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
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Section 240.14a-12
DELUXE CORPORATION
(Name of Registrant as Specified in Its Charter)
N/A
(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)(1) 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.
Shoreview, MN 55126-2966
P.O. Box 64235
St. Paul, MN 55164-0235
[LOGO]
--------------------------------------------------------------------------------
NOTICE OF MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 4, 2000
To the Shareholders of Deluxe Corporation:
The 2000 regular meeting of shareholders will be held in the Continental
Room at the Holiday Inn - St. Paul North at 1201 W. County Road E, St. Paul,
Minnesota 55112 on Friday, August 4, 2000, at 11:00 a.m. for the following
purposes:
1. to elect 8 Directors to hold office until the 2001 regular meeting of
shareholders;
2. to consider and act upon a proposal to approve the Deluxe Corporation
2000 Annual Incentive Plan;
3. to consider and act upon a proposal to approve the Deluxe Corporation
2000 Stock Incentive Plan;
4. 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, 2000; and
5. to take action on any other business that may properly come before the
meeting.
Shareholders of record at the close of business on June 5, 2000 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
Dated: June 23, 2000 Secretary
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.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ EFUNDS CORPORATION'S
REGISTRATION STATEMENT ON FORM S-4, INCLUDING THE PROSPECTUS RELATING TO THE
EXCHANGE OFFER DESCRIBED HEREIN, WHEN IT BECOMES AVAILABLE, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. WHEN THESE AND OTHER DOCUMENTS RELATING TO THE
TRANSACTION ARE FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, THEY MAY
BE OBTAINED FREE AT THE SEC'S WEB SITE AT www.sec.gov. HOLDERS OF DELUXE COMMON
STOCK MAY ALSO OBTAIN EACH OF THESE DOCUMENTS (WHEN THEY BECOME AVAILABLE) FOR
FREE BY DIRECTING YOUR REQUEST TO DELUXE CORPORATION, C/O SHAREOWNER SERVICES,
P.O. BOX 64873, SAINT PAUL, MINNESOTA 55164-0873. THIS COMMUNICATION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BY ANY SALE OF SECURITIES IN ANY STATE IN WHICH THE OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE. NO OFFERING OF SECURITIES SHALL BE MADE
EXCEPT BY MEANS OF A PROSPECTUS MEETING THE REQUIREMENTS OF SECTION 10 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
--------------------------------------------------------------------------------
DELUXE CORPORATION
3680 VICTORIA STREET N., SHOREVIEW, MINNESOTA 55126-2966
--------------------------------------------------------------------------------
PROXY STATEMENT
2000 REGULAR MEETING OF SHAREHOLDERS TO BE HELD
AUGUST 4, 2000
The accompanying proxy is solicited by the Board of Directors of Deluxe
Corporation (the "Company") in connection with the 2000 regular meeting
(including any adjournments, the "Meeting") of shareholders of the Company to be
held August 4, 2000.
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 $25,000. 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 June 30, 2000. 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 June 5, 2000 may
vote at the Meeting. As of that date, there were 72,322,238 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.
During 1999, the Company announced that it planned to reduce its corporate
support group and move most corporate resources into the Company's operating
units to enable them to operate more independently. These moves were
substantially completed by the end of 1999. In April 1999, the Company announced
that it was changing its business model to a holding company structure with four
independently operated business
2
<PAGE>
units: Paper Payment Systems; Electronic Payment Solutions; Professional
Services and Government Services. In January 2000, the Company announced that
its Board of Directors approved a plan to combine its Electronic Payment
Solutions, Professional Services and Government Services segments into a
separate, independent, publicly traded company to be called eFunds Corporation
("eFunds").
eFunds has filed a registration statement with the Securities and Exchange
Commission to issue shares of its common stock to the public through an initial
public offering (the "eFunds IPO"). After this offering, the Company will
continue to own at least 80.1% of eFunds' outstanding shares. The Company plans
to distribute all of its shares of eFunds' common stock to its shareholders who
tender shares of the Company's common stock in an exchange offer (the
Split-off). The Company has requested a private letter ruling from the Internal
Revenue Service (IRS) that the Split-off would be a tax-free transaction to the
Company and its shareholders. The Split-off is contingent upon the Company
receiving a favorable tax ruling from the IRS.
Management believes that the plan to Split-off the Company's higher growth
businesses is consistent with its strategy to create strategically focused
enterprises that can independently achieve their business objectives, raise
capital and pursue growth opportunities in their respective markets. Management
also believes that splitting-off its electronic payment related businesses into
a publicly traded company maximizes shareholder value.
3
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
The Board of Directors has set the size of the Board at eight persons and
recommends that the persons listed below be elected Directors to serve until the
2001 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 57, 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. Mr. Blanchard has also served as Chairman of the
Board and Chief Executive Officer of eFunds since March 1, 2000 and he is
expected to continue in that role following the Split-off. 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 ADC Telecommunications, Inc. It is anticipated
that Mr. Blanchard will resign as an officer and director of the Company at the
time the Split-off is completed.
LAWRENCE J. MOSNER, age 58, served as Executive Vice President of the Company
since July 1997 and became Vice-Chairman of the Company's Board of Directors in
August 1999. As Executive Vice President and Vice Chairman, Mr. Mosner had
overall responsibility for all of the Company's day-to-day operations until Mr.
Blanchard assumed responsibility for eFunds as its chief executive officer.
Following the Split-off, Mr. Mosner is expected to succeed Mr. Blanchard as
Chairman of the Board and Chief Executive Officer of the Company. Mr. Mosner
served as Senior Vice President of the Company from November 1995 until October
1996, when he became President of Deluxe Direct, Inc. ("DDI") a subsidiary of
the Company that provided management services to the companies in the Company's
former Deluxe Direct business unit. Deluxe Direct, which as divested in 1998,
was a direct mail marketer of specialty papers and other products to small
businesses through PaperDirect, Inc. ("PaperDirect") and greeting cards, gift
wrap, small gifts and related products through Current, Inc. ("Current"). Deluxe
Direct also marketed checks to consumers via direct mail, but this direct mail
check business was not included in the divestiture. As a Senior Vice President
of the Company and President of DDI, Mr. Mosner served as the principal
executive officer of Deluxe Direct. In February 1997, Mr. Mosner returned to the
office of Senior Vice President of the Company and he served as President of its
Paper Payment Systems business unit until he became Executive Vice President of
the Company. Mr. Mosner was executive vice president and chief operating officer
of Hanover Direct, a direct marketing company, with responsibility for
non-apparel products, from 1993 until he joined the Company. Previously, he was
employed for 28 years by Sears, Roebuck and Company, where he was Vice President
of catalog merchandising from 1991 to 1993.
RONALD E. EILERS, age 52, joined the Company in 1988 when it purchased Current.
From 1990 to 1995, Mr. Eilers served as Vice President and General Manager of
Current's direct mail check business. In 1995, Mr. Eilers became President of
the Company's former PaperDirect subsidiary and the manager of the Company's
business forms division. Mr. Eilers became a Vice President of DDI in October
1996 and he succeeded Mr. Mosner as the President of DDI in February 1997.
Current's non-check printing businesses and PaperDirect were divested in 1998.
In August 1997, Mr. Eilers became a Senior Vice President of the Company and now
manages its Paper Payment Systems business. Mr. Eilers is expected to serve as
President and Chief Operating Officer of the Company following the Split-off.
BARBARA B. GROGAN, age 52, 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 55, is a corporate vice president of Intel
Corporation ("Intel") and has served as the co-director of Intel Capital 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 70, 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
4
<PAGE>
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 64, has served as president of DRH Strategic Consulting,
Inc., a consulting firm which assists technology firms and financial
institutions in developing and improving their products based on information
technology, since January 1996. Mr. Hollis also serves as president of Hollis
Enterprises of Vermont, Inc. 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.
ROBERT C. SALIPANTE, age 44, has served as president and chief operating officer
of ReliaStar, a holding company specializing in financial services since July
1999. Prior to this position, Mr. Salipante served as senior vice president,
personal financial services of ReliaStar from November 1996 through June 1999.
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.
The Board of Directors has engaged the services of a professional
recruiting firm for the purpose of identifying suitable candidates to be added
to the Board of Directors. Although these efforts are on-going, no candidate has
been identified for nomination for election at the Meeting. The Board of
Directors expects, however, to recruit one or more additional candidates for
election to the Board of Directors after the Meeting and to enlarge the size of
the Board and elect such candidate or candidates to serve on the Board of
Directors after the Meeting until the regular meeting of shareholders in 2001.
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.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 2000 (except as otherwise
noted), 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 and each Director, each person named in the
Summary Compensation Table that appears elsewhere in this Report (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>
FMR Corp.
82 Devonshire Street
Boston, MA 02109(2).....................7,904,999
ESL Partners, L.P.
One Lafayatte Place
Greenwich, CT 06832(3)..................4,292,400
John A. Blanchard III(4)..................479,099..............................0..................479,099
Lawrence J. Mosner(5) ....................236,192.........................16,801..................252,993
Thomas W. VanHimbergen(6) ................119,941..............................0..................119,941
Ronald E. Eilers(7)........................71,303..........................5,000...................76,303
Debra A. Janssen(8)........................17,085..........................1,889...................18,974
Dr. James J. Renier(9) ....................15,380..............................0...................15,380
Barbara B. Grogan(10) ......................6,925..........................2,651....................9,576
Stephen P. Nachtsheim(11) ..................3,471..........................2,424....................5,895
Calvin W. Aurand, Jr.(12) ..................2,100..........................2,204....................4,304
Donald R. Hollis(13) .......................8,815..............................0....................8,815
Robert C. Salipante(14) ....................5,226..............................0....................5,226
Jack Robinson(15) ..........................8,836..........................1,710...................10,546
Hatim A. Tyabji(15).........................1,000..........................4,407....................5,407
All Directors and executive officers
as a group (14 persons)(16) ............1,052,948........................ 38,875................1,091,823
</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
August 8, 2000 and January 28, 2001 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
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<PAGE>
holder ceases to serve as a Director of the Company. 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.
(2) Based on a Schedule 13G, dated as of February 14, 2000, filed by FMR Corp.
("FMR"), Edward C. Johnson 3d, chairman of FMR, Abigail P. Johnson, a director
of FMR, Fidelity Management & Research Company ("Fidelity"), an investment
advisor and 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 various registered investment companies (the "Funds"), and the Funds
each have sole power to dispose of 6,135,200 shares (8.5% of the outstanding
shares of Common Stock on June 5, 2000) owned by the Funds. One of the Funds,
FVF, owned 5,952,300 shares or 8.2% of the Company's outstanding shares on June
5, 2000. Neither Mr. Johnson nor FMR has the sole power to vote or direct the
voting of the shares held by the Funds. Fidelity carries out the voting of the
shares under guidelines established by the Fund'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 1,214,269 shares held by institutional accounts managed
by FMTC. FMR and Mr. Johnson each have sole dispositive and voting power with
respect to 356,869 of such shares and sole dispositive and no voting power with
respect to 857,400 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. Strategic Advisers, Inc., a wholly owned subsidiary
of FMR, provides investment advice to individuals. It has sole dispositive
power, but not the sole voting power, with respect to certain securities held
for its clients. FMR's beneficial ownership of shares of Common Stock may
include shares beneficially owned by Strategic Advisers, Inc. Edward C. Johnson
is the chairman of Fidelity International Limited ("FIL") and Mr. Johnson and
his family own shares of FIL representing approximately 40% of the total voting
power of FIL's outstanding securities. FIL is the beneficial owner of 555,530
shares of Common Stock. FMR and FIL are each of the view that they are not
required to attribute to other the beneficial ownership of securities
beneficially owned by them. However, in the February 14, 2000 Schedule 13G, FMR
voluntarily included the shares beneficially owned by FIL in the number of
shares beneficially owned by FMR.
(3) Based on a schedule 13G, dated March 10, 2000, filed with the Commission by
ESL Partners, L.P. (2,805,971 shares), ESL Limited (631,487 shares), ESL
Institutional Partners, L.P. (57,060 shares) and ESL Investors, L.L.C. (797,882
shares). These entities (the "ESL Reporting Group") each have sole voting and
dispositive power with respect to the number of shares indicated after their
respective names and the members of the ESL Reporting Group are, collectively,
the beneficial owners of an aggregate of 4,292,400 shares of the Company's
Common Stock, or 5.9% of the number of shares outstanding on June 5, 2000.
(4) Includes 414,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days.
(5) Includes 198,000 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 and 94,001
shares receivable upon the exercise of options that are currently exercisable or
will become exercisable within 60 days. Mr. VanHimbergen left the employ of the
Company on May 31, 2000.
(7) Includes 54,851 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 15,001 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days. Ms. Janssen
left the employ of the Company on June 1, 2000.
(9) Includes 4,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 684 shares
of restricted stock. The transfer restrictions on 304 of such shares will lapse
on June 15, 2000 and the restrictions on the remaining 380 shares will lapse on
September 15, 2000.
(10) Includes 4,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days.
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<PAGE>
(11) 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.
(12) Includes 1,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days.
(13) Includes 1,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days, 3,036 shares
held by the Hollis Family Limited Partnership I and 833 shares of restricted
stock. The transfer restrictions on 407 of the restricted shares will lapse on
June 15, 2000 and the restrictions on the remaining 426 shares will lapse on
September 15, 2000.
(14) Includes 1,000 shares receivable upon the exercise of options that are
currently exercisable or will become exercisable within 60 days and 635 shares
of restricted stock. The transfer restrictions on 292 of the restricted shares
will lapse on June 15, 2000 and the restrictions on 343 of such shares will
lapse on September 15, 2000.
(15) Includes 333 restricted shares which will vest on the date of the Company's
next annual shareholders meeting, provided that the holder remains a Director
after the meeting. Messrs. Robinsion and Tyabji serve on the board of directors
of eFunds and not standing for re-election at the Meeting.
