UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ending March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 1-7945
DELUXE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0216800
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3680 Victoria St., N. St. Paul, Minnesota 55126-2966
(Address of principal executive offices) (Zip Code)
(612) 483-7111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at May 6, 1998 was 80,826,968.
<PAGE>
ITEM I. FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, 1998 December 31,
(Unaudited) 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 153,459 $ 171,438
Marketable securities 13,696 8,021
Trade accounts receivable 135,640 151,201
Inventories:
Raw material 19,742 22,950
Semi-finished goods 10,817 9,132
Finished goods 17,786 23,768
Supplies 11,080 11,146
Deferred advertising 10,135 15,763
Deferred income taxes 50,351 50,345
Prepaid expenses and other current assets 51,972 48,849
----------- -----------
Total current assets 474,678 512,613
----------- -----------
LONG-TERM INVESTMENTS 51,892 52,910
PROPERTY, PLANT, AND EQUIPMENT
Land 38,349 38,832
Buildings and improvements 283,762 288,270
Machinery and equipment 557,432 562,637
Construction in progress 3,583 346
----------- -----------
Total 883,126 890,085
Less accumulated depreciation 479,511 475,077
----------- -----------
Property, plant, and equipment - net 403,615 415,008
INTANGIBLES
Cost in excess of net assets acquired - net 55,177 54,435
Internal use software - net 89,156 74,584
Other intangible assets - net 39,656 38,814
----------- -----------
Total intangibles 183,989 167,833
----------- -----------
TOTAL ASSETS $ 1,114,174 $ 1,148,364
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 76,940 $ 73,516
Accrued liabilities:
Wages, including vacation pay 63,058 62,513
Employee profit sharing and pension 9,480 40,517
Accrued income taxes 41,904 31,960
Accrued rebates 35,944 36,708
Other 122,693 129,263
Long-term debt due within one year 6,724 7,078
----------- -----------
Total current liabilities 356,743 381,555
----------- -----------
LONG-TERM DEBT 111,008 109,986
DEFERRED INCOME TAXES 6,353 6,040
OTHER LONG-TERM LIABILITIES 39,554 40,535
SHAREHOLDERS' EQUITY
Common shares - $1 par value (authorized 500,000,000 shares; issued: 1998 - 80,614 81,326
80,613,944 shares; 1997 - 81,325,925 shares)
Additional paid-in capital 4,758
Retained earnings 520,744 525,302
Unearned compensation (397) (649)
Cumulative translation adjustment (445) (489)
----------- -----------
Total shareholders' equity 600,516 610,248
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,114,174 $ 1,148,364
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except per Share Amounts)
(Unaudited)
QUARTER ENDED MARCH 31,
1998 1997
--------- ---------
NET SALES $ 488,970 $ 490,104
OPERATING EXPENSES
Cost of sales 223,612 227,195
Selling, general and administrative 193,841 196,767
--------- ---------
Total 417,453 423,962
--------- ---------
INCOME FROM OPERATIONS 71,517 66,142
OTHER INCOME (EXPENSE)
Other income 3,312 5,632
Interest expense (2,223) (2,385)
--------- ---------
INCOME BEFORE INCOME TAXES 72,606 69,389
PROVISION FOR INCOME TAXES 29,035 27,964
--------- ---------
NET INCOME $ 43,571 $ 41,425
========= =========
NET INCOME PER COMMON SHARE - Basic and Diluted $ 0.54 $ 0.50
CASH DIVIDENDS PER COMMON SHARE $ 0.37 $ 0.37
See Notes to Consolidated Financial Statements
<PAGE>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarter Ended March 31, 1998 and 1997
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 43,571 $ 41,425
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 15,150 14,120
Amortization of intangibles 5,393 6,920
Stock purchase discount 1,620 1,735
Net loss (gain) on sales of businesses 558 (3,500)
Changes in assets and liabilities, net of effects from
discontinued operations and sales of businesses:
Trade accounts receivable 15,051 (10,804)
Inventories 6,168 7,309
Accounts payable 3,666 (1,688)
Other assets and liabilities (29,339) (272)
--------- ---------
Net cash provided by continuing operations 61,838 55,245
Net cash used by discontinued operations (206)
--------- ---------
Net cash provided by operating activities 61,838 55,039
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of marketable securities with maturities of 8,000
more than 3 months
Purchases of marketable securities with maturities of more than 3 (13,674) (8,000)
months
Purchases of capital assets (24,652) (21,510)
Net proceeds from sales of businesses and discontinued operations,
net of cash sold 1,284 797
Other 5,798 (308)
--------- ---------
Net cash used in investing activities (23,244) (29,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 292
Payments on long-term debt (1,709) (1,643)
Payments to retire common stock (32,087) (4,899)
Proceeds from issuing stock under employee plans 7,096 5,674
Net payments on short-term debt (15,950)
Cash dividends paid to shareholders (30,165) (30,423)
--------- ---------
Net cash used in financing activities (56,573) (47,241)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,979) (21,223)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,438 142,571
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 153,459 $ 121,348
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 1998 and the
consolidated statements of income and the consolidated statements of cash flows
for the quarters ended March 31, 1998 and 1997 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements are included. Other than those discussed in the notes below, such
adjustments consist only of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented in accordance with
instructions for Form 10-Q, and do not contain certain information included in
the Company's consolidated annual financial statements and notes.
2. As of March 31, 1998, the Company had uncommitted bank lines of
credit of $170 million available at variable interest rates. As of that date,
there were no amounts drawn on those lines. The Company also had a $150 million
committed line of credit available for borrowing and as support for commercial
paper. As of March 31, 1998, the Company had no commercial paper outstanding and
no indebtedness outstanding under its committed line of credit. Additionally,
the Company had 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 March 31, 1998, no such notes were issued or outstanding.
3. During April 1998, the Company announced that it had reached an
agreement to sell PaperDirect, Inc. ("PaperDirect") and the Social Expressions
component ("Social Expressions") of Current, Inc. The closing is currently
expected to take place in the second quarter. The Company does not expect to
report any material gain or loss on the sale. These businesses, along with the
international component of Deluxe Electronic Payment Systems, are currently held
for sale and are accounted for in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". These businesses
contributed revenue of approximately $72 million and $67 million in the first
quarters of 1998 and 1997, respectively. They contributed no material operating
profit or loss in the first quarter of 1998 and contributed operating profit of
approximately $3.6 million in the first quarter of 1997. The direct mail check
printing business of Current is not part of the sale agreement and will remain
with Deluxe. The sale of PaperDirect and Social Expressions is subject to
certain contingencies. See "Part II, Item 5 - Other Information - Sales of
Businesses."
4. Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which
requires disclosure of comprehensive income and its components in the Company's
financial statements. The Company's total comprehensive income for the quarters
ended March 31, 1998 and 1997 was $43.6 million and $40.9 million, respectively.
The Company's comprehensive income consists of net income, unrealized holding
gains and losses on securities and foreign currency translation adjustments.
5. During 1998, the Company will adopt Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which requires the disclosure of financial and descriptive
information about the reportable operating segments of the Company. The Company
will also adopt Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" during 1998, which
revises employers' disclosures about pensions and other postretirement benefit
plans.
6. The following table reflects the calculation of basic and diluted
earnings per share (dollars and shares outstanding in thousands, except per
share amounts).
<PAGE>
- ------------------------------------------------------------------------------
Three Months Ended March 31,
1998 1997
- ------------------------------------------------------------------------------
Net income per share-basic:
Net income $43,571 $41,425
Weighted average shares outstanding 80,967 82,125
Net income per share-basic $.54 $.50
==============================================================================
Net income per share-diluted:
Net income $43,571 $41,425
- ------------------------------------------------------------------------------
Weighted average shares outstanding 80,967 82,125
Dilutive impact of options 191 80
Shares contingently issuable 3 6
- ------------------------------------------------------------------------------
Weighted average shares and potential dilutive
shares outstanding 81,161 82,211
- ------------------------------------------------------------------------------
Net income per share-diluted $.54 $.50
==============================================================================
7. The Company's balance sheets reflect restructuring accruals of $32.2
million and $39.5 million as of March 31, 1998 and December 31, 1997,
respectively, for employee severance costs, and $3.7 million as of both dates
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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Company Profile
The Company has organized its many business units into three reporting segments,
Deluxe Financial Services, Deluxe Electronic Payment Systems and Deluxe Direct.
Through Deluxe Financial Services, the Company provides check printing, direct
marketing assistance, business forms and related services to financial
institutions and their customers in the United States and Canada and payment
systems protection services, including check authorization, account
verification, and collection services to financial institutions and retailers.
Through Deluxe Electronic Payment Systems, the Company provides electronic funds
transfer and other software services to financial institutions and electronic
benefit transfer services to state governments. Through Deluxe Direct, the
Company provides specialty papers to small businesses and direct mail greeting
cards, gift wrap, and related products to households.
Results of Operations - Quarter Ended March 31, 1998 Compared to the Quarter
Ended March 31, 1997
Net sales were $489 million for the first quarter of 1998, relatively even with
the first quarter of 1997, when sales were $490.1 million. Deluxe Financial
Services' revenue decreased slightly from the first quarter of 1997 due to
decreased volume in the check printing and database marketing businesses. These
decreases were partially offset by increased volume in the payment protection
businesses, increased prices in the check printing business, and revenue from a
new practice of charging check printing customers for placing orders via
telephone as opposed to electronic channels. Deluxe Electronic Payment Systems'
revenue increased over 20% from the first quarter of 1997 due to increased
volume in a variety of product lines. Deluxe Direct's revenue decreased
approximately 7% from the first quarter of 1997 due primarily to lower volume
and sales of businesses.
Cost of sales decreased $3.6 million, or 1.6%, from the first quarter of 1997.
Deluxe Financial Services' costs of sales decreased approximately 4% from the
first quarter of 1997 due primarily to decreased volume in the check printing
and database marketing businesses, a more profitable product mix and
productivity improvements within the check printing business. Deluxe Electronic
Payment Systems' cost of sales increased just over 18% from the first quarter of
1997 primarily due to increased sales volume. Deluxe Direct's cost of sales
decreased approximately 6%, consistent with the reduced sales.
Selling, general and administrative expense decreased $2.9 million or 1.5% from
the first quarter of 1997. Deluxe Financial
<PAGE>
Services' selling, general and administrative expense decreased slightly from
the first quarter of 1997 due mainly to a decrease in marketing expenses. Deluxe
Electronic Payment Systems' selling, general and administrative expense
increased 13% over 1997 due to increased marketing and selling expenses and
costs of correcting its computer systems to address the Year 2000 problem.
Deluxe Direct's selling, general and administrative expense decreased
approximately 3% from 1997, due to sales of businesses.
Net income for the first quarter of 1998 increased 5.2% to $43.6 million,
compared to net income of $41.4 million for the first quarter of 1997. This
increase in net income is primarily the result of the changes discussed above
offset somewhat by a $3.5 million non-operating pretax gain recognized in 1997
for the sale of a business.
Financial Condition - Liquidity
Cash provided by operations was $61.8 million for the first quarter of 1998,
compared with $55.0 million for the first quarter of 1997. Cash from operations
represents the Company's primary source of working capital for financing capital
expenditures and paying cash dividends. The Company's working capital on March
31, 1998 was $117.9 million compared to $131.1 million on December 31, 1997. The
Company's current ratio on both March 31, 1998 and December 31, 1997 was 1.3 to
1.
Financial Condition - Capital Resources
Purchases of capital assets totaled $24.7 million for the first quarter of 1998
compared to $21.5 million during the comparable period one year ago. As of March
31, 1998, the Company had uncommitted bank lines of credit of $170 million
available at variable interest rates. As of that date, there were no amounts
drawn on those lines. The Company also had a $150 million committed line of
credit available for borrowing and as support for commercial paper. As of March
31, 1998, the Company had no commercial paper outstanding and no indebtedness
outstanding under its committed line of credit. Additionally, the Company had 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 March 31, 1998, no such notes were issued or outstanding. Cash
dividends totaled $30.2 million in the first three months of 1998 compared to
$30.4 million in the first three months of 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 approximately $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 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.
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 its divestiture program by selling its remaining
non-strategic businesses.
<PAGE>
The Company's ongoing changes related to organizational improvements and growth
opportunities may require additional charges to earnings. These charges, should,
however, lessen as the Company completes its reorganization and focuses on its
growth opportunities.
PART II - OTHER INFORMATION
Item 5. Other Information
RISK FACTORS AND CAUTIONARY STATEMENTS.
When used in this Quarterly Report on Form 10-Q and in future filings by the
Company with the Securities and Exchange 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 discussion supersedes the discussion in Exhibit 99.1
to the Company's Annual Report on Form 10-K for the year ended December 31,
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 in
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.
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
<PAGE>
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. Although the Company
has entered into a divestiture agreement for the sale of PaperDirect and the
Social Expressions business with a potential buyer, that agreement is currently
terminable by either of the parties due to the failure of the buyer to provide
the necessary assurances of its ability to fund the purchase of these businesses
prior to an agreed-upon date. The possibility exists that the potential buyer
will not obtain the needed financing in a timely manner, or at all. In addition,
either party could elect to abandon the proposed transaction at any time. The
occurrence of either of these events would materially delay the anticipated sale
and 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
operations 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.
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. 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.
<PAGE>
HCL Joint Venture. There can be no assurance that the software, transaction
processing services and 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. In addition, it is possible that the United
States government may impose economic or trade sanctions upon India that may
affect the joint venture as a result of India's recent nuclear tests.
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. In any event, the continued
development of the debit bureau is expected to require a significant level of
investment by the Company.
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 prior delays
experienced by the Company in connection with such development and the
conversion will not recur. Any such event 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.
Limited Source of Supply. The Company's check printing business utilizes a paper
printing plate material that is available from only a limited number of sources.
The Company believes it has a reliable source of supply for this material and
that it maintains an inventory sufficient to avoid any production disruptions in
the event of an interruption of its supply. In the event, however, that the
Company's current supplier becomes unwilling or unable to supply the required
printing plate material at an acceptable price and the Company is unable to
locate a suitable alternative source within a reasonable time
<PAGE>
frame, the Company would be forced to convert its facilities to an alternative
printing process. Any such conversion would require the unanticipated investment
of significant sums and there can be no assurance that the conversion could be
accomplished without production delays.
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.
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.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
10.1 Separation Agreement, effective as of April 6, 1998, by and between Filed herewith
Deluxe Corporation ("Deluxe") and Gregory J. Bjorndahl
10.2 Separation Agreement, effective as of April 23, 1998 between Deluxe and Filed herewith
Gregory J. Bjorndahl
10.3 Executive Retention Agreement, dated as of January 9, 1998, by and Filed herewith
between Deluxe and John A. Blanchard III
10.4 Executive Retention Agreement, dated as of January 9, 1998, by and Filed herewith
between Deluxe and Gregory J. Bjorndahl
10.5 Executive Retention Agreement, dated as of January 9, 1998, by and Filed herewith
between Deluxe and Ronald E. Eilers
10.6 Executive Retention Agreement, dated as of January 9, 1998, by and Filed herewith
between Deluxe and John H. LeFevre
10.7 Executive Retention Agreement, dated as of January 9, 1998, by and Fled herewith
between Deluxe and Lawrence J. Mosner
10.8 Schedule identifying other Executive Retention Agreements omitted for Filed herewith
this Report on Form 10-Q and the differences between such Agreements and
those filed herewith
12.1 Computation of Ratio of Earnings to Fixed Charges Filed herewith
27.1 Financial Data Schedule Filed herewith
</TABLE>
(b) The registrant did not, and was not required to, file any reports
on form 8-K during the quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
DELUXE CORPORATION
(Registrant)
Date May 15, 1998 /s/ J.A. Blanchard III
J.A. Blanchard III, President
and Chief Executive Officer
(Principal Executive Officer)
Date May 15, 1998 /s/ Thomas W. VanHimbergen
Thomas W. VanHimbergen, Senior
Vice President
and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page Number
- ----------- ----------- -----------
<S> <C> <C>
10.1 Separation Agreement, effective as of April 6, 1998, by and between
Deluxe Corporation ("Deluxe") and Gregory J. Bjorndahl
10.2 Separation Agreement, effective as of April 23, 1998 between Deluxe and
Gregory J. Bjorndahl
10.3 Executive Retention Agreement, dated as of January 9, 1998, by and
between Deluxe and John A. Blanchard III
10.4 Executive Retention Agreement, dated as of January 9, 1998, by and
between Deluxe and Gregory J. Bjorndahl
10.5 Executive Retention Agreement, dated as of January 9, 1998, by and
between Deluxe and Ronald E. Eilers
10.6 Executive Retention Agreement, dated as of January 9, 1998, by and
between Deluxe and John H. LeFevre
10.7 Executive Retention Agreement, dated as of January 9, 1998, by and
between Deluxe and Lawrence J. Mosner
10.8 Schedule identifying other Executive Retention Agreements
omitted for this Report on Form 10-Q and the differences
between such Agreements and those filed herewith
12.1 Computation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule
</TABLE>
Exhibit 10.1
SEPARATION AGREEMENT
This Separation Agreement is made and entered into April 3 , 1998,
between Gregory J. Bjorndahl (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 for several years; 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 March 31, 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 Six Thousand and 00/100 Dollars ($206,000.00) in
three installments of Sixty-Eight Thousand Six Hundred
Sixty-Six and 66/100 Dollars ($68,666.66), at the time
described in the last paragraph of this Section, Sixty-Eight
Thousand Six Hundred Sixty-Six and 66/100 Dollars ($68,666.66)
on April 8, 1999 and Sixty-Eight Thousand Six Hundred
Sixty-Six and 68/100 Dollars ($68,666.68) on April 8, 2000,
respectively.
B. All accrued vacation pay as of Termination Date.
C. Accrued amounts in Employee's Stock Purchase Plan Account as
of Termination Date, if any.
D. Payment to Employee of his accrued balance in the Deferred
Compensation Plan, if any, in accordance with the terms of the
Plan.
E. Payment to Employee of his accrued balance in his Supplemental
Retirement Plan Account, if any, in accordance with the terms
of the Plan.
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 7. 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
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.
<PAGE>
4. Insurance. If Employee rescinds this Separation Agreement pursuant
to Section 7 below, Employee will still have the right to continue his health,
dental, vision and life plans as provided by law.
5. 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.
6. 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 computers, keys, pagers and corporate charge cards.
7. 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 8 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 Sonia St. Charles, 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.
8. 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.
