SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DELUXE CORPORATION
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
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DELUXE CORPORATION
3680 Victoria Street N.
[DELUXE LOGO] Shoreview, MN 55126-2966
P.O. Box 64235
St. Paul, MN 55164-0235
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NOTICE OF MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 1999
To the Shareholders of Deluxe Corporation:
The 1999 regular meeting of shareholders will be held in the Nicollet Grand
Ballroom of the Hyatt Regency Hotel, 1300 Nicollet Mall, Minneapolis, Minnesota
55403 on Tuesday, May 4, 1999, at 5:00 p.m. for the following purposes:
1. to elect 9 Directors to hold office until the 2000 regular meeting of
shareholders;
2. to consider and act upon a proposal to ratify the selection of Deloitte
& Touche as independent auditors of the Company for the year ending
December 31, 1999; and
3. to take action on any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 8, 1999 are
entitled to vote at the meeting and at any adjournment thereof.
Whether or not you expect to be present at the meeting, please complete,
sign, date, and return the enclosed proxy card as soon as possible to ensure the
presence of a quorum and save the Company further solicitation expense. For your
convenience, a return envelope is enclosed that requires no postage if mailed in
the United States. If you attend the meeting in person, your proxy will be
returned to you upon request. Telephonic and Internet voting are also permitted
in accordance with the instructions set forth on your proxy card.
John H. LeFevre
Secretary
Dated: March 31, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THANK YOU.
<PAGE>
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DELUXE CORPORATION
3680 VICTORIA STREET N., SHOREVIEW, MINNESOTA 55126-2966
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PROXY STATEMENT
1999 REGULAR MEETING OF SHAREHOLDERS TO BE HELD
MAY 4, 1999
The accompanying proxy is solicited by the Board of Directors of Deluxe
Corporation (the "Company") in connection with the 1999 regular meeting
(including any adjournments, the "Meeting") of shareholders of the Company to be
held May 4, 1999.
The cost of soliciting proxies, including the cost of preparing and mailing
the notice of the Meeting and this proxy statement, will be paid by the Company.
Proxies will be solicited primarily by mailing this proxy statement to all
shareholders entitled to vote at the Meeting. In addition to the use of the
mails, proxies may be solicited personally or by telephone, telegraph, facsimile
or other means of communication by directors, officers and employees of the
Company. These solicitors will not be specially compensated for such activities,
but they may be reimbursed for any reasonable out-of-pocket expenses incurred by
them in connection therewith. The Company has also retained, at its expense,
Beacon Hill Partners, Inc., a proxy solicitation firm, to assist in the
solicitation of proxies. The cost of such proxy solicitation services is
expected to be less than $10,000. The Company may also reimburse brokers, banks
and others holding shares in their names that are beneficially owned by others
for the cost of forwarding proxy materials and obtaining proxies from their
principals.
A shareholder may revoke his or her proxy at any time before it is voted by
written notice addressed to the Secretary at the offices of the Company, by
filing another proxy bearing a later date with the Secretary or by appearing at
the Meeting and voting in person. Unless revoked, all properly executed proxies
will be voted. This proxy statement and enclosed form of proxy are first being
mailed to shareholders on or about April 2, 1999. Telephonic and Internet voting
are also permitted in accordance with the instructions on your proxy card.
Only shareholders of record at the close of business on March 8, 1999 may
vote at the Meeting. As of that date, there were 79,405,544 shares of common
stock, $1.00 par value per share ("Common Stock"), of the Company outstanding.
Such shares constitute the only class of the Company's outstanding equity
securities. Each shareholder of record is entitled to one vote for each share
registered in his or her name on each matter presented at the Meeting.
Cumulative voting is not permitted.
Shares of Common Stock represented by proxies in the form solicited will be
voted in the manner directed by the holder of such shares. If no direction is
made, such shares will be voted FOR the election of the nominees for the
Company's Board of Directors named and the other matters described in this proxy
statement. The persons named as proxies may also vote on any other matter to
properly come before the Meeting. If a shareholder returns a proxy on which he
or she elects to "abstain" from voting on any matter (or to "withhold authority"
as to the election of any Director), the shares represented by such proxy will
be considered present at the Meeting for purposes of determining a quorum and
for purposes of calculating the vote, but will not be considered to have been
voted in favor of such matter. If a proxy is returned by a broker holding shares
in street name that indicates that the broker does not have discretionary
authority to vote certain of such shares on one or more matters, those shares
will be considered present at the Meeting for purposes of determining a quorum,
but will not be considered to be represented at the Meeting for purposes of
calculating the vote with respect to such matters.
1
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
The Board of Directors has set the size of the Board at 9 persons and
recommends that the persons listed below be elected Directors to serve until the
2000 regular meeting of the Company's shareholders. The affirmative vote of the
holders of a majority of the shares of Common Stock entitled to vote and present
in person or by proxy at the Meeting will be necessary to elect each of the
nominees listed below. All of the nominees are presently Directors of the
Company whose terms of office will expire at the Meeting.
JOHN A. BLANCHARD III, age 56, has served as President and Chief Executive
Officer of the Company since May 1, 1995 and as Chairman of the Board of
Directors since May 6, 1996. From January 1994 to April 1995, Mr. Blanchard was
executive vice president of General Instrument Corporation, a supplier of
systems and equipment to the cable and satellite television industry. From 1991
to 1993, Mr. Blanchard was chairman and chief executive officer of Harbridge
Merchant Services, a national credit card processing company. Previously, Mr.
Blanchard was employed by American Telephone & Telegraph Company for 25 years,
most recently as senior vice president responsible for national business sales.
Mr. Blanchard also serves as a director of Wells Fargo and Company and Saville
Systems PLC.
DR. JAMES J. RENIER, age 69, was chairman and chief executive officer of
Honeywell Inc. ("Honeywell") from 1988 until 1993, when he retired as chief
executive officer. Dr Renier continued as chairman of the executive committee of
Honeywell's board of directors until April 1994. Honeywell is a manufacturer of
control systems that provides products and services for use in homes, commercial
and industrial buildings and aviation throughout the world. Dr. Renier has
served on the Board of Directors since 1990. Dr. Renier also served on the board
of directors of KLM Royal Dutch Airlines through June 1998 and he is currently a
member of the board of directors of ReliaStar Financial Corp. ("ReliaStar").
BARBARA B. GROGAN, age 51, is the founder of Western Industrial Contractors of
Denver, Colorado ("Western Industrial") and has served as its president and
chief executive officer since 1982. Western Industrial specializes in the moving
and installation of heavy industrial equipment. Ms. Grogan was elected to the
Board of Directors in 1991. Ms. Grogan also serves as a director of Pentair
Industries, Inc. and Apogee Enterprises, Inc.
STEPHEN P. NACHTSHEIM, age 54, is a corporate vice president of Intel
Corporation ("Intel") and has served as the co-general manager of the corporate
business development group for Intel since 1998. From 1994 until he transferred
to his current position, Mr. Nachtsheim served as the general manager of Intel's
mobile/handheld products group. Intel designs and manufactures integrated
circuits, microprocessors and other electronic components. Mr. Nachtsheim has
been employed by Intel since 1981. Mr. Nachtsheim was elected to the Board of
Directors in November 1995.
CALVIN W. AURAND, JR., age 68, became the chairman of the board of directors,
president and chief executive officer of Banta Corporation ("Banta") in July
1989, where he served until his retirement in April 1995. Banta is a printing
services company. Mr. Aurand was elected to the Board of Directors in November
1996. Mr. Aurand also serves on the board of directors of US Can Corp.
DONALD R. HOLLIS, age 63, has served as president of DRH Strategic Consulting,
Inc., a consulting firm which assists financial institutions in developing and
improving their transaction processing products, since January 1996. Mr. Hollis
also serves as president of Hollis Enterprises of Vermont, Inc. and Johnson Fine
Arts Associates, L.L.C., each of which provides services to consumers and small
businesses. From 1981 through 1995, Mr. Hollis served as executive vice
president and chief technical officer of First Chicago Corporation, a bank
holding company. Mr. Hollis was elected to the Board of Directors in November
1996. Mr. Hollis also serves on the board of directors of Teltrend Inc. and
Edify Corp.