(16) Number of Shares Beneficially Owned includes 858,520 shares receivable upon
the exercise of options that are currently exercisable or will become
exercisable within 60 days and 2,818 shares of restricted stock that will vest
as described in footnotes, (9), (13), (14) and (15). The group comprised of the
executive officers and directors of the Company beneficially owned approximately
1.5% of the outstanding shares of Common Stock on May 31, 2000.
Immediately prior to the Split-off, all outstanding options to purchase
shares of the Company's Common Stock will be converted into new options to
purchase shares of the Company's Common Stock and options to purchase the common
stock of eFunds. The actual number of options to be issued and the exercise
price of those options will be determined immediately prior to the Split-off
based on the market price of the Company's Common Stock and eFunds' common
stock. Based on an assumed price of eFunds common stock of $15.00 per share and
the closing price of the Company's Common Stock on June 2, 2000 ($24.125), the
number of options to purchase shares of the Company's Common Stock held by each
person listed in the table and the directors and officers as a group would be
reduced by approximately 35%.
8
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------
LONG-TERM ALL OTHER
COMPENSATION COMPENSATION(3)
ANNUAL -------------------
COMPENSATION
AWARDS
-------------------------------------------------------------------------------------------------------------------------
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) 1999 $680,000 $680,000 $22,866 0 185,000 $136,400
President and Chief 1998 $600,000 $1,200,000 $13,848 0 176,000 $79,051
Executive Officer 1997 $600,000 $638,550 $11,328 0 100,000 $67,745
-------------------------------------------------------------------------------------------------------------------------
Lawrence J. Mosner 1999 $440,000 $440,000 $14,465 0 80,000 $37,052
Vice Chairman 1998 $440,000 $880,000 $39,334 0 80,000 $68,175
1997 $440,000 $394,293 $45,153 $461,250 100,000 $108,623
-------------------------------------------------------------------------------------------------------------------------
Thomas W. VanHimbergen(5) 1999 $325,000 $243,750 $17,891 0 50,000 $41,223
Executive Vice President 1998 $300,000 $405,000 $13,815 0 41,000 $15,188
and Chief Financial Officer 1997 $200,000 $142,610 $31,547 $154,375 50,000 $34,959
-------------------------------------------------------------------------------------------------------------------------
Ronald E. Eilers(6) 1999 $302,333 $146,858 $190 0 35,616 $35,158
President and Chief 1998 $275,000 $295,531 $3,963 0 50,000 $36,801
Operating Officer 1997 $242,083 $262,892 $29,596 $168,750 9,000 $72,350
(Paper Payment Systems)
-------------------------------------------------------------------------------------------------------------------------
Debra A. Janssen (7) 1999 $261,282 $168,233 $8,719 0 25,000 $17,476
President and Chief 1998 $198,892 $168,300 $2,467 0 10,000 __
Operating Officer (eFunds) 1997 __ __ __ __ __ __
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------
(1) Bonus compensation for 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 and 1999 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 1999 under the Annual Incentive Plan, restricted stock
units were granted on January 28, 2000 in lieu of cash compensation as follows:
16,801 units ($440,000) to Mr. Mosner; 9,307 units ($243,750) to Mr.
VanHimbergen; and 1,889 units ($49,480) to Ms. Janssen. 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; and 4,608
units ($164,184) to Mr. Eilers. 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; and 4,321 units ($142,610) to Mr.
VanHimbergen. 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 ($26.1875 on January 28, 2000, $35.625 on January 29, 1999 and $33.00 per
share on January 30, 1998). The units vest on the anniversary of the date of
grant, 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 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.
9
<PAGE>
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
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
vested and were converted into shares of Common Stock on 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 and the remaining
units vested and were converted into shares of Common Stock on May 1, 1999. 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, 1999 ($27.4375
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, $685,938 (25,000 restricted
shares); Mr. Mosner, $411,563 (15,000 restricted stock units); and Mr. Eilers,
$137,182 (5,000 restricted stock units). The restrictions on all of Mr.
Blanchard's restricted shares lapsed on May 1, 2000, the fifth anniversary of
Mr. Blanchard's employment by the Company.
(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 1999, these amounts were as follows: For Mr. Blanchard $16,000,
$120,400 and $0, respectively; for Mr. Mosner $16,000, $16,520 and $4,532,
respectively; for Mr. VanHimbergen $16,000, $21,875 and $3,348, respectively;
for Mr. Eilers $16,000, $17,758 and $1,400, respectively; and for Ms. Janssen
$11,200, $4,010 and $2,266, respectively. The qualified retirement plans
referred to in clause (a) above, consisting of a defined contribution plan and
profit sharing plan, and the non-qualified, supplemental retirement plan
referred to in clause (b) above 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) and $41,025 (1997); 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 became payable to Mr. Blanchard on
May 1, 2000, the date on which Mr. Blanchard completed five years of continuous
service with the Company. The Supplemental Retirement Benefits are payable for
15 years following 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
10
<PAGE>
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." Provided that
the Split-off is completed, the Company expects to make a lump-sum cash payment
of approximately $3.8 million to Mr. Blanchard on January 1, 2001 in
satisfaction of its obligations in respect of the Supplemental Retirement
Benefits.
(5) Mr. VanHimbergen became an employee of the Company in May 1997 and left the
employ of the Company on May 31, 2000.
(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.
(7) Ms. Janssen became an employee of the Company in February 1998 and left the
employ of the Company on June 1, 2000.
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 success. 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
four members of the Board of Directors (Mr. Aurand, Chairman, Dr. Renier, Ms.
Grogan and Mr. Hollis, who became a member of the Committee in January 2000) who
are not current or former officers or employees of the Company.
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 awards 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 1999, the Compensation Committee used compensation survey
(the "Compensation Survey") data from two peer groups selected from among
publicly traded companies to provide comparative data on the appropriate mix of
compensation elements and overall compensation levels. The first peer group
included companies engaged in similar industries or facing similar business
challenges to those faced by the Company or which met other selected financial
and quantitative criteria. The second peer group, which consisted of companies
based in the Minneapolis-St. Paul area, was selected to permit examination of
local pay practices. In either case, the comparative compensation data was
extrapolated to most nearly approximate an industrial company with sales
approximately equal to those of the Company in order to make appropriate
compensation comparisons.
11
<PAGE>
OFFICER COMPENSATION PROGRAM
BASE SALARIES--As part of its overall short- and long-term compensation
program, base salaries of the Officers during 1999 were generally set at or near
the median of similar positions in the Compensation Survey.
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 1999, a
total of 26 employees received awards pursuant to the Annual Incentive Plan.
The 1999 performance criteria adopted by the Compensation Committee were
intended to provide bonus cash compensation at approximately the 65th percentile
and 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 Named Executive Officers, other than Mr. Eilers and Ms. Janssen, the
only performance factor that was considered in determining incentive
compensation for 1999 under the Annual Incentive Plan was Deluxe Value Added, a
criteria designed to measure the effectiveness of the Company's investment of
its funds ("DVA"). Three-fourths of Mr. Eilers' incentive compensation for 1999
was linked to the financial performance of the Company's Paper Payment Systems
segment, the operations of which are directed by Mr. Eilers. The balance of Mr.
Eilers' incentive compensation was based on the DVA of the Company as a whole.
Ms. Janssen's 1999 incentive compensation was based on the DVA of Deluxe
Electronic Payment Systems, Inc. for the first half of 1999 and a combination of
the revenue and DVA of the Company's Electronic Payment Solutions segment for
the second half of 1999. In establishing performance measurements for 1999, the
Compensation Committee considered that certain extraordinary or one-time gains
and charges and the discontinuation or sale of certain business units could
affect 1999 earnings and, as a consequence, DVA and business unit performance.
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 DVA and the applicable business unit performances
met targeted levels during 1999, incentive compensation payments to the Officers
under the Annual Incentive Plan for 1999 were generally at the targeted award
levels, with the exception of Ms. Janssen, whose award was approximately 1.2
times 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 1999 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 1999, and the awards are described elsewhere herein under the
caption "Option/SAR Grants in Last Fiscal Year." In 1995, the Company approved a
four year performance share plan for certain of the key Executives. Awards were
issued under this plan in 1996, but the performance requirements were not
achieved and so no shares were issued pursuant to these awards. The performance
share plan expired at the end of 1999 and was not renewed.
1999 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 1999, Mr. Blanchard received base compensation of $680,000. Mr.
Blanchard also earned incentive compensation of $680,000 under the Annual
Incentive Plan. As more fully described above, Mr. Blanchard's 1999 incentive
compensation was determined by a comparison between the Company's adjusted DVA
and the performance standards set by the Compensation Committee.
Mr. Blanchard was also awarded a ten-year, non-qualified stock option to
purchase 185,000 shares of Common Stock in 1999. This option is exercisable at
$35.9375 per share and will vest in three equal annual installments commencing
on January 4, 2000 (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.
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<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 has taken
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 $1 million paid to the five named executive officers
of publicly traded companies. The Committee expects that all performance-based
compensation paid in 1999 to the Named Executive Officers under the plans
described above will qualify for deductibility, either because the compensation
is below the threshold for non-deductibility provided in Section 162(m) or
because the payment of such compensation complies with the provisions of Section
162(m), and provide the Company's senior management team with a competitive
level of compensation.
Calvin W. Aurand, Jr., Chairman
Barbara B. Grogan
James J. Renier
Donald R. Hollis
13
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM(2)
INDIVIDUAL GRANTS
------------------------- --------------------------------------------------------------- ------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
NAME UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN
GRANTED FISCAL YEAR EXERCISE OR EXPIRATION 5% ($) 10% ($)
BASE PRICE DATE
------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Blanchard III 185,000 15.04% $35.9375 1/04/09 $4,181,167 $10,595,897
------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
Lawrence J. Mosner 80,000 6.50% $35.9375 1/04/09 $1,808,072 $4,582,010
------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
Thomas W. VanHimbergen 50,000 4.06% $35.9375 1/04/09 $1,130,045 $2,863,756
------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
Ronald E. Eilers 30,000 2.44% $35.9375 1/04/09 $678,027 $1,718,254
1,081 .08% $39.6875 12/11/04 $12,994 $29,071
4,535 .37% $39.6875 2/09/06 $68,246 $157,468
------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
Debra A. Janssen 15,000 1.22% $35.6250 1/29/09 $336,066 $851,651
10,000 .81% $35.8125 5/04/09 $225,223 $570,759
------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
</TABLE>
(1) The options shown were granted at an exercise price not less than the fair
market value of the Common Stock on the date of grant. The options are
exercisable in cumulative installments of 33-1/3 percent on each anniversary of
the date of grant, provided that the option holder is then employed by the
Company (other than the reload options to acquire 1,081 and 4,535 shares issued
to Mr. Eilers, which options became exercisable upon issuance). 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 originally scheduled 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. All of the options
shown contain a reload feature. The vesting of the options shown as granted to
Mr. VanHimbergen was accelerated in connection with the termination of his
employment with the Company. The Company is currently negotiating a separation
agreement with Ms. Janssen and has agreed, subject to the execution and delivery
of such agreement and to the authorization of the Compensation Committee, to
vest her options as of her separation date.
(2) The assumed 5 and 10 percent annual stock price appreciation is shown for
illustrative purposes only.
14
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
---------------------------------------------------------------------------------------------------------------------------
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
NAME ACQUIRED ON VALUE REALIZED EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(3)
EXERCISE
------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John A. Blanchard 0 $0 260,334 335,666 $0 $0
III
------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Lawrence J. 0 $0 111,334 166,666 $1,125 $0
Mosner
------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Thomas W. 0 $0 47,001 93,999 $0 $0
VanHimbergen
------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Ronald E. Eilers 7,500 $74,719 25,184 66,333 $0 $0
------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Debra A. Janssen 0 $0 3,334 31,666 $0 $0
------------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
(1) None of the Named Executive Officers held or exercised any SARs in 1999.
(2) The value of unexercised options at December 31, 1999 is determined by
multiplying the difference between the exercise prices of the options and the
closing price of the Company's Common Stock on the NYSE on December 31, 1999
($27.4375 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 (16,666 shares at $30.875 per share); and Mr. Eilers 3,000 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 and Eilers. All of the options held by Mr.
VanHimbergen vested and became exerciseable in connection with the termination
of his employment with the Company. The Company is currently negotiating a
Separation Agreement with Ms. Janssen and has agreed, subject to the execution
and delivery of such agreement and to the authorization of the Compensation
Committee, to vest her options as of her separation date.
JOHN A. BLANCHARD III
eFunds has entered into an Executive Employment Agreement with Mr. Blanchard
related to his expected service as its Chairman and Chief Executive Officer
following the Split-off. The term of the agreement begins as of the date of the
Split-off and expires on December 31, 2002. Under the agreement, Mr. Blanchard
will receive a salary of $680,000, subject to increase at the discretion of the
eFunds board. Mr. Blanchard is also eligible to receive annual cash bonuses on
the same basis that eFunds pays bonuses to its other executives, with a target
bonus equal to his base salary. Mr. Blanchard is eligible to participate in the
eFunds stock incentive plan. eFunds anticipates that he will receive annual
stock option grants having a value equal to 200% of his base salary, as
determined by the Black-Scholes methods. Mr. Blanchard will receive an option
grant twice this size in 2000. In recognition of the termination of Mr.
Blanchard's existing Supplemental Retirement Benefits, Mr. Blanchard is also
entitled to receive $490,768 from eFunds on or about January 2, 2003. This
amount is reflective of the present value on that date of the Supplemental
Retirement Benefits Mr. Blanchard would have been entitled to under his
supplemental retirement benefit plan if that plan was continued throughout the
term of his Executive Employment Agreement. Mr. Blanchard has the option to
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<PAGE>
receive the economic equivalent of this benefit on an annuity basis for 15 years
following his retirement.
