursuant to
subsection 3.01(e), and such Bank shall not at any time be
entitled to exemption from deduction or withholding of United
States Federal income tax in respect of payments by the
Company hereunder for the account of such Lending Office for
any reason other than a change in United States law or
regulations or in the official interpretation of such law or
regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not
having the force of law) after the date of delivery of such
Form 4224; or
(iii) if the Bank shall have delivered to the Company
a Form 1001 in respect of such Lending Office pursuant to
subsection 3.01(e), and such Bank shall not at any time be
entitled to exemption from deduction or withholding of
<PAGE>
United States Federal income tax in respect of payments by the
Company hereunder for the account of such Lending Office for
any reason other than a change in United States law or
regulations or any applicable tax treaty or regulations or in
the official interpretation of any such law, treaty or
regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not
having the force of law) after the date of delivery of such
Form 1001.
(g) If the Company is required to pay additional amounts to
any Bank or the Agent pursuant to subsection (c) of this Section, then
such Bank shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending
Office so as to eliminate any such additional payment by the Company
which may thereafter accrue, if such change in the judgment of such
Bank is not otherwise disadvantageous to such Bank.
(h) Each Bank agrees to promptly notify the Company of the
first written assessment of any Taxes payable by the Company hereunder
which is received by such Bank, provided that failure to give such
notice shall not in any way prejudice the Bank's rights under Section
3.01 hereof. The Company shall not be obligated to pay any Taxes under
Section 3.01 which are assessed against any Bank if the statute of
<PAGE>
limitations applicable thereto (as same may be extended from time to
time by agreement between such Bank and the relevant Governmental
Authority) has lapsed. Additionally, the Company shall not be obligated
to pay any penalties, interest, additions to tax or expenses with
respect to any final assessment of Taxes against any Bank (i) unless
such Bank shall have first notified the Company in writing of such
final assessment, and (ii) which are attributable to periods exceeding
90 days prior to the date of receipt by the Company of such notice.
3.02 Illegality.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or any central bank or other Governmental Authority has
asserted that it is unlawful, for any Bank or its applicable Lending
Office to make Offshore Rate Loans, then, on notice thereof by the Bank
to the Company through the Agent, any obligation of that Bank to make
additional Offshore Rate Loans (including in respect of any LIBOR Bid
Loan as to which the Company has accepted such Bank's Competitive Bid,
but as to which the Borrowing Date has not arrived) shall be suspended
until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
<PAGE>
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of
such fact and demand from such Bank (with a copy to the Agent), prepay
in full such Offshore Rate Loans of that Bank then outstanding,
together with interest accrued thereon and amounts required under
Section 3.04, either on the last day of the Interest Period thereof, if
the Bank may lawfully continue to maintain such Offshore Rate Loans to
such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to so
prepay any Offshore Rate Committed Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, and the
affected Bank shall lend to the Company, in the amount of such
repayment, a Base Rate Committed Loan.
(c) If the obligation of any Bank to make or maintain Offshore
Rate Committed Loans has been so terminated or suspended, the Company
may elect, by giving notice to the Bank through the Agent that all
Loans which would otherwise be made by the Bank as Offshore Rate
Committed Loans shall be instead Base Rate Committed Loans.
(d) Before giving any notice to the Agent under this Section,
the affected Bank shall designate a different Lending Office with
respect to its Offshore Rate Loans if such
<PAGE>
designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of the Bank, be illegal or
otherwise disadvantageous to the Bank in such Bank's reasonable
judgment.
3.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation after the Closing Date or (ii) the compliance by that Bank
with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) after
the Closing Date, there shall be any increase in the cost to such Bank
of agreeing to make or making, funding or maintaining any Offshore Rate
Loans, then the Company shall be liable for, and shall from time to
time, upon demand (with a copy of such demand to be sent to the Agent),
pay to the Agent for the account of such Bank, additional amounts as
are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction after the Closing Date of any Capital Adequacy Regulation
, (ii) any change after the Closing Date in any Capital Adequacy
Regulation, (iii) any change after the Closing Date in the
interpretation or administration of any
<PAGE>
Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or
(iv) compliance by the Bank (or its Lending Office) or any corporation
controlling the Bank with any change in any Capital Adequacy Regulation
after the Closing Date, affects the amount of capital required to be
maintained by the Bank or any corporation controlling the Bank and
(taking into consideration such Bank's or such corporation's policies
with respect to capital adequacy and such Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, upon demand of such Bank to the Company through the
Agent, the Company shall pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to compensate the
Bank for such increase.
(c) The Company shall not be obligated to pay any amounts
under subsection 3.03(a) or (b) to any Bank (i) unless such Bank shall
have first notified the Company in writing that it intends to seek
compensation from the Company pursuant to such subsection, and (ii)
which are attributable to periods exceeding 90 days prior to the date
of receipt by the Company of such notice.
<PAGE>
3.04 Funding Losses. The Company shall reimburse each Bank and hold
each Bank harmless from any direct loss or expense (but excluding any
consequential loss or expense) which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis any
payment required hereunder of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow a Bid Loan after the
Agent has notified a Bank pursuant to subsection 2.06(g)(i) that its
Competitive Bid has been accepted by the Company, or the failure of the
Company to borrow, continue or convert a Committed Loan after the
Company has given (or is deemed to have given) a Notice of Borrowing or
a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment of any
Committed Loan in accordance with any notice delivered under Section
2.08;
(d) the prepayment (including pursuant to Section 2.08) or
payment after acceleration thereof following an Event of Default of any
Offshore Rate Loan or Absolute Rate Bid Loan on a day that is not the
last day of the relevant Interest Period; or
<PAGE>
(e) the automatic conversion under the proviso contained in
Section 2.04(a) or under the proviso contained in Section 2.08 of any
Offshore Rate Committed Loan to a Base Rate Committed Loan on a day
that is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate
Loans or from fees payable to terminate the deposits from which such
funds were obtained. For purposes of calculating amounts payable by the
Company to the Banks under this Section and under subsection 3.03(a),
each Offshore Rate Committed Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBO Rate by a matching deposit or
other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Offshore Rate
Committed Loan is in fact so funded.
3.05 Inability to Determine Rates. If all of the Reference Banks
determine that for any reason adequate and reasonable means do not exist for
determining the LIBO Rate for any requested Interest Period with respect to a
proposed Offshore Rate Loan, or that the LIBO Rate applicable pursuant to
subsection 2.11(a) for any requested Interest Period with respect to a proposed
Offshore
<PAGE>
Rate Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Agent will promptly so notify the Company and each Bank.
Thereafter, the obligation of the Banks to make additional Offshore Rate Loans
hereunder shall be suspended until the Agent upon the instruction of the
Majority Banks revokes such notice in writing. Upon receipt of such notice, the
Company without cost or expense may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Committed Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Committed Loans shall be made, converted or
continued as Base Rate Committed Loans instead of Offshore Rate Committed Loans.
3.06 Reserves on Offshore Rate Committed Loans. The Company shall pay
to each Bank, as long as such Bank shall be required under regulations of the
FRB to maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional interest on the unpaid principal amount of each
Offshore Rate Committed Loan equal to the actual costs of such reserves
allocated to such Committed Loan by the Bank (as reasonably determined by the
Bank), payable on each date on which interest is payable on such Committed Loan,
provided the Company shall have received at least 30 days' prior written notice
(with a copy to the Agent) of such additional interest from the Bank. If a Bank
fails
<PAGE>
to give notice 30 days prior to the relevant Interest Payment Date, such
additional interest shall be payable 30 days from receipt of such notice.
3.07 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error unless the Company shall have
notified such Bank of its objection to such certificate (with a copy to the
Agent) within 30 days of the Company's receipt of such claim.
3.08 Substitution of Banks. Upon the receipt by the Company from any
Bank (an "Affected Bank") of a claim for compensation under Section 3.01, 3.02
or 3.03, the Company may: (i) request the Affected Bank to use its reasonable
efforts to obtain a replacement bank or financial institution satisfactory to
the Company and meeting the qualifications of an Eligible Assignee to acquire
and assume all or a ratable part of all of such Affected Bank's Loans and
Commitment (a "Replacement Bank"); (ii) request one more of the other Banks to
acquire and assume all or part of such Affected Bank's Loans and Commitment (but
no other Bank shall be required to do so); or (iii) designate a Replacement
Bank. Any such designation of a Replacement Bank under clause (i) or (iii) shall
be subject to the prior written consent of the Agent (which consent
<PAGE>
shall not be unreasonably withheld). Any transfer arising under this Section
3.08 shall comply with the requirements of Section 10.08 and on the date of
transfer the Affected Bank shall be entitled to all sums payable to it hereunder
on such date including, without limitation, outstanding principal, accrued
interest and fees, and other sums arising under the provisions of this
Agreement.
3.09 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of each Bank to make
its initial Committed Loan hereunder, and to receive through the Agent the
initial Competitive Bid Request, is subject to and shall become effective when
the Agent shall have received on or before the Closing Date all of the
following, in form and substance satisfactory to the Agent and each Bank, and in
sufficient copies for each Bank:
(a) Credit Agreement; Notes. This Agreement (and a Bid Loan
Note for each Bank) properly executed;
<PAGE>
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the transactions
contemplated hereby, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to
execute, deliver and perform, this Agreement, and all other
Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation and
the bylaws of the Company as in effect on the Closing Date,
certified by the Secretary or Assistant Secretary of the
Company as of the Closing Date; and
(ii) a good standing certificate dated within five
(5) days of the Closing Date for the Company from the
Secretary of State (or similar, applicable Governmental
Authority) of its state of incorporation;
<PAGE>
(d) Legal Opinions. An opinion of John H. LeFevre, General
Counsel to the Company and addressed to the Agent and the Banks,
substantially in the form of Exhibit K;
(e) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, including any such costs, fees and
expenses arising under or referenced in Section 2.12;
(f) Certificate. A certificate signed on behalf of the Company
by the Company's chief executive officer, chief financial officer or
treasurer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained in
Article V are true and correct on and as of such date, as
though made on and as of such date;
(ii) no Default or Event of Default exists or would
result from the initial Borrowing; and
(iii) there has occurred since December 31, 1996, no
event or circumstance that has resulted or would reasonably be
expected to result in a Material Adverse Effect;
<PAGE>
(g) Existing Agreement. Evidence to the satisfaction of the
Agent of the Company's payment of all amounts due under the Existing
Agreement;
(h) Other Documents. Such other approvals, opinions, documents
or materials as the Agent or any Bank may reasonably request.
4.02 Conditions to All Borrowings. The obligation of each Bank to make
any Committed Loan to be made by it, or any Bid Loan as to which the Company has
accepted the relevant Competitive Bid (including its initial Loan), or to
continue or convert any Committed Loan under Section 2.04 is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date or Conversion/Continuation Date:
(a) Notice of Borrowing or Conversion/Continuation. As to any
Committed Loan, the Agent shall have received (with, in the case of the
initial Loan only, a copy for each Bank) a Notice of Borrowing or a
Notice of Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct
on and as of such Borrowing Date or Conversion/Continuation Date with
the same effect as if made
<PAGE>
on and as of such Borrowing Date or Conversion/Continuation Date
(except to the extent such representations and warranties expressly
refer to an earlier date, in which case they shall be true and correct
as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or
conversion.
Each Notice of Borrowing and Notice of Conversion/Continuation and Competitive
Bid Request submitted by the Company hereunder shall constitute a representation
and warranty by the Company hereunder, as of the date of each such notice or
request and as of each Borrowing Date or Conversion/Continuation Date, as
applicable, that the conditions in Section 4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
5.01 Corporate Existence and Power. The Company and each of its
Material Subsidiaries:
<PAGE>
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its
business (except where the failure to have any such governmental
license, authorization, consent or approval would not reasonably be
expected to have a Material Adverse Effect) and to execute, deliver,
and as to the Company only, to perform its obligations under the Loan
Documents;
(c) is duly qualified as a foreign corporation and is licensed
and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its
business requires such qualification or license except when the failure
to so qualify or be so licensed or in good standing would preclude it
from enforcing its rights with respect to any of its assets or expose
it to any liability, which in either case would reasonably be expected
to have a Material Adverse Effect; and
(d) is in all material respects in compliance with the
Requirements of Law except to the extent that the failure to do so
would not reasonably be expected to have a Material Adverse Effect.
<PAGE>
5.02 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and each other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) contravene the terms of any of the Company's Organization
Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any
Contractual Obligation to which the Company is a party or any order,
injunction, writ or decree of any Governmental Authority to which the
Company or its property is subject except where such conflict, breach,
contravention or Lien would not reasonably be expected to have a
Material Adverse Effect; or
(c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
the Agreement or any other Loan Document.
<PAGE>
5.04 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.05 Litigation. Except as specifically disclosed in Schedule 5.05,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or
thereby; or
(b) would reasonably be expected to have a Material Adverse
Effect.
No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery or performance of this Agreement
or any other Loan Document, or
<PAGE>
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
5.06 No Default. At the Closing Date and at the time of any Borrowing,
no Default or Event of Default exists or would result from the incurring of any
Obligations by the Company. As of the Closing Date, neither the Company nor any
Subsidiary is in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, would
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Closing Date, create an Event of Default under
subsection 8.01(e).
5.07 ERISA Compliance. Except as specifically disclosed in Schedule
5.07:
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state
law except where non-compliance would not reasonably be expected to
result in a Material Adverse Effect. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or, if otherwise, the failure to
apply for or receive a favorable determination letter would not
reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, nothing has occurred which would
<PAGE>
cause the loss of qualification the effect of which would reasonably be
expected to result in a Material Adverse Effect. The Company and each
ERISA Affiliate has made all required contributions to any Plan subject
to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan when the failure to make
such contribution or when such application or extension would
reasonably be expected to result in a Material Adverse Effect.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or would
reasonably be expected to result in a Material Adverse Effect. There
has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or
would reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with
respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither the Company nor any ERISA
<PAGE>
Affiliate has incurred, or reasonably expects to incur, any liability
(and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section
4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA
that, in the case of any of clauses (i) through (v), would reasonably
be expected to result in a Material Adverse Effect.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 6.12
and Section 7.05. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or to their knowledge valid
leasehold interests in, all real property necessary for the ordinary conduct of
their respective businesses, except for such defects in title as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. As of the Closing Date, the property of the Company and its
Subsidiaries is subject to no Liens, other than Permitted Liens.
<PAGE>
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP or where failure to file such return or to pay any such tax
would not reasonably be expected to have a Material Adverse Effect. There is no
proposed tax assessment against the Company or any Subsidiary that would, if
made, have a Material Adverse Effect.
5.11 Financial Condition.
(a) The audited consolidated financial statements of the
Company and its Subsidiaries dated December 31, 1996, and the unaudited
consolidated financial statements dated March 31, 1997, and the related
consolidated statements of income or operations, balance sheet and cash
flows for the fiscal year or the fiscal quarter, respectively, ended on
that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein,
<PAGE>
subject to ordinary, good faith year end audit adjustments in
the case of such unaudited statements;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) show all material Indebtedness and other
liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent
Obligations except for Indebtedness and other liabilities, the
existence of which would not have a Material Adverse Effect.
(b) Since December 31, 1996, there has been no Material
Adverse Effect.
5.12 Environmental Matters. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 5.12, such Environmental Laws and Environmental Claims
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
<PAGE>
5.13 Regulated Entities. None of the Company, any Person controlling
the Company, or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which would
reasonably be expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person except where the failure to own, be licensed to or otherwise
have the right to use the same would not have a Material Adverse Effect. To the
best knowledge of the Company, no material slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Company or any Subsidiary infringes upon any
rights held by any other Person where any such infringement would reasonably be
expected to have a Material Adverse Effect. Except
<PAGE>
as specifically disclosed in Schedule 5.05, no claim or litigation regarding any
of the foregoing is pending or to the knowledge of the Company threatened, which
would reasonably be expected to have a Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no material equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance or reinsurance companies,
in such amounts, with such deductibles and covering such risks as are believed
by the Company to be adequate in the exercise of its reasonable business
judgment.
5.18 Full Disclosure. None of the representations or warranties made by
the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, financial report or statements or certificate furnished by or on behalf
of the Company in connection with the Loan Documents, contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein,
<PAGE>
in light of the circumstances under which they are made, not misleading as of
the time when made or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
6.01 Financial Statements. The Company shall deliver to the Agent, in
form and detail reasonably satisfactory to the Agent, with sufficient copies for
each Bank:
(a) as soon as available, but not later than the date which is
the earlier of (x) 120 days after the end of each fiscal year or (y)
five (5) Business Days after the delivery of the following financial
statements to the SEC, a copy of the audited consolidated balance sheet
of the Company and its consolidated Subsidiaries as at the end of such
year and the related consolidated statements of income or operations,
shareholders' equity and cash flows for such year, setting forth in
each case in comparative form the figures for the previous fiscal year,
and accompanied by the opinion of Deloitte & Touche or another
nationally-recognized independent public accounting firm ("Independent
Auditor") which report
<PAGE>
shall state that such consolidated financial statements present fairly,
in all material respects, the financial position for the periods
indicated in conformity with GAAP. Such opinion shall not be qualified
or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any
Subsidiary's records; and
(b) as soon as available, but not later than 60 days after the
end of each of the first three fiscal quarters of each fiscal year, a
copy of the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for the period
commencing on the first day and ending on the last day of such quarter,
and certified on behalf of the Company by a Responsible Officer as
fairly presenting, in all material respects and in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company and its
consolidated Subsidiaries.
6.02 Certificates; Other Information. The Company shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsections 6.01(a) and (b), a
<PAGE>
Compliance Certificate executed by a Responsible Officer on behalf of
the Company which certifies that no Default or Event of Default has
occurred and is continuing (except as described therein);
(b) promptly, copies of all financial statements and reports
that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms
10K, 10Q and 8K) that the Company or any Subsidiary may make to, or
file with, the SEC; and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any
Subsidiary as the Agent, at the request of any Bank, may from time to
time reasonably request and which relates to the ability of the Company
to perform under this Agreement.
6.03 Notices. Upon obtaining knowledge of any event described below,
the Company shall promptly notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any of the following matters of which a Responsible
Officer obtains knowledge that would result in a
<PAGE>
Material Adverse Effect: (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Company or any
Subsidiary; (ii) any dispute, litigation, investigation, proceeding or
suspension between the Company or any Subsidiary and any Governmental
Authority; or (iii) the commencement of, or any material development
in, any litigation or proceeding affecting the Company or any
Subsidiary, including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate which would reasonably be expected
to result in a Material Adverse Effect (but in no event more than 10
days after a Responsible Officer obtains knowledge of such event), and
deliver to the Agent and each Bank a copy of any notice with respect to
such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
<PAGE>
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code
by the Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject
to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension
Liability ;
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated
Subsidiaries which would reasonably be expected to materially affect
the Company's consolidated financial reports;
(e) of any change in the Company's senior unsecured long-term
debt ratings as publicly announced by either S&P or Moody's, provided
that any failure by the Company to give notice of such change shall not
affect the Company's payment obligations hereunder and such failure
shall not constitute an Event of Default.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to therein,
and stating what action the Company or any affected Subsidiary proposes to take
with respect thereto
<PAGE>
and at what time. Each notice under subsection 6.03(a) shall describe with
particularity any and all provisions of this Agreement or other Loan Document
(if any) that have been breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Material Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) to the extent practicable, using reasonable efforts,
preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except (x) when the
non-preservation and non-maintenance of such rights, privileges,
qualifications, permits, licenses or franchises would reasonably be
expected not to have a Material Adverse Effect or (y) in connection
with transactions permitted by Section 7.03 and sales of assets
permitted by Section 7.02;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill except
when in the reasonable judgment of the Company it is
<PAGE>
not economical to do so or where the failure to do so would
not reasonably be expected to have a Material Adverse Effect;
and
(d) to the extent practicable, using reasonable efforts,
preserve or renew all of its registered patents, trademarks, trade
names and service marks, except when non-preservation or non-renewal of
such patents, trademarks, trade names or service marks would reasonably
be expected not to have a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and condition, ordinary wear and
tear and casualty loss excepted and make all necessary repairs thereto and
renewals and replacements thereof except when in the reasonable judgment of the
Company it is not economical to do so or where the failure to do so would not
reasonably be expected to have a Material Adverse Effect. The Company and each
Subsidiary shall use the standard of care typical in the industry in the
operation and maintenance of its facilities.
6.06 Insurance. The Company shall maintain, and shall cause each
Material Subsidiary to maintain, with financially sound and reputable insurers
or independent reinsurers, insurance with
<PAGE>
respect to its properties and business against loss or damage of the kinds and
in the amounts determined by the Company to be necessary or desirable in the
exercise of its reasonable business judgment.
6.07 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Company or
such Subsidiary or unless the failure to pay or discharge would not
have a Material Adverse Effect;
(b) all lawful claims which, if unpaid, would by law become a
Lien upon its property except when the failure to pay or discharge
would not have a Material Adverse Effect; and
(c) all Indebtedness, as and when due and payable (except for
such Indebtedness which is contested by the Company or any Subsidiary
in good faith or where the failure to pay or discharge would not
reasonably be expected to result
<PAGE>
in a Material Adverse Effect), but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist or where
the failure to comply would not have a Material Adverse Effect.
6.09 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law except where non-compliance would not reasonably be expected to result
in a Material Adverse Effect; and (b) make all required contributions to any
Plan subject to Section 412 of the Code except where failure to make any
contribution would not reasonably be expected to result in a Material Adverse
Effect.
6.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Material Subsidiary to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied
<PAGE>
shall be made of all financial transactions and matters involving the assets and
business of the Company and such Subsidiary. Subject to reasonable safeguards to
protect confidential information, the Company shall permit, and shall cause each
Material Subsidiary to permit, representatives and independent contractors of
the Agent to visit and inspect any of their respective properties, to examine
their respective corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and with respect to the Company but not its
Subsidiaries to discuss their respective affairs, finances and accounts with the
Company's directors, senior officers, and independent public accountants, all at
such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company; provided,
however, when an Event of Default exists the Agent or any Bank may do any of the
foregoing at the expense of the Company at any time during normal business hours
and without advance notice. The Agent shall promptly advise the Banks of its
findings after any such visit, inspection, examination or discussion.
6.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws except where the failure to comply would
not have a Material Adverse Effect.
<PAGE>
6.12 Use of Proceeds. The Company shall use the proceeds of the Loans
for general corporate purposes including Acquisitions not in contravention of
any Requirement of Law or of this Agreement.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.01 or shown
as a liability on the Company's consolidated financial statements as of
December 31, 1996 securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
<PAGE>
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or
to the extent that non-payment thereof is permitted by Section 6.07,
provided that no notice of lien has been filed or recorded under the
Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
(e) Liens consisting of pledges or deposits required in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other social security legislation;
(f) Liens on the property of the Company or any of its
Subsidiaries securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, (ii) contingent obligations on surety and appeal bonds,
and (iii) other non-delinquent obligations of a like nature; in each
case, incurred in the ordinary
<PAGE>
course of business, provided all such Liens in the aggregate
would not (even if enforced) cause a Material Adverse Effect;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of the Company
and its Subsidiaries;
(h) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement, provided, however, that such Liens
existed at the time the respective corporations became Subsidiaries;
(i) purchase money security interests on any property acquired
or held by the Company or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property;
provided that (i) any such Lien attaches to such property concurrently
with or within 20 days after the acquisition thereof, (ii) such Lien
attaches solely to the property so acquired in such transaction, (iii)
the principal amount of the Indebtedness secured thereby does not
exceed 100% of the cost of such property, and (iv) the
<PAGE>
principal amount of the Indebtedness secured by any and all such
purchase money security interests shall not at any time exceed
$30,000,000;
(j) Liens securing obligations in respect of capital leases on
assets subject to such leases;
(k) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; provided that (i) such deposit
account is not a dedicated cash collateral account and is not subject
to restrictions against access by the Company in excess of those set
forth by regulations promulgated by the FRB, and (ii) such deposit
account is not intended by the Company or any Subsidiary to provide
collateral to the depository institution except in either case when
such deposit accounts are established or required in the ordinary
course of business and would not have a Material Adverse Effect; and
(l) Notwithstanding the provisions of subsections 7.01(a)
through (k), there shall be permitted Liens on property (including
Liens which would otherwise be in violation of such subsections),
provided that the sum of the aggregate Indebtedness of the Company and
its Subsidiaries
<PAGE>
secured by all Liens permitted under this subsection (l), excluding the
Liens permitted under subsections (a) through (k), shall not exceed an
amount equal to 15% of the Company's total consolidated assets as shown
on its consolidated balance sheet for its most recent prior fiscal
quarter.
7.02 Disposition of Assets. Except as otherwise permitted by any other
provision of this Agreement, the Company shall not, and shall not suffer or
permit any Material Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) dispositions on reasonable commercial terms and for fair
value or which would not have a Material Adverse Effect, provided that
dispositions of the stock of any Material Subsidiary shall not be
permitted under this subsection(b);
(c) dispositions of property between the Company and any
consolidated Subsidiary or among consolidated Subsidiaries; and
<PAGE>
(d) other dispositions of property during the term of this
Agreement (excluding dispositions permitted under subsections 7.02(a)
through (c)) whose net book value in the aggregate shall not exceed 25%
of the Company's total consolidated assets as shown on its consolidated
balance sheet for its most recent prior fiscal quarter.
7.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Material Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Person may merge with the Company, provided that the
Company shall be the continuing or surviving corporation;
(b) any Subsidiary may merge with the Company, provided that
the Company shall be the continuing or surviving corporation, or with
any one or more Subsidiaries, provided that if any transaction shall be
between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned
Subsidiary shall be the continuing or surviving corporation; and
(c) the Company or any Subsidiary may convey, transfer, lease
or otherwise dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise), to the
<PAGE>
Company or another Wholly-Owned Subsidiary, as the case may be.
7.04 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate (other than a Wholly-Owned Subsidiary) of the Company, except
transactions (a) entered into in good faith and (b) upon commercially reasonable
terms and taking into consideration the totality of circumstances pertaining to
such transaction as determined by the Company.
7.05 Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, in a manner which violates any applicable Requirement of Law and
which would have a Material Adverse Effect (provided that this Section 7.05
shall not be deemed to permit the use of Loan proceeds in violation of any
Requirement of Law applicable to any Bank). Notwithstanding the foregoing, at no
time shall more than 25% of the value (as determined by any reasonable method)
of the Company's assets consist of Margin Stock.
7.06 Restricted Payments. The Company shall not, and shall not suffer
or permit any Subsidiary (other than a Wholly-Owned Subsidiary) to, declare or
make any dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of any class of its
capital
<PAGE>
stock, or purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding; except that the Company or any non-Wholly-Owned
Subsidiary may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of its common
stock or warrants or options to acquire any such shares with the
proceeds received from the substantially concurrent issue of new shares
of its common stock; and
(c) declare or pay cash dividends to its stockholders and
purchase, redeem or otherwise acquire shares of its capital stock or
warrants, rights or options to acquire any such shares for cash
provided, that, before and immediately after giving effect to such
proposed action, no Default or Event of Default exists or would exist.
7.07 ERISA. The Company shall not, and shall not suffer or permit any
of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or would reasonably expected to result in a Material Adverse Effect; or
(b) engage in a transaction that could be subject to Section 4069 or 4212(c) of
<PAGE>
ERISA and which would reasonably be expected to result in a Material Adverse
Effect.
7.08 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any business that would substantially change
the general nature of the business conducted by the Company and its consolidated
Subsidiaries on the Closing Date.
7.09 Accounting Changes. The Company shall not, and shall not suffer or
permit any Material Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any such Subsidiary, if such change would
reasonably be expected to result in a Material Adverse Effect.
7.10 Interest Coverage. The Company shall not permit as of the last day
of any fiscal quarter (commencing with the period ending March 31, 1997), on a
consolidated basis, the ratio of (i) Earnings Before Interest and Taxes to (ii)
Interest Expense, to be less than 2.5 to 1.0. For purposes of this section,
"Earnings Before Interest and Taxes" means as at the end of any fiscal quarter
of the Company for the period of four consecutive fiscal quarters ended as at
such date, the sum of (a) the consolidated net income (or net loss) of the
Company and its Subsidiaries for such period as determined in accordance with
GAAP, plus (b) all amounts
<PAGE>
treated as interest expense for such period to the extent included in the
determination of such consolidated net income (or loss); plus (c) all taxes
accrued for such period on or measured by income to the extent included in the
determination of such consolidated net income (or loss); provided, however, that
consolidated net income (or loss) shall be computed for the purposes of this
definition without giving effect to extraordinary losses or extraordinary gains
for such period; and "Interest Expense" means as at the end of any fiscal
quarter of the Company for the period of four consecutive fiscal quarters ended
as at such date, all amounts treated as interest expense for such period to the
extent included in the determination of the Company's consolidated net income
(or net loss) for such period as determined in accordance with GAAP.
7.11 Leverage. The Company shall not permit as of the last day of any
fiscal quarter (commencing with the period ending March 31, 1997), on a
consolidated basis, the ratio of (i) Funded Debt to (ii) Total Capitalization,
to be greater than 0.60 to 1.0.
7.12 Subsidiary Indebtedness. The Company shall not permit as of the
last day of any fiscal quarter (commencing with the period ending March 31,
1997), the aggregate Indebtedness of its consolidated Subsidiaries to exceed 25%
of shareholders' equity as set forth on the consolidated balance sheet of the
Company and its consolidated Subsidiaries as determined in accordance with GAAP
and
<PAGE>
as reflected in its most recent annual or quarterly financial statements
delivered to the Agent under Section 6.01. For purposes of this Section 7.12,
the term "Indebtedness" shall be deemed to exclude Indebtedness of a Person
which becomes a Subsidiary after the date hereof, provided that such excluded
Indebtedness existed at the time such Person became a Subsidiary and was not
created in anticipation thereof.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or
(ii) within two (2) Business Days following written notice to the
Company given by the Agent or any Bank after the same becomes due, any
interest, fee or any other amount payable hereunder or under any other
Loan Document; or
(b) Representation or Warranty. Any representation or warranty
by the Company or any Subsidiary made or deemed made herein, in any
other Loan Document, or which is contained in any certificate, document
or financial or other statement by the Company, any Subsidiary, or any
Responsible Officer,
<PAGE>
furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or observe
any term, covenant or agreement contained in any of Section 6.03(a),
6.12, 7.02, 7.04, 7.05, 7.06, 7.10, 7.11 or 7.12; or
(d) Other Defaults. The Company fails to perform or observe
any other term or covenant contained in this Agreement or any other
Loan Document, and such default shall continue unremedied for a period
of 30 days after the earlier of (i) the date upon which a Responsible
Officer knew of such failure or (ii) the date upon which written notice
thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (i) fails
to perform or observe any condition or covenant, or any other event
shall occur or condition shall exist, under any agreement or instrument
relating to any Indebtedness having an aggregate principal amount
(including undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit
arrangement) of more than $50,000,000, and such failure continues after
the applicable grace or notice period, if any,
<PAGE>
specified in the relevant document on the date of such failure if the
effect of such failure, event or condition is to cause such
Indebtedness to be declared to be due and payable prior to its stated
maturity; or (ii) if there shall occur any default or event of default,
however denominated, under any cross default provision under any
agreement or instrument relating to any such Indebtedness of more than
$50,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or any
Material Subsidiary (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether
at stated maturity or otherwise; (ii) voluntarily ceases to conduct its
business in the ordinary course; (iii) commences any Insolvency
Proceeding with respect to itself; or (iv) takes any action to
effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Material
Subsidiary, or any writ, judgment, warrant of attachment, execution or
similar process, is issued or levied against a substantial part of the
Company's or any such Subsidiary's properties, and any such proceeding
or petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not
<PAGE>
be released, stayed, vacated or fully bonded within 60 days after
commencement, filing, issuance or levy; (ii) the Company or any
Material Subsidiary admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law involving a material portion of the
Company's or such Subsidiary's total assets) is ordered in any
Insolvency Proceeding involving the Company or any such Subsidiary; or
(iii) the Company or any Material Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person
for itself or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of the Company under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC
in an aggregate amount in excess of $50,000,000; (ii) the aggregate
amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $50,000,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of
<PAGE>
$50,000,000 and, in the case of any of clauses (i) through (iii), such
liability or failure to pay shall not have been vacated, discharged,
stayed, appealed or paid within ten (10) Business Days after such
liability or payment obligation arises; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, non-interlocutory decrees or
arbitration awards is entered against the Company or any Material
Subsidiary involving in the aggregate a liability (to the extent not
covered by independent third-party insurance as to which the insurer
does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $50,000,000 or more, and the
same shall not have been vacated, discharged, stayed or appealed within
the applicable period for appeal from the date of entry thereof or paid
within ten (10) Business Days after the same becomes non-appealable; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order
or decree is entered against the Company or any Subsidiary which does
or would reasonably be expected to have a Material Adverse Effect; or
(k) Change of Control. There occurs any Change of Control. For
purposes of this Section 8.01(k), (i) a "Change
<PAGE>
of Control" shall occur if any person or group of persons becomes the
beneficial owner of 51% or more of the voting power of the Company for
a period of 30 days or more; and (ii) the term "person" shall have the
meaning set forth in Section 13(d) of the Exchange Act and the term
"beneficial owner" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act.
8.02 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Committed
Loans to be terminated, whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts
owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by
the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or
applicable law;
<PAGE>
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent or any
Bank without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company.
8.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents (whether now existing or hereafter arising) are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity.
ARTICLE IX
THE AGENT
9.01 Appointment and Authorization. Each Bank hereby irrevocably
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
<PAGE>
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
9.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.03 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof,
<PAGE>
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of the Company or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Company or any of the Company's Subsidiaries or Affiliates.
9.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to the Company), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified
in failing or refusing to take any
<PAGE>
action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks (or all
the Banks if specifically required hereunder) as it deems appropriate
and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other
Loan Document in accordance with a request or consent of the Majority
Banks (or all the Banks if specifically required hereunder) and such
request and any action taken or failure to act pursuant thereto shall
be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent on or prior
to the Closing Date by the Agent to such Bank for consent, approval,
acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
9.05 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of
<PAGE>
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent will notify the
Banks of its receipt of any such notice. The Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Majority
Banks in accordance with Article VIII; provided, however, that unless and until
the Agent has received any such request, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
9.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries,
<PAGE>
and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Company hereunder. Each Bank also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the Agent, the Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
9.07 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be
<PAGE>
liable for the payment to the Agent-Related Persons of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
9.08 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
<PAGE>
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of the Company
(so long as no Default or Event of Default exists at the time of such request)
or the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks.
If the Agent resigns under this Agreement, the Company shall appoint from among
the Banks a successor agent for the Banks (unless an Event of Default then
exists in which case the Majority Banks shall appoint the successor agent). If
no successor agent is appointed prior to the effective date of the resignation
of the Agent, the Agent may appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article IX and Sections 10.04 and
10.05 shall inure to its benefit as to any actions taken or omitted
<PAGE>
to be taken by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Agent hereunder until such time, if any, as the Company or the
Majority Banks appoint a successor agent as provided for above.
