UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.
Commission file number 1-7945.
DELUXE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-0216800
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3680 Victoria St. N., Shoreview, Minnesota 55126-2966
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (651) 483-7111.
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1.00 per share
(Title of Class) New York Stock Exchange
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. _x_ Yes __ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $1,836,947,704 based on the last sales price of the registrant's
common stock on the New York Stock Exchange on March 15, 2000. The number of
outstanding shares of the registrant's common stock as of March 15, 2000 was
72,218,276.
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PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
BOARD OF DIRECTORS
The following persons serve as members of the Board of Directors of the Company.
The term of office of each director will expire at the next annual meeting of
the Company's shareholders. This meeting has been scheduled for August 4, 2000.
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.
LAWRENCE J. MOSNER, age 57, has served as Executive Vice President of the
Company with overall responsibility for all of its day-to-day operations since
July 1997 and he became Vice-Chairman of the Company's Board of Directors in
August 1999. 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
its Deluxe Direct business unit. As a Senior Vice President of the Company and
President of DDI, Mr. Mosner served as the Principal Executive Officer of Deluxe
Direct. In February 1997, Mr. Mosner returned to the office of Senior Vice
President of the Company and he served as President of its 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.
DR. JAMES J. RENIER, age 70, was chairman and chief executive officer of
Honeywell Inc. ("Honeywell") from 1988 until 1993, when he retired as chief
executive officer. Dr. Renier continued as chairman of the executive committee
of Honeywell's board of directors until April 1994. Honeywell, which was
recently acquired by Allied Signal Automotive, Inc. is a manufacturer of control
systems that provides products and services for use in homes, commercial and
industrial buildings and aviation throughout the world. Dr. Renier was elected
to the Board of Directors in 1990 and he is also a member of the board of
directors of ReliaStar Financial Corp. ("ReliaStar").
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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 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 43, 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.
JACK ROBINSON, age 45, has served as the chief executive officer of Personal
Cuisine, Inc. ("PCI"), a recently formed foodservice company, since January 31,
2000. Mr. Robinson served as the vice president, finance for the home and small
business group of Dell Computer Corporation ("Dell Computer"), a computer
manufacturer, from November 1998 until he joined PCI. From February 1998 through
November 1998, Mr. Robinson served as president of the Foodservice unit of Sara
Lee Bakery, a division of Sara Lee Corporation ("Sara Lee"). Between July 1996
and February 1998, Mr. Robinson served as president of the Specialty Markets
division of Sara Lee. Mr. Robinson joined Sara Lee in June 1993 as a senior vice
president and the chief financial officer of its Sara Lee Bakery division. Sara
Lee is a global packaged food and consumer products company. Mr. Robinson was
elected to the Board of Directors in June 1997.
HATIM A. TYABJI, age 55, has served as chief executive officer and chairman of
Saraide Inc. ("Saraide.com") since September 1998. Saraide.com is a provider of
Internet and wireless data services. From November 1986 until March 1998, Mr.
Tyabji served as president and chief executive officer of VeriFone, Inc.
("VeriFone"), which was acquired by Hewlett Packard Company in June 1997. Mr.
Tyabji also served as chairman of VeriFone from 1992 until 1998. VeriFone is a
global provider of transaction automation systems and Internet commerce
solutions. Mr. Tyabji was elected to the Board of Directors in November 1997.
Mr. Tyabji also serves on the board of directors of PubliCARD, Inc., Ariba,
Inc., Smart Disk Corp., and Best Buy Company, Inc.
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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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 2000, the number of shares
of Common Stock beneficially owned by each person who is known by the Company to
beneficially own more than five percent of the Company's outstanding Common
Stock, each Director, each person named in the Summary Compensation Table that
appears elsewhere in this 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>
ESL Partners, L.P.
One Lafayatte Place
Greenwich, CT 06832(2)..................4,292,400
FMR Corp.
82 Devonshire Street
Boston, MA 02109(3).....................7,904,999
John A. Blanchard III(4)..................478,221..............................0..................478,221
Lawrence J. Mosner(5) ....................235,601.........................16,801..................252,402
Thomas W. VanHimbergen(6) ................110,634..........................9,307..................119,941
Ronald E. Eilers(7)........................71,303 .........................5,000...................76,303
Debra A. Janssen(8)........................16,650..........................1,889...................18,539
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 .........................2,425....................5,896
Calvin W. Aurand, Jr.(12) ..................2,100 .........................2,204....................4,304
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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) ............1,041,446 ........................48,183................1,089,629
</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 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 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 March 15, 2000.