If eFunds terminates Mr. Blanchard's employment other than for Cause, or if
Mr. Blanchard terminates his employment for Good Reason (as such terms are
defined in the Executive Employment Agreement), Mr. Blanchard is entitled to a
lump sum payment equal to:
o the sum of (1) his unpaid base salary due through the date of
termination, (2) the product of his most recent annual bonus and the
fraction of the year he was employed and (3) any deferred compensation
and any accrued vacation pay;
o an amount equal to the annual base salary that Mr. Blanchard would have
earned during the remaining term of the Executive Employment Agreement
had his employment not been terminated; and
o an amount equal to the annual bonus that Mr. Blanchard would have earned
had he remained continuously employed throughout the employment period
and been awarded his annual target bonus amount to the extent this bonus
amount has not theretofore been paid.
In addition, upon any such termination of Mr. Blanchard's employment, Mr.
Blanchard will be entitled to participate in all of the eFunds benefits plans,
including medical, disability, life and other health insurance benefits and to
certain out-placement services. All unvested options granted to Mr. Blanchard
will immediately vest and remain exercisable for a five year period or their
remaining term and all other restricted shares and restricted stock units held
by Mr. Blanchard under the stock incentive plan will vest and be converted into
shares of common stock on the date of any termination other than for cause or
for good reason. Mr. Blanchard would also be entitled to retain and earn any
performance-based awards previously received under the eFunds stock incentive
plan as if he had continued in the employ eFunds until the expiration of the
relevant performance period. Any options granted to Mr. Blanchard will also vest
and remain exercisable for five years following any termination of Mr.
Blanchard's employment upon the expiration of his Executive Employment
agreement.
The agreement also provides that if any payment or benefit received or to be
received by Mr. Blanchard would be subject to the federal excise tax on "excess
parachute payments," eFunds will pay Mr. Blanchard such additional amount as may
be necessary so that he realizes, after the payment of the excise tax and any
income tax or excise tax on that additional amount, the amount of such
compensation.
Mr. Blanchard and the Company have also entered into an agreement pursuant
to which the Executive Retention Agreement described below and his Supplemental
Retirement Benefits will be terminated. This agreement will be effective upon
the occurrence of the Split-off. Provided that the Split-off is completed, the
Company expects to make a lump-sum cash payment of approximately $3.8 million to
Mr. Blanchard on January 1, 2001 in satisfaction of its obligations in respect
of the Supplemental Retirement Benefits.
RONALD E. EILERS
In the event Mr. Eiler's employment should be terminated on or before July
31, 2001 because of a reorganization of the Company that results in the
elimination or material reduction of Mr. Eiler's job responsibilities, Mr.
Eilers' is entitled to receive a severance package consisting of one year's base
salary and an additional six months of income continuation. As part of this
income continuation, the Company would continue to make payments to Mr. Eilers
in an amount equal to the difference between his base salary and any lesser
salary received by Mr. Eilers from a subsequent employer.
DEBRA A. JANSSEN
Ms. Janssen had entered into a letter agreement with eFunds which entitled
her to receive one year's base salary plus a second year of income continuation
if her employment is terminated for reasons other than willful misconduct, gross
negligence or unlawful actions towards eFunds or others involved with its
business. As part of this income continuation, eFunds would continue to make
payments to Ms. Janssen in an amount equal to the difference between her base
salary and any lesser salary received by her from a subsequent employer. Ms.
Janssen resigned on June 1, 2000 and no amounts were paid to her pursuant to
this Agreement.
EXECUTIVE RETENTION AGREEMENTS
On January 9, 1998, the Company entered into Executive Retention Agreements
(the "Retention Agreements") with each of Messrs. Blanchard, Mosner,
VanHimbergen and Eilers (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
16
<PAGE>
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. Certain resignations and terminations in anticipation of
expected business combinations and changes in control also constitute qualifying
terminations. With respect to Mr. Blanchard, the amount payable in respect of
retirement plan 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 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
17
<PAGE>
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. Ms. Janssen entered into a Change in Control
Agreement, dated May 12, 2000, with eFunds containing payment provisions
substantially similar to those described above in the event of a change in
control of eFunds. No payments were made under this agreement in connection with
the termination of her employment.
In November 1999, the Retention Agreements with Messrs. Blanchard, Mosner
and VanHimbergen were amended to provide, among other things, that the sale or
split-off of the Company's non-check printing business would constitute a
"business combination" within the meaning of their Retention Agreements which by
definition would result in a diminution of their position and authority
entitling them to resign for "good reason." A resignation in anticipation of
such a transaction (whether or not the transaction actually occurs) also
constitutes a qualifying termination.
Mr. VanHimbergen's resignation in May 2000 constituted a qualifying
termination under his Retention Agreement and Mr. VanHimbergen was paid $742,625
under that Agreement in May 2000. In addition, the Company will contribute
$1,500,000, plus interest at 8% from May 31, 2000 until the date of
contribution, to a deferred compensation account to be established for Mr.
VanHimbergen on or before December 31, 2000. If no such account is established
on or before such date, the amount that would have been contributed thereto
shall instead be paid to Mr. VanHimbergen. All of Mr. VanHimbergen's options
(141,000 shares) vested and became exerciseable on May 31, 2000 and will remain
exerciseable for five years following such date. In addition, 9,307 restricted
stock units granted to Mr. VanHimbergen in lieu of cash incentive compensation
under the Company's 1996 Annual Incentive Plan vested and were converted into
shares of common stock on his termination date. If Mr. VanHimbergen becomes
subject to any federal excise taxes on "excess parachute payments" by reason of
the payments and benefits received or to be received by him, the Company will
make an additional payment to him so that he realizes, after the payment of such
tax and any income or excise taxes on such additional payment, the payment
amount described above. The Company does not believe, however, that any such
excise taxes will be owed by Mr. VanHimbergen.
Mr. Blanchard has agreed that his right to payments under his Retention
Agreement will be terminated if the Split-off occurs. The Company and Mr. Eilers
have agreed that his Retention Agreement has been terminated. The Company has
reached an agreement in principle to pay Mr. Mosner the $2.9 million accrued
under his Retention Agreement in December 2002 (plus interest thereon at 8% per
annum from April 2000). Payment of this amount is expected to be contingent upon
Mr. Mosner remaining in the employ of the Company through December 31, 2002,
unless his employment shall be terminated earlier due to his death, disability
or by the Company without cause.
The foregoing summary is qualified in its entirety by reference to the
complete text of the Retention Agreements and the amendments thereto, copies of
which were filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 and to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999.
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) and Eilers (35,616 shares) and Ms. Janssen
(25,000 shares) received options in 1999 containing this feature.
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<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
----------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
---------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DELUXE 100.00 115.56 136.25 150.07 166.37 130.71
---------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
S&P 500 STOCK INDEX 100.00 137.58 169.17 225.60 290.08 351.12
---------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
S&P PUBLISHING 100.00 124.13 137.41 138.63 146.35 147.05
INDUSTRY GROUP
(15 companies, excluding the Company)
---------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
TOTAL SHAREHOLDER RETURN*
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
(DIVIDENDS REINVESTED)
[GRAPH]
* Assumes $100 invested on December 31, 1994 in Deluxe Common Stock, the S&P 500
Stock Index and the S&P Publishing Industry Group. The S&P Publishing Industry
Group is a published industry or line-of-business index prepared independently
by Standard & Poor's and is weighted on the basis of stock market
capitalization. The Publishing Industry Group contains other companies engaged
primarily in the printing business, including the Company's largest competitor
in the check printing business.
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<PAGE>
MEETINGS AND COMPENSATION OF DIRECTORS
There were seven meetings of the Board of Directors in 1999.
The Board of Directors has an Audit Committee, a Compensation Committee and
a Committee on Board Affairs. The Audit Committee reviews the Company's audited
financial statements with management and significant accounting matters with the
Company's outside auditors; receives and evaluates disclosures from the outside
auditors relating to their independence; reviews the performance of the outside
auditors and recommends the engagement or replacement of those auditors;
annually reviews and assesses the adequacy of its charter; takes such other
actions as may be required of audit committees under rules promulgated by the
Securities and Exchange Commission or the New York Stock Exchange; and is
authorized to take such other actions as the Committee determines to be
necessary or appropriate relating to the Company's financial management, systems
of financial record keeping and financial reporting. During 1999, the Audit
Committee was composed of Messrs. Salipante (Chairman), Nachtsheim and Robinson.
The Audit Committee held five meetings in 1999.
From January 1999 until October 28, 1999, the Compensation Committee was
composed of Messrs. Aurand (Chairman) and Renier and Ms. Grogan. In October
1999, Mr. Hollis joined the Committee. 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 and the Divisional Executives; establishing
performance measurements and compensation awards under the Company's short- and
long-term incentive compensation programs for the Officers and Divisional
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 four
meetings in 1999. The Committee on Board Affairs consisted of Messrs. Tyabji
(Chairman), 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 1999.
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 1999, 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
2000, 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
Director 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
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<PAGE>
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
Incentive Plan and must be held by the Independent Director receiving them for a
minimum period of six months from the date of issuance.
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.
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 Hatim Tyabji) are
eligible for benefits under this plan. Allen F. Jacobson, who retired from the
Board in January 1999, is entitled to receive benefits under this plan for up to
seven years following his retirement and Whitney MacMillan, who retired from the
Board in May 1999, will be eligible to receive benefits for up to 10 years
following his retirement. Jack Robinson, who has been elected to serve on
eFunds' board of directors and is not standing for re-election to the Board at
the Meeting, will not be eligible to receive benefits under this plan because he
did not serve on the Board for five years. Dr. Renier, who will retire from the
Board immediately prior to the Meeting, will be eligible to receive benefits for
up to eight years following his retirement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of four 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.
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 Securities and
Exchange Commission (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 1999. Based on its review of
the reports submitted to it, the Company believes that each Reporting Person
timely filed all required reports during this period.
ITEM 2: APPROVAL OF THE 2000 ANNUAL INCENTIVE PLAN
Consistent with its responsibility to ensure that executive compensation is
aligned with the interests of the Company's shareholders, the Compensation
Committee, on January 27, 2000, recommended that the Company continue its
current approach towards creating incentive compensation opportunities for the
Officers. In accordance with this recommendation, at its meeting held on January
27-28, 2000, the Board of Directors, subject to shareholder approval, adopted
the Deluxe Corporation 2000 Annual Incentive Plan (the
21
<PAGE>
"2000 Incentive Plan"). The 2000 Incentive Plan is designed to retain the
flexibility afforded the Compensation Committee in selecting objective
performance measurements for incentive compensation reflected in the Company's
1996 Annual Incentive Plan (the "1996 Plan"), which is set to expire on December
31, 2000. Adoption of the 2000 Annual Incentive Plan will enable the
Compensation Committee to continue to fashion management incentives that are
reflective of shareholder interests following the expiration of the 1996 Plan.
The Company is seeking shareholder approval of the 2000 Incentive Plan to
quality compensation paid with respect to awards made thereunder through
December 31, 2003, as "qualified performance-based compensation," as defined in
Section 162(m) of the Code.
OVERVIEW OF THE 2000 INCENTIVE PLAN
Commencing in 2001, the 2000 Incentive Plan is intended to supersede the
1996 Plan as the primary source of short-term cash incentive compensation for
the Officers. Like the 1996 Plan, the 2000 Incentive Plan allows the Committee
to base the incentive compensation of the executive officers named in the
Company's annual proxy statement or otherwise designated as "Executives" by the
Compensation Committee (the "Executives") upon a variety of objective indicators
of corporate performance, including, among others, DVA, sales, margins, stock
price, earnings per share, profits, earnings, earnings before interest income,
interest expense and taxes, return on average capital employed, margins,
cumulative total return to stockholders ("TSR") and cash flow. The performance
goals may vary between Executives and may be made applicable to the Company as a
whole or one or more identifiable business units. Further, the achievements of
the Executives may be measured against internal corporate objectives or compared
to the corresponding results of preselected peer groups.
The Compensation Committee intends to continue to associate the incentive
compensation of the Executives and other members of senior management with the
achievement of objective corporate performance standards. It is expected that
the Named Executive Officers will receive cash incentive compensation primarily
under the 2000 Incentive Plan. A portion of the incentive compensation of the
other Officers may be derived from business unit-based incentive plans.
The Board of Directors believes that the 2000 Incentive Plan will enable the
Compensation Committee to tailor the incentives, and the compensation risks, of
the Executives and other participants in such Plan to their specific
responsibilities and the overall framework of corporate objectives.
ELIGIBILITY
Participation in the 2000 Incentive Plan is limited to management and highly
compensated employees selected by the Compensation Committee. The purpose of
this limitation is to align the financial interests of the persons whose
positions of responsibility can most affect the performance of the Company more
closely with shareholder interests. Independent Directors are not eligible to
participate in the 2000 Incentive Plan. Participants in the 2000 Incentive Plan
are designated by the Committee as either "Executives" or "Other Participants."
The executive officers of the Company that the Committee reasonably believes
will be named in the Company's annual proxy statement must be designated as
"Executives," for whom incentive compensation must be based upon the achievement
of objective indicators of corporate performance. There were approximately 25
persons employed by the Company and its subsidiaries as of June 1, 2000 who the
Compensation Committee believes would currently be eligible to receive awards
under the 2000 Incentive Plan.
ADMINISTRATION
The 2000 Incentive Plan is administered by the Compensation Committee. The
Compensation Committee has the authority to select the individuals to whom
awards are granted, to set the terms and conditions of such awards and to
determine whether and under what conditions the payment of any amounts received
under any award shall or may be deferred. The Compensation Committee also has
the authority to establish rules for the administration of the 2000 Incentive
Plan. Any determinations under and interpretations with respect to the 2000
Incentive Plan are at the sole discretion of the Compensation Committee, whose
determination and interpretations are binding on all interested parties. The
Compensation Committee may delegate its powers and duties under the 2000
Incentive Plan to one or more officers or a committee of officers; provided,
however, that the Compensation Committee may not delegate its power to make
determinations regarding officers or directors of the Company who are subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor delegate any of its powers and duties under the 2000 Incentive Plan
in such a manner as would cause such Plan to fail to comply with any of the
requirements of Section 162(m) of the Code.