9.10 Withholding Tax.
(a) If any Bank claims exemption from withholding tax under a
United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank
agrees to notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such Bank.
To the extent of such percentage amount, the Agent will treat such
Bank's IRS Form 1001 as no longer valid.
(b) Subject to the requirements of this Agreement, if any Bank
claiming exemption from United States withholding tax by filing IRS
Form 4224 with the Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of the Company to
such Bank, such Bank agrees to undertake sole responsibility for
complying with the
<PAGE>
withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(c) If the IRS or any other Governmental Authority of the
United States or any other jurisdiction asserts a claim that the Agent
did not properly withhold tax from amounts paid to or for the account
of any Bank (because the appropriate form was not delivered, was not
properly executed, or because such Bank failed to notify the Agent of a
change in circumstances which rendered the exemption from withholding
tax ineffective, or for any other reason) such Bank shall indemnify the
Agent fully for all amounts paid, directly or indirectly, by the Agent
as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to the
Agent under this subsection, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the
resignation or replacement of the Agent.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom,
<PAGE>
shall be effective unless the same shall be in writing and signed by the
Majority Banks (or by the Agent at the written request of the Majority Banks)
and the Company and acknowledged by the Agent, and then any such waiver and
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Banks and the Company and
acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to subsection 8.02(a)),
unless such Bank has consented thereto in writing pursuant to Section
2.09 or otherwise;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, facility
fees or other material amounts due to the Banks (or any of them)
hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any facility fees
or other material amounts payable hereunder or under any other Loan
Document;
<PAGE>
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for
the Banks or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
10.02 Notices.
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 10.02, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and
<PAGE>
mailed, faxed or delivered, to the address or facsimile number
specified for notices on Schedule 10.02; or, as directed to the Company
or the Agent, to such other address as shall be designated by such
party in a written notice to the other parties, and as directed to any
other party, at such other address as shall be designated by such party
in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible
form by facsimile machine, respectively, or if mailed, upon the fifth
Business Day after the date deposited into the U.S. mail, or if
delivered, upon delivery; except that notices pursuant to Article II or
IX shall not be effective until actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Agent and the Banks shall be
entitled to rely on the authority of any Person purporting to be a
Person authorized by the Company to give such notice and, absent gross
negligence or willful misconduct, the Agent and the Banks shall not
have any liability to the Company or other Person on account of any
action taken or not taken by the Agent or the Banks in
<PAGE>
reliance upon such telephonic or facsimile notice. The obligation of
the Company to repay the Loans shall not be affected in any way or to
any extent by any failure by the Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by
the Agent and the Banks of a confirmation which is at variance with the
terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
10.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
(a) following the Closing Date pay or reimburse the Agent
within five Business Days after demand for all reasonable costs and
expenses incurred by the Agent in connection with the administration
of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document
and any other documents prepared in connection herewith or therewith,
<PAGE>
including reasonable Attorney Costs incurred by the Agent with respect
thereto; and
(b) pay or reimburse the Agent, the Arranger and each Bank
within five Business Days after demand for all reasonable costs and
expenses (including Attorney Costs) incurred by them in connection with
the enforcement, attempted enforcement, or preservation of any rights
or remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding
the Loans, and including in any Insolvency Proceeding or appellate
proceeding).
10.05 Indemnity. Whether or not the transactions contemplated hereby
are consummated, the Company shall indemnify and hold the Agent-Related Persons,
and each Bank and each of its respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including reasonable Attorney Costs) of any kind or nature whatsoever which may
at any time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any Bank)
result from an action, suit, proceeding or claim asserted against any such
<PAGE>
Indemnified Person by any Person not entitled to indemnification under this
section in any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby,
or any action taken or omitted by any such Person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to or arising out of this Agreement or the Loans or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, however, that
the Company shall not be liable to any Indemnified Person for any portion of
such Indemnified Liabilities resulting from such Indemnified Person's gross
negligence or willful misconduct. In the event this indemnity is unenforceable
as a matter of law as to a particular matter or consequence referred to herein,
it shall be enforceable to the full extent permitted by law. Promptly upon
receipt of notice of the making of any claim or the initiation of any action,
suit, or proceeding, the Indemnified Person shall, if a claim in respect thereof
is to be made against the Company hereunder, notify the Company in writing of
the commencement thereof. The Company shall have the right at its expense, to
provide and to control the defense of any such claim, action, suit, or
proceeding, provided that the Company must keep such Indemnified Person apprised
of the progress of any such claim, action, suit or proceeding, and provided
further that if such Indemnified Person
<PAGE>
reasonably believes that its failure to participate will materially adversely
affect its interests or when the Indemnified Person has received an opinion of
nationally recognized counsel (which opinion shall be at the Company's expense)
that there is a conflict of interest which makes it inadvisable for the
Company's attorney to represent such Person, it shall notify the Company of such
conclusion in writing and may, at its election, participate in such claim,
action, suit or proceeding (the legal fees incurred by such Indemnified Person
as a result of such participation to be reimbursed by the Company to such
Person). Any such claim, action, suit or proceeding shall not be settled, if any
indemnification is claimed hereunder with respect thereto, without the prior
written approval of the Company and such Indemnified Person which shall not be
unreasonably withheld or delayed in either case. The agreements in this Section
shall survive payment of all other Obligations.
10.06 Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be
<PAGE>
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Agent upon demand its pro rata share or other
applicable share of any amount so recovered from or repaid by the Agent.
10.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank and no Bank shall assign any of its rights or
obligations hereunder except in accordance with Section 10.08.
10.08 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Company at
all times other than during the existence of an Event of Default and
the Agent, which consents shall not be unreasonably withheld, at any
time assign and delegate to one or more Eligible Assignees (provided
that no written consent of the Company or the Agent shall be required
in connection with any assignment and delegation by a Bank to an
Eligible Assignee that is an Affiliate of such Bank) (each an
"Assignee") all, or any ratable part of all, of the Loans, the
<PAGE>
Commitment and the other rights and obligations of such Bank hereunder,
in a minimum amount of $20,000,000; provided, however, that the Company
and the Agent may continue to deal solely and directly with such Bank
in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall
have been given to the Company and the Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to the
Company and the Agent an Assignment and Acceptance in the form of
Exhibit L ("Assignment and Acceptance") and (iii) the assignor Bank or
Assignee has paid to the Agent a processing fee in the amount of
$2,500, provided that in the case of a transfer under Section 3.08, the
assignor Bank shall not be obligated to pay such processing fee.
(b) From and after the date that the Agent notifies the
Company and the assignor Bank that it has received an executed
Assignment and Acceptance which has been consented to by the Agent and
by the Company (if required), and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Bank under the Loan Documents, and (ii)
the
<PAGE>
assignor Bank shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee, (and provided that the Agent and the
Company consents to such assignment in accordance with subsection
10.08(a)), the Company shall execute and deliver to the Agent a Bid
Loan Note for the Assignee (if the Assignee was not previously a Bank
under this Agreement) and, if the assignor Bank is not retaining any
interest in this Agreement such assignor Bank shall promptly cancel and
return its Bid Loan Note to the Agent for return to the Company.
Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each
Assignee shall reduce such Commitments of the assigning Bank pro tanto.
<PAGE>
(d) Any Bank may, with the written consent of the Company at
all times other than during the existence of an Event of Default, which
consent shall not be unreasonably withheld, at any time sell to one or
more Eligible Assignees (a "Participant") participating interests in
any Loans, the Commitment of that Bank and the other interests of that
Bank (the "originating Bank") hereunder and under the other Loan
Documents; provided, however, that (i) the originating Bank's
obligations under this Agreement shall remain unchanged, (ii) the
originating Bank shall remain solely responsible for the performance of
such obligations, (iii) the Company and the Agent shall continue to
deal solely and directly with the originating Bank in connection with
the originating Bank's rights and obligations under this Agreement and
the other Loan Documents, (iv) no Bank shall transfer or grant any
participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the
Banks as described in the first proviso to Section 10.01 and (v) with
respect to the sale of participating interests in any Bid Loan to any
Participant, (x) the Company's consent shall not be required and (y)
the term "Eligible Assignee" shall be deemed to include any financial
institution organized under the laws of the United States having a
combined capital and surplus of at least
<PAGE>
$250,000,000. In the case of any such participation, the Participant
shall not have any rights under this Agreement, or any of the other
Loan Documents, and all amounts payable by the Company hereunder shall
be determined as if such Bank had not sold such participation.
(e) Each Bank agrees to take normal and reasonable precautions
and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Company and
provided to it by the Company or any Subsidiary, or by the Agent on
such Company's or Subsidiary's behalf, under this Agreement or any
other Loan Document, and neither it nor any of its Affiliates shall
disseminate such information except on a "need to know" basis to
employees of such Bank or Affiliate, as the case may be, and their
respective representatives or use any such information other than in
connection with or in enforcement of this Agreement and the other Loan
Documents; except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential
basis from a source other than the Company, provided that such source
is not bound by a confidentiality agreement with the Company known to
the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the
<PAGE>
Bank is subject or in connection with an examination of such Bank by
any such authority; (B) pursuant to subpoena or other court process
(provided that such Bank shall promptly notify the Company of any such
subpoena or process, unless it is legally prohibited from doing so, and
cooperate with the Company at the Company's expense in obtaining a
suitable order protecting the confidentiality of such information); (C)
when required to do so in accordance with the provisions of any
applicable Requirement of Law; (D) to the extent reasonably required in
connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party provided that such
Bank will promptly notify the Company of any such disclosure and use
reasonable efforts at the Company's expense to obtain a suitable order
protecting the confidentiality of such information; (E) to the extent
reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Bank's
independent auditors and other professional advisors; and (G) to any
Affiliate of such Bank, or to any Participant or Assignee, actual or
(with the written consent of the Company) potential, provided that such
Affiliate, Participant or Assignee agrees in writing to keep such
information confidential to the same extent required of the Banks
hereunder.
<PAGE>
(f) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or
any portion of its rights under and interest in this Agreement and any
Note held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR ss.203.14,
and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law. If requested by
any such Bank for purposes of this subsection 10.08(f), the Company
shall execute and deliver to such Bank a promissory note evidencing
such Bank's Committed Loans, which promissory note shall be in a form
reasonably satisfactory to the Agent and the Company.
10.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists, each Bank is authorized at any
time and from time to time, without prior notice to the Company, any such notice
being waived by the Company to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by, such
Bank to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or
<PAGE>
unmatured. In the event of any inconsistency between this section and any
agreement governing deposits maintained by the Company with any Bank, this
Section shall control with respect to set-offs affecting this Agreement. Each
Bank agrees promptly to notify the Company and the Agent after any such set-off
and application made by such Bank; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
10.10 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.11 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.12 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the
<PAGE>
legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
10.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
10.14 Governing Law and Jurisdiction.
(a) THIS AGREEMENT (AND THE NOTES) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK;
PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES
ANY
<PAGE>
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN
RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
10.15 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
<PAGE>
10.16 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
DELUXE CORPORATION
By Thomas W. VanHimbergen
------------------------------
Title Senior Vice President
---------------------------
and Chief Financial Officer
---------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By J. Casey Cosgrove
------------------------------
Title Assistant Vice President
---------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
By J. Casey Cosgrove
------------------------------
Title Assistant Vice President
---------------------------
<PAGE>
FIRST BANK NATIONAL ASSOCIATION
By David Y. Kopolow
------------------------------
Title Vice President
---------------------------
THE BANK OF NEW YORK
By Richard A. Raffetto
------------------------------
Title Vice President
---------------------------
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By Douglas A. Lindstrom
------------------------------
Title Assistant Vice President
---------------------------
WACHOVIA BANK, N.A.
By Elizabeth Schrock
------------------------------
Title Vice President
---------------------------
<PAGE>
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
Pro Rata
Bank Commitment Share
---- ---------- -----
Bank of America National
Trust and Savings
Association $50,000,000 33.33333332%
First Bank National Association $25,000,000 16.66666667%
The Bank of New York $25,000,000 16.66666667%
Norwest Bank Minnesota, $25,000,000 16.66666667%
National Association
Wachovia Bank, N.A. $25,000,000 16.66666667%
TOTAL $150,000,000 100.00000000%
<PAGE>
SCHEDULE 5.12
ENVIRONMENTAL MATTERS
None
<PAGE>
SCHEDULE 5.16
LIST OF SUBSIDIARIES AND MATERIAL EQUITY INVESTMENTS
Part (a) -- Subsidiaries:
Chex Systems, Inc. (DE - 100%)
Current, Inc. (DE - 100%)
Deluxe Business Forms and Supplies, Inc. (MN - 100%)
Deluxe Canada, Inc. (Canada - 100%)
Deluxe Check Printers, Inc. (MN - 100%)
Deluxe Check Texas, Inc. (MN - 100%)
Deluxe Check Printers Texas, L.P.
Deluxe Direct, Inc. (CO - 100%)
Deluxe Electronic Payment Systems, Inc. (DE - 100%)
Deluxe Financial Services, Inc. (MN - 100%)
Deluxe Holdings (Netherlands) B.V. (To be formed)
Deluxe Payment Protection Systems, Inc. (DE - 100%)
Deluxe (UK) Limited (United Kingdom - 100%)
United Creditors' Alliance International Limited (United
Kingdom - 100%)
Deluxe Data International Limited (United Kingdom - 100%)
Connex Europe s.r.l. (Italy - 100%)
ESP Employment Screening Partners, Inc. (MN - 100%)
Nelco, Inc. (WI - 100%)
NRC Holding Corporation (DE - 100%)
National Revenue Corporation (OH - 100%) United Creditors' Alliance
Corporation (OH - 100%) National Credit Services Corporation (MO - 100%)
National Receivables Corporation (OH- 100%)
PaperDirect, Inc. (NJ - 100%)
PaperDirect Pacific Holdings, Ltd. (MN - 100%)
PaperDirect Pacific Pty. Limited (Australia - 100%)
PaperDirect Pacific Exports Pty. Limited (Australia
- 100%)
1385 East County Road E Inc. (MN - 100%)
PART (b) MATERIAL EQUITY INVESTMENTS:
NONE
<PAGE>
SCHEDULE 7.01
EXISTING LIENS
None
<PAGE>
SCHEDULE 10.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
DELUXE CORPORATION
All notices:
Deluxe Corporation
3680 Victoria Street North
Shoreview, Minnesota 55126-2966
Attention: Thomas W. VanHimbergen, Chief Financial Officer
Telephone: (612) 483-7355
Facsimile: (612) 481-4163
with a copy to:
John M. LeFevre, General Counsel
Deluxe Corporation
3680 Victoria Street North
Shoreview, Minnesota 55126-2966
Telephone: (612) 483-7008
Facsimile: (612) 481-4163
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Address for Credit/Documentation Issues:
Bank of America National Trust
and Savings Association
231 South LaSalle Street, Suite 913
Chicago, Illinois 60697
Attention: Casey Cosgrove
Telephone: (312) 828-3092
Facsimile: (312) 987-1276
<PAGE>
Address for Notices/Operational Purposes:
Bank of America National Trust
and Savings Association
Agency Administrative Services #5596
1455 Market Street, 13th Floor
San Francisco, California 94103
Attention: Elizabeth Chao
Telephone: (415) 436-4023
Facsimile: (415) 436-2700
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
DOMESTIC AND OFFSHORE LENDING OFFICE:
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
with a copy to:
Bank of America NT&SA
231 South LaSalle Street, 9L
Chicago, Illinois 60697
Attention: Casey Cosgrove
Telephone: (312) 828-3092
Facsimile: (312) 987-1276
<PAGE>
FIRST BANK NATIONAL ASSOCIATION
DOMESTIC AND OFFSHORE LENDING OFFICE:
First Bank Place, 601 2nd Avenue South
Minneapolis, Minnesota 55402-4302
Notices (other than Borrowing notices and Notices of Conversion/Continuation):
Address: First Bank Place, 601 2nd Avenue South
Minneapolis Minnesota 55402-4302
Attention: David Kopolow
Telephone: (612) 973-0516
Facsimile: (612) 973-0824
THE BANK OF NEW YORK
DOMESTIC AND OFFSHORE LENDING OFFICE:
One Wall Street Central Division, 19th Floor
New York, New York 10286
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Address: One Wall Street Division, 19th Floor
New York, New York 10286
Attention: Richard Raffetto
Telephone: (212) 635-8044
Facsimile: (212) 635-1208
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
DOMESTIC AND OFFSHORE LENDING OFFICE:
Sixth & Marquette
Minneapolis, Minnesota 55479-0085
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Address: Sixth & Marquette
Minneapolis, Minnesota 55479-0085
Attention: Mary D. Falck
Telephone: (612) 667-9674
Facsimile: (612) 667-4145
<PAGE>
WACHOVIA BANK, N.A.
DOMESTIC AND OFFSHORE LENDING OFFICE:
191 Peachtree Street, N.E. 28th Floor
Atlanta, Georgia 30303
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Address: 191 Peachtree Street, N.E. 28th Floor
Atlanta, Georgia 30303
Attention: Frances Josephic
Telephone: (404) 332-4132
sdxFacsimile: (404) 332-6898
<PAGE>
EXHIBIT A
FORM OF COMPLIANCE CERTIFICATE
To Bank of America National Trust and
Savings Association (individually and as
Agent) and the other Banks parties to the
Amended and Restated Credit Agreement dated
as of July 8, 1997 (as amended or otherwise
modified, the "Agreement") with Deluxe
Corporation
This certificate is furnished to you pursuant to Section 6.02(a) of the
Agreement concurrently with the delivery of the financial statements required
pursuant to Section 6.01 (a) and (b) of the Agreement. Terms not otherwise
defined herein are used herein as defined in the Agreement.
The Company hereby certifies to you that:
(A) no Default or Event of Default has occurred and is continuing,
except as described in Attachment 1 hereto;
(B) the computations set forth below are true and correct as of
________________, 19__(1) (the "Computation Date");
(C) if the financial statements of the Company being concurrently
delivered were not prepared in accordance with GAAP, Attachment 2 hereto sets
forth any derivations required to conform the relevant data in such financial
statements to the computations set forth below; and
(D) there have been no changes in accounting policies or financial
reporting practices of the Company or any of its Subsidiaries since the date of
the last compliance certificate delivered to you.
(1) Section 7.10 Interest Coverage
(a) Ratio of Earnings Before Interest
and Taxes to Interest Expense
under Section 7.10 ___ to 1.0
- --------
(1) The last day of the accounting period for which financial statements
are being concurrently delivered.
<PAGE>
(b) Maximum ratio of Earnings
Before Interest and Taxes to
Interest Expense permitted
under Section 7.10 2.5 to 1.0
(2) Section 7.11 Leverage
(a) Ratio of Funded Debt to
Total Capitalization under
Section 7.11 ___ to 1.0
(b) Maximum ratio of Funded Debt
to Total Capitalization permitted
under Section 7.11 0.60 to 1.0
Dated this ________ day of ______________, 19__.
DELUXE CORPORATION
By:____________________________
Its:___________________________
<PAGE>
Schedule A
List of Lenders
Bank of America National Trust
and Savings Association, as a Lender
Facsimile: (312) 974-6518
[LENDER]
Facsimile: (___) ___-____
[LENDER]
Facsimile: (___) ___-____
[LENDER]
Facsimile: (___) ___-____
[LENDER]
Facsimile: (___) ___-____
<PAGE>
EXHIBIT B
FORM OF NOTICE OF BORROWING
Date: ______________, 199_
To: Bank of American National Trust and Savings Association as Agent for the
Banks parties to the Amended and Restated Credit Agreement dated as of
July 8, 1997 (as extended, renewed, amended or restated from time to time,
the "Credit Agreement") among Deluxe Corporation, certain Banks which are
signatories thereto and Bank of America National Trust and Savings
Association, as Agent.
Ladies and Gentlemen:
The undersigned, Deluxe Corporation, (the "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of
the Credit Agreement, of the Committed Borrowing specified herein:
1. The Borrowing Date of the proposed Borrowing is ___________, 19___.
2. The aggregate amount of the proposed Borrowing is $_________________.
3. The Borrowing is to be comprised of $______________ of [Offshore Rate] [Base
Rate] Committed Loans.
4. [If applicable:] The duration of the Interest Period for the Offshore Rate
Committed Loans included in the Borrowing shall be ____ months.
The undersigned hereby certifies that the following statements are true
as of the date of the proposed Borrowing, before and after giving effect thereto
and to the application of the proceeds therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on and as
of such date (except to the extent such representations and warranties expressly
refer to an earlier date, in which case they are true and correct as of such
earlier date);
(b) no Default or Event of Default shall exist or shall result from
such proposed Borrowing; and
<PAGE>
(c) The proposed Borrowing will not cause the aggregate principal
amount of all outstanding Committed Loans together with the aggregate principal
amount of all outstanding Bid Loans, to exceed the combined Commitments.
DELUXE CORPORATION
By: _________________________
Title: ________________________
<PAGE>
EXHIBIT C
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date: _________________, 199__
To: To: Bank of American National Trust and Savings Association as Agent
for the Banks parties to the Amended and Restated Credit Agreement
dated as of July 8, 1997 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement") among Deluxe Corporation,
certain Banks which are signatories thereto and Bank of America
National Trust and Savings Association, as Agent.
Ladies and Gentlemen:
The undersigned, Deluxe Corporation (the "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of
the Credit Agreement, of the [conversion] [continuation] of the Committed Loans
specified herein, that:
1. The Conversion/Continuation Date is ______________, 19___.
2. The aggregate amount of the Loans to be [converted] [continued] is
$______________.
3. The Loans are to be [converted into] [continued as] [Offshore Rate] [Base
Rate] Committed Loans.
4. [If applicable:] The duration of the Interest Period for the Loans included
in the [conversion] [continuation] shall be _____ months.
The undersigned hereby certifies that the following statements are true
as of the proposed Conversion/Continuation Date, before and after giving effect
thereto and to the application of the proceeds therefrom;
(a) the representations and warranties of the Company
contained Article V of the Credit Agreement are true and correct as
though made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in
which case they are true and correct as of such earlier date);
(b) no Default or Event of Default shall exist or shall result
from such proposed [conversion] [continuation]; and
(c) the proposed [conversion] [continuation] will not cause
the aggregate principal amount of all outstanding Committed Loans
together with the aggregate principal amount of all outstanding Bid
Loans, to exceed the combined Commitments.
DELUXE CORPORATION
By: ____________________________
Title: _________________________
<PAGE>
EXHIBIT D
FORM OF INVITATION FOR COMPETITIVE BIDS
Via Facsimile
To the Banks Listed on Schedule A attached hereto:
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 8, 1997 (as amended from time to time, the "Credit Agreement"),
among Deluxe Corporation (the "Company"), the Banks party thereto, and Bank of
America National Trust and Savings Association, as Agent for the Banks (the
"Agent"). Capitalized terms used herein have the meanings specified in the
Credit Agreement.
Pursuant to subsection 2.06(b) of the Credit Agreement, you are hereby
invited to submit offers to make Bid Loans to the Company based on the following
specifications:
1. Borrowing date: ______________, 199__;
2. Aggregate amount requested by the Company; $ ________________.
3. [LIBOR Bid Loans] [Absolute Rate Bid Loans]; and
4. Interest Period[s]: _________________, [___________] and [_______________]
All Competitive Bids must be in the form of Exhibit F to the Credit
Agreement. Please respond to this invitation by no later than 6:30 a.m. (unless
the invitation is from the Agent on behalf of the Company, in which case for
BofA only, 6:15 a.m.) (San Francisco time) on _________, 19__.(1) [This
invitation is from the Agent on behalf of the Company and your response should
be submitted to the agent.](2) [This invitation is from the Company and your
response should be submitted directly to the Company.](3)
- --------------
(1) Insert a date which is three Business Days prior to the date of Borrowing,
in the case of a LIBOR Auction, or on the date of Borrowing, in the case of an
Absolute Rate Auction.
(2) To be included if the invitation is made by the Company through the Agent.
(3) To be included if the invitation is made by the Company directly to the
Banks.
<PAGE>
Schedule A
List of Banks
Bank of America National Trust
and Savings Association, as a Bank
[Bank]
Facsimile: (___) ___- _____
[Bank]
Facsimile: (___) ___- _____
[Bank]
Facsimile: (___) ___- _____
[Bank]
Facsimile: (___) ___- _____
<PAGE>
EXHIBIT E
FORM OF COMPETITIVE BID REQUEST
_______________, 199_
Bank of America National Trust
and Savings Association,
as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Service #5596
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as
of July 8, 1997 (as amended from time to time to time, the "Credit Agreement"),
by and among Deluxe Corporation (the "Company"), the Banks party thereto, and
Bank of America National Trust and Savings Association, as Agent for the Banks
(the "Agent"). Capitalized terms used herein have the meanings specified in the
Credit Agreement.
This is a Competitive Bid Request for Bid Loans pursuant to Section
2.06(a) of the Credit Agreement as follows:
(i) The Business Day of the proposed Bid Borrowing is __________,
199__.
(ii) The aggregate amount of the proposed Bid Borrowing is
$_______________.
(iii) The proposed Bid Borrowing to be made pursuant to Section 2.06
shall be comprised of [LIBOR] [Absolute Rate] Bid Loans.
(iv) The Interest Period[s[ for the Bid Loans comprised in the
Borrowing shall be _____________, [__________] and [______________].
DELUXE CORPORATION
By: _________________________
Title: _______________________
<PAGE>
EXHIBIT F
FORM OF COMPETITIVE BID
__________________, 199___
[Bank of American National Trust
and Savings Association,
as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596](1)
]Deluxe Corporation
_____________________
_____________________
Attention: _______________________](2)
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as
of July 8, 1997 (as amended from time to time, the "Credit Agreement"), by and
among Deluxe Corporation (the "Company"), the Banks party thereto, and Bank of
America National Trust and Savings Association, as Agent for the Banks (the
"Agent"). Capitalized terms used herein have the meanings specified in the
Credit Agreement.
In response to the Invitation for Competitive Bids dated ________,
199___ and in accordance with subsection 2.06(c)(ii) of the Credit Agreement,
the undersigned Bank offers to make [a] Bid Loan[s] thereunder in the following
principal amount[s] at the following interest rates for the following Interest
Period[s]:
Date of Borrowing: ________________, 199___
Aggregate Maximum Bid Amount: $_________________________
(1) To be addressed to the Agent if the Agent sent the Invitation for
Competitive Bids.
(2) To be addressed directly to the Company if the Company sent the Invitation
for Competitive Bids.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------ ----------------------------------- -----------------------------------
<S> <C> <C>
Principal Principal Principal
Amount $______________ Amount $ ______________ Amount $ ______________
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
Interest: Interest: Interest:
[Absolute [Absolute [Absolute
Rate __%, __%, __%](3) Rate __%, __%, __%](3) Rate __%, __%, __%](3)
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
or or or
[LIBOR Bid [LIBOR Bid [LIBOR Bid
Margin +/- __%, Margin +/- __%, Margin +/- __%,
+/- __%, +/- __%](3) +/- __%, +/- __%](3) +/- __%, +/- __%](3)
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
Interest Interest Interest
Period __________ Period __________ Period __________
- ------------------------------------ ----------------------------------- -----------------------------------
[NAME OF BANK]
By: _______________________
Title: ______________________
</TABLE>
(3) Interest rate may be quoted to five decimal places.
<PAGE>
EXHIBIT G
FORM OF BID LOAN NOTE
The undersigned for value received, promises to pay to the order of
_________ (herein called the Bank), at the offices of Bank of American National
Trust and Savings Association located at 1850 Gateway Boulevard, Concord,
California 94520 (herein called the Agent) or at such other offices as the Agent
may specify from time to time, the principal amount of each Bid Loan made by the
Bank to the undersigned from time to time from the date hereof up to the
Revolving Termination Date pursuant to Section 2.06 of that certain Amended and
Restated Credit Agreement dated as of July 8, 1997, as amended, supplemented or
otherwise modified from time to time (herein called the Credit Agreement) by and
between the undersigned, various banks (including the Bank) and the Agent, on
the last day of the Interest Period for such Bid Loan. In any event, the
aggregate unpaid principal amount of all Bid Loans shall be due and payable on
the Revolving Termination Date.
The aggregate unpaid principal amount from time to time of Bid Loans
made by the Bank to the undersigned shall bear interest until paid at the
rate(s) per annum as agreed to by the Bak and the undersigned pursuant to the
Credit Agreement, payable at such time(s) as is therein provided.
All capitalized terms appearing herein are, unless otherwise indicated,
used with the meanings assigned to such terms in the Credit Agreement.
This promissory note is one of the Bid Loan Notes issued pursuant to
the Credit Agreement and evidences indebtedness of the undersigned incurred
under, and is subject to the terms and provisions of, the Credit Agreement (and,
if amended, all amendments thereto), to which reference is hereby made for a
statement of said terms and provisions.
The principal hereof and interest hereon are payable in lawful money of
the United States of America in immediately available funds. Prior to any
transfer of this Note to the extent allowed under the Credit Agreement, each Bid
Loan made by the Bank to the undersigned under the Credit Agreement (including
any refinancing thereof), the interest rate and Interest Period applicable
thereto and all payments of principal hereof by the undersigned to the Bank
shall be endorsed on a grid schedule or grid schedules in the form of the
schedule attached hereto and by this reference thereto made a part of this Note.
Notwithstanding the foregoing, the failure to make, or an error in making, such
endorsement shall not in any manner affect the obligation of the undersigned
hereunder.
<PAGE>
THIS NOTE HAS BEEN MADE UNDER AND IS GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK.
DELUXE CORPORATION
By: __________________________
Title: _________________________
Address:
3680 Victoria Street North
Shoreview, MN 55126-2966
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE
Amount of Interest Maturity Interest Amount of Outstanding Name of Person
Date Bid Loan Rate of Interest Paid Principal Balance Making Notation
Period Repaid
<S> <C>
</TABLE>
<PAGE>
EXHIBIT H
BANK'S RESPONSE TO PRO RATA COMMITMENT INCREASE REQUEST
SUPPLEMENT, dated _________________, 19____, to the Amended and Restated Credit
Agreement, dated as of July 8, 1997 (as amended from time to time, the
"Agreement"), among DELUXE CORPORATION (the "Company"), the banks parties
thereto (individually a "Bank" and collectively the "Banks"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent for the Banks (the
"Agent").
W I T N E S S E T H :
WHEREAS, the Agreement provides, pursuant to Section 2.09 thereof, that the
Company may request the Banks to increase the aggregate Commitments, and each
Bank has the option, in its sole discretion, to subscribe for its proportionate
share of such requested increase, according to its then existing Pro Rata Share,
by executing and delivering to the Company and the Agent a supplement to the
Agreement in substantially the form of this Supplement; and
WHEREAS, at the Company's request the undersigned now desires to increase the
amount of its Commitments under the Agreement;
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees, subject to the terms and conditions of the Agreement,
that on the date this Supplement is accepted by the Company and the Agent, it
shall have its Commitment to the Company increased by $_____________, thereby
making the amount of its Commitment $_____________.
2. Terms defined in the Agreement shall have their meanings defined therein when
used herein.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed
and delivered by a duly authorized officer on the date first above written.
______________________________________
By: _________________________________
Title: _______________________________
<PAGE>
Accepted this ____ day of ___________________, 199___.
DELUXE CORPORATION
By: ________________________________
Title: _______________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: ________________________________
Title: _______________________________
<PAGE>
EXHIBIT I
SUPPLEMENT FOR NON-PRO RATA COMMITMENT INCREASE (EXISTING BANK)
SUPPLEMENT, dated __________________, 19__, to the Amended and Restated
Credit Agreement, dated as of July 8, 1997 (as amended from time to time, the
"Agreement"), among DELUXE CORPORATION (the "Company"), the banks parties
thereto (individually a "Bank" and collectively the "Banks"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent for the Banks (the
"Agent").
W I T N E S S E T H :
WHEREAS, the Agreement provides, pursuant to Section 2.09 thereof, that
in the event all of the Banks do not subscribe for their proportionate share of
an increase in the aggregate Commitments requested by the Company pursuant to
such section then a Bank may subscribe for a non-proportionate increase in its
Commitment, by executing and delivering to the Company and the Agent a
supplement to the Agreement in substantially the form of this Supplement; and
WHEREAS, at the Company's request the undersigned now desires to
increase the amount of its Commitments under the Agreement;
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees, subject to the terms and conditions of the Agreement,
that on the date this Supplement is accepted by the Company and the Agent, it
shall have its Commitment to the Company increased by $___________, thereby
making the amount of its Commitment $_____________.
2. Terms defined in the Agreement shall have their meanings defined therein when
used herein.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
____________________________
By: _________________________
Title: ________________________
<PAGE>
Accepted this ___ day of _______________, 199__.
DELUXE CORPORATION
By: ________________________
Title: _______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: _________________________
Title: ________________________
<PAGE>
EXHIBIT J
SUPPLEMENT FOR COMMITMENT INCREASE (NEW BANK)
SUPPLEMENT, dated ________________, 19__, to the Amended and Restated
Credit Agreement, dated as of July 8, 1997 (as amended from time to time, the
"Agreement") among DELUXE CORPORATION (the "Company"), the banks parties thereto
(individually a "Bank" and collectively the "Banks"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent for the Banks (the "Agent").
W I T N E S S E T H :
WHEREAS, the Agreement provides, pursuant to Section 2.09 thereof, that
any bank meeting the qualifications of an Eligible Assignee, although not
originally a party thereto, may become a party to the Agreement with the consent
of the Company and the Agent by executing and delivering to the Company and the
Agent a supplement to the Agreement in substantially the form of this
Supplement; and
WHEREAS, the undersigned was not an original party to the Agreement but
now desires to become a party thereto;
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by the provisions of the Agreement and
agrees that, on the date of this Supplement is accepted by the Company and the
Agent, it shall become a Bank for all purposes of the Agreement to the same
extent as if originally a party thereto. The undersigned agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Agreement are required to be performed by it as a Bank, including the
requirements concerning confidentiality.
2. As of the acceptance date noted below, the amount of the Commitment of the
undersigned shall be
$________________.
3. The following administrative details apply to the undersigned:
(A) Domestic Lending Office:
Name: _____________________
Address: __________________
___________________________
___________________________
Attention: ________________
Telephone: ( ) __________
Facsimile: ( ) __________
<PAGE>
(B) Offshore Lending Office:
Name: _____________________
Address: __________________
___________________________
___________________________
Attention: ________________
Telephone: ( ) __________
Facsimile: ( ) __________
(C) Notice Address:
Name: ______________________
Address: ___________________
____________________________
____________________________
Attention: _________________
Telephone: _________________
Facsimile: _________________
(D) Payment Instructions:
Account No.: _______________
At: ________________________
____________________________
____________________________
Reference: _________________
Attention: _________________
4. The undersigned (a) acknowledges that it has received a copy of the Agreement
and the Schedules and Exhibits thereto, together with copies of the financial
statements refered to in Section 6.01 of the Agreement, and such other documents
and information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into the Agreement; and (b) agrees that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Agreement.
5. The undersigned agrees to comply with Sections 3.01 and 9.10 of the Agreement
(if applicable).