(3) 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 March 15, 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 March
15, 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
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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.
(4) Includes 25,000 shares of restricted stock that will vest on May 1, 2000,
provided that Mr. Blanchard is then employed by the Company and 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. It is currently anticipated that Mr.
VanHimbergen will leave the employ of the Company on or about 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.
(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.
(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.
(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 27,818 shares
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of restricted stock that will vest as described in footnotes (4), (9), (13),
(14) and (15). The group comprised of the executive officers and directors of
the Company beneficially owned approximately 1.4% of the outstanding shares of
Common Stock on March 15, 2000.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION(3)
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
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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. 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).
(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.
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<PAGE>
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 and the non-qualified,
supplemental retirement plan referred to in clauses (a) and (b) above,
respectively, are defined contribution and profit sharing plans that provide
that contributions vest when made or declared.
All Other Compensation also includes income recognized from relocation expense
reimbursement in excess of deductible amounts, incidental relocation
compensation and guaranteed minimum resale price allowances in respect of
residences sold that is paid to executives under the Company's relocation
program. The persons named above recognized income in the following amounts
under this program: Mr. Mosner, $27,123 (1998) 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 will not be paid unless Mr.
Blanchard completes five years of continuous service with the Company, unless
Mr. Blanchard's employment is terminated by reason of Mr. Blanchard's disability
or death (in which event the Supplemental Retirement Benefits will be paid to
Mr. Blanchard or his heirs without regard to the five year service requirement
and the amounts payable will be determined based on Mr. Blanchard's years of
service prior to his disability or death). The Supplemental Retirement Benefits
are payable for 15 years following a qualifying termination of Mr. Blanchard's
employment with the Company. Mr. Blanchard's base salary and his participation
in the Company's retirement and other benefit plans continue for twenty-four
months following any actual or constructive termination of his employment
without cause, unless Mr. Blanchard's employment with the Company is terminated
in certain circumstances described in an Executive Retention Agreement entered
on January 9, 1998, in which event payments to Mr. Blanchard following his
termination of employment would be governed by that agreement. See "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements--Executive Retention Agreements." The Company expects to make a
lump-sum cash payment to Mr. Blanchard on December 31, 2000 in satisfaction of
its obligations in respect of the Supplemental Retirement Benefits.
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<PAGE>
(5) Mr. VanHimbergen became an employee of the Company in May 1997. It is
currently anticipated that Mr. VanHimbergen will leave the employ of the Company
on or about 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.
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
10
<PAGE>
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.
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
11
<PAGE>
"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 is not being 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.
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 $1 million paid to the five named executive officers
of publicly traded companies. The Committee expects that all performance-based
compensation paid in 1999 to the Named Executive Officers under the plans
described above will qualify for deductibility, either because the compensation
is below the threshold for non-deductibility provided in Section 162(m) or
because the payment of such compensation complies with the provisions of Section
162(m), and provide the Company's senior management team with a competitive
level of compensation.
Calvin W. Aurand, Jr., Chairman
Barbara B. Grogan
James J. Renier
Donald R. Hollis
12
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
- ------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM
Individual Grants
- ------------------------- ---------------- ----------------- -------------- ------------- ------------------ -----------------
% OF TOTAL
OPTIONS/ SARS
NUMBER OF GRANTED TO
SECURITIES EMPLOYEES IN
NAME UNDERLYING FISCAL YEAR
OPTIONS/SARS
GRANTED EXERCISE OR EXPIRATION 5% ($)(2) 10% ($)(2)
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 exerciseable 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.
(2) The assumed 5 and 10 percent annual stock price appreciation is shown for
illustrative purposes only.
13
<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.
DESCRIPTION OF NON-EMPLOYEE DIRECTORS COMPENSATION ARRANGEMENTS
Directors who are employees of the Company do not receive compensation for their
service on the Board other than their compensation as employees. During 1999,
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
14
<PAGE>
Committees that are considered beyond the scope of the ordinary responsibilities
of Directors or Committee members.