AWARD FORMULA, BUSINESS CRITERIA
Awards under the 2000 Incentive Plan will be based on individual,
pre-established criteria to be set by the
22
<PAGE>
Compensation Committee not later than the 90th day of each annual performance
period. For the Other Participants, such criteria are not required to be
objective and may include financial and nonfinancial performance goals that are
tied to the results achieved by such individual's business unit, the Company as
a whole or to such individual's particular area of responsibility. Performance
goals for Executives must be objective and must be based solely on one or more
of the following criteria: DVA, 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 or equity or
costs, return on invested or average capital employed; or TSR. These criteria
may be linked to the participant's business unit or area of responsibility or
the Company as a whole on an annual or other periodic or cumulative basis. The
Company's performance may or may not be compared to that of selected peer
groups.
The goal of the 2000 Incentive Plan is to provide total compensation (base
salary and annual incentive) commensurate with the Company's financial or other
performance. Each Other Participant and Executive (collectively, the
"Participants") receives an incentive payment for each year in an amount equal
to a dollar amount or a percentage of the Participant's base salary determined
by the Compensation Committee (the "Target Award") multiplied by a percentage
(the "Award Percentage") that corresponds to each performance factor applicable
to and achieved by the Participant during such year. The Award Percentage may be
equal to or more or less than 100%, and the Target Award may be equal to or more
or less than the Participant's base salary. To assist it in achieving the
desired compensation levels, the Compensation Committee has retained the
ability, in its sole discretion, to increase or reduce the amount of any
incentive payment under the 2000 Incentive Plan; provided, however, that the
Compensation Committee may not increase the incentive compensation payable to
any Executive for any performance period. Unless otherwise determined by the
Compensation Committee, no incentive payments will be made under the 2000
Incentive Plan to any Participant whose employment terminates prior to the last
day of a yearly performance period.
INVESTMENT ELECTIONS, DIVIDEND AND VOTING RIGHTS
Each year, Participants may irrevocably elect, prior to a date specified by
the Compensation Committee (which must be not later than the 90th day of a
performance period) whether to receive any benefits that may be paid under the
2000 Incentive Plan in cash or in the form of shares of Common Stock, restricted
stock units or a combination thereof under the Stock Incentive Plan, whichever
is made available by the Compensation Committee to such Participant.
Participants may also defer the receipt of any cash incentive payments in
accordance with any available deferred compensation plan.
In consideration of a Participant's electing to receive shares of Common
Stock or restricted stock units in lieu of all or part of the cash portion of an
incentive award, the amount of the cash foregone will be increased by 25 percent
for purposes of determining the number of shares of Common Stock or restricted
stock units to be credited to the electing Participant. As authorized by the
Compensation Committee, shares of Common Stock or restricted stock units will
then be issued based on the fair market value of a share of Common Stock on the
date of issuance, as determined in accordance with the terms of the Stock
Incentive Plan. Any shares of Common Stock or restricted stock units awarded to
a Participant may be subject to such forfeiture rights and transfer restrictions
as may be established by the Compensation Committee. The annual award
limitations of the Stock Incentive Plan do not apply to awards made under the
2000 Incentive Plan see "Item 3 Approval of the 2000 Stock Incentive Plan".
The Company anticipates by electing to receive restricted stock units, a
Participant will receive cash payments equivalent to the cash dividends declared
on a corresponding number of shares of Common Stock until such time as such
restricted stock units are forfeited or exchanged for shares of Common Stock.
RESTRICTIONS ON AWARDS AND TRANSFERS
The maximum amount any Participant can receive under the 2000 Incentive Plan
in any plan year is $2.0 million (the maximum amount receivable under the 1996
Plan in any plan year was also $2.0 million). Except as otherwise permitted by
the Compensation Committee, no right to any incentive payments under such Plan
may be transferred by a Participant other than by will or the laws of descent
and distribution, although Participants may, if so determined by the
Compensation Committee, designate beneficiaries to receive their payments upon
their death or transfer their rights to cash incentive payments to members of
their immediate family or a trust for the benefit of such members. Participants
electing to receive shares of Common Stock or restricted stock units may not
sell, assign, transfer, pledge or otherwise dispose of any such shares or units
prior to their vesting date.
FEDERAL TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
generally applicable to
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<PAGE>
awards expected to be made under the 2000 Incentive Plan. The amount of any cash
received pursuant to such Plan is taxable as ordinary income to a Participant.
Subject to the usual rules concerning reasonable compensation, and assuming
that, as expected, compensation paid under the 2000 Incentive Plan is "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code, the Company will be entitled to a corresponding tax deduction at the time
a Participant recognizes ordinary income from such Plan.
Participants who receive shares of Common Stock or restricted stock units
pursuant to the 2000 Incentive Plan that are not transferable and subject to a
substantial risk or forfeiture must, unless a special election is made pursuant
to the Code, recognize ordinary income equal to the fair market value of such
securities, determined as of the first time such securities become transferable
or not subject to a substantial risk of forfeiture, whichever occurs earlier.
The Company expects to be entitled to a corresponding tax deduction. It is not
anticipated that there will be any tax consequences to the Company in connection
with a subsequent disposition of any securities acquired by a Participant.
The Compensation Committee may, upon such terms and conditions as it may
impose, permit Participants receiving awards to surrender shares of Common Stock
(which shares may be either received upon the receipt of the award or previously
owned by the Participant) to the Company to satisfy a Participant's federal and
state tax obligations.
TERMINATION
The 2000 Incentive Plan will, subject to shareholder approval, be deemed
effective as of January 1, 2001 and will terminate on December 31, 2003. No
awards may be made after the termination of the 2000 Incentive Plan, although
any right to receive an incentive payment may continue after any termination of
such Plan.
AMENDMENT
The Board of Directors may amend, alter or discontinue the 2000 Incentive
Plan at any time; provided, however, that shareholder approval must be obtained
for any action that, absent such approval, would (i) cause Rule 16b-3 under the
Exchange Act to become unavailable with respect to the 2000 Incentive Plan or
(ii) violate the rules or regulations of any securities exchange or the National
Association of Securities Dealers, Inc. applicable to the Company. The
Compensation Committee may correct any defect, supply any omission or reconcile
any inconsistency in such Plan in the manner and to the extent it shall deem
desirable to carry the 2000 Incentive Plan into effect. The Compensation
Committee may waive any condition or rights of the Company under any outstanding
award, prospectively or retroactively, without the consent of the holder or
beneficiary of the award. Any other amendment or alteration to an outstanding
award will require the consent of the holder or beneficiary thereof.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY VOTE FOR
THE PROPOSAL TO APPROVE THE DELUXE CORPORATION 2000 INCENTIVE PLAN. The
affirmative vote of a majority of the shares of Common Stock entitled to vote
and present in person or by proxy at the annual meeting of shareholders will be
necessary for such approval. If the 2000 Incentive Plan is not approved by the
shareholders, the Company expects to use a different incentive plan as the
framework for its incentive compensation program. Any such alternative plan
would not be expected to comply with Section 162(m) of the Code.
ITEM 3: APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
OVERVIEW OF THE 2000 STOCK INCENTIVE PLAN
On December 22, 1993, the Board of Directors, upon the recommendation of the
Compensation Committee adopted the Deluxe Corporation Stock Incentive Plan (the
"1993 Stock Plan"). The adoption of the 1993 Stock Plan was approved by the
shareholders of the Company at the 1994 annual meeting of shareholders. Pursuant
to amendments approved by the shareholders of the Company in 1996, a total of
7,000,000 shares were reserved for issuance under the 1993 Stock Plan.
The 1993 Stock Plan is currently scheduled to expire on December 31, 2000.
On January 27, 2000 the Compensation Committee recommended that the Company
continue its current approach towards creating equity-based incentive
compensation opportunities for the Officers. In accordance with this
recommendation, at its meeting held on January 27-28, 2000, the Board of
Directors, subject to shareholder approval, adopted the Deluxe Corporation 2000
Stock Incentive Plan (the "2000 Stock Plan"). The 2000 Stock Plan is intended
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<PAGE>
to continue to promote the interests of the Company and its shareholders by
aiding the Company in attracting management personnel capable of assuring the
future success of the Company, offering such personnel incentives to put forth
maximum efforts for the success of the Company's business and affording such
personnel an opportunity to acquire a proprietary interest in the Company. The
2000 Stock Plan will act as the umbrella plan under which any shares of Common
Stock or restricted stock units issued pursuant to the 2000 Incentive Plan are
issued. A copy of the 2000 Stock Plan, is attached as Appendix I, and the
following discussion is qualified in its entirety by reference to the full text
of such Plan.
Consistent with its efforts to continue to closely align the compensation of
the Officers and employees of the Company with the long-term interests of its
shareholders, the Board of Directors and the Compensation Committee expect that
equity-based incentive compensation will continue to constitute and important
element of the Company's overall compensation mix. To ensure that the Company
has sufficient flexibility to effectively implement its compensation objectives
in future years, the Board of Directors has determined to adopt the 2000 Stock
Plan. Shareholder approval of the 2000 Stock Plan is necessary to quality
compensation paid thereunder, as "qualified performance-based compensation," as
defined in Section 162(m) of the Code.
ADMINISTRATION
With the exception of the provisions applicable to Independent Directors,
which provisions are discussed below, the 2000 Stock Plan is administered by the
Compensation Committee. The Compensation Committee has the authority to (i)
select the individuals to whom awards are granted, (ii) determine the types of
awards to be granted and the number of shares of Common Stock covered by such
awards (or with respect to which payments, rights or other matters are to be
calculated), (iii) set the terms and conditions of such awards, (iv) amend the
terms and conditions of any award or award agreement and accelerate the
exercisability of options or the lapse of restrictions related to restricted
stock or other awards made under the Plan, (v) determine whether, to what extent
and under what circumstances awards made under the 2000 Stock Plan may be
exercised in cash, shares of Common Stock, other securities or property or
canceled or forfeited and (vi) determine whether the payment of any amounts
received under any award shall or may be deferred. The Compensation Committee
has the authority to interpret and administer the 2000 Stock Plan and any
agreement relating to or award made thereunder and to establish rules for the
administration of the Plan. The determinations and interpretations of the
Compensation Committee are binding on all interested parties. The Compensation
Committee may delegate to one or more Officers, the Committee's powers and
duties under the Plan; provided, however, that the Compensation Committee may
not delegate any of its powers and duties under the Plan with respect to
individuals who are subject to Section 16 of the Exchange Act or in such a
manner as would cause the Plan to fail to comply with any of the requirements of
Section 162(m) of the Code.
TERMS OF THE 2000 STOCK PLAN
The 2000 Stock Plan permits the granting of a variety of different types of
awards: stock options; stock appreciation rights ("SARs"); restricted stock and
restricted stock units; performance awards; dividend equivalents; and other
awards valued in whole or in part by reference to or otherwise based upon the
value of the Common Stock ("Other Stock-Based Awards"). Awards may be granted
alone, in addition to, in tandem with or in substitution for any other award
granted under the 2000 Stock Plan or any other compensation plan. Awards may be
granted for no cash consideration or for such minimal cash consideration as may
be required by applicable law. Awards may provide that upon the grant or
exercise thereof, the holder will receive cash, shares of Common Stock or other
securities, awards or property, or any combination thereof, all as the
Compensation Committee shall determine. The exercise price per share under any
stock option, the grant price of any SAR and the purchase price of any security
which may be purchased under any Other Stock-Based Award may not be less than
the fair market value on the date of the grant of such option, SAR or Award.
Determinations of fair market value under the Plan are made in accordance with
methods and procedures established by the Compensation Committee.
Options may be exercised by payment in full of the exercise price in whole or
in part by the tendering of cash, shares of Common Stock or other consideration
having a fair market value on the date the option is exercised equal to the
exercise price, all as determined by the Compensation Committee.
The holder of a SAR is entitled to receive the excess of the fair market
value (calculated as of the exercise date or, if the Compensation Committee
shall so determine, as of any time during a specified period before or after the
exercise date) of a specified number of shares of Common Stock over the grant
price of the SAR.
Shares of restricted stock and restricted stock units are subject to such
restrictions as the Compensation Committee may impose (including any limitations
on the right to vote or the right to receive dividends), which
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<PAGE>
restrictions may lapse separately or in combination at such time or times, in
such installments or otherwise as the Compensation Committee may determine.
Restricted stock and restricted stock units may not be transferred by the holder
until the restrictions established by the Compensation Committee lapse. Holders
of restricted stock units have the right, subject to any terms and conditions
imposed by the Compensation Committee, to receive shares of Common Stock at some
future date. Upon termination of the holder's employment (as determined under
criteria established by the Compensation Committee) during the applicable
restriction period, shares of restricted stock and restricted stock units are
forfeited, provided that the Compensation Committee may, when it finds that a
waiver would be in the best interests of the Company, waive all or part of any
remaining restrictions.
Performance awards provide the holder thereof the right to receive payments
based, in whole or in part, upon the achievement of such goals during such
performance periods as the Compensation Committee shall establish. A performance
award granted under the Plan may be denominated or payable in cash, shares of
Common Stock, restricted stock, restricted stock units, other securities, awards
or property. Dividend equivalents entitle the holder thereof to receive payments
(in cash, shares of Common Stock or otherwise, as determined by the Compensation
Committee) equivalent to the amount of cash dividends paid with respect to a
number of shares of Common Stock determined by the Compensation Committee. The
Compensation Committee is also authorized to establish the terms and conditions
of Other Stock-Based Awards.
RESTRICTIONS ON AWARDS AND TRANSFERS
The 2000 Stock Plan provides that no person may be granted any award or
awards thereunder of more than an aggregate of 400,000 shares in any calendar
year.
No award granted under the Plan may be assigned, transferred, pledged or
otherwise encumbered by the individual to whom it is granted other than by will
or the laws of descent and distribution, except 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 property distributable with
respect to any award upon the death of the participant or (ii) transfer any
award (other than an incentive stock option) to any member of such participant's
"immediate family" (as such term is defined in Rule 16a-1(e) promulgated under
the Exchange Act, or any successor rule or regulation) or to a trust whose
beneficiaries are members of such Participant's "immediate family." Each award
or right under any award shall be exercisable during a participant's lifetime
only by the participant, or by a member of such participant's "immediate family"
or a trust for the members of such "immediate family" pursuant to a transfer as
described above, or if permissible under applicable law, by the participant's
guardian or legal representative. No award or right under any award may be
pledged, alienated, attached or otherwise encumbered.