9. Confidential Deluxe Information. Employee agrees that for a period
of two (2) years after execution of this Agreement, Employee will not use or
disclose Confidential Information of Deluxe.
"Confidential Information" means all confidential or proprietary
information of Deluxe or any affiliate or subsidiary, 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, 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. Standstill. Employee agrees that for a period of two (2) years
after Termination Date, Employee will not directly or indirectly, (a) effect or
seek, offer or propose (whether publicly or otherwise) to effect, or cause or
participate in or in any way assist any other person or entity to effect or
seek, offer or propose (whether publicly or otherwise) to effect or participate
in (i) any acquisition, sale, breakup or auction of more than one percent of the
outstanding securities (or beneficial ownership thereof) or any assets (except
in the ordinary course of business) of Deluxe or any of its subsidiaries or
affiliates; (ii) any takeover bid, tender offer, merger or other business
combination involving Deluxe or any of its subsidiaries or affiliates; (iii)
except as a creditor, any recapitalization, restructuring, liquidation,
dissolution, or other extraordinary transaction with respect to Deluxe or any of
its subsidiaries or affiliates; (iv) any solicitation of proxies to vote any
common shares of Deluxe; or (v) negotiate, execute or perform any agreement,
arrangement or understanding with any person or entity regarding a possible
transaction of the type described above involving Deluxe or any of its
subsidiaries or affiliates; (b) take any action which might compel Deluxe to
make a public announcement regarding any of the types of matters referred to in
clause
<PAGE>
(a); (c) form, join, or in any way participate in a group of persons or entities
acting jointly or in concert with respect to Deluxe or any of its subsidiaries
or affiliates as to any of the types of matters referred to in clauses (a) or
(b); (d) otherwise act alone or in concert with others, to seek to control or
influence the management, board of directors or policies of Deluxe or any of its
subsidiaries or affiliates with respect to any of the foregoing; or (e) enter
into discussions or arrangements with any other person or entity with respect to
any of the foregoing, unless Employee has acquired the explicit prior written
consent of the President of Deluxe to engage in such foregoing activity.
11. 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. Deluxe may disclose the terms of this Separation
Agreement and the Release to its officers and directors, outside auditors, and
to employees who have a legitimate need to know the terms in the course of
performing their duties and either party may disclose the terms of this
Separation Agreement and the Release if requested or ordered by a governmental
agency or court of competent jurisdiction. Each party recognizes and agrees that
this confidentiality provision was a significant inducement for the other to
enter into this Separation Agreement and Release.
12. Non-Recruitment. 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 one (1) year prior to Termination Date through expiration of the
non-recruitment period is or was an employee of Deluxe or any of its affiliates
or subsidiaries.
13. 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.
14. Non-Competition. 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.
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 (which the parties agree are the
following general categories: (a) check products used by financial institutions
and their customers; (b) check and check transaction security features; (c)
check related printed forms products; (d) direct marketing services for
financial institutions; (e) market research information services for financial
institutions; (f) electronic funds transfers services of the type provided by
Deluxe or any of its subsidiaries or similar to any payment risk management
services provided by Deluxe or any of its affiliates; and (g) direct marketing
sales of check products to the same classes of customers).
14. Reference Letter. In consideration for Employee's agreement to the
Non-Competition provision described above, Deluxe agrees that in the event the
parties agree upon the text of a reference
<PAGE>
letter on or before April 6, 1998 a copy of it shall be attached and
incorporated by reference as Exhibit B and Employee may provide a copy of such
letter to any prospective employer. Deluxe agrees that any communication by John
A. Blanchard III, President, concerning Employee's employment with Deluxe shall
in tone and content not be inconsistent with the statements contained in any
Exhibit B.
15. Non-Assignment. 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.
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 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 or
the Release or, as against Deluxe, or any employee benefit plan in which
Employee is a participant.
17. Entire Agreement. This Separation Agreement and Release 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 Release 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/ J.A. Blanchard III By: /s/ Gregory J. Bjorndahl
J. A. Blanchard III Gregory J. Bjorndahl
President
STATE OF MINNESOTA
COUNTY OF RAMSEY
I, Deborah J. Cramlet , a Notary Public, do hereby certify that Gregory J.
Bjorndahl 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.
<PAGE>
Given under my hand and official seal this 3rd day of April, 1998.
/s/ Deborah J. Cramlet
Notary Public
STATE OF MINNESOTA
COUNTY OF RAMSEY
The foregoing instrument was acknowledged before me this 6th day of April, 1998
by J. A. Blanchard III, the 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, 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
Corporation, in their official and individual capacities.
C. Employee, as used herein, means Gregory J. Bjorndahl 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 Corporation whether or not Employee knows now
about those rights, arising out of his employment with Deluxe Corporation, 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 Corporation 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 Corporation. Employee agrees to give up all
Employee's Claims against Deluxe Corporation in exchange for those payments.
Employee will not bring any lawsuits, file any charges, complaints, or notices,
or make any other demands against Deluxe Corporation 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 Corporation 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 reinstate state claims. To be effective, Employee's
rescission must be in writing and delivered to Deluxe Corporation in care of
Sonia St. Charles, 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 Corporation agrees to give up any claim against Employee that Deluxe
Corporation may have now or hereafter arising from or in connection with
Employee's employment with Deluxe Corporation, except as may arise under the
Agreement to which this Release is attached.
<PAGE>
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 Corporation and Employee understand and agree that this Release, the
Agreement and the Deluxe Corporation employee benefit plans in which Employee is
a participant, contain all of the agreements between Deluxe Corporation and
Employee. We have no other written or oral agreements.
Dated: April 3 , 1998 /s/ Gregory J. Bjorndahl
Gregory J. Bjorndahl
Witnesses:
/s/ Sonia St. Charles
/s/ Jean M. Tackman
DELUXE CORPORATION
Dated: April 6 , 1998 By: /s/ J.A. Blanchard III
J. A. Blanchard III
President
Witnesses:
/s/ Cheryl J. Yursi
/s/ Sharon R. Maylath
<PAGE>
Exhibit B
To Whom It May Concern:
Greg Bjorndahl left the employment of Deluxe Corporation on March 31, 1998. Mr.
Bjorndahl indicated to me his desire to move on to new personal and professional
challenges.
Greg made many major contributions in the two and one-half years that he was
with us. He led the reorganization and improved the level of professionalism of
our product management, marketing and sales organizations. He initiated and
created a united brand strategy for the many divisions, products and services of
Deluxe. He also helped to set our strategic direction.
However, as we began to evolve our organization to implement our strategy it
became apparent that his position as Senior Vice President of Sales and
Marketing would change, a change that Greg led and with which he agreed. Those
changes would alter his role in the company and as a result Greg felt it would
be best if he pursued other opportunities.
Sincerely,
J. A. Blanchard III
President
Exhibit 10.2
SEPARATION AGREEMENT
This Separation Agreement is made and entered into April 23, 1998,
between Gregory J. Bjorndahl (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 for several years; 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 March 31, 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 Six Thousand and 00/100 Dollars ($206,000.00) in
one installment of One Hundred Thirty Thousand and 00/100
Dollars ($130,000.00), at the time described in the last
paragraph of this Section and one installment of Seventy-Six
Thousand and 00/100 Dollars ($76,000.00) on or about April 8,
1999, respectively.
B. All accrued vacation pay as of Termination Date.
C. Accrued amounts in Employee's Stock Purchase Plan Account as
of Termination Date, if any.
D. Payment to Employee of his accrued balance in the Deferred
Compensation Plan, if any, in accordance with the terms of the
Plan.
E. Payment to Employee of his accrued balance in his Supplemental
Retirement Plan Account, if any, in accordance with the terms
of the Plan.
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 7. 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
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. Insurance. If Employee rescinds this Separation Agreement pursuant
to Section 7 below, Employee will still have the right to continue his health,
dental, vision and life plans as provided by law.
<PAGE>
5. 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.
6. 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 computers, keys, pagers and corporate charge cards.
7. 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 8 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 Sonia St. Charles, 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.
8. 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.
9. Confidential Deluxe Information. Employee agrees that for a period
of two (2) years after execution of this Agreement, Employee will not use or
disclose Confidential Information of Deluxe.
"Confidential Information" means all confidential or proprietary
information of Deluxe or any affiliate or subsidiary, 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, 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. Standstill. Employee agrees that for a period of two (2) years
after Termination Date, Employee will not directly or indirectly, (a) effect or
seek, offer or propose (whether publicly or otherwise) to effect, or cause or
participate in or in any way assist any other person or entity to effect or
seek, offer or propose (whether publicly or otherwise) to effect or participate
in (i) any acquisition, sale, breakup or auction of more than one percent of the
outstanding securities (or beneficial ownership thereof) or any assets (except
in the ordinary course of business) of Deluxe or any of its subsidiaries or
affiliates; (ii) any takeover bid, tender offer, merger or other business
combination involving Deluxe or any of its subsidiaries or affiliates; (iii)
except as a creditor, any recapitalization, restructuring, liquidation,
dissolution, or other extraordinary transaction with respect to Deluxe or any of
its subsidiaries or affiliates; (iv) any solicitation of proxies to vote any
common shares of Deluxe; or (v) negotiate, execute or perform any agreement,
arrangement or understanding with any person or entity regarding a possible
transaction of the type described above involving Deluxe or any of its
subsidiaries or affiliates; (b) take any action which might compel Deluxe to
make a public announcement regarding any of the types of matters referred to in
clause (a); (c) form, join, or in any way participate in a group of persons or
entities acting jointly or in concert with respect to Deluxe or any of its
subsidiaries or affiliates as to any of the types of matters referred to in
clauses (a) or (b); (d) otherwise act alone or in concert with others, to seek
to control or influence the management, board of directors or policies of Deluxe
or any of its subsidiaries or affiliates with respect to
<PAGE>
any of the foregoing; or (e) enter into discussions or arrangements with any
other person or entity with respect to any of the foregoing, unless Employee has
acquired the explicit prior written consent of the President of Deluxe to engage
in such foregoing activity.
11. 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. Deluxe may disclose the terms of this Separation
Agreement and the Release to its officers and directors, outside auditors, and
to employees who have a legitimate need to know the terms in the course of
performing their duties and either party may disclose the terms of this
Separation Agreement and the Release if requested or ordered by a governmental
agency or court of competent jurisdiction. Each party recognizes and agrees that
this confidentiality provision was a significant inducement for the other to
enter into this Separation Agreement and Release.
12. Non-Recruitment. 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 one (1) year prior to Termination Date through expiration of the
non-recruitment period is or was an employee of Deluxe or any of its affiliates
or subsidiaries.
13. 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.
14. Reference Letter. Deluxe agrees that in the event the parties agree
upon the text of a reference letter on or before April 6, 1998 a copy of it
shall be attached and incorporated by reference as Exhibit B and Employee may
provide a copy of such letter to any prospective employer. Deluxe agrees that
any communication by John A. Blanchard III, President, concerning Employee's
employment with Deluxe shall in tone and content not be inconsistent with the
statements contained in any Exhibit B.
15. Non-Assignment. 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.
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 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 or
the Release or, as against Deluxe, or any employee benefit plan in which
Employee is a participant.
17. Entire Agreement. This Separation Agreement and Release 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 Release 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.
<PAGE>
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.
21. Supersession. This Agreement supersedes the agreement between the
parties dated April 3, 1998.
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/ J.A. Blanchard III By: /s/ Gregory J. Bjorndahl
J. A. Blanchard III Gregory J. Bjorndahl
President
STATE OF MINNESOTA
COUNTY OF RAMSEY
I, Lorraine E. Houle , a Notary Public, do hereby certify that Gregory J.
Bjorndahl 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 23rd day of April, 1998.
/s/ Lorraine E. Houle
Notary Public
STATE OF MINNESOTA
COUNTY OF RAMSEY
The foregoing instrument was acknowledged before me this 23rd day of April, 1998
by J. A. Blanchard III, the 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, 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
Corporation, in their official and individual capacities.
C. Employee, as used herein, means Gregory J. Bjorndahl 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 Corporation whether or not Employee knows now
about those rights, arising out of his employment with Deluxe Corporation, 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 Corporation 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 Corporation. Employee agrees to give up all
Employee's Claims against Deluxe Corporation in exchange for those payments.
Employee will not bring any lawsuits, file any charges, complaints, or notices,
or make any other demands against Deluxe Corporation 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 Corporation 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 reinstate state claims. To be effective, Employee's
rescission must be in writing and delivered to Deluxe Corporation in care of
Sonia St. Charles, 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 Corporation agrees to give up any claim against Employee that Deluxe
Corporation may have now or hereafter arising from or in connection with
Employee's employment with Deluxe Corporation, except as may arise under the
Agreement to which this Release is attached.
<PAGE>
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 Corporation and Employee understand and agree that this Release, the
Agreement and the Deluxe Corporation employee benefit plans in which Employee is
a participant, contain all of the agreements between Deluxe Corporation and
Employee. We have no other written or oral agreements.
Dated: April 23 , 1998 /s/ Gregory J. Bjorndahl
Gregory J. Bjorndahl
Witnesses:
/s/ Mary Ann Bjorndahl
/s/ Catalina Vasquez
DELUXE CORPORATION
Dated: April 23 , 1998 By: /s/ J.A. Blanchard III
J. A. Blanchard III
President
Witnesses:
/s/ Carol L. Schaaf
/s/ Terrie A. Shattuck
<PAGE>
EXHIBIT B
To Whom It May Concern:
Greg Bjorndahl left the employment of Deluxe Corporation on March 31, 1998. Mr.
Bjorndahl indicated to me his desire to move on to new personal and professional
challenges.
Greg made many major contributions in the two and one-half years that he was
with us. He led the reorganization and improved the level of professionalism of
our product management, marketing and sales organizations. He initiated and
created a united brand strategy for the many divisions, products and services of
Deluxe. He also helped to set our strategic direction.
However, as we began to evolve our organization to implement our strategy it
became apparent that his position as Senior Vice President of Sales and
Marketing would change, a change that Greg led and with which he agreed. Those
changes would alter his role in the company and as a result Greg felt it would
be best if he pursued other opportunities.
Sincerely,
J. A. Blanchard III
President
Exhibit 10.3
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Deluxe Corporation, a Minnesota corporation (the
"Company") and John A. Blanchard III (the "Executive") dated as of the 9th day
of January, 1998.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company and to encourage the Executive's full support of and participation
in implementing the Company's business strategy involving one or more
significant acquisitions. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks associated with a Change of Control and by such acquisitions and to
encourage the Executive's full attention and dedication to the Company and its
business strategies and to provide the Executive with compensation and benefits
arrangements upon the occurrence of a Business Combination (as defined below)
which ensure that the compensation and benefits expectations of the Executive
will be satisfied in that event and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions.
A. "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.
B. "Beneficial Owner" shall have the meaning defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
C. "Business Combination" shall mean the occurrence of either a Change
of Control or an Other Business Combination.
D. "Business Combination Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year
after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Business Combination Period
shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 120 days prior to the Renewal
Date the Company shall give notice to the Executive that the
Business Combination Period shall not be so extended.
E. "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:
1. any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, excluding, at the time of their
original acquisition, in the securities acquired directly or
beneficially by such Person any securities acquired directly
from the Company or its Affiliates or in connection with a
transaction described in clause (a) of paragraph 3 below; or
<PAGE>
2. the individuals who at the date of this Agreement constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election consent, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors as of the date of this Agreement or whose
appointment, election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or
3. there is consummated a merger or consolidation of the Company
or any Affiliate with any other company, 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 or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any Affiliate, at least 65% of the combined voting power of
the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
4. the shareholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
5. Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the common
stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
F. "Effective Date" shall mean the first date during the Business
Combination Period on which a Business Combination occurs.
G. Other Business Combination" shall mean the occurrence of:
1. any merger, exchange, transfer, or other form of business
combination or acquisition (but not including dispositions),
whether involving assets, shares or any other form of
ownership interest, by the Company or any of its Affiliates of
or with one or more other corporations, partnerships or other
entities in a single transaction or a series of related
transactions for consideration aggregating $500 million or
more (regardless of the form of consideration or the method or
time of payment), or
<PAGE>
2. a sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its non-check
printing assets, business units and/or Affiliates (excluding
those assets, business units and Affiliates that have been
offered for sale prior to the date of this Agreement) or the
sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its check printing
assets, business units and/or Affiliates.
H. "Person" shall have the meaning defined in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, as amended, except
that such term shall not include (I) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of
the Company.
II. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing on the Effective Date and
ending on the third anniversary of such date (the "Employment
Period").
III. Terms of Employment.
A. Position and Duties.
1. Except with Executive's written consent given in his or her
discretion, during the Employment Period, (a) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 180-day period immediately preceding the Effective
Date and (b) the Executive's services shall be performed at
the location where the Executive was employed immediately
preceding the Effective Date or at a location less than 35
miles from such location.
2. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable efforts to perform faithfully and
efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to
the Company.
B. Compensation.
1. Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which
shall be paid not less often than monthly, at least equal to
twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred,
to the Executive by the Company and its Affiliates in
<PAGE>
respect to the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no
more than 12 months after the last salary increase awarded to
the Executive prior to the Effective Date and thereafter at
least annually. In considering any increase to Executive's
Annual Base Salary, Executive will be treated in the same
manner as other peer executives. For example, if the Company
establishes the annual base salaries of other peer executives
by reference to a percentile of comparative market data, the
increase, if any, to Executive's Annual Base Salary shall be
established in a like manner. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base Salary
shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased.
2. Annual Incentive Payment or Bonus. In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year
ending during the Employment Period (ratably apportioned in
the case of any fiscal year included within the Employment
Period but which does not end within the Employment Period),
an annual incentive payment or bonus (the "Annual Incentive
Payment") in cash on the same basis as such incentive payments
or bonuses are paid to other peer executives. For example, if
annual incentive payments are paid to other peer executives
under the Company's annual incentive plan, the target award
for the Executive shall be established in the same manner as
the target award for the other peer executives (e.g. by
reference to a percentile target based on comparative market
data) and the performance criteria and performance
measurements governing any payment earned by Executive shall
be based on the same performance criteria (such as earnings
per share or return of average capital employed) and
performance measurements applied to the other peer executives.