<PAGE>
6. The undersigned represents and warrants that (i) it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute and deliver this Supplement and any other documents
required or permitted to be executed or delivered by it in connection with this
Supplement, and to fulfill its obligations hereunder; (ii) no notices to, or
consents, authorizations or approvals of, any person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Supplement; and apart from any agreements or undertaking or filings
required by the Agreement, no further action by, or notice to, or filing with,
any person is required of it for such execution, delivery or performance; (iii)
this Supplement has been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of the undersigned, enforceable against the
undersigned in accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors' rights and to general equitable
principles; and (iv) it is an Eligible Assignee.
7. Terms defined in the Agreement shall have their meanings defined therein when
used herein.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
____________________________
By: ________________________
Title: _____________________
Accepted this ____ day of ________________, 199_.
DELUXE CORPORATION
By: ________________________
Title: _____________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: ________________________
Title: _____________________
<PAGE>
EXHIBIT K
Form of Opinion of Counsel to the Company
July 8, 1997
Bank of America National Trust and
Savings Association, as Agent
Each of the Banks referred to as the
Banks in the Agreement mentioned below
c/o Bank of America National Trust and
Savings Association
1455 Market Street, 12th Floor
San Francisco, California 94103
Ladies and Gentlemen:
This opinion is furnished to you in connection with the execution and delivery
of the Amended and Restated Credit Agreement dated as of July 8, 1997 between
Deluxe Corporation, a Minnesota corporation (the "Company") and Bank of America
National Trust and Savings Association as Agent (the "Agent") for the Banks
named on the signature pages thereto (the "Banks") (the "Agreement").
The undersigned is Senior Vice President, General Counsel and Secretary of the
Company. In rendering this opinion, I have consulted with other officers of the
Company, outside counsel, and other attorneys within the Company's Law
Department, as I have deemed appropriate for purposes of this opinion.
This opinion is provided pursuant to Section 4.01(d) of the Agreement.
Capitalized terms not otherwise defined herein have the respective meanings set
forth in the Agreement.
In connection with this opinion, I, or other attorneys within the Company's Law
Department, have reviewed the Agreement, the Notes, the other Loan Documents
(collectively, the "Loan Documents"), and such other documents as I have deemed
necessary and appropriate for purposes of this opinion, including, without
limitation, the Amended Articles of Incorporation and the Amended By-laws of the
Company. In addition, I, or other attorneys within the Company's Law Department,
have investigated such questions of law (including where deemed appropriate,
consulting with outside counsel) and reviewed such certificates of government
officials and information from
<PAGE>
officers and representatives of the Company as I have deemed necessary or
appropriate for the purposes of this opinion.
In rendering the opinions expressed below, I have assumed, with the Bank's
permission and without verification:
(a) the authenticity of all Loan Documents submitted to me as originals,
(b) the genuineness of all signatures,
(c) the legal capacity of natural persons,
(d) the conformity to originals of the Loan Documents submitted to me as
copies,
(e) the due authorization, execution and delivery of the Loan Documents by the
parties thereto other than the Company, and
(f) that the Loan Documents constitute the valid, binding and enforceable
obligations of the parties thereto other than the Company.
Based on the foregoing, and subject to the qualifications set forth below, I am
of the opinion that:
1. The Company and each of its Material Subsidiaries, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to conduct business
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except to
the extent that failure to do so would not reasonably be expected to have a
Material Adverse Effect (as defined in the Agreement). The Company has the
requisite corporate power to execute, deliver and perform its obligations under
the Loan Documents.
2. The execution, delivery and performance by the Company of the Loan Documents
to which the Company is a party have been duly authorized by all requisite
corporate action. The Loan Documents have been duly executed and delivered by
the Company and constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms.
3. The execution and delivery by the Company of the Loan Documents to which the
Company is a party, and the performance by the Company of its obligations
thereunder, do not and will not (a) violate any provision of law, statute, rule
or regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Company, (b) violate any provision of the Amended Articles
of Incorporation or Amended By-laws of the Company, (c) result in breach or
constitute a default under any
<PAGE>
indenture, loan or credit agreement or any other material agreement, lease or
instrument known to me to which the Company is a party or by which it or any of
its properties may be bound or result in the creation of a Lien thereunder.
4. No order, consent, approval, license, authorization or validation of, or
filing, recording, or registration with, or exemption by, any governmental or
public body or authority is required on the part of the Company to authorize, or
is required in connection with the execution, delivery and performance of, or
the legality, validity or binding effect or enforceability of, the Loan
Documents.
5. Except as disclosed on Schedule 5.05 of the Agreement, there are no actions,
suits or proceedings pending or, to the best of my knowledge, overtly threatened
against or affecting the Company or any of its properties before any court or
arbitrator, or any governmental department, board, agency or other
instrumentality which (i) challenge the legality, validity or enforceability of
the Loan Documents, or (ii) would reasonably be expected to have a Material
Adverse Effect.
6. The Company is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
7. There is no litigation pending or, to the best of my knowledge, threatened,
alleging that any slogan or other advertising device, product, process, method,
substance, part or other material now employed by the Company or any Subsidiary
infringes upon any rights of any other Person which would reasonably be expected
to have a Material Adverse Effect.
8. The making of the Loans contemplated by the Agreement, and the use of the
proceeds thereof as provided in the Agreement, does not violate Regulations G, U
or X of the FRB.
The opinions set forth above are subject to the following qualifications and
exceptions:
(a) I express no opinion as to the laws of any jurisdiction other than the
State of Minnesota and the federal laws of the United States of America. I
call to your attention the fact that the Loan Documents provided that they
are to be governed by the laws of the State of New York. For purposes of my
opinion concerning the enforceability of the Loan Documents, I have
assumed, with your permission, that the laws of the State of New York are
the same in all material respects as the laws of the State of Minnesota.
(b) My opinions are subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, arrangement, fraudulent transfer or
other similar law of general application affecting creditors' rights
generally.
<PAGE>
(c) My opinions are subject to the effect of general principles of equity and
concepts of materiality, reasonableness, good faith and fair dealing, and
other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
(d) My opinion with respect to the enforceability of the provisions of the
Agreement is qualified to the extent that the provision that terms
contained therein may not be waived or modified except in writing may be
limited under certain circumstances.
(e) My opinion with respect to the enforceability of the provisions of the
Agreement is further qualified to the extent that the availability of
specific performance, injunctive relief and other equitable remedies is
subject to the discretion of the tribunal before which any proceeding
therefor may be brought.
(f) I express no opinion as to the enforceability of the Loan Documents to the
extent they contain:
(i) choice of law or forum selection provisions,
(ii) waivers by the Company of any statutory or constitutional rights or
remedies, or
(iii) grants to the Agent or Banks of powers of attorney.
(g) I express no opinion as to (i) the enforceability of provisions of the Loan
Documents to the extent they contain cumulative remedies which purport to
compensate, or would have the effect of compensating, the party entitled to the
benefits thereof in an amount in excess of the actual loss suffered by such
party, or (ii) the enforceability of the Company's obligation to pay any default
interest rate if the payment of such interest rate may be construed as
unreasonable in relation to actual damages or grossly disproportionate to actual
damages suffered by the Agent or the Banks as a result of such default.
(h) I express no opinion as to compliance or the effect of noncompliance by the
Agent or the Banks or any subsequent holder of the Notes with any state or
federal laws or regulations applicable to the Agent or the Banks or such
holder in connection with the transactions described in the Agreement.
(i) My opinion as to the enforceability of the Loan Documents is subject to the
effect of Minnesota Statutes 290.371, Subd. 4.
(j) My opinions, insofar as they relate to the enforceability of
indemnification provisions, are subject to the effect of federal and state
securities laws and public policy relating thereto. I express no opinion
with respect to the enforceability of any provision of the Loan Documents
which purports to excuse the Agent or Banks from liability for, or
<PAGE>
require the Company to indemnify the Agent or the Banks against, the Agent
or the Bank's negligence or willful misconduct.
(k) My opinion is limited solely to facts and laws existing as of the date
hereof.
The foregoing opinions are being furnished to you solely for your benefit and
may not be relied upon by, nor may copies be delivered to, any other person
except any Participant or Assignee without my prior written consent. By your
acceptance, you acknowledge that this opinion is given without personal recourse
of any nature to me individually.
Very truly yours,
John H. LeFevre
Senior Vice President,
General Counsel
and Secretary
<PAGE>
EXHIBIT L
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as of
_______________, 19__ is made between _____________________________
_______________________________ (the "Assignor") and _________________________
___________________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Amended and Restated
Credit Agreement dated as of July 8, 1997 among DELUXE CORPORATION, a Minnesota
corporation (the "Company"), the banks parties thereto (including the Assignor,
the "Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Agent (as from time to time amended, modified or supplemented, the "Credit
Agreement"). Any terms defined in the Credit Agreement and not defined in this
Agreement are used herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to make Committed Loans to the Company in an aggregate amount not to
exceed $______________________ (the "Commitment");
WHEREAS, [the Assignor has made Committed Loans in the aggregate
principal amount of $_________________ to the Company] [no Committed Loans are
outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, [together with a corresponding portion of each of its
outstanding Committed Loans,] in an amount equal to $_______________________
(the "Assigned Amount") on the terms and subject to the conditions set forth
herein, and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such
conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Agreement, (i)
the Assignor hereby sells, transfers and assigns to the Assignee, and
(ii) the Assignee hereby purchases, assumes and undertakes from the
Assignor, without
<PAGE>
recourse and without representation or warranty (except as provided in
this Agreement) ___% (the "Assignee's Percentage Share") of (A) the
Commitment [and the Committed Loans] of the Assignor and (B) all
related rights, benefits, obligations, liabilities and indemnities of
the Assignor under and in connection with the Credit Agreement and the
Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees
with respect to, Committed Loans assigned.]
(b) With effect on and after the Effective Date (as defined
herein), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the
obligations of a Bank under the Credit Agreement, including the
requirements concerning confidentiality, with a Commitment in an amount
equal to the Assigned Amount. The Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a
Bank. It is the intent of the parties hereto that the Commitment of the
Assignor shall, as of the Effective Date, be reduced by an amount equal
to the Assigned Amount and the Assignor shall relinquish its rights and
be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee.
(c) After giving effect to the assignment and assumption, on
the Effective Date the Assignee's Commitment will be $_________________
and the Assignor's remaining Commitment will be $___________________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1, the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to
$___________________________________, representing the Assignee's
Percentage Share of the principal amount of all Committed Loans
previously made, and currently owed, by the Company to the Assignor
under the Credit Agreement and outstanding on the Effective Date.
(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount specified in Section 10.08(a) of
the Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued prior to the
Effective Date with respect to the Committed Loans and the
<PAGE>
Commitment shall be for the account of the Assignor. Any interest, fees and
other payments accrued on and after the Effective Date with respect to the
Assigned Amount shall be for the account of the Assignee. Each of the Assignor
and the Assignee agrees that it will hold in trust for the other party any
interest, fees and other amounts which it may receive to which the other party
is entitled pursuant to the preceding two sentences and pay to the other party
any such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of
the Credit Agreement and the Schedules and Exhibits thereto, together with
copies of the financial statements referred to in Section 6.01 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Agreement; and (b) agrees that it will, independently and without reliance upon
the Assignor, the Agent, the Arranger or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit and legal decisions in taking or not taking action under the
Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective
date for this Agreement shall be ___________, 199_ (the "Effective
Date"); provided that the following conditions precedent have been
satisfied on or before the Effective Date:
(i) this Agreement shall be executed and delivered by
the Assignor and the Assignee;
(ii) the written consent of the Company and the Agent
required for an effective assignment of the Assigned Amount by
the Assignor to the Assignee under Section 10.08(a) of the
Credit Agreement shall have been duly obtained and shall be in
full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Agreement;
(iv) the Assignor and the Assignee shall have
complied with Sections 3.01 and 9.10 of the Credit Agreement
(if applicable); and
(v) the processing fee referred to in Section 2(b)
hereof and in Section 10.08(a) of the Credit Agreement shall
have been paid to the Agent.
<PAGE>
(b) Promptly following the execution of this Agreement, the
Assignor shall deliver to the Company and the Agent for acknowledgement
by the Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.
[6. Agent [INCLUDE ONLY IF ASSIGNOR IS AGENT].
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Agent by the Banks
pursuant to the terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations held by
the Assignor in its capacity as Agent under the Credit Agreement.]
7. Withholding Tax.
The Assignee agrees to comply with Sections 3.01 and 9.10 of
the Credit Agreement (if applicable).
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any lien,
security interest or other adverse claim; (ii) it is duly organized and
existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this Agreement and
any other documents required or permitted to be executed or delivered
by it in connection with this Agreement and to fulfill its obligations
hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any person are required (other than any already given or
obtained) for its due execution, delivery and performance of this
Agreement, and apart from any agreements or undertaking or filings
required by the Credit Agreement, no further action by, or notice to,
or filing with, any person is required of it for such execution,
delivery or performance; and (iv) this Agreement has been duly executed
and delivered by it and constitutes the legal, valid and binding
obligation of the Assignor, enforceable against the Assignor in
accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of
general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
the execution, legality, validity,
<PAGE>
enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant
thereto. The Assignor makes no representation or warranty in connection
with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of the Company, or the performance or
observance by the Company, of any of its respective obligations under
the Credit Agreement or any other instrument or document furnished in
connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and
has taken, all action necessary to execute and deliver this Agreement
and any other documents required or permitted to be executed or
delivered by it in connection with this Agreement, and to fulfill its
obligations hereunder; (ii) no notices to, or consents, authorizations
or approvals of, any person are required (other than any already given
or obtained) for its due execution, delivery and performance of this
Agreement; and apart from any agreements or undertaking or filings
required by the Credit Agreement, no further action by, or notice to,
or filing with, any person is required of it for such execution,
delivery or performance; (iii) this Agreement has been duly executed
and delivered by it and constitutes the legal, valid and binding
obligation of the Assignee, enforceable against the Assignee in
accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of
general application relating to or affecting creditors' rights and to
general equitable principles; and (iv) it is an Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agrees to execute
and deliver such other instruments, and take such other action, as either party
may reasonably request in connection with the transactions contemplated by this
Agreement, including the delivery of any notices or other documents or
instruments to the Company or the Agent, which may be required in connection
with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Agreement
shall be in writing signed by the parties hereto. No failure or delay
by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Agreement shall be without prejudice
to any rights with respect to any other or further breach hereof.
<PAGE>
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement.
(d) This Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and the
Assignee each irrevocably submits to the non-exclusive jurisdiction of
any New York State or Federal court sitting in The City of New York
over any suit, action or proceeding arising out of or relating to this
Agreement and irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State
or Federal court. Each party to this Agreement hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of
an inconvenient forum to the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not
inconsistent with the Credit Agreement.]
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
____________________________________
Assignor
By:_________________________________
Title:______________________________
Address:
____________________________________
Assignee
By:_________________________________
Title:______________________________
Address:
<PAGE>
Schedule 1 to
Exhibit L
__________________, 19___
Bank of America National Trust
and Savings Association,
as Agent
1455 Market Street - 12th Floor
San Francisco, California 94103
Attention: Agency Management Services
Deluxe Corporation
_____________________
_____________________
_____________________
Attention:________________
Ladies and Gentlemen:
We refer to the Amended and Restated Credit Agreement dated as of July
8, 1997 (the "Credit Agreement") among Deluxe Corporation (the "Company"), the
Banks referred to therein, and Bank of America National Trust and Savings
Association, as Agent. Terms defined in the Credit Agreement are used herein as
therein defined.
1. We hereby give you notice of, and request the consent of the Company
and the Agent to, the assignment by _______________ (the "Assignor") to ________
(the "Assignee") of ___% of the right, title and interest of the Assignor in and
to the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitment of the Assignor and all
outstanding Committed Loans made by the Assignor) pursuant to that certain
Assignment and Acceptance Agreement, dated ______, 19___ (the "Assignment and
Acceptance Agreement"), by and between Assignor and Assignee, a copy of which
Assignment and Acceptance Agreement is attached hereto. Before giving effect to
such assignment the Assignor's Commitment is $_________ and the aggregate
principal amount of its outstanding Committed Loans is
$_______________.
2. The Assignee agrees that, upon receiving the written consent of the
Company and the Agent to such assignment and from and after the Effective Date
(as such term is defined in Section 5 of the Assignment and Acceptance
Agreement), the Assignee will be bound by the terms of the Credit Agreement,
with respect to the interest in the Credit Agreement assigned to it as specified
above, as fully and to the same extent as if the Assignee were the Bank
originally holding such interest in the Credit Agreement.
<PAGE>
3. The following administrative details apply to the Assignee:
(A) Domestic Lending Office:
Assignee name:_______________________
Address:_____________________________
_____________________________
_____________________________
_____________________________
Attention:___________________________
Telephone: ( )_____________________
Facsimile: ( )_____________________
(B) Offshore Lending Office:
Assignee name:_______________________
Address:_____________________________
_____________________________
_____________________________
_____________________________
Attention:___________________________
Telephone: ( )_____________________
Facsimile: ( )_____________________
(C) Notice Address:
Assignee name:_______________________
Address:_____________________________
_____________________________
_____________________________
_____________________________
Attention:___________________________
Telephone: ( )_____________________
Facsimile: ( )_____________________
(D) Payment Instructions:
Account No.:_________________________
At:_________________________
_________________________
_________________________
_________________________
Reference:___________________________
Attention:___________________________
This Notice of Assignment may be executed by the Assignor and the Assignee in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same notice and agreement.
<PAGE>
Adjusted Commitment: [ASSIGNOR]
$_____________________ By________________________
Title_____________________
Commitment: [ASSIGNEE]
$_____________________ By________________________
Title_____________________
ACKNOWLEDGED this ______ day of
_____________________, 19__:
DELUXE CORPORATION
By_____________________
Title__________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By_____________________
Title__________________
Exhibit 10.2
DELUXE CORPORATION STOCK INCENTIVE PLAN
(AS AMENDED OCTOBER 31, 1997)
SECTION 1. PURPOSE.
The purpose of the plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting management personnel capable of
assuring the future success of the Company, by offering such personnel
incentives to put forth maximum efforts for the success of the Company's
business, and by affording such personnel an opportunity to acquire a
proprietary interest in the Company.
SECTION 2. DEFINITIONS.
As used in the plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly through
one or more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, in each case as determined
by the committee.
(b) "Award" shall mean any option, stock appreciation right, restricted stock,
restricted stock unit, performance award, dividend equivalent or other
stock-based award granted under the plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any award granted under the plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the board of directors of the
Company designated by such board to administer the plan, which shall consist of
members appointed from time to time by the board of directors and shall be
comprised of not fewer than such number of directors as shall be required to
permit grants and awards made under the plan to satisfy the requirements of Rule
16b-3. Each member of the committee shall be a "Non-Employee Director" within
the meaning of Rule 16b-3 and an "outside director" within the meaning of
Section 162(m) of the Code.
(f) "Company" shall mean DELUXE CORPORATION, a Minnesota corporation, and any
successor corporation.
(g) "Dividend Equivalent" shall mean any right granted under Section 6(e) of
the plan.
(h) "Eligible Person" shall mean a non-employee director and any employee (as
determined by the committee) providing services to the Company or any affiliate
who the committee determines to be an eligible person.
(i) "Fair Market Value" shall mean, with respect to any property (including,
without limitation, any shares or other securities), the fair market value of
such property determined by such methods or procedures as shall be established
from time to time by the committee.
(j) "Incentive Stock Option" shall mean an option granted under Section 6(a)
of the plan that is intended to meet the requirements of Section 422 of the Code
or any successor provision.
(k) "Non-Employee Director" shall have the meaning provided in Section 7.1 of
the plan.
(l) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the plan that is not intended to be an incentive stock option.
(m) "Option" shall mean an incentive stock option or a non-qualified stock
option and shall be deemed to include any reload option issued under the plan.
(n) "Other Stock-Based Award" shall mean any right granted under Section 6(f)
of the plan.
(o) "Participant" shall mean an eligible person designated to be granted an
award under the plan.
<PAGE>
(p) "Performance Award" shall mean any right granted under Section 6(d) of the
plan.
(q) "Person" shall mean any individual, corporation, partnership, association
or trust.
(r) "Plan" shall mean this stock incentive plan, as amended from time to time.
(s) "Reload Option" means an option issued under Section 6(a) to purchase a
number of shares equal to the number of shares delivered by an option holder (or
such lesser number as the committee may determine) in payment of all or any
portion of the exercise price of an option previously granted under this plan to
such holder, provided that the option term of such option shall not end later
than the option term of the option so exercised
(t) "Reload Option Feature" means provisions in an option granted under this
plan that permit the holder of the option to receive a reload option upon the
exercise of the option through the delivery of shares in payment of all or any
portion of the exercise price. A reload option feature may be included in any
reload option issued under the plan.
(u) "Restricted Stock" shall mean any share granted under Section 6(c) of the
plan.
(v) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of
the plan evidencing the right to receive a share (or a cash payment equal to the
fair market value of a share) at some future date.
(w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation.
(x) "Shares" shall mean shares of common stock, $1.00 par value, of the
Company or such other securities or property as may become subject to awards
pursuant to an adjustment made under Section 4(c) of the plan.
(y) "Stock Appreciation Right" shall mean any right granted under Section 6(b)
of the plan.
SECTION 3. ADMINISTRATION.
(a) POWER AND AUTHORITY OF THE COMMITTEE. The plan shall be administered by
the committee. Except as provided in Section 7 and subject to the express
provisions of the plan and to applicable law, the committee shall have full
power and authority to: (i) designate participants; (ii) determine the type or
types of awards to be granted to each participant under the plan; (iii)
determine the number of shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with) each
award; (iv) determine the terms and conditions of any award or award agreement;
(v) amend the terms and conditions of any award or award agreement and
accelerate the exercisability of options or the lapse of restrictions relating
to restricted stock or other awards; (vi) determine whether, to what extent and
under what circumstances awards may be exercised in cash, shares, other
securities, other awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash,
shares, other securities, other awards, other property and other amounts payable
with respect to an award under the plan shall be deferred either automatically
or at the election of the holder thereof or the committee; (viii) interpret and
administer the plan and any instrument or agreement relating to, or award made
under, the plan; (ix) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the plan; and (x) make any other determination and take any
other action that the committee deems necessary or desirable for the
administration of the plan. Unless otherwise expressly provided in the plan, all
designations, determinations, interpretations and other decisions under or with
respect to the plan or any award shall be within the sole discretion of the
committee, may be made at any time and shall be final, conclusive and binding
upon any participant, any holder or beneficiary of any award and any employee of
the Company or any affiliate.
(b) DELEGATION. The committee may delegate its powers and duties under the
plan to one or more officers of the company or an affiliate or a committee of
such officers, subject to such terms, conditions and limitations as the
committee may establish in its sole discretion; provided, however, that the
committee shall not delegate its powers and duties under the plan (i) with
regard to officers or directors of the Company or any affiliate who are subject
to Section 16 of the Securities Exchange Act of 1934, as amended, if the effect
of such delegation would make the exemption under Rule 16b-3 unavailable or (ii)
in such a manner as would cause the plan not to comply with the requirements of
Section 162(m) of the Code.
<PAGE>
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(c), the
number of shares available for granting awards under the plan shall be
7,000,000. Shares to be issued under the plan may be either shares reacquired or
authorized but unissued shares. If any shares covered by an award or to which an
award relates are not purchased or are forfeited, or if an award otherwise
terminates without delivery of any shares, then the number of shares counted
against the aggregate number of shares available under the plan with respect to
such award, to the extent of any such forfeiture or termination, shall again be
available for grants under the plan. Shares delivered in payment of the option
exercise price of an option containing a reload option feature shall again be
available for granting awards under the plan (other than incentive stock
options) to the extent that the number of shares so delivered are made subject
to an option granted pursuant to the said reload option feature. Shares
delivered in payment of the option exercise price of an option not containing a
reload option feature shall again be available for granting awards under the
plan (other than incentive stock options) to the extent that the number of
shares so delivered are made subject to an option granted pursuant to section
6(a)(v).
(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4, if an award
entitles the holder thereof to receive or purchase shares, the number of shares
covered by such award or to which such award relates shall be counted on the
date of grant of such award against the aggregate number of shares available for
grants under the plan.
(c) ADJUSTMENTS. In the event that the committee shall determine that any
dividend or other distribution (whether in the form of cash, shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of shares or other securities of the Company, issuance of
warrants or other rights to purchase shares or other securities of the Company
or other similar corporate transaction or event affects the shares such that an
adjustment is determined by the committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the plan, then the committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of shares (or
other securities or other property) which thereafter may be made the subject of
awards, (ii) the number and type of shares (or other securities or other
property) subject to outstanding awards and (iii) the purchase or exercise price
with respect to any award; provided, however, that the number of shares covered
by any award or to which such award relates shall always be a whole number.
(d) AWARDS LIMITATION UNDER THE PLAN. No eligible person may be granted any
award or awards under the plan (including the Company's performance share plan)
of more than 200,000 shares, in the aggregate, in any calendar year. The
foregoing limitation shall not include any shares acquired pursuant to the
annual incentive plan. Furthermore, no more than 1,000,000 shares, in the
aggregate, may be issued under the plan (including the Company's performance
share plan) in the form of either restricted stock or restricted stock units or
any combination thereof.
SECTION 5. ELIGIBILITY.
Any eligible person, including any eligible person who is an officer or
director of the Company or any affiliate, shall be eligible to be designated a
participant. In determining which eligible persons shall receive an award and
the terms of any award, the committee may take into account the nature of the
services rendered by the respective eligible persons, their present and
potential contributions to the success of the Company, and such other factors as
the committee, in its discretion shall deem relevant. Notwithstanding the
foregoing, incentive stock options may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) and an incentive stock option shall not be
granted to an employee of an affiliate unless such affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision.
SECTION 6. AWARDS.
(a) OPTIONS. The committee is hereby authorized to grant options to
participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the plan as the
committee shall determine:
<PAGE>
(i) EXERCISE PRICE. The purchase price per share purchasable under an
option shall be determined by the committee; provided, however, that
such purchase price shall not be less than 100 percent of the fair
market value of a share on the date of grant of such option.
(ii) OPTION TERM. The term of each option shall be fixed by the committee.
(iii) TIME AND METHOD OF EXERCISE. The committee shall determine the time
or times at which an option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including,
without limitation, cash, shares, promissory notes, other securities,
other awards or other property, or any combination thereof, having a
fair market value on the exercise date equal to the relevant exercise
price) in which, payment of the exercise price with respect thereto
may be made or deemed to have been made.
(iv) RELOAD OPTION FEATURE. The committee may determine, in its
discretion, whether to grant an option containing a reload option
feature and whether any reload option issued upon the exercise of an
option containing a reload option feature may itself contain a reload
option feature.
(v) ISSUANCE OF OPTIONS TO REPLACE SHARES. The committee may determine,
in its discretion, whether to grant to a participant who exercises by
delivery of shares in payment of all or any portion of the exercise
price an option, previously or hereafter granted under the plan, that
does not contain a reload option feature, an option to acquire the
number of shares so delivered (or such lesser number as the committee
may determine), provided that the option term of such option shall
not end later than the option term of the option so exercised.
(b) STOCK APPRECIATION RIGHTS. The committee is hereby authorized to grant
stock appreciation rights to participants subject to the terms of the plan and
any applicable award agreement. A stock appreciation right granted under the
plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the fair market value of one share on the date of exercise
(or, if the committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the stock
appreciation right as specified by the committee, which price shall not be less
than 100 percent of the fair market value of one share on the date of grant of
the stock appreciation right. Subject to the terms of the plan and any
applicable award agreement, the grant price, term, methods of exercise, dates of
exercise, methods of settlement and any other terms and conditions of any stock
appreciation right shall be as determined by the committee. The committee may
impose such conditions or restrictions on the exercise of any stock appreciation
right as it may deem appropriate.
(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The committee is hereby
authorized to grant awards of restricted stock and restricted stock units to
participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the plan as the
committee shall determine:
(i) RESTRICTIONS. Shares of restricted stock and restricted stock units
shall be subject to such restrictions as the committee may impose
(including, without limitation, any limitation on the right to vote a
share of restricted stock or the right to receive any dividend or
other right or property with respect thereto or with respect to a
restricted stock unit), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise
as the committee may deem appropriate.
(ii) STOCK CERTIFICATES. Any restricted stock granted under the plan shall
be evidenced by issuance of a stock certificate or certificates,
which certificate or certificates shall be held by the Company. Such
certificate or certificates shall be registered in the name of the
participant and shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such restricted
stock. In the case of restricted stock units, no shares shall be
issued at the time such awards are granted.
(iii) FORFEITURE; DELIVERY OF SHARES. Except as otherwise determined by
the committee or provided in a plan governed by this Plan, upon
termination of employment (as determined under criteria established
by the committee) or, in the case of a director, service as a
director during the applicable restriction period, all shares of
restricted stock and all restricted stock units at such time subject
to restriction shall be forfeited and reacquired by the Company;
provided, however, that the committee may, when it finds that a
waiver would be in the best interest of the Company,
<PAGE>
waive in whole or in part any or all remaining restrictions with
respect to shares of restricted stock or restricted stock units. Any
share representing restricted stock that is no longer subject to
restrictions shall be delivered to the holder thereof promptly after
the applicable restrictions lapse or are waived. Upon the lapse or
waiver of restrictions and the restricted period relating to
restricted stock units evidencing the right to receive shares, such
shares shall be issued and delivered to the holders of the restricted
stock units, subject to the provisions of the plan and any applicable
award agreement.
(d) PERFORMANCE AWARDS. The committee is hereby authorized to grant
performance awards to participants subject to the terms of the plan and any
applicable award agreement. A performance award granted under the plan (i) may
be denominated or payable in cash, shares (including, without limitation,
restricted stock and restricted stock units), other securities, other awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the committee shall establish. Subject to the
terms of the plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any performance award granted, the amount of any payment or
transfer to be made pursuant to any performance award, and any other terms and
conditions of any performance award shall be determined by the committee.
(e) DIVIDEND EQUIVALENTS. The committee is hereby authorized to grant to
participants dividend equivalents under which such participants shall be
entitled to receive payments (in cash, shares, other securities, other awards or
other property as determined in the discretion of the committee) equivalent to
the amount of cash dividends paid by the Company to holders of shares with
respect to a number of shares determined by the committee. Subject to the terms
of the plan and any applicable award agreement, such dividend equivalents may
have such terms and conditions as the committee shall determine.
(f) OTHER STOCK-BASED AWARDS. The committee is hereby authorized to grant to
participants such other awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, shares
(including, without limitation, securities convertible into shares), as are
deemed by the committee to be consistent with the purpose of the plan; provided,
however, that such grants must comply with Rule 16b-3 and applicable law.
Subject to the terms of the plan and any applicable award agreement, the
committee shall determine the terms and conditions of such awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including, without limitation,
cash, shares, promissory notes, other securities, other awards or other property
or any combination thereof), as the committee shall determine, the value of
which consideration, as established by the committee, shall not be less than 100
percent of the fair market value of such shares or other securities as of the
date such purchase right is granted.
(g) GENERAL
(i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in the
discretion of the committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other award or any
award granted under any plan of the Company or any affiliate other
than the plan. Awards granted in addition to or in tandem with other
awards or in addition to or in tandem with awards granted under any
such other plan of the Company or any affiliate, may be granted
either at the same time as or at a different time from the grant of
such other award or awards.
(iii) FORMS OF PAYMENTS UNDER AWARDS. Subject to the terms of the plan
and of any applicable award agreement, payments or transfers to be
made by the Company or an affiliate upon the grant, exercise or
payment of an award may be made in such form or forms as the
committee shall determine (including, without limitation, cash,
shares, promissory notes, other securities, other awards or other
property or any combination thereof), and may be made in a single
payment or transfer, in installments or on a deferred basis, in each
case in accordance with rules and procedures established by the
committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred
<PAGE>
payments or the grant or crediting of dividend equivalents with
respect to installment or deferred payments.
(iv) LIMITS ON TRANSFER OF AWARDS. No award and no right under any such
award shall be transferable by a participant otherwise than by will
or by the laws of descent and distribution; provided, however, that
if so determined by the committee, a participant may, in the manner
established by the committee, (x) designate a beneficiary or
beneficiaries to exercise the rights of the participant and receive
any property distributable with respect to any award upon the death
of the participant, or (y) transfer an award (other than an incentive
stock option) to any member of such participant's "immediate family"
(as such term is defined in Rule 16a-1(e) promulgated by the
Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended, or any successor rule or regulation) or to a
trust whose beneficiaries are members of such participant's
"immediate family." Each award or right under any award shall be
exercisable during the participant's lifetime only by the
participant, or by a member of such participant's immediate family or
a trust for members of such immediate family pursuant to a transfer
as described above, or if permissible under applicable law, by the
participant's guardian or legal representative. No award or right
under any such award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the
Company or any affiliate.
(v) TERM OF AWARDS. The term of each award shall be for such period as
may be determined by the committee.
(vi) RESTRICTIONS; SECURITIES EXCHANGE LISTING. All certificates for
shares or other securities delivered under the plan pursuant to any
award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the committee may deem advisable
under the plan or the rules, regulations and other requirements of
the Securities and Exchange Commission and any applicable federal or
state securities laws, and the committee may cause a legend or
legends to be placed on any such certificates to make appropriate
reference to such restrictions. If the shares or other securities are
traded on a securities exchange, the Company shall not be required to
deliver any shares or other securities covered by an award unless and
until such shares or other securities have been admitted for trading
on such securities exchange.
(vii) ATTESTATION. Where the plan or any applicable award agreement
provides for or permits delivery of shares by a participant in
payment with respect to any award or grant under this plan or for
taxes, such payment may be made constructively through attestation in
the discretion of and in accordance with rules established by the
committee.
SECTION 7. AWARDS TO NON-EMPLOYEE DIRECTORS.
7.1 ELIGIBILITY. If this plan is approved by the shareholders of the Company
at the annual meeting of the shareholders in 1994 (the 1994 annual meeting),
shares of restricted stock shall be granted automatically under the plan to each
member of the board of directors who is not an employee of the Company or of any
affiliate of the Company (a non-employee director) under the terms and
conditions contained in this Section 7. The authority of the committee under
this Section 7 shall be limited to ministerial and non-discretionary matters.
7.2 ONE-TIME AWARD OF RESTRICTED STOCK. Upon the date of the 1994 annual
meeting, each non-employee director in office following the meeting shall
receive an award of 1,000 shares of restricted stock. These shares shall vest in
three equal installments, on the dates of the annual shareholder meeting in each
of the three succeeding years, if such director remains in office immediately
following such meeting. In the event that in accordance with the Company's
policy with respect to mandatory retirement of directors, any director is not
nominated for election to serve as a director of the Company, all restricted
stock so awarded shall immediately vest in full upon such director's retirement
from the board. Subsequent to the date of the 1994 annual meeting, each
non-employee director shall, upon the date of his or her initial election to the
board, receive an award of 1,000 shares of restricted stock subject to the same
vesting restrictions. If a director ceases to be a director prior to the date on
which the award is fully vested for any reason other than mandatory retirement,
any unvested portion of the award shall terminate and be irrevocably forfeited.