The aggregate number of shares of Common Stock that may be issued under all
awards granted during the period from January 1, 2001 through December 31, 2003
under the 2000 Stock Plan is 3,000,000 (subject to adjustment as described
below). No more than 1,000,000 shares may be issued under the Plan in the form
of shares of restricted stock or in exchange for restricted stock units or any
combination thereof (subject to adjustment as described below). If any shares of
Common Stock subject to any award or to which an award relates are not purchased
or are forfeited, or if any such award terminates without the delivery of any
shares, the shares previously set aside for such awards will be available for
future awards under the 2000 Stock Plan. Shares underlying awards that allow the
holder to receive or purchase shares will be counted against the aggregate
number of shares available under the Plan.
ADJUSTMENTS
If any dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, exchange of shares of Common Stock or other securities
of the Company, issuance of warrants or other rights to purchase shares of
Common Stock or other securities of the Company or other similar corporate
transaction or event affects the shares of Common Stock so that an adjustment is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, the
Compensation Committee shall, in such manner as it deems equitable, adjust (a)
the number and type of shares (or other securities or property) which thereafter
may be made the subject of awards, (b) the number and type of shares (or other
securities or property) subject to outstanding awards and (c) the exercise price
with respect to any award.
TERMINATION
The expiration date of the 2000 Stock Plan is December 31, 2003. No awards
may be made under the Plan after that date. However, unless otherwise expressly
provided in the Plan or an applicable award
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<PAGE>
agreement, any award theretofore granted under the Plan may extend beyond the
end of such period.
AMENDMENT
The Board of Directors may amend, alter or discontinue the 2000 Stock Plan at
any time, although shareholder approval must be obtained for any such action
that, absent such shareholder approval, would (i) cause Rule 16b-3 under the
Exchange Act to become unavailable with respect to awards made under the Plan;
(ii) violate the rules and regulations of the NYSE, any other securities
exchange or the National Association of Securities Dealers, Inc. applicable to
the Company or (iii) cause the Company to be unable, under the Code, to grant
incentive stock options under the 2000 Stock Plan. The Compensation Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the 2000 Stock Plan or any award agreement in the manner and to the extent it
shall deem desirable to carry the 2000 Stock Plan into effect. The Compensation
Committee may waive any condition of, or rights of the Company under any
outstanding award, prospectively or retroactively. Neither the Compensation
Committee nor the Company may amend, alter, suspend, discontinue or terminate
any outstanding award, prospectively or retroactively, without the consent of
the holder thereof, except as otherwise provided in the relevant award agreement
or the Plan.
FEDERAL TAX CONSEQUENCES
The grant of an option or SAR under the 2000 Stock Incentive Plan is not
expected to result in any taxable income to the recipient. The holder of an
incentive stock option generally will have no taxable income upon exercising the
incentive stock option (except that a liability may arise pursuant to the
alternative minimum tax), and the Company will not be entitled to a tax
deduction when an incentive stock option is exercised. Upon exercising a
non-qualified stock option, the optionee must recognize ordinary income equal to
the excess of the fair market value of the shares of Common Stock acquired on
the date of exercise over the exercise price, and the Company will be entitled
at that time to a tax deduction in the same amount. Upon exercising a SAR, the
amount of any cash received and the fair market value on the exercise date of
any shares of Common Stock received are taxable to the recipient as ordinary
income and deductible by the Company. The tax consequence to an optionee upon a
disposition of shares acquired through the exercise of an option or SAR will
depend on how long the shares have been held and whether such shares were
acquired by exercising an incentive stock option or by exercising a
non-qualified stock option or SAR. Generally, there will be no tax consequence
to the Company in connection with disposition of shares acquired under an
option, except that the Company may be entitled to a tax deduction in the case
of a disposition of shares acquired under an incentive stock option before the
applicable incentive stock option holding periods set forth in the Code have
been satisfied.
With respect to other awards granted under the 2000 Stock Plan that are
payable either in cash or shares of Common Stock that are either transferable or
not subject to substantial risk of forfeiture, the holder of such an award must
recognize ordinary income equal to the excess of (a) the cash or the fair market
value of the shares of Common Stock received (determined as of the date of such
receipt) over (b) the amount (if any) paid for such shares of Common Stock by
the holder of the award, and the Company will be entitled at that time to a
deduction for the same amount. With respect to an award that is payable in
shares of Common Stock that are restricted as to transferability and subject to
substantial risk of forfeiture, unless a special election is made pursuant to
the Code, the holder of the award must recognize ordinary income equal to the
excess of (i) the fair market value of the shares of Common Stock received
(determined as of the first time the shares become transferable or not subject
to substantial risk of forfeiture, whichever occurs earlier) over (ii) the
amount (if any) paid for such shares of Common Stock by the holder, and the
Company will be entitled at that time to a tax deduction in the same amount.
Special rules may apply in the case of individuals subject to Section 16 of
the Exchange Act. In particular, unless a special election is made pursuant to
the Code, shares received pursuant to the exercise of a stock option or SAR or
when restricted stock units are earned may be treated as restricted as to
transferability and subject to a substantial risk of forfeiture for a period up
to six months after the date of exercise. Accordingly, the amount of any
ordinary income recognized, and the amount of the Company's tax deduction, are
determined as of the end of such period.
Under the Plan, the Compensation Committee may permit participants receiving
or exercising awards, subject to the discretion of the Compensation Committee
and upon such terms and conditions as it may impose, to surrender shares of
Common Stock (either shares received upon the receipt or exercise of the award
or shares previously owned by the optionee) or other property to the Company to
satisfy federal and state tax obligations.
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<PAGE>
ELIGIBLE EMPLOYEES
Any employee of the Company and its affiliates selected by the Compensation
Committee is eligible to receive an award under the 2000 Stock Plan. It is
currently the Compensation Committee's intention to limit eligibility to the key
management group, defined by level of job responsibility. There were
approximately 25 persons employed by the Company and its subsidiaries as of June
1, 2000 who are eligible as a class to receive awards under the 2000 Stock Plan,
if eligibility is limited to the key management group. The amount, type and
recipients of awards under the 2000 Stock Plan are not likely to differ
materially from those previously made under the 1993 Stock Plan. See "New
Benefits Table."
INDEPENDENT DIRECTORS
If the 2000 Stock Plan is approved by the shareholders of the Company at the
Meeting, each Independent Director who is elected to the Board subsequent to
December 31, 2000 shall, upon the date of his or her initial election to the
Board, receive an award of 1,000 shares of restricted stock. These shares will
vest in three equal installments on the dates of the Company's annual
shareholder meeting in each of the three succeeding years, if such director
remains in office immediately following such meeting. In the event that in
accordance with the Company's policy with respect to mandatory retirement of
directors, any director is not nominated for election to serve as a director of
the Company, all restricted stock so awarded shall immediately vest in full upon
such director's retirement from the Board. If a director ceases to be a director
prior to the date on which the award is fully vested for any reason other than
mandatory retirement, any unvested portion of the award shall terminate and be
irrevocably forfeited. Each Independent director will be eligible to receive or
elect to receive his or her fees for service on the Company's Board of Directors
and the committees thereof in shares of Common Stock or restricted stock units
and to defer the receipt of any such units. These provisions of the 2000 Stock
Plan are identical to the provisions of the Director Plan described under the
heading "Meetings and Compensation of Directors."
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY VOTE FOR
THE PROPOSAL TO ADOPT THE DELUXE CORPORATION 2000 STOCK INCENTIVE PLAN. 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 for the approval of the 2000 Stock Incentive Plan. If the 2000 Stock
Incentive Plan is not approved by shareholders, the Company expects to use a
different equity incentive plan as the framework for its equity-based incentive
compensation program. Any such alternative plan would not be expected to comply
with Section 162(m) of the code.
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<PAGE>
NEW PLAN BENEFITS
The benefits or amounts that will be received by or allocated to the
Officers, employees and Directors of the Company if the 2000 Incentive Plan and
the 2000 Stock Plan are approved by the shareholders are not presently
determinable. The following chart describes the benefits that would have been
received by the indicated Participants if the 2000 Incentive Plan had been in
effect in 1999 and the 2000 Target Awards and Award Percentages applicable to
such individuals were applied to the Company's performance during the fiscal
year ended December 31, 1999. The awards shown as payable under the 2000 Stock
Incentive Plan are identical to the awards made under the 1993 Stock Incentive
Plan to the designated individuals and groups of individuals. The actual awards
to be made to the persons shown under the 2000 Incentive Plan and the 2000 Stock
Plan will likely be different than the amounts shown.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------------
NAME AND POSITION 2000 INCENTIVE PLAN 2000 STOCK INCENTIVE PLAN
------------------------------------------- ----------------------------- ---------------------- ---------------------
NAME AND PRINCIPAL POSITION DOLLAR VALUE ($) (1) DOLLAR VALUE (S) (2) NUMBER OF UNITS
------------------------------------------- ----------------------------- ---------------------- ---------------------
<S> <C> <C> <C>
John A. Blanchard III $437,000 - $680,000 $0 185,000
President and Chief Executive Officer
------------------------------------------- ----------------------------- ---------------------- ---------------------
Lawrence J. Mosner $381,000 - $594,000 $0 80,000
Vice Chairman $440,000(3) 16,801
------------------------------------------- ----------------------------- ---------------------- ---------------------
Thomas W. VanHimbergen $125,000 - $195,000 $0 50,000
Executive Vice President and $243,750(3) 9,307
Chief Financial Officer
------------------------------------------- ----------------------------- ---------------------- ---------------------
Ronald E. Eilers $161,000 - $251,000 $0 35,616
President and Chief Operating Officer
(Paper Payment Systems)
------------------------------------------- ----------------------------- ---------------------- ---------------------
Debra A. Janssen $156,000 - $242,000 $0 25,000
President and Chief $49,840(3) 1,889
Operating Officer (eFunds)
------------------------------------------- ----------------------------- ---------------------- ---------------------
Executive Group $1,356,000 - $2,112,000 $0 405,616
$780,440(3) 29,786
------------------------------------------- ----------------------------- ---------------------- ---------------------
Non-Executive Director Group - $391,761(4) 12,000
------------------------------------------- ----------------------------- ---------------------- ---------------------
Non-Executive Employee Group $695,000 - $1,040,500 $0 145,000
$612,558(3) (5) 22,723(5)
------------------------------------------- ----------------------------- ---------------------- ---------------------
</TABLE>
(1) The maximum amount shown reflects the application of certain adjustments to
the Company's reported financial results for 1999. The minimum amounts shown
represent the incentive compensation that would have been payable for 1999 if no
adjustments were made to such financial results. The Compensation Committee has
the discretion to reduce the incentive compensation payable under the 2000
Incentive Plan by not giving effect to any or all of such adjustments and may,
in any event, reduce the amount of incentive compensation payable to any
executive officer. As a result of the foregoing and because the Company's
results for 2000 cannot now be determined, the amount of incentive compensation,
if any, that may ultimately be awarded to any of the indicated persons or groups
for 2000 is not determinable at this time. No incentive compensation is to be
paid if the Company's performance falls more than 20% below the targeted levels.
Awards under the proposed 2000 Incentive plan will be made in cash, although
Participants may defer all or a portion of the cash award and elect to receive
shares of restricted stock or restricted stock units instead, whichever is made
available by the Compensation Committee. The performance parameters for the
initial awards in 2001 under the 2000 Incentive Plan have not yet been
determined. Certain persons made an election in 1999 to receive all or a portion
of their awards under the 1996 Plan in the form of restricted stock units; the
amount shown in the table includes adjustments to such awards in accordance with
the terms of the 1996 Plan. "Units" are not shown in the portion of the table
covering the 2000 Incentive Plan because the number of units issued, if any to
these electing persons will vary depending upon the price of the Common Stock on
the date of issuance (which would occur in 2001) of the units subject to the
award as well as upon the Company's performance relative to the applicable
performance targets. The award shown in the table for each of the Participants
may be increased or decreased at the direction of the Compensation Committee;
provided, however, that the Compensation Committee may not increase the
incentive compensation of any Executive.
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<PAGE>
(2) The dollar value shown is based on the different between the exercise price
of the awards indicated ($35.9375 per share, except for options to purchase an
aggregate of 5,616 shares granted to Mr. Eilers at $39.6875 per share and
options to purchase 15,000 shares and 10,000 shares granted to Ms. Janssen at
$35.625 and $35.8125 per share, respectively) and the closing price of the
Common Stock on June 5, 2000 ($24.4375), the record date for the Meeting. The
closing price of the Common Stock on the NYSE on June 19, 2000 was $25.0625.
(3) Amounts shown reflect the election by the recipient to receive all or a
portion of their 1999 incentive compensation in the form of restricted stock
units. If an election is made to receive restricted stock units, the amount of
cash forgone is increased by 25 percent in determining the number of restricted
stock units awarded.
(4) Represents restricted stock units or shares of restricted stock issued
pursuant to the Director Plan in lieu of cash retainers to the Independent
Directors.
(5) Includes 8,000 shares of restricted stock issued to an Officer in 1999 as a
retention incentive.
ITEM 4: 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, 2000 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
a reasonable time before the Company printed and mailed these proxy materials.
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the Company's 2001
regular meeting of shareholders must be received by the Company a reasonable
time before the Company begins to print and mail its proxy materials for that
meeting 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 2001 annual meeting of shareholders is untimely and may not be
presented in any manner at the 2001 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 a reasonable time before the
Company begins to print and mail its proxy materials for the 2001 annual
meeting. The Company currently expects to print and mail the proxy materials for
its 2001 annual meeting of shareholders on or about March 31, 2001. Accordingly,
the Company would consider shareholder proposals received on or before December
1, 2000 to have been received a reasonable time before the date scheduled for
printing and mailing its 2001 proxy materials.
