Exhibit 10.1
DELUXE CORPORATION
2000
ANNUAL INCENTIVE PLAN
(AS ADOPTED JANUARY 28, 2000)
1. ESTABLISHMENT. On January 28, 2000 the Board of Directors of Deluxe
Corporation, upon recommendation by the Compensation Committee of the Board of
Directors, approved an incentive plan for executives as described herein, which
plan shall be known as the "Deluxe Corporation 2000 Annual Incentive Plan." This
Plan shall be submitted for approval by the shareholders of Deluxe Corporation
at the 2000 Annual Meeting of Shareholders. This Plan shall be effective as of
January 1, 2001, subject to its approval by the shareholders, and no benefits
shall be issued pursuant thereto until after this Plan has been approved by the
shareholders.
2. PURPOSE. The purpose of this Plan is to advance the interests of
Deluxe Corporation and its shareholders by attracting and retaining key
employees, and by stimulating the efforts of such employees to contribute to the
continued success and growth of the business of the Company. This Plan is
further intended to provide employees with an opportunity to increase their
ownership of the Company's common stock and, thereby, to increase their personal
interest in the long-term success of the business in a manner designed to
increase shareholder value.
3. DEFINITIONS. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
3.1. BASE SALARY - a Participant's annualized base salary, as
determined by the Committee, as of the last day of a Performance Period.
3.2. COMPENSATION COMMITTEE - a committee of the Board of Directors of
the Company designated by such Board to administer the Plan which shall consist
of members appointed from time to time by the Board of Directors and shall be
composed of not fewer than such number of directors as shall be required to
permit grants and awards made under the Plan to satisfy the requirements of Rule
16b-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (the "1934 Act"), as amended, or any successor rule or
regulation ("Rule 16b-3"). Each member of the Compensation Committee shall be a
"Non-Employee Director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Code.
3.3. CODE - the Internal Revenue Code of 1986, as it may be amended
from time to time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
3.4. COMMON STOCK - the common stock, par value $1.00 per share, of the
Company.
3.5. COMPANY - Deluxe Corporation, a Minnesota corporation, and any of
its subsidiaries or affiliates, whether now or hereafter established.
3.6. DELUXE - Deluxe Corporation, a Minnesota corporation, and all
subsidiaries included in its consolidated financial reports for a given period.
3.7. EXECUTIVES - all Participants for a given Performance Period
designated by the Compensation Committee as "Executives" for purposes of this
Plan. The Compensation Committee shall designate as Executives all Participants
it reasonably believes may be "named executive officers" under Rule 402
promulgated under the 1934 Act for that Performance Period.
<PAGE>
3.8. MAXIMUM AWARD PERCENTAGE - a percentage, which may be greater or
less than 100%, as determined by the Committee for each Participant with respect
to each Performance Period and with respect to each Performance Factor.
3.9. OTHER PARTICIPANTS - all Participants for a given Performance
Period who are not designated as "Executives" by the Compensation Committee for
such Performance Period.
3.10. PARTICIPANTS - any management or highly compensated employees of
the Company who are designated by the Compensation Committee prior to the start
of a Performance Period as Participants in this Plan. Directors of the Company
who are not also employees of the Company are not eligible to participate in the
Plan. Participants shall be designated as either Executives or Other
Participants by the Compensation Committee as provided in Section 4.3 below.
3.11. PERFORMANCE FACTOR - the pre-established, objective performance
goals selected by the Committee for each Participant with respect to each
Performance Period and which shall be determined solely on account of the
attainment of one or more pre-established, objective performance goals selected
by the Committee in connection with the grant of an award hereunder; provided,
however, that in the case of Other Participants, such performance goals need not
be objective and may be based on such business criteria as the Committee may
determine to be appropriate, which may include financial and nonfinancial
performance goals that are linked to such individual's business unit or the
Company as a whole or to such individual's areas of responsibility. The
objective performance goals for Executives shall be based solely on one or more
of the following business criteria, which may apply to the individual in
question, an identifiable business unit or the Company as a whole, and on an
annual or other periodic or cumulative basis: sales values, margins, volume,
cash flow, stock price, market share, sales, earnings per share, profits,
earnings before interest expense and taxes, earnings before interest expense,
interest income and taxes, earnings before interest expense, taxes, and
depreciation and/or amortization, earnings before interest expense, interest
income, taxes, and depreciation and/or amortization, return on equity or costs,
return on invested or average capital employed, or cumulative total return to
stockholders (in each case, whether compared to pre-selected peer groups or
not).