Notwithstanding the foregoing, (a) if the payment of a bonus
to other peer executives is, in whole or part, not based on
objective performance criteria, Executive's Annual Incentive
Payment shall be at least equal to the average of Executive's
Annual Incentive Payments for the last three full fiscal years
prior to the Effective Date or, if the Executive was not in
the employment of the Company or its Affiliates during one or
more of the last three full fiscal years, the average of
Executive's Annual Incentive Payments during the number of
full fiscal years prior to the Effective Date that the
Executive was so employed (annualized, in either case, in the
event that the Executive was not employed by the Company for
the whole of any such fiscal year), provided that any special
or one-time awards (such as those associated with a new hire
or promotion) shall not be taken into account (the "Recent
Annual Incentive Payment") and (b) the Executive's annual
target incentive or bonus opportunity shall in no event be
less favorable to the Executive than that provided by the
Company and its Affiliates to the Executive under its annual
incentive or bonus plans during the last fiscal year
immediately preceding the Effective Date, provided that any
special or one time awards (such as those associated with a
new hire or promotion) shall not be taken into account. Each
such Annual Incentive Payment shall be paid no later than the
end of the third month of the fiscal year next following the
fiscal year for which the Annual Incentive Payment is awarded,
unless the Executive shall elect to defer the receipt of such
Annual Incentive Payment.
3. Stock Incentive Plans. During the Employment Period, the
Executive shall be entitled to participate in the Company's
stock incentive, performance share and other stock-based
incentive plans (if any), on the same basis as other peer
executives. For example, if other peer executives are awarded
stock options or performance shares based on references to
comparative market data, Executive's awards shall be made on
the same basis, and shall, in any event, contain the same
terms and conditions, and if applicable, be subject to the
same performance criteria, as applied to awards to other peer
executives. Notwithstanding the foregoing, such long-term
incentive opportunities for the Executive shall in no event be
less favorable, in each case and in the aggregate, than those
provided by the Company and its
<PAGE>
Affiliates for the Executive under such plans during the
fiscal year immediately preceding the Effective Date, provided
that any special or one-time awards (such as those associated
with a new hire or promotion) shall not be taken into account.
4. Savings, Retirement and Other Incentive Plans. During the
Employment Period, the Executive shall be entitled to
participate in all other incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives of the Company and its Affiliates,
but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate,
than the most favorable of those provided by the Company and
its Affiliates for the Executive under such plans, practices,
policies and programs as in effect at any time during the one
year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer executives of
the Company and its Affiliates, provided, however, that such
benefits may be reduced pursuant to a general
(across-the-board) reduction of such benefits similarly
affecting all senior officers of the Company or its
Affiliates, as the case may be.
5. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under all welfare benefit plans, practices, policies
and programs provided by the Company and its Affiliates
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the Executive
and/or the Executive's family, to the extent applicable
generally to other peer executives of the Company and its
Affiliates, as the case may be, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the
one year period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its Affiliates, as the case may be,
provided, however, that such benefits may be reduced pursuant
to a general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be, and all senior officers of any
Person in control of the Company.
6. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company
and its Affiliates in effect for the Executive at any time
during the one year period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its Affiliates, as the case may
be.
7. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, use or
reimbursement for the use of an automobile, as the case may
be, and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the
Company and its Affiliates in effect for the Executive at any
time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be, provided, however, that such benefits may be reduced
pursuant to a general (across-the-board) reduction of such
benefits similarly affecting all senior officers of the
Company or its Affiliates, as the case may be, and all senior
officers of any
<PAGE>
Person in control of the Company.
8. Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size
and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, not materially less
favorable with respect to the foregoing provided to the
Executive by the Company and its Affiliates at any time during
the one year period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer executives
of the Company and its Affiliates, as the case may be.
9. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and holidays in accordance with the
most favorable plans, policies, programs and practices of the
Company and its Affiliates as in effect for the Executive at
any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be.
IV. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may, give a
Notice of Termination to the Executive in accordance with Section
XI.B. of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company or its Affiliates, as the case may be, shall
terminate effective on the 30th day after receipt of the Notice of
Termination by the Executive (unless such date is extended as
provided in Section IV.F.), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from
the Executive's duties with the Company or its Affiliates, as the
case may be, on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
B. Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
1. the willful and continued failure of the Executive to perform
substantially the Executive's material duties with the Company
and its Affiliates (other than any such failure resulting from
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section IV.D. hereof), after a written demand for substantial
performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
2. the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company or its Affiliates.
For purposes of this provision, (a) no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company and (b) in the event of a
dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the
Company establishes to the
<PAGE>
Committee (as defined in Section XI.J.) by clear and convincing
evidence that Cause exists. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board
or upon the instructions of the Chief Executive Officer or a senior
officer of the Company or based upon the advice of counsel for the
Company (or if the Executive is counsel to the Company, based upon
such Executive's own legal conclusions) shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good
faith and in the best interests of the Company.
C. Good Reason. The Executive's employment during the Employment Period
may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
1. except with Executive's written consent given in his or her
discretion, the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section III.A. of this Agreement, or any other
action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial or inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
2. any failure by the Company to comply with any of the
provisions of Section III.B. of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
3. the Company's requiring the Executive to be based at any
location other than as provided in clause III.A.1(b) hereof or
the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
4. any purported termination by the Company of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section IV.D hereof
and otherwise expressly permitted by this Agreement. For
purposes of this Agreement, no such purported termination
shall be effective;
5. any failure by the Company to comply with and satisfy Section
X.C. of this Agreement; or
6. any request or requirement by the Company of its Affiliates
that the Executive take any action or omit to take any action
that is inconsistent with or in violation of the Company's
ethical guidelines and policies as the same existed within the
120 day period prior to the Effective Date or any professional
ethical guidelines or principles that may be applicable to the
Executive or, if Executive is counsel to the Company,
requesting or requiring Executive to practice in or under the
laws of any jurisdiction or appear before any court or other
tribunal to or before which Executive is not admitted to
practice.
For purposes of this Section IV.C., any good faith claim of "Good
Reason" made by the Executive shall be presumed to be correct unless
the Company establishes to the Committee by clear and convincing
evidence that Good Reason does not exist. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not constitute a
consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
<PAGE>
D. Notice of Termination. Any purported termination of the Executive's
employment during the Employment Period (other than by reason of
death) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section XI.B. of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (3) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph B.1. or
B.2. above, and specifying the particulars thereof in detail. The
failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a
showing of Disability, Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting
such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder;
E. Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or any other reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (2) if the Executive's employment is
terminated during the Employment Period by the Company other than
for Cause or Disability, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination, (3)
if the Executive's employment is terminated by reason of death
during the Employment Period, the Date of Termination shall be the
date of death of the Executive and (4) if the Executive's employment
is terminated by the Company for Disability, the date Executive's
employment is terminated as provided in Section IV.A., provided,
however, the Date of Termination specified in this Section E. may be
extended to the date of termination (if applicable) provided in
Section IV.F.
F. Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section IV.F.),
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on
which the Employment Period ends or (ii) the date on which the
dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator
or a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and
no appeal has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
G. Compensation During Dispute. If a purported termination occurs
during the Employment Period and the Date of Termination is extended
in accordance with Section IV.F. hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with
Section IV.F. hereof. Amounts paid under this Section IV.G. are in
addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this
<PAGE>
Agreement.
H. Pre-Effective Date Actions. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated
during the Employment Period by the Company without Cause or by the
Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to the Effective Date
(whether or not a Business Combination ever occurs) and such
termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which
would constitute a Business Combination, (ii) the Executive
terminates his employment for Good Reason prior to the Effective
Date (whether or not a Business Combination ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person, or (iii) the Executive's
employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance
or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Business Combination (whether or not a
Business Combination ever occurs). For purposes of any determination
regarding the applicability of the immediately preceding sentence,
any position taken by the Executive shall be presumed to be correct
unless the Company establishes to the Committee by clear and
convincing evidence that such position is not correct.
V. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause. If, during the Employment Period,
the Company shall terminate the Executive's employment other than
for Cause or Disability or the Executive shall terminate employment
for Good Reason:
1. the Company shall pay to the Executive in a lump sum in cash
within 5 days after the Date of Termination the aggregate of
the following amounts:
(a) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (ii) the product of (x) the higher of
(I) the Recent Annual Incentive Payment and (II) the
Annual Incentive Payment paid or payable, including any
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was
employed for less than twelve full months), for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which 365 and (iii) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (i),
(ii) and (iii) shall be hereinafter referred to as the
"Accrued Obligations"); and
(b) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
(c) an amount equal to the excess, if any, of (i) the
actuarial equivalent of the aggregate retirement pension
(taking into account any early retirement subsidies
associated therewith and determined as a straight life
annuity commencing at the date (but in no event earlier
than the third anniversary of the Date of Termination)
as of which the actuarial equivalent of such annuity is
greatest) which the Executive would have accrued under
the terms of all Pension Plans (without regard to any
amendment to any Pension Plan made subsequent to the
Effective Date and on or prior to the Date of
Termination, which amendment adversely affects in any
manner the computation
<PAGE>
of retirement benefits thereunder), determined as if the
Executive were fully vested thereunder and had
accumulated (after the Date of Termination) thirty-six
(36) additional months of service credit thereunder and
had been credited under each Pension Plan during such
period with compensation equal to the Executive's
compensation (as defined in such Pension Plan) during
the twelve (12) months immediately preceding the Date of
Termination or, if higher, during the twelve months
immediately prior to the Effective Date, over (ii) the
actuarial equivalent of the aggregate retirement pension
(taking into account any early retirement subsidies
associated therewith and determined as a straight life
annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial
equivalent of such annuity is greatest) which the
Executive had accrued pursuant to the provisions of the
Pension Plans as of the Date of Termination. For
purposes of this Section V.A.1.(c), (a) "Pension Plan"
shall mean any tax-qualified, supplemental or excess
benefit pension plan maintained by the Company and any
other plan or agreement entered into between the
Executive and the Company which is designed to provide
the Executive with supplemental retirement benefits
(including, but not limited to the memorandum from the
Company to the Executive dated October 11, 1995 (the
"Memorandum")) and (b) "actuarial equivalent" shall be
determined using the same assumptions utilized under the
Memorandum immediately prior to the Date of Termination
or, if more favorable to the Executive, immediately
prior to the Effective Date.
2. for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices and policies described in Section III.B.5. of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates and their
families, as the case may be, provided, however, that if the
Executive becomes re-employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary and supplemental
to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the
Executive for retiree welfare benefits pursuant to such plans,
practices, programs and policies, the Executive shall be
considered to have remained employed until three years after
the Date of Termination and to have retired on the last day of
such period as a qualified retiree of the Company;
3. immediately following the Executive's Date of Termination and,
if a Change of Control shall earlier occur, immediately
following the Change of Control, the Company shall take all
such action as may be required fully and immediately (but
without duplication of benefits under this Section V.A.3.) to:
(a) vest all outstanding, unvested options that may have
been granted to the Executive under the Company' Stock
Incentive Plan (as amended) and as the same may be
further amended and any successor or replacement plan
(the "SIP") and, upon the Date of Termination (if the
Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive
for Good Reason), permit the Executive a period equal to
the lesser of five years following that Date of
Termination or the remaining term of the applicable
options to exercise such options in accordance with the
provisions of the SIP and any applicable award agreement
(as
<PAGE>
modified or amended as a result of the actions required
by this clause),
(b) following the Date of Termination (if the Executive's
employment is terminated by the Company other than for
Cause or Disability or by the Executive for Good
Reason), permit the Executive to earn and be awarded
shares of the Company pursuant to awards previously made
to the Executive under the Deluxe Corporation
Performance Share Plan as if Executive had continued as
a participant in such plan and an employee of the
Company or the relevant Affiliate until the expiration
of the performance period or periods applicable to each
such award,
(c) vest all other restricted shares and units theretofore
granted the Executive under the SIP and any other
stock-based compensation plan (other than the
Performance Share Plan), and
(d) in the case that the Company is not a surviving
corporation, to provide the Executive with the economic
equivalent of the value that the Executive would have
received had the Company been the surviving corporation
and taken the actions required in clauses (a) though (c)
hereof.
4. the Company shall, at its sole expense as incurred, provide
the Executive with out-placement services the scope and
provider of which shall be selected by the Executive in his or
her sole discretion; and
5. to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided to the Executive
or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its Affiliates (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section
V.B. shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its
Affiliates, as the case may be, to the estates and beneficiaries of
peer executives of the Company or such Affiliates under such plans,
programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their
beneficiaries at any time during the one year period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its Affiliates, as applicable,
and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section V.C.
shall include, and the Executive shall be entitled after the Date of
Termination to receive, disability and other benefits at least equal
to the most favorable of those generally provided by the Company and
its Affiliates, as applicable, to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect
<PAGE>
generally with respect to other peer executives and their families
at any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
Affiliates, as applicable, and their families
D. Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1) his
Annual Base Salary through the Date of Termination, (2) the amount
of any compensation previously deferred by the Executive, and (3)
Other Benefits, in each case to the extent theretofore unpaid. If
the Executive terminates employment during the Employment Period,
excluding a termination for Good Reason or Disability, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
VI. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of
its Affiliates and for which the Executive may qualify, nor, subject
to Section XI. F., shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its Affiliates. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contact or agreement with the Company or any of its Affiliates or
subsequent to the Date of Termination shall be payable in accordance
with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
VII. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section V.A.2. hereof, such
amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may incur in good faith as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). Such payments shall be made within
five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
VIII. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any payment or benefit received or to be received by the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Business Combination or any Person affiliated with the Company or
such Person, but determined without regard to any additional
payments required under this Section VIII) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest
and
<PAGE>
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section VIII.A., if it shall be determined that
the Executive is entitled to a Gross-Up Payment, but that the
Executive, after taking into account the Payments and the Gross-Up
Payment, would not receive a net after-tax benefit of at least
$50,000 (taking into account both income taxes and any Excise Tax)
as compared to the net after-tax benefit the Executive would receive
if the Gross-Up Payment were eliminated and the Payments were
reduced, in the aggregate, to an amount (the "Reduced Amount") such
that the receipt of Payments would not give rise to any Excise Tax,
then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all
of the Payments shall be treated as "parachute payments" (within the
meaning of Section 280G(b) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the Accounting Firm (as defined below), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base amount"
(as defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm in
accordance with the principals of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of Executive's residence on the Date of Termination (or
if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section
VIII.A.), net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
B. Subject to the provisions of Section VIII. C., all determinations
required to be made under this Section VIII, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that a
Payment has been made or will be required, as the case may be, or
such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a Business Combination, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this
Section VIII., shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section VIII.C. and the
Executive thereafter is required to make a payment of
<PAGE>
any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the
Executive.
C. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period
following the date on which he or she gives such notice to the
Company (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
1. give the Company any information reasonably requested by the
Company relating to such claim,
2. take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
3. cooperate with the Company in good faith in order to
effectively contest such claim, and
4. permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section VIII.C., the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section VIII.C., the Executive becomes entitled
to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of
Section VIII.C.) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of
any amount advanced by the Company
<PAGE>
pursuant to Section VIII.C., a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
E. The Gross-Up Payment shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amount of such Gross-Up Payment, and the limitation on such payments
set forth in Section VIII.A. hereof, cannot be finally determined on
or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accounting Firm,
of the minimum amount of such Gross-Up Payment to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments
when due) at 120% of the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under
this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments
were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Accounting Firm or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
IX. Confidential Information. During the term of this Agreement and for
a period of three (3) years thereafter, Executive will retain in
confidence all proprietary and confidential information concerning
the Company and its Affiliates, including, without limitation,
customer lists, cost and pricing information, employee data, trade
secrets and software and, shall return to the Company or destroy all
copies and extracts thereof (however and on whatever medium
recorded), 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 the Executive prior to disclosure to the Executive by the Company
or any of its Affiliates; (B) any information which was in the
public domain prior to its disclosure to the Executive; (C) any
information which comes into the public domain through no fault of
the Executive; (D) any information which the Executive is required
to disclose by a court or similar authority or under subpoena,
provided that the Executive provides the Company with notice thereof
and assists, at the Company's sole expense, any reasonable endeavor
by the Company, using appropriate means, to obtain a protective
order limiting the disclosure of such information; and (E) any
information which is disclosed to the Executive by a third party
which has a legal right to make such disclosure. In no event shall
an asserted violation of the provisions of this Section X.
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
X. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives. If the
Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the
Executive's estate.
<PAGE>
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after the Effective Date,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
Miscellaneous.
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
B. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
John A. Blanchard III
9869 Hidden Glade Road
White Bear Lake, MN 55110
If to the Company:
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126
Attn: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
<PAGE>
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section IV.C. of
this Agreement, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
F. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section IV.H. hereof, prior to
the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement, provided that nothing herein
shall be construed to limit or prevent the Executive from receiving
compensation and benefits from the Company or its Affiliates that
are customarily paid and provided other peer executives who leave
the employment of the Company or any of its Affiliates. From and
after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter
hereof (e.g., benefits accruing to the Executive upon termination of
employment following a Business Combination), provided, however, in
no event shall this Agreement supersede the provisions of the
Memorandum.
G. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the term of this Agreement
(including, without limitation, those under Section V. hereof) shall
survive such expiration.
H. In the event that the Company is a party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable,
be interpreted so as to permit such accounting treatment, and (B) to
the extent that the application of clause (A) of this Section XI.H.
does not preserve the availability of such accounting treatment,
then, the Company may modify or limit the effect of the provisions
of this Agreement to the extent necessary to qualify the
transactions as a "pooling transaction" and provide the Executive
with payments or benefits as nearly equivalent as possible to those
the Executive would have received absent such modification or
limitation, provided, however, to the extent that any provision of
the Agreement would disqualify the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement) and
cannot otherwise be modified or limited, such provision shall be
null and void as of the date hereof. All determinations under this
Section XI.H. shall be made by the accounting firm whose opinion
with respect to "pooling of interests" is required as a condition to
the consummation of such transaction.
I. All claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty
(60) days after notification by the Committee that the Executive's
claims has been denied.
J. Notwithstanding any other provision in this Agreement to the
contrary, the Board shall delegate the responsibilities, duties and
powers specified under this Agreement to be observed or performed by
the "Committee" to a committee (the "Committee") consisting of not
less than three individuals who, on the date six months before a
Business Combination, were directors of the Corporation ("Incumbent
Directors"), provided that in the event that fewer than three
Incumbent Directors are available at the time of such delegation or
thereafter, the Committee's members may include such individual or
individuals as may be appointed by the Incumbent Directors
(including, for such purpose, by any individual or individuals who
have been appointed to the Committee by the Incumbent Directors);
<PAGE>
provided further, however, the maximum number of individuals
(including directors) appointed to the Committee shall not exceed
five.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board
of Directors, the Company has caused these presents to be executed
in its name on its behalf, all as of the day and year first above
written.