By order of the Board of Directors:
John H. LeFevre
June 23, 2000 Secretary
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<PAGE>
APPENDIX I
DELUXE CORPORATION 2000 STOCK INCENTIVE PLAN
(AS ADOPTED JANUARY 28, 2000)
SECTION 1. PURPOSE.
The purpose of the plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting management personnel capable of
assuring the future success of the Company, by offering such personnel
incentives to put forth maximum efforts for the success of the Company's
business, and by affording such personnel an opportunity to acquire a
proprietary interest in the Company.
SECTION 2. DEFINITIONS.
As used in the plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly through
one or more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, in each case as determined
by the committee.
(b) "Award" shall mean any option, stock appreciation right, restricted stock,
restricted stock unit, performance award, dividend equivalent or other
stock-based award granted under the plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any award granted under the plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the board of directors of the
Company designated by such board to administer the plan, which shall consist of
members appointed from time to time by the board of directors and shall be
comprised of not fewer than such number of directors as shall be required to
permit grants and awards made under the plan to satisfy the requirements of Rule
16b-3. Each member of the committee shall be a "Non-Employee Director" within
the meaning of Rule 16b-3 and an "outside director" within the meaning of
Section 162(m) of the Code.
(f) "Company" shall mean DELUXE CORPORATION, a Minnesota corporation, and any
successor corporation.
(g) "Dividend Equivalent" shall mean any right granted under Section 6(e) of
the plan.
(h) "Eligible Person" shall mean a non-employee director and any employee (as
determined by the committee) providing services to the Company or any affiliate
who the committee determines to be an eligible person.
(i) "Fair Market Value" shall mean, with respect to any property (including,
without limitation, any shares or other securities), the fair market value of
such property determined by such methods or procedures as shall be established
from time to time by the committee.
(j) "Incentive Stock Option" shall mean an option granted under Section 6(a)
of the plan that is intended to meet the requirements of Section 422 of the Code
or any successor provision.
(k) "Non-Employee Director" shall have the meaning provided in Section 7.1 of
the plan.
(l) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the plan that is not intended to be an incentive stock option.
(m) "Option" shall mean an incentive stock option or a non-qualified stock
option and shall be deemed to include any reload option issued under the plan.
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(n) "Other Stock-Based Award" shall mean any right granted under Section 6(f)
of the plan.
(o) "Participant" shall mean an eligible person designated to be granted an
award under the plan.
(p) "Performance Award" shall mean any right granted under Section 6(d) of the
plan.
(q) "Person" shall mean any individual, corporation, partnership, association
or trust.
(r) "Plan" shall mean this stock incentive plan, as amended from time to time.
(s) "Reload Option" means an option issued under Section 6(a) to purchase a
number of shares equal to the number of shares delivered by an option holder (or
such lesser number as the committee may determine) in payment of all or any
portion of the exercise price of an option previously granted under this plan to
such holder, provided that the option term of such option shall not end later
than the option term of the option so exercised.
(t) "Reload Option Feature" means provisions in an option granted under this
plan that permit the holder of the option to receive a reload option upon the
exercise of the option through the delivery of shares in payment of all or any
portion of the exercise price. A reload option feature may be included in any
reload option issued under the plan.
(u) "Restricted Stock" shall mean any share granted under Section 6(c) of the
plan.
(v) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of
the plan evidencing the right to receive a share (or a cash payment equal to the
fair market value of a share) at some future date.
(w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation.
(x) "Shares" shall mean shares of common stock, $1.00 par value, of the
Company or such other securities or property as may become subject to awards
pursuant to an adjustment made under Section 4(c) of the plan.
(y) "Stock Appreciation Right" shall mean any right granted under Section 6(b)
of the plan.
SECTION 3. ADMINISTRATION.
(a) POWER AND AUTHORITY OF THE COMMITTEE. The plan shall be administered by
the committee. Except as provided in Section 7 and subject to the express
provisions of the plan and to applicable law, the committee shall have full
power and authority to: (i) designate participants; (ii) determine the type or
types of awards to be granted to each participant under the plan; (iii)
determine the number of shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with) each
award; (iv) determine the terms and conditions of any award or award agreement;
(v) amend the terms and conditions of any award or award agreement and
accelerate the exercisability of options or the lapse of restrictions relating
to restricted stock or other awards; (vi) determine whether, to what extent and
under what circumstances awards may be exercised in cash, shares, other
securities, other awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash,
shares, other securities, other awards, other property and other amounts payable
with respect to an award under the plan shall be deferred either automatically
or at the election of the holder thereof or the committee; (viii) interpret and
administer the plan and any instrument or agreement relating to, or award made
under, the plan; (ix) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the plan; and (x) make any other determination and take any
other action that the committee deems necessary or desirable for the
administration of the plan. Unless otherwise expressly provided in the plan, all
designations, determinations, interpretations and other decisions under or with
respect to the plan or any award shall be within the sole discretion of the
committee, may be made at any time and shall be final, conclusive and
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binding upon any participant, any holder or beneficiary of any award and any
employee of the Company or any affiliate.
(b) DELEGATION. The committee may delegate its powers and duties under the
plan to one or more officers of the company or an affiliate or a committee of
such officers, subject to such terms, conditions and limitations as the
committee may establish in its sole discretion; provided, however, that the
committee shall not delegate its powers and duties under the plan (i) with
regard to officers or directors of the Company or any affiliate who are subject
to Section 16 of the Securities Exchange Act of 1934, as amended, if the effect
of such delegation would make the exemption under Rule 16b-3 unavailable or (ii)
in such a manner as would cause the plan not to comply with the requirements of
Section 162(m) of the Code.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(c), the
number of shares available for granting awards under the plan shall be
3,000,000. Shares to be issued under the plan may be either shares reacquired or
authorized but unissued shares. If any shares covered by an award or to which an
award relates are not purchased or are forfeited, or if an award otherwise
terminates without delivery of any shares, then the number of shares counted
against the aggregate number of shares available under the plan with respect to
such award, to the extent of any such forfeiture or termination, shall again be
available for grants under the plan. Shares delivered in payment of the option
exercise price of an option containing a reload option feature shall again be
available for granting awards under the plan (other than incentive stock
options) to the extent that the number of shares so delivered are made subject
to an option granted pursuant to the said reload option feature. Shares
delivered in payment of the option exercise price of an option not containing a
reload option feature shall again be available for granting awards under the
plan (other than incentive stock options) to the extent that the number of
shares so delivered are made subject to an option granted pursuant to section
6(a)(v).
(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4, if an award
entitles the holder thereof to receive or purchase shares, the number of shares
covered by such award or to which such award relates shall be counted on the
date of grant of such award against the aggregate number of shares available for
grants under the plan.
(c) ADJUSTMENTS. In the event that the committee shall determine that any
dividend or other distribution (whether in the form of cash, shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of shares or other securities of the Company, issuance of
warrants or other rights to purchase shares or other securities of the Company
or other similar corporate transaction or event affects the shares such that an
adjustment is determined by the committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the plan, then the committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of shares (or
other securities or other property) which thereafter may be made the subject of
awards, (ii) the number and type of shares (or other securities or other
property) subject to outstanding awards and (iii) the purchase or exercise price
with respect to any award; provided, however, that the number of shares covered
by any award or to which such award relates shall always be a whole number.
(d) AWARDS LIMITATION UNDER THE PLAN. No eligible person may be granted any
award or awards under the plan (including the Company's performance share plan)
of more than 400,000 shares, in the aggregate, in any calendar year. The
foregoing limitation shall not include any shares acquired pursuant to the
annual incentive plan. Furthermore, no more than 1,000,000 shares, in the
aggregate, may be issued under the plan in the form of either restricted stock
or restricted stock units or any combination thereof.
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SECTION 5. ELIGIBILITY.
Any eligible person, including any eligible person who is an officer or
director of the Company or any affiliate, shall be eligible to be designated a
participant. In determining which eligible persons shall receive an award and
the terms of any award, the committee may take into account the nature of the
services rendered by the respective eligible persons, their present and
potential contributions to the success of the Company, and such other factors as
the committee, in its discretion shall deem relevant. Notwithstanding the
foregoing, incentive stock options may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) and an incentive stock option shall not be
granted to an employee of an affiliate unless such affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision.
SECTION 6. AWARDS.
(a) OPTIONS. The committee is hereby authorized to grant options to
participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the plan as the
committee shall determine:
(i) EXERCISE PRICE. The purchase price per share purchasable under an
option shall be determined by the committee; provided, however, that
such purchase price shall not be less than 100 percent of the fair
market value of a share on the date of grant of such option.
(ii) OPTION TERM. The term of each option shall be fixed by the committee.
(iii) TIME AND METHOD OF EXERCISE. The committee shall determine the time
or times at which an option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including,
without limitation, cash, shares, promissory notes, other securities,
other awards or other property, or any combination thereof, having a
fair market value on the exercise date equal to the relevant exercise
price) in which, payment of the exercise price with respect thereto
may be made or deemed to have been made.
(iv) RELOAD OPTION FEATURE. The committee may determine, in its
discretion, whether to grant an option containing a reload option
feature and whether any reload option issued upon the exercise of an
option containing a reload option feature may itself contain a reload
option feature.
(v) ISSUANCE OF OPTIONS TO REPLACE SHARES. The committee may determine,
in its discretion, whether to grant to a participant who exercises by
delivery of shares in payment of all or any portion of the exercise
price an option, previously or hereafter granted under the plan, that
does not contain a reload option feature, an option to acquire the
number of shares so delivered (or such lesser number as the committee
may determine), provided that the option term of such option shall
not end later than the option term of the option so exercised.
(b) STOCK APPRECIATION RIGHTS. The committee is hereby authorized to grant
stock appreciation rights to participants subject to the terms of the plan and
any applicable award agreement. A stock appreciation right granted under the
plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the fair market value of one share on the date of exercise
(or, if the committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the stock
appreciation right as specified by the committee, which price shall not be less
than 100 percent of the fair market value of one share on the date of grant of
the stock appreciation right. Subject to the terms of the plan and any
applicable award agreement, the grant price, term, methods of exercise, dates of
exercise, methods of settlement and any other terms and conditions of any stock
appreciation right shall be as determined by the committee. The committee may
impose such conditions or restrictions on the exercise of any stock appreciation
right as it may deem appropriate.
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(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The committee is hereby
authorized to grant awards of restricted stock and restricted stock units to
participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the plan as the
committee shall determine:
(i) RESTRICTIONS. Shares of restricted stock and restricted stock units
shall be subject to such restrictions as the committee may impose
(including, without limitation, any limitation on the right to vote a
share of restricted stock or the right to receive any dividend or
other right or property with respect thereto or with respect to a
restricted stock unit), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise
as the committee may deem appropriate.
(ii) STOCK CERTIFICATES. Any restricted stock granted under the plan may
be evidenced by issuance of a stock certificate or certificates or by
the creation of a book entry at the Company's transfer agent. Any
such certificate or certificates shall be held by the Company. Such
certificate or certificates or book entry shall be registered in the
name of the participant and any such certificate or certificates
shall bear an appropriate legend referring to the terms, conditions
and restrictions applicable to such restricted stock. A similar
notation shall be made in the records of the transfer agent with
respect to any shares evidenced by a book entry. In the case of
restricted stock units, no shares shall be issued at the time such
awards are granted.
(iii) FORFEITURE; DELIVERY OF SHARES. Except as otherwise determined by
the committee or provided in a plan governed by this Plan, upon
termination of employment (as determined under criteria established
by the committee) or, in the case of a director, service as a
director during the applicable restriction period, all shares of
restricted stock and all restricted stock units at such time subject
to restriction shall be forfeited and reacquired by the Company;
provided, however, that the committee may, when it finds that a
waiver would be in the best interest of the Company, waive in whole
or in part any or all remaining restrictions with respect to shares
of restricted stock or restricted stock units. Any share representing
restricted stock that is no longer subject to restrictions shall be
delivered to the holder thereof promptly after the applicable
restrictions lapse or are waived. Upon the lapse or waiver of
restrictions and the restricted period relating to restricted stock
units evidencing the right to receive shares, such shares shall be
issued and delivered to the holders of the restricted stock units,
subject to the provisions of the plan and any applicable award
agreement.
(d) PERFORMANCE AWARDS. The committee is hereby authorized to grant
performance awards to participants subject to the terms of the plan and any
applicable award agreement. A performance award granted under the plan (i) may
be denominated or payable in cash, shares (including, without limitation,
restricted stock and restricted stock units), other securities, other awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the committee shall establish. Subject to the
terms of the plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any performance award granted, the amount of any payment or
transfer to be made pursuant to any performance award, and any other terms and
conditions of any performance award shall be determined by the committee.
(e) DIVIDEND EQUIVALENTS. The committee is hereby authorized to grant to
participants dividend equivalents under which such participants shall be
entitled to receive payments (in cash, shares, other securities, other awards or
other property as determined in the discretion of the committee) equivalent to
the amount of cash dividends paid by the Company to holders of shares with
respect to a number of shares determined by the committee. Subject to the terms
of the plan and any applicable award agreement, such dividend equivalents may
have such terms and conditions as the committee shall determine.
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(f) OTHER STOCK-BASED AWARDS. The committee is hereby authorized to grant to
participants such other awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, shares
(including, without limitation, securities convertible into shares), as are
deemed by the committee to be consistent with the purpose of the plan; provided,
however, that such grants must comply with Rule 16b-3 and applicable law.
Subject to the terms of the plan and any applicable award agreement, the
committee shall determine the terms and conditions of such awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including, without limitation,
cash, shares, promissory notes, other securities, other awards or other property
or any combination thereof), as the committee shall determine, the value of
which consideration, as established by the committee, shall not be less than 100
percent of the fair market value of such shares or other securities as of the
date such purchase right is granted.
(g) GENERAL
(i)NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be
required by applicable law.