Such awards shall be subject to Sections 6(c), 9 and 10 of this plan.
<PAGE>
7.3 STOCK COMPENSATION. Each non-employee director shall be eligible to
receive or elect to receive his or her fees for service on the Company's board
of directors and the committees thereof in shares or restricted stock units and
to defer the receipt of such units, all as described in the Deluxe Corporation
Non-Employee Director Stock and Deferral Plan attached hereto as Annex I and
hereby made a part hereof.
7.4 AMENDMENTS TO SECTION 7. The provisions of this Section 7 may not be
amended more often than once every six months other than to comply with changes
in the Code or the Employee Retirement Income Security Act of 1974, as amended,
or the respective rules promulgated under either statute.
SECTION 8. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an award agreement or in the plan:
(a) AMENDMENTS TO THE PLAN. The board of directors of the Company may amend,
alter, suspend, discontinue or terminate the plan; provided, however, that,
notwithstanding any other provision of the plan or any award agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:
(i) would cause Rule 16b-3 to become unavailable with respect to grants and
awards made under the plan;
(ii) would violate the rules or regulations of the New York Stock Exchange,
any other securities exchange or the National Association of Securities
Dealers, Inc., that are applicable to the Company; or
(iii) would cause the Company to be unable, under the Code, to grant incentive
stock options under the plan.
The board of directors shall be entitled to delegate to the committee the power
to amend such terms of the plan and for such purposes as the board of directors
shall from time to time determine.
(b) WAIVERS. The committee may waive any conditions of or rights of the
Company under any outstanding award, prospectively or retroactively.
(c) LIMITATIONS ON AMENDMENTS. Neither the committee nor the Company may
amend, alter, suspend, discontinue or terminate any outstanding award,
prospectively or retroactively, without the consent of the participant or holder
or beneficiary thereof, except as otherwise provided herein or in the award
agreement.
(d) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The committee may
correct any defect, supply any omission or reconcile any inconsistency in the
plan or any award in the manner and to the extent it shall deem desirable to
carry the plan into effect.
SECTION 9. INCOME TAX WITHHOLDING.
In order to comply with all applicable federal or state income tax laws or
regulations, the committee may establish such policy or policies as it deems
appropriate with respect to such laws and regulations, including without
limitation the establishment of policies to ensure that all applicable federal
or state payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a participant, are withheld or collected from such
participant. In order to assist a participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an award, the committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the payment or transfer otherwise to be
made upon exercise or receipt of (or the lapse of restrictions relating to) such
award with a fair market value equal to the amount of such taxes or (ii)
delivering to the Company shares or other property other than shares issuable
upon exercise or receipt of (or the lapse of restrictions relating to) such
award with a fair market value equal to the amount of such taxes. The election,
if any, must be on or before the date that the amount of tax to be withheld is
determined.
SECTION 10. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. No eligible person, participant or other person
shall have any claim to be granted any award under the plan, and there is no
obligation for uniformity of treatment of eligible persons,
<PAGE>
participants or holders or beneficiaries of awards under the plan. The terms and
conditions of awards need not be the same with respect to any participant or
with respect to different participants.
(b) AWARD AGREEMENTS. No participant will have rights under an award granted
to such participant unless and until an award agreement shall have been duly
executed on behalf of the Company and, if requested by the Company, signed by
the participant.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
plan shall prevent the Company or any affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(d) NO RIGHT TO EMPLOYMENT. The grant of an award shall not be construed as
giving a participant the right to be retained in the employ of the Company or
any affiliate, nor will it affect in any way the right of the Company or the
affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an affiliate may at any time dismiss a participant from
employment free from any liability or any claim under the plan, unless otherwise
expressly provided in the plan or in any award agreement.
(e) GOVERNING LAW. The validity, construction and effect of the plan or any
award, and any rules and regulations relating to the plan or any award, shall be
determined in accordance with the laws of the State of Minnesota.
(f) SEVERABILITY. If any provision of the plan or any award is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the plan or any award under any law deemed applicable by the
committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the committee, materially altering the purpose or intent of
the plan or the award, such provision shall be stricken as to the plan or such
jurisdiction or award, and the remainder of the plan or any such award shall
remain in full force and effect.
(g) NO TRUST OR FUND CREATED. Neither the plan nor any award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any affiliate and a participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company or any affiliate pursuant to an award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
affiliate.
(h) NO FRACTIONAL SHARES. No fractional shares shall be issued or delivered
pursuant to the plan or any award, and the committee shall determine whether
cash shall be paid in lieu of any fractional shares or whether such fractional
shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(i) HEADINGS. Headings are given to the sections and subsections of the plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the plan or any provision thereof.
(j) OTHER BENEFITS. No compensation or benefit awarded to or realized by any
participant under the plan shall be included for the purpose of computing such
participant's compensation under any compensation-based retirement, disability,
or similar plan of the Company unless required by law or otherwise provided by
such other plan.
SECTION 11. SECTION 16(B) COMPLIANCE.
The plan is intended to comply in all respects with Rule 16b-3 or any
successor provision, as in effect from time to time and in all events the plan
shall be construed in accordance with the requirements of Rule 16b-3. If any
plan provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The board of directors,
in its absolute discretion, may bifurcate the plan so as to restrict, limit or
condition the use of any provision of the plan to participants who are officers
or directors subject to Section 16 of the Securities and Exchange Act of 1934,
as amended, without so restricting, limiting or conditioning the plan with
respect to other participants.
<PAGE>
SECTION 12. EFFECTIVE DATE OF THE PLAN.
The plan shall be effective as of December 22, 1993, subject to approval by
the shareholders of the Company within one year thereafter.
SECTION 13. TERM OF THE PLAN.
Unless the plan shall have been discontinued or terminated as provided in
Section 8(a), the plan shall terminate on December 31, 2000. No award shall be
granted after the termination of the plan, provided that nothing herein shall be
construed to limit the issuance of options pursuant to an option containing a
reload option feature or the provisions of section 6(a)(v). However, unless
otherwise expressly provided in the plan or in an applicable award agreement,
any award theretofore granted may extend beyond the termination of the plan, and
the authority of the committee provided for hereunder with respect to the plan
and any awards, and the authority of the board of directors of the Company to
amend the plan, shall extend beyond the termination of the plan.
<PAGE>
ANNEX I
DELUXE CORPORATION
NON-EMPLOYEE DIRECTOR STOCK AND DEFERRAL PLAN
("PLAN")
1. Purpose of the Plan. The purpose of the Deluxe Corporation
Non-Employee Director Stock and Deferral Plan (the "Plan") is to provide an
opportunity for non-employee members of the Board of Directors (the "Board") of
Deluxe Corporation ("Deluxe" or the "Company") to increase their ownership of
Deluxe Common Stock, $1.00 par value ("Common Stock"), and thereby align their
interest in the long-term success of the Company with that of the other
shareholders. This will be accomplished by allowing each participating director
to elect voluntarily to receive all or a portion of his or her Retainer (as
hereinafter defined) in the form of shares of Common Stock and to allow each of
them to defer the receipt of such shares until a later date pursuant to
elections made by him or her under this Plan.
2. Eligibility. Directors of the Company who are not also officers or
other employees of the Company or its subsidiaries are eligible to participate
in this Plan ("Eligible Directors").
3. Administration. This Plan will be administered by or under the
direction of the Secretary of the Company (the "Administrator"). Since the
issuance of shares of Common Stock pursuant to this Plan is based on elections
made by Eligible Directors, the Administrator's duties under this Plan will be
limited to matters of interpretation and administrative oversight. All questions
of interpretation of this Plan will be determined by the Administrator, and each
determination, interpretation or other action that the Administrator makes or
takes pursuant to the provisions of this Plan will be conclusive and binding for
all purposes and on all persons. The Administrator will not be liable for any
action or determination made in good faith with respect to this Plan.
4. Election to Receive Stock and Stock Issuance.
4.1. Election to Receive Stock in Lieu of Cash. On forms
provided by the Company and approved by the Administrator, each Eligible
Director may irrevocably elect ("Stock Election") to receive, in lieu of cash,
shares of Common Stock having a Fair Market Value, as defined in Section 4.6,
equal to 50% or more of the annual cash retainer and all meeting fees (including
all committee retainers and meeting fees, the "Retainer") payable to that
director for services rendered as a director. From and after January 1, 1998,
all Eligible Directors will be deemed to have made such a Stock Election to
receive shares of Common Stock with respect to no less than 50% of such Retainer
and shall be deemed to be a participating director under this Plan
<PAGE>
("Participating Director") to at least such extent. Except as provided in the
preceding sentence, to be effective, any Stock Election must be filed with the
Company (the date of such filing being the date of such election) no later than
May 31 of each year (or by such other date as the Administrator shall determine)
and shall apply only with respect to services as a director provided for the
period of July 1 of that year through June 30 of the year following ("Fiscal
Year"); provided, however, that an Eligible Director whose initial election to
the Board of Directors occurs after May 31, shall have 30 days following such
election to make a Stock Election, which shall apply only with respect to
services as a director provided following the filing of such Stock Election with
the Company during the then current or the ensuing Fiscal Year, as specified in
the Stock Election. Upon adoption of the Plan in 1997, Eligible Directors shall
be entitled to make a Stock Election at any time on or before December 31, 1997,
with respect to services as a director provided during the period from January
1, 1998 through June 30, 1998. In the event that an Eligible Director shall fail
to file with the Company the required form for making a Stock Election, such
director shall be deemed to have made the same Stock Election that such director
made with respect to the then current Fiscal Year, or in the absence of having
made such Stock Election, to have elected to receive 50% of his or her Retainer
in cash and 50% in Common Stock, and such election will be deemed to have been
made on (i) May 31 in any year with respect to the ensuing Fiscal Year as
aforesaid, (ii) the thirtieth day following initial election to the Board of new
directors with respect to the current Fiscal Year only unless such date is
within the period of May 31 through June 30 of that Fiscal Year, in which event
the election shall be deemed made for both the current and next following Fiscal
Years, and (iii) December 31, 1997 with respect to Deferral Elections for the
period of January 1, 1998 through June 30, 1998 made by directors who are
Eligible Directors on December 31, 1997, as applicable. Any Stock Election made
in accordance with the provisions of this Section 4.1 shall be irrevocable for
the period to which such election applies.
4.2. Issuance of Stock in Lieu of Cash. Shares of Deluxe
Common Stock having a Fair Market Value equal to the amount of the Retainer so
elected shall (i) be issued to each Participating Director or (ii) at the
Participating Director's election pursuant to Section 4.3, be credited to such
director's account (a "Deferred Stock Account"), on March 15, June 15, September
15 and December 15 for the calendar quarter ending on the last day of each such
month (each such payment date, a "Payment Date"). The Company shall not issue
fractional shares. Whenever, under the terms of this Plan, a fractional share
would be required to be issued, the Company will round the number of shares (up
or down) to the nearest integer. In the event that a Participating Director
elects to receive less than 100% of each quarterly installment of the Retainer
in shares of Common Stock (or Stock Units as defined and provided in Section
4.4), that Participating Director shall receive the balance of the quarterly
installment in cash.
<PAGE>
4.3. Manner of Making Deferral Election. A Participating
Director may elect to defer payment of the Retainer otherwise payable in shares
of Common Stock pursuant to this Plan by filing (the date of such filing being
the date of such election), no later than May 31 of each year (or by such other
date as the Administrator shall determine) with respect to payments in the
ensuing Fiscal Year, an irrevocable election with the Administrator on a form
(the "Deferral Election Form") provided by the Administrator for that purpose
("Deferral Election"). Any portion of the Retainer to be paid in cash may not be
deferred pursuant to the Plan. The special Stock Election rules set forth in
Section 4.1 with respect to new directors and first elections under the Plan
during 1997 shall also apply to the corresponding Deferral Elections. Failure
timely to file a Deferral Election shall conclusively be deemed to mean that no
election to defer has been made for the applicable period. The Deferral Election
shall be effective for the Retainer payable (i) during the ensuing Fiscal Year
with respect to elections made on or before May 31 of each year as aforesaid,
(ii) for the portion of the Fiscal Year after the date the Deferral Election is
made or the ensuing Fiscal Year as specified in the Deferral Election with
respect to Deferral Elections made by new directors, and (iii) for the period of
January 1, 1998 through June 30, 1998 with respect to Deferral Elections made by
Eligible Directors on or before December 31, 1997. Any Deferral Election made in
accordance with the provisions of this Section shall be irrevocable for the
period to which such election applies. The Deferral Election form shall specify
the amount to be deferred expressed as a percentage of the Participating
Director's Retainer.
4.4. Credits to Deferred Stock Account for Elective Deferrals.
On each Payment Date, a Participating Director who has made a then effective
Deferral Election shall receive a credit in the form of restricted stock units
("Stock Units") to his or her Deferred Stock Account. Each Stock Unit shall
represent the right to receive one share of Common Stock. The number of Stock
Units credited to a Participating Director's Deferred Stock Account shall be
determined by dividing an amount equal to the Participating Director's Retainer
payable on the Payment Date for the current calendar quarter and specified for
deferral pursuant to Section 4.3, by the Fair Market Value of a share of Common
Stock on such Payment Date. If that computation would result in a fractional
Stock Unit being credited to a Participating Director's Deferred Stock Account,
the Company will round the number of Stock Units so credited (up or down) to the
nearest integer.
4.5. Dividend Equivalent Payments. Each time a dividend is
paid on the Common Stock, the Participating Director who has a Deferred Stock
Account shall receive a dividend equivalent payment on the dividend payment date
equal to the amount of the dividend payable on a single share of Common Stock
multiplied by the number of Stock Units credited to the Participating Director's
Deferred Stock Account on the dividend record date.
<PAGE>
4.6. Fair Market Value. The Fair Market Value of each share of
Common Stock shall be equal to the closing price of one share of Common Stock on
the New York Stock Exchange ("NYSE") on the relevant date as reported by the
WALL STREET JOURNAL, MIDWEST EDITION; provided that if, on such date, the NYSE
is not open for business or there are no shares of Common Stock traded on such
date, the Fair Market Value of a share of Common Stock shall be equal to the
closing price of one share of Common Stock on the first day preceding such date
on which the NYSE is open for business and has reported trades in the Common
Stock.
4.7. Termination of Service as a Director. If a Participating
Director leaves the Board before the conclusion of any quarter of a Fiscal Year,
he or she will be paid the quarterly installment of the Retainer entirely in
cash or Common Stock on the applicable Payment Date in accordance with such
Participating Director's then effective Stock Election, notwithstanding that a
Deferral Election is on file with the Company. The date of termination of a
Participating Director's service as a director of the Company will be deemed to
be the date of termination recorded on the personnel or other records of the
Company.
5. Shares Available for Issuance. This Plan constitutes an amendment to
and is part of the Deluxe Corporation Stock Incentive Plan, as amended from time
to time (the "SIP"), and is subject to the terms and conditions of the SIP. Any
shares of Common Stock issued under this Plan shall be issued pursuant to the
terms and conditions of the SIP, and any such shares so issued shall be subject
to the limits set forth in the SIP, including, without limiting the generality
of the foregoing, the limits contained in Section 4(a) of the SIP.
6. Deferral Payment.
6.1. Deferral Payment Election. At the time of making the
Deferral Election and as a part thereof, each Participating Director shall make
and file with the Company, a deferral payment election on the Deferral Election
Form specifying one of the payment options described in Section 6.2. If a
Participating Director fails to make a deferral payment election at the time any
Deferral Election is made in accordance with this Plan, the Participating
Director shall conclusively be deemed to have elected to receive the Common
Stock represented by the Stock Units earned during the period covered by the
Deferral Election in a lump sum payment at the time of the Participating
Director's termination of service on the Board as provided in Section 6.2. The
deferral payment election shall be irrevocable as to all amounts credited to the
Participating Director's Deferred Stock Account during the period covered by the
relevant Deferral Election.
6.2. Payment of Deferred Stock Accounts in a Lump Sum. Stock
Units credited to a Participating Director's Deferred Stock Account shall be
converted to an
<PAGE>
equal number of shares of Common Stock and issued in full to the Participating
Director on the earlier of the tenth anniversary of February 1 of the year
following the Participating Director's termination of service on the Board (or
the first business day thereafter) or such other date as elected by the
Participating Director by making a deferral payment election in accordance with
the provisions of Section 6.1. All payments shall be made in whole shares of
Common Stock (rounded as necessary to the nearest integer). Notwithstanding the
foregoing, in the event of a Change of Control (as defined in Section 12), Stock
Units credited to a Participating Director's Deferred Stock Account as of the
business day immediately prior to the effective date of the transaction
constituting the Change of Control shall be converted to an equal number of
shares of Common Stock (rounded as necessary to the nearest integer) and issued
in full to the Participating Director in whole shares of Common Stock on such
date.
6.3. Payment to Estate. In the event that a Participating
Director shall die before full distribution of his or her Deferred Stock
Account, any shares that issue therefrom shall be issued to such Director's
estate or beneficiaries, as the case may be.
7. Holding Period. All shares of Common Stock issued under this Plan,
including shares that are issued as a result of distributions of a Participating
Director's Deferred Stock Account, shall be held by the Participating Director
receiving such shares for a minimum period of six months from the date of
issuance or such longer period as may be required for compliance with Rule
16b-3, as amended or any successor rule ("Rule 16b-3"), promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Administrator may, in his or her discretion,
require that shares of Common Stock issued pursuant to this Plan contain a
suitable legend restricting trading in such shares during such holding period.
8. Limitation on Rights of Eligible and Participating Directors.
8.1. Service as a Director. Nothing in this Plan will
interfere with or limit in any way the right of the Company's Board or its
shareholders not to nominate for re-election, elect or remove an Eligible or
Participating Director from the Board. Neither this Plan nor any action taken
pursuant to it will constitute or be evidence of any agreement or understanding,
express or implied, that the Company or its Board or shareholders have retained
or will retain an Eligible or Participating Director for any period of time or
at any particular rate of compensation.
8.2. Nonexclusivity of the Plan. Nothing contained in this
Plan is intended to affect, modify or rescind any of the Company's existing
compensation plans or programs or to create any limitations on the power of the
Company's officers or Board to modify or adopt compensation arrangements as they
or it may from time to time deem necessary or desirable.
<PAGE>
9. Plan Amendment, Modification and Termination. The Board may suspend
or terminate this Plan at any time. The Board may amend this Plan from time to
time in such respects as the Board may deem advisable in order that this Plan
will conform to any change in applicable laws or regulations or in any other
respect that the Board may deem to be in the Company's best interests; provided,
however, that no amendments to this Plan will be effective without approval of
the Company's shareholders, if shareholder approval of the amendment is then
required to exempt issuance or crediting of shares of Common Stock or Stock
Units from Section 16 of the Exchange Act under Rule 16b-3, or pursuant to the
rules of the New York Stock Exchange.
10. Effective Date and Duration of the Plan. This Plan shall become
effective as of October 31, 1997 and shall continue, unless terminated by action
of the Board, until the expiration or termination of the SIP, provided that the
expiration or termination of this Plan shall not affect any rights of
Participating Directors with respect to their Deferral Accounts which shall
continue to be governed by the provisions of this Plan until the final
distribution of all Deferral Accounts established under this Plan.
11. Participants are General Creditors of the Company. The
Participating Directors and beneficiaries thereof shall be general, unsecured
creditors of the Company with respect to any payments to be made pursuant to
this Plan and shall not have any preferred interest by way of trust, escrow,
lien or otherwise in any specific assets of the Company. If the Company shall,
in fact, elect to set aside monies or other assets to meet its obligations
hereunder (there being no obligation to do so), whether in a grantor's trust or
otherwise, the same shall, nevertheless, be regarded as a part of the general
assets of the Company subject to the claims of its general creditors, and
neither any Participating Director nor any beneficiary thereof shall have a
legal, beneficial or security interest therein.
12. Change of Control. A "Change of Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
A. Any Person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company) 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) representing 25% or more
of the combined voting power of the Company's then outstanding securities; or
B. During the period from the effective date of this Plan
until final distribution to all Participating Directors of their Deferred Stock
Accounts, individuals
<PAGE>
who at the beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has acquired securities of the
Company or entered into an agreement with the Company to effect a transaction
constituting a Change of Control as described in paragraphs (A), (C) or (D) of
this Section 12) whose 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 at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
C. The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 51% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 40% of the combined voting power of the Company's then
outstanding securities; or
D. The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
E. For the purposes of this Section 12, the following terms
shall have definitions ascribed herein to them:
(i) "Person" shall have the meaning defined in
Sections 3(a)(9) and 13(d) of the Securities
Exchange.
(ii) "Beneficial Owner" shall have the meaning
defined in Rule 13d-3 promulgated under the
Exchange Act.
(iii) "Affiliate" shall mean a company controlled
directly or indirectly by the Company, where
"control" shall mean the right, either
directly or indirectly, to elect a majority
of the directors thereof without the consent
or acquiescence of any third party.
<PAGE>
13. Miscellaneous.
13.1 Securities Law and Other Restrictions. Notwithstanding
any other provision of this Plan or any Stock Election or Deferral Election
delivered pursuant to this Plan, the Company will not be required to issue any
shares of Common Stock under this Plan and a Participating Director may not
sell, assign, transfer or otherwise dispose of shares of Common Stock issued
pursuant to this Plan, unless (a) there is in effect with respect to such shares
a registration statement under the Securities Act of 1933, as amended (the
"Securities Act") and any applicable state securities laws or an exemption from
such registration under the Securities Act and applicable state securities laws,
and (b) there has been obtained any other consent, approval or permit from any
other regulatory body that the Administrator, in his or her sole discretion,
deems necessary or advisable. The Company may condition such issuance, sale or
transfer upon the receipt of any representations or agreements from the parties
involved, and the placement of any legends on certificates representing shares
of Common Stock, as may be deemed necessary or advisable by the Company, in
order to comply with such securities law or other restriction.
13.2. Governing Law. The validity, construction,
interpretation, administration and effect of this Plan and any rules,
regulations and actions relating to this Plan will be governed by and construed
exclusively in accordance with the laws of the State of Minnesota.
Exhibit 10.9
DELUXE CORPORATION
1998 DELUXESHARES PLAN
ARTICLE I
PURPOSE OF THE PLAN
The Deluxe Corporation 1998 DeluxeSHARES Plan is intended to recognize employee
contributions and enhance the profitability and value of the Corporation by
providing performance-based incentives and additional equity ownership
opportunities to Eligible Employees of the Corporation and its Affiliates
through a one-time grant during 1998 of Options to certain Eligible Employees.
ARTICLE II
DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions. As used herein, the following capitalized terms have
the following respective meanings.
(a) "Affiliate" means any corporation or limited liability company, a
majority of the voting stock or membership interest of which is
directly or indirectly owned by the Corporation.
(b) "Award" means any Option granted to an Eligible Employee pursuant
to Article 6 of the Plan.
(c) "Award Certificate" means a statement issued by the Corporation
certifying that a Participant has been granted an Award and
containing applicable terms and conditions supplementing or
amending those contained in the Award Term Sheet, including the
number of Shares that are subject to the Award and the exercise
price and expiration date of the Award.
(d) "Award Date" means the date an Award is granted under the Plan.
(e) "Award Term Sheet" means the document provided to or otherwise
made available to a Participant which describes the Award granted
to the Participant and sets forth the terms, conditions and
restrictions of the Award. Unless otherwise determined by the
Committee in its discretion, the Award Term Sheet will be in the
form annexed to the Plan as Exhibit I.
(f) "Board" means the Corporation's board of directors.
(g) "Committee" means a Committee consisting of one or more officers
of the Corporation, who are not Participants, designated from time
to time by the Chief Executive Officer of the Corporation to
administer the Plan.
(h) "Common Stock" means the Corporation's common stock, par value
$1.00 per share.
<PAGE>
(i) "Corporation" means Deluxe Corporation and its successors.
(j) "Disability" means a disability which would entitle a Participant
to receive a disability benefit under the Corporation's long-term
disability plan, as the same is from time to time in effect,
whether or not the Participant is then participating in such plan.
(k) "Eligible Employee" means any person employed by the Corporation
or an Affiliate other than a person who (i) is subject to Section
16 of the Exchange Act of 1934, as amended from time to time, as
of the Award Date, (ii) receives an option to purchase Common
Stock under the Deluxe Corporation Stock Incentive Plan (as
amended, the "SIP") during the period from January 1, 1998 through
March 31, 1998 or (iii) becomes an employee of the Corporation or
any Affiliate at any other time during 1998 and receives an option
to purchase Common Stock under the SIP in connection with such
employment.
(l) "Fair Market Value" means the closing price for a given date of a
Share traded on the New York Stock Exchange ("NYSE") as reported
by the WALL STREET JOURNAL, MIDWEST EDITION or, in the absence of
the sale of any Shares on the NYSE on a given date, such closing
price for the immediately preceding business day in which a sale
occurred.
(m) "Option" means a non-qualified stock option granted under the Plan
to purchase shares of Common Stock and having such terms,
conditions and restrictions as are provided in the Award
Certificate and Award Term Sheet.
(n) "Participant" means an Eligible Employee who is granted an Award
under the Plan.
(o) "Plan" means this Deluxe Corporation 1998 DeluxeSHARES Plan, as
amended from time to time.
(p) "Retirement" means any termination of employment with the
Corporation or any of its Affiliates on or after the date on which
the sum of a Participant's age and years of employment by the
Corporation and/or any of its Affiliates equals at least
seventy-five (75).
(q) "Severance" means any voluntary or involuntary termination of
employment with the Corporation or any of its Affiliates as a
result of which a Participant is entitled to receive severance
payments pursuant to any severance plan or arrangement established
by the Corporation or its Affiliates that is then on file with the
United States Department of Labor.
(r) "Share" means one share of Common Stock.
<PAGE>
2.2 Other Definitions. Other capitalized terms used herein and not defined
above are defined where they first appear.
2.3 Conflicting Provisions. In the event of any conflict or other inconsistency
between the terms of the Plan and the terms of any Award Certificate or
Award Term Sheet, the terms of the Plan will control and in the event of
any conflict or any inconsistency between the terms of any Award
Certificate or Award Term Sheet, the terms of the Award Certificate will
control.
ARTICLE III
SHARES AVAILABLE FOR AWARDS UNDER THE PLAN
3.1 Number of Shares. An aggregate of up to One Million Eight Hundred Thousand
(1,800,000) Shares are available for Awards under the Plan.
3.2 No Re-Use of Shares. Shares identified with Awards that for any reason
terminate or expire unexercised will not thereafter be available for other
Awards under the Plan.
3.3 Adjustments. Any change in the number of outstanding shares of Common Stock
occurring by reason of a stock split, stock dividend, spin-off, split-up,
recapitalization or other similar event will, as and to the extent
determined to be necessary or appropriate by the Committee, acting in its
sole discretion, be reflected proportionally in (a) the aggregate number of
Shares available for Awards under the Plan, (b) the number of Shares
identified with Awards then outstanding, and (c) the purchase price of
Awards then outstanding, provided that the number of Shares, if any,
identified with an Award, after giving effect to any such adjustment, will
always be a whole number and the purchase price of each Award, after giving
effect to any such adjustment, will be rounded to the nearest whole cent.
ARTICLE IV
PARTICIPATION IN THE PLAN
The Committee will have sole discretionary authority to select Participants from
among the Eligible Employees and determine the Award each Participant will
receive. In making such selections and determinations, the Committee will
consider such factors as it deems relevant to effect the purposes of the Plan.
No Eligible Employee who receives an Award under the Plan will thereafter be
entitled to receive any additional Awards or otherwise further participate in
the Plan.
ARTICLE V
ADMINISTRATION OF THE PLAN
Subject to the terms of the Plan, the Committee will have sole discretionary
authority to determine the number of shares subject to and the Award Date and
exercise price associated with each Award granted under the Plan. The terms and
conditions and restrictions of each Award will be those contained in the Plan,
Award Certificate and Award Term Sheet, as the Award Term Sheet may be modified
by the Committee in its discretion, provided that such modifications shall not
be inconsistent with the provisions of the Plan. Notwithstanding
<PAGE>
anything in the Plan to the contrary, the Committee may delegate and re-delegate
in writing, signed by a majority of all members of the Committee, any or all of
its authority under the Plan to employees of the Corporation as the Committee
may designate from time to time, provided that such employees are not
Participants. The Committee and such employees acting within the authority
delegated hereunder by the Committee, shall have the authority to interpret the
Plan and all Award Certificates and Award Term Sheets and to grant such waivers
of the terms thereof as the Committee or such employees determine to be
necessary or desirable, provided that nothing herein shall be construed to grant
to the Committee or any such employee authority to make Awards to anyone who is
not an Eligible Employee or to grant to any such employee the authority to make
the adjustments provided in Section 3.3 (which authority shall be retained by
the Committee). All decisions of the Committee and any such employees made
pursuant to the authority granted herein or delegated by the Committee will be
final and binding on all parties.
ARTICLE VI
AWARDS
6.1 Price. The Committee will determine the purchase price of each Share
subject to an Option, provided that such purchase price shall not be less
than the Fair Market Value of a Share on the Award Date applicable to such
Option and in any event will not be less than the par value of the Share
subject to the Award.
6.2 Exercise Term. The Committee will determine the term of each Award,
provided that (a) no Award will be exercisable after the fifth anniversary
of its Award Date and (b) no Award will be exercisable unless a
registration statement for the Shares underlying the Award is then in
effect under the Securities Act of 1933, as amended, or unless in the
opinion of legal counsel, registration under such Act is not required.
6.3 Payment of Purchase Price. Upon exercise of any Award that requires a
payment from the Participant to the Corporation, the amount due the
Corporation shall be paid in cash or by check in accordance with procedures
established by the Committee.
6.4 Award Term Sheet. Each Award will be evidenced by an Award Certificate and
Award Term Sheet. The Committee may, in its discretion, include terms and
conditions in the Award Certificate that modify the terms and conditions of
the Award Term Sheet, provided that such modifications are not inconsistent
with the Plan.
6.5 Withholding Taxes. The Corporation and its Affiliates have the right to
withhold, at the time any Award is exercised by the recipient thereof, all
amounts necessary to satisfy federal, state and local withholding
requirements related to such exercise. Any required withholding shall be
satisfied by cash (or by check), or under terms and conditions established
by the Committee, in its discretion, the Corporation's withholding of
Shares having a Fair Market Value equal to the amount required to be
withheld.
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Termination of Employment.
7.1.1 Due to Death, Disability, Severance or Retirement. If a
Participant ceases to be an employee of the Corporation or its
Affiliates by reason of the Participant's death, Disability,
Severance or Retirement, the Participant's Award shall continue
in effect for the balance of the term provided in the
applicable Award Certificate or Award Term Sheet.
7.1.2 Other than Due to Death, Disability, Severance or Retirement.
If a Participant ceases to be employed by the Corporation or
any of its Affiliates for any reason other than death,
Disability, Severance or Retirement, the Participant's Award
will thereupon terminate, effective immediately upon such
cessation without notice of any kind.
7.2 Non-transferability. Except as otherwise determined by the Committee, (a)
an Award may be exercised during a Participant's lifetime only by the
Participant or the Participant's legal guardian or legal representative and
(b) no Award may be assigned or otherwise transferred by the Participant to
whom it was granted other than by will or pursuant to the laws of descent
and distribution.
7.3 Change in Control, Pooling of Interests Accounting. On the date that (a)
substantially all of the assets of the Corporation are acquired by another
corporation, (b) there is a reorganization of the Corporation involving an
acquisition of the Corporation by another entity or (c) a majority of the
Board shall be comprised of persons other than persons (i) for whose
election proxies shall have been solicited by the Board or (ii) who shall
have been appointed by a majority of directors whose elections satisfy the
provisions of clause (i) to fill vacancies on the Board caused by death or
resignation (but not by removal) of one or more directors or to fill newly
created directorships, then all Awards will become immediately exercisable
in full without regard to any vesting requirements applicable thereto and
shall continue in effect until their expiration. In the event, however,
that the Corporation is a party to a transaction which is otherwise
intended to qualify for "pooling of interests" accounting treatment then
(x) the change of control provisions contained in this Section shall, to
the extent practicable, be interpreted so as to permit such accounting
treatment, and (y) to the extent that the application of clause (x) of this
paragraph does not preserve the availability of such accounting treatment,
then, the Corporation may modify or limit the effect of the provisions of
this Section relating to change of control to the extent necessary to
qualify the transactions as a "pooling transaction" and provide the
Participant with benefits as nearly equivalent as possible to those the
Participant would have received absent such modification or limitation,
provided, however, to the extent that any of the change of control
provisions of this Section would disqualify the transaction as a "pooling"
transaction and cannot otherwise be modified or limited, such provisions
shall be null and void as of the effective date of the Plan.
<PAGE>
7.4 No Employment Contract. Neither the adoption of the Plan nor the grant of
any Award will (a) confer upon any Eligible Employee any right to continued
employment with the Corporation or any Affiliate or (b) interfere in any
way with any right of the Corporation or any Affiliate to terminate at any
time the employment of any Eligible Employee.
7.5 Amendment of Plan. The Board or the Committee may at any time terminate,
suspend or amend the Plan, provided that any such action shall not modify
or impair the rights of any Participant under any Award granted prior to
such action.
7.6 Governing Law and Severability. The validity, construction and effect of
the Plan and Awards shall be determined in accordance with the internal
laws of the State of Minnesota. If any provision of the Plan or any Award
is deemed to be invalid, illegal or unenforceable in any jurisdiction, such
provision shall be construed to conform to applicable laws or if it cannot
be so construed in the opinion of the Committee without materially altering
the intent of the Plan or Award, such provision shall be stricken from the
Plan or Award in such jurisdiction, and the remainder of the Plan and such
Award shall remain in full force and effect.
7.7 No Rights in Awards. No Eligible Employee or any other person shall have
any claim to be granted an Award under the Plan and there is no obligation
for uniformity of treatment of Eligible Employees or Participants holding
Awards or requirement that Awards contain the same or similar terms and
conditions.
7.8 No Fractional Shares. No fractional Shares will be issued under the Plan or
any Award and the Committee shall determine whether to deliver cash in lieu
of fractional Shares or whether such fractional Shares will be terminated
or rounded up or down to the nearest whole Share.
7.9 No Rights in Shares Subject to an Award. No Participant shall have any
rights with respect to Shares that are subject to an Award unless and until
the Award is exercised and the Shares subject to the Award are issued to
the Participant, including, without limitation, any right to vote or
receive dividends with respect to such Shares.
7.10 Headings. Headings contained in this Plan and any Award are for convenience
only and shall not be relevant to the interpretation of any provision
contained in the Plan or any Award.
7.11 Duration of the Plan. The Plan will become effective upon its approval by
the Board and, unless earlier terminated, will remain in effect until
December 31, 1998. No Award shall be made under the Plan before January 1,
1998 or after December 31, 1998. However, unless otherwise expressly
provided in the Plan, any right under any Award granted on or before the
expiration or termination of this Plan may extend beyond the date of such
expiration or termination, and the authority of the Board and the Committee
to amend or otherwise administer the Plan or any Award shall extend beyond
such date.