3.12. PERFORMANCE PERIOD - each consecutive twelve-month period
commencing on January 1 of each year during the term of this Plan.
3.13. PLAN - this Deluxe Corporation 2000 Annual Incentive Plan.
3.14. STOCK INCENTIVE PLAN - The Deluxe Corporation 2000 Stock
Incentive Plan.
3.15. TARGET AWARD - a dollar amount or a percentage of Base Salary,
which may be greater or less than 100%, as determined by the Committee with
respect to each Participant for each Performance Period.
3.16. UNITS - Restricted Stock Units, as defined in the Stock Incentive
Plan.
4. ADMINISTRATION.
4.1. POWER AND AUTHORITY OF COMPENSATION COMMITTEE. The Plan shall be
administered by the Compensation Committee. The Compensation Committee shall
have full power and authority, subject to all the applicable provisions of the
Plan and applicable law, to (a) establish, amend, suspend or waive such rules
and regulations and appoint such agents as it deems necessary or advisable for
the proper administration of the Plan, (b) construe, interpret and administer
the Plan and any instrument or agreement relating to the Plan, (c) determine,
from
2
<PAGE>
time to time, whether shares of Common Stock and/or Units will be made available
to Participants under the Plan, and (d) make all other determinations and take
all other actions necessary or advisable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, each determination made and
each action taken by the Compensation Committee pursuant to the Plan or any
instrument or agreement relating to the Plan shall be (x) within the sole
discretion of the Compensation Committee, (y) may be made at any time and (z)
shall be final, binding and conclusive for all purposes on all persons,
including, but not limited to, Participants and their legal representatives and
beneficiaries, and employees of the Company.
4.2 DELEGATION. The Compensation Committee may delegate its powers and
duties under the Plan to one or more officers of the Company or a committee of
such officers, subject to such terms, conditions and limitations as the
Compensation Committee may establish in its sole discretion; provided, however,
that the Compensation Committee shall not delegate its power (a) to make
determinations regarding officers or directors of the Company who are subject to
Section 16 of the 1934 Act; or (b) in such a manner as would cause the Plan not
to comply with the provisions of Section 162(m) of the Code.
4.3. DETERMINATIONS MADE PRIOR TO EACH PERFORMANCE PERIOD. On or before
the 90th day of each Performance Period, the Compensation Committee shall:
(a) designate all Participants (including designation as
Executives or Other Participants) for such Performance Period;
(b) establish a Target Award for each Participant;
(c) with respect to each Participant, establish one or more
Performance Factors and a corresponding Maximum Award Percentage for each
Performance Factor;
4.4. CERTIFICATION. Following the close of each Performance Period and
prior to payment of any amount to any Participant under the Plan, the Committee
must certify in writing which of the applicable Performance Factors for that
Performance Period (and the corresponding Maximum Award Percentages) have been
achieved and certify as to the attainment of all other factors upon which any
payments to a Participant for that Performance Period are to be based.
4.5. SHAREHOLDER APPROVAL. The material terms of this Plan shall be
disclosed to and approved by shareholders of the Company in accordance with
Section 162(m) of the Code. No amount shall be paid to any Participant under
this Plan unless such shareholder approval has been obtained.
5. INCENTIVE PAYMENT.
5.1. FORMULA. Each Participant shall receive an incentive payment for
each Performance Period in an amount not greater than:
(a) the Participant's Target Award for the Performance Period,
multiplied by
(b) the Participant's Maximum Award Percentage for the
Performance Period that corresponds to the Performance Factor achieved by the
Participant for that Performance Period.
5.2. LIMITATIONS.
(a) DISCRETIONARY INCREASE OR REDUCTION. The Compensation
Committee shall retain sole and absolute discretion to increase or reduce the
amount of any incentive
3
<PAGE>
payment otherwise payable to any Participant under this Plan, but may not
increase the payment to any Executive for any Performance Period.