Deluxe Corporation Executive
By: /s/ John H. LeFevre /s/ John A. Blanchard III
Its: General Counsel
John H. LeFevre
(Typed Name)
Exhibit 10.4
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Deluxe Corporation, a Minnesota corporation (the
"Company") and Gregory J. Bjorndahl (the "Executive") dated as of the 9th day of
January, 1998.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company and to encourage the Executive's full support of and participation
in implementing the Company's business strategy involving one or more
significant acquisitions. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks associated with a Change of Control and by such acquisitions and to
encourage the Executive's full attention and dedication to the Company and its
business strategies and to provide the Executive with compensation and benefits
arrangements upon the occurrence of a Business Combination (as defined below)
which ensure that the compensation and benefits expectations of the Executive
will be satisfied in that event and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions.
A. "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.
B. "Beneficial Owner" shall have the meaning defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
C. "Business Combination" shall mean the occurrence of either a Change
of Control or an Other Business Combination.
D. "Business Combination Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year
after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Business Combination Period
shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 120 days prior to the Renewal
Date the Company shall give notice to the Executive that the
Business Combination Period shall not be so extended.
E. "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:
1. any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, excluding, at the time of their
original acquisition, in the securities acquired directly or
beneficially by such Person any securities acquired directly
from the Company or its Affiliates or in connection with a
transaction described in clause (a) of paragraph 3 below;
<PAGE>
or
2. the individuals who at the date of this Agreement constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election consent, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors as of the date of this Agreement or whose
appointment, election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or
3. there is consummated a merger or consolidation of the Company
or any Affiliate with any other company, 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 or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any Affiliate, at least 65% of the combined voting power of
the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
4. the shareholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
5. Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the common
stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
F. "Effective Date" shall mean the first date during the Business
Combination Period on which a Business Combination occurs.
G. Other Business Combination" shall mean the occurrence of:
1. any merger, exchange, transfer, or other form of business
combination or acquisition (but not including dispositions),
whether involving assets, shares or any other form of
ownership interest, by the Company or any of its Affiliates of
or with one or more other corporations, partnerships or other
entities in a single
<PAGE>
transaction or a series of related transactions for
consideration aggregating $500 million or more (regardless of
the form of consideration or the method or time of payment),
or
2. a sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its non-check
printing assets, business units and/or Affiliates (excluding
those assets, business units and Affiliates that have been
offered for sale prior to the date of this Agreement) or the
sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its check printing
assets, business units and/or Affiliates.
H. "Person" shall have the meaning defined in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, as amended, except
that such term shall not include (I) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of
the Company.
II. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing on
<PAGE>
the Effective Date and ending on the third anniversary of such date
(the "Employment Period").
III. Terms of Employment.
A. Position and Duties.
1. Except with Executive's written consent given in his or her
discretion, during the Employment Period, (a) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 180-day period immediately preceding the Effective
Date and (b) the Executive's services shall be performed at
the location where the Executive was employed immediately
preceding the Effective Date or at a location less than 35
miles from such location.
2. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable efforts to perform faithfully and
efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to
the Company.
B. Compensation.
1. Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which
shall be paid not less often than monthly, at least equal to
twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred,
to the Executive by the Company and its Affiliates in respect
to the twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
In considering any increase to Executive's Annual Base Salary,
Executive will be treated in the same manner as other peer
executives. For example, if the Company establishes the annual
base salaries of other peer executives by reference to a
percentile of comparative market data, the increase, if any,
to Executive's Annual Base Salary shall be established in a
like manner. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as
utilized in this
<PAGE>
Agreement shall refer to Annual Base Salary as so increased.
2. Annual Incentive Payment or Bonus. In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year
ending during the Employment Period (ratably apportioned in
the case of any fiscal year included within the Employment
Period but which does not end within the Employment Period),
an annual incentive payment or bonus (the "Annual Incentive
Payment") in cash on the same basis as such incentive payments
or bonuses are paid to other peer executives. For example, if
annual incentive payments are paid to other peer executives
under the Company's annual incentive plan, the target award
for the Executive shall be established in the same manner as
the target award for the other peer executives (e.g. by
reference to a percentile target based on comparative market
data) and the performance criteria and performance
measurements governing any payment earned by Executive shall
be based on the same performance criteria (such as earnings
per share or return of average capital employed) and
performance measurements applied to the other peer executives.
Notwithstanding the foregoing, (a) if the payment of a bonus
to other peer executives is, in whole or part, not based on
objective performance criteria, Executive's Annual Incentive
Payment shall be at least equal to the average of Executive's
Annual Incentive Payments for the last three full fiscal years
prior to the Effective Date or, if Executive was not in the
employment of the Company or its Affiliates during one or more
of the last three full fiscal years, the average of
Executive's Annual Incentive Payments during the number of
full fiscal years prior to the Effective Date that the
Executive was so employed (annualized, in either case, in the
event that the Executive was not employed by the Company for
the whole of any such fiscal year), provided that any special
or one-time awards (such as those associated with a new hire
or promotion) shall not be taken into account (the "Recent
Annual Incentive Payment") and (b) the Executive's annual
target incentive or bonus opportunity shall in no event be
less favorable to the Executive than that provided by the
Company and its Affiliates to the Executive under its annual
incentive or bonus plans during the last fiscal year
immediately preceding the Effective Date, provided that any
special or one time awards (such as those associated with a
new hire or promotion) shall not be taken into account. Each
such Annual Incentive Payment shall be paid no later than the
end of the third month of the fiscal year next following the
fiscal year for which the Annual Incentive Payment is awarded,
unless the Executive shall elect to defer the receipt of such
Annual Incentive Payment.
3. Stock Incentive Plans. During the Employment Period, the
Executive shall be entitled to participate in the Company's
stock incentive, performance share and other stock-based
incentive plans (if any), on the same basis as other peer
executives. For example, if other peer executives are awarded
stock options or performance shares based on references to
comparative market data, Executive's awards shall be made on
the same basis, and shall, in any event, contain the same
terms and conditions, and if applicable, be subject to the
same performance criteria, as applied to awards to other peer
executives. Notwithstanding the foregoing, such long-term
incentive opportunities for the Executive shall in no event be
less favorable, in each case and in the aggregate, than those
provided by the Company and its Affiliates for the Executive
under such plans during the fiscal year immediately preceding
the Effective Date, provided that any special or one-time
awards (such as those associated with a new hire or promotion)
shall not be taken into account.
4. Savings, Retirement and Other Incentive Plans. During the
Employment Period, the Executive shall be entitled to
participate in all other incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives
<PAGE>
of the Company and its Affiliates, but in no event shall such
plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both
regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliates
for the Executive under such plans, practices, policies and
programs as in effect at any time during the one year period
immediately preceding the Effective Date or if more favorable
to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and
its Affiliates, provided, however, that such benefits may be
reduced pursuant to a general (across-the-board) reduction of
such benefits similarly affecting all senior officers of the
Company or its Affiliates, as the case may be.
5. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under all welfare benefit plans, practices, policies
and programs provided by the Company and its Affiliates
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the Executive
and/or the Executive's family, to the extent applicable
generally to other peer executives of the Company and its
Affiliates, as the case may be, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the
one year period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its Affiliates, as the case may be,
provided, however, that such benefits may be reduced pursuant
to a general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be, and all senior officers of any
Person in control of the Company.
6. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company
and its Affiliates in effect for the Executive at any time
during the one year period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its Affiliates, as the case may
be.
7. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, use or
reimbursement for the use of an automobile, as the case may
be, and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the
Company and its Affiliates in effect for the Executive at any
time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be, provided, however, that such benefits may be reduced
pursuant to a general (across-the-board) reduction of such
benefits similarly affecting all senior officers of the
Company or its Affiliates, as the case may be, and all senior
officers of any Person in control of the Company.
<PAGE>
8. Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size
and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, not materially less
favorable with respect to the foregoing provided to the
Executive by the Company and its Affiliates at any time during
the one year period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer executives
of the Company and its Affiliates, as the case may be.
9. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and holidays in accordance with the
most favorable plans, policies, programs and practices of the
Company and its Affiliates as in effect for the Executive at
any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be.
IV. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may, give a
Notice of Termination to the Executive in accordance with Section
XI.B. of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company or its Affiliates, as the case may be, shall
terminate effective on the 30th day after receipt of the Notice of
Termination by the Executive (unless such date is extended as
provided in Section IV.F.), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from
the Executive's duties with the Company or its Affiliates, as the
case may be, on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
B. Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
1. the willful and continued failure of the Executive to perform
substantially the Executive's material duties with the Company
and its Affiliates (other than any such failure resulting from
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section IV.D. hereof), after a written demand for substantial
performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
2. the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company or its Affiliates.
For purposes of this provision, (a) no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the
<PAGE>
best interests of the Company and (b) in the event of a dispute
concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company
establishes to the Committee (as defined in Section XI.J.) by clear
and convincing evidence that Cause exists. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice
of counsel for the Company (or if the Executive is counsel to the
Company, based upon such Executive's own legal conclusions) shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
C. Good Reason. The Executive's employment during the Employment Period
may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
1. except with Executive's written consent given in his or her
discretion, (a) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section III.A. of this Agreement, provided
that the Company may, in its discretion, transfer the
Executive to another position (or positions) with the Company
or its Affiliates that is generally, substantially equivalent
to such position, or (b) any other action by the Company which
results in a material diminution in the Executive's position
(or positions) with the Company or its Affiliates, excluding
for this purpose an isolated, insubstantial or inadvertent
action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Executive;
2. any failure by the Company to comply with any of the
provisions of Section III.B. of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
3. the Company's requiring the Executive to be based at any
location other than as provided in clause III.A.1(b) hereof or
the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
4. any purported termination by the Company of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section IV.D hereof
and otherwise expressly permitted by this Agreement. For
purposes of this Agreement, no such purported termination
shall be effective;
5. any failure by the Company to comply with and satisfy Section
X.C. of this Agreement; or
6. any request or requirement by the Company of its Affiliates
that the Executive take any action or omit to take any action
that is inconsistent with or in violation of the Company's
ethical guidelines and policies as the same existed within the
120 day period prior to the Effective Date or any professional
ethical guidelines or principles that may be applicable to the
Executive or, if Executive is counsel to the Company,
requesting or requiring Executive to practice in or under the
laws of any jurisdiction or appear before any court or other
tribunal to or before which Executive is not
<PAGE>
admitted to practice.
For purposes of this Section IV.C., any good faith claim of
"Good Reason" made by the Executive shall be presumed to be
correct unless the Company establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute a consent to, or a
waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
D. Notice of Termination. Any purported termination of the Executive's
employment during the Employment Period (other than by reason of
death) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section XI.B. of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (3) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph B.1. or
B.2. above, and specifying the particulars thereof in detail. The
failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a
showing of Disability, Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting
such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder;
E. Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or any other reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (2) if the Executive's employment is
terminated during the Employment Period by the Company other than
for Cause or Disability, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination, (3)
if the Executive's employment is terminated by reason of death
during the Employment Period, the Date of Termination shall be the
date of death of the Executive and (4) if the Executive's employment
is terminated by the Company for Disability, the date Executive's
employment is terminated as provided in Section IV.A., provided,
however, the Date of Termination specified in this Section E. may be
extended to the date of termination (if applicable) provided in
Section IV.F.
F. Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section IV.F.),
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on
which the Employment Period ends or (ii) the date on which the
dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator
or a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and
no appeal
<PAGE>
has been perfected); provided, however, that the Date of Termination
shall be extended by a notice of dispute given by the Executive only
if such notice is given in good faith and the Executive pursues the
resolution of such dispute with reasonable diligence.
G. Compensation During Dispute. If a purported termination occurs
during the Employment Period and the Date of Termination is extended
in accordance with Section IV.F. hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with
Section IV.F. hereof. Amounts paid under this Section IV.G. are in
addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this
Agreement.
H. Pre-Effective Date Actions. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated
during the Employment Period by the Company without Cause or by the
Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to the Effective Date
(whether or not a Business Combination ever occurs) and such
termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which
would constitute a Business Combination, (ii) the Executive
terminates his employment for Good Reason prior to the Effective
Date (whether or not a Business Combination ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person, or (iii) the Executive's
employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance
or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Business Combination (whether or not a
Business Combination ever occurs). For purposes of any determination
regarding the applicability of the immediately preceding sentence,
any position taken by the Executive shall be presumed to be correct
unless the Company establishes to the Committee by clear and
convincing evidence that such position is not correct.
V. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause. If, during the Employment Period,
the Company shall terminate the Executive's employment other than
for Cause or Disability or the Executive shall terminate employment
for Good Reason:
1. the Company shall pay to the Executive in a lump sum in cash
within 5 days after the Date of Termination the aggregate of
the following amounts:
(a) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (ii) the product of (x) the higher of
(I) the Recent Annual Incentive Payment and (II) the
Annual Incentive Payment paid or payable, including any
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was
employed for less than twelve full months), for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which 365 and (iii) any compensation
previously deferred by the Executive (together with any
accrued interest or
<PAGE>
earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid (the sum of the
amounts described in clauses (i), (ii) and (iii) shall
be hereinafter referred to as the "Accrued
Obligations"); and
(b) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
(c) an amount equal to the product of three times the higher
of (i) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount (defined below) to the Executive's
account under (x) all of the Company's retirement plans,
or if higher, the retirement plans of any Affiliate in
which the Executive was eligible to participate
immediately prior to the Effective Date and (y) any
excess or supplemental retirement plan in which the
Executive was eligible to participate as of the
Effective Date (the "ERISA Excess Plan") (the ERISA
Excess Plan and such retirement plans, as amended, and
any successor or replacement plans being referred to as
the "Plans") as the Plans were in effect and funded for
the fiscal year immediately preceding the Effective Date
or (ii) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount, to the Company's Plans or, if higher,
the Plans of an Affiliate in which the Executive was
eligible to participate immediately prior to the Date of
Termination as those Plans were in effect and funded for
the fiscal year immediately preceding the Date of
Termination. For the purposes hereof, the term
"Reference Amount" shall mean an amount equal to
one-third of the amount calculated in clause V.A.1.(b)
without adjustment in the case of death or Disability.
2. for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices and policies described in Section III.B.5. of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates and their
families, as the case may be, provided, however, that if the
Executive becomes re-employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary and supplemental
to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the
Executive for retiree welfare benefits pursuant to such plans,
practices, programs and policies, the Executive shall be
considered to have remained employed until three years after
the Date of Termination and to have retired on the last day of
such period as a qualified retiree of the Company;
3. immediately following the Executive's Date of Termination and,
if a Change of Control shall earlier occur, immediately
following the Change of Control, the Company shall take all
such action as may be required fully and immediately (but
without duplication of benefits under this Section V.A.3.) to:
<PAGE>
(a) vest all outstanding, unvested options that may have
been granted to the Executive under the Company' Stock
Incentive Plan (as amended) and as the same may be
further amended and any successor or replacement plan
(the "SIP") and, upon the Date of Termination (if the
Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive
for Good Reason), permit the Executive a period equal to
the lesser of five years following that Date of
Termination or the remaining term of the applicable
options to exercise such options in accordance with the
provisions of the SIP and any applicable award agreement
(as modified or amended as a result of the actions
required by this clause),
(b) following the Date of Termination (if the Executive's
employment is terminated by the Company other than for
Cause or Disability or by the Executive for Good
Reason), permit the Executive to earn and be awarded
shares of the Company pursuant to awards previously made
to the Executive under the Deluxe Corporation
Performance Share Plan as if Executive had continued as
a participant in such plan and an employee of the
Company or the relevant Affiliate until the expiration
of the performance period or periods applicable to each
such award,
(c) vest all other restricted shares and units theretofore
granted the Executive under the SIP and any other
stock-based compensation plan (other than the
Performance Share Plan), and
(d) in the case that the Company is not a surviving
corporation, to provide the Executive with the economic
equivalent of the value that the Executive would have
received had the Company been the surviving corporation
and taken the actions required in clauses (a) though (c)
hereof.
4. the Company shall, at its sole expense as incurred, provide
the Executive with out-placement services the scope and
provider of which shall be selected by the Executive in his or
her sole discretion; and
5. to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided to the Executive
or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its Affiliates (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section
V.B. shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its
Affiliates, as the case may be, to the estates and beneficiaries of
peer executives of the Company or such Affiliates under such plans,
programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their
beneficiaries at any time during the one year period
<PAGE>
immediately preceding the Effective Date or, if more favorable to
the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its Affiliates, as applicable,
and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section V.C.
shall include, and the Executive shall be entitled after the Date of
Termination to receive, disability and other benefits at least equal
to the most favorable of those generally provided by the Company and
its Affiliates, as applicable, to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the one year period immediately preceding the Effective Date
or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect
to other peer executives of the Company and its Affiliates, as
applicable, and their families.
D. Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1) his
Annual Base Salary through the Date of Termination, (2) the amount
of any compensation previously deferred by the Executive, and (3)
Other Benefits, in each case to the extent theretofore unpaid. If
the Executive terminates employment during the Employment Period,
excluding a termination for Good Reason or Disability, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
VI. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of
its Affiliates and for which the Executive may qualify, nor, subject
to Section XI. F., shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its Affiliates. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contact or agreement with the Company or any of its Affiliates or
subsequent to the Date of Termination shall be payable in accordance
with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
VII. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section V.A.2. hereof, such
amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may incur in good faith as a result of any contest
(regardless of the outcome thereof) by the Company,
<PAGE>
the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"). Such
payments shall be made within five (5) business days after delivery
of the Executive's written requests for payment accompanied with
such evidence of fees and expenses incurred as the Company
reasonably may require.