<PAGE>
Exhibit I
AWARD TERM SHEET
1. Option Grant. Effective as of the date specified in your Award Certificate,
Deluxe Corporation (the "Corporation") has granted you an option (the
"Option") to purchase the number of shares of the Corporation's Common
Stock (the "Shares") specified in your Award Certificate. Your ownership
and exercise of the Option are subject to the terms, conditions and
restrictions set forth in the Award Certificate, this Award Term Sheet and
the Deluxe Corporation 1998 DeluxeSHARES Plan (the "Plan"). Capitalized
terms used and not otherwise defined in this Award Term Sheet have the
meanings given to them in the Plan.
2. Option Terms and Conditions.
a. Purchase Price. The purchase price of each Share subject to the Option
is the Fair Market Value of a Share of Common Stock on the Award Date
applicable to your Award. Such price is stated in your Award
Certificate.
b. Term. Unless exercisability is accelerated as provided in paragraph
3(b) below, the Option will become exercisable upon the earlier of the
third anniversary of the Award Date or the first date on which the Fair
Market Value of the Corporation's Common Stock equals or exceeds the
150% of the purchase price of a Share established under Section 2(a)
above. Unless earlier terminated as provided in paragraph 3 below, the
Option will expire on the fifth (5th) anniversary of the Award Date
applicable to your Award.
c. Exercise. The Option must be exercised for all of the Shares subject to
the Option. No partial exercise is permitted. You will be sent
instructions on how to exercise the Option prior to the Option becoming
exercisable.
d. Payment of Purchase Price and Withholding Taxes. Upon exercise of the
Option, you will be required to pay in cash, on the date of exercise
and as a condition to receiving the Shares, the purchase price for the
Shares. You will also be required to pay in cash an amount sufficient
to satisfy federal, state and local income tax withholding requirements
triggered by your exercise of the Option, unless the Committee has
established procedures under which the Corporation will withhold Shares
having a Fair Market Value equal to the amount required to be withheld.
3. Accelerated Exercisability and Termination of Employment.
a. Death, Disability, Severance and Retirement . In the event your
employment with the Corporation or an Affiliate terminates as a result
of your death, Retirement, Severance or Disability, the Option will
continue in effect until its stated expiration date.
b. Change of Control. In the event of a change of control of the
Corporation as provided in Section 7.3 of the Plan, the Option will
become exercisable immediately and will
<PAGE>
continue to be exercisable until its stated expiration date, unless
otherwise provided in Section 7.3 of the Plan.
c. Other. If your employment with the Corporation or an Affiliate
terminates for any reason other than your Retirement, Severance,
Disability or death, all of your rights to and under the Option will
terminate immediately without notice to you.
4. Non-transferability of Option. Only you or your legal guardian or legal
representative may exercise the Option during your lifetime. The Option may
not be sold, assigned or otherwise transferred except by will or pursuant
to the laws of descent and distribution.
5. No Change in Employment Status. Neither the grant of the Option to you nor
the delivery to you of this Award Term Sheet, your Award Certificate or any
other document relating to the Option will confer on you any right to
continued employment with the Corporation or any Affiliate or interfere in
any way with any right of the Corporation or any Affiliate to terminate
your employment at any time.
6. Other Restrictions. The Corporation may delay your exercise of the Option
to (a) ensure that at the time of exercise there is a registration
statement for the Shares in effect under the Securities Act of 1933, as
amended, (b) comply with all other applicable laws, regulations and
guidelines or (c) the extent the Committee deems it in the best interests
of the Corporation or necessary for the orderly administration of the Plan.
7. Conflicts between Award Term Sheet and Plan. In the event of any conflict
or other inconsistency between the terms of the Plan and the terms of any
Award Certificate or this Award Term Sheet, the terms of the Plan will
control and in the event of any conflict or any inconsistency between the
terms of any Award Certificate or this Award Term Sheet, the terms of the
Award Certificate will control.
8. No Obligation to Exercise Option. Your receipt of the Option in no way
obligates you to exercise the Option and purchase any of the Shares.
Exhibit 10.10
Description of Modification to the
Director Retirement and Deferred Compensation Plan
The Company has previously adopted a retirement plan (the "Plan") for
non-employee Directors ("Independent Directors"). Under the Plan, non-employee
Directors with at least five years of service, who resigned or were not
nominated for re-election were entitled to receive annual retirement payments
equal to the annual retainer in effect on the date of retirement for the lesser
of ten years or the number of years the retiring Director served on the Board.
Such payments did not extend beyond the lifetime of the retiring Director and
were contingent upon the Director's availability for consultation with
management and refraining from engaging in competition with the Company.
In October 1997, benefits under the Plan were frozen. As a result, no
additional benefits will be accrued for current Directors or be offered to newly
elected Directors. Under the provisions of the Plan following such action,
Independent Directors with at least five years of service as an Independent
Director who resign are not nominated for re-election will receive an annual
payment equal to the annual Board retainer in effect on July 1, 1997 ($30,000
per year) for the number of years during which the retiree served on the Board
as an Independent Director prior to October 31, 1997. In calculating a
Director's eligibility for benefits under this plan, partial years of service
are rounded up to the nearest whole number. Retirement payments do not extend
beyond the lifetime of the retiree and are contingent upon the retiree's
availability for consultation with management and refraining from engaging in
any activity in competition with the Company. All of the current Independent
Directors (other than Messrs. Tyabji and Haverty) are eligible for benefits
under this plan.
Prior to October 1997, Independent Directors could, if they wished,
defer payment of their cash retainers until termination of their service on the
Board of Directors. Cash amounts deferred were retained by the Company and
credited with interest at the prime rate until paid. None of the current
Independent Directors elected to defer receipt of their retainers under this
deferral option, and this program has been eliminated.
Exhibit 10.15
Description of Severance Arrangement
with
Thomas W. VanHimbergen
Thomas W. VanHimbergen, the Company's Senior Vice President and Chief Financial
Officer, is entitled to severance benefits in the event his employment is
terminated for reasons other than willful misconduct, gross negligence or
unlawful actions towards the Company or towards others on behalf of the Company
(i.e., other than for cause). Under this arrangement, in the event of such a
termination, Mr. VanHimbergen will receive a severance package of one year's
base salary plus a second year of income continuation. As a part of this income
continuation, the Company would continue to make payments to Mr. VanHimbergen in
an amount equal to the difference between his base salary and any lesser salary
received by Mr. VanHimbergen from a subsequent employer. Mr. VanHimbergen is
also entitled to the continuation of his medical, dental, vision and life
insurance coverage at employee rates for one year following his termination. In
the event Mr. VanHimbergen's employment is terminated following certain business
combinations or changes of control involving the Company, the terms of the
Executive Retention Agreement between Mr. VanHimbergen and the Company that is
described in the Company's Proxy Statement for its 1998 regular meeting of
shareholders under the heading "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements--Executive Retention Agreements"
would govern Mr. VanHimbergen's severance entitlements in lieu of the foregoing.
Exhibit 10.16
SEPARATION AGREEMENT
This Separation Agreement is made and entered into December 23, 1997,
between Michael R. Schwab (Employee) and Deluxe Corporation, a Minnesota
corporation having its principal offices at 3680 Victoria Street North,
Shoreview, Minnesota 55126 (Deluxe).
WHEREAS, Employee has been employed by Deluxe pursuant to an agreement
dated as of October 24, 1994; and
WHEREAS, the parties agree to set forth herein the terms and conditions
under which such employment is terminated.
NOW THEREFORE, in consideration of the mutual benefits and promises
contained herein the parties agree as follows:
1. Termination. Employee and Deluxe agree that Employee voluntarily
terminates his employment with Deluxe on January 1, 1998 (Termination Date).
2. Payments and Benefits. Deluxe and Employee agree that the following
payments and benefits, less applicable payroll and any supplemental deductions,
shall be provided by Deluxe to Employee:
A. Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00).
B. All accrued vacation pay as of Termination Date.
C. Accrued amount in Employee's Stock Purchase Plan
Account as of Termination Date.
D. Payment to Employee of his accrued balance in his
Deferred Compensation and Supplemental Retirement
Plan Account in accordance with the terms of the
Plans and the payout option selected by Employee.
Where the Plans allow, Employee may transfer his
balance to other plans of his choosing.
E. Any contribution for 1997 to the Deluxe retirement
plans in which Employee is a participant and the
Deferred Compensation Plan in accordance with the
plans. Where the Plans allow, Employee may transfer
his balance to other plans of his choosing.
F. Executive out-placement services through an agency
chosen by Employee, the fee for which shall be
negotiated by Deluxe. Such services shall be paid for
by Deluxe upon receipt of an invoice from the agency.
<PAGE>
G. One Thousand One Hundred and 00/100 Dollars
($1,100.00) per month for the twelve (12) month
period following Termination Date in connection with
payment of Employee's automobile expenses.
H. Continuation of financial planning assistance through
AMG for the twelve (12) month period following
Termination Date.
I. Payment of premiums at employee rates for and
provision of medical, dental, vision and life
coverage for the twelve (12) month period following
Termination Date, and further continuation of medical
coverage as though Employee were a qualified retiree
at 58 years of age having thirty-six (36) years of
service, as each such plan shall change from
time-to-time until Employee is eligible for Medicare
coverage at which time Medicare coverage shall become
primary and coverage provided by Deluxe shall become
secondary.
J. Payment of up to Four Thousand and 00/100 Dollars
($4,000.00) in legal expenses for Employee's
attorney's review and negotiation of this transaction
on Employee's behalf upon receipt of an invoice from
such attorney.
K. Thirty-One Thousand Seven Hundred Fifty and 00/100
Dollars ($31,750.00) in lieu of receipt of One
Thousand Two Hundred Ninety (1,290) restricted stock
units granted on February 9, 1996 under the Deluxe
Corporation Annual Incentive Plan. Employee
acknowledges that Employee's rights to receive
incentive compensation under such plan will terminate
as of Termination Date.
L. In accordance with approval of the Compensation
Committee of the Board of Directors the (1) vesting
of the unvested nonqualified stock options granted to
Employee (a) on November 11, 1994 to purchase 8,000
shares thereunder; (b) on February 9, 1996 to
purchase 12,000 shares thereunder; and (c) on January
31, 1997 to purchase 15,000 shares thereunder of
Deluxe common stock (with respect to all shares then
remaining under such options) in accordance with the
provisions of the applicable option agreements, as
amended, including the five (5) year period of
exercise applicable to each such option, as if
Employee had satisfied the requirements for approved
retirement as therein specified and the Termination
Date were the date of Employee's retirement; (2)
continuation of Employee's rights, as if Employee had
retired in accordance with applicable policies, with
respect to the 5,000 (up to a maximum of 7,500) stock
units granted on February 9, 1996 under the Deluxe
Corporation Performance Share Plan plus any
additional stock units determined and resulting
thereunder in lieu of the payment of dividends.
<PAGE>
M. Beginning on the first day of the second month
following Termination Date and continuing for up to a
eight (8) month period thereafter, payment to
Employee of any difference in Employee's basic
monthly compensation at Deluxe and any lesser amount
earned by Employee during the immediately prior
month. Employee shall use reasonable, diligent
efforts to obtain monthly compensation at the
earliest opportunity and within five (5) days
following the close of any month for which Employee
claims payment hereunder, Employee shall provide
Deluxe documentation satisfactory to Deluxe of all
compensation earned by Employee for his services in
the month for which he makes such claim.
N. Employee's target incentive bonus for 1997.
O. Assignment to Employee of the Manufacturer's Life
Insurance Company single premium deferred annuity No.
5009136-2.
The payments and benefits described in subsections B, C and D of this Section
shall be provided by Deluxe to Employee on Termination Date. Except as otherwise
provided, the payments and benefits described in this Section shall be provided
by Deluxe to Employee upon receipt of the signed Separation Agreement and a
Release in the form attached as Exhibit A, but no earlier than five (5) nor
later than seven (7) days after the expiration of the rescission period referred
to in Section 6. Such payments shall be reduced by any amount Employee owes
Deluxe for outstanding credit card or other charges. Any payment to Employee
described in this Agreement shall be made by automated transfer to Employee's
Deluxe payroll account using Deluxe's payroll department.
3. Full Compensation. The payments that will be made to Employee or for
his benefit pursuant to this Separation Agreement shall compensate him for and
extinguish any and all claims he may have arising out of his employment with
Deluxe or his employment termination as of the effective date of the Release,
including but not limited to claims for attorneys' fees and costs, and any and
all claims for any type of legal or equitable relief.
4. Benefits. Employee is a participant in various employee benefit
plans sponsored by Deluxe. Unless otherwise agreed hereunder, the payment or
cancellation of benefits, including the amounts and the timing thereof, will be
governed by the terms of the employee benefit plans. Deluxe will provide
Employee the same assistance given other participants in employee benefit plans
so long as he is entitled to benefits thereunder.
5. Records, Documents and Property. Employee will return to Deluxe all
of its property including, but not limited to its records, correspondence and
documents as well as all keys, corporate charge cards and computers.
<PAGE>
6. Rescission. Employee acknowledges that he has had a period of
twenty-one (21) days in which to consider this Separation Agreement and the
Release referred to in Section 7 and deliver signed originals of them to the
officer and at the address set out below in this Section. Once this Separation
Agreement and the Release are executed, Employee may rescind this Separation
Agreement and the Release within seven (7) calendar days to reinstate federal
claims and fifteen (15) days to release Minnesota claims. To be effective, any
rescission within the relevant time periods must be in writing and delivered to
Deluxe Corporation, in care of Michael F. Reeves, Vice President, Deluxe
Corporation, 3680 Victoria Street North, Shoreview, Minnesota 55126, either by
hand or by mail within the respective periods. If sent by mail, the rescission
must be (1) postmarked within the respective periods (2) properly addressed to
Deluxe Corporation; and (3) sent by certified mail, return receipt requested.
7. General Release. In consideration of the payments and other
undertakings stated herein, the parties shall sign a separate Release in the
form attached hereto as Exhibit A at the time each signs this Separation
Agreement.
8. Resignation. Employee agrees that as of Termination Date he will
resign as a Senior Vice President of Deluxe.
9. Confidential Deluxe Information. Employee agrees that for a period
of one (1) year after execution of this Agreement unless so ordered by a court
or governmental agency, Employee will not use or disclose Confidential
Information of Deluxe.
"Confidential Information" means all confidential or proprietary
information of Deluxe or any affiliate, including without limitation, financial
data, trade secrets, customer and mailing lists, business plans, sales and
marketing plans, business acquisition or divestiture plans, data processing
systems unique to Deluxe or any affiliate, information services systems unique
to Deluxe or any affiliate, pricing and credit policies and practices unique to
Deluxe, books and records, research and development activities relating to
existing commercial activities and new products, services and offerings under
active consideration, which Employee may have acquired or obtained during the
course of Employee's employment with Deluxe.
10. Nonrecruitment. For a period of one (1) year after Termination
Date, Employee shall not for himself or any other person or entity either,
directly or indirectly, recruit for employment any person who at any time during
the period one (1) year prior to Termination Date through Termination Date is or
was an employee of Deluxe or any of its affiliates or subsidiaries.
11. Noncompetition. Employee agrees that for a period of one (1) year
after Termination Date, Employee will not (a) serve as an officer, principal,
advisor, agent, partner, director, stockholder, employee or consultant of any
corporation or other business enterprise that engages in activities, directly or
through an affiliate, that are directly competitive with the commercial
activities of Deluxe from which it derives a
<PAGE>
significant portion of its revenue and which were engaged in by Deluxe at the
time of the termination of Employee's employment without the prior written
consent of the President and Chief Executive Officer of Deluxe Corporation; or
(b) with respect to such activities that are directly competitive, cause
customers, distributors, suppliers or consultants under contract or doing
business with Deluxe at any time within one year prior to and including the
Termination Date to modify their business relationships with Deluxe in any
material respect.
Ownership by Employee of less than one percent (1%) of the outstanding
shares of capital stock of any corporation, for investment purposes, shall not
constitute a breach of this provision.
For commercial activities to be "directly competitive" with those of
Deluxe within the meaning of this Agreement, such activities must consist of
selling or attempting to sell the same types of products or services from which
Deluxe Corporation now derives at least one percent (1%) of its revenue or which
are the subject of material business development plans of which Employee is
aware.
12. Non-Disparagement. The parties mutually agree that they shall not
disparage or defame each other in any respect or make any such comments
concerning the employment relationship between them.
13. Confidentiality. The terms of this Separation Agreement and the
Release shall be treated as confidential by both Employee and Deluxe and neither
party shall disclose its terms to anyone, except Employee may disclose the terms
of this Separation Agreement and the Release or any portions thereof, as needed,
to his immediate family, legal counsel, accountant and prospective or subsequent
employers, or in response to requests from such prospective or subsequent
employers to facilitate compliance with its terms or as ordered by a court or
governmental agency. Deluxe may disclose the terms of this Separation Agreement
and the Release to its officers and directors, outside auditors, employees who
have a legitimate need to know the terms in the course of performing their
duties and as required by law. Each party recognizes and agrees that this
confidentiality provision was a significant inducement for the other to enter
into this Separation Agreement and Release. Either party may disclose this
Agreement or its terms to its legal advisors for purposes of enforcement or in
the course of judicial proceedings.
14. Nonassignment. The parties agree that this Separation Agreement and
the Release will not be assigned by either party unless the other party agrees
to such assignment in writing.
15. This Agreement shall bind and inure to the benefit of the parties,
and as applicable, their respective heirs, personal representatives, successors
and permitted assigns. Successors, in the case of Deluxe, shall mean both direct
or indirect successors,
<PAGE>
whether by purchase, merger, consolidation or otherwise, to all or substantially
all of the businesses or assets of Deluxe.
16. Merger. This Separation Agreement and the Release, and the employee
benefit plans in which Employee is a participant supersede all prior oral and
written agreements and communications between the parties. Employee and Deluxe
agree that any and all claims which either might have had against the other to
the extent described in the Release are fully released and discharged by this
Separation Agreement and the Release, and that the only claims arising out of
Employee's employment with Deluxe and his employment termination which either
may hereafter assert against the other will be derived only from an alleged
breach of the terms of the Separation Agreement, the Release or, as against
Deluxe, or any employee benefit plan in which Employee is a participant.
17. Entire Agreement. This Separation Agreement and Attachments
constitute the entire agreement between the parties with respect to the
termination of Employee's employment relationship with Deluxe, and the parties
agree that there were no inducements or representations leading to the execution
of this Separation Agreement or any of the Attachments except as herein
contained.
18. Voluntary and Knowing Action. Employee acknowledges that he has
been advised of his right to be represented by his own attorney, that he has
read and understands the terms of this Separation Agreement and the Release, and
that he is voluntarily entering into the Separation Agreement and the Release.
19. Governing Law. This Separation Agreement and the Release will be
construed and interpreted in accordance with the laws of the State of Minnesota.
20. Counterparts. This Separation Agreement and the Release may be
executed simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one of the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Separation
Agreement as of the day and year first above written.
DELUXE CORPORATION EMPLOYEE
By: /s/ Michael F. Reeves By: /s/ Michael R. Schwab
Michael F. Reeves Michael R. Schwab
Title: Vice President
<PAGE>
STATE OF MINNESOTA
COUNTY OF RAMSEY
I, Lorraine E. Houle , a Notary Public, do hereby certify that Michael R. Schwab
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he signed and delivered the said instrument as his free and voluntary act,
for the uses and purposes therein set forth.
Given under my hand and official seal this 7th day of January, 1997.
/s/ Lorraine E. Houle
Notary Public
STATE OF MINNESOTA
COUNTY OF RAMSEY
The foregoing instrument was acknowledged before me this 7th day of January,
1997 by Michael F. Reeves, a Vice President of Deluxe Corporation, a Minnesota
corporation, on behalf of the Corporation.
/s/ Lorraine E. Houle
Notary Public
<PAGE>
EXHIBIT A
RELEASE
Definitions. We intend all words used in this Release to have their plain
meaning in ordinary English. Technical legal words are not needed to describe
what we mean. Specific terms we use in this Release have the following meanings:
A. We, as used herein, includes Deluxe Corporation defined at B and
Employee, as defined at C.
B. Deluxe Corporation or Deluxe, as used herein, shall at all times
mean Deluxe Corporation, its subsidiaries, successors and assigns, their
affiliated companies, their successors and assigns, their affiliated and
predecessor companies and the present or former officers, employees and agents
of any of them, whether in their individual or official capacities, and the
current and former trustees or administrators of any profit sharing, pension or
other benefit plan applicable to the employees or former employees of Deluxe, in
their official and individual capacities.
C. Employee, as used herein, means Michael R. Schwab or anyone who has
or obtains any legal rights or claims through him.
D. Employee's Claims means any rights Employee has now or hereafter to
any relief of any kind from Deluxe whether or not Employee knows now about those
rights, arising out of his employment with Deluxe, and his employment
termination, including, but not limited to, claims for breach of contracts;
fraud or misrepresentation; violation of the Minnesota anti-discrimination laws,
the Americans with Disabilities Act, or other federal, state, or local civil
rights laws based on disability or other protected class status; defamation;
intentional or negligent infliction of emotional distress; breach of the
covenant of good faith and fair dealing; promissory estoppel; negligence;
wrongful termination of employment; and any other claims for unlawful employment
practices. However, this Release shall not affect any claims which Employee
could have made under any welfare benefit plan or any profit sharing, pension or
retirement plan through Deluxe or which may arise under the Agreement to which
this Release is attached.
Agreement to Release Claims. Employee agrees that he is receiving a substantial
amount of money and benefits from Deluxe. Employee agrees to give up all
Employee's Claims against Deluxe in exchange for those payments and benefits.
Employee will not bring any lawsuits, file any charges, complaints, or notices,
or make any other demands against Deluxe based on Employee's Claims. Employee
agrees that the money and benefits Employee is receiving are full and fair
compensation for the release of all Employee's Claims. Employee agrees that
Deluxe does not owe Employee anything in addition to what Employee will be
receiving.
Employee understands that he may rescind (that is, cancel) this Release within
seven (7) calendar days of signing it to reinstate federal claims and within
fifteen (15) days to
<PAGE>
reinstate state claims. To be effective, Employee's rescission must be in
writing and delivered to Deluxe Corporation in care of Michael F. Reeves, Vice
President, Deluxe Corporation, 3680 Victoria Street North, Shoreview, Minnesota
55126, either by hand or by mail within the relevant period. If sent by mail,
the rescission must be postmarked within the relevant period, properly addressed
to Deluxe Corporation, and sent by certified mail, return receipt requested.
Deluxe agrees to give up any claim against Employee that Deluxe may have now or
hereafter arising from Employee's employment with Deluxe, except as may arise
under the Agreement to which this Release is attached.
We acknowledge that we have read this Release carefully and understand all its
terms. In agreeing to sign this Release, we have not relied on any statements or
explanations made by either of us.
We agree that this Release shall be effective as of the last date set out below.
Deluxe and Employee understand and agree that this Release, the Agreement and
the Deluxe employee benefit plans in which Employee is a participant, contain
all of the agreements between Deluxe and Employee. We have no other written or
oral agreements.
Dated: December 23 , 1997 /s/ Michael R. Schwab
Michael R. Schwab
Witnesses:
/s/ Sharon R. Maylath
/s/ Lorraine E. Houle
DELUXE CORPORATION
Dated: December 23 , 1997 By: /s/ Michael F. Reeves
Michael F. Reeves
Vice President
Witnesses:
/s/ Sharon R. Maylath
/s/ Lorraine E. Houle
Exhibit 10.17
SEPARATION AGREEMENT
This Separation Agreement is made and entered into April 25, 1997,
between Charles M. Osborne (Employee) and Deluxe Corporation, a Minnesota
corporation having its principal offices at 3680 Victoria Street North,
Shoreview, Minnesota 55126 (Deluxe).
WHEREAS, Employee has been employed by Deluxe from January 19, 1981
through May 2, 1997; and
WHEREAS, the parties agree to set forth herein the terms and conditions
under which such employment is terminated.
NOW THEREFORE, in consideration of the mutual benefits and promises
contained herein the parties agree as follows:
1. Termination. Employee and Deluxe agree that Employee voluntarily
terminates his employment with Deluxe on May 2, 1997 (Termination Date).
2. Payments and Benefits. Deluxe and Employee agree that the following
payments and benefits, less applicable payroll and any supplemental deductions,
shall be provided by Deluxe to Employee:
A. One Hundred Thousand and 00/100 Dollars
($100,000.00).
B. Seventy Thousand Nine Hundred Forty-Two and 75/100
($70,942.75).
C. All accrued vacation pay as of Termination Date.
D. Accrued amount in Employee's Stock Purchase Plan
Account as of Termination Date.
E. Payment to Employee of his accrued balance in his
Supplemental Retirement Plan Account in accordance
with the terms of the Plans and the payout option
selected by Employee.
F. Forgiveness of a note Deluxe holds from Employee
under which Employee owes Deluxe Eight Thousand Five
Hundred and 00/100 Dollars ($8,500.00) in connection
with Employee's membership at North Oaks Golf Club,
and the discharge of Employee's obligations under the
note.
The payments and benefits described in subsections B, C, D and E of this Section
shall be provided by Deluxe to Employee on Termination Date. Except as otherwise
provided,
<PAGE>
the payments and benefits described in this Section shall be provided by Deluxe
to Employee upon receipt of the signed Separation Agreement and a Release in the
form attached as Exhibit A, but no earlier than five (5) nor later than seven
(7) days after the expiration of the rescission period referred to in Section 6.
Such payments shall be reduced by any amount Employee owes Deluxe for
outstanding credit card or other charges.
3. Full Compensation. The payments that will be made to Employee or for
his benefit pursuant to this Separation Agreement shall compensate him for and
extinguish any and all claims he may have arising out of his employment with
Deluxe or his employment termination as of the effective date of the Release,
including but not limited to claims for attorneys' fees and costs, and any and
all claims for any type of legal or equitable relief.
4. Benefits. Employee is a participant in various employee benefit
plans sponsored by Deluxe. Unless otherwise agreed hereunder, the payment or
cancellation of benefits, including the amounts and the timing thereof, will be
governed by the terms of the employee benefit plans. Deluxe will provide
Employee the same assistance given other participants in employee benefit plans
so long as he is entitled to benefits thereunder.
5. Records, Documents and Property. Employee will return to Deluxe all
of its property including, but not limited to its records, correspondence and
documents as well as all keys and corporate charge cards, except that Employee
shall be permitted to retain a desk chair, laptop computer, printer and
peripheral equipment.
6. Rescission. Employee acknowledges that he has had a period of
twenty-one (21) days in which to consider this Separation Agreement and the
Release referred to in Section 7 and deliver signed originals of them to the
officer and at the address set out below in this Section. Once this Separation
Agreement and the Release are executed, Employee may rescind this Separation
Agreement and the Release within seven (7) calendar days to reinstate federal
claims and fifteen (15) days to release Minnesota claims. To be effective, any
rescission within the relevant time periods must be in writing and delivered to
Deluxe Corporation, in care of Michael F. Reeves, Vice President, Deluxe
Corporation, 3680 Victoria Street North, Shoreview, Minnesota 55126, either by
hand or by mail within the respective periods. If sent by mail, the rescission
must be (1) postmarked within the respective periods (2) properly addressed to
Deluxe Corporation; and (3) sent by certified mail, return receipt requested.
7. General Release. In consideration of the payments and other
undertakings stated herein, the parties shall sign a separate Release in the
form attached hereto as Exhibit A at the time each signs this Separation
Agreement.
8. Resignation. Employee agrees that as of April 21, 1997 he resigned
as an executive officer of Deluxe and as a member of the Board of Directors of
each company,
<PAGE>
foundation, trust or other entity where he served in either capacity on behalf
of Deluxe, except that Employee agrees, if requested by Deluxe, to continue as a
member of the Board of Directors of Deluxe Mexicana until further action is
taken at its next meeting.
9. Confidential Deluxe Information. Employee agrees that for a period
of two (2) years after execution of this Agreement unless so ordered by a court
or governmental agency, Employee will not use or disclose Confidential
Information of Deluxe.
"Confidential Information" means all confidential or proprietary
information of Deluxe or any affiliate, including without limitation, financial
data, trade secrets, customer and mailing lists, business plans, sales and
marketing plans, business acquisition or divestiture plans, data processing
systems unique to Deluxe, pricing and credit policies and practices unique to
Deluxe, books and records, research and development activities relating to
existing commercial activities and new products, services and offerings under
active consideration, which Employee may have acquired or obtained during the
course of Employee's employment with Deluxe. This confidentiality commitment is
not applicable to information intentionally disclosed to the public by Deluxe or
information received by Employee from third parties not under an obligation of
confidentiality to Deluxe or any of its affiliates or subsidiaries.
10. Nonrecruitment. For a period of two (2) years after Termination
Date, Employee shall not for himself or any other person or entity either,
directly or indirectly, recruit for employment any person who at any time during
the period May 1, 1996 through Termination Date is or was an employee of Deluxe
or any of its affiliates or subsidiaries.
11. Noncompetition. Employee agrees that for a period of two (2) years
after Termination Date, Employee will not (a) serve as an officer, principal,
advisor, agent, partner, director, stockholder, employee or consultant of any
corporation or other business enterprise that engages in activities, directly or
through an affiliate, that are directly competitive with the commercial
activities of Deluxe from which it derives a significant portion of its revenue
and which were engaged in by Deluxe at the time of the termination of Employee's
employment without the prior written consent of the President and Chief
Executive Officer of Deluxe Corporation; or (b) with respect to such activities
that are directly competitive, cause customers, distributors or suppliers under
contract or doing business with Deluxe at any time within one year prior to and
including the Termination Date to modify their business relationships with
Deluxe in any material respect.
Ownership by Employee of less than one percent (1%) of the outstanding
shares of capital stock of any corporation, for investment purposes, shall not
constitute a breach of this provision.
<PAGE>
For commercial activities to be "directly competitive" with those of
Deluxe within the meaning of this Agreement, such activities must consist of
selling or attempting to sell the same types of products or services from which
Deluxe Corporation now derives at least one percent (1%) of its revenue or which
are the subject of business development plans.
12. Non-Disparagement. The parties mutually agree that they shall not
disparage or defame each other in any respect or make any such comments
concerning the employment relationship between them.
13. Confidentiality. The terms of this Separation Agreement and the
Release shall be treated as confidential by both Employee and Deluxe and neither
party shall disclose its terms to anyone, except Employee may disclose the terms
of this Separation Agreement and the Release to his immediate family, legal
counsel and accountant and as ordered by a court or governmental agency. Deluxe
may disclose the terms of this Separation Agreement and the Release to its
officers and directors, outside auditors, to employees who have a legitimate
need to know the terms in the course of performing their duties and as required
by law. Each party recognizes and agrees that this confidentiality provision was
a significant inducement for the other to enter into this Separation Agreement
and Release.
14. Nonassignment. The parties agree that this Separation Agreement and
the Release will not be assigned by either party unless the other party agrees
to such assignment in writing.
15. Merger. This Separation Agreement and the Release, and the employee
benefit plans in which Employee is a participant supersede all prior oral and
written agreements and communications between the parties. Employee and Deluxe
agree that any and all claims which either might have had against the other are
fully released and discharged by this Separation Agreement and the Release, and
that the only claims which either may hereafter assert against the other will be
derived only from an alleged breach of the terms of the Separation Agreement,
the Release or, as against Deluxe, or any employee benefit plan in which
Employee is a participant.
16. Entire Agreement. This Separation Agreement and Attachments
constitute the entire agreement between the parties with respect to the
termination of Employee's employment relationship with Deluxe, and the parties
agree that there were no inducements or representations leading to the execution
of this Separation Agreement or any of the Attachments except as herein
contained.
17. Voluntary and Knowing Action. Employee acknowledges that he has
been advised of his right to be represented by his own attorney, that he has
read and understands the terms of this Separation Agreement and the Release, and
that he is voluntarily entering into the Separation Agreement and the Release.
<PAGE>
18. Governing Law. This Separation Agreement and the Release will be
construed and interpreted in accordance with the laws of the State of Minnesota.
19. Counterparts. This Separation Agreement and the Release may be
executed simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one of the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Separation
Agreement as of the day and year first above written.
DELUXE CORPORATION EMPLOYEE
By: /s/ Michael F. Reeves By: /s/ Charles M. Osborne
Michael F. Reeves Charles M. Osborne
Title: Vice President
STATE OF MINNESOTA
COUNTY OF RAMSEY
I, Deborah Cramlet , a Notary Public, do hereby certify that Charles M. Osborne
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he signed and delivered the said instrument as his free and voluntary act,
for the uses and purposes therein set forth.
Given under my hand and official seal this 25 day of April , 1997.
/s/ Deborah Cramlet
Notary Public
STATE OF MINNESOTA
COUNTY OF RAMSEY
The foregoing instrument was acknowledged before me this 25 day of April , 1997
by Michael F. Reeves, a Vice President of Deluxe Corporation, a Minnesota
corporation, on behalf of the Corporation.
/s/ Deborah Cramlet
Notary Public
<PAGE>
EXHIBIT A
RELEASE
Definitions. We intend all words used in this Release to have their plain
meaning in ordinary English. Technical legal words are not needed to describe
what we mean. Specific terms we use in this Release have the following meanings:
A. We, as used herein, includes Deluxe Corporation defined at B and
Employee, as defined at C.
B. Deluxe Corporation or Deluxe, as used herein, shall at all times
mean Deluxe Corporation, its subsidiaries, successors and assigns, their
affiliated companies, their successors and assigns, their affiliated and
predecessor companies and the present or former officers, employees and agents
of any of them, whether in their individual or official capacities, and the
current and former trustees or administrators of any profit sharing, pension or
other benefit plan applicable to the employees or former employees of Deluxe, in
their official and individual capacities.
C. Employee, as used herein, means Charles M. Osborne or anyone who has
or obtains any legal rights or claims through him.
D. Employee's Claims means any rights Employee has now or hereafter to
any relief of any kind from Deluxe whether or not Employee knows now about those
rights, arising out of his employment with Deluxe, and his employment
termination, including, but not limited to, claims for breach of contracts;
fraud or misrepresentation; violation of the Minnesota anti-discrimination laws,
the Americans with Disabilities Act, or other federal, state, or local civil
rights laws based on disability or other protected class status; defamation;
intentional or negligent infliction of emotional distress; breach of the
covenant of good faith and fair dealing; promissory estoppel; negligence;
wrongful termination of employment; and any other claims for unlawful employment
practices. However, this Release shall not affect any claims which Employee
could have made under any welfare benefit plan or any profit sharing, pension or
retirement plan through Deluxe or which may arise under the Agreement to which
this Release is attached.
Agreement to Release Claims. Employee agrees that he is receiving a substantial
amount of money paid by Deluxe. Employee agrees to give up all Employee's Claims
against Deluxe in exchange for those payments. Employee will not bring any
lawsuits, file any charges, complaints, or notices, or make any other demands
against Deluxe based on Employee's Claims. Employee agrees that the money and
benefits Employee is receiving are full and fair compensation for the release of
all Employee's Claims. Employee agrees that Deluxe does not owe Employee
anything in addition to what Employee will be receiving.