(b) CONTINUED EMPLOYMENT. Except as otherwise provided by the
Compensation Committee, no incentive payment under this Plan with respect to a
Performance Period shall be paid or owed to a Participant whose employment
terminates prior to the last day of such Performance Period.
(c) MAXIMUM PAYMENTS. No Participant shall receive a payment
under this Plan for any Performance Period in excess of $2.0 million.
6. BENEFIT PAYMENTS.
6.1. TIME AND FORM OF PAYMENTS. Prior to a date specified by the
Compensation Committee but in no event later than the 90th day of a Performance
Period, each Participant shall elect whether to receive benefits which may be
paid under the Plan in cash or in the form of shares of Common Stock or Units
(whichever is made available by the Compensation Committee to such Participant
in the Compensation Committee's sole discretion) or some combination thereof.
Participants who elect to receive some percentage of the incentive payment in
the form of cash shall be entitled to elect, at the same time as the cash
election is made, to defer such receipt in accordance with the terms of any
Company deferred compensation plan in effect at the time and applicable to such
cash payment. In the event a Participant has elected to receive some percentage
of the incentive payment in the form of cash, and subject to any such deferred
compensation election, such cash incentive shall be paid as soon as
administratively feasible after the Compensation Committee has made the
certifications provided for in Section 4.4 above and otherwise determined the
amount of such Participant's incentive payment payable under this Plan. In the
event that a Participant chooses to receive some percentage of the incentive
payment in the form of shares or Units (as the case may be), in lieu of cash
(the "Share Dollar Amount"), the Participant shall be entitled to receive shares
of restricted Common Stock (or Units, as the case may be) equal to 125% of the
Share Dollar Amount pursuant to this Plan, based on the fair market value of a
share of Common Stock (as determined in accordance with the terms of the Stock
Incentive Plan, as of the date such shares or Units are to be issued or awarded,
respectively, after the Compensation Committee has made the certifications
provided for in Section 4.4 above and otherwise determined the amount of a
Participant's incentive payment payable under this Plan.
In the event a Participant has elected to receive some percentage of
the incentive payment in the form of shares of Common Stock or Units (as the
case may be), such shares or Units shall be issued or awarded, respectively,
pursuant to the Stock Incentive Plan, which shares or Units shall be subject to
such forfeiture rights and to such restrictions regarding transfer as may be
established by the Compensation Committee; provided, however, that the
individual share limitation provided for in Section 4(d) of the Stock Incentive
Plan shall not apply to shares issued under this Plan.
6.2. NONTRANSFERABILITY. Except as otherwise determined by the
Compensation Committee, no right to any incentive payment hereunder, whether
payable in cash or other property, shall be transferable by a Participant
otherwise than by will or by the laws of descent and distribution; provided
however, that if so determined by the Compensation Committee, a Participant may,
in the manner established by the Compensation Committee (i) designate a
beneficiary or beneficiaries to exercise the rights of the Participant and
receive any cash or property hereunder upon the death of the Participant, or
(ii) transfer any rights to any cash incentive payment hereunder to any member
of such Participant's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated by the Securities and Exchange Commission under the 1934
Act, or any successor rule or regulation) or to a trust whose beneficiaries are
members of such Participant's "immediate family." No right to any incentive
payment hereunder may be
4
<PAGE>
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company.
6.3. TAX WITHHOLDING. In order to comply with all applicable federal or
state income, social security, payroll, withholding or other tax laws or
regulations, the Compensation Committee may establish such policy or policies as
it deems appropriate with respect to such laws and regulations, including
without limitation, the establishment of policies to ensure that all applicable
federal or state income, social security, payroll, withholding or other taxes,
which are the sole and absolute responsibility of the Participant, are withheld
or collected from such Participant. In order to assist a Participant in paying
all or part of the federal and state taxes to be withheld or collected upon
receipt or payment of (or the lapse of restrictions relating to) an incentive
payment payable hereunder, the Compensation Committee, in its sole discretion
and subject to such additional terms and conditions as it may adopt, may permit
the Participant to satisfy such tax obligation by (a) electing to have the
Company withhold a portion of the shares of Common Stock otherwise to be
delivered upon payment of (or the lapse of restrictions relating to) an
incentive payment hereunder with a fair market value equal to the amount of such
taxes or (b) delivering to the Company shares of Common Stock other than the
shares issuable upon payment of (or the lapse of restrictions relating to) such
incentive payment with a fair market value equal to the amount of such taxes.