ROBERT C. SALIPANTE, age 42, has served as senior vice president, personal
financial services of ReliaStar, a holding company specializing in financial
services, since November 1996. Mr. Salipante joined ReliaStar in July 1992 as
senior vice president and chief financial officer and has since served in a
variety of senior management positions. Mr. Salipante was elected to the Board
of Directors in November 1996.
JACK ROBINSON, age 44, has served as the vice president, finance for the home
and small business group of Dell Computer Corporation ("Dell Computer"), a
computer manufacturer, since November 1998. From February 1998 through November
1998, Mr. Robinson served as president of the Foodservice unit of Sara
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Lee Bakery, a division of Sara Lee Corporation ("Sara Lee"). Between July 1996
and February 1998, Mr. Robinson served as president of the Specialty Markets
division of Sara Lee. Mr. Robinson joined Sara Lee in June 1993 as a senior vice
president and the chief financial officer of its Sara Lee Bakery division. Sara
Lee is a global packaged food and consumer products company. Mr. Robinson was
elected to the Board of Directors in June 1997.
HATIM A. TYABJI, age 54, has served as chief executive officer and chairman of
Saraide Inc. ("Saraide.com") since September 1998. Saraide.com is a provider of
Internet and wireless data services. From November 1986 until March 1998, Mr.
Tyabji served as president and chief executive officer of VeriFone, Inc.
("VeriFone"), which was acquired by Hewlett Packard Company in June 1997. Mr.
Tyabji also served as chairman of VeriFone from 1992 until 1998. VeriFone is a
global provider of transaction automation systems and Internet commerce
solutions. Mr. Tyabji was elected to the Board of Directors in November 1997.
Mr. Tyabji also serves on the board of directors of PubliCARD, Inc., Best Buy
Corporation and BA Merchant Services Inc.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS OF THE
COMPANY VOTE FOR THE ELECTION OF EACH NOMINEE NAMED ABOVE. Unless authority to
vote is withheld, the persons named as proxies will vote FOR the election of
each of the above-listed nominees. If any of the nominees are not candidates for
election at the meeting, which is not presently anticipated, the persons named
as proxies will vote for such other person or persons as they may, in their
discretion, determine.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 8, 1999, the number of shares of
Common Stock beneficially owned by each person who is known by the Company to
beneficially own more than five percent of the Company's outstanding Common
Stock, each Director, each person named in the Summary Compensation Table that
appears elsewhere in this proxy statement (the "Named Executive Officers"), and
all of the Directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF RESTRICTED
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED STOCK UNITS(1) TOTAL(1)
- ------------------------ ------------------------- --------------------- --------
<S> <C> <C> <C>
AMVESCAP PLC
11 Devonshire Square
London ECZM 4yr
England(2)..............................7,493,119
FMR Corp.
82 Devonshire Street
Boston, MA 02109(3).....................4,793,053
John A. Blanchard III(4)..................313,424..........................6,693..................320,117
Lawrence J. Mosner(5) ....................122,034.........................39,701..................161,735
Thomas W. VanHimbergen(6) .................55,489..........................6,315...................61,804
Ronald E. Eilers(7)........................39,447..........................9,608...................49,055
John H. LeFevre(8).........................47,492..........................4,842...................52,334
Whitney MacMillan(9) ......................13,000..........................1,764...................14,764
Dr. James J. Renier(10) ...................14,002..............................0...................14,002
Barbara B. Grogan(11) ......................6,002............................941....................6,943
Stephen P. Nachtsheim(12) ..................3,471............................430....................3,901
Calvin W. Aurand, Jr.(13) ..................2,100............................939....................3,039
Donald R. Hollis(14) .......................5,148..............................0....................5,148
Robert C. Salipante(15) ....................3,790..............................0....................3,790
Jack Robinson(16) ..........................1,941............................972....................2,913
Hatim A. Tyabji(16).........................1,000..........................1,875....................2,875
All Directors and executive officers
as a group (16 persons)(17) ..............658,541.........................77,590..................736,131
</TABLE>
(1) The Restricted stock units held by the executive officers of the Company
will vest and be converted into shares of Common Stock at various times between
May 1, 1999 and August 8, 2000 as described in footnotes (1) and (2) to the
Summary Compensation Table. The restricted stock units held by the Directors of
the Company were received in lieu of directors' fees pursuant to the Deluxe
Corporation Non-Employee Stock and Deferral Plan. These units will generally be
converted into shares of Common Stock when the holder ceases to serve as a
Director of the Company, with the exception of the restricted stock units held
by Mr. Robinson, which will vest and be converted into shares of Common Stock on
January 15, 2000. The shares of Common Stock subject to issuance upon the
vesting of the restricted stock units shown are not beneficially owned by the
holders thereof. The group comprised of the executive officers and directors of
the Company beneficially owned less than 1% of the outstanding shares of Common
Stock on March 8, 1999.
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(2) Based on a schedule 13G, dated February 8, 1999 (as amended on March 11,
1999) filed with the Securities and Exchange Commission (the "Commission") by
AMVESCAP PLC, AVZ, Inc., AMVESCAP Group Services, Inc., AIM Management Group
Inc.*, INVESCO,Inc., INVESCO North American Holdings, Inc., INVESCO Capital
Management, Inc.*, INVESCO Funds Group, Inc., Invesco Management and Research,
Inc., INVESCO Realty Advisers, Inc. and INVESCO (NY) Asset Management, Inc. The
entities listed above have shared voting and dispositive power with respect to
7,493,119 shares (9.44% of the outstanding shares of Common Stock on March 8,
1999). The shares are held by the entities indicated with an asterisk on behalf
of other persons who have the right or power to direct the receipt of dividends
from or the proceeds of any sale of the shares.
(3) Based on a Schedule 13G, dated as of February 1, 1999, filed by FMR Corp.
("FMR"), Edward C. Johnson 3d, chairman of FMR, Abigail P. Johnson, a director
of FMR, Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR, and Fidelity Value Fund an investment company ("FVF"), with
the Commission. According to such Schedule 13G, Mr. Johnson and FMR, through its
control of Fidelity, which serves as investment advisor to FVF, and FVF each has
sole power to dispose of 4,300,100 shares (5.42% of the outstanding shares of
Common Stock on March 8, 1999) owned by FVF. Neither Mr. Johnson nor FMR has the
sole power to vote or direct the voting of such shares. Fidelity carries out the
voting of the shares under guidelines established by the FVF's Board of
Trustees. Mr. Johnson and FMR, through its control of Fidelity Management Trust
Company, a bank which is a wholly owned subsidiary of FMR ("FMTC"), may also be
deemed the beneficial owners of an additional 492,953 shares held by
institutional accounts managed by FMTC. FMR and Mr. Johnson each have sole
dispositive and voting power with respect to of such shares. Members of the
Johnson family, including Edward C. Johnson 3d and Abigail P. Johnson, may be
deemed to form a controlling group with respect to FMR.
(4) Includes 25,000 shares of restricted stock that will vest on May 1, 2000,
provided that Mr. Blanchard is then employed by the Company and 260,334 shares
receivable upon the exercise of options that are currently exercisable or will
become exercisable within 60 days.
(5) Includes 111,334 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days.
(6) Includes 200 shares held by the Lynne A. VanHimbergen Trust, 2,500 shares
receivable on May 1, 1999 (provided that, subject to certain exceptions, Mr.
VanHimbergen is then in the employ of the Company) upon the vesting of
restricted stock units held by Mr. VanHimbergen and 47,001 shares receivable
upon the exercise of options that are currently exercisable or will become
exercisable within 60 days.
(7) Includes 32,684 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days. Table does not
reflect an additional .12 share held in a brokerage account for the benefit of
Mr. Eilers.
(8) Includes 43,834 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days.
(9) Includes 4,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days.