Employee understands that he may rescind (that is, cancel) this Release within
seven (7) calendar days of signing it to reinstate federal claims and within
fifteen (15) days to
<PAGE>
reinstate state claims. To be effective, Employee's rescission must be in
writing and delivered to Deluxe Corporation in care of Michael F. Reeves, Vice
President, Deluxe Corporation, 3680 Victoria Street North, Shoreview, Minnesota
55126, either by hand or by mail within the relevant period. If sent by mail,
the rescission must be postmarked within the relevant period, properly addressed
to Deluxe Corporation, and sent by certified mail, return receipt requested.
Deluxe agrees to give up any claim against Employee that Deluxe may have now or
hereafter arising from Employee's employment with Deluxe, except as may arise
under the Agreement to which this Release is attached.
We acknowledge that we have read this Release carefully and understand all its
terms. In agreeing to sign this Release, we have not relied on any statements or
explanations made by either of us.
We agree that this Release shall be effective as of the last date set out below.
Deluxe and Employee understand and agree that this Release, the Agreement and
the Deluxe employee benefit plans in which Employee is a participant, contain
all of the agreements between Deluxe and Employee. We have no other written or
oral agreements.
Dated: April 25 , 1997 /s/ Charles M. Osborne
Charles M. Osborne
Witnesses:
/s/ Maureen L. Mikel
/s/ Sharon R. Maylath
DELUXE CORPORATION
Dated: 4-25 , 1997 By: /s/ Michael F. Reeves
Michael F. Reeves
Vice President
Witnesses:
/s/ Maureen L. Mikel
/s/ Hope Newland
Exhibit 10.18
CONFIDENTIAL
Mr. Robert H. Rosseau
Deluxe Electronic Payment Systems, Inc.
400 West Deluxe Parkway
Milwaukee, WI 53212
Dear Bob:
In recognition that Deluxe Electronic Payment Systems, Inc. ("DEPS") has decided
to divest or restructure certain portions of its business and desires to
maximize shareholder value in so doing and values your expertise and
contributions to the business and to such divestiture and restructuring efforts
in your current position as Chief Executive Officer of DEPS, we agree with you
as follows:
I. RETENTION INCENTIVE: If you remain with DEPS in accordance with the
provisions of this agreement through March 31, 1998 (the "Retention
Date"), in addition to your base salary ("Salary") and all benefits,
you will receive a lump sum payment equal to eighteen (18) months
Salary (the "Retention Incentive Payment"). The Retention Incentive
Payment will be made on or before April 15, 1998. In the event that we
so request by providing you sixty (60) days notice prior to the
Retention Date, you agree to remain with DEPS in accordance with the
provisions of this agreement subsequent to the Retention Date for an
additional period of up to three (3) months as specified by us, in
which event, the Retention Date shall be extended for the period of
time you are requested by us to remain after the initial Retention
Date, and you shall be entitled to receive, in addition to your Salary
and all benefits through the extended Retention Date, an increment to
your Retention Incentive Payment, payable within fifteen (15) days
after the extended Retention date, equal to twice your aggregate Salary
for the full three (3) month period, provided you remain in your
position for the period of time specified by us.
II. SEVERANCE: In addition, upon your separation from service to DEPS and
its affiliates at any time for reasons other than (a) Cause (as
hereinafter defined) or (b) your voluntary resignation, upon signing a
severance agreement and release in form and substance reasonably
satisfactory to you, DEPS and Deluxe, you will receive certain benefits
and be subject to certain obligations (which shall not include any
non-compete obligation) as the agreement and release describe. The
benefits will consist of full "COBRA" benefits, upon payment by you of
appropriate premiums therefor, plus a lump sum payment of $900,000.
<PAGE>
For the purposes hereof, "Cause" shall mean:
(i) You have breached your obligations of confidentiality to Deluxe,
DEPS or any of their affiliates; (ii) You have failed to perform
reasonable employment duties assigned to you from time to time by
Deluxe's chief executive officer (or person having equivalent
responsibilities) ("Deluxe's CEO"), which duties will be
commensurate with your title and consistent in nature with your
past responsibilities;
(iii)You commit an act, or omit to take action, in bad faith which
results in material detriment to Deluxe, DEPS or any of their
affiliates;
(iv) You have had excessive absences unrelated to illness or vacation
("excessive" shall be defined in accordance with local employment
customs);
(v) You have committed fraud, misappropriation, embezzlement or other
acts of dishonesty in connection with Deluxe, DEPS or any of their
affiliates or their businesses;
(vi) You have been convicted or have pleaded guilty or nolo contendere
to criminal misconduct constituting a felony or a gross
misdemeanor, which gross misdemeanor involves a breach of ethics,
moral turpitude, or immoral or other conduct reflecting adversely
upon the reputation or interest of Deluxe, DEPS or their
affiliates;
(vii) Your use of narcotics, liquor or illicit drugs has had a
detrimental effect on performance of employment responsibilities;
(viii) You are in material default under any other agreement between
you and Deluxe, DEPS or any of their affiliates beyond all
applicable notice, grace and cure periods;
(ix) You fail to exhibit professionalism in support of the goals of
Deluxe and DEPS and their affiliates, including supporting the
restructuring, sale and/or divestiture of certain portions of
DEPS, among your fellow employees, your customers and your
acquaintances; or
(x) You fail to perform your obligations under this agreement and to
keep the terms of this agreement confidential.
DEPS acknowledges that any material change in your employer
relationship, salary, reporting relationship, duties or title shall
constitute constructive termination without Cause. It is understood and
agreed, however, that your activities may not be limited to the
business of DEPS and that you may from time to time be reasonably
requested to undertake projects at a corporate level and that nothing
herein is intended to prevent DEPS from taking reasonable steps to
insure an orderly transition to a new management team.
III. SUCCESS INCENTIVE: In addition, if you are an active employee of DEPS
or any of its affiliates when the [***] and the business and assets of
Deluxe Data International Limited ("DDIL") relating to DDIL's
proprietary software product known as "SP Architect" are placed under
binding agreement to be sold or otherwise divested ("Incentive Payment
Date"), you will receive a lump sum payment of $500,000, it being
understood and agreed that the terms
<PAGE>
and conditions of each such sale or divestiture shall be acceptable to
DEPS and Deluxe in their sole discretion. Payment under this Section
III will be made thirty (30) days after the Incentive Payment Date.
IV. DIRECT REPORT AND TRANSITION: From the date of this agreement through
your Retention Date, you shall continue to report directly to Deluxe's
CEO on a practical level, however, such reporting relationship may be
reflected differently for Deluxe's reasonable corporate organizational
purposes. During the period of your employment, you agree to perform
all reasonable employment duties assigned to you from time to time by
Deluxe's CEO; lead the effort to sell the [***] and SP Architect
businesses; and assist actively and to the best of your abilities in
the transition of the management of DEPS to a new management team.
V. CONFIDENTIALITY: During the term of this agreement and for a period of
three (3) years thereafter, you shall retain in confidence all
proprietary and confidential information concerning DEPS, Deluxe and
their affiliates, including, without limitation, customer lists, cost
and pricing information, employee data, trade secrets and software and,
not withstanding the exceptions contained in the next sentence, shall
return all copies and extracts thereof (however and on whatever medium
recorded) to DEPS, or as otherwise requested by Deluxe, without keeping
any copies thereof. The foregoing obligation with respect to the
protection of confidential information shall not apply to (a) any
information which was known to you prior to disclosure to you by
Deluxe, DEPS or any of their affiliates; (b) any information which was
in the public domain prior to its disclosure to you; (c) any
information which comes into the public domain through no fault of
yours; (d) any information which you are required to disclose by a
court or similar authority or under subpoena, provided that you provide
DEPS with notice thereof and assist, at DEPS' sole expense, any
reasonable Deluxe or DEPS endeavor by appropriate means to obtain a
protective order limiting the disclosure of such information; and (e)
any information which is disclosed to you by a third party which has a
legal right to make such disclosure.
VI. DEATH OR DISABILITY: Your death or disability prior to your Retention
Date shall not bar any payment (a) under Section II of this agreement
or (b) of the Salary earned by you under Section I prior to your death
or disability. In addition, upon your death or disability during your
employment by DEPS or its affiliates, you (or your estate) shall be
entitled to receive the ratable portion of your Retention Incentive
Payment attributable to the period (x) commencing on July 1, 1997
through the date of your death or disability (based on the period of
July 1, 1997 through March 31, 1998) if you die or become disabled
prior to March 31, 1998 or (y) of April 1, 1998 through the date of
your death or disability, if you die or become disabled after March
31,1998 and before such extended Retention Date,
<PAGE>
payable at the time provided in Section I. In the event of your death
or disability prior to the Incentive Payment Date, DEPS will have no
obligation to make the payment to you under Section III above.
VII. CONDITIONS: The obligations of Deluxe and/or DEPS to you, including any
obligation to make the payments under this agreement, are conditional
upon the absence at all times of grounds for your dismissal for Cause.
VIII. PRIOR AGREEMENTS: This agreement is intended to contain all of the
terms and conditions relative to the subject matter hereof, and there
are no other terms, conditions, agreements or understandings relative
thereto not set forth herein. This agreement supersedes in its entirety
the offer of employment from Deluxe to you dated August 5, 1996 which,
as of the date hereof, is of no further force or effect. In connection
therewith, you acknowledge that upon the termination of your employment
for any reason, your options and rights in restricted shares and any
other stock-based compensation will terminate. Further, you acknowledge
and agree that you will not be eligible to receive an annual incentive
bonus for 1997 or thereafter participate in any similar program or
plan.
IX. MISCELLANEOUS: This agreement will be binding upon DEPS, its successors
and assigns and shall inure to the benefit of you, your heirs,
executors and permitted assigns. You acknowledge and agree that your
employment by DEPS may be transferred by DEPS from time to time to one
or more of Deluxe's affiliates, provided that Deluxe guarantees any and
all obligations to you hereunder and that your benefits are not reduced
in any material way (or that alternate payments or benefits having the
economic equivalency are substituted therefor). Where you agree in this
agreement to observe or perform certain covenants or obligations with
respect to Deluxe or any of its other affiliates, you agree that each
of Deluxe and such affiliate shall be a third party beneficiary
thereof. This agreement shall be governed by the substantive laws of
the State of Minnesota.
X. ASSIGNMENT: DEPS' payment obligations hereunder may be assigned at any
time and from time to time to any other Deluxe affiliate provided that
Deluxe guarantees any and all obligations to you hereunder and that
your benefits are not reduced in any material way (or that alternate
payments or benefits having the economic equivalency are substituted
therefor). Without DEPS' prior written consent, you may not assign this
agreement or any of your obligations hereunder and any attempted
assignment without such consent shall be null and void.
We need and appreciate the leadership you can provide in this transition period.
Thank you for your understanding and professionalism as we move forward.
<PAGE>
DELUXE ELECTRONIC EMPLOYEE
PAYMENT SYSTEMS, INC.
By: /s/ J. A. Blanchard III /s/ Robert H. Rosseau
J. A. Blanchard III Robert H. Rosseau
Chairman
DELUXE CORPORATION
(as guarantor as required under
Sections IX and X only)
By: /s/ J. A. Blanchard III
J. A. Blanchard III
Dated as of 29 Oct. , 1997
<PAGE>
STOCK OPTION AND RESTRICTED SHARE AWARD
AGREEMENT AMENDMENT
AMENDMENT, dated as of October 29 , 1997, to (i) a Non-qualified Stock
Option Agreement, dated August 20, 1996 (the "First Option Agreement"), (ii) a
Non-qualified Stock Option Agreement, dated January 31, 1997 (the "Second Option
Agreement), and (iii) an Agreement as to Award of Restricted Common Stock, dated
August 20, 1996 (the "Restricted Stock Agreement"), each by and between Deluxe
Corporation and Robert H. Rosseau.
1. The paragraph of the First Option Agreement entitled "Duration &
Exercisability" is hereby revised to read in full as follows:
You may not exercise any portion of this Option prior to one
year from the date of grant, and your right to exercise will
terminate ten years after the date of grant. You may exercise
this Option in cumulative installments of 50 percent
following the first and second anniversaries of the grant
date. If you cease to be employed by Deluxe or its affiliates
for any reason, the entire unexercised portion of this Option
will be canceled as of the date of such cessation.
2. The clause entitled "Retirement, Disability, Death or Termination"
in the First Option Agreement is hereby deleted.
3. The definitions of "Cause" and "Approved Retirement" appearing on
the back of the First Option Agreement (and the associated receipt) are hereby
deleted.
4. The last two sentences of the paragraph entitled "Duration &
Exercisability" in the Second Option Agreement are hereby deleted.
5. The paragraph entitled "Retirement, Disability, Death or
Termination" in the Second Option Agreement is hereby revised to read in full as
follows:
TERMINATION
If you cease to be employed by Deluxe or its affiliates for
any reason, the entire unexercised portion of this Option
will be canceled as of the date of such cessation.
6. The definition of "Approved Retirement" appearing on the back of the
Second Option Agreement (and the associated receipt) is hereby deleted.
7. The words "Except as provided on the reverse side of this
Agreement," in the paragraph of the Restricted Stock Agreement entitled
"Restrictions" are hereby deleted.
8. The Section entitled "1. Earlier Lapse of Restrictions" appearing on
the back of the Restricted Stock Agreement is hereby deleted.
9. This Amendment shall become effective as of the date above written
upon approval by the Compensation Committee of Deluxe Corporation.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
date set forth above.
/s/ Robert H. Rosseau
Robert H. Rosseau
DELUXE CORPORATION
By: /s/ J. A. Blanchard III
Its: Chairman + CEO
*** Denotes confidential information that has been omitted from this
Exhibit and filed separately, accompanied by a confidential treatment
request, with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities and Exchange Act of 1934.
Exhibit 10.19
Description of Severance Arrangement
with
Lawrence J. Mosner
Lawrence J. Mosner, the Company's Executive Vice President, is entitled to
severance benefits in the event his employment is terminated for reasons other
than willful misconduct, gross negligence or unlawful actions towards the
Company or towards others on behalf of the Company (i.e., other than for cause).
Under this arrangement, in the event of such a termination, Mr. Mosner will
receive a severance package of one year's base salary plus a second year of
income continuation. As a part of this income continuation, the Company would
continue to make payments to Mr. Mosner in an amount equal to the difference
between his base salary and any lesser salary received by Mr. Mosner from a
subsequent employer. In the event Mr. Mosner's employment is terminated
following certain business combinations or changes of control involving the
Company, the terms of the Executive Retention Agreement between Mr. Mosner and
the Company that is described in the Company's Proxy Statement for its 1998
regular meeting of shareholders under the heading "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements--Executive
Retention Agreements" would govern Mr. Mosner's severance entitlements in lieu
of the foregoing.
Exhibit 10.20
DESCRIPTION OF NON-EMPLOYEE DIRECTOR
COMPENSATION ARRANGEMENTS
Directors who are employees of the Company do not receive compensation for
their service on the Board other than their compensation as employees. During
1997, Directors who were not employees of the Company ("Independent Directors")
each received a $30,000 annual board retainer, payable quarterly. An additional
$11,600 annual committee retainer was paid to the chair of each committee and a
$6,600 annual committee retainer was paid to each other member of a committee.
Fees are not paid for attendance at meetings. In addition to the foregoing,
Independent Directors may receive compensation for the performance of duties
assigned by the Board or its Committees that are considered beyond the scope of
the ordinary responsibilities of Directors or Committee members.
For 1998, the annual board retainer was increased to $50,000, the retainer
payable to the chairperson of board committees was increased to $12,500 and the
annual committee retainer was increased to $7,500 in connection with the
adoption of a retainer stock and deferral plan, the phasing out of the
Independent Director retirement plan and the discontinuation of the annual
option grant program for Independent Directors. Retainers are paid quarterly.
Harold V. Haverty, the Company's former President and Chief Executive
Officer, served as a director between the Company's 1997 regular meeting of
shareholders (the "1997 Meeting") and November 1998, when he became a director
emeritus. Mr. Haverty will retire from this position immediately prior to the
Company's 1998 regular meeting (the "Meeting") of shareholders. Mr. Haverty
continued to receive his board and committee retainers (payable in cash) as a
director emeritus. Mr. Haverty retired as an employee of the Company immediately
prior to the 1997 Meeting.
Each new Independent Director receives a one-time grant of 1,000 shares of
restricted stock under the Stock Incentive Plan as of the date of his or her
initial election to the Board of Directors. Messrs. Robinson and Tyabji received
such a grant in 1997. The restricted stock vests in equal installments on the
dates of the Company's regular shareholders' meetings in each of the three years
following the date of grant, provided that the Director remains in office
immediately following the regular meeting. Restricted stock awards also vest
immediately upon an Independent Director's retirement from the Board in
accordance with the Company's policy with respect to mandatory retirement.
In 1997, each Independent Director elected at the 1997 Meeting received a
non-qualified option to purchase 1,000 shares of the Company's Common Stock
under the Stock Incentive Plan on the date of the 1997 Meeting. These options
have an exercise price equal to the fair market value of the underlying Common
Stock on the date of grant, became fully exercisable six months after the date
of grant and will expire on the tenth anniversary of such date. The options also
terminate three months following the date upon which a participant ceases to be
a Director of the Company. This option program has been discontinued and options
will not be granted in connection with the Meeting.
DRH Strategic Consulting, Inc., a corporation controlled by Mr. Hollis and
for which Mr. Hollis serves as President ("DRH"), provides, through the services
of Mr. Hollis, advisory services to the Company and its joint venture with HCL
Corporation of India (the "Joint Venture") regarding their respective
strategies, technology and product plans and assists the Company and the Joint
Venture in communicating their strategic initiatives to the financial services
industry. DRH was paid a total of $84,750 in consulting fees by the Company
($69,750) and the Joint Venture ($15,000) in 1997 and reimbursed by such
entities for an aggregate of $43,575 of expenses incurred in providing such
services. Consulting fees are not paid under this arrangement for Mr. Hollis'
attendance at Board and Committee meetings. An agreement extending Mr. Hollis'
services during 1998 is currently under discussion.
Exhibit 12.4
DELUXE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year
Ended Years Ended December 31,
December 31, 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income from Continuing $115,150 $118,765 $169,319 $246,706 $235,913 $324,783 $295,493
Operations before Income Taxes
Interest expense 8,822 10,649 13,099 9,733 10,070 15,371 8,220
(excluding capitalized interest)
Portion of rent expense under 13,621 13,467 14,761 13,554 13,259 12,923 11,807
long-term operating leases
representative of an interest fact
Amortization of debt expense 122 121 84 84 84 84 71
TOTAL EARNINGS $137,715 $143,002 $197,262 $270,077 $259,326 $353,161 $315,591
Fixed charges
Interest Expense $9,742 $11,978 $14,714 $10,492 $10,555 $15,824 $8,990
(including capitalized interest)
Portion of rent expense under 13,621 13,467 14,761 13,554 13,259 12,923 11,807
long-term operating leases
representative of an interest factor
Amortization of debt expense 122 121 84 84 84 84 71
TOTAL FIXED CHARGES $23,485 $25,566 $29,559 $24,130 $23,898 $28,831 $20,868
RATIO OF EARNINGS TO FIXED CHARGES: 5.9 5.6 6.7 11.2 10.9 12.2 15.1
</TABLE>
EXHIBIT 13.1
FINANCIAL
HIGHLIGHTS
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts) 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $1,919,366 $1,979,627
Net income (1) 44,672 65,463
Return on sales 2.3% 3.3%
Per share - basic .55 .80
Per share - diluted .55 .79
Return on average shareholders' equity 6.8% 8.8%
Cash dividends per share 1.48 1.48
Shareholders' equity 610,248 712,916
Average common shares outstanding (thousands) 81,854 82,311
Number of shareholders 16,897 19,495
Number of employees 18,937 19,643
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Income from continuing operations and net income include reorganization and
other special charges each year except 1992. Adjusted income from continuing
operations excludes these charges and their tax effects. See Management's
Discussion and Analysis on page 14.
[GRAPH]
NET SALES
[GRAPH]
INCOME FROM CONTINUING OPERATIONS(1)
[GRAPH]
ADJUSTED INCOME FROM CONTINUING OPERATIONS(1)
[GRAPH]
CASH FROM CONTINUING OPERATIONS
<PAGE>
MANAGEMENT'S
DISCUSSION AND ANALYSIS
INTRODUCTION
This discussion summarizes the significant factors that affected the
consolidated operating results and financial condition of Deluxe Corporation
during the three years ended December 31, 1997. During this period, the Company
has undergone a significant transformation. It has reorganized to improve its
profitability in its core and ongoing businesses and redefined its strategy to
focus on information-based growth opportunities in the payment process. As part
of its strategy, the Company is creating and providing its financial institution
and retail customers with integrated products and services that can help them
maximize their profit opportunities and manage their risks. As a result of its
transformation, the Company has recorded significant consolidation,
restructuring, and reorganization costs as well as gains and losses on sales of
businesses, which together, have had a significant impact on the operating
results and cash position of the Company. The following discussion considers
these items separately when analyzing the Company's financial and operational
progress and is based on the organization of the Company's businesses into three
operating segments: Deluxe Financial Services, Deluxe Electronic Payment
Systems, and Deluxe Direct. Deluxe Financial Services provides check printing,
direct marketing, customer database management, and related services to
financial institutions; checks directly to households and small businesses; and
payment protection and collections services to financial institutions and the
retail market primarily in the United States. Deluxe Electronic Payment Systems
provides debit transaction processing and other electronic banking functions in
the United States and internationally. Deluxe Direct primarily sells greeting
cards, stationery, and specialty paper products through direct mail to customers
principally in the United States.
OVERALL SUMMARY
In 1997, the Company's sales decreased 3.0% due primarily to strategic
divestitures within the Deluxe Direct segment. Excluding the impact of lost
revenue due to these divestitures, sales increased 3.5% over 1996 due to growth
in the Deluxe Financial Services and Deluxe Electronic Payment Systems segments.
1997 income from continuing operations was $44.7 million, compared to $65.5
million and $94.4 million in 1996 and 1995, respectively. Basic earnings per
share from continuing operations were $.55 in 1997, compared to $.80 in 1996 and
$1.15 in 1995. Return on average assets was 3.8% for 1997, compared to 5.3% and
7.4% in 1996 and 1995, respectively. Return on average shareholders' equity was
6.8% in 1997 versus 8.8% in 1996 and 11.8% in 1995. These results included
pretax reorganization and other special charges of $180 million in 1997, $142.3
million in 1996, and $62.5 million in 1995.
<PAGE>
REORGANIZATION AND OTHER SPECIAL CHARGES
Over the last three years, the Company has engaged in a reorganization process
involving an examination of the Company's lines of business, including each
business' product offerings, short-term and long-term profitability, and
strategic fit within the Company. This effort resulted in the consolidation of
operating and administrative facilities, the elimination of products and
businesses, and the restructuring of the Company's management and organization.
The result is improved adjusted operating profitability and expected future cost
reductions, which will be reflected primarily in the form of reduced facility,
materials, and employee expenses in the Company's operating results. Competitive
pricing pressures, other increased expenses, and other factors will offset some
of the savings expected to be achieved through these cost reduction efforts.
During 1996, the Company announced its plans to divest three businesses
within its Deluxe Direct segment. One of these businesses was sold in 1997. The
remaining two are expected to be sold in 1998. Additionally, in 1997, the
Company determined that it will divest the international unit of its Deluxe
Electronic Payment Systems segment. In 1997, the Company recorded a pretax
impairment charge of $99 million to write these businesses down to their
estimated fair values less costs to sell. Additionally, the Company recorded
pretax charges of $81 million mostly related to production consolidation, legal
proceedings, and other asset impairments. These charges are reflected throughout
the 1997 consolidated statement of income according to the nature of the charge,
with $82.9 million identified separately as goodwill impairment charge, $7.7
million in cost of sales expense, $39.6 million in selling, general, and
administrative expense, and $49.8 million in other expense. As a result of these
charges and previous consolidation charges, the December 31, 1997, consolidated
balance sheet includes a restructuring accrual of $39.5 million for employee
severance costs and $3.7 million for estimated losses on asset dispositions. The
majority of these severance costs are expected to be paid out in 1998 and early
1999 from cash generated from the Company's operations. The December 31, 1997,
consolidated balance sheet also reflects a long-term liability of $40 million
for legal proceedings. During 1997, a judgment was entered against Deluxe
Electronic Payment Systems, Inc. (DEPS), in U.S. District Court in Pittsburgh.
The case was brought against DEPS by Mellon Bank in connection with a potential
bid to provide electronic benefit transfer services for the Southern Alliance of
States. The majority of this amount is expected to be paid in 1999 if the
Company is unsuccessful in its attempt to seek reversal of this judgment.
During 1996, as a result of the initial decision to sell the three businesses
within the Deluxe Direct segment, the Company recorded a pretax goodwill
impairment charge of $111.9 million to write them down to their estimated fair
values less costs to sell at the time. Additionally, the Company recorded net
pretax charges of $30.4 million during 1996 for restructuring, gains and losses
on sales of businesses, and other reorganization costs. These charges are
reflected throughout the 1996 consolidated statement of income according to the
nature of the charge, with $39.2 million in cost of sales expense, $24.6 million
in selling, general, and administrative expense, and a $33.4 million gain in
other income.
During the fourth quarter of 1995, the Company announced that it was exiting
its Printwise ink business, which is treated as discontinued operations in the
consolidated financial statements presented in this report. Also during 1995,
the Company recorded pretax charges of $62.5 million for production
consolidation and process improvements, exiting unprofitable businesses,
eliminating certain products, and write-offs of non-performing assets. These
costs are spread throughout the 1995 consolidated statement of income. Of the
$62.5 million in charges, $16.6 million is included in cost of sales, $35.9
million in selling, general, and administrative expense, and $10 million in
other expense.
The following table displays the Company's results of operations as reported,
compared to results with the above mentioned charges excluded (dollars in
thousands).
<PAGE>
RESULTS OF OPERATIONS - AS REPORTED AND AS ADJUSTED TO EXCLUDE REORGANIZATION
AND OTHER SPECIAL CHARGES
<TABLE>
<CAPTION>
1997 1997 1996 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------------
Reported Adjusted Reported Adjusted Reported Adjusted
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,919,366 $1,919,366 $1,979,627 $1,979,627 $1,936,719 $1,936,719
Gross margin 1,036,179 1,043,918 996,183 1,035,357 1,001,132 1,017,748
Selling, general, and administrative 797,566 757,996 797,174 772,568 817,348 781,492
Goodwill impairment charge 82,893 111,900
Other net income (expense) (40,570) 9,201 31,656 (1,767) (14,465) (4,459)
Provision for income taxes 70,478 119,525 53,302 105,000 74,885 98,600
Income from continuing operations $ 44,672 $ 175,598 $ 65,463 $ 156,022 $ 94,434 $ 133,197
====================================================================================================================
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, the percentage
relationship to revenue of certain items in the Company's consolidated
statements of income and the percentage dollar changes of such items compared to
the prior year. This table contains the "adjusted" results of the Company to
exclude the reorganization and other special charges discussed above.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE PERCENTAGE OF DOLLAR INCREASE/(DECREASE)
(NOT INCLUDING REORGANIZATION AND
OTHER SPECIAL CHARGES)
1997 1996 1995 1997 VS 1996 1996 vs 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
100% 100% 100% Net sales (3%) 2.2%
54.4 52.3 52.6 Gross margin .8 1.7
39.5 39.0 40.4 Selling, general, and administrative (1.9) (1.1)
.4 (.1) (.2) Other net income (expense) 620.7 60.4
6.2 5.3 5.1 Provision for income taxes 13.8 6.5
9.1 7.9 6.9 Income from continuing operations 12.5 17.1
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The segment results discussed below reflect results from continuing
operations, excluding the above mentioned reorganization and other special
charges.
<PAGE>
NET SALES - Net sales for the Company in 1997 decreased 3.0% from 1996. Net
sales for the Deluxe Financial Services segment increased 4.7% to $1,543.3
million in 1997. The majority of the increase came from higher collection
service volume. Additionally, volume from both financial institution and direct
mail check offerings increased. These increases were partially offset by
competitive pricing pressures on financial institution check printing products.
The Deluxe Electronic Payment Systems segment experienced a sales increase of
10.5% to $143.6 million in 1997, mostly due to increased volumes in financial
institution ATM processing and electronic benefits transfer. These sales
increases at the Deluxe Electronic Payment Systems and the Deluxe Financial
Services segments were offset by a 38.1% decrease to $232.5 million at the
Deluxe Direct segment. This decrease was the result of the continuation of
actions initiated in 1996 to increase the profitability of the segment. Such
actions included sales of businesses within the segment, reduced catalog
circulation, and the elimination of unprofitable product lines. Additionally,
response rates for the direct mail businesses declined from 1996. Excluding the
impact of the lost revenues from divestitures, the Company's consolidated net
sales increased 3.5% from 1996.
In 1996, net sales for the Company increased 2.2% over 1995. Net sales for
the Deluxe Financial Services segment increased 7.3% to $1,474.2 million. The
majority of the increase came from increased sales of higher priced products in
the financial institution check printing business and increased volume from
direct mail checks. Additionally, collection service revenue increased due to
acquisitions and increased sales volume. The Deluxe Electronic Payment Systems
segment experienced a sales increase of 4.3% to $129.9 million in 1996,
primarily due to increased volume in financial institution ATM processing. These
sales increases were partially offset by a 14.2% decrease to $375.5 million for
the Deluxe Direct segment. This decrease was the result of actions taken to
increase the profitability of the segment, including sales of businesses,
reduced catalog circulation, and the elimination of unprofitable product lines.
GROSS MARGIN - Consolidated gross margin for the Company was 54.0% in 1997,
compared to 50.3% and 51.7% in 1996 and 1995, respectively. With the
reorganization and other special charges excluded, consolidated gross margin for
the Company was 54.4% in 1997, compared to 52.3% and 52.6% in 1996 and 1995,
respectively. The Deluxe Financial Services segment's gross margin increased to
58.1% in 1997 from 56.7% in 1996. The competitive pricing pressures experienced
by the financial institution check printing business were more than offset by
improved product mix and production efficiencies within this business, as well
as reduced employee benefits costs due to a revision of the employee benefits
program. Gross margin for the Deluxe Electronic Payment Systems segment
increased to 19.0% in 1997 from 15.2% in 1996, due primarily to decreased
consulting expenses and other cost containment initiatives. The Deluxe Direct
segment's gross margin increased to 51.8% from 48.0% in 1996, due to better cost
control and inventory management within the direct mail businesses and the sale
of businesses with poorer margins.
The Deluxe Financial Services segment's gross margin was flat at 56.7% in
1996 and 56.8% in 1995. The gross margin for the Deluxe Electronic Payment
Systems segment decreased to 15.2% in 1996 from 34.6% in 1995, due primarily to
higher computer equipment rent expense, costs of infrastructure upgrades and
software re-engineering, and higher telecommunication expense. Gross margin for
the Deluxe Direct segment increased to 48.0% from 44.3% in 1995, due primarily
to the sale of businesses with poorer margins, better cost containment and
inventory management, and consolidation of products within the direct mail
businesses.
<PAGE>
SELLING, GENERAL, AND ADMINISTRATIVE - Selling, general, and administrative
(SG&A) expenses for the Company were flat in 1997 compared to 1996. With the
reorganization and other special charges discussed above excluded, SG&A expenses
decreased $14.6 million, or 1.9%, in 1997. The Deluxe Financial Services
segment's SG&A expenses increased 8.7% due primarily to financial institution
check printing SG&A, which increased due to higher customer service call center
volume and duplicate costs from maintaining an old customer service system as a
new system was implemented. Although customer service call volume increased on
an annual basis, call volume did decrease in the fourth quarter of 1997 as
compared to the fourth quarter of 1996. During this time, the Company began
charging customers for orders placed via telephone as opposed to electronic
channels. Additionally, SG&A expenses increased within the collections, direct
marketing and customer database management businesses as a result of growth. The
Deluxe Electronic Payment Systems segment's SG&A expenses increased 10.4% due to
legal expenses and human resources initiatives. The Deluxe Direct segment's SG&A
expenses decreased 34.2% mainly due to the cessation of depreciation and
amortization of the assets of the businesses held for sale, as well as reduced
catalog costs due to simplified catalog designs and lower paper costs.
In 1996, SG&A expenses for the Company decreased $20.2 million, or 2.5%. With
the reorganization and other special charges discussed above excluded, SG&A
expenses decreased $8.9 million, or 1.1%, in 1996. The Deluxe Financial Services
segment's SG&A expenses increased 5.4%, primarily in the financial institution
check printing business, due to increased customer service call center volume
and higher marketing expenditures for new products. The Deluxe Electronic
Payment Systems segment's SG&A expenses decreased 8.0% due to lower consulting
expenses. The Deluxe Direct segment's SG&A expenses decreased 14.8%, mainly due
to planned catalog circulation decreases by the segment's direct mail
businesses.
OTHER INCOME (EXPENSE) - Other expense for the Company was $40.6 million in
1997, compared to other income of $31.7 million in 1996 and other expense of
$14.5 million in 1995. These changes were primarily due to the reorganization
and other special charges discussed above. With these charges removed, other
income was $9.2 million in 1997, compared to other expense of $1.8 million and
$4.5 million in 1996 and 1995, respectively. The improvement in 1997 is due to
gains realized from the sale of check printing facilities and increased
investment earnings resulting from the investment of cash obtained through
divestitures. The decrease in expense from 1995 to 1996 is due primarily to
lower interest expense as a result of decreased borrowings.
PROVISION FOR INCOME TAXES - The Company's effective tax rate increased to 61.2%
in 1997 from 44.9% in 1996 and 44.2% in 1995, due primarily to lower pretax
income combined with an increasing base of non-deductible expenses consisting
primarily of the non-deductible goodwill impairment charge recorded by the
Company. In 1996, the effect of the goodwill impairment charge was offset by tax
benefits recognized for the sales of businesses and businesses held for sale.
With the effect of the reorganization and other special charges removed in each
year, the Company's tax rate was 40.5%, 40.2%, and 42.5% in 1997, 1996, and
1995, respectively. The decrease in the 1996 rate from 1995 is due to an
increase in adjusted pretax income, while the base of non-deductible expenses
remained constant.
NET INCOME - 1997 net income decreased to $44.7 million from $65.5 million in
1996. The primary reason for the decrease was the higher amount of
reorganization and other special charges discussed above. With the charges and
their related tax effects removed, the Company's net income was $175.6 million
and $156 million in 1997 and 1996, respectively.
1996 net income decreased to $65.5 million from $87 million in 1995. The
primary reason for the decrease was the higher amount of reorganization and
other special charges discussed above. With the charges and their related tax
effects removed, the Company had income from continuing operations of $156
million and $133.2 million in 1996 and 1995, respectively.