VIII. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any payment or benefit received or to be received by the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Business Combination or any Person affiliated with the Company or
such Person, but determined without regard to any additional
payments required under this Section VIII) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of this Section VIII.A., if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the
Gross-Up Payment, would not receive a net after-tax benefit of at
least $50,000 (taking into account both income taxes and any Excise
Tax) as compared to the net after-tax benefit the Executive would
receive if the Gross-Up Payment were eliminated and the Payments
were reduced, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all
of the Payments shall be treated as "parachute payments" (within the
meaning of Section 280G(b) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the Accounting Firm (as defined below), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base amount"
(as defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm in
accordance with the principals of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of Executive's residence on the Date of Termination (or
if there is no Date of
<PAGE>
Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section VIII.A.), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
B. Subject to the provisions of Section VIII. C., all determinations
required to be made under this Section VIII, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that a
Payment has been made or will be required, as the case may be, or
such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a Business Combination, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this
Section VIII., shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section VIII.C. and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
C. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period
following the date on which he or she gives such notice to the
Company (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
1. give the Company any information reasonably requested by the
Company relating to such claim,
2. take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
3. cooperate with the Company in good faith in order to
effectively contest such claim, and
4. permit the Company to participate in any proceedings relating
to such claim;
<PAGE>
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section VIII.C., the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section VIII.C., the Executive becomes entitled
to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of
Section VIII.C.) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of
any amount advanced by the Company pursuant to Section VIII.C., a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
E. The Gross-Up Payment shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amount of such Gross-Up Payment, and the limitation on such payments
set forth in Section VIII.A. hereof, cannot be finally determined on
or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accounting Firm,
of the minimum amount of such Gross-Up Payment to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments
when due) at 120% of the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under
<PAGE>
this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments
were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Accounting Firm or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
IX. Confidential Information. During the term of this Agreement and for
a period of three (3) years thereafter, Executive will retain in
confidence all proprietary and confidential information concerning
the Company and its Affiliates, including, without limitation,
customer lists, cost and pricing information, employee data, trade
secrets and software and, shall return to the Company or destroy all
copies and extracts thereof (however and on whatever medium
recorded), 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 the Executive prior to disclosure to the Executive by the Company
or any of its Affiliates; (B) any information which was in the
public domain prior to its disclosure to the Executive; (C) any
information which comes into the public domain through no fault of
the Executive; (D) any information which the Executive is required
to disclose by a court or similar authority or under subpoena,
provided that the Executive provides the Company with notice thereof
and assists, at the Company's sole expense, any reasonable endeavor
by the Company, using appropriate means, to obtain a protective
order limiting the disclosure of such information; and (E) any
information which is disclosed to the Executive by a third party
which has a legal right to make such disclosure. In no event shall
an asserted violation of the provisions of this Section X.
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
X. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives. If the
Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the
Executive's estate.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after the Effective Date,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or
<PAGE>
otherwise.
XI. Miscellaneous.
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
B. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Gregory J. Bjorndahl
19 Lake Court
North Oaks, MN 55127
If to the Company:
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126
Attn: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section IV.C. of
this Agreement, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
F. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section IV.H. hereof, prior to
the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement, provided that nothing herein
shall be construed to limit or prevent the Executive from receiving
compensation and benefits from the Company or its Affiliates that
are customarily paid and provided other peer
<PAGE>
executives who leave the employment of the Company or any of its
Affiliates. From and after the Effective Date this Agreement shall
supersede any other agreement between the parties with respect to
the subject matter hereof (e.g., benefits accruing to the Executive
upon termination of employment following a Business Combination).
G. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the term of this Agreement
(including, without limitation, those under Section V. hereof) shall
survive such expiration.
H. In the event that the Company is a party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable,
be interpreted so as to permit such accounting treatment, and (B) to
the extent that the application of clause (A) of this Section XI.H.
does not preserve the availability of such accounting treatment,
then, the Company may modify or limit the effect of the provisions
of this Agreement to the extent necessary to qualify the
transactions as a "pooling transaction" and provide the Executive
with payments or benefits as nearly equivalent as possible to those
the Executive would have received absent such modification or
limitation, provided, however, to the extent that any provision of
the Agreement would disqualify the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement) and
cannot otherwise be modified or limited, such provision shall be
null and void as of the date hereof. All determinations under this
Section XI.H. shall be made by the accounting firm whose opinion
with respect to "pooling of interests" is required as a condition to
the consummation of such transaction.
I. All claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty
(60) days after notification by the Committee that the Executive's
claims has been denied.
J. Notwithstanding any other provision in this Agreement to the
contrary, the Board shall delegate the responsibilities, duties and
powers specified under this Agreement to be observed or performed by
the "Committee" to a committee (the "Committee") consisting of not
less than three individuals who, on the date six months before a
Business Combination, were directors of the Corporation ("Incumbent
Directors"), provided that in the event that fewer than three
Incumbent Directors are available at the time of such delegation or
thereafter, the Committee's members may include such individual or
individuals as may be appointed by the Incumbent Directors
(including, for such purpose, by any individual or individuals who
have been appointed to the Committee by the Incumbent Directors);
provided further, however, the maximum number of individuals
(including directors) appointed to the Committee shall not exceed
five.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
<PAGE>
Deluxe Corporation Executive
By: /s/ John A. Blanchard III /s/ Gregory J. Bjorndahl
Its: Chief Executive Officer
John A. Blanchard III
(Typed Name)
Exhibit 10.5
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Deluxe Corporation, a Minnesota corporation (the
"Company") and Ronald E. Eilers (the "Executive") dated as of the 9th day of
January, 1998.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company and to encourage the Executive's full support of and participation
in implementing the Company's business strategy involving one or more
significant acquisitions. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks associated with a Change of Control and by such acquisitions and to
encourage the Executive's full attention and dedication to the Company and its
business strategies and to provide the Executive with compensation and benefits
arrangements upon the occurrence of a Business Combination (as defined below)
which ensure that the compensation and benefits expectations of the Executive
will be satisfied in that event and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions.
A. "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.
B. "Beneficial Owner" shall have the meaning defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
C. "Business Combination" shall mean the occurrence of either a Change
of Control or an Other Business Combination.
D. "Business Combination Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year
after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Business Combination Period
shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 120 days prior to the Renewal
Date the Company shall give notice to the Executive that the
Business Combination Period shall not be so extended.
E. "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:
1. any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, excluding, at the time of their
original acquisition, in the securities acquired directly or
beneficially by such Person any securities acquired directly
from the Company or its Affiliates or in connection with a
transaction described in clause (a) of paragraph 3 below; or
<PAGE>
2. the individuals who at the date of this Agreement constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election consent, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors as of the date of this Agreement or whose
appointment, election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or
3. there is consummated a merger or consolidation of the Company
or any Affiliate with any other company, 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 or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any Affiliate, at least 65% of the combined voting power of
the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
4. the shareholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
5. Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the common
stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
F. "Effective Date" shall mean the first date during the Business
Combination Period on which a Business Combination occurs.
G. Other Business Combination" shall mean the occurrence of:
1. any merger, exchange, transfer, or other form of business
combination or acquisition (but not including dispositions),
whether involving assets, shares or any other form of
ownership interest, by the Company or any of its Affiliates of
or with one or more other corporations, partnerships or other
entities in a single transaction or a series of related
transactions for consideration aggregating $500 million or
more (regardless of the form of consideration or the method or
time of payment), or
<PAGE>
2. a sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its non-check
printing assets, business units and/or Affiliates (excluding
those assets, business units and Affiliates that have been
offered for sale prior to the date of this Agreement) or the
sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its check printing
assets, business units and/or Affiliates.
H. "Person" shall have the meaning defined in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, as amended, except
that such term shall not include (I) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of
the Company.
II. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing on
<PAGE>
the Effective Date and ending on the third anniversary of such date
(the "Employment Period").
III. Terms of Employment.
A. Position and Duties.
1. Except with Executive's written consent given in his or her
discretion, during the Employment Period, (a) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 180-day period immediately preceding the Effective
Date and (b) the Executive's services shall be performed at
the location where the Executive was employed immediately
preceding the Effective Date or at a location less than 35
miles from such location.
2. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable efforts to perform faithfully and
efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to
the Company.
B. Compensation.
1. Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which
shall be paid not less often than monthly, at least equal to
twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred,
to the Executive by the Company and its Affiliates in respect
to the twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
In considering any increase to Executive's Annual Base Salary,
Executive will be treated in the same manner as other peer
executives. For example, if the Company establishes the annual
base salaries of other peer executives by reference to a
percentile of comparative market data, the increase, if any,
to Executive's Annual Base Salary shall be established in a
like manner. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary
as so increased.
2. Annual Incentive Payment or Bonus. In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year
ending during the Employment Period (ratably apportioned in
the case of any fiscal year included within the Employment
Period but which does not end
<PAGE>
within the Employment Period), an annual incentive payment or
bonus (the "Annual Incentive Payment") in cash on the same
basis as such incentive payments or bonuses are paid to other
peer executives. For example, if annual incentive payments are
paid to other peer executives under the Company's annual
incentive plan, the target award for the Executive shall be
established in the same manner as the target award for the
other peer executives (e.g. by reference to a percentile
target based on comparative market data) and the performance
criteria and performance measurements governing any payment
earned by Executive shall be based on the same performance
criteria (such as earnings per share or return of average
capital employed) and performance measurements applied to the
other peer executives. Notwithstanding the foregoing, (a) if
the payment of a bonus to other peer executives is, in whole
or part, not based on objective performance criteria,
Executive's Annual Incentive Payment shall be at least equal
to the average of Executive's Annual Incentive Payments for
the last three full fiscal years prior to the Effective Date
or, if Executive was not in the employment of the Company or
its Affiliates during one or more of the last three full
fiscal years, the average of Executive's Annual Incentive
Payments during the number of full fiscal years prior to the
Effective Date that the Executive was so employed (annualized,
in either case, in the event that the Executive was not
employed by the Company for the whole of any such fiscal
year), provided that any special or one-time awards (such as
those associated with a new hire or promotion) shall not be
taken into account (the "Recent Annual Incentive Payment") and
(b) the Executive's annual target incentive or bonus
opportunity shall in no event be less favorable to the
Executive than that provided by the Company and its Affiliates
to the Executive under its annual incentive or bonus plans
during the last fiscal year immediately preceding the
Effective Date, provided that any special or one time awards
(such as those associated with a new hire or promotion) shall
not be taken into account. Each such Annual Incentive Payment
shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the
Annual Incentive Payment is awarded, unless the Executive
shall elect to defer the receipt of such Annual Incentive
Payment.
3. Stock Incentive Plans. During the Employment Period, the
Executive shall be entitled to participate in the Company's
stock incentive, performance share and other stock-based
incentive plans (if any), on the same basis as other peer
executives. For example, if other peer executives are awarded
stock options or performance shares based on references to
comparative market data, Executive's awards shall be made on
the same basis, and shall, in any event, contain the same
terms and conditions, and if applicable, be subject to the
same performance criteria, as applied to awards to other peer
executives. Notwithstanding the foregoing, such long-term
incentive opportunities for the Executive shall in no event be
less favorable, in each case and in the aggregate, than those
provided by the Company and its Affiliates for the Executive
under such plans during the fiscal year immediately preceding
the Effective Date, provided that any special or one-time
awards (such as those associated with a new hire or promotion)
shall not be taken into account.
4. Savings, Retirement and Other Incentive Plans. During the
Employment Period, the Executive shall be entitled to
participate in all other incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives of the Company and its Affiliates,
but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate,
than the most favorable of those provided by the Company and
its Affiliates for the Executive under such plans, practices,
policies and programs as in effect at any time during the one
year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer
<PAGE>
executives of the Company and its Affiliates, provided,
however, that such benefits may be reduced pursuant to a
general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be.
5. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under all welfare benefit plans, practices, policies
and programs provided by the Company and its Affiliates
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the Executive
and/or the Executive's family, to the extent applicable
generally to other peer executives of the Company and its
Affiliates, as the case may be, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the
one year period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its Affiliates, as the case may be,
provided, however, that such benefits may be reduced pursuant
to a general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be, and all senior officers of any
Person in control of the Company.
6. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company
and its Affiliates in effect for the Executive at any time
during the one year period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its Affiliates, as the case may
be.
7. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, use or
reimbursement for the use of an automobile, as the case may
be, and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the
Company and its Affiliates in effect for the Executive at any
time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be, provided, however, that such benefits may be reduced
pursuant to a general (across-the-board) reduction of such
benefits similarly affecting all senior officers of the
Company or its Affiliates, as the case may be, and all senior
officers of any Person in control of the Company.
8. Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size
and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, not materially less
favorable with respect to the foregoing provided to the
Executive by the Company and its Affiliates at any time during
the one year period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer executives
of the Company and its Affiliates, as the case may be.
9. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and holidays in accordance with the
most favorable plans, policies, programs and practices of the
Company and its Affiliates as in effect for the Executive at
any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the
<PAGE>
Company and its Affiliates, as the case may be.
IV. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may, give a
Notice of Termination to the Executive in accordance with Section
XI.B. of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company or its Affiliates, as the case may be, shall
terminate effective on the 30th day after receipt of the Notice of
Termination by the Executive (unless such date is extended as
provided in Section IV.F.), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from
the Executive's duties with the Company or its Affiliates, as the
case may be, on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
B. Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
1. the willful and continued failure of the Executive to perform
substantially the Executive's material duties with the Company
and its Affiliates (other than any such failure resulting from
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section IV.D. hereof), after a written demand for substantial
performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
2. the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company or its Affiliates.
For purposes of this provision, (a) no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company and (b) in the event of a
dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the
Company establishes to the Committee (as defined in Section XI.J.)
by clear and convincing evidence that Cause exists. Any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon
the advice of counsel for the Company (or if the Executive is
counsel to the Company, based upon such Executive's own legal
conclusions) shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests
of the Company.
C. Good Reason. The Executive's employment during the Employment Period
may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
1. except with Executive's written consent given in his or her
discretion, (a) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section III.A. of this Agreement, provided
that the
<PAGE>
Company may, in its discretion, transfer the Executive to
another position (or positions) with the Company or its
Affiliates that is generally, substantially equivalent to such
position, or (b) any other action by the Company which results
in a material diminution in the Executive's position (or
positions) with the Company or its Affiliates, excluding for
this purpose an isolated, insubstantial or inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
2. any failure by the Company to comply with any of the
provisions of Section III.B. of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
3. the Company's requiring the Executive to be based at any
location other than as provided in clause III.A.1(b) hereof or
the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
4. any purported termination by the Company of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section IV.D hereof
and otherwise expressly permitted by this Agreement. For
purposes of this Agreement, no such purported termination
shall be effective;
5. any failure by the Company to comply with and satisfy Section
X.C. of this Agreement; or
6. any request or requirement by the Company of its Affiliates
that the Executive take any action or omit to take any action
that is inconsistent with or in violation of the Company's
ethical guidelines and policies as the same existed within the
120 day period prior to the Effective Date or any professional
ethical guidelines or principles that may be applicable to the
Executive or, if Executive is counsel to the Company,
requesting or requiring Executive to practice in or under the
laws of any jurisdiction or appear before any court or other
tribunal to or before which Executive is not admitted to
practice.
For purposes of this Section IV.C., any good faith claim of "Good
Reason" made by the Executive shall be presumed to be correct unless
the Company establishes to the Committee by clear and convincing
evidence that Good Reason does not exist. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not constitute a
consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
D. Notice of Termination. Any purported termination of the Executive's
employment during the Employment Period (other than by reason of
death) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section XI.B. of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (3) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that,
<PAGE>
in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph B.1. or B.2. above, and
specifying the particulars thereof in detail. The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of
Disability, Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights
hereunder;
E. Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or any other reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (2) if the Executive's employment is
terminated during the Employment Period by the Company other than
for Cause or Disability, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination, (3)
if the Executive's employment is terminated by reason of death
during the Employment Period, the Date of Termination shall be the
date of death of the Executive and (4) if the Executive's employment
is terminated by the Company for Disability, the date Executive's
employment is terminated as provided in Section IV.A., provided,
however, the Date of Termination specified in this Section E. may be
extended to the date of termination (if applicable) provided in
Section IV.F.
F. Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section IV.F.),
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on
which the Employment Period ends or (ii) the date on which the
dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator
or a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and
no appeal has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
G. Compensation During Dispute. If a purported termination occurs
during the Employment Period and the Date of Termination is extended
in accordance with Section IV.F. hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with
Section IV.F. hereof. Amounts paid under this Section IV.G. are in
addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this
Agreement.
H. Pre-Effective Date Actions. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated
during the Employment Period by the Company without Cause or by the
Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to the Effective Date
(whether or not a Business Combination ever occurs) and such
termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which
would constitute a Business Combination, (ii) the Executive
terminates his employment for Good Reason prior to the Effective
Date (whether or not a Business Combination ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person, or (iii) the Executive's
employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance
or event which constitutes Good Reason is otherwise in connection
with or in
<PAGE>
anticipation of a Business Combination (whether or not a Business
Combination ever occurs). For purposes of any determination
regarding the applicability of the immediately preceding sentence,
any position taken by the Executive shall be presumed to be correct
unless the Company establishes to the Committee by clear and
convincing evidence that such position is not correct.
V. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause. If, during the Employment Period,
the Company shall terminate the Executive's employment other than
for Cause or Disability or the Executive shall terminate employment
for Good Reason:
1. the Company shall pay to the Executive in a lump sum in cash
within 5 days after the Date of Termination the aggregate of
the following amounts:
(a) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (ii) the product of (x) the higher of
(I) the Recent Annual Incentive Payment and (II) the
Annual Incentive Payment paid or payable, including any
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was
employed for less than twelve full months), for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which 365 and (iii) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (i),
(ii) and (iii) shall be hereinafter referred to as the
"Accrued Obligations"); and
(b) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
(c) an amount equal to the product of three times the higher
of (i) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount (defined below) to the Executive's
account under (x) all of the Company's retirement plans,
or if higher, the retirement plans of any Affiliate in
which the Executive was eligible to participate
immediately prior to the Effective Date and (y) any
excess or supplemental retirement plan in which the
Executive was eligible to participate as of the
Effective Date (the "ERISA Excess Plan") (the ERISA
Excess Plan and such retirement plans, as amended, and
any successor or replacement plans being referred to as
the "Plans") as the Plans were in effect and funded for
the fiscal year immediately preceding the Effective Date
or (ii) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount, to the Company's Plans or, if higher,
the Plans of an Affiliate in which the Executive was
eligible to participate immediately prior to the Date of
Termination as those Plans were in effect and funded for
the fiscal year immediately preceding the Date of
Termination. For the purposes hereof, the term
"Reference Amount" shall mean an amount equal to
one-third of the amount calculated in clause V.A.1.(b)
without adjustment in the case of death or Disability.