(10) Includes 4,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 485 shares
of restricted stock. The transfer restrictions on 257 of such shares lapsed on
March 15, 1999 and the restrictions on the remaining 228 shares will lapse on
June 15, 1999.
(11) Includes 4,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 972 shares
of restricted stock. The transfer restrictions on 515 of such shares lapsed on
March 15, 1999 and the restrictions on 457 of such shares will lapse on June 15,
1999.
(12) Includes 2,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 1,000 shares
held by the Nachtsheim Family Trust.
(13) Includes 1,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 333 shares
of restricted stock which will vest on the date of the Meeting, provided that
the holder remains a Director after the Meeting.
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(14) Includes 1,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days, 2,334 shares
held by the Hollis Family Limited Partnership I and 916 shares of restricted
stock. 333 of such shares will vest on the date of the Meeting, provided that
the holder remains a Director after the Meeting. The transfer restrictions on
309 of the restricted shares lapsed on March 15, 1999 and the restrictions on
274 of such shares will lapse on June 15, 1999.
(15) Includes 1,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 941 shares
of restricted stock. 333 of such shares will vest on the date of the Meeting,
provided that the holder remains a Director after the Meeting. The transfer
restrictions on 322 of the restricted shares lapsed on March 15, 1999 and the
restrictions on 286 of such shares will lapse on June 15, 1999.
(16) Includes 666 restricted shares, 333 of which will vest on the date of the
Meeting, provided that the holder remains a Director after the Meeting.
(17) Number of Shares Beneficially Owned includes 540,855 shares receivable upon
the exercise of options that are currently exercisable or will become
exercisable within 60 days, 29,979 shares of restricted stock that will vest as
described in footnotes (4), (10), (11), (13), (14), (15) and (16) and 2,500
restricted stock units that will vest as described in footnote (6). The group
comprised of the executive officers and directors of the Company beneficially
owned less than 1% of the outstanding shares of Common Stock on March 8, 1999.
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<TABLE>
<CAPTION>
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SUMMARY COMPENSATION TABLE
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LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION(3)
COMPENSATION ----------------------
AWARDS
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SECURITIES
UNDER-
RESTRICTED LYING
OTHER ANNUAL STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS(2) SARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Blanchard III(4) 1998 $600,000 $1,200,000 $13,848 0 176,000 $79,051
President and Chief 1997 $600,000 $638,550 $11,328 0 100,000 $67,745
Executive Officer 1996 $500,000 $617,500 $7,973 0 70,000 $31,473
- ----------------------------------------------------------------------------------------------------------------------
Lawrence J. Mosner 1998 $440,000 $880,000 $39,334 0 80,000 $68,175
Executive Vice President 1997 $440,000 $394,293 $45,153 $461,250 100,000 $108,623
1996 $300,000 $190,500 $17,903 0 0 $43,179
- ----------------------------------------------------------------------------------------------------------------------
Thomas W. VanHimbergen(5) 1998 $300,000 $405,000 $13,815 0 41,000 $15,188
Senior Vice President and 1997 $200,000 $142,610 $31,547 $154,375 50,000 $34,959
Chief Financial Officer 1996 - - - - - -
- ----------------------------------------------------------------------------------------------------------------------
Ronald E. Eilers(6) 1998 $275,000 $295,531 $3,963 0 50,000 $36,801
Senior Vice President 1997 $242,083 $262,892 $29,596 $168,750 9,000 $72,350
1996 $185,000 $126,872 $2,088 0 6,000 $12,433
- ----------------------------------------------------------------------------------------------------------------------
John H. LeFevre 1998 $230,000 $310,500 $2,346 0 32,500 $26,575
Senior Vice President 1997 $230,000 $121,253 $119 0 15,000 $39,333
1996 $210,000 $110,918 $2,517 0 10,000 $33,033
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) Bonus compensation for 1996 and 1997 was earned under the Company's 1996
Annual Incentive Plan (the "Annual Incentive Plan") and the Company's quarterly
bonus plan (the "Quarterly Bonus Plan"). The Quarterly Bonus Plan was terminated
at the end of 1997 and all 1998 incentive compensation was paid pursuant to the
Annual Incentive Plan.
Recipients of awards under the Annual Incentive Plan are entitled to elect to
receive all or a portion of their incentive compensation in the form of shares
of restricted stock or restricted stock units (whichever option is made
available by the Compensation Committee). If an election is made to receive
shares of restricted stock or restricted stock units, the amount of the cash
forgone is increased by 25 percent in determining the number of shares of
restricted stock or restricted stock units awarded. For awards earned during
1998 under the Annual Incentive Plan, restricted stock units were granted on
January 29, 1999 in lieu of cash compensation as follows: 24,701 units
($880,000) to Mr. Mosner; 6,315 units ($225,000) to Mr. VanHimbergen; 4,608
units ($164,184) to Mr. Eilers; and 4,842 units ($172,500) to Mr. LeFevre. For
awards earned during 1997 under the Annual Incentive Plan, restricted stock
units were granted on January 30, 1998 in lieu of cash compensation as follows:
10,750 units ($354,750) to Mr. Blanchard; 11,948 units ($394,293) to Mr. Mosner;
4,321 units ($142,610) to Mr. VanHimbergen; and 1,648 units ($54,395) to Mr.
LeFevre. For awards earned during 1996 under the Annual Incentive Plan,
restricted stock units were granted on January 31, 1997 in lieu of cash
compensation as follows: 20,081 units ($617,500) to Mr. Blanchard. The imputed
value of the restricted stock units received by such persons is included in the
bonus compensation amounts shown above and is based on the closing price of the
Company's Common Stock on the date of grant of such units ($35.625 on January
29, 1999, $33.00 per share on January 30, 1998 and $30.75 per share on January
31, 1997). The restricted stock units earned during 1996 will vest during the
employment of Mr. Blanchard in equal installments on the first, second and third
anniversaries of the grant date, subject to acceleration in the event of certain
defined changes in control of the Company, the death, disability or approved
retirement of the holder or the termination of the employment of the holder
without cause. The units earned in 1997 vested on January 30, 1999 and the units
earned during 1998 will vest on January 29, 2000, subject to acceleration in the
event of the death, disability or approved retirement of the holder and upon
certain defined changes in control of the Company. If the employment of the
holder is terminated without cause or if the holder voluntarily resigns prior to
the vesting of the holder's 1998 restricted stock units, the holder will be
entitled to receive a cash payment equal to the amount of incentive compensation
foregone in exchange for such units. Following the vesting of a restricted stock
unit, the holder thereof is entitled to receive one share of Common Stock for
each restricted stock unit that vests. Each restricted stock unit also entitles
the holder to receive payments prior to the vesting date in an amount equal to
the dividend payment on one share of Common Stock. Such amount is payable at the
time the corresponding dividend is paid to the Company's shareholders.
(2) The valuations shown in the table are based on the closing price of the
Common Stock on the date the awards indicated were granted. In addition to the
awards described in the preceding footnote, grants of restricted stock units
7
<PAGE>
were made on January 31, 1997 (Mr. Mosner, 15,000 restricted stock units), May
1, 1997 (Mr. VanHimbergen, 5,000 restricted stock units) and August 8, 1997 (Mr.
Eilers, 5,000 restricted stock units). Mr. Mosner's restricted stock units will
vest and be converted into shares of Common Stock on January 31, 2000, provided
that Mr. Mosner is then in the employ of the Company, or upon certain defined
changes in control of the Company. The restricted stock units will also vest in
the event Mr. Mosner's employment is terminated without cause prior to January
31, 2000. One-half of the restricted stock units granted to Mr. VanHimbergen
vested and were converted into shares of Common Stock on May 1, 1998. The
remaining units will vest and be converted into shares of Common Stock on May 1,
1999, if Mr. VanHimbergen is then in the employ of the Company. The restricted
stock units granted to Mr. Eilers in 1997 will vest and be converted into shares
of Common Stock on August 8, 2000, provided that Mr. Eilers is then in the
employ of the Company. These units will also vest and be converted into shares
of Common Stock upon certain defined changes in control of the Company. Cash
dividends are paid on all of the restricted stock units described above during
the vesting period.