<PAGE>
FINANCIAL CONDITION
LIQUIDITY - Cash provided by continuing operations was $294 million in 1997,
compared to $290.6 million in 1996 and $214.6 million in 1995. Funds provided by
operations are the Company's primary source of working capital for financing
capital expenditures and paying dividends. The increase in 1997 over 1996 and
1995 was due to better cash management and improved profitability resulting from
operating cost reductions. Working capital was $131.1 million as of December 31,
1997, compared to $108.1 million and $12.3 million on December 31, 1996 and
1995, respectively. The year-end current ratio for 1997 and 1996 was 1.3 to 1,
compared to 1 to 1 for 1995. The increase over 1995 is primarily the result of
cost savings from the Company's reorganization initiatives, cash proceeds from
divestitures and lower capital expenditures. The Company anticipates that
approximately $29.1 million of cash will be paid out in 1998 for restructuring
charges, compared to $11.2 million in 1997.
CAPITAL RESOURCES - In 1997, the Company made one business acquisition and
several divestitures from which the Company derived $1.1 million in net cash
proceeds. In 1996, the Company made numerous business acquisitions and
divestitures from which the Company derived $98.1 million in net cash proceeds.
In 1995, the Company made one acquisition at a cost of $38.8 million.
Cash purchases of capital assets were $109.5 million in 1997, compared to $92
million in 1996 and $125.1 million in 1995. The Company anticipates capital
expenditures of approximately $150 million in 1998 mainly for information
technology systems upgrades and replacement as well as for productivity
improvements.
The Company has uncommitted bank lines of credit for $170 million. The
average amount drawn on those lines during 1997 was $3.1 million at a weighted
average interest rate of 6.47%. There was no outstanding balance at December 31,
1997. At December 31, 1996, $17 million was outstanding at an interest rate of
6.5%. The Company also has in place a $150 million committed line of credit as
support for commercial paper and as a source of cash. No commercial paper was
outstanding at December 31, 1997 and 1996. Additionally, the Company has a shelf
registration in place for the issuance of up to $300 million in medium-term
notes. Such notes could be used for general corporate purposes, including
working capital, capital expenditures, acquisitions, and repayment or repurchase
of outstanding indebtedness and other securities of the Company. As of December
31, 1997 and 1996, no such notes were issued or outstanding.
Cash dividends totaled $121.3 million in 1997, compared to $122 million in
1996 and $122.1 million in 1995. Dividend payments were 271.6% of earnings in
1997, 186.3% in 1996, and 140.4% in 1995. In December 1996, the Company's board
of directors amended the Company's stock repurchase plan to permit the
repurchase of up to 10 million shares of Deluxe common stock. The board also
approved the repurchase of up to 5 million of the 10 million approved shares
under this plan. The Company repurchased 1.7 million shares in 1997.
YEAR 2000 - In 1996, the Company initiated a companywide program to prepare its
computer systems and applications for the year 2000. During 1997, the Company
identified the systems affected, determined a resolution strategy for each
affected system, and began executing these resolution strategies. The Company
expects either to modify or upgrade existing systems or replace some systems
through other development projects. The Company expects to incur expense of $17
million over the next two years, consisting of both internal staff costs and
consulting expenses, as it continues to implement its resolution strategy.
Because of the nature of the Company's business, the year 2000 issue would,
if unaddressed, pose a significant business risk for the Company. The Company
presently believes that with the planned modifications to existing systems and
the replacement of other systems, the year 2000 compliance issue will be
resolved in a timely manner and will not pose significant operational problems
for the Company. Additionally, the Company has communicated with its suppliers
and customers to determine their year 2000 readiness and the extent to which the
Company is vulnerable to any third party year 2000 issues. However, there can be
no guarantee that the systems of other companies upon which the Company's
systems rely will be converted timely, or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have a material adverse effect on the Company.
<PAGE>
OUTLOOK - In 1998, the Company will continue its efforts to reduce costs and
improve productivity throughout the organization. At the same time, the Company
will continue to invest in major infrastructure improvements. The Company also
expects to complete a divestiture program by selling the two remaining
non-strategic businesses in the Deluxe Direct segment and the international
operations of the Deluxe Electronic Payment Systems segment.
With the major components of its reorganization nearing completion, the
Company is now better positioned for growth. Its improved cash position, low
debt, and available financing create the opportunity for the Company to enhance
its products and services through internal developments and external alliances,
partnerships, and acquisitions that are within its strategic focus.
The Company's ongoing changes related to organizational improvements and
growth opportunities may require additional charges to earnings. These charges,
however, should lessen as the Company completes its reorganization and focuses
on its growth opportunities.
MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL REPORTING
The accompanying consolidated financial statements and related information are
the responsibility of management. They have been prepared in conformity with
generally accepted accounting principles and include amounts that are based on
our best estimates and judgments under the existing circumstances. The financial
information contained elsewhere in this annual report is consistent with that in
the consolidated financial statements.
The Company maintains internal accounting control systems that are adequate
to provide reasonable assurance that the assets are safeguarded from loss or
unauthorized use. These systems produce records adequate for preparation of
financial information. We believe the Company's systems are effective, and that
the costs of the systems do not exceed the benefits obtained.
The audit committee of the board of directors has reviewed the financial data
included in this report. The audit committee is composed entirely of outside
directors and meets periodically with the internal auditors, management, and the
Company's independent auditors on financial reporting matters. The independent
auditors have free access to meet with the audit committee, without the presence
of management, to discuss their audit results and opinions on the quality of
financial reporting.
The role of independent auditors is to render an independent, professional
opinion on management's consolidated financial statements to the extent required
by generally accepted auditing standards.
Deluxe recognizes its responsibility for conducting its affairs according to
the highest standards of personal and corporate conduct. It has distributed to
all employees a statement of its commitment to conducting all Company business
in accordance with applicable legal requirements and the highest ethical
standards.
/s/ J.A. Blanchard III /s/ Thomas W. VanHimbergen
J.A. Blanchard III Thomas W. VanHimbergen
Chairman, President, and Senior Vice President and
Chief Executive Officer Chief Financial Officer
January 26, 1998
<PAGE>
SIX-YEAR
SUMMARY
<TABLE>
<CAPTION>
Years ended December 31 (dollars in
thousands, except per share amounts) 1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,919,366 $1,979,627 $1,936,719 $1,834,024 $1,666,302 $1,617,621
Salaries and wages 572,035 586,949 551,788 519,901 491,868 456,893
Provision for income taxes 70,478 53,302 74,885 102,453 94,052 121,999
Income from continuing operations (1) 44,672 65,463 94,434 144,253 141,861 202,784
Return on sales 2.33% 3.31% 4.88% 7.87% 8.51% 12.54%
Per share - basic .55 .80 1.15 1.75 1.71 2.42
Per share - diluted .55 .79 1.15 1.75 1.71 2.41
Return on average shareholders' equity 6.75% 8.77% 11.84% 17.86% 17.40% 25.70%
Return on average assets 3.84% 5.30% 7.40% 11.50% 11.57% 17.64%
Net income (1) 44,672 65,463 87,021 140,866 141,861 202,784
Per share - basic .55 .80 1.06 1.71 1.71 2.42
Per share - diluted .55 .79 1.06 1.71 1.71 2.41
Cash dividends per share 1.48 1.48 1.48 1.46 1.42 1.34
Shareholders' equity 610,248 712,916 780,374 814,393 801,249 829,808
Purchases of capital assets 109,500 92,038 125,068 126,226 60,990 64,114
Depreciation and amortization expense 97,269 106,636 103,303 85,906 72,320 66,615
Working capital increase (decrease) 22,911 95,857 (118,116) (94,086) (162,387) 55,975
Total assets 1,148,364 1,176,440 1,295,095 1,256,272 1,251,994 1,199,556
Long-term debt 109,986 108,622 110,997 110,867 110,755 115,522
Debt to capital ratio 15.98% 14.56% 15.75% 15.68% 16.02% 14.91%
Average common shares
outstanding (thousands) 81,854 82,311 82,420 82,400 82,936 83,861
Number of employees 18,937 19,643 19,286 18,839 17,748 17,400
Number of production and service facilities 68 81 81 78 73 85
========================================================================================================================
</TABLE>
(1) Income from continuing operations and net income include reorganization and
other special charges each year except 1992. Adjusted income from continuing
operations excludes these charges and their tax effects. See Management's
Discussion and Analysis on page 14.
[GRAPH]
WORKING CAPITAL
[GRAPH]
INCOME FROM CONTINUING OPERATIONS PER SHARE - BASIC(1)
[GRAPH]
ADJUSTED INCOME FROMM CONTINUING OPERATIONS PER SHARE - BASIC(1)
<PAGE>
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 (dollars in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 171,438 $ 142,571
Marketable securities 8,021
Trade accounts receivable 151,201 145,475
Inventories:
Raw material 22,950 20,194
Semi-finished goods 9,132 14,549
Finished goods 23,768 21,295
Supplies 11,146 11,503
Deferred advertising 15,763 14,222
Deferred income taxes 50,345 31,413
Prepaid expenses and other current assets 48,849 48,302
- -----------------------------------------------------------------------------------------------
Total current assets 512,613 449,524
LONG-TERM INVESTMENTS 52,910 59,138
PROPERTY, PLANT, AND EQUIPMENT
Land 38,832 42,563
Buildings and improvements 288,270 307,018
Machinery and equipment 562,637 553,955
Construction in progress 346 1,382
- -----------------------------------------------------------------------------------------------
Total 890,085 904,918
Less accumulated depreciation 475,077 458,060
- -----------------------------------------------------------------------------------------------
Property, plant, and equipment - net 415,008 446,858
INTANGIBLES
Cost in excess of net assets acquired - net 54,435 139,593
Internal use software - net 74,584 44,438
Other intangible assets - net 38,814 36,889
- -----------------------------------------------------------------------------------------------
Total intangibles 167,833 220,920
- -----------------------------------------------------------------------------------------------
Total assets $1,148,364 $1,176,440
===============================================================================================
CURRENT LIABILITIES
Accounts payable $ 73,516 $ 63,810
Accrued liabilities:
Wages, including vacation pay 62,513 56,471
Employee profit sharing and pension 40,517 52,879
Accrued income taxes 31,960
Accrued rebates 36,708 33,975
Other 129,263 110,625
Short-term debt 17,011
Long-term debt due within one year 7,078 6,606
- -----------------------------------------------------------------------------------------------
Total current liabilities 381,555 341,377
LONG-TERM DEBT 109,986 108,622
DEFERRED INCOME TAXES 6,040 12,837
OTHER LONG-TERM LIABILITIES 40,535 688
SHAREHOLDERS' EQUITY
Common shares $1 par value (authorized: 500,000,000 shares;
issued: 1997 - 81,325,925 shares 1996 - 82,056,203 shares) 81,326 82,056
Additional paid-in capital 4,758
Retained earnings 525,302 631,151
Unearned compensation (649) (937)
Cumulative translation adjustment (489) 646
- -----------------------------------------------------------------------------------------------
Shareholders' equity 610,248 712,916
- -----------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,148,364 $1,176,440
===============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31 (dollars in thousands, except per share amounts) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 1,919,366 $ 1,979,627 $ 1,936,719
- ---------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales 883,187 983,444 935,587
Selling, general, and administrative 797,566 797,174 817,348
Goodwill impairment charge 82,893 111,900
- ---------------------------------------------------------------------------------------------------------------------
Total 1,763,646 1,892,518 1,752,935
- ---------------------------------------------------------------------------------------------------------------------
Income from operations 155,720 87,109 183,784
OTHER INCOME (EXPENSE)
Other income (expense) (31,748) 42,305 (1,404)
Interest expense (8,822) (10,649) (13,061)
- ---------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 115,150 118,765 169,319
- ---------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 70,478 53,302 74,885
- ---------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 44,672 65,463 94,434
=====================================================================================================================
DISCONTINUED OPERATIONS
Loss from operations (net of income tax benefit of $2,146) (3,098)
Loss on disposal (net of income tax benefit of $2,985) (4,315)
- ---------------------------------------------------------------------------------------------------------------------
LOSS FROM DISCONTINUED OPERATIONS (7,413)
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME $ 44,672 $ 65,463 $ 87,021
=====================================================================================================================
BASIC EARNINGS PER SHARE
Income from continuing operations $ .55 $ .80 $ 1.15
Loss from discontinued operations (.09)
=====================================================================================================================
NET INCOME PER SHARE - BASIC $ .55 $ .80 $ 1.06
=====================================================================================================================
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .55 $ .79 $ 1.15
Loss from discontinued operations (.09)
=====================================================================================================================
NET INCOME PER SHARE - DILUTED $ .55 $ .79 $ 1.06
=====================================================================================================================
CASH DIVIDENDS PER COMMON SHARE $ 1.48 $ 1.48 $ 1.48
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31 (dollars in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 44,672 $ 65,463 $ 87,021
Discontinued operations 7,413
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 44,672 65,463 94,434
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation 68,816 66,269 69,027
Amortization of intangibles 28,453 40,367 34,276
Goodwill impairment charge 82,893 111,900
Stock purchase discount 6,654 7,478 8,185
Net gain on sales of businesses (866) (37,007)
Deferred income taxes (25,733) (20,690) (9,201)
Changes in assets and liabilities, net of effects from acquisitions,
discontinued operations, and sales of businesses:
Trade accounts receivable (5,806) 13,082 (24,949)
Inventories 266 13,367 12,893
Accounts payable 9,678 (11,456) 6,631
Other assets and liabilities 84,979 41,870 23,346
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 294,006 290,643 214,642
Net cash provided by (used in) discontinued operations 1,772 60 (5,315)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 295,778 290,703 209,327
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of marketable securities with maturities of more
than 3 months 6,250 28,878
Purchases of marketable securities with maturities of more than 3 months (8,000)
Net reductions of marketable securities with maturities of 3 months or less 16,000
Purchases of capital assets (109,500) (92,038) (125,068)
Payments for acquisitions, net of cash acquired (10,600) (15,098) (37,313)
Net proceeds from sales of businesses and discontinued operations,
net of cash sold 21,627 112,913
Other 17,111 11,488 (2,858)
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (89,362) 23,515 (120,361)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments on) proceeds from short-term debt (16,783) (32,428) 36,312
Payments on long-term debt (6,818) (10,934) (8,918)
Payments to retire common stock (56,281) (48,065) (34,715)
Proceeds from issuing stock under employee plans 23,654 28,088 25,027
Cash dividends paid to shareholders (121,321) (121,976) (122,143)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (177,549) (185,315) (104,437)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 28,867 128,903 (15,471)
- --------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 142,571 13,668 29,139
- --------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 171,438 $ 142,571 $ 13,668
==========================================================================================================================
Supplementary cash flow disclosure:
Interest paid $ 10,540 $ 12,001 $ 12,519
Income taxes paid $ 63,612 $ 83,600 $ 93,023
==========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE ONE
SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and all wholly owned subsidiaries. All significant intercompany
accounts, transactions, and profits have been eliminated.
CASH AND CASH EQUIVALENTS - The Company considers all cash on hand, money market
funds, and other highly liquid investments with original maturities of three
months or less to be cash and cash equivalents. The carrying amounts reported in
the consolidated balance sheets for cash and cash equivalents approximate fair
value.
MARKETABLE SECURITIES - Marketable securities consist of debt and equity
securities. They are classified as available for sale and carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of shareholders' equity. At December 31, 1997 and 1996, there were no
unrealized gains or losses relating to the securities held on those dates.
Realized gains and losses and permanent declines in value are included in other
income. The cost of securities sold is determined using the specific
identification method.
INVENTORY - Inventory is stated at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for substantially all
inventory. LIFO inventories at December 31, 1997 and 1996, were approximately
$8.5 million and $11.6 million, respectively, less than replacement cost.
PROPERTY, PLANT, AND EQUIPMENT - Property, plant, and equipment, including
leasehold and other improvements that extend an asset's useful life or
productive capabilities, are stated at historical cost. Buildings with 40-year
lives and machinery and equipment with lives of five to 11 years are generally
depreciated using accelerated methods. Leasehold and building improvements are
depreciated on a straight-line basis over the estimated useful life of the
property or the life of the lease, whichever is shorter.
INTANGIBLES - Intangibles are presented in the consolidated balance sheets net
of accumulated amortization. Amortization expense is determined on the
straight-line basis over periods of five to 30 years for cost in excess of net
assets acquired (goodwill), and three to 10 years for internal use software and
other intangibles. Other intangibles consist primarily of software to be
licensed. Total intangibles at December 31 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost in excess of net assets acquired $ 318,579 $ 317,315
Internal use software 94,826 57,358
Other intangible assets 103,682 89,223
Total $ 517,087 $ 463,896
Less goodwill impairment charge
(see note 4) (194,793) (111,900)
Less other accumulated amortization (154,461) (131,076)
Intangibles - net $ 167,833 $ 220,920
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LONG-TERM INVESTMENTS - Long-term investments consist principally of cash
surrender values of insurance contracts, investments with maturities in excess
of one year, and notes receivable. Such investments are carried at cost or
amortized cost which approximates their fair values.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of
long-lived assets not held for sale by measuring the carrying amount of the
assets against the estimated undiscounted future cash flows associated with
them. At the time such evaluations indicate that the future undiscounted cash
flows of certain long-lived assets are not sufficient to recover the carrying
value of such assets, the assets are adjusted to their fair values. There were
no material adjustments in 1997, 1996, or 1995 to the carrying value of
long-lived assets to be held and used.
The Company evaluates the recoverability of long-lived assets held for
disposal by comparing the asset's carrying amount with its fair value less cost
to sell. In keeping with this policy, the Company recorded a charge of $99
million in 1997 and $111.9 million in 1996 to write down businesses held for
sale within its Deluxe Direct and Deluxe Electronic Payment Systems segments
(see note 4).
INCOME TAXES - Deferred income taxes result from temporary differences between
the financial reporting basis of assets and liabilities and their respective tax
reporting bases. Future tax benefits are recognized to the extent that
realization of such benefits is more likely than not.
ACCRUED REBATES - On occasion, the Company enters into contractual agreements
with its customers for rebates on certain products it sells. The Company records
these amounts as reductions to sales and accrues them on the consolidated
balance sheets as incurred.
DEFERRED ADVERTISING - These costs consist of materials, production, postage,
and design expenditures required to produce catalogs for the Company's direct
mail businesses. Such costs are amortized over periods (generally less than 12
months) that correspond to the estimated revenue streams of the individual
catalogs. The actual timing of these revenue streams may differ from these
estimates. The total amount of deferred advertising amortization for 1997, 1996,
and 1995 was $101.3 million, $107.4 million, and $126.3 million, respectively.
TRANSLATION ADJUSTMENT - The financial position and results of operations of the
Company's international subsidiaries are measured using local currencies as the
functional currencies. Assets and liabilities of these operations were
translated at the exchange rate in effect at the balance sheet date. Income
statement accounts were translated at the average exchange rate during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are included in the cumulative translation adjustment line in
the shareholders' equity section of the consolidated balance sheets. Gains and
losses that result from foreign currency transactions are included in earnings.
EMPLOYEE STOCK-BASED COMPENSATION - As permitted by Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
the Company continues to account for its employee stock-based compensation in
accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees." Accordingly, no compensation cost has been
recognized for fixed stock options issued under the Company's stock incentive
plan. The Company has adopted the disclosure-only provisions of SFAS No. 123
(see note 8).
<PAGE>
RECLASSIFICATIONS - Effective October 1, 1997, the Company elected to reclassify
certain expenses in its consolidated statements of income. As a result, net
sales, cost of sales, and selling, general, and administrative expense have been
restated for all prior periods to reflect these new classifications. The Company
now reflects postage expense incurred by its financial institution check
printing operations as cost of sales. Previously, this expense was included in
net sales. The effect of this reclassification was to increase net sales and
cost of sales expense by $92.9 million, $84 million, and $79.5 million for the
years ended December 31, 1997, 1996, and 1995, respectively. The Company
reclassified all of its employee profit sharing and pension expense and its
employee bonus and stock purchase discount expense to cost of sales and selling,
general, and administrative expense. The effect of this reclassification was to
increase cost of sales by $26 million, $37.2 million, and $34.3 million and to
increase selling, general, and administrative expense by $31.8 million, $34.8
million, and $45.2 million for the years ended December 31, 1997, 1996, and
1995, respectively. Additionally, certain other costs of the financial
institution check printing operations have been reclassified. Costs of the order
entry function and certain accounting and information services have been
reclassified from cost of sales to selling, general, and administrative expense,
and costs related to reprinting check orders have been reclassified from
selling, general, and administrative expense to cost of sales. These
reclassifications resulted in a decrease to cost of sales and an increase to
selling, general, and administrative expense of $31.8 million, $31.5 million,
and $36.2 million for the years ended December 31, 1997, 1996 and 1995,
respectively. Finally, certain minor amounts reported in 1996 and 1995 have been
reclassified to conform with the 1997 presentation. These changes had no
significant impact on previously reported results of operations or shareholders'
equity.
USE OF ESTIMATES - The Company has prepared the accompanying consolidated
financial statements in conformity with generally accepted accounting
principles. In this process, it is necessary for management to make certain
assumptions and related estimates affecting the amounts reported in the
consolidated financial statements and attached notes. These estimates and
assumptions are developed based upon all information available using
management's best efforts. However, actual results can differ from assumed and
estimated amounts.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income," which
requires businesses to disclose comprehensive income and its components in their
general purpose financial statements. This statement is effective for the
Company on January 1, 1998. Also in June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
redefines how operating segments are determined and requires the disclosure of
certain financial and descriptive information about these segments. This
statement is effective for the Company on January 1, 1998. In February, 1998,
the FASB issued SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits," which revises the disclosure requirements for pensions
and other postretirement benefits. This statement is effective for the Company
on January 1, 1998. In March 1998, the Accounting Standards Executive Committee
(AcSEC) of the American Institute of CPA's issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which provides guidance on accounting for the costs of
internal-use computer software. This statement is effective for the Company on
January 1, 1999. The Company anticipates that the effect of these pronouncements
will not have a material impact on reported operating results.
<PAGE>
NOTE TWO
EARNINGS PER SHARE
Effective December 1997, the Company adopted SFAS No. 128, "Earnings per Share."
Earnings per share amounts presented for 1996 and 1995 have been restated to
reflect this adoption. The following table reflects the calculation of basic and
diluted earnings per share (dollars and shares outstanding in thousands, except
per share amounts).
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations per share - basic:
Income from continuing operations $44,672 $65,463 $94,434
Weighted average shares outstanding 81,854 82,311 82,420
Income from continuing operations per share - basic $ .55 $ .80 $ 1.15
=====================================================================================================================
Income from continuing operations per share - diluted:
Income from continuing operations $44,672 $65,463 $94,434
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 81,854 82,311 82,420
Dilutive impact of options 92 121 40
Shares contingently issuable 11 1 2
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares and potential dilutive shares outstanding 81,957 82,433 82,462
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations per share - diluted $ .55 $ .79 $ 1.15
=====================================================================================================================
</TABLE>
During 1997, 1996, and 1995, respectively, options to purchase .7 million, .9
million, and 1.4 million shares of common stock were outstanding but were not
included in the computation of diluted earnings per share. These options'
exercise prices were greater than the average market price of the common shares
during the respective periods.
In January 1998, the Company awarded options to substantially all employees
(excluding foreign employees and employees of businesses held for sale),
allowing them to purchase 100 shares of common stock at an exercise price of $33
per share. Total options for the purchase of 1.7 million shares of common stock
were issued under this program. Had these options been issued in previous years,
the dilutive impact of options presented above may have differed.
NOTE THREE
RESTRUCTURING CHARGE
In the first quarter of 1996, the Company announced a plan to close 21 of its
financial institution check printing plants over a two-year period. The plant
closings were made possible by advancements in the Company's telecommunications,
order processing, and printing technologies. Upon the completion of this
restructuring, the Company's 15 remaining plants will be equipped with
sufficient capacity to produce at or above current order volumes. Also, during
the first quarter of 1996, the Company announced a plan to move the operating
and administrative facilities of one of its direct mail businesses from New
Jersey to Colorado. In conjunction with these plans, the Company recorded a
pretax restructuring charge of $45.4 million in 1996. The charge consisted of
estimated costs for asset dispositions ($9 million) and employee severance
($36.4 million). This charge is reflected in cost of sales ($35.2 million) and
selling, general, and administrative expense ($10.2 million) in the 1996
consolidated statement of income. As of December 31, 1997, 18 of the 21 plants
had been fully or partially closed. The remaining plants will be closed during
1998 and the first half of 1999.
<PAGE>
During the third quarter of 1997, the Company recorded pretax restructuring
charges of $24.5 million. The restructuring charges include additional costs for
closing the 21 plants discussed above and costs associated with the continued
consolidation of the Company's core businesses. The additional charge for plant
closing costs represents amounts which could not be recorded in 1996 because
they did not meet the requirements for accrual in that year due to the timeframe
over which the plant closing plan was expected to be completed. The
restructuring charges consisted of employee severance costs of $21.6 million and
$2.9 million for expected losses on the disposition of assets. Expenses of $7.7
million were included in cost of sales; $13.9 million was included in selling,
general, and administrative expense, and $2.9 million was included in other
expense in the 1997 consolidated statement of income.
The Company's consolidated balance sheets reflect restructuring accruals of
$39.5 million and $29.1 million as of December 31, 1997 and 1996, respectively,
for employee severance costs, and $3.7 million and $3.8 million as of December
31, 1997 and 1996, respectively, for estimated losses on asset dispositions. The
majority of the severance costs are expected to be paid in 1998 and early 1999
with cash generated from the Company's operations.
NOTE FOUR
IMPAIRMENT LOSSES
During December 1996, the Company announced its plans to divest three of the
businesses in the Deluxe Direct segment - Nelco, Inc., PaperDirect, Inc., and
the Social Expressions unit of Current, Inc. Based on fair market value
estimates at that time, the Company recorded a $111.9 million charge to write
down the carrying amounts of these businesses to estimated fair value less cost
to sell. Additionally, in September 1997, the Company determined that it would
dispose of the international operations of the Deluxe Electronic Payment Systems
segment. Based on fair market value estimates of these international operations
and changes in the fair market value of the PaperDirect and Social Expressions
businesses, the Company recorded an additional charge of $99 million in 1997 to
write down the carrying amounts of these businesses to estimated fair value less
cost to sell. The 1997 charge is included in the 1997 consolidated statement of
income in goodwill impairment charge ($82.9 million) and selling, general, and
administrative expense ($16.1 million). The 1996 charge is reflected in goodwill
impairment charge. The Company will not depreciate or amortize any of the
long-term assets of these businesses while they are held for disposal. The
Company anticipates completing these disposal efforts in 1998. At December 31,
1997 and 1996, the aggregate remaining carrying amount of businesses held for
sale was $83 million and $158.5 million, respectively. Together, these
businesses recorded sales of $243.2 million, $275.3 million, and $323.9 million
and contributed a net loss of $4.2 million, $17.4 million, and $35.3 million in
1997, 1996, and 1995, respectively, excluding the impairment charges in 1997 and
1996.
NOTE FIVE
BUSINESS COMBINATIONS
1997 DIVESTITURES - During 1997, the Company sold substantially all of the
assets of Nelco, Inc., the U.K. checks business, and a product line within the
Company's Financial Services segment. The aggregate sales price for these
businesses was $17.4 million, consisting of cash proceeds of $11.7 million and
notes receivable of $5.7 million. The consolidated financial statements of the
Company include the results of these businesses through their individual sale
dates. In aggregate, the effect of these divestitures did not have a material
impact on the operations of the Company.
1997 ACQUISITIONS - During 1997, the Company acquired substantially all of the
assets of Fusion Marketing Group, Inc., for $10.6 million. Fusion provides
customized database marketing services to financial institutions. Under the
purchase agreement, the Company may have to pay additional amounts through the
year 2000, contingent on the future earnings of the Fusion business. The
acquisition was accounted for under the purchase method. Accordingly, the
consolidated financial statements of the Company include the results of this
business subsequent to its acquisition date. The purchase price was allocated to
the assets acquired and liabilities assumed based on their fair values on the
date of purchase. The total cost in excess of net assets acquired of $9.6
million was recorded as goodwill and is being amortized over 15 years. The
effect of this acquisition was not material to the Company's operations.
<PAGE>
1996 DIVESTITURES - During 1996, the Company sold its Health Care Forms, T/Maker
Company, Financial Alliance Processing Services, Inc., U.K. forms, and internal
bank forms businesses. The aggregate sales price for these businesses was $133.3
million consisting of cash proceeds of $116.7 million and notes receivable of
$16.6 million. The resultant aggregate net gain on these sales was $37 million.
The consolidated financial statements of the Company include the results of
these businesses through their individual sale dates. In aggregate, the
financial statements of the Company include revenues from these businesses of
$118.1 million and $133.2 million in 1996 and 1995, respectively. Also, they
contributed net income of $2.6 million in 1996 and net losses of $9.3 million in
1995.
1996 ACQUISITIONS - During 1996, the Company purchased a number of businesses in
the payment protection and database marketing fields. The aggregate amount paid
for these acquisitions was $18.6 million. Additionally, under the purchase
agreements, the Company may have to pay additional amounts up to $14.3 million
contingent on the future net earnings of some of the acquired businesses.
Each acquisition was accounted for using the purchase method. Accordingly,
the consolidated financial statements of the Company include the results of
these businesses subsequent to their purchase dates. The purchase price for each
acquisition was allocated to the assets acquired and liabilities assumed based
on their fair values at the time of purchase. The aggregate cost in excess of
net assets acquired for these acquisitions was $16.5 million, which was recorded
as goodwill and is being amortized over periods ranging from five to 25 years.
The combined effect of these acquisitions did not have a material pro forma
impact on the operations of the Company.
1996 JOINT VENTURE - During 1997, the Company completed its 1996 agreement to
form a joint venture with HCL Corporation of India. This venture provides
software development and other services to financial institutions in the United
States and in certain foreign countries. The joint venture commenced operations
in September 1997. The results of the joint venture did not have a material
effect on the Company's operations in 1997.
1995 ACQUISITIONS - On January 10, 1995, the Company acquired all of the
outstanding stock of Financial Alliance Processing Services, Inc., a provider of
merchant credit card processing, for $38.8 million. The acquisition was
accounted for under the purchase method. Accordingly, the purchase price was
allocated to the net assets acquired based on their fair values on the date of
purchase. The total cost in excess of the fair value of the net assets acquired
of $36.6 million was recorded as goodwill and was being amortized over a 10-year
period. In December 1996, the Company sold all of its capital interest in
Financial Alliance Processing Services, Inc. The effect of this acquisition and
subsequent divestiture did not have a material pro forma impact on the Company's
operations.
NOTE SIX
MARKETABLE SECURITIES
On December 31, 1997, the Company held marketable securities of $8 million. In
aggregate, the fair market value of these securities approximated cost. Debt
securities (included in cash and cash equivalents) held on December 31, 1997 and
1996, of $129.7 million and $73.3 million, respectively, were highly liquid and
had experienced no material aggregate unrealized holding gains or losses as of
these dates.
There were no sales of marketable securities in 1997. Proceeds from sales of
marketable securities available for sale were $6.3 million and $54.6 million in
1996 and 1995, respectively. The Company realized net losses of $36,000 and $1.1
million in 1996 and 1995, respectively, on these sales.
<PAGE>
NOTE SEVEN
PROVISION FOR INCOME TAXES
The components of the provision for income taxes from continuing operations are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax provision:
Federal $ 84,392 $ 67,749 $71,884
State 14,062 11,794 17,845
- ----------------------------------------------------------------------------------------
Total 98,454 79,543 89,729
Deferred tax (benefit) provision:
Federal (23,876) (29,581) (10,587)
State (4,100) 3,340 (4,257)
- ----------------------------------------------------------------------------------------
Total $ 70,478 $ 53,302 $74,885
========================================================================================
</TABLE>
The Company's effective tax rate on pretax income from continuing operations
differs from the U.S. Federal statutory tax rate of 35% as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at Federal statutory rate $40,303 $ 41,568 $59,262
State income taxes net of Federal income tax benefit 6,442 9,837 8,832
Amortization and write-down of non-deductible intangibles 32,116 44,170 5,978
Recognition of excess of tax basis over book investment
in subsidiaries sold and held for disposal (3,786) (45,430)
Change in valuation allowance 1,024 7,496 4,355
Other (5,621) (4,339) (3,542)
- ----------------------------------------------------------------------------------------------------------------------
Provision for income taxes $70,478 $ 53,302 $74,885
======================================================================================================================
</TABLE>
Tax effected temporary differences which give rise to a significant portion
of deferred tax assets and liabilities at December 31, 1997 and 1996, are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Deferred Deferred Deferred Deferred
tax tax tax tax
assets liabilities assets liabilities
<S> <C> <C> <C> <C>
Property, plant, and equipment $ 21,412 $26,879
Deferred advertising 2,994 5,129
Employee benefit plans $ 12,599 $ 11,270
Inventory 1,755 3,077
Intangibles 19,280 9,284
Foreign net operating loss carry forwards 10,447 8,059
Excess of tax basis over book investment in
subsidiaries held for disposal 34,203 30,417
Restructuring accrual 18,419 12,898
Reserve for legal proceedings 13,991
Miscellaneous reserves and accruals 7,213 8,868
All other 13,638 7,111 8,490 7,017
- ----------------------------------------------------------------------------------------------------------------------
Subtotal 112,265 50,797 83,079 48,309
Valuation allowance (17,163) (16,194)
- ----------------------------------------------------------------------------------------------------------------------
Total deferred taxes $ 95,102 $50,797 $ 66,885 $48,309
======================================================================================================================
</TABLE>
<PAGE>
In accordance with SFAS No. 109, "Accounting for Income Taxes," the Company does
not recognize deferred tax assets for the excess of tax basis over the basis for
financial reporting of investments in subsidiaries until it becomes apparent
that these temporary differences will reverse in the foreseeable future. The tax
benefit arising from the difference in tax and financial reporting bases in
subsidiaries was recognized in 1996 for those subsidiaries sold during the year
(see note 5). Additionally, in December 1996, the Company announced its
intention to sell certain businesses within its Deluxe Direct segment. The
deferred tax assets relating to the investments in these subsidiaries were
reflected in the Company's consolidated financial statements at December 31,
1997 and 1996, to the extent that realization of such benefits was more likely
than not. The remainder of the valuation allowance at December 31, 1997 and
1996, relates to the uncertainty of realizing foreign deferred tax assets.
NOTE EIGHT
EMPLOYEE BENEFIT AND STOCK-BASED COMPENSATION PLANS
STOCK PURCHASE PLAN - The Company has an employee stock purchase plan that
enables eligible employees to purchase the Company's common stock at 75% of its
fair market value on the first business day following each three-month purchase
period. Compensation expense recognized for the difference between the
employees' purchase price and the fair value of the stock was $6.7 million, $7.5
million, and $8.2 million in 1997, 1996, and 1995, respectively. Under the plan,
840,143, 907,424, and 1,121,153 shares were issued at prices ranging from $22.88
to $24.75, $22.41 to $28.04, and $20.07 to $24.00 in 1997, 1996, and 1995,
respectively.