In November 1997, the Company adopted the Deluxe Corporation Non-Employee Stock
and Deferral Plan (the "Director Plan"). The purpose of the Director Plan is to
provide an opportunity for Independent Directors to increase their ownership of
Common Stock and thereby align their interest in the long-term success of the
Company with that of the Company's other shareholders. Under the Director Plan,
each Independent Director may irrevocably elect to receive, in lieu of cash,
shares of Common Stock having a fair market value equal to at least 50% of his
or her annual board and committee retainer (collectively, the "Retainer"). The
shares of Common Stock receivable pursuant to the Director Plan are issued
quarterly or, at the option of the Independent Director, credited to the
Director in the form of deferred restricted stock units. These units vest and
are converted into shares of Common Stock on the earlier of the tenth
anniversary of the February 1st of the year following the year in which the
Independent Director ceases to serve on the Company's Board of Directors or such
other date as is elected by the Independent Director in his or her deferral
election.
Each restricted stock unit receives dividend equivalent payments equal to the
dividend payment on one share of Common Stock. Any restricted stock units issued
pursuant to the Director Plan will vest and be converted into shares of Common
Stock in connection with certain defined changes in control of the Company. All
shares of Common Stock issued pursuant to the Director Plan are issued under the
Stock 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
15
<PAGE>
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.
LAWRENCE J. MOSNER
In the event Mr. Mosner's employment should be terminated for reasons other
than misconduct or negligence, Mr. Mosner is entitled to receive a severance
package consisting of one year's base salary and a second year of income
continuation. As part of this income continuation, the Company would continue to
make payments to Mr. Mosner in an amount equal to the difference between his
base salary and any lesser salary received by Mr. Mosner from a subsequent
employer. In the event Mr. Mosner's employment is terminated following certain
business combinations or changes of control involving the Company, the terms of
the Executive Retention Agreement between Mr. Mosner and the Company that is
described below would govern Mr. Mosner's severance entitlements in lieu of the
foregoing.
THOMAS W. VANHIMBERGEN
Mr. VanHimbergen is entitled to severance benefits in the event his
employment is terminated for reasons other than willful misconduct, gross
negligence or unlawful actions towards the Company or towards others on behalf
of the Company (i.e., other than for cause). Under this arrangement, in the
event of such a termination, Mr. VanHimbergen will receive a severance package
of one year's base salary plus a second year of income continuation. As a part
of this income continuation, the Company would continue to make payments to Mr.
VanHimbergen in an amount equal to the difference between his base salary and
any lesser salary received by Mr. VanHimbergen from a subsequent employer. Mr.
VanHimbergen is also entitled to the continuation of his medical, dental, vision
and life insurance coverage at employee rates for one year following his
termination. In the event Mr. VanHimbergen's employment is terminated following
certain business combinations or changes of control involving the Company, the
terms of the Executive Retention Agreement between Mr. VanHimbergen and the
Company that is described below would govern Mr. VanHimbergen's severance
entitlements in lieu of the foregoing.
DEBRA A. JANSSEN
Ms. Janssen has entered into a letter agreement with the Company's
subsidiary, eFunds Corporation ("eFunds"), which entitles 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.
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
16
<PAGE>
designed to diminish the distractions that could be caused by personal
uncertainties and risks associated with changes of control and other significant
business combinations including the Company by providing the Executives with
assurances regarding their compensation and benefits expectations under such
circumstances.
Under the Retention Agreements, each of the Executives agrees to remain in
the employ of the Company, and the Company agreed to continue to employ each
Executive, until the third anniversary following any "business combination"
involving or "change in control" of the Company (as such terms are defined in
the Retention Agreements). During such three-year period (the "Employment
Period"), each Executive is entitled to maintain a position, authority, duties
and responsibilities at least commensurate with the most significant of those
held by the Executive during the 180 day period prior to the date (the
"Effective Date") of the business combination or change in control
(collectively, a "Business Combination") and the base salary of an Executive may
not be reduced below that earned by the Executive during the twelve month period
preceding the Effective Date. In determining any increase in an Executive's base
salary during the Employment Period, the Executive is to be treated in a manner
consistent with other peer executives. The Executives are also entitled to
receive annual incentive payments during the Employment Period on the same
objective basis as other peer executives (although in no event may an
Executive's annual target bonus opportunity be less favorable to the Executive
than that provided by the Company in the last fiscal year prior to the Effective
Date and if the bonuses payable to other peer executives during the Employment
Period are not wholly based on objective criteria, the Executive's annual
incentive payment must be at least equal to an amount determined with reference
to Executive's average annual incentive payments for certain periods ending
prior to the Effective Date). During the Employment Period, each Executive is
also entitled to participate in the Company's stock incentive, performance
share, savings, retirement, welfare and fringe benefit plans on the same basis
as the Company's other executives and the opportunities for and benefits to the
Executives under such plans may not generally be reduced from those provided
during the one-year period prior to the Effective Date.