Based on the closing price of the Common Stock on December 31, 1998 ($36.5625
per share), the value at the end of the Company's last completed fiscal year of
the aggregate restricted shares and restricted stock units (other than those
received in lieu of incentive compensation as described in footnote (1)) held by
the persons named above were: Mr. Blanchard, $914,063 (25,000 restricted
shares); Mr. Mosner, $548,438 (15,000 restricted stock units); Mr. VanHimbergen,
$91,406 (2,500 restricted stock units); and Mr. Eilers, $182,812 (5,000
restricted stock units).
(3) All Other Compensation consists of (a) contributions to qualified retirement
plans, (b) amounts credited to a non-qualified, supplemental retirement plan
(defined contribution and profit sharing allocations in excess of Employee
Retirement Income Security Act of 1974 (ERISA) limitations) and (c) amounts
credited to a non-qualified deferred compensation plan as benefit plan
equivalents. For 1998, these amounts were as follows: For Mr. Blanchard $14,400,
$64,651 and $0, respectively; for Mr. Mosner $14,400, $21,240 and $5,412,
respectively; for Mr. VanHimbergen $12,150, $0 and $2,010, respectively; for Mr.
Eilers $14,400, $19,585 and $1,691, respectively; and for Mr. LeFevre $14,400,
$10,216 and $1,958, respectively. The qualified retirement plans and the
non-qualified, supplemental retirement plan referred to in clauses (a) and (b)
above, respectively, are defined contribution and profit sharing plans that
provide that contributions vest when made or declared.
All Other Compensation also includes income recognized from relocation expense
reimbursement in excess of deductible amounts, incidental relocation
compensation and guaranteed minimum resale price allowances in respect of
residences sold that is paid to executives under the Company's relocation
program. The persons named above recognized income in the following amounts
under this program: Mr. Mosner, $27,123 (1998), $41,025 (1997) and $43,179
(1996); Mr. VanHimbergen, $1,028 (1998) and $34,959 (1997); and Mr. Eilers,
$1,125 (1998) and $32,852 (1997). Taxes reimbursed as a result of such
recognition are reported under Other Annual Compensation in the corresponding
years.
(4) Mr. Blanchard is entitled to supplemental retirement benefits (the
"Supplemental Retirement Benefits") in addition to those ordinarily payable
under the Company's profit-sharing, pension and supplemental retirement plans,
and with respect to any Company-paid portion of contributory retirement plans,
such as the Company's 401(k) plan (collectively, the "Base Plans"). The
Supplemental Retirement Benefits are intended to provide Mr. Blanchard with
annual retirement benefits approximating those that would be payable to Mr.
Blanchard if he had an additional 15 years of service with the Company. The
annual amount of the Supplemental Retirement Benefits is calculated by (i)
multiplying 1.5 percent times Mr. Blanchard's actual number of years of service
at retirement plus 15 and further multiplying the product obtained thereby by
the average of Mr. Blanchard's highest five years of cash compensation (base
salary plus annual cash incentive) with the Company and (ii) subtracting from
the result obtained in clause (i) an amount equal to a level payment annuity
obtained by assuming that the principal accumulated for Mr. Blanchard under the
Base Plans will be distributed to Mr. Blanchard in 15 equal annual installments
with interest paid at an annual rate of eight percent during the distribution
period. The Supplemental Retirement Benefits will not be paid unless Mr.
Blanchard completes five years of continuous service with the Company, unless
Mr. Blanchard's employment is terminated by reason of Mr. Blanchard's disability
or death (in which event the Supplemental Retirement Benefits will be paid to
Mr. Blanchard or his heirs without regard to the five year service requirement
and the amounts payable will be determined based on Mr. Blanchard's years of
service prior to his disability or death). The Supplemental Retirement Benefits
are payable for 15 years following a qualifying termination of Mr. Blanchard's
employment with the Company. Mr. Blanchard's base salary and his participation
in the Company's retirement and other benefit plans continue for twenty-four
months following any actual or constructive termination of his employment
without cause, unless Mr. Blanchard's employment with the Company is terminated
in certain circumstances described in an Executive Retention Agreement entered
on January 9, 1998, in which event payments to Mr. Blanchard following his
termination of employment would be governed by that agreement. See "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements--Executive Retention Agreements."
(5) Mr. VanHimbergen became an employee of the Company in May 1997.
(6) Mr. Eilers' 1997 bonus amount includes a special $146,250 retention bonus
earned in connection with his service on behalf of companies held for sale by
the Company.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Company's officer compensation program is designed to attract and retain
highly skilled and capable executives and other individuals who will be
responsible for ensuring the Company's future success. This group will include
not only those executives and others who can sustain the Company's existing
businesses, but also those who will envision new businesses and opportunities,
including appropriate acquisitions and alliances, that will contribute to the
Company's future growth. The compensation program is also intended to align the
interests of shareholders and management by linking both short- and long-term
compensation to corporate performance, encouraging stock ownership by management
and rewarding financial performance that increases total shareholder return.
The Compensation Committee (the "Compensation Committee") of the Board of
Directors has overall responsibility for compensation actions affecting the
Company's senior executives. The Compensation Committee is currently composed of
three members of the Board of Directors (Mr. Aurand, who succeeded Dr. Renier as
Chairman of the Compensation Committee on August 7, 1998, Dr. Renier and Ms.
Grogan) who are not current or former officers or employees of the Company.
During 1998, Mr. Hatim Tyabji also served on the Compensation Committee until
August 7, 1998.
The Compensation Committee is responsible for:
o Developing an executive compensation philosophy and related
administrative policies;
o Reviewing comparative market data for the Chief Executive Officer
(the "CEO") and the Company's other senior executives (together with
the CEO, the "Officers") and ensuring that the Company's
compensation programs are competitive;
o Approving the design of short- and long-term incentive compensation
programs for the Officers and certain other divisional executives
(the "Divisional Executives");
o Establishing performance measurements and compensation under the
Company's short- and long-term incentive compensation programs for
the Officers and Divisional Executives;
o Determining the compensation of the CEO;
o Reviewing and approving the compensation of the Company's other
Officers; and
o Administering the Company's equity-based compensation programs.
The Compensation Committee has access to and meets with independent
compensation consultants regarding industry and geographic compensation levels
and practices. For 1998, the Compensation Committee used, depending on the
position being reviewed and the availability of data, industry compensation data
from one or more compensation surveys (collectively, the "Compensation Survey")
covering a broad range of domestic companies to provide comparative data on the
appropriate mix of compensation elements and overall compensation levels. To the
extent available, the Compensation Committee used data for comparative purposes
from companies that were similar in size to the Company or, if such data was
unavailable, other data and, in either case, extrapolated such data to an
industrial company with sales approximately equal to those of the Company in
order to make such comparisons.
OFFICER COMPENSATION PROGRAM
BASE SALARIES--As part of its overall short- and long-term compensation
program, base salaries of the Officers during 1998 were generally set at or near
the median of similar positions in the Compensation Survey.
9
<PAGE>
ANNUAL INCENTIVE COMPENSATION--Management and highly compensated employees
selected by the Compensation Committee also participate in the Company's 1996
Annual Incentive Plan (as amended, the "Annual Incentive Plan"). For 1998, a
total of 28 employees received awards pursuant to the Annual Incentive Plan.
The 1998 performance criteria adopted by the Compensation Committee were
intended to provide total cash compensation (base salary plus incentive) between
the 50th and the 65th percentile of the companies in the Compensation Survey if
the target goals were achieved, rising above such level if the goals were
exceeded. A reduced level of compensation was to have been paid if the
performance goals were not attained, and no incentive compensation would have
been paid if the Company's performance fell below certain thresholds.