STOCK INCENTIVE PLAN - Under the stock incentive plan, stock-based awards may be
issued to employees via a broad range of methods, including non-qualified or
incentive stock options, restricted stock and restricted stock units, stock
appreciation rights, and other awards based on the value of the Company's common
stock. The plan was amended in 1996 to reserve an aggregate of 7 million shares
of common stock for issuance under the plan. Through 1997, the Company has
issued restricted shares and restricted stock units, and non-qualified and
incentive stock options. At December 31, 1997, options for 4.9 million shares
remain available for issuance under the plan.
All options allow for the purchase of shares of common stock at prices equal
to their market value at the date of grant. Options become exercisable in
varying amounts beginning generally one year after the date of grant.
Information regarding the options issued under the current plan, which was
adopted in 1994, and the remaining options outstanding under the former plan
adopted in 1984, is as follows:
<TABLE>
<CAPTION>
Weighted Average
Number of Shares Exercise Price
- --------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1995 2,212,149 $35.04
Granted 204,899 30.33
Exercised (44,566) 28.43
Canceled (224,909) 34.85
- --------------------------------------------------------------------------------------
Outstanding at December 31, 1995 2,147,573 $34.81
Granted 631,250 30.63
Exercised (144,039) 30.71
Canceled (496,225) 34.54
- --------------------------------------------------------------------------------------
Outstanding at December 31, 1996 2,138,559 $33.92
Granted 808,400 30.92
Exercised (126,100) 29.25
Canceled (317,507) 35.07
- --------------------------------------------------------------------------------------
Outstanding at December 31, 1997 2,503,352 $33.04
======================================================================================
</TABLE>
<PAGE>
For options outstanding and exercisable at December 31, 1997, the exercise price
ranges and average remaining lives were as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -------------------------------
Range of Number Weighted-Average Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$24.25 to $35.125 1,869,297 7.5 years $30.26 943,861 $29.82
$35.50 to $45.875 634,055 5.0 years $41.23 614,055 $41.30
2,503,352 6.8 years $33.04 1,557,916 $34.34
=========================================================================================================================
</TABLE>
The Company issued 72,581, 19,752, and 66,399 restricted shares and
restricted stock units at weighted average fair values of $31.52, $35.25, and
$30.22 during 1997, 1996, and 1995, respectively. These awards generally vest
over periods ranging from one to five years.
Pro forma information regarding net income and income per share has been
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS No. 123. The fair value of these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions: risk-free interest rate of about 6%,
dividend yield of approximately 4%, and expected volatility of 23%. The
weighted-average expected option life was 7.17 years, 6.90 years, and 7.12 years
for 1997, 1996, and 1995, respectively. The weighted-average fair value of
options granted in 1997, 1996, and 1995 was $7.49, $6.86, and $6.99 per share,
respectively. For purposes of pro forma disclosures, the estimated fair value of
the options was recognized as expense over the options' vesting periods. The
Company's pro forma net income and income per share were as follows (dollars in
thousands, except per share amounts):
1997 1996 1995
- ------------------------------------------------------------------
Net income:
As reported $44,672 $65,463 $87,021
Pro forma 44,536 63,353 86,801
Basic net income per share:
As reported $ .55 $ .80 $ 1.06
Pro forma .54 .77 1.05
Diluted net income per share:
As reported $ .55 $ .79 $ 1.06
Pro forma .54 .77 1.05
==================================================================
These pro forma calculations only include the effects of grants made
subsequent to January 1, 1995. As such, these impacts are not necessarily
indicative of the effects on reported net income of future years.
PROFIT SHARING, DEFINED CONTRIBUTION AND 401(k) PLANS - The Company maintains
profit sharing plans, a defined contribution pension plan, and plans established
under section 401(k) of the Internal Revenue Code to provide retirement for
certain of its employees. The plans cover substantially all full-time employees
with at least 15 months of service. Contributions to the profit sharing and
defined contribution plans are made solely by the Company. Employees may
contribute up to 5% of their wages to the 401(k) plan. The Company will match
100% of amounts up to 1% of wages contributed and 50% of the remaining funds
contributed. All contributions are remitted to the plans' respective trustees,
and benefits provided by the plans are paid from accumulated funds by the
trustees.
Contributions to the defined contribution plan equaled 6% of eligible
compensation in 1997, 1996, and 1995. Related expense for these years was $18.6
million, $19.9 million, and $20.8 million, respectively. Contributions to the
profit sharing plans vary based on the Company's performance. Expense for these
plans was $25.6 million, $44.5 million, and $50.6 million in 1997, 1996, and
1995, respectively. The 401(k) plan was established on January 1, 1997. Company
contributions to the 401(k) plan were $7 million in 1997.
<PAGE>
NOTE NINE
POSTRETIREMENT BENEFITS
The Company provides certain health care benefits for a large number of its
retired employees. Employees included in the plan may become eligible for such
benefits if they attain the appropriate years of service and age while working
for the Company. Certain retirees' medical insurance premiums are based on the
amounts paid by active employees. Effective January 1, 1998, active employees'
premiums were reduced, thus reducing the medical premiums required to be paid by
these retirees. Additionally, for retirees who participate in the active
employees' indemnity plans, their copayment amount was increased 5%. The plan
was also amended to provide employees who are involuntarily terminated and who
are qualified retirees at the time of termination with a bridge for retiree
medical benefits if they are terminated prior to age 53.
The following table summarizes the funded status of the plan at December 31
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $49,347 $46,645
Fully eligible plan participants 64 38
Other active participants 16,772 12,462
- ----------------------------------------------------------------------------------
Total 66,183 59,145
Less:
Fair value of plan assets (debt and equity securities) 60,203 51,828
Unrecognized prior service cost 1,621 1,891
Unrecognized net gain (2,364) (3,309)
Unrecognized transition obligation 10,192 10,872
- ----------------------------------------------------------------------------------
Prepaid postretirement asset recognized in the
consolidated balance sheets $ (3,469) $ (2,137)
==================================================================================
</TABLE>
Net postretirement benefit cost for the year ended December 31 consisted of
the following components (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 877 $ 899 $ 474
Interest cost on the accumulated postretirement
benefit obligation 4,163 4,416 4,392
Actual return on plan assets (11,133) (7,126) (9,897)
Amortization of transition obligation 680 1,025 1,140
Net amortization and deferral of gains and losses 6,345 3,194 6,604
- --------------------------------------------------------------------------------------------------------------
Net postretirement benefit cost 932 2,408 2,713
Curtailment loss 3,019
==============================================================================================================
Total postretirement benefit cost $ 932 $ 5,427 $ 2,713
==============================================================================================================
</TABLE>
As a result of the 1996 plan to close 21 financial institution check printing
plants (see note 3) and the sale of the Company's Health Care Forms and internal
bank forms businesses in 1996 (see note 5), the Company recognized a
postretirement benefit curtailment loss of $3 million in 1996.
In measuring the accumulated postretirement benefit obligation as of December
31, 1997, the Company's health care inflation rate for 1998 was assumed to be
7%. Inflation rates are assumed to trend downward gradually over the next three
years to 5% for the years 2000 and beyond. A one percentage point increase in
the health care inflation rate for each year would increase the accumulated
postretirement benefit obligation by approximately $9.7 million, and the service
and interest cost components of the net postretirement benefit cost by
approximately $.8 million. The discount rate used in determining the accumulated
postretirement benefit obligation as of December 31, 1997 and 1996, was 7.25%.
The expected long-term rate of return on plan assets used to determine the net
periodic postretirement benefit cost was 9.5% in 1997 and 1996.
<PAGE>
NOTE TEN
LEASE AND DEBT COMMITMENTS
Long-term debt was as follows at December 31 (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
8.55% unsecured and unsubordinated notes
due February 15, 2001 $100,000 $100,000
Other 17,064 15,228
- ----------------------------------------------------------------------------------------------
Total long-term debt 117,064 115,228
Less amount due within one year 7,078 6,606
- ----------------------------------------------------------------------------------------------
Total $109,986 $108,622
==============================================================================================
</TABLE>
In February 1991, the Company issued $100 million of 8.55% unsecured and
unsubordinated notes due February 15, 2001. The notes are not redeemable prior
to maturity. The fair values of these notes were estimated to be $106.7 million
and $107 million at December 31, 1997 and 1996, respectively, based on quoted
market prices.
Other long-term debt consists principally of capital leases on equipment and
payments due under non-compete agreements. The capital lease obligations bear
interest rates of 4% to 21% and are due through the year 2012. Carrying value
materially approximates fair value for these obligations.
Maturities of long-term debt for the five years ending December 31, 2002, are
$7.1 million, $7 million, $.9 million, $100.8 million, and $.7 million, and $.6
million thereafter.
The Company has uncommitted bank lines of credit for $170 million. The
average amount drawn on those lines during 1997 was $3.1 million at a weighted
average interest rate of 6.47%. There was no outstanding balance at December 31,
1997. At December 31, 1996, $17 million was outstanding at an interest rate of
6.5%. The Company also has in place a $150 million committed line of credit as
support for commercial paper and as a source of cash. No commercial paper was
outstanding at December 31, 1997 and 1996. Additionally, the Company has a shelf
registration in place for the issuance of up to $300 million in medium-term
notes. Such notes could be used for general corporate purposes, including
working capital, capital expenditures, possible acquisitions, and repayment or
repurchase of outstanding indebtedness and other securities of the Company. As
of December 31, 1997 and 1996, no such notes were issued or outstanding.
Minimum future rental payments for leased facilities and equipment for the
five years ending December 31, 2002, are $32.5 million, $26.1 million, $17.2
million, $8.8 million, and $4.9 million, and $4.4 million thereafter. Rental
expense was $40.9 million, $40.4 million, and $44.3 million for 1997, 1996, and
1995, respectively.
NOTE ELEVEN
COMMON STOCK PURCHASE RIGHTS
On February 5, 1988, the Company declared a distribution to shareholders of
record on February 22, 1988, of one common stock purchase right for each
outstanding share of common stock. These rights were governed by the terms and
conditions of a rights agreement entered into by the Company as of February 12,
1988. That agreement was amended and restated as of January 31, 1997 (Restated
Agreement).
Pursuant to the Restated Agreement, upon the occurrence of certain events,
each right will entitle the holder to purchase one share of common stock at an
exercise price of $150. In certain circumstances described in the Restated
Agreement, if (i) any person becomes the beneficial owner of 15% or more of the
Company's common stock, (ii) the Company is acquired in a merger or other
business combination or (iii) upon the occurrence of other events, each right
will entitle its holder to purchase a number of shares of common stock of the
Company, or the acquirer or the surviving entity if the Company is not the
surviving corporation in such a transaction. The number of shares purchasable
will be equal to the exercise price of the right divided by 50% of the
then-current market price of one share of common stock of the Company, or other
surviving entity (i.e., at a 50% discount), subject to adjustments provided in
the Restated Agreement. The rights expire January 31, 2007, and may be redeemed
by the Company at a price of $.01 per right at any time prior to the occurrence
of the circumstances described above.
<PAGE>
NOTE TWELVE
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Additional gain (loss) on Cumulative
Common paid-in Retained Unearned marketable translation
(Dollars in thousands) shares capital earnings compensation securities adjustment
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $82,375 $ 1,694 $ 732,158 $ (149) $ (2,054) $ 369
Net income 87,021
Cash dividends (122,143)
Common stock issued 1,180 33,285
Common stock retired (1,191) (33,524)
Unearned compensation (590)
Unrealized fair value adjustments,
net of taxes of $977 1,812
Translation adjustment 131
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 82,364 1,455 697,036 (739) (242) 500
Net income 65,463
Cash dividends (121,976)
Common stock issued 1,106 35,824
Common stock retired (1,414) (37,279) (9,372)
Unearned compensation (198)
Unrealized fair value adjustments,
net of taxes of $130 242
Translation adjustment 146
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 82,056 0 631,151 (937) 0 646
Net income 44,672
Cash dividends (121,321)
Common stock issued 985 30,124
Common stock retired (1,715) (25,366) (29,200)
Unearned compensation 288
Translation adjustment (1,135)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $81,326 $ 4,758 $ 525,302 $ (649) $ 0 $ (489)
=========================================================================================================================
</TABLE>
<PAGE>
NOTE THIRTEEN
BUSINESS SEGMENT INFORMATION
The Company has classified its operations into three business segments: Deluxe
Financial Services, Deluxe Electronic Payment Systems, and Deluxe Direct. Deluxe
Financial Services provides check printing, direct marketing, customer database
management, and related services to financial institutions; checks directly to
households and small businesses; and payment protection and collections services
to financial institutions and the retail market primarily in the United States.
Deluxe Electronic Payment Systems provides debit transaction processing and
other electronic banking functions in the United States and internationally.
Deluxe Direct primarily sells greeting cards, stationery, and specialty paper
products through direct mail to customers principally in the United States. As a
result of the Company's reorganization process, the Company determined that the
businesses in the Deluxe Direct segment do not fit into the Company's long-term
plans. During 1996 and 1997, a number of these businesses were sold and the
remaining portions of this business segment are expected to be sold in 1998.
For the three years ended December 31, 1997, the Company's segment
information is as follows. The costs of the Company's corporate operations have
been allocated to each segment based on the services provided to them. The
restructuring charges (see note 3) and impairment losses (see note 4) recorded
by the Company are reflected in the segment generating such charges.
<TABLE>
<CAPTION>
Deluxe Financial Deluxe Electronic
1997 (dollars in thousands) Services Payment Systems Deluxe Direct Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,543,263 $143,561 $232,542 $1,919,366
Income (loss) from operations 275,918 (27,863) (92,335) 155,720
Identifiable assets 830,872 170,126 147,366 1,148,364
Depreciation and amortization 61,570 21,871 13,828 97,269
Capital expenditures 85,827 16,194 7,479 109,500
- ----------------------------------------------------------------------------------------------------------
1996
Net sales $1,474,222 $129,920 $ 375,485 $1,979,627
Income (loss) from operations 251,621 (25,154) (139,358) 87,109
Identifiable assets 781,996 160,716 233,728 1,176,440
Depreciation and amortization 56,860 21,638 28,138 106,636
Capital expenditures 76,815 5,576 9,647 92,038
- ----------------------------------------------------------------------------------------------------------
1995
Net sales $1,374,435 $124,509 $ 437,775 $1,936,719
Income (loss) from operations 257,330 1,778 (75,324) 183,784
Identifiable assets 628,773 135,851 530,471 1,295,095
Depreciation and amortization 53,606 18,291 31,406 103,303
Capital expenditures 75,662 19,330 30,076 125,068
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE FOURTEEN
DISCONTINUED OPERATIONS
On November 29, 1995, the Company adopted a plan to exit the Printwise ink
business. Accordingly, Printwise is reported as a discontinued operation for the
year ended December 31, 1995. Net assets of the discontinued operation at
December 31, 1995, consisted primarily of property, plant, and equipment. The
Company disposed of substantially all the assets of the business in 1996. The
loss on the disposal of Printwise did not differ significantly from the
estimated loss as of December 31, 1995. Summarized results of Printwise for the
year ended December 31, 1995, are as follows:
Year ended December 31 (dollars in thousands) 1995
- --------------------------------------------------------------
Net sales $ 1,124
- --------------------------------------------------------------
Loss from operations before income tax benefit (5,244)
Income tax benefit 2,146
- --------------------------------------------------------------
Loss from operations (3,098)
- --------------------------------------------------------------
Loss on disposal before income tax benefit (7,300)
Income tax benefit 2,985
- --------------------------------------------------------------
Loss on disposal (4,315)
- --------------------------------------------------------------
Total loss on discontinued operations $(7,413)
==============================================================
NOTE FIFTEEN
LEGAL PROCEEDINGS
During 1997, a judgment was entered against Deluxe Electronic Payment Systems,
Inc. (DEPS), in U.S. District Court in Pittsburgh. The case was brought against
DEPS by Mellon Bank in connection with a potential bid to provide electronic
benefits transfer services for the Southern Alliance of States. In September
1997, the Company recorded a pretax charge of $40 million to reserve for this
judgment and other related costs. The Company has filed a notice of appeal from
this judgment and has thus classified this obligation as other long-term
liabilities in the December 31, 1997, consolidated balance sheet.
<PAGE>
INDEPENDENT
AUDITORS' REPORT
To the Shareholders of Deluxe Corporation:
We have audited the accompanying consolidated balance sheets of Deluxe
Corporation and its subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 Deluxe Corporation and its
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
January 26, 1998
<PAGE>
SUMMARIZED QUARTERLY
FINANCIAL DATA (UNAUDITED)
The following net sales and cost of sales data differs from that reported in the
Company's quarterly financial statements as reported on Form 10-Q due to the
financial statement reclassifications outlined in note 1. The following per
share net income data differs from that reported in the Company's quarterly
financial statements as reported on Form 10-Q due to the application of
Statement of Financial Accounting Standards No. 128, "Earnings per Share."
<TABLE>
<CAPTION>
1997 Quarter Ended MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $490,104 $463,750 $466,908 $498,604
Cost of sales 227,195 214,854 222,516 218,622
Net income (loss) 41,425 37,457 (67,515)(1) 33,305
Per share of common stock
Net income (loss) - basic .50 .46 (.82) .41
Net income (loss) - diluted .50 .46 (.82) .41
Cash dividends .37 .37 .37 .37
- ---------------------------------------------------------------------------------------------------------
1996 Quarter Ended March 31 June 30 September 30 December 31
- ---------------------------------------------------------------------------------------------------------
Net sales $508,289 $486,734 $482,199 $502,405
Cost of sales 270,885 234,320 232,829 245,410
Net income (loss) 18,921(2) 38,056 33,524 (25,038)(2)
Per share of common stock
Net income (loss) - basic .23 .46 .41 (.30)
Net income (loss) - diluted .23 .46 .41 (.30)
Cash dividends .37 .37 .37 .37
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1997 third quarter results include a pretax charge of $180 million, related
primarily to impaired assets (see note 4), production consolidation (see note
3), legal proceedings (see note 15), and other balance sheet adjustments.
(2) 1996 first and fourth quarter results include net pretax charges of $34.8
million and $107.5 million, respectively, related to production consolidation
(see note 3), goodwill impairment (see note 4), gains and losses on sales of
businesses (see note 5), postretirement benefit curtailment loss (see note 9),
and write-offs of non-performing assets.
<PAGE>
SHAREHOLDER
INFORMATION
QUARTERLY STOCK DATA
The charts below show the per-share price range of the Company's common stock
for the past two fiscal years as quoted on the New York Stock Exchange.
[GRAPH]
1997 QUARTER HIGH LOW CLOSE
- ----------------------------------------------------------------
1st 33 5/8 29 3/4 32 1/4
2nd 34 9/16 29 3/4 34 1/8
3rd 35 7/8 32 5/16 33 9/16
4th 37 31 1/4 34 1/2
- ----------------------------------------------------------------
1996 QUARTER HIGH LOW CLOSE
- ----------------------------------------------------------------
1st 33 5/8 27 31 3/8
2nd 37 7/8 30 1/4 35 1/2
3rd 39 3/4 33 37 3/4
4th 39 3/8 29 3/4 32 3/4
- ----------------------------------------------------------------
STOCK EXCHANGE
Deluxe Corporation common stock is traded on the New York Stock Exchange under
the symbol DLX.
ANNUAL MEETING
The annual meeting of the shareholders of Deluxe Corporation will be held
Tuesday, May 5, 1998, at The Donald E. Benson Great Hall, Bethel College, 3900
Bethel Drive, St. Paul, Minnesota at 5 p.m.
FORM 10-K AVAILABLE
A copy of the Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission by the Company, may be obtained without charge by
calling 1-888-359-6397 (1-888-DLX-NEWS) or by sending a written request to
Stuart Alexander, Deluxe Corporation, P.O. Box 64235, St. Paul, Minnesota
55164-0235.
SHAREHOLDER INQUIRIES
Requests for additional information should be sent to corporate headquarters to
the attention of:
Stuart Alexander, Vice President
(612) 483-7358
STOCK OWNERSHIP AND RECORD KEEPING
Norwest Bank Minnesota N.A.
Stock Transfer Department
161 N. Concord Exchange
P.O. Box 64854
St. Paul, Minnesota 55164-0854
(800) 468-9716
(612) 450-4064
E-mail: [email protected]
<PAGE>
EXECUTIVE OFFICES
STREET ADDRESS:
3680 Victoria St. N.
Shoreview, Minnesota 55126-2966
MAILING ADDRESS:
P.O. Box 64235
St. Paul, Minnesota 55164-0235
(612) 483-7111
TOLL-FREE SHAREHOLDER INFORMATION LINE
You may dial 1-888-359-6397 (1-888-DLX-NEWS) to listen to the latest financial
results, dividend news, and other information about Deluxe or to request copies
of our annual report, 10-K, 10-Q, proxy statement, news releases, and financial
presentation information.
PLANNED RELEASE DATES
Quarterly results: Thursday, April 23, July 23, October 22, Wednesday, January
27, 1999.
Dividends are announced the second week of February, May, August, and November.
WEB SITE
Visit our home page at www.deluxe.com
FORWARD-LOOKING STATEMENTS
We use "forward-looking statements," as defined in the Private Securities Reform
Act of 1995, in this year's annual report. These statements typically address
management's present expectations about future performance and typically include
wording such as "should result," "expect," "anticipate," "estimate," or similar
expressions. Because of the unavoidable risks and uncertainties of predicting
the future, Deluxe's actual results may vary from management's current
expectations. These variations may be significant and may not always be
positive. Additional information about factors that may affect our current
estimates appears in our Form 10-K filed with the Securities and Exchange
Commission on March 31, 1998. To obtain a copy, we encourage investors to call
our shareholder information line (1-888-359-6397).
Exhibit 21.1
DELUXE CORPORATION SUBSIDIARIES
Chex Systems, Inc. (Minnesota)
Current, Inc. (Delaware)
Current Stationers, Inc. (Colorado)
Deluxe Canada, Inc. (Canada)
Deluxe Check Printers, Inc. (Minnesota)
Deluxe Check Texas, Inc. (Minnesota)
Deluxe Data International Limited (United Kingdom)
Deluxe Electronic Payment Systems, Inc. (Delaware)
Deluxe Financial Services, Inc. (Minnesota)
Deluxe Financial Services Texas, L.P. (Texas)
Deluxe-HCL, Inc. (Delaware) (100% owned by HCL-Deluxe N.V.)
Deluxe Holdings (Netherlands) B.V. (Netherlands)
Deluxe Mexicana S.A. de C.V. (Mexico)
Deluxe Overseas, Inc. (Minnesota)
Deluxe Payment Protection Systems, Inc. (Delaware)
DLX (UK) Limited (United Kingdom)
ESP Employment Screening Partners, Inc., (Minnesota)
HCL-Deluxe N.V. (Netherlands) (50% owned)
HCL-Deluxe Private Limited (India) (100% owned by HCL-Deluxe N.V.)
NRC Holding Corporation (Delaware)
National Credit Services Corporation (Missouri)
National Receivables Corporation (Ohio)
National Revenue Corporation (Ohio)
PaperDirect, Inc. (New Jersey)
PaperIndirect, Inc. (Colorado)
United Creditors Alliance Corporation (Ohio)
United Creditors Alliance International Limited (United Kingdom)
Exhibit 24.1
POWER OF ATTORNEY
Each of the undersigned directors and officers of DELUXE CORPORATION, a
Minnesota corporation, hereby constitutes and appoints John A. Blanchard III,
Thomas W. VanHimbergen and John H. LeFevre his true and lawful
attorneys-in-fact, and each of them, with full power to act without the other,
to sign the Company's annual report on Form 10-K for the year ended December 31,
1997, and any and all amendments to such report, and to file the same and any
such amendment, with any exhibits, and any other documents in connection with
such filing, with the Securities and Exchange Commission under the provisions of
the Securities Exchange Act of 1934.
Date
/s/ John A. Blanchard III 1/30/98
John A. Blanchard III, Director and
Principal Executive Officer
/s/ Thomas W. VanHimbergen 1/30/98
Thomas W. VanHimbergen, Principal Financial
Officer and Principal Accounting Officer
/s/ Whitney MacMillan 1/30/98
Whitney MacMillan, Director
/s/ James J. Renier 1/30/98
James J. Renier, Director
/s/ Barbara B. Grogan 1/30/98
Barbara B. Grogan, Director
Allen F. Jacobson, Director
/s/ Stephen P. Nachtsheim 1/30/98
Stephen P. Nachtsheim, Director
/s/ Calvin W. Aurand, Jr. 1/30/98
Calvin W. Aurand, Jr., Director
/s/ Donald R. Hollis 1/30/98
Stephen P. Nachtsheim, Director
/s/ Robert C. Salipante 1/30/98
Robert C. Salipante, Director
/s/ Jack Robinson 1/30/98
Jack Robinson, Director
/s/ Hatim A. Tyabji 1/30/98
Hatim A. Tyabji, Director
EXHIBIT 99.1
RISK FACTORS AND CAUTIONARY STATEMENTS
When used in this Annual Report on Form 10-K and in future filings by the
Company with the Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer, the words
or phrases "should result," "are expected to," "will continue," "will
approximate," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are
necessarily subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially from
the Company's historical experience and its present expectations or projections.
Caution should be taken not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The factors listed below could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ from any opinions or statements expressed
with respect thereto. Such differences could be material and adverse.
The Company will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances occurring after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events. This Exhibit 99 statement supersedes and replaces the
discussion in Item 5 of the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
Earnings Estimates. From time to time, the authorized representatives of the
Company may make predictions or forecasts regarding the Company's future
results, including estimated earnings or earnings from operations. Any forecast,
including the Company's current statement that it expects to achieve at least 3
to 6 percent annual growth in revenues and 5 to 9 percent annual growth earnings
in 1998, regarding the Company's future performance reflects various
assumptions. These assumptions are subject to significant uncertainties and, as
a matter of course, many of them will prove to be incorrect. Further, the
achievement of any forecast depends on numerous factors (including those
described in this discussion), many of which are beyond the Company's control.
As a result, there can be no assurance that the Company's performance will be
consistent with any management forecasts and the variation from such forecasts
may be material and adverse. Investors are cautioned not to base their entire
analysis of the Company's business and prospects upon isolated predictions, but
instead are encouraged to utilize the entire available mix of historical and
forward-looking information made available by the Company and other information
affecting the Company and its products when evaluating the Company's prospective
results of operations.
In addition, authorized representatives of the Company may occasionally comment
on the perceived reasonableness of published reports by independent analysts
regarding the Company's projected future performance. Such comments should not
be interpreted as an endorsement or adoption of any given estimate or range of
estimates or the assumptions and methodologies upon which such estimates are
based. Generally speaking, the Company does not make public its own internal
projections, budgets or estimates. Undue reliance should not be placed on any
comments regarding the conformity, or lack thereof, of any independent estimates
with the Company's own present expectations regarding its future results of
operations.
<PAGE>
The methodologies employed by the Company in arriving at its own internal
projections and the approaches taken by independent analysts in making their
estimates are likely different in many significant respects. Although the
Company may presently perceive a given estimate to be reasonable, changes in the
Company's business, market conditions or the general economic climate may have
varying effects on the results obtained through the use of differing analyses
and assumptions. The Company expressly disclaims any continuing responsibility
to advise analysts or the public markets of its view regarding the current
accuracy of the published estimates of outside analysts. Persons relying on such
estimates should pursue their own independent investigation and analysis of
their accuracy and the reasonableness of the assumptions on which they are
based.
Sales of Businesses. The Company has a continuing intention to divest the
remaining businesses comprising its Deluxe Direct segment. The possibility
exists, however, that the Company will not identify a suitable, viable buyer or
receive an acceptable price for the entities to be divested. A failure to
identify an appropriate buyer and/or reach an acceptable purchase price could
materially delay the anticipated sales and/or could result in further write-offs
by the Company, some of which could be significant. In addition, delays in the
execution of these sales could cause the Company to incur continued operating
losses from the businesses sought to be divested or make unanticipated
investments in those businesses. Any such delay would also postpone the receipt
and use by the Company of the proceeds expected to be generated thereby.
Other Dispositions and Acquisitions. In connection with its ongoing
restructuring, the Company may also consider divesting or discontinuing the
operation of various business units and assets and the Company may undertake one
or more significant acquisitions. Any such divestiture or discontinuance could
result in write-offs by the Company, some or all of which could be significant.
In addition, a significant acquisition could result in future earnings dilution
for the Company's shareholders.
Effect of Financial Institution Consolidation. There is an ongoing trend towards
increasing consolidation within the banking industry that has resulted in
increased competition and pressure on check prices. This concentration greatly
increases the importance to the Company of retaining its major customers and
attracting significant additional customers in an increasingly competitive
environment. Although the Company devotes considerable efforts towards the
development of a competitively priced, high quality suite of products for the
financial services and retail industries, there can be no assurance that
significant customers will not be lost nor that any such loss can be
counterbalanced through the addition of new customers or by expanded sales to
the Company's remaining customers.
Raw Material Postage Costs and Delivery Costs. Increases in the price of paper
and the cost of postage can adversely affect the profitability of the Company's
printing and mail order businesses. Events such as the 1997 UPS strike can also
adversely impact the Company's margins by imposing higher delivery costs.
Competitive pressures and overall trends in the marketplace may have the effect
of inhibiting the Company's ability to reflect increased costs of production in
the retail prices of its products.
<PAGE>
Timing and Amount of Anticipated Cost Reductions. With regard to the results of
the Company's ongoing cost reduction efforts, there can be no assurance that the
anticipated cost savings will be fully realized or will be achieved within the
time periods expected. The implementation of the printing plant closures is, in
large part, dependent upon the successful development of the software needed to
streamline the check ordering process and redistribute the resultant order flow
among the Company's remaining printing plants. Because of the complexities
inherent in the development of software products as sophisticated as those
needed to accomplish this task, there can be no assurance that unanticipated
development or conversion delays will not occur or that the delays recently
experienced by the Company in connection with such development and the
conversion will not continue beyond the Company's current expectations. Any such
occurrence (or the continuation of any such delay beyond current expectations)
could adversely affect the planned consolidation of the Company's printing
facilities and delay the realization or reduce the amount of the anticipated
expense reductions.
In addition, the achievement of the expected level of cost savings is dependent
upon the successful execution of a variety of other cost reduction strategies.
These additional efforts include the consolidation of the Company's purchasing
process, the disposition of unprofitable or low-margin businesses and other
efforts. The optimum means of realizing many of these strategies is, in some
cases, still being evaluated by the Company. Unexpected delays, complicating
factors and other hindrances are common in these types of endeavors and can
arise from a variety of sources, some of which are likely to have been
unanticipated. A failure to timely achieve one or more of the Company's primary
cost reduction objectives could materially reduce the benefit to the Company of
its cost savings programs and strategies or substantially delay the full
realization of their expected benefits.
Further, there can be no assurance that increased expenses attributable to other
areas of the Company's operations or to increases in raw material, labor,
equipment or other costs will not offset some or all of the savings expected to
be achieved through the cost reduction efforts. Competitive pressures and other
market factors may also require the Company to share the benefit of some or all
of any savings with its customers or otherwise adversely affect the prices it
receives or the market for its products. As a result, even if the expected cost
reductions are fully achieved in a timely manner, such reductions are not likely
to be fully reflected by commensurate gains in the Company's net income, cash
position, dividend rate or the price of its Common Stock.
Competition. Although the Company believes it is the leading check printer in
the United States, it faces considerable competition from other smaller
companies in both its traditional marketing channel to financial institutions
and from direct mail marketers of checks. From time to time, one or more of
these competitors reduce the prices of their products in an attempt to gain
market share. The corresponding pricing pressure placed on the Company has
resulted in reduced profit margins in the past and there can be no assurance
that similar pressures will not be exerted in the future.
Check printing is, and is expected to continue to be, an essential part of the
Company's business and the principal source of its operating income for at least
the next several years. A wide variety of alternative payment delivery systems,
including credit cards, debit cards, smart cards, ATM machines, direct deposit
and bill paying services, home banking applications and Internet-based retail
services, are in various stages of maturity or development and additional
systems will likely be introduced.
<PAGE>
Although the Company expects that there will continue to be a substantial market
for checks for the foreseeable future, the rate and the extent to which these
alternative systems will achieve consumer acceptance and replace checks cannot
be predicted. A surge in the popularity of any of these alternative payment
methods could have a material, adverse effect on the demand for the Company's
primary products and its account verification, payment protection and collection
services. The creation of these alternative payment methodologies has also
resulted in an increased interest in transaction processing as a source of
revenue, which has led to increased competition for the Company's transaction
processing businesses.
Seasonality. A significant portion of the revenues and earnings of the Company's
Deluxe Direct segment is dependent upon its results of operations during the
fourth quarter. As a result, the results reported for this division during the
first three quarters of any given year are not necessarily indicative of those
which may be expected for the entire year.
HCL Joint Venture. There can be no assurance that the software and transaction
processing products and software development services proposed to be offered by
the Company's joint venture with HCL Corporation of New Delhi, India will
achieve market acceptance in either the United States or India. In addition, the
Company has no operational experience in India and only limited international
exposure to date. Operations in foreign countries are subject to numerous
potential obstacles including, among other things, cultural differences,
political unrest, export controls, governmental interference or regulation (both
domestic and foreign), currency fluctuations, personnel issues and varying
competitive conditions. There can be no assurance that one or more of these
factors, or additional causes or influences, many of which are likely to have
been unanticipated and beyond the ability of the Company to control, will not
operate to inhibit the success of the venture. As a result, there can be no
assurance that the HCL joint venture will generate significant revenues or
profits or provide an adequate return on any investment by the Company.
Debit Bureau. The Company has recently announced an alliance with several
entities that is intended to offer decision support tools for retailers and
financial institutions that offer or accept direct debit-based products, such as
checking accounts, ATM cards and debit cards. To date, this effort has primarily
been directed towards the creation of the supporting data warehouse and research
regarding the utility and value of the data available to the Company for use in
this area. There can be no assurance that this effort will result in the
introduction of a significant number of new products or the generation of
incremental revenues in material amounts.
Year 2000. In 1996, the Company initiated a companywide program to prepare its
computer systems and applications for the year 2000. During 1997, the Company
identified the systems affected, determined a resolution strategy for each
affected system, and began executing these resolution strategies. The Company
expects either to modify or upgrade existing systems or replace some systems
through other development projects. The Company expects to incur expenses of $17
million over the next two years, consisting of both internal staff costs and
consulting expenses, as it continues to implement its resolution strategy.
Because of the nature of the Company's business, the year 2000 issue would, if
it is not successfully resolved, pose a significant business risk for the
Company. The Company presently believes that with the planned modifications to
existing systems and the replacement of other systems, the year 2000 compliance
issue will be resolved in a timely manner and will not pose significant
operational problems for the Company, but the Company's ultimate success in this
endeavor cannot be assured. Additionally, the Company has communicated with its
suppliers and customers to determine their year 2000 readiness and the extent to
which the Company is vulnerable to any third party year 2000 issues. However,
there can be no assurances that the systems of other companies on which the
Company's systems rely will be converted in a timely manner or in a manner that
is compatible with the Company's systems. A failure by such a company to convert
their systems in a timely manner or a conversion that renders such systems
incompatible with those of the Company could have a material adverse effect on
the Company.
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