(ii)AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in the
discretion of the committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other award or any
award granted under any plan of the Company or any affiliate other
than the plan. Awards granted in addition to or in tandem with other
awards or in addition to or in tandem with awards granted under any
such other plan of the Company or any affiliate, may be granted
either at the same time as or at a different time from the grant of
such other award or awards.
(iii)FORMS OF PAYMENTS UNDER AWARDS. Subject to the terms of the plan
and of any applicable award agreement, payments or transfers to be
made by the Company or an affiliate upon the grant, exercise or
payment of an award may be made in such form or forms as the
committee shall determine (including, without limitation, cash,
shares, promissory notes, other securities, other awards or other
property or any combination thereof), and may be made in a single
payment or transfer, in installments or on a deferred basis, in each
case in accordance with rules and procedures established by the
committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of
dividend equivalents with respect to installment or deferred
payments.
(iv)LIMITS ON TRANSFER OF AWARDS. No award and no right under any such
award shall be transferable by a participant otherwise than by will
or by the laws of descent and distribution; provided, however, that
if so determined by the committee, a participant may, in the manner
established by the committee, (x) designate a beneficiary or
beneficiaries to exercise the rights of the participant and receive
any property distributable with respect to any award upon the death
of the participant, or (y) transfer an award (other than an incentive
stock option) to any member of such participant's "immediate family"
(as such term is defined in Rule 16a-1(e) promulgated by the
Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended, or any successor rule or regulation) or to a
trust whose beneficiaries are members of such participant's
"immediate family." Each award or right under any award shall be
exercisable during the participant's lifetime only by the
participant, or by a member of such participant's immediate family or
a trust for members of such immediate family pursuant to a transfer
as described above, or if permissible under applicable law, by the
participant's guardian or legal representative. No award or right
under any such award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the
Company or any affiliate.
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(v) TERM OF AWARDS. The term of each award shall be for such period as
may be determined by the committee.
(vi)RESTRICTIONS; SECURITIES EXCHANGE LISTING. All certificates for
shares or other securities delivered under the plan pursuant to any
award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the committee may deem advisable
under the plan or the rules, regulations and other requirements of
the Securities and Exchange Commission and any applicable federal or
state securities laws, and the committee may cause a legend or
legends to be placed on any such certificates to make appropriate
reference to such restrictions. If the shares or other securities are
traded on a securities exchange, the Company shall not be required to
deliver any shares or other securities covered by an award unless and
until such shares or other securities have been admitted for trading
on such securities exchange.
(vii) ATTESTATION. Where the plan or any applicable award agreement
provides for or permits delivery of shares by a participant in
payment with respect to any award or grant under this plan or for
taxes, such payment may be made constructively through attestation in
the discretion of and in accordance with rules established by the
committee.
SECTION 7. AWARDS TO NON-EMPLOYEE DIRECTORS.
7.1 ELIGIBILITY; ONE-TIME AWARD. If this plan is approved by the shareholders
of the Company at the annual meeting of the shareholders in 2000 (the 2000
annual meeting), each member of the board of directors who is not an employee of
the Company or of any affiliate of the Company (a non-employee director). who is
elected to the board subsequent to December 31, 2000 shall, upon the date of his
or her initial election to the board, receive an award of 1,000 shares of
restricted stock. These shares shall vest in three equal installments, on the
dates of the annual shareholder meeting in each of the three succeeding years,
if such director remains in office immediately following such meeting. In the
event that in accordance with the Company's policy with respect to mandatory
retirement of directors, any director is not nominated for election to serve as
a director of the Company, all restricted stock so awarded shall immediately
vest in full upon such director's retirement from the board. If a director
ceases to be a director prior to the date on which the award is fully vested for
any reason other than mandatory retirement, any unvested portion of the award
shall terminate and be irrevocably forfeited. Such awards shall be subject to
Sections 6(c), 9 and 10 of this plan. The authority of the committee under this
Section 7 shall be limited to ministerial and non-discretionary matters.
7.2 STOCK COMPENSATION. Each non-employee director shall be eligible to
receive or elect to receive his or her fees for service on the Company's board
of directors and the committees thereof in shares or restricted stock units and
to defer the receipt of such units, all as described in the Deluxe Corporation
Non-Employee Director Stock and Deferral Plan attached hereto as Annex I and
hereby made a part hereof.
7.3 AMENDMENTS TO SECTION 7. The provisions of this Section 7 may not be
amended more often than once every six months other than to comply with changes
in the Code or the Employee Retirement Income Security Act of 1974, as amended,
or the respective rules promulgated under either statute.
SECTION 8. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an award agreement or in the plan:
(a) AMENDMENTS TO THE PLAN. The board of directors of the Company may amend,
alter, suspend, discontinue or terminate the plan; provided, however, that,
notwithstanding any other provision of the plan or any award agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:
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(i) would cause Rule 16b-3 to become unavailable with respect to grants and
awards made under the plan;
(ii) would violate the rules or regulations of the New York Stock Exchange,
any other securities exchange or the National Association of Securities
Dealers, Inc., that are applicable to the Company; or
(iii) would cause the Company to be unable, under the Code, to grant
incentive stock options under the plan.
The board of directors shall be entitled to delegate to the committee the
power to amend such terms of the plan and for such purposes as the board of
directors shall from time to time determine.
(b) WAIVERS. The committee may waive any conditions of or rights of the
Company under any outstanding award, prospectively or retroactively.
(c) LIMITATIONS ON AMENDMENTS. Neither the committee nor the Company may
amend, alter, suspend, discontinue or terminate any outstanding award,
prospectively or retroactively, without the consent of the participant or holder
or beneficiary thereof, except as otherwise provided herein or in the award
agreement.
(d) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The committee may
correct any defect, supply any omission or reconcile any inconsistency in the
plan or any award in the manner and to the extent it shall deem desirable to
carry the plan into effect.
SECTION 9. INCOME TAX WITHHOLDING.
In order to comply with all applicable federal or state income tax laws or
regulations, the committee may establish such policy or policies as it deems
appropriate with respect to such laws and regulations, including without
limitation the establishment of policies to ensure that all applicable federal
or state payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a participant, are withheld or collected from such
participant. In order to assist a participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an award, the committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the payment or transfer otherwise to be
made upon exercise or receipt of (or the lapse of restrictions relating to) such
award with a fair market value equal to the amount of such taxes or (ii)
delivering to the Company shares or other property other than shares issuable
upon exercise or receipt of (or the lapse of restrictions relating to) such
award with a fair market value equal to the amount of such taxes. The election,
if any, must be on or before the date that the amount of tax to be withheld is
determined.
SECTION 10. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. No eligible person, participant or other person
shall have any claim to be granted any award under the plan, and there is no
obligation for uniformity of treatment of eligible persons, participants or
holders or beneficiaries of awards under the plan. The terms and conditions of
awards need not be the same with respect to any participant or with respect to
different participants.
(b) AWARD AGREEMENTS. No participant will have rights under an award granted
to such participant unless and until an award agreement shall have been duly
executed on behalf of the Company and, if requested by the Company, signed by
the participant.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
plan shall prevent the Company or any affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
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(d) NO RIGHT TO EMPLOYMENT. The grant of an award shall not be construed as
giving a participant the right to be retained in the employ of the Company or
any affiliate, nor will it affect in any way the right of the Company or the
affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an affiliate may at any time dismiss a participant from
employment free from any liability or any claim under the plan, unless otherwise
expressly provided in the plan or in any award agreement.
(e) GOVERNING LAW. The validity, construction and effect of the plan or any
award, and any rules and regulations relating to the plan or any award, shall be
determined in accordance with the laws of the State of Minnesota.
(f) SEVERABILITY. If any provision of the plan or any award is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the plan or any award under any law deemed applicable by the
committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the committee, materially altering the purpose or intent of
the plan or the award, such provision shall be stricken as to the plan or such
jurisdiction or award, and the remainder of the plan or any such award shall
remain in full force and effect.
(g) NO TRUST OR FUND CREATED. Neither the plan nor any award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any affiliate and a participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company or any affiliate pursuant to an award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
affiliate.
(h) NO FRACTIONAL SHARES. No fractional shares shall be issued or delivered
pursuant to the plan or any award, and the committee shall determine whether
cash shall be paid in lieu of any fractional shares or whether such fractional
shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(i) HEADINGS. Headings are given to the sections and subsections of the plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the plan or any provision thereof.
(j) OTHER BENEFITS. No compensation or benefit awarded to or realized by any
participant under the plan shall be included for the purpose of computing such
participant's compensation under any compensation-based retirement, disability,
or similar plan of the Company unless required by law or otherwise provided by
such other plan.
SECTION 11. SECTION 16(B) COMPLIANCE.
The plan is intended to comply in all respects with Rule 16b-3 or any
successor provision, as in effect from time to time and in all events the plan
shall be construed in accordance with the requirements of Rule 16b-3. If any
plan provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The board of directors,
in its absolute discretion, may bifurcate the plan so as to restrict, limit or
condition the use of any provision of the plan to participants who are officers
or directors subject to Section 16 of the Securities and Exchange Act of 1934,
as amended, without so restricting, limiting or conditioning the plan with
respect to other participants.
SECTION 12. EFFECTIVE DATE OF THE PLAN.
The plan shall be effective as of January 1, 2001, subject to approval by the
shareholders of the Company, either prior to such date or within one year
thereafter.
SECTION 13. TERM OF THE PLAN.
Unless the plan shall have been discontinued or terminated as provided in
Section 8(a), the plan shall terminate on December 31, 2003. No award shall be
granted after the termination of the plan, provided that nothing herein shall be
construed to limit the issuance of options pursuant to
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an option containing a reload option feature or the provisions of section
6(a)(v). However, unless otherwise expressly provided in the plan or in an
applicable award agreement, any award theretofore granted may extend beyond
the termination of the plan, and the authority of the committee provided for
hereunder with respect to the plan and any awards, and the authority of the
board of directors of the Company to amend the plan, shall extend beyond the
termination of the plan.
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ANNEX I
DELUXE CORPORATION
NON-EMPLOYEE DIRECTOR STOCK AND DEFERRAL PLAN
("PLAN")
1. Purpose of the Plan. The purpose of the Deluxe Corporation
Non-Employee Director Stock and Deferral Plan (the "Plan") is to provide an
opportunity for non-employee members of the Board of Directors (the "Board") of
Deluxe Corporation ("Deluxe" or the "Company") to increase their ownership of
Deluxe Common Stock, $1.00 par value ("Common Stock"), and thereby align their
interest in the long-term success of the Company with that of the other
shareholders. This will be accomplished by allowing each participating director
to elect voluntarily to receive all or a portion of his or her Retainer (as
hereinafter defined) in the form of shares of Common Stock and to allow each of
them to defer the receipt of such shares until a later date pursuant to
elections made by him or her under this Plan.
2. Eligibility. Directors of the Company who are not also officers or
other employees of the Company or its subsidiaries are eligible to participate
in this Plan ("Eligible Directors").
3. Administration. This Plan will be administered by or under the
direction of the Secretary of the Company (the "Administrator"). Since the
issuance of shares of Common Stock pursuant to this Plan is based on elections
made by Eligible Directors, the Administrator's duties under this Plan will be
limited to matters of interpretation and administrative oversight. All questions
of interpretation of this Plan will be determined by the Administrator, and each
determination, interpretation or other action that the Administrator makes or
takes pursuant to the provisions of this Plan will be conclusive and binding for
all purposes and on all persons. The Administrator will not be liable for any
action or determination made in good faith with respect to this Plan.
4. Election to Receive Stock and Stock Issuance.
4.1. Election to Receive Stock in Lieu of Cash. On forms provided by
the Company and approved by the Administrator, each Eligible Director may
irrevocably elect ("Stock Election") to receive, in lieu of cash, shares of
Common Stock having a Fair Market Value, as defined in Section 4.6, equal to 50%
or more of the annual cash retainer and all meeting fees (including all
committee retainers and meeting fees, the "Retainer") payable to that director
for services rendered as a director. From and after January 1, 2001, all
Eligible Directors will be deemed to have made such a Stock Election to receive
shares of Common Stock with respect to no less than 50% of such Retainer and
shall be deemed to be a participating director under this Plan ("Participating
Director") to at least such extent. Except as provided in the preceding
sentence, to be effective, any Stock Election must be filed with the Company
(the date of such filing being the date of such election) no later than May 31
of each year (or by such other date as the Administrator shall determine) and
shall apply only with respect to services as a director provided for the period
of July 1 of that year through June 30 of the year following ("Fiscal Year");
provided, however, that an Eligible Director whose initial election to the Board
of Directors occurs after May 31, shall have 30 days following such election to
make a Stock Election, which shall apply only with respect to services as a
director provided following the filing of such Stock Election with the Company
during the then current or the ensuing Fiscal Year, as specified in the Stock
Election. Following the implementation of the Plan upon the expiration of the
existing Deluxe Corporation Non-Employee Director Stock and Deferral Plan,
effective as of October 31, 1997, Eligible Directors shall continue to be bound
by the Stock Elections previously made by them for the Fiscal
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Year ending June 30, 2001 with respect to their services as a director during
the period from January 1, 2001through June 30, 2001. In the event that an
Eligible Director shall fail to file with the Company the required form for
making a Stock Election, such director shall be deemed to have made the same
Stock Election that such director made with respect to the then current Fiscal
Year, or in the absence of having made such Stock Election, to have elected to
receive 50% of his or her Retainer in cash and 50% in Common Stock, and such
election will be deemed to have been made on (i) May 31 in any year with respect
to the ensuing Fiscal Year as aforesaid and (ii) the thirtieth day following
initial election to the Board of new directors with respect to the current
Fiscal Year only unless such date is within the period of May 31 through June 30
of that Fiscal Year, in which event the election shall be deemed made for both
the current and next following Fiscal Years. Any Stock Election made in
accordance with the provisions of this Section 4.1 shall be irrevocable for the
period to which such election applies.