For the Officers named in this proxy statement (the "Named Executive
Officers"), other than Mr. Eilers, the performance factors that were considered
in determining incentive compensation for 1998 under the Annual Incentive Plan
were earnings per share ("EPS") and return on average capital employed
("ROACE"). One-half of Mr. Eilers' incentive compensation for 1998 was linked to
the financial performance of the Company's Paper Payment Systems segment, which
is headed by Mr. Eilers. The balance of Mr. Eilers' incentive compensation was
based on EPS and ROACE. In establishing performance measurements for 1998, the
Compensation Committee considered that certain extraordinary or one-time gains
and charges and the discontinuation or sale of certain business units could
affect 1998 earnings, and as a consequence EPS and ROACE. The performance
measurements were adjusted to eliminate the impact of such events, although the
Compensation Committee retained the ability to reduce payments to the Officers
in its discretion.
As the Company's adjusted EPS and ROACE exceeded targeted levels during
1998, incentive compensation payments to the Officers under the Annual Incentive
Plan for 1998 were generally double the targeted award levels. Mr. Eilers' award
was approximately 1.9 times the targeted level. Other Named Executive Officers
received awards at twice the targeted level.
LONG-TERM INCENTIVE COMPENSATION--The third element of the Company's
compensation program involves stock options issued under the Company's Stock
Incentive Plan (as amended, the "Stock Incentive Plan"). As part of the
Company's strategy to emphasize performance-based compensation, the level of
long-term incentive grants for 1998 was targeted at between the 50th and 65th
percentile of the level of long-term incentive compensation provided by
companies in the Compensation Survey. Each Named Executive Officer received an
option grant in 1998, and the awards are described elsewhere herein under the
caption "Option/SAR Grants in Last Fiscal Year." The Company ceased making
grants of performance-based restricted stock units in 1998, electing instead to
rely solely on stock options as the basis for its long-term incentive
compensation plan.
1998 CEO COMPENSATION
Mr. Blanchard became President and Chief Executive Officer of the Company
effective May 1, 1995 and was elected Chairman of the Board of Directors on May
6, 1996. For 1998, Mr. Blanchard received base compensation of $600,000. Mr.
Blanchard also earned incentive compensation of $1,200,000 under the Annual
Incentive Plan. As more fully described above, Mr. Blanchard's 1998 incentive
compensation was determined by a comparison between the Company's adjusted EPS
and ROACE and the performance standards set by the Compensation Committee. Mr.
Blanchard's target total cash compensation for 1998 was set by the Committee at
the 55th percentile of competitive compensation in the Compensation Survey.
Mr. Blanchard was also awarded a ten-year, non-qualified stock option to
purchase 176,000 shares of Common Stock in 1998. This option is exercisable at
$33.00 per share and will vest in three equal annual installments commencing on
January 30, 1999 (subject to acceleration upon the occurrence of certain events
customarily included in the Company's current form of non-qualified option
agreements and in the event of certain defined changes in control of the
Company).
The Compensation Committee believes that the terms and amount of Mr.
Blanchard's compensation are reasonable given the scope of Mr. Blanchard's
duties and responsibilities.
10
<PAGE>
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE
The Compensation Committee believes that it is important for the Company to
continue to be able to take all available tax deductions with respect to the
compensation paid to its executive officers. Therefore, the Company intends to
take such actions as may be necessary under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), to continue to qualify for all
available tax deductions related to executive compensation. The Omnibus Budget
Reconciliation Act of 1993 created limitations governing the deductibility of
compensation in excess of $1 million paid to the five named executive officers
of publicly traded companies. The Committee expects that all performance-based
compensation paid in 1998 to the Named Executive Officers under the plans
described above will qualify for deductibility, either because the compensation
is below the threshold for non-deductibility provided in Section 162(m) or
because the payment of such compensation complies with the provisions of Section
162(m), and provide the Company's senior management team with a competitive
level of compensation.
Calvin W. Aurand, Jr., Chairman
Barbara B. Grogan
James J. Renier
11
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
- ---------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM
INDIVIDUAL GRANTS
- ----------------------- ---------------------------------------------------------------- ----------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
NAME UNDERLYING SARS GRANTED
OPTIONS/SARS TO EMPLOYEES
GRANTED IN FISCAL EXERCISE OR EXPIRATION 5% ($)(2) 10% ($)(2)
YEAR BASE PRICE DATE
- ----------------------- ---------------- -------------- --------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John A. Blanchard III 176,000 12.7% $33.00 01/30/08 $3,652,616 $9,256,456
- ----------------------- ---------------- -------------- --------------- ---------------- ----------------- ----------------
Lawrence J. Mosner 80,000 5.8% $33.00 01/30/08 $1,660,280 $4,207,481
- ----------------------- ---------------- -------------- --------------- ---------------- ----------------- ----------------
Thomas W. VanHimbergen 41,000 3.0% $33.00 01/30/08 $850,894 $2,156,334
- ----------------------- ---------------- -------------- --------------- ---------------- ----------------- ----------------
Ronald E. Eilers 50,000 3.6% $33.00 01/30/08 $1,037,675 $2,629,675
- ----------------------- ---------------- -------------- --------------- ---------------- ----------------- ----------------
John H. LeFevre 32,500 2.3% $33.00 01/30/08 $674,489 $1,709,289
- ----------------------- ---------------- -------------- --------------- ---------------- ----------------- ----------------
</TABLE>
(1) The options shown were granted at an exercise price not less than the fair
market value of the Common Stock on January 30, 1998, the date of grant. The
options are exercisable in cumulative installments of 33-1/3 percent on each of
January 30, 1999, 2000 and 2001, provided that the option holder is then
employed by the Company. The vesting of the options is subject to acceleration
in the event of the death, disability or approved retirement of the optionee and
each option will remain exercisable for a five year period following any such
event, although no option may be exercised after the expiration of its 10 year
term. In addition, the vesting of the options are subject to acceleration in the
event of certain defined changes in control of the Company. If the employment of
the holder is terminated by the Company without cause, the holder's options will
remain exercisable for a five year period following such termination, although
no option may be exercised after the expiration of its term. No stock
appreciation rights ("SARs") were granted to any of the Named Executive Officers
during 1998.
(2) The assumed 5 and 10 percent annual stock price appreciation is shown for
illustrative purposes only.
12
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
FISCAL YEAR END FISCAL YEAR END (2))
- ------------------- --------------------------------- ---------------------------------- ---------------------------------
SHARES VALUE
ACQUIRED ON
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(3)
- ------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John A. 0 $0 145,001 265,999 $877,819 $1,167,619
Blanchard III
- ------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Lawrence J. 0 $0 51,334 146,666 $359,129 $672,496
Mosner
- ------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Thomas W. 0 $0 16,667 74,333 $94,794 $335,644
VanHimbergen
- ------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Ronald E. Eilers 0 $0 11,017 58,000 $55,781 $226,125
- ------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
John H. LeFevre 0 $0 24,667 45,833 $143,502 $195,779
- ------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
(1) None of the Named Executive Officers held or exercised any SARs in 1998.
(2) The value of unexercised options at December 31, 1998 is determined by
multiplying the difference between the exercise prices of the options and the
closing price of the Common Stock on the NYSE on December 31, 1998 ($36.5625 per
share) by the number of shares underlying the options.
(3) All of the unexercisable options described above will vest and become fully
exercisable upon certain changes in control other than the following: Mr.
VanHimbergen (33,333 shares at $30.875 per share); Mr. LeFevre (3,333 shares at
$30.00 per share and 10,000 shares at $30.75 per share); and Mr. Eilers (2,000
shares at $30.00 per share and 6,000 shares at $30.75 per share). In the event
of a change in control of the Company, the vesting of these options will also
accelerate under certain circumstance set forth in the Executive Retention
Agreements described below between the Company and each of Messrs. VanHimbergen,
LeFevre and Eilers.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
The following summarizes the material terms of Mr. Mosner's and Mr.
VanHimbergen's employment, certain Executive Retention Agreements entered into
by the Company in 1998 and a revised form of option agreement adopted by the
Company in 1998.