7. AMENDMENT AND TERMINATION; ADJUSTMENTS. Except to the extent
prohibited by applicable law and unless otherwise expressly provided in the
Plan:
(a) AMENDMENTS TO THE PLAN. The Board of Directors of the
Company may amend, alter, suspend, discontinue or terminate the Plan, without
the approval of the shareholders of the Company, except that no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:
(i) would cause Rule 16b-3 to become unavailable with
respect to grants and awards made under the Plan; or
(ii) would violate the rules or regulations of the
New York Stock Exchange, any other securities exchange or the National
Association of Securities Dealers, Inc. that are applicable to the Company.
(b) WAIVERS OF INCENTIVE PAYMENT CONDITIONS OR RIGHTS. The
Compensation Committee may waive any conditions of or rights of the Company
under any right to an incentive payment hereunder, prospectively or
retroactively.
(c) LIMITATION ON AMENDMENTS TO INCENTIVE PAYMENT RIGHTS.
Neither the Compensation Committee nor the Company may amend, alter, suspend,
discontinue or terminate any rights to an incentive payment, prospectively or
retroactively, without the consent of the Participant or holder or beneficiary
thereof, except as otherwise herein provided.
(d) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The
Compensation Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan in the manner and to the extent it shall deem
desirable to carry the Plan into effect.
8. MISCELLANEOUS.
8.1. EFFECTIVE DATE. This Plan shall be deemed effective, subject to
shareholder approval, as of January 1, 2001.
5
<PAGE>
8.2. TERM OF THE PLAN. Unless the Plan shall have been discontinued or
terminated, the Plan shall terminate on December 31, 2003. No right to receive
an incentive payment shall be granted after the termination of the Plan.
However, unless otherwise expressly provided in the Plan, any right to receive
an incentive payment theretofore granted may extend beyond the termination of
the Plan, and the authority of the Board of Directors and Compensation Committee
to amend or otherwise administer the Plan shall extend beyond the termination of
the Plan.
8.3. HEADINGS. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
8.4. APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and
inure to the benefit of the Company and each Participant, the successors and
assigns of the Company, and the beneficiaries, personal representatives and
heirs of each Participant. If the Company becomes a party to any merger,
consolidation or reorganization, this Plan shall remain in full force and effect
as an obligation of the Company or its successors in interest (except to the
extent modified by the terms of the Stock Incentive Plan with respect to the
shares of restricted Common Stock issued under Section 6.1 hereof).
8.5. EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of
this Plan shall not give any Participant any right to be retained in the
employment of the Company. In the absence of any specific agreement to the
contrary, this Plan shall not affect any right of the Company, or of any
affiliate of the Company, to terminate, with or without cause, any Participant's
employment at any time. This Plan shall not replace any contract of employment,
whether oral or written, between the Company and any Participant, but shall be
considered a supplement thereto. This Plan is in addition to, and not in lieu
of, any other employee benefit plan or program in which any Participant may be
or become eligible to participate by reason of employment with the Company. No
compensation or benefit awarded to or realized by any Participant under the Plan
shall be included for the purpose of computing such Participant's compensation
under any compensation-based retirement, disability, or similar plan of the
Company unless required by law or otherwise provided by such other plan.
8.6. NO TRUST OR FUND CREATED. This Plan shall not create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any affiliate and a Participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company or any affiliate pursuant to this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company or of
any affiliate.
8.7. GOVERNING LAW. The validity, construction and effect of the Plan
or any incentive payment payable under the Plan shall be determined in
accordance with the laws of the State of Minnesota.
8.8. SEVERABILITY. If any provision of the Plan is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction such
provision shall be construed or deemed amended to conform to applicable laws, or
if it cannot be so construed or deemed amended without, in the determination of
the Compensation Committee, materially altering the purpose or intent of the
Plan, such provision shall be stricken as to such jurisdiction, and the
remainder of the Plan shall remain in full force and effect.
8.9. QUALIFIED PERFORMANCE-BASED COMPENSATION. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify all
compensation paid hereunder as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.
6