If, during the Employment Period, the Company terminates an Executive's
employment other than for "cause" or "disability" or the Executive terminates
his employment for "good reason" (as such terms are defined in the Retention
Agreements), the Executive is entitled to a lump sum payment equal to the sum of
any unpaid base salary and accrued vacation pay through the date of termination
and an amount determined with reference to the Executive's historical incentive
awards (the "Highest Annual Bonus") and the portion of the year in which the
termination occurs that the Executive was employed by the Company. In addition,
the Executive is entitled to receive a lump sum payment equal to three times the
sum of the Executive's annual base salary and the Highest Annual Bonus, plus the
amount that would have been contributed by the Company or its affiliates to the
retirement plans in which the Executive participated prior to his termination in
respect of such sum. 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.
17
<PAGE>
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
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.
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.
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, respectively, to which this Report serves
as Amendment No.1.
CHANGE IN CONTROL
In addition to the change of control features applicable to some of the
equity-based awards described elsewhere in this Report, 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.
18
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS RETURN*
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(DIVIDENDS REINVESTED)
DELUXE CORPORATION, S&P 500 INDEX
AND S&P PUBLISHING INDUSTRY GROUP
- ----------------------------------------------------------------------------------------------------------------------
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 $100 invested on December 31, 1994 in Deluxe Common Stock, the S&P
500 Stock Index and the S&P Publishing Industry Group. The S&P Publishing
Industry Group is a published industry or line-of-business index prepared
independently by Standard & Poor's and is weighted on the basis of stock market
capitalization. The Publishing Industry Group contains other companies engaged
primarily in the printing business, including the Company's largest competitor
in the check printing business.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(b) The following exhibits are filed as part of or are incorporated in this
Amendment No.1 by reference:
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
24.1 Power of attorney (incorporated by reference to Exhibit 24.1 to the *
Company's Annual Report on Form 10-k for the year ended December 31,
1999).
</TABLE>
- ------------------
*Incorporated by reference
20
<PAGE>
Note to recipients of Form 10-K: Copies of exhibits will be furnished upon
written request and payment of the Company's reasonable expenses ($.25 per page)
in furnishing such copies.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of St.
Paul, State of Minnesota.
DELUXE CORPORATION
Date: April 27, 2000 By: /s/ John A. Blanchard III
----------------------------------------
John A. Blanchard III
Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on April 27, 2000.
SIGNATURE TITLE
- --------- -----
By /s/ John A. Blanchard III Chairman of the Board of Directors,
----------------------------------- President and Chief Executive
John A. Blanchard III Officer (Principal Executive
Officer)
By /s/ Thomas W. VanHimbergen Executive Vice President and Chief
---------------------------------- Financial Officer (Principal
Thomas W. VanHimbergen Financial Officer and Principal
Accounting Officer)
By /s/ Lawrence J. Mosner
---------------------------------
Lawrence J. Mosner Vice Chairman
*
---------------------------------
James J. Renier Director
*
---------------------------------
Barbara B. Grogan Director
*
---------------------------------
Stephen P. Nachtsheim Director
*
---------------------------------
Calvin W. Aurand, Jr Director
*
---------------------------------
Donald R. Hollis Director
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*
- ------------------------------------
Robert C. Salipante Director
*
- ------------------------------------
Jack Robinson Director
*
- ------------------------------------
Hatim A. Tyabji Director
*By: /s/ John A. Blanchard III
----------------------------
John A. Blanchard III
Attorney-in-Fact
22