LAWRENCE J. MOSNER
In the event Mr. Mosner's employment should be terminated for reasons other
than misconduct or negligence, Mr. Mosner is entitled to receive a severance
package consisting of one year's base salary and a second year of income
continuation. As part of this income continuation, the Company would continue to
make payments to Mr. Mosner in an amount equal to the difference between his
base salary and any lesser salary received by Mr. Mosner from a subsequent
employer. In the event Mr. Mosner's employment is terminated following certain
business combinations or changes of control involving the Company, the terms of
the Executive Retention Agreement between Mr. Mosner and the Company that is
described below would govern Mr. Mosner's severance entitlements in lieu of the
foregoing.
13
<PAGE>
THOMAS W. VANHIMBERGEN
Mr. VanHimbergen is entitled to severance benefits in the event his
employment is terminated for reasons other than willful misconduct, gross
negligence or unlawful actions towards the Company or towards others on behalf
of the Company (i.e., other than for cause). Under this arrangement, in the
event of such a termination, Mr. VanHimbergen will receive a severance package
of one year's base salary plus a second year of income continuation. As a part
of this income continuation, the Company would continue to make payments to Mr.
VanHimbergen in an amount equal to the difference between his base salary and
any lesser salary received by Mr. VanHimbergen from a subsequent employer. Mr.
VanHimbergen is also entitled to the continuation of his medical, dental, vision
and life insurance coverage at employee rates for one year following his
termination. In the event Mr. VanHimbergen's employment is terminated following
certain business combinations or changes of control involving the Company, the
terms of the Executive Retention Agreement between Mr. VanHimbergen and the
Company that is described below would govern Mr. VanHimbergen's severance
entitlements in lieu of the foregoing.
EXECUTIVE RETENTION AGREEMENTS
On January 9, 1998, the Company entered into Executive Retention Agreements
(the "Retention Agreements") with each of Messrs. Blanchard, Mosner,
VanHimbergen, Eilers and LeFevre (collectively, the "Executives"). The Retention
Agreements are intended to ensure that the Company will receive the continued
dedication and service of the Executives notwithstanding the possibility or
occurrence of a change in control of the Company and to encourage the full
support and participation of the Executives in formulating and implementing the
Company's strategic objectives. The Retention Agreements are designed to
diminish the distractions that could be caused by personal uncertainties and
risks associated with changes of control and other significant business
combinations including the Company by providing the Executives with assurances
regarding their compensation and benefits expectations under such circumstances.
Under the Retention Agreements, each of the Executives agrees to remain in
the employ of the Company, and the Company agreed to continue to employ each
Executive, until the third anniversary following any "business combination"
involving or "change in control" of the Company (as such terms are defined in
the Retention Agreements). During such three-year period (the "Employment
Period"), each Executive is entitled to maintain a position, authority, duties
and responsibilities at least commensurate with the most significant of those
held by the Executive during the 180 day period prior to the date (the
"Effective Date") of the business combination or change in control
(collectively, a "Business Combination") and the base salary of an Executive may
not be reduced below that earned by the Executive during the twelve month period
preceding the Effective Date. In determining any increase in an Executive's base
salary during the Employment Period, the Executive is to be treated in a manner
consistent with other peer executives. The Executives are also entitled to
receive annual incentive payments during the Employment Period on the same
objective basis as other peer executives (although in no event may an
Executive's annual target bonus opportunity be less favorable to the Executive
than that provided by the Company in the last fiscal year prior to the Effective
Date and if the bonuses payable to other peer executives during the Employment
Period are not wholly based on objective criteria, the Executive's annual
incentive payment must be at least equal to an amount determined with reference
to Executive's average annual incentive payments for certain periods ending
prior to the Effective Date). During the Employment Period, each Executive is
also entitled to participate in the Company's stock incentive, performance
share, savings, retirement, welfare and fringe benefit plans on the same basis
as the Company's other executives and the opportunities for and benefits to the
Executives under such plans may not generally be reduced from those provided
during the one-year period prior to the Effective Date.
If, during the Employment Period, the Company terminates an Executive's
employment other than for "cause" or "disability" or the Executive terminates
his employment for "good reason" (as such terms are defined in the Retention
Agreements), the Executive is entitled to a lump sum payment equal to the sum of
any unpaid base salary and accrued vacation pay through the date of termination
and an amount determined with reference to the Executive's historical incentive
awards (the "Highest Annual Bonus") and the portion of the year in which the
termination occurs that the Executive was employed by the Company. In addition,
the Executive is entitled to receive a lump sum payment equal to three times the
sum of the Executive's annual base salary and the Highest Annual Bonus, plus the
amount that would have been contributed by the Company or its affiliates to the
retirement plans in which the Executive participated prior to his termination in
respect of such sum. With respect to Mr. Blanchard, the amount payable in
respect of retirement plan
14
<PAGE>
contributions is instead based on the actuarial equivalent of the additional
aggregate retirement pension Mr. Blanchard would have received if his
Supplemental Retirement Benefits had been fully vested at the time of
termination and he had been credited with an additional three years of service
at a compensation rate determined by reference to his compensation during the 12
month period preceding the date of termination or, if higher, the 12 month
period preceding the Effective Date. See "Summary Compensation Table--footnote
4." The Executives are also entitled to the continuation of their medical,
disability, life and other health insurance benefits for up to a three year
period after a qualifying termination and to certain out-placement services.
All unvested options granted to an Executive vest and remain exercisable for
a five year period (or, if less, their remaining term) following a qualifying
termination and all other restricted shares and restricted stock units held by
the Executive under the Stock Incentive Plan vest and are converted into shares
of Common Stock on the date of any such termination. In the event of a
qualifying termination, the Executives are also entitled to retain and earn any
awards previously received under the Company's Performance Share Plan as if they
had continued in the employ of the Company until the expiration of the relevant
performance period. In the event the Company is not the surviving corporation in
a Business Combination, the Executives are entitled to receive the economic
equivalent of the foregoing benefits.
The Retention Agreements also provide that if any payment or benefit
received or to be received by an Executive, whether or not pursuant to his
Retention Agreement, would be subject to the federal excise tax on "excess
parachute payments," the Company will pay to the Executive such additional
amount as may be necessary so that the Executive realizes, after the payment of
such excise tax and any income tax or excise tax on such additional amount, the
amount of such compensation.
Under the Retention Agreements, if an Executive's employment is terminated
by the Company without cause or by the Executive with good reason prior to the
Effective Date at the request or direction of a person who agrees to engage in a
Business Combination with the Company or otherwise in anticipation of or in
connection with such a Combination (whether or not such a transaction in fact
occurs), the Executive's employment shall be deemed to have been so terminated
during the Employment Period and the Executive will become eligible for the
benefits described above.
CHANGE IN CONTROL
In addition to the change of control features applicable to some of the
equity-based awards described elsewhere in this proxy statement, in January 1998
the Company adopted a new form of stock option agreement. Under this new form of
agreement the three-year vesting schedule of the options granted to Officers of
the Company is subject to acceleration upon certain defined changes in control
of the Company. Each of Messrs. Blanchard (185,000 shares), Mosner (80,000
shares), VanHimbergen (50,000 shares), Eilers (30,000 shares) and LeFevre
(30,000 shares) received an option in 1999 containing this feature.
15
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS RETURN *
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(DIVIDENDS REINVESTED)
DELUXE CORPORATION, S&P 500 INDEX
AND S&P PUBLISHING INDUSTRY GROUP
----------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DELUXE 100.00 47.38 88.26 104.70 114.62 127.07
----------------------------------------------------------------------------------------------
S&P 500 STOCK INDEX 100.00 101.32 139.40 171.40 228.59 293.91
----------------------------------------------------------------------------------------------
S&P PUBLISHING 100.00 101.65 129.27 131.52 138.00 139.09
INDUSTRY GROUP
(13 companies, excluding the
Company)
----------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER RETURN *
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
(DIVIDENDS REINVESTED)
[PLOT POINT CHART]
* Assumes $100 invested on December 31, 1993 in Deluxe Publishing Industry Group contains other companies
Common Stock, the S&P 500 Stock Index and the S&P Publishing engaged primarily in the printing business, including the
Industry Group. The S&P Publishing Industry Group is a Company's largest competitor in the check printing
published industry or line-of-business index prepared business.
independently by Standard & Poor's and is weighted on the
basis of stock market capitalization. The
</TABLE>
16
<PAGE>
MEETINGS AND COMPENSATION OF DIRECTORS
There were six meetings of the Board of Directors in 1998.