4.2. Issuance of Stock in Lieu of Cash. Shares of Deluxe Common Stock
having a Fair Market Value equal to the amount of the Retainer so elected shall
(i) be issued to each Participating Director or (ii) at the Participating
Director's election pursuant to Section 4.3, be credited to such director's
account (a "Deferred Stock Account"), on March 15, June 15, September 15 and
December 15 for the calendar quarter ending on the last day of each such month
(each such payment date, a "Payment Date"). The Company shall not issue
fractional shares. Whenever, under the terms of this Plan, a fractional share
would be required to be issued, the Company will round the number of shares (up
or down) to the nearest integer. In the event that a Participating Director
elects to receive less than 100% of each quarterly installment of the Retainer
in shares of Common Stock (or Stock Units as defined and provided in Section
4.4), that Participating Director shall receive the balance of the quarterly
installment in cash.
4.3. Manner of Making Deferral Election. A Participating Director may
elect to defer payment of the Retainer otherwise payable in shares of Common
Stock pursuant to this Plan by filing (the date of such filing being the date of
such election), no later than May 31 of each year (or by such other date as the
Administrator shall determine) with respect to payments in the ensuing Fiscal
Year, an irrevocable election with the Administrator on a form (the "Deferral
Election Form") provided by the Administrator for that purpose ("Deferral
Election"). Any portion of the Retainer to be paid in cash may not be deferred
pursuant to the Plan. The special Stock Election rules set forth in Section 4.1
with respect to new directors and continuing elections under the Plan during
2001 shall also apply to the corresponding Deferral Elections. Failure timely to
file a Deferral Election shall conclusively be deemed to mean that no election
to defer has been made for the applicable period. The Deferral Election shall be
effective for the Retainer payable (i) during the ensuing Fiscal Year with
respect to elections made on or before May 31 of each year as aforesaid and (ii)
for the portion of the Fiscal Year after the date the Deferral Election is made
or the ensuing Fiscal Year as specified in the Deferral Election with respect to
Deferral Elections made by new directors. Any Deferral Election made in
accordance with the provisions of this Section shall be irrevocable for the
period to which such election applies. The Deferral Election form shall specify
the amount to be deferred expressed as a percentage of the Participating
Director's Retainer.
4.4. Credits to Deferred Stock Account for Elective Deferrals. On each
Payment Date, a Participating Director who has made a then effective Deferral
Election shall receive a credit in the form of restricted stock units ("Stock
Units") to his or her Deferred Stock Account. Each Stock Unit shall represent
the right to receive one share of Common Stock. The number of Stock Units
credited to a Participating Director's Deferred Stock Account shall be
determined by dividing an amount equal to the Participating Director's Retainer
payable on the Payment Date for the current calendar quarter and specified for
deferral pursuant to Section 4.3, by the Fair Market Value of a share of Common
Stock on such Payment Date. If that computation would result in a fractional
Stock Unit being credited to a Participating Director's Deferred Stock Account,
the Company will round the number of Stock Units so credited (up or down) to the
nearest integer.
4.5. Dividend Equivalent Payments. Each time a dividend is paid on the
Common
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<PAGE>
Stock, the Participating Director who has a Deferred Stock Account shall receive
a dividend equivalent payment on the dividend payment date equal to the amount
of the dividend payable on a single share of Common Stock multiplied by the
number of Stock Units credited to the Participating Director's Deferred Stock
Account on the dividend record date.
4.6. Fair Market Value. The Fair Market Value of each share of Common
Stock shall be equal to the closing price of one share of Common Stock on the
New York Stock Exchange ("NYSE") on the relevant date as reported by the WALL
STREET JOURNAL, MIDWEST EDITION; provided that if, on such date, the NYSE is not
open for business or there are no shares of Common Stock traded on such date,
the Fair Market Value of a share of Common Stock shall be equal to the closing
price of one share of Common Stock on the first day preceding such date on which
the NYSE is open for business and has reported trades in the Common Stock.
4.7. Termination of Service as a Director. If a Participating Director
leaves the Board before the conclusion of any quarter of a Fiscal Year, he or
she will be paid the quarterly installment of the Retainer entirely in cash or
Common Stock on the applicable Payment Date in accordance with such
Participating Director's then effective Stock Election, notwithstanding that a
Deferral Election is on file with the Company. The date of termination of a
Participating Director's service as a director of the Company will be deemed to
be the date of termination recorded on the personnel or other records of the
Company.
5. Shares Available for Issuance. This Plan constitutes part of the
Deluxe Corporation 2000 Stock Incentive Plan, as amended from time to time (the
"SIP"), and is subject to the terms and conditions of the SIP. Any shares of
Common Stock issued under this Plan shall be issued pursuant to the terms and
conditions of the SIP, and any such shares so issued shall be subject to the
limits set forth in the SIP, including, without limiting the generality of the
foregoing, the limits contained in Section 4(a) of the SIP.
6. Deferral Payment.
6.1. Deferral Payment Election. At the time of making the Deferral
Election and as a part thereof, each Participating Director shall make and file
with the Company, a deferral payment election on the Deferral Election Form
specifying one of the payment options described in Section 6.2. If a
Participating Director fails to make a deferral payment election at the time any
Deferral Election is made in accordance with this Plan, the Participating
Director shall conclusively be deemed to have elected to receive the Common
Stock represented by the Stock Units earned during the period covered by the
Deferral Election in a lump sum payment at the time of the Participating
Director's termination of service on the Board as provided in Section 6.2. The
deferral payment election shall be irrevocable as to all amounts credited to the
Participating Director's Deferred Stock Account during the period covered by the
relevant Deferral Election.
6.2. Payment of Deferred Stock Accounts in a Lump Sum. Stock Units
credited to a Participating Director's Deferred Stock Account shall be converted
to an equal number of shares of Common Stock and issued in full to the
Participating Director on the earlier of the tenth anniversary of February 1 of
the year following the Participating Director's termination of service on the
Board (or the first business day thereafter) or such other date as elected by
the Participating Director by making a deferral payment election in accordance
with the provisions of Section 6.1. All payments shall be made in whole shares
of Common Stock (rounded as necessary to the nearest integer). Notwithstanding
the foregoing, in the event of a Change of Control (as defined in Section 12),
Stock Units credited to a Participating Director's Deferred Stock Account as of
the business day immediately prior to the effective date of the transaction
constituting the Change of Control shall be converted to an equal number of
shares of Common Stock (rounded as necessary to the nearest integer) and issued
in full to the Participating Director in whole shares of Common Stock on such
date.
6.3. Payment to Estate. In the event that a Participating Director
shall die before full
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<PAGE>
distribution of his or her Deferred Stock Account, any shares that issue
therefrom shall be issued to such Director's estate or beneficiaries, as the
case may be.
7. Holding Period. All shares of Common Stock issued under this Plan,
including shares that are issued as a result of distributions of a Participating
Director's Deferred Stock Account, shall be held by the Participating Director
receiving such shares for a minimum period of six months from the date of
issuance or such longer period as may be required for compliance with Rule
16b-3, as amended or any successor rule ("Rule 16b-3"), promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Administrator may, in his or her discretion,
require that shares of Common Stock issued pursuant to this Plan contain a
suitable legend restricting trading in such shares during such holding period.
8. Limitation on Rights of Eligible and Participating Directors.
8.1. Service as a Director. Nothing in this Plan will interfere with or
limit in any way the right of the Company's Board or its shareholders not to
nominate for re-election, elect or remove an Eligible or Participating Director
from the Board. Neither this Plan nor any action taken pursuant to it will
constitute or be evidence of any agreement or understanding, express or implied,
that the Company or its Board or shareholders have retained or will retain an
Eligible or Participating Director for any period of time or at any particular
rate of compensation.
8.2. Non-Exclusivity of the Plan. Nothing contained in this Plan is
intended to affect, modify or rescind any of the Company's existing compensation
plans or programs or to create any limitations on the power of the Company's
officers or Board to modify or adopt compensation arrangements as they or it may
from time to time deem necessary or desirable.
9. Plan Amendment, Modification and Termination. The Board may suspend
or terminate this Plan at any time. The Board may amend this Plan from time to
time in such respects as the Board may deem advisable in order that this Plan
will conform to any change in applicable laws or regulations or in any other
respect that the Board may deem to be in the Company's best interests; provided,
however, that no amendments to this Plan will be effective without approval of
the Company's shareholders, if shareholder approval of the amendment is then
required to exempt issuance or crediting of shares of Common Stock or Stock
Units from Section 16 of the Exchange Act under Rule 16b-3, or pursuant to the
rules of the New York Stock Exchange.
10. Effective Date and Duration of the Plan. This Plan shall become
effective on January 1, 2001and shall continue, unless terminated by action of
the Board, until the expiration or termination of the SIP, provided that the
expiration or termination of this Plan shall not affect any rights of
Participating Directors with respect to their Deferral Accounts which shall
continue to be governed by the provisions of this Plan until the final
distribution of all Deferral Accounts established under this Plan.
11. Participants are General Creditors of the Company. The
Participating Directors and beneficiaries thereof shall be general, unsecured
creditors of the Company with respect to any payments to be made pursuant to
this Plan and shall not have any preferred interest by way of trust, escrow,
lien or otherwise in any specific assets of the Company. If the Company shall,
in fact, elect to set aside monies or other assets to meet its obligations
hereunder (there being no obligation to do so), whether in a grantor's trust or
otherwise, the same shall, nevertheless, be regarded as a part of the general
assets of the Company subject to the claims of its general creditors, and
neither any Participating Director nor any beneficiary thereof shall have a
legal, beneficial or security interest therein.
12. Change of Control. A "Change of Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
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<PAGE>
A. Any Person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates) representing 25% or more
of the combined voting power of the Company's then outstanding securities; or
B. During the period from the effective date of this Plan
until final distribution to all Participating Directors of their Deferred Stock
Accounts, individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who has
acquired securities of the Company or entered into an agreement with the Company
to effect a transaction constituting a Change of Control as described in
paragraphs (A), (C) or (D) of this Section 12) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or
C. The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 51% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 40% of the combined voting power of the Company's then
outstanding securities; or
D. The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
E. For the purposes of this Section 12, the following terms
shall have definitions ascribed herein to them:
(i) "Person" shall have the meaning defined in
Sections 3(a)(9) and 13(d) of the Securities
Exchange.
(ii) "Beneficial Owner" shall have the meaning
defined in Rule 13d-3 promulgated under the
Exchange Act.
(iii) "Affiliate" shall mean a company controlled
directly or indirectly by the Company, where
"control" shall mean the right, either
directly or indirectly, to elect a majority
of the directors thereof without the consent
or acquiescence of any third party.
13. Miscellaneous.
13.1 Securities Law and Other Restrictions. Notwithstanding any other
provision of this Plan or any Stock Election or Deferral Election delivered
pursuant to this Plan, the Company will not be required to issue any shares of
Common Stock under this Plan and a Participating Director may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to this
Plan, unless (a) there is in effect with respect to such shares a registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
and any applicable state securities laws or an exemption from such registration
under the Securities Act and applicable state securities laws, and (b) there has
been obtained any other consent, approval or
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<PAGE>
permit from any other regulatory body that the Administrator, in his or her sole
discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or advisable by
the Company, in order to comply with such securities law or other restriction.
13.2. Governing Law. The validity, construction, interpretation,
administration and effect of this Plan and any rules, regulations and actions
relating to this Plan will be governed by and construed exclusively in
accordance with the laws of the State of Minnesota.
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<PAGE>
REGULAR MEETING OF SHAREHOLDERS
Shareholders are invited to attend Deluxe's regular shareholder meeting. It
will be held Friday, August 4, 2000, in the Continental Room at the Holiday Inn
-- St. Paul North, 1201 W. County Rd. E, St. Paul, Minn., at 11:00 a.m.
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.
Information about Deluxe can also be found on our Web site at
http://www.dlx.com.
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].
[LOGO] DELUXE CORPORATION
3680 Victoria Street N.
Shoreview, MN 55126-2966
P.O. Box 64235
St. Paul, MN 55164-0235
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 June 5, 2000 at the regular meeting of shareholders to be
held on August 4, 2000, 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. ALSO, BY SIGNING THIS PROXY, YOU
AUTHORIZE THE ABOVE-NAMED PROXIES TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING. THE COMPANY ANTICIPATES THAT NO OTHER BUSINESS
WILL BE CONDUCTED AT THE MEETING.
(Continued and to be SIGNED on the reverse side)
<PAGE>
COMPANY #
CONTROL #
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 -- IT'S TOLL-FREE. IT'S QUICK, EASY, AND IMMEDIATE. 1-800-240-6326
o Use any touch-tone telephone to grant your proxy 24 hours a day, 7 days a
week, until 12:00 p.m. on August 3, 2000.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number that is located above.
o Follow the simple instructions provided by the voice.
VOTE BY INTERNET -- IT'S QUICK, EASY AND IMMEDIATE. http://www.eproxy.com/dlx
o Use the Internet to grant your proxy 24 hours a day, 7 days a week, until
12:00 p.m. on August 3, 2000.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number that 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
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS LISTED BELOW.
<TABLE>
<S> <C> <C>
1. Election of directors 01 John A. Blanchard III 05 Calvin W. Aurand, Jr. [ ] Vote FOR [ ] Vote WITHHELD
02 Lawrence J. Mosner 06 Donald R. Hollis all nominees from all nominees
03 Barbara B. Grogan 07 Robert C. Salipante (except as marked)
04 Stephen P. Nachtsheim 08 Ronald E. Eilers
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEES, WRITE THE [ ]
NUMBER(S) OF THE NOMINEE(S) IN THE BOX TO THE RIGHT.
2. Adoption of the Deluxe Corporation 2000 Annual Incentive Plan.
[ ]For [ ] Against [ ] Abstain
3. Adoption of the Deluxe Corporation 2000 Stock Incentive Plan.
[ ]For [ ] Against [ ] Abstain
4. Ratification of the selection of Deloitte & Touche as
independent auditors.
[ ]For [ ] Against [ ] Abstain
5. 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 [ ] Indicate changes below:
Date _________________________
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.