2. for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
<PAGE>
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices and policies described in Section III.B.5. of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates and their
families, as the case may be, provided, however, that if the
Executive becomes re-employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary and supplemental
to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the
Executive for retiree welfare benefits pursuant to such plans,
practices, programs and policies, the Executive shall be
considered to have remained employed until three years after
the Date of Termination and to have retired on the last day of
such period as a qualified retiree of the Company;
3. immediately following the Executive's Date of Termination and,
if a Change of Control shall earlier occur, immediately
following the Change of Control, the Company shall take all
such action as may be required fully and immediately (but
without duplication of benefits under this Section V.A.3.) to:
(a) vest all outstanding, unvested options that may have
been granted to the Executive under the Company' Stock
Incentive Plan (as amended) and as the same may be
further amended and any successor or replacement plan
(the "SIP") and, upon the Date of Termination (if the
Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive
for Good Reason), permit the Executive a period equal to
the lesser of five years following that Date of
Termination or the remaining term of the applicable
options to exercise such options in accordance with the
provisions of the SIP and any applicable award agreement
(as modified or amended as a result of the actions
required by this clause),
(b) following the Date of Termination (if the Executive's
employment is terminated by the Company other than for
Cause or Disability or by the Executive for Good
Reason), permit the Executive to earn and be awarded
shares of the Company pursuant to awards previously made
to the Executive under the Deluxe Corporation
Performance Share Plan as if Executive had continued as
a participant in such plan and an employee of the
Company or the relevant Affiliate until the expiration
of the performance period or periods applicable to each
such award,
(c) vest all other restricted shares and units theretofore
granted the Executive under the SIP and any other
stock-based compensation plan (other than the
Performance Share Plan), and
(d) in the case that the Company is not a surviving
corporation, to provide the Executive with the economic
equivalent of the value that the Executive would have
received had the Company been the surviving corporation
and taken the actions required in clauses (a) though (c)
hereof.
4. the Company shall, at its sole expense as incurred, provide
the Executive with out-placement services the scope and
provider of which shall be selected by the Executive in his or
her sole discretion; and
<PAGE>
5. to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided to the Executive
or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its Affiliates (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section
V.B. shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its
Affiliates, as the case may be, to the estates and beneficiaries of
peer executives of the Company or such Affiliates under such plans,
programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their
beneficiaries at any time during the one year period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its Affiliates, as applicable,
and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section V.C.
shall include, and the Executive shall be entitled after the Date of
Termination to receive, disability and other benefits at least equal
to the most favorable of those generally provided by the Company and
its Affiliates, as applicable, to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the one year period immediately preceding the Effective Date
or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect
to other peer executives of the Company and its Affiliates, as
applicable, and their families
D. Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1) his
Annual Base Salary through the Date of Termination, (2) the amount
of any compensation previously deferred by the Executive, and (3)
Other Benefits, in each case to the extent theretofore unpaid. If
the Executive terminates employment during the Employment Period,
excluding a termination for Good Reason or Disability, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
VI. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of
its Affiliates and for which the Executive may qualify, nor, subject
to Section XI. F., shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its Affiliates. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contact or agreement with the Company or any of its Affiliates or
subsequent to the Date of
<PAGE>
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
VII. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section V.A.2. hereof, such
amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may incur in good faith as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). Such payments shall be made within
five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
VIII. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any payment or benefit received or to be received by the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Business Combination or any Person affiliated with the Company or
such Person, but determined without regard to any additional
payments required under this Section VIII) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of this Section VIII.A., if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the
Gross-Up Payment, would not receive a net after-tax benefit of at
least $50,000 (taking into account both income taxes and any Excise
Tax) as compared to the net after-tax benefit the Executive would
receive if the Gross-Up Payment were eliminated and the Payments
were reduced, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all
of the Payments shall be treated as "parachute payments" (within the
meaning of Section 280G(b) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the Accounting Firm (as defined below), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for
<PAGE>
services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base amount" (as
defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm in
accordance with the principals of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of Executive's residence on the Date of Termination (or
if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section
VIII.A.), net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
B. Subject to the provisions of Section VIII. C., all determinations
required to be made under this Section VIII, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that a
Payment has been made or will be required, as the case may be, or
such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a Business Combination, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this
Section VIII., shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section VIII.C. and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
C. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period
following the date on which he or she gives such notice to the
Company (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
1. give the Company any information reasonably requested by the
Company relating to such claim,
2. take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
<PAGE>
3. cooperate with the Company in good faith in order to
effectively contest such claim, and
4. permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section VIII.C., the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section VIII.C., the Executive becomes entitled
to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of
Section VIII.C.) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of
any amount advanced by the Company pursuant to Section VIII.C., a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
E. The Gross-Up Payment shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amount of such Gross-Up Payment, and the limitation on such payments
set forth in Section VIII.A. hereof, cannot be finally determined on
or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accounting Firm,
of the minimum amount of such Gross-Up Payment to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments
when due) at 120% of the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under
this
<PAGE>
Agreement, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received
from Tax Counsel, the Accounting Firm or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
IX. Confidential Information. During the term of this Agreement and for
a period of three (3) years thereafter, Executive will retain in
confidence all proprietary and confidential information concerning
the Company and its Affiliates, including, without limitation,
customer lists, cost and pricing information, employee data, trade
secrets and software and, shall return to the Company or destroy all
copies and extracts thereof (however and on whatever medium
recorded), 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 the Executive prior to disclosure to the Executive by the Company
or any of its Affiliates; (B) any information which was in the
public domain prior to its disclosure to the Executive; (C) any
information which comes into the public domain through no fault of
the Executive; (D) any information which the Executive is required
to disclose by a court or similar authority or under subpoena,
provided that the Executive provides the Company with notice thereof
and assists, at the Company's sole expense, any reasonable endeavor
by the Company, using appropriate means, to obtain a protective
order limiting the disclosure of such information; and (E) any
information which is disclosed to the Executive by a third party
which has a legal right to make such disclosure. In no event shall
an asserted violation of the provisions of this Section X.
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
X. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives. If the
Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the
Executive's estate.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after the Effective Date,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
XI. Miscellaneous.
<PAGE>
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
B. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Ronald E. Eilers
4920 Neal Avenue North
Stillwater, MN 55082
If to the Company:
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126
Attn: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section IV.C. of
this Agreement, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
F. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section IV.H. hereof, prior to
the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement, provided that nothing herein
shall be construed to limit or prevent the Executive from receiving
compensation and benefits from the Company or its Affiliates that
are customarily paid and provided other peer executives who leave
the employment of the Company or any of its Affiliates. From and
after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter
hereof (e.g., benefits accruing to the Executive upon termination of
employment following a Business Combination).
<PAGE>
G. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the term of this Agreement
(including, without limitation, those under Section V. hereof) shall
survive such expiration.
H. In the event that the Company is a party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable,
be interpreted so as to permit such accounting treatment, and (B) to
the extent that the application of clause (A) of this Section XI.H.
does not preserve the availability of such accounting treatment,
then, the Company may modify or limit the effect of the provisions
of this Agreement to the extent necessary to qualify the
transactions as a "pooling transaction" and provide the Executive
with payments or benefits as nearly equivalent as possible to those
the Executive would have received absent such modification or
limitation, provided, however, to the extent that any provision of
the Agreement would disqualify the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement) and
cannot otherwise be modified or limited, such provision shall be
null and void as of the date hereof. All determinations under this
Section XI.H. shall be made by the accounting firm whose opinion
with respect to "pooling of interests" is required as a condition to
the consummation of such transaction.
I. All claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty
(60) days after notification by the Committee that the Executive's
claims has been denied.
J. Notwithstanding any other provision in this Agreement to the
contrary, the Board shall delegate the responsibilities, duties and
powers specified under this Agreement to be observed or performed by
the "Committee" to a committee (the "Committee") consisting of not
less than three individuals who, on the date six months before a
Business Combination, were directors of the Corporation ("Incumbent
Directors"), provided that in the event that fewer than three
Incumbent Directors are available at the time of such delegation or
thereafter, the Committee's members may include such individual or
individuals as may be appointed by the Incumbent Directors
(including, for such purpose, by any individual or individuals who
have been appointed to the Committee by the Incumbent Directors);
provided further, however, the maximum number of individuals
(including directors) appointed to the Committee shall not exceed
five.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
Deluxe Corporation Executive
By: /s/ John A. Blanchard III /s/ Ronald E. Eilers
Its: Chief Executive Officer
John A. Blanchard III
(Typed Name)
Exhibit 10.6
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Deluxe Corporation, a Minnesota corporation
(the "Company") and John H. LeFevre (the "Executive") dated as of the 9th day of
January, 1998.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company and to encourage the Executive's full support of and participation
in implementing the Company's business strategy involving one or more
significant acquisitions. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks associated with a Change of Control and by such acquisitions and to
encourage the Executive's full attention and dedication to the Company and its
business strategies and to provide the Executive with compensation and benefits
arrangements upon the occurrence of a Business Combination (as defined below)
which ensure that the compensation and benefits expectations of the Executive
will be satisfied in that event and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions.
A. "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.
B. "Beneficial Owner" shall have the meaning defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
C. "Business Combination" shall mean the occurrence of either a Change
of Control or an Other Business Combination.
D. "Business Combination Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year
after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Business Combination Period
shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 120 days prior to the Renewal
Date the Company shall give notice to the Executive that the
Business Combination Period shall not be so extended.
E. "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:
1. any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, excluding, at the time of their
original acquisition, in the securities acquired directly or
beneficially by such Person any securities acquired directly
from the Company or its Affiliates or in connection with a
transaction described in clause (a) of paragraph 3 below; or
<PAGE>
2. the individuals who at the date of this Agreement constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election consent, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors as of the date of this Agreement or whose
appointment, election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or
3. there is consummated a merger or consolidation of the Company
or any Affiliate with any other company, 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 or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any Affiliate, at least 65% of the combined voting power of
the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
4. the shareholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
5. Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the common
stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
F. "Effective Date" shall mean the first date during the Business
Combination Period on which a Business Combination occurs.
G. Other Business Combination" shall mean the occurrence of:
1. any merger, exchange, transfer, or other form of business
combination or acquisition (but not including dispositions),
whether involving assets, shares or any other form of
ownership interest, by the Company or any of its Affiliates of
or with one or more other corporations, partnerships or other
entities in a single transaction or a series of related
transactions for consideration aggregating $500 million or
more (regardless of the form of consideration or the method or
time of payment), or
<PAGE>
2. a sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its non-check
printing assets, business units and/or Affiliates (excluding
those assets, business units and Affiliates that have been
offered for sale prior to the date of this Agreement) or the
sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its check printing
assets, business units and/or Affiliates.
H. "Person" shall have the meaning defined in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, as amended, except
that such term shall not include (I) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of
the Company.
II. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing on
<PAGE>
the Effective Date and ending on the third anniversary of such date
(the "Employment Period").
III. Terms of Employment.
A. Position and Duties.
1. Except with Executive's written consent given in his or her
discretion, during the Employment Period, (a) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 180-day period immediately preceding the Effective
Date and (b) the Executive's services shall be performed at
the location where the Executive was employed immediately
preceding the Effective Date or at a location less than 35
miles from such location.
2. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable efforts to perform faithfully and
efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to
the Company.
B. Compensation.
1. Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which
shall be paid not less often than monthly, at least equal to
twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred,
to the Executive by the Company and its Affiliates in respect
to the twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
In considering any increase to Executive's Annual Base Salary,
Executive will be treated in the same manner as other peer
executives. For example, if the Company establishes the annual
base salaries of other peer executives by reference to a
percentile of comparative market data, the increase, if any,
to Executive's Annual Base Salary shall be established in a
like manner. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary
as so increased.
2. Annual Incentive Payment or Bonus. In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year
ending during the Employment Period (ratably apportioned in
the case of any fiscal year included within the Employment
Period but which does not end
<PAGE>
within the Employment Period), an annual incentive payment or
bonus (the "Annual Incentive Payment") in cash on the same
basis as such incentive payments or bonuses are paid to other
peer executives. For example, if annual incentive payments are
paid to other peer executives under the Company's annual
incentive plan, the target award for the Executive shall be
established in the same manner as the target award for the
other peer executives (e.g. by reference to a percentile
target based on comparative market data) and the performance
criteria and performance measurements governing any payment
earned by Executive shall be based on the same performance
criteria (such as earnings per share or return of average
capital employed) and performance measurements applied to the
other peer executives. Notwithstanding the foregoing, (a) if
the payment of a bonus to other peer executives is, in whole
or part, not based on objective performance criteria,
Executive's Annual Incentive Payment shall be at least equal
to the average of Executive's Annual Incentive Payments for
the last three full fiscal years prior to the Effective Date
or, if Executive was not in the employment of the Company or
its Affiliates during one or more of the last three full
fiscal years, the average of Executive's Annual Incentive
Payments during the number of full fiscal years prior to the
Effective Date that the Executive was so employed (annualized,
in either case, in the event that the Executive was not
employed by the Company for the whole of any such fiscal
year), provided that any special or one-time awards (such as
those associated with a new hire or promotion) shall not be
taken into account (the "Recent Annual Incentive Payment") and
(b) the Executive's annual target incentive or bonus
opportunity shall in no event be less favorable to the
Executive than that provided by the Company and its Affiliates
to the Executive under its annual incentive or bonus plans
during the last fiscal year immediately preceding the
Effective Date, provided that any special or one time awards
(such as those associated with a new hire or promotion) shall
not be taken into account. Each such Annual Incentive Payment
shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the
Annual Incentive Payment is awarded, unless the Executive
shall elect to defer the receipt of such Annual Incentive
Payment.
3. Stock Incentive Plans. During the Employment Period, the
Executive shall be entitled to participate in the Company's
stock incentive, performance share and other stock-based
incentive plans (if any), on the same basis as other peer
executives. For example, if other peer executives are awarded
stock options or performance shares based on references to
comparative market data, Executive's awards shall be made on
the same basis, and shall, in any event, contain the same
terms and conditions, and if applicable, be subject to the
same performance criteria, as applied to awards to other peer
executives. Notwithstanding the foregoing, such long-term
incentive opportunities for the Executive shall in no event be
less favorable, in each case and in the aggregate, than those
provided by the Company and its Affiliates for the Executive
under such plans during the fiscal year immediately preceding
the Effective Date, provided that any special or one-time
awards (such as those associated with a new hire or promotion)
shall not be taken into account.
4. Savings, Retirement and Other Incentive Plans. During the
Employment Period, the Executive shall be entitled to
participate in all other incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives of the Company and its Affiliates,
but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate,
than the most favorable of those provided by the Company and
its Affiliates for the Executive under such plans, practices,
policies and programs as in effect at any time during the one
year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer
<PAGE>
executives of the Company and its Affiliates, provided,
however, that such benefits may be reduced pursuant to a
general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be.
5. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under all welfare benefit plans, practices, policies
and programs provided by the Company and its Affiliates
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the Executive
and/or the Executive's family, to the extent applicable
generally to other peer executives of the Company and its
Affiliates, as the case may be, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the
one year period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its Affiliates, as the case may be,
provided, however, that such benefits may be reduced pursuant
to a general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be, and all senior officers of any
Person in control of the Company.
6. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company
and its Affiliates in effect for the Executive at any time
during the one year period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its Affiliates, as the case may
be.
7. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, use or
reimbursement for the use of an automobile, as the case may
be, and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the
Company and its Affiliates in effect for the Executive at any
time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be, provided, however, that such benefits may be reduced
pursuant to a general (across-the-board) reduction of such
benefits similarly affecting all senior officers of the
Company or its Affiliates, as the case may be, and all senior
officers of any Person in control of the Company.
8. Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size
and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, not materially less
favorable with respect to the foregoing provided to the
Executive by the Company and its Affiliates at any time during
the one year period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer executives
of the Company and its Affiliates, as the case may be.
9. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and holidays in accordance with the
most favorable plans, policies, programs and practices of the
Company and its Affiliates as in effect for the Executive at
any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the
<PAGE>
Company and its Affiliates, as the case may be.
IV. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may, give a
Notice of Termination to the Executive in accordance with Section
XI.B. of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company or its Affiliates, as the case may be, shall
terminate effective on the 30th day after receipt of the Notice of
Termination by the Executive (unless such date is extended as
provided in Section IV.F.), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from
the Executive's duties with the Company or its Affiliates, as the
case may be, on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
B. Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
1. the willful and continued failure of the Executive to perform
substantially the Executive's material duties with the Company
and its Affiliates (other than any such failure resulting from
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section IV.D. hereof), after a written demand for substantial
performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
2. the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company or its Affiliates.
For purposes of this provision, (a) no act or failure to act,
on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that the Executive's
action or omission was in the best interests of the Company
and (b) in the event of a dispute concerning the application
of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the
Committee (as defined in Section XI.J.) by clear and
convincing evidence that Cause exists. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based
upon the advice of counsel for the Company (or if the
Executive is counsel to the Company, based upon such
Executive's own legal conclusions) shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
C. Good Reason. The Executive's employment during the Employment Period
may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
1. except with Executive's written consent given in his or her
discretion, the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section III.A. of this Agreement, or any other
action by the Company which
<PAGE>
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
2. any failure by the Company to comply with any of the
provisions of Section III.B. of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
3. the Company's requiring the Executive to be based at any
location other than as provided in clause III.A.1(b) hereof or
the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
4. any purported termination by the Company of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section IV.D hereof
and otherwise expressly permitted by this Agreement. For
purposes of this Agreement, no such purported termination
shall be effective;
5. any failure by the Company to comply with and satisfy Section
X.C. of this Agreement; or
6. any request or requirement by the Company of its Affiliates
that the Executive take any action or omit to take any action
that is inconsistent with or in violation of the Company's
ethical guidelines and policies as the same existed within the
120 day period prior to the Effective Date or any professional
ethical guidelines or principles that may be applicable to the
Executive or, if Executive is counsel to the Company,
requesting or requiring Executive to practice in or under the
laws of any jurisdiction or appear before any court or other
tribunal to or before which Executive is not admitted to
practice.
For purposes of this Section IV.C., any good faith claim of
"Good Reason" made by the Executive shall be presumed to be
correct unless the Company establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute a consent to, or a
waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
D. Notice of Termination. Any purported termination of the Executive's
employment during the Employment Period (other than by reason of
death) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section XI.B. of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (3) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph B.1. or
B.2. above, and specifying the particulars thereof in detail. The
failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which
<PAGE>
contributes to a showing of Disability, Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder;
E. Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or any other reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (2) if the Executive's employment is
terminated during the Employment Period by the Company other than
for Cause or Disability, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination, (3)
if the Executive's employment is terminated by reason of death
during the Employment Period, the Date of Termination shall be the
date of death of the Executive and (4) if the Executive's employment
is terminated by the Company for Disability, the date Executive's
employment is terminated as provided in Section IV.A., provided,
however, the Date of Termination specified in this Section E. may be
extended to the date of termination (if applicable) provided in
Section IV.F.
F. Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section IV.F.),
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on
which the Employment Period ends or (ii) the date on which the
dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator
or a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and
no appeal has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
G. Compensation During Dispute. If a purported termination occurs
during the Employment Period and the Date of Termination is extended
in accordance with Section IV.F. hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with
Section IV.F. hereof. Amounts paid under this Section IV.G. are in
addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this
Agreement.
H. Pre-Effective Date Actions. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated
during the Employment Period by the Company without Cause or by the
Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to the Effective Date
(whether or not a Business Combination ever occurs) and such
termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which
would constitute a Business Combination, (ii) the Executive
terminates his employment for Good Reason prior to the Effective
Date (whether or not a Business Combination ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person, or (iii) the Executive's
employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance
or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Business Combination (whether or not a
Business Combination ever occurs). For purposes of any determination
regarding the applicability of the immediately preceding sentence,
any
<PAGE>
position taken by the Executive shall be presumed to be correct
unless the Company establishes to the Committee by clear and
convincing evidence that such position is not correct.
V. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause. If, during the Employment Period,
the Company shall terminate the Executive's employment other than
for Cause or Disability or the Executive shall terminate employment
for Good Reason:
1. the Company shall pay to the Executive in a lump sum in cash
within 5 days after the Date of Termination the aggregate of
the following amounts:
(a) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (ii) the product of (x) the higher of
(I) the Recent Annual Incentive Payment and (II) the
Annual Incentive Payment paid or payable, including any
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was
employed for less than twelve full months), for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which 365 and (iii) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (i),
(ii) and (iii) shall be hereinafter referred to as the
"Accrued Obligations"); and
(b) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
(c) an amount equal to the product of three times the higher
of (i) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount (defined below) to the Executive's
account under (x) all of the Company's retirement plans,
or if higher, the retirement plans of any Affiliate in
which the Executive was eligible to participate
immediately prior to the Effective Date and (y) any
excess or supplemental retirement plan in which the
Executive was eligible to participate as of the
Effective Date (the "ERISA Excess Plan") (the ERISA
Excess Plan and such retirement plans, as amended, and
any successor or replacement plans being referred to as
the "Plans") as the Plans were in effect and funded for
the fiscal year immediately preceding the Effective Date
or (ii) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount, to the Company's Plans or, if higher,
the Plans of an Affiliate in which the Executive was
eligible to participate immediately prior to the Date of
Termination as those Plans were in effect and funded for
the fiscal year immediately preceding the Date of
Termination. For the purposes hereof, the term
"Reference Amount" shall mean an amount equal to
one-third of the amount calculated in clause V.A.1.(b)
without adjustment in the case of death or Disability.
2. for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices
<PAGE>
and policies described in Section III.B.5. of this Agreement
if the Executive's employment had not been terminated or, if
more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the
Company and its Affiliates and their families, as the case may
be, provided, however, that if the Executive becomes
re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits
described herein shall be secondary and supplemental to those
provided under such other plan during such applicable period
of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for
retiree welfare benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to
have remained employed until three years after the Date of
Termination and to have retired on the last day of such period
as a qualified retiree of the Company;
3. immediately following the Executive's Date of Termination and,
if a Change of Control shall earlier occur, immediately
following the Change of Control, the Company shall take all
such action as may be required fully and immediately (but
without duplication of benefits under this Section V.A.3.) to:
(a) vest all outstanding, unvested options that may have
been granted to the Executive under the Company' Stock
Incentive Plan (as amended) and as the same may be
further amended and any successor or replacement plan
(the "SIP") and, upon the Date of Termination (if the
Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive
for Good Reason), permit the Executive a period equal to
the lesser of five years following that Date of
Termination or the remaining term of the applicable
options to exercise such options in accordance with the
provisions of the SIP and any applicable award agreement
(as modified or amended as a result of the actions
required by this clause),
(b) following the Date of Termination (if the Executive's
employment is terminated by the Company other than for
Cause or Disability or by the Executive for Good
Reason), permit the Executive to earn and be awarded
shares of the Company pursuant to awards previously made
to the Executive under the Deluxe Corporation
Performance Share Plan as if Executive had continued as
a participant in such plan and an employee of the
Company or the relevant Affiliate until the expiration
of the performance period or periods applicable to each
such award,
(c) vest all other restricted shares and units theretofore
granted the Executive under the SIP and any other
stock-based compensation plan (other than the
Performance Share Plan), and
(d) in the case that the Company is not a surviving
corporation, to provide the Executive with the economic
equivalent of the value that the Executive would have
received had the Company been the surviving corporation
and taken the actions required in clauses (a) though (c)
hereof.
4. the Company shall, at its sole expense as incurred, provide
the Executive with out-placement services the scope and
provider of which shall be selected by the Executive in his or
her sole discretion; and
5. to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided to the Executive
or which the Executive is eligible to receive under any plan,
program, policy or practice or
<PAGE>
contract or agreement of the Company and its Affiliates (such
other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section
V.B. shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its
Affiliates, as the case may be, to the estates and beneficiaries of
peer executives of the Company or such Affiliates under such plans,
programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their
beneficiaries at any time during the one year period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its Affiliates, as applicable,
and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section V.C.
shall include, and the Executive shall be entitled after the Date of
Termination to receive, disability and other benefits at least equal
to the most favorable of those generally provided by the Company and
its Affiliates, as applicable, to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the one year period immediately preceding the Effective Date
or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect
to other peer executives of the Company and its Affiliates, as
applicable, and their families.
D. Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1) his
Annual Base Salary through the Date of Termination, (2) the amount
of any compensation previously deferred by the Executive, and (3)
Other Benefits, in each case to the extent theretofore unpaid. If
the Executive terminates employment during the Employment Period,
excluding a termination for Good Reason or Disability, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
VI. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of
its Affiliates and for which the Executive may qualify, nor, subject
to Section XI. F., shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its Affiliates. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contact or agreement with the Company or any of its Affiliates or
subsequent to the Date of Termination shall be payable in accordance
with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
<PAGE>
VII. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section V.A.2. hereof, such
amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may incur in good faith as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). Such payments shall be made within
five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
VIII. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any payment or benefit received or to be received by the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Business Combination or any Person affiliated with the Company or
such Person, but determined without regard to any additional
payments required under this Section VIII) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of this Section VIII.A., if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the
Gross-Up Payment, would not receive a net after-tax benefit of at
least $50,000 (taking into account both income taxes and any Excise
Tax) as compared to the net after-tax benefit the Executive would
receive if the Gross-Up Payment were eliminated and the Payments
were reduced, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all
of the Payments shall be treated as "parachute payments" (within the
meaning of Section 280G(b) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the Accounting Firm (as defined below), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base amount"
(as defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any non-cash
<PAGE>
benefits or any deferred payment or benefit shall be determined by
the Accounting Firm in accordance with the principals of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay
federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rate
of taxation in the state and locality of Executive's residence on
the Date of Termination (or if there is no Date of Termination, then
the date on which the Gross-Up Payment is calculated for purposes of
this Section VIII.A.), net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state
and local taxes.
B. Subject to the provisions of Section VIII. C., all determinations
required to be made under this Section VIII, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that a
Payment has been made or will be required, as the case may be, or
such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a Business Combination, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this
Section VIII., shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section VIII.C. and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
C. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period
following the date on which he or she gives such notice to the
Company (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
1. give the Company any information reasonably requested by the
Company relating to such claim,
2. take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
3. cooperate with the Company in good faith in order to
effectively contest such claim, and
<PAGE>
4. permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section VIII.C., the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section VIII.C., the Executive becomes entitled
to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of
Section VIII.C.) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of
any amount advanced by the Company pursuant to Section VIII.C., a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
E. The Gross-Up Payment shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amount of such Gross-Up Payment, and the limitation on such payments
set forth in Section VIII.A. hereof, cannot be finally determined on
or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accounting Firm,
of the minimum amount of such Gross-Up Payment to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments
when due) at 120% of the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under
this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments
were calculated and the basis for such calculations including,
<PAGE>
without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Accounting Firm or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
IX. Confidential Information. During the term of this Agreement and for
a period of three (3) years thereafter, Executive will retain in
confidence all proprietary and confidential information concerning
the Company and its Affiliates, including, without limitation,
customer lists, cost and pricing information, employee data, trade
secrets and software and, shall return to the Company or destroy all
copies and extracts thereof (however and on whatever medium
recorded), 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 the Executive prior to disclosure to the Executive by the Company
or any of its Affiliates; (B) any information which was in the
public domain prior to its disclosure to the Executive; (C) any
information which comes into the public domain through no fault of
the Executive; (D) any information which the Executive is required
to disclose by a court or similar authority or under subpoena,
provided that the Executive provides the Company with notice thereof
and assists, at the Company's sole expense, any reasonable endeavor
by the Company, using appropriate means, to obtain a protective
order limiting the disclosure of such information; and (E) any
information which is disclosed to the Executive by a third party
which has a legal right to make such disclosure. In no event shall
an asserted violation of the provisions of this Section X.
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
X. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives. If the
Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the
Executive's estate.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after the Effective Date,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
XI. Miscellaneous.
<PAGE>
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
B. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
John H. LeFevre
2 Foster Place
North Oaks, MN 55127
If to the Company:
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126
Attn: Chief Financial Officer
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section IV.C. of
this Agreement, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
F. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section IV.H. hereof, prior to
the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement, provided that nothing herein
shall be construed to limit or prevent the Executive from receiving
compensation and benefits from the Company or its Affiliates that
are customarily paid and provided other peer executives who leave
the employment of the Company or any of its Affiliates. From and
after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter
hereof (e.g., benefits accruing to the Executive upon termination of
employment following a Business Combination).
<PAGE>
G. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the term of this Agreement
(including, without limitation, those under Section V. hereof) shall
survive such expiration.
H. In the event that the Company is a party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable,
be interpreted so as to permit such accounting treatment, and (B) to
the extent that the application of clause (A) of this Section XI.H.
does not preserve the availability of such accounting treatment,
then, the Company may modify or limit the effect of the provisions
of this Agreement to the extent necessary to qualify the
transactions as a "pooling transaction" and provide the Executive
with payments or benefits as nearly equivalent as possible to those
the Executive would have received absent such modification or
limitation, provided, however, to the extent that any provision of
the Agreement would disqualify the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement) and
cannot otherwise be modified or limited, such provision shall be
null and void as of the date hereof. All determinations under this
Section XI.H. shall be made by the accounting firm whose opinion
with respect to "pooling of interests" is required as a condition to
the consummation of such transaction.
I. All claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty
(60) days after notification by the Committee that the Executive's
claims has been denied.
J. Notwithstanding any other provision in this Agreement to the
contrary, the Board shall delegate the responsibilities, duties and
powers specified under this Agreement to be observed or performed by
the "Committee" to a committee (the "Committee") consisting of not
less than three individuals who, on the date six months before a
Business Combination, were directors of the Corporation ("Incumbent
Directors"), provided that in the event that fewer than three
Incumbent Directors are available at the time of such delegation or
thereafter, the Committee's members may include such individual or
individuals as may be appointed by the Incumbent Directors
(including, for such purpose, by any individual or individuals who
have been appointed to the Committee by the Incumbent Directors);
provided further, however, the maximum number of individuals
(including directors) appointed to the Committee shall not exceed
five.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
Deluxe Corporation Executive
By: /s/ John A. Blanchard III /s/ John H. LeFevre
Its: Chief Executive Officer
John A. Blanchard III
(Typed Name)
Exhibit 10.7
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Deluxe Corporation, a Minnesota corporation (the
"Company") and Lawrence J. Mosner (the "Executive") dated as of the 9th day of
January, 1998.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company and to encourage the Executive's full support of and participation
in implementing the Company's business strategy involving one or more
significant acquisitions. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks associated with a Change of Control and by such acquisitions and to
encourage the Executive's full attention and dedication to the Company and its
business strategies and to provide the Executive with compensation and benefits
arrangements upon the occurrence of a Business Combination (as defined below)
which ensure that the compensation and benefits expectations of the Executive
will be satisfied in that event and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions.
A. "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.
B. "Beneficial Owner" shall have the meaning defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
C. "Business Combination" shall mean the occurrence of either a Change
of Control or an Other Business Combination.
D. "Business Combination Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year
after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Business Combination Period
shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 120 days prior to the Renewal
Date the Company shall give notice to the Executive that the
Business Combination Period shall not be so extended.
E. "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:
1. any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, excluding, at the time of their
original acquisition, in the securities acquired directly or
beneficially by such Person any securities acquired directly
from the Company or its Affiliates or in connection with a
transaction described in clause (a) of paragraph 3 below; or
<PAGE>
2. the individuals who at the date of this Agreement constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election consent, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors as of the date of this Agreement or whose
appointment, election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or
3. there is consummated a merger or consolidation of the Company
or any Affiliate with any other company, 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 or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any Affiliate, at least 65% of the combined voting power of
the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
4. the shareholders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
5. Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions
immediately following which the record holders of the common
stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
F. "Effective Date" shall mean the first date during the Business
Combination Period on which a Business Combination occurs.
G. Other Business Combination" shall mean the occurrence of:
1. any merger, exchange, transfer, or other form of business
combination or acquisition (but not including dispositions),
whether involving assets, shares or any other form of
ownership interest, by the Company or any of its Affiliates of
or with one or more other corporations, partnerships or other
entities in a single transaction or a series of related
transactions for consideration aggregating $500 million or
more (regardless of the form of consideration or the method or
time of payment), or
<PAGE>
2. a sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its non-check
printing assets, business units and/or Affiliates (excluding
those assets, business units and Affiliates that have been
offered for sale prior to the date of this Agreement) or the
sale or other similar divestiture for consideration by the
Company of all or a substantial portion of its check printing
assets, business units and/or Affiliates.
H. "Person" shall have the meaning defined in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, as amended, except
that such term shall not include (I) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of
the Company.
II. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of
this Agreement, for the period commencing on
<PAGE>
the Effective Date and ending on the third anniversary of such date
(the "Employment Period").
III. Terms of Employment.
A. Position and Duties.
1. Except with Executive's written consent given in his or her
discretion, during the Employment Period, (a) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 180-day period immediately preceding the Effective
Date and (b) the Executive's services shall be performed at
the location where the Executive was employed immediately
preceding the Effective Date or at a location less than 35
miles from such location.
2. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable efforts to perform faithfully and
efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to
the Company.
B. Compensation.
1. Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which
shall be paid not less often than monthly, at least equal to
twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred,
to the Executive by the Company and its Affiliates in respect
to the twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
In considering any increase to Executive's Annual Base Salary,
Executive will be treated in the same manner as other peer
executives. For example, if the Company establishes the annual
base salaries of other peer executives by reference to a
percentile of comparative market data, the increase, if any,
to Executive's Annual Base Salary shall be established in a
like manner. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary
as so increased.
2. Annual Incentive Payment or Bonus. In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year
ending during the Employment Period (ratably apportioned in
the case of any fiscal year included within the Employment
Period but which does not end
<PAGE>
within the Employment Period), an annual incentive payment or
bonus (the "Annual Incentive Payment") in cash on the same
basis as such incentive payments or bonuses are paid to other
peer executives. For example, if annual incentive payments are
paid to other peer executives under the Company's annual
incentive plan, the target award for the Executive shall be
established in the same manner as the target award for the
other peer executives (e.g. by reference to a percentile
target based on comparative market data) and the performance
criteria and performance measurements governing any payment
earned by Executive shall be based on the same performance
criteria (such as earnings per share or return of average
capital employed) and performance measurements applied to the
other peer executives. Notwithstanding the foregoing, (a) if
the payment of a bonus to other peer executives is, in whole
or part, not based on objective performance criteria,
Executive's Annual Incentive Payment shall be at least equal
to the average of Executive's Annual Incentive Payments for
the last three full fiscal years prior to the Effective Date
or, if Executive was not in the employment of the Company or
its Affiliates during one or more of the last three full
fiscal years, the average of Executive's Annual Incentive
Payments during the number of full fiscal years prior to the
Effective Date that the Executive was so employed (annualized,
in either case, in the event that the Executive was not
employed by the Company for the whole of any such fiscal
year), provided that any special or one-time awards (such as
those associated with a new hire or promotion) shall not be
taken into account (the "Recent Annual Incentive Payment") and
(b) the Executive's annual target incentive or bonus
opportunity shall in no event be less favorable to the
Executive than that provided by the Company and its Affiliates
to the Executive under its annual incentive or bonus plans
during the last fiscal year immediately preceding the
Effective Date, provided that any special or one time awards
(such as those associated with a new hire or promotion) shall
not be taken into account. Each such Annual Incentive Payment
shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the
Annual Incentive Payment is awarded, unless the Executive
shall elect to defer the receipt of such Annual Incentive
Payment.
3. Stock Incentive Plans. During the Employment Period, the
Executive shall be entitled to participate in the Company's
stock incentive, performance share and other stock-based
incentive plans (if any), on the same basis as other peer
executives. For example, if other peer executives are awarded
stock options or performance shares based on references to
comparative market data, Executive's awards shall be made on
the same basis, and shall, in any event, contain the same
terms and conditions, and if applicable, be subject to the
same performance criteria, as applied to awards to other peer
executives. Notwithstanding the foregoing, such long-term
incentive opportunities for the Executive shall in no event be
less favorable, in each case and in the aggregate, than those
provided by the Company and its Affiliates for the Executive
under such plans during the fiscal year immediately preceding
the Effective Date, provided that any special or one-time
awards (such as those associated with a new hire or promotion)
shall not be taken into account.
4. Savings, Retirement and Other Incentive Plans. During the
Employment Period, the Executive shall be entitled to
participate in all other incentive, savings and retirement
plans, practices, policies and programs applicable generally
to other peer executives of the Company and its Affiliates,
but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate,
than the most favorable of those provided by the Company and
its Affiliates for the Executive under such plans, practices,
policies and programs as in effect at any time during the one
year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer
<PAGE>
executives of the Company and its Affiliates, provided,
however, that such benefits may be reduced pursuant to a
general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be.
5. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under all welfare benefit plans, practices, policies
and programs provided by the Company and its Affiliates
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the Executive
and/or the Executive's family, to the extent applicable
generally to other peer executives of the Company and its
Affiliates, as the case may be, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the
one year period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its Affiliates, as the case may be,
provided, however, that such benefits may be reduced pursuant
to a general (across-the-board) reduction of such benefits
similarly affecting all senior officers of the Company or its
Affiliates, as the case may be, and all senior officers of any
Person in control of the Company.
6. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company
and its Affiliates in effect for the Executive at any time
during the one year period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its Affiliates, as the case may
be.
7. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, use or
reimbursement for the use of an automobile, as the case may
be, and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the
Company and its Affiliates in effect for the Executive at any
time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates, as the case
may be, provided, however, that such benefits may be reduced
pursuant to a general (across-the-board) reduction of such
benefits similarly affecting all senior officers of the
Company or its Affiliates, as the case may be, and all senior
officers of any Person in control of the Company.
8. Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size
and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, not materially less
favorable with respect to the foregoing provided to the
Executive by the Company and its Affiliates at any time during
the one year period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other peer executives
of the Company and its Affiliates, as the case may be.
9. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and holidays in accordance with the
most favorable plans, policies, programs and practices of the
Company and its Affiliates as in effect for the Executive at
any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the
<PAGE>
Company and its Affiliates, as the case may be.
IV. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may, give a
Notice of Termination to the Executive in accordance with Section
XI.B. of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company or its Affiliates, as the case may be, shall
terminate effective on the 30th day after receipt of the Notice of
Termination by the Executive (unless such date is extended as
provided in Section IV.F.), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from
the Executive's duties with the Company or its Affiliates, as the
case may be, on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
B. Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
1. the willful and continued failure of the Executive to perform
substantially the Executive's material duties with the Company
and its Affiliates (other than any such failure resulting from
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section IV.D. hereof), after a written demand for substantial
performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or
2. the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company or its Affiliates.
For purposes of this provision, (a) no act or failure to act,
on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that the Executive's
action or omission was in the best interests of the Company
and (b) in the event of a dispute concerning the application
of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the
Committee (as defined in Section XI.J.) by clear and
convincing evidence that Cause exists. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based
upon the advice of counsel for the Company (or if the
Executive is counsel to the Company, based upon such
Executive's own legal conclusions) shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
C. Good Reason. The Executive's employment during the Employment Period
may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
1. except with Executive's written consent given in his or her
discretion, (a) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section III.A. of this Agreement, provided
that the
<PAGE>
Company may, in its discretion, transfer the Executive to
another position (or positions) with the Company or its
Affiliates that is generally, substantially equivalent to such
position, or (b) any other action by the Company which results
in a material diminution in the Executive's position (or
positions) with the Company or its Affiliates, excluding for
this purpose an isolated, insubstantial or inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
2. any failure by the Company to comply with any of the
provisions of Section III.B. of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
3. the Company's requiring the Executive to be based at any
location other than as provided in clause III.A.1(b) hereof or
the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
4. any purported termination by the Company of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section IV.D hereof
and otherwise expressly permitted by this Agreement. For
purposes of this Agreement, no such purported termination
shall be effective;
5. any failure by the Company to comply with and satisfy Section
X.C. of this Agreement; or
6. any request or requirement by the Company of its Affiliates
that the Executive take any action or omit to take any action
that is inconsistent with or in violation of the Company's
ethical guidelines and policies as the same existed within the
120 day period prior to the Effective Date or any professional
ethical guidelines or principles that may be applicable to the
Executive or, if Executive is counsel to the Company,
requesting or requiring Executive to practice in or under the
laws of any jurisdiction or appear before any court or other
tribunal to or before which Executive is not admitted to
practice.
For purposes of this Section IV.C., any good faith claim of
"Good Reason" made by the Executive shall be presumed to be
correct unless the Company establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute a consent to, or a
waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
D. Notice of Termination. Any purported termination of the Executive's
employment during the Employment Period (other than by reason of
death) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section XI.B. of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (3) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that,
<PAGE>
in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph B.1. or B.2. above, and
specifying the particulars thereof in detail. The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of
Disability, Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights
hereunder;
E. Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or any other reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (2) if the Executive's employment is
terminated during the Employment Period by the Company other than
for Cause or Disability, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination, (3)
if the Executive's employment is terminated by reason of death
during the Employment Period, the Date of Termination shall be the
date of death of the Executive and (4) if the Executive's employment
is terminated by the Company for Disability, the date Executive's
employment is terminated as provided in Section IV.A., provided,
however, the Date of Termination specified in this Section E. may be
extended to the date of termination (if applicable) provided in
Section IV.F.
F. Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section IV.F.),
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on
which the Employment Period ends or (ii) the date on which the
dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator
or a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and
no appeal has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
G. Compensation During Dispute. If a purported termination occurs
during the Employment Period and the Date of Termination is extended
in accordance with Section IV.F. hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with
Section IV.F. hereof. Amounts paid under this Section IV.G. are in
addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this
Agreement.
H. Pre-Effective Date Actions. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated
during the Employment Period by the Company without Cause or by the
Executive with Good Reason, if (i) the Executive's employment is
terminated by the Company without Cause prior to the Effective Date
(whether or not a Business Combination ever occurs) and such
termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which
would constitute a Business Combination, (ii) the Executive
terminates his employment for Good Reason prior to the Effective
Date (whether or not a Business Combination ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person, or (iii) the Executive's
employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance
or event which constitutes Good Reason is otherwise in connection
with or in
<PAGE>
anticipation of a Business Combination (whether or not a Business
Combination ever occurs). For purposes of any determination
regarding the applicability of the immediately preceding sentence,
any position taken by the Executive shall be presumed to be correct
unless the Company establishes to the Committee by clear and
convincing evidence that such position is not correct.
V. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause. If, during the Employment Period,
the Company shall terminate the Executive's employment other than
for Cause or Disability or the Executive shall terminate employment
for Good Reason:
1. the Company shall pay to the Executive in a lump sum in cash
within 5 days after the Date of Termination the aggregate of
the following amounts:
(a) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (ii) the product of (x) the higher of
(I) the Recent Annual Incentive Payment and (II) the
Annual Incentive Payment paid or payable, including any
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was
employed for less than twelve full months), for the most
recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as
the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which 365 and (iii) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (i),
(ii) and (iii) shall be hereinafter referred to as the
"Accrued Obligations"); and
(b) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
(c) an amount equal to the product of three times the higher
of (i) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount (defined below) to the Executive's
account under (x) all of the Company's retirement plans,
or if higher, the retirement plans of any Affiliate in
which the Executive was eligible to participate
immediately prior to the Effective Date and (y) any
excess or supplemental retirement plan in which the
Executive was eligible to participate as of the
Effective Date (the "ERISA Excess Plan") (the ERISA
Excess Plan and such retirement plans, as amended, and
any successor or replacement plans being referred to as
the "Plans") as the Plans were in effect and funded for
the fiscal year immediately preceding the Effective Date
or (ii) the sum of the amounts that would have been
contributed by the Company or any Affiliate based on the
Reference Amount, to the Company's Plans or, if higher,
the Plans of an Affiliate in which the Executive was
eligible to participate immediately prior to the Date of
Termination as those Plans were in effect and funded for
the fiscal year immediately preceding the Date of
Termination. For the purposes hereof, the term
"Reference Amount" shall mean an amount equal to
one-third of the amount calculated in clause V.A.1.(b)
without adjustment in the case of death or Disability.
2. for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
<PAGE>
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices and policies described in Section III.B.5. of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates and their
families, as the case may be, provided, however, that if the
Executive becomes re-employed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary and supplemental
to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the
Executive for retiree welfare benefits pursuant to such plans,
practices, programs and policies, the Executive shall be
considered to have remained employed until three years after
the Date of Termination and to have retired on the last day of
such period as a qualified retiree of the Company;
3. immediately following the Executive's Date of Termination and,
if a Change of Control shall earlier occur, immediately
following the Change of Control, the Company shall take all
such action as may be required fully and immediately (but
without duplication of benefits under this Section V.A.3.) to:
(a) vest all outstanding, unvested options that may have
been granted to the Executive under the Company' Stock
Incentive Plan (as amended) and as the same may be
further amended and any successor or replacement plan
(the "SIP") and, upon the Date of Termination (if the
Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive
for Good Reason), permit the Executive a period equal to
the lesser of five years following that Date of
Termination or the remaining term of the applicable
options to exercise such options in accordance with the
provisions of the SIP and any applicable award agreement
(as modified or amended as a result of the actions
required by this clause),
(b) following the Date of Termination (if the Executive's
employment is terminated by the Company other than for
Cause or Disability or by the Executive for Good
Reason), permit the Executive to earn and be awarded
shares of the Company pursuant to awards previously made
to the Executive under the Deluxe Corporation
Performance Share Plan as if Executive had continued as
a participant in such plan and an employee of the
Company or the relevant Affiliate until the expiration
of the performance period or periods applicable to each
such award,
(c) vest all other restricted shares and units theretofore
granted the Executive under the SIP and any other
stock-based compensation plan (other than the
Performance Share Plan), and
(d) in the case that the Company is not a surviving
corporation, to provide the Executive with the economic
equivalent of the value that the Executive would have
received had the Company been the surviving corporation
and taken the actions required in clauses (a) though (c)
hereof.
4. the Company shall, at its sole expense as incurred, provide
the Executive with out-placement services the scope and
provider of which shall be selected by the Executive in his or
her sole discretion; and
<PAGE>
5. to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided to the Executive
or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its Affiliates (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section
V.B. shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its
Affiliates, as the case may be, to the estates and beneficiaries of
peer executives of the Company or such Affiliates under such plans,
programs, practices and policies relating to death benefits, if any,
as in effect with respect to other peer executives and their
beneficiaries at any time during the one year period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its Affiliates, as applicable,
and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section V.C.
shall include, and the Executive shall be entitled after the Date of
Termination to receive, disability and other benefits at least equal
to the most favorable of those generally provided by the Company and
its Affiliates, as applicable, to disabled executives and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the one year period immediately preceding the Effective Date
or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect
to other peer executives of the Company and its Affiliates, as
applicable, and their families
D. Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1) his
Annual Base Salary through the Date of Termination, (2) the amount
of any compensation previously deferred by the Executive, and (3)
Other Benefits, in each case to the extent theretofore unpaid. If
the Executive terminates employment during the Employment Period,
excluding a termination for Good Reason or Disability, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
VI. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of
its Affiliates and for which the Executive may qualify, nor, subject
to Section XI. F., shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its Affiliates. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contact or agreement with the Company or any of its Affiliates or
subsequent to the Date of
<PAGE>
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
VII. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section V.A.2. hereof, such
amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may incur in good faith as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). Such payments shall be made within
five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
VIII. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any payment or benefit received or to be received by the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Business Combination or any Person affiliated with the Company or
such Person, but determined without regard to any additional
payments required under this Section VIII) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of this Section VIII.A., if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the
Gross-Up Payment, would not receive a net after-tax benefit of at
least $50,000 (taking into account both income taxes and any Excise
Tax) as compared to the net after-tax benefit the Executive would
receive if the Gross-Up Payment were eliminated and the Payments
were reduced, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all
of the Payments shall be treated as "parachute payments" (within the
meaning of Section 280G(b) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the Accounting Firm (as defined below), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for
<PAGE>
services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base amount" (as
defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm in
accordance with the principals of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of Executive's residence on the Date of Termination (or
if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section
VIII.A.), net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
B. Subject to the provisions of Section VIII. C., all determinations
required to be made under this Section VIII, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that a
Payment has been made or will be required, as the case may be, or
such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a Business Combination, the
Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this
Section VIII., shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section VIII.C. and the
Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
C. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period
following the date on which he or she gives such notice to the
Company (or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
1. give the Company any information reasonably requested by the
Company relating to such claim,
2. take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
<PAGE>
3. cooperate with the Company in good faith in order to
effectively contest such claim, and
4. permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section VIII.C., the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section VIII.C., the Executive becomes entitled
to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of
Section VIII.C.) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of
any amount advanced by the Company pursuant to Section VIII.C., a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
E. The Gross-Up Payment shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amount of such Gross-Up Payment, and the limitation on such payments
set forth in Section VIII.A. hereof, cannot be finally determined on
or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accounting Firm,
of the minimum amount of such Gross-Up Payment to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments
when due) at 120% of the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under
this
<PAGE>
Agreement, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received
from Tax Counsel, the Accounting Firm or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
IX. Confidential Information. During the term of this Agreement and for
a period of three (3) years thereafter, Executive will retain in
confidence all proprietary and confidential information concerning
the Company and its Affiliates, including, without limitation,
customer lists, cost and pricing information, employee data, trade
secrets and software and, shall return to the Company or destroy all
copies and extracts thereof (however and on whatever medium
recorded), 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 the Executive prior to disclosure to the Executive by the Company
or any of its Affiliates; (B) any information which was in the
public domain prior to its disclosure to the Executive; (C) any
information which comes into the public domain through no fault of
the Executive; (D) any information which the Executive is required
to disclose by a court or similar authority or under subpoena,
provided that the Executive provides the Company with notice thereof
and assists, at the Company's sole expense, any reasonable endeavor
by the Company, using appropriate means, to obtain a protective
order limiting the disclosure of such information; and (E) any
information which is disclosed to the Executive by a third party
which has a legal right to make such disclosure. In no event shall
an asserted violation of the provisions of this Section X.
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
X. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives. If the
Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the
Executive's estate.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after the Effective Date,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
XI. Miscellaneous.
<PAGE>
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
B. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Lawrence J. Mosner
12000 Marion Lane, Suite 1102
Minnetonka, MN 55305
If to the Company:
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126
Attn: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section IV.C. of
this Agreement, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
F. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section IV.H. hereof, prior to
the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement, provided that nothing herein
shall be construed to limit or prevent the Executive from receiving
compensation and benefits from the Company or its Affiliates that
are customarily paid and provided other peer executives who leave
the employment of the Company or any of its Affiliates. From and
after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter
hereof (e.g., benefits accruing to the Executive upon termination of
employment following a Business Combination).
<PAGE>
G. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the term of this Agreement
(including, without limitation, those under Section V. hereof) shall
survive such expiration.
H. In the event that the Company is a party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable,
be interpreted so as to permit such accounting treatment, and (B) to
the extent that the application of clause (A) of this Section XI.H.
does not preserve the availability of such accounting treatment,
then, the Company may modify or limit the effect of the provisions
of this Agreement to the extent necessary to qualify the
transactions as a "pooling transaction" and provide the Executive
with payments or benefits as nearly equivalent as possible to those
the Executive would have received absent such modification or
limitation, provided, however, to the extent that any provision of
the Agreement would disqualify the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement) and
cannot otherwise be modified or limited, such provision shall be
null and void as of the date hereof. All determinations under this
Section XI.H. shall be made by the accounting firm whose opinion
with respect to "pooling of interests" is required as a condition to
the consummation of such transaction.
I. All claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty
(60) days after notification by the Committee that the Executive's
claims has been denied.
J. Notwithstanding any other provision in this Agreement to the
contrary, the Board shall delegate the responsibilities, duties and
powers specified under this Agreement to be observed or performed by
the "Committee" to a committee (the "Committee") consisting of not
less than three individuals who, on the date six months before a
Business Combination, were directors of the Corporation ("Incumbent
Directors"), provided that in the event that fewer than three
Incumbent Directors are available at the time of such delegation or
thereafter, the Committee's members may include such individual or
individuals as may be appointed by the Incumbent Directors
(including, for such purpose, by any individual or individuals who
have been appointed to the Committee by the Incumbent Directors);
provided further, however, the maximum number of individuals
(including directors) appointed to the Committee shall not exceed
five.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
Deluxe Corporation Executive
By: /s/ John A. Blanchard III /s/ Lawrence J. Mosner
Its: Chief Executive Officer
John A. Blanchard III
(Typed Name)
Exhibit 10.8
SCHEDULE IDENTIFYING OTHER
EXECUTIVE RETENTION AGREEMENTS
OMITTED FROM THIS REPORT ON FORM 10-Q
The Registrant has also entered into Executive Retention Agreements
with Morris Goodwin Jr., Lois M. Martin and Thomas W. VanHimbergen. Apart from
the names of the parties to such Agreements, these Agreements are substantially
identical to the Agreements between the Registrant and John H. LeFevre, a copy
of which was filed with this Quarterly Report on Form -10-Q as Exhibit 10.6.
Exhibit 12.1
DELUXE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three Months
Ended Years Ended December 31,
---------------------------------------------------------------------------------------------
March 31, 1998 1997 1996 1995 1994 1993 1992
-------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income from Continuing Operations
before Income Taxes $ 72,606 $115,150 $118,765 $169,319 $246,706 $235,913 $324,783
Interest expense
(excluding capitalized interest) 2,223 8,822 10,649 13,099 9,733 10,070 15,371
Portion of rent expense under
long-term operating leases
representative of an interest factor 3,405 $ 13,621 13,467 14,761 13,554 13,259 12,923
Amortization of debt expense 30 122 121 84 84 84 84
-------- -------- -------- -------- -------- -------- --------
TOTAL EARNINGS $ 78,264 $137,715 $143,002 $197,262 $270,077 $259,326 $353,161
Fixed charges
Interest Expense
(including capitalized interest) $ 2,702 $ 9,742 $ 11,978 $ 14,714 $ 10,492 $ 10,555 $ 15,824
Portion of rent expense under
long-term operating leases
representative of an interest factor 3,405 13,621 13,467 14,761 13,554 13,259 12,923
Amortization of debt expense 30 122 121 84 84 84 84
-------- -------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES $ 6,137 $ 23,485 $ 25,566 $ 29,559 $ 24,130 $ 23,898 $ 28,831
RATIO OF EARNINGS
TO FIXED CHARGES: 12.8 5.9 5.6 6.7 11.2 10.9 12.2
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 153,459
<SECURITIES> 13,696
<RECEIVABLES> 135,640
<ALLOWANCES> 0
<INVENTORY> 48,345
<CURRENT-ASSETS> 474,678
<PP&E> 883,126
<DEPRECIATION> 479,511
<TOTAL-ASSETS> 1,114,174
<CURRENT-LIABILITIES> 356,743
<BONDS> 111,008
0
0
<COMMON> 80,614
<OTHER-SE> 519,902
<TOTAL-LIABILITY-AND-EQUITY> 1,114,174
<SALES> 488,970
<TOTAL-REVENUES> 488,970
<CGS> 223,612
<TOTAL-COSTS> 417,453
<OTHER-EXPENSES> (3,312)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,223
<INCOME-PRETAX> 72,606
<INCOME-TAX> 29,035
<INCOME-CONTINUING> 43,571
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,571
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