The Board of Directors has an Audit Committee, a Compensation Committee and
a Committee on Board Affairs. The Audit Committee reviews the reports of the
independent public accountants and the Company's internal auditors. During 1998,
the Audit Committee was composed of Messrs. Jacobson (who served as Chairman
until August 7, 1998), Salipante (who succeeded Mr. Jacobson as Chairman in
August 1998), Nachtsheim and Robinson. The Audit Committee held four meetings in
1998. From November 1997 until August 7, 1998, the Compensation Committee was
composed of Messrs. Renier (Chairman), Aurand and Tyabji and Ms. Grogan. In
August 1998, Mr. Tyabji left the Committee and Mr. Aurand succeeded Dr. Renier
as Chairman. The Compensation Committee is responsible for, among other things,
developing an executive compensation philosophy and related administrative
policies, reviewing comparative market data for the CEO and the other Officers
and ensuring that the Company's compensation programs are competitive, approving
the design of short- and long-term incentive compensation programs for the
Officers, establishing performance measurements and compensation under the
Company's short- and long-term incentive compensation programs for the Officers
and Division Executives, determining the compensation of the CEO, reviewing and
approving the compensation of the Company's other Officers and administering the
Company's equity-based compensation programs. The Compensation Committee held
three meetings in 1998. From November 1997 until August 1998, the Committee on
Board Affairs consisted of Whitney MacMillan (Chairman) and Allen Jacobson,
Messrs. Renier, Nachtsheim, Aurand, Hollis, Salipante, Robinson and Tyabji and
Ms. Grogan. Since August 1998, the Committee on Board Affairs has been comprised
of Messrs. Tyabji (Chairman), MacMillan, Renier and Hollis and Ms. Grogan. The
Committee on Board Affairs, in consultation with the Company's management,
identifies prospective nominees for election to the Board and reviews their
qualifications. The Committee on Board Affairs also considers matters relating
to management succession and reports on such matters to the Board of Directors.
The Committee on Board Affairs had one meeting in 1998.
The Committee on Board Affairs will consider nominees to the Board of
Directors recommended by shareholders. Such recommendations should be submitted
by mail, addressed to the Committee on Board Affairs in care of the Secretary of
the Company.
During 1998, each incumbent Director, attended at least 75 percent of the
aggregate of: (i) the total number of meetings of the Board of Directors and
(ii) the total number of meetings held by all committees of the Board on which
he or she served.
Directors who are employees of the Company do not receive compensation for
their service on the Board other than their compensation as employees. During
1998, Directors who were not employees of the Company ("Independent Directors")
each received a $50,000 annual board retainer, payable quarterly. An additional
$12,500 annual committee retainer was paid to the chair of each committee and a
$7,500 annual committee retainer was paid to each other member of a committee.
Fees are not paid for attendance at meetings. In addition to the foregoing,
Independent Directors may receive compensation for the performance of duties
assigned by the Board or its Committees that are considered beyond the scope of
the ordinary responsibilities of Directors or Committee members.
In November 1997, the Company adopted the Deluxe Corporation Non-Employee
Stock and Deferral Plan (the "Director Plan"). The purpose of the Director Plan
is to provide an opportunity for Independent Directors to increase their
ownership of Common Stock and thereby align their interest in the long-term
success of the Company with that of the Company's other shareholders. Under the
Director Plan, each Independent Director may irrevocably elect to receive, in
lieu of cash, shares of Common Stock having a fair market value equal to at
least 50% of his or her annual board and committee retainer (collectively, the
"Retainer"). The shares of Common Stock receivable pursuant to the Director Plan
are issued quarterly or, at the option of the Independent Director, credited to
the Director in the form of deferred restricted stock units. These units vest
and are converted into shares of Common Stock on the earlier of the tenth
anniversary of the February 1st of the year following the year in which the
Independent Director ceases to serve on the Company's Board of Directors or such
other date as is elected by the Independent Director in his or her deferral
election.
Each restricted stock unit receives dividend equivalent payments equal to
the dividend payment on one share of Common Stock. Any restricted stock units
issued pursuant to the Director Plan will vest and be converted into shares of
Common Stock in connection with certain defined changes in control of the
Company. All shares of Common Stock issued pursuant to the Director Plan are
issued under the Stock
17
<PAGE>
Incentive Plan and must be held by the Independent Director receiving them for a
minimum period of six months from the date of issuance.
Harold V. Haverty, the Company's former President and Chief Executive
Officer, served as a director emeritus between November 1997 and the Company's
1998 annual meeting of shareholders, when he retired. Mr. Haverty continued to
receive his Retainer (payable in cash) as a director emeritus. Allen F.
Jacobson, a member of the Company's Board of Directors since 1991, retired from
the Board in January, 1999. Whitney MacMillan, who has served on the Board since
1988, is not standing for re-election and will retire from the Board following
the 1999 meeting of shareholders.
Each new Independent Director receives a one-time grant of 1,000 shares of
restricted stock under the Stock Incentive Plan as of the date of his or her
initial election to the Board of Directors. The restricted stock vests in equal
installments on the dates of the Company's regular shareholders' meetings in
each of the three years following the date of grant, provided that the Director
remains in office immediately following the regular meeting. Restricted stock
awards also vest immediately upon an Independent Director's retirement from the
Board in accordance with the Company's policy with respect to mandatory
retirement.
In 1997, each Independent Director elected at the 1997 Meeting received a
non-qualified option to purchase 1,000 shares of the Company's Common Stock
under the Stock Incentive Plan on the date of the 1997 Meeting. These options
have an exercise price equal to the fair market value of the underlying Common
Stock on the date of grant, became fully exercisable six months after the date
of grant and will expire on the tenth anniversary of such date. The options also
terminate three months following the date upon which a participant ceases to be
a Director of the Company. This option program was discontinued in 1998 and
options will not be granted in connection with the Meeting.
Benefits under the Company's previous Board retirement plan were frozen
following the adoption of the Director Plan. As a result, no additional benefits
will be accrued for current Directors or be offered to newly elected Directors.
Under the current provisions of the Board retirement plan, Independent Directors
with at least five years of service as an Independent Director who resign or are
not nominated for re-election will receive an annual payment equal to the annual
Board retainer in effect on July 1, 1997 ($30,000 per year) for the number of
years during which the retiree served on the Board as an Independent Director
prior to October 31, 1997. In calculating a Director's eligibility for benefits
under this plan, partial years of service are rounded up to the nearest whole
number. Retirement payments do not extend beyond the lifetime of the retiree and
are contingent upon the retiree's remaining available for consultation with
management and refraining from engaging in any activity in competition with the
Company. All of the current Independent Directors (other than Mr. Tyabji) are
eligible for benefits under this plan. Mr. Jacobson is entitled to receive
benefits under this plan for up to seven years following his retirement and Mr.
MacMillan will be eligible to receive benefits for up to 10 years following his
retirement.
DRH Strategic Consulting, Inc., a corporation controlled by Mr. Hollis and
for which Mr. Hollis serves as President ("DRH"), provides, through the services
of Mr. Hollis, advisory services to the Company and its joint venture with HCL
Corporation of India (the "Joint Venture") regarding their respective
strategies, technology and product plans and assists the Company and the Joint
Venture in communicating their strategic initiatives to the financial services
industry. DRH was paid a total of $106,250 in consulting fees by the Joint
Venture in 1998, which amount was paid by the Company for the account of the
Joint Venture, and reimbursed by such entities for an aggregate of ($50,077) of
expenses incurred in providing such services. Consulting fees are not paid under
this arrangement for Mr. Hollis' attendance at Board and Committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of three independent
Directors, none of whom is or has been an Officer of the Company. The Company
has no compensation committee interlocks--that is, no Officer of the Company
serves as a director or a compensation committee member of a company that has an
officer or former officer serving on the Company's Board of Directors or the
Compensation Committee.
18
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
related regulations requires the Company's directors, executive officers, and
any persons holding more than 10% of the Company's Common Stock (collectively,
"Reporting Persons") to report their initial ownership of the Company's Common
Stock and any subsequent changes in that ownership to the Commission and the New
York Stock Exchange. Specific due dates for these reports have been established,
and the Company is required to disclose in this proxy statement any failure of a
Reporting Person to file a required report by the applicable due date during
1998. Based on its review of the reports submitted to it, the Company believes
that each Reporting Person, other than Mr. VanHimbergen, timely filed all
required reports during this period. Mr. VanHimbergen filed a late report
associated with the vesting of a portion of his restricted stock unit award in
May 1998.
ITEM 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Deloitte & Touche as independent auditors to examine the accounts of
the Company for the fiscal year ending December 31, 1999 and to perform other
accounting services. Deloitte & Touche has acted as independent auditors of the
Company since 1964.
Representatives of Deloitte & Touche are not expected to be present at the
Meeting. Although it is not required to do so, the Board of Directors has
submitted the selection of Deloitte & Touche as the Company's independent
auditors to the shareholders for ratification. Unless a contrary choice is
specified, persons named as proxies will vote for the ratification of the
selection of Deloitte & Touche. If the selection is not ratified, the Board of
Directors will reconsider its selection of Deloitte & Touche. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF ITS
SELECTION OF DELOITTE & TOUCHE AS INDEPENDENT AUDITORS.
OTHER BUSINESS
The Board of Directors does not intend to present any business at the
Meeting other than the matters specifically set forth in this proxy statement
and knows of no other business scheduled to come before the Meeting. If any
other matters are brought before the Meeting, the persons named as proxies will
vote on such matters in accordance with their judgment of the best interests of
the Company. The proxies solicited by the Company will confer discretionary
authority on the persons named therein as proxies to vote on any matter
presented at the meeting of which the Board of Directors did not have knowledge
on or before November 30, 1998.
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 2000
regular meeting of shareholders must be received by the Company no later than
December 3, 1999 in order to be included in the proxy statement for that
meeting. Under the Company's Bylaws, a shareholder proposal not included in the
Company's Proxy Statement for its 2000 annual meeting of shareholders is
untimely and may not be presented in any manner at the 2000 annual meeting of
shareholders unless the shareholder wishing to make such proposal follows
certain specific notice procedures set forth in the Company's Bylaws, including
delivering notice of such proposal in writing to the Secretary of the Company at
the address indicated on the first page of this proxy statement no later than
December 3, 1999.
By order of the Board of Directors:
John H. LeFevre
Secretary
March 31, 1999
19
<PAGE>
-----------------------------
COMPANY #
CONTROL #
-----------------------------
THIS YEAR THERE ARE THREE WAYS TO VOTE.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY
CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
* Use any touch-tone telephone to grant your proxy 24 hours a day, 7 days a
week.
* You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
* Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- http://www.eproxy.com/dlx/ -- QUICK *** EASY *** IMMEDIATE
* Use the Internet to grant your proxy 24 hours a day, 7 days a week.
* You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Deluxe Corporation, c/o Shareowner Services(SM),
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS LISTED BELOW.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of directors 01 John A. Blanchard III 06 Donald R. Hollis [ ] Vote FOR [ ] Vote WITHHELD
02 Dr. James J. Renier 07 Robert C. Salipante all nominees from all nominees
03 Barbara B. Grogan 08 Jack Robinson
04 Stephen P. Nachtsheim 09 Hatim A. Tyabji
05 Calvin W. Aurand, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEES, ---------------------------------------------------
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX TO THE RIGHT. | |
---------------------------------------------------
2. Ratification of the selection of Deloitte & Touche as
independent auditors. [ ]For [ ] Against [ ] Abstain
3. In their discretion, each of the proxies is authorized to vote upon
such other business as may properly come before the meeting.
Address Change? Mark Box [ ] Date ------------------------------------------
Indicate changes below:
---------------------------------------------------
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Signature(s) in Box
Please sign exactly as name appears at the left.
When shares are held by joint tenants, either or
both may sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If the shareholder is a
corporation, please sign in full corporate name by
president or other authorized officer. If the
shareholder is a partnership, please sign in
partnership name by authorized person.
</TABLE>
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
Shareholders are invited to attend Deluxe's annual shareholder meeting. It will
be held Tuesday, May 4, 1999, in the Nicollet Grand Ballroom, main level, at
the Hyatt Regency Minneapolis, 1300 Nicollet Mall, Minneapolis, Minn., at 5
p.m. Light refreshments will be served after the meeting.
TOLL-FREE SHAREHOLDER INFORMATION LINE
The Company no longer distributes printed quarterly reports because of a lack
of timeliness and of increased printing and distribution costs. However, you
may dial 1-888-359-6397 (1-888-DLX-NEWS) to listen to the latest quarterly
financial results, dividend news, and other information about Deluxe.
The planned quarterly release dates for 1999 financial information are:
April 22, 1999
July 15, 1999
October 14, 1999
January 25, 2000
Information about Deluxe can also be found on our Web site at
http://www.deluxe.com.
1-888-359-6397 OR (1-888-DLX-NEWS)
DIVIDEND DIRECT DEPOSIT
Deluxe Corporation directly deposits dividends into the accounts of its
employee shareholders. This service is also available to shareholders who are
not employees. It allows shareholders to have their dividends automatically
deposited into an account at whatever financial institution they designate.
Direct deposit provides convenient, fast access to dividend payments.
For additional information about dividend direct deposit or to change the
account to which your dividend is currently being deposited, please contact
Norwest Bank Minnesota, N.A. by telephone at (800) 468-9716 or by e-mail at
[email protected]
[DELUXE LETTERHEAD]
PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned appoints John A. Blanchard III, Lawrence J. Mosner, and John
H. LeFevre as proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote, as designated on the reverse
side hereof, all shares of common stock of Deluxe Corporation held of record by
the undersigned on March 8, 1999 at the annual meeting of shareholders to be
held on May 4, 1999, and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO CONTRARY DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR EACH OF THE NOMINEES FOR THE BOARD OF DIRECTORS LISTED ON THE
REVERSE SIDE HEREOF AND EACH OF THE LISTED PROPOSALS.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
[DELUXE LETTERHEAD]
PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned appoints John A. Blanchard III, Lawrence J. Mosner, and John
H. LeFevre as proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote, as designated on the reverse
side hereof, all shares of common stock of Deluxe Corporation held of record by
the undersigned on March 8, 1999 at the annual meeting of shareholders to be
held on May 4, 1999, and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO CONTRARY DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR EACH OF THE NOMINEES FOR THE BOARD OF DIRECTORS LISTED ON THE
REVERSE SIDE HEREOF AND EACH OF THE LISTED PROPOSALS.
(Continued and to be SIGNED on the reverse side)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS LISTED BELOW.
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Election of directors 01 John A. Blanchard III 06 Donald R. Hollis [ ] Vote FOR [ ] Vote WITHHELD
02 Dr. James J. Renier 07 Robert C. Salipante all nominees from all nominees
03 Barbara B. Grogan 08 Jack Robinson
04 Stephen P. Nachtsheim 09 Hatim A. Tyabji
05 Calvin W. Aurand, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEES, ----------------------------------------------------
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX TO THE RIGHT. | |
----------------------------------------------------
2. Ratification of the selection of Deloitte & Touche as independent auditors. [ ] For [ ] Against [ ] Abstain
3. In their discretion, each of the proxies is authorized to vote upon
such other business as may properly come before the meeting.
Date ---------------------------------------------
----------------------------------------------------
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----------------------------------------------------
Signature(s) in Box
Please sign exactly as name appears at the left.
When shares are held by joint tenants, either or
both may sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If the shareholder is a
corporation, please sign in full corporate name by
president or other authorized officer. If the
shareholder is a partnership, please sign in
partnership name by authorized person.
</TABLE>
