UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended October 31, 1994 Commission File No. 1-10411
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SAFECARD SERVICES, INCORPORATED
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(Exact name of Registrant as specified in its charter)
Delaware 13-2650534
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
3001 E. Pershing Blvd., Cheyenne, Wyoming 82001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (307) 771-2700
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Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on Which Registered
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Common Stock, $.01 Par Value New York Stock Exchange
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.
Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing market price on January 13, 1995):
$535,272,000.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock (as of January 13, 1995): Common Stock, $.01 Par Value -
28,933,599 shares.
Documents Incorporated By Reference
Portions of the Proxy Statement for the 1995 Annual Meeting of Stockholders
are incorporated by reference into Part III.
PART I
Item 1. BUSINESS
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Background
SafeCard Services, Incorporated ("SafeCard" or the "Company") is an
information based services company that delivers added value offerings to
identifiable high growth markets and serves over 150 credit card issuers and
more than 13 million subscribers. The Company has embarked on a
diversification program designed to transform itself from a single unit
credit card enhancement provider into an innovative marketing and servicing
organization operating through multiple strategic business units.
SafeCard is a Delaware corporation organized in 1969. During 1992, the
Company relocated its headquarters and operational facility from Ft.
Lauderdale, Florida to Cheyenne, Wyoming. The Company's executive offices
are currently located at 3001 E. Pershing Blvd., Cheyenne, Wyoming, 82001,
and its telephone number is (307) 771-2700. The Company has announced its
intention to officially relocate its corporate headquarters from Cheyenne,
Wyoming to Jacksonville, Florida in May 1995 following its Annual Meeting of
Stockholders. This move will not impact the operational facility in
Cheyenne. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 6 of Notes to Consolidated
Financial Statements under Item 8. Financial Statements and Supplementary
Data.
SafeCard has historically been in the business of selling subscriptions
by mail and telephone for continuity services that it provides to
subscribers. Continuity services are services provided pursuant to
subscriptions which typically continue annually or periodically unless
canceled by the subscriber. Subscriptions are primarily sold to credit
cardholders through arrangements with credit card issuers, including banks
and financial services companies, major oil companies, retail department
stores and others. Subscriber acquisition material printed for the Company
that describes its services and how to subscribe is inserted in the credit
card issuer's monthly billing statements or mailed by the Company directly to
credit cardholders. Credit cardholders are also asked to subscribe by means
of telemarketing calls. Subscription fees of $15 to $45 are generally
billed to subscribers' credit card accounts and remitted to the Company by
the credit card issuer.
The Company's principal service is credit card registration and loss
notification ("Hot-Line"), whereby the Company gives prompt notice to credit
card issuers upon being informed that a subscriber's credit cards have been
lost or stolen. Other continuity services offered by the Company include
those related to fee-based credit cards, reminder services, a personal credit
information service and a discount travel service. Certain of the Company's
services include incidental insurance coverage underwritten by its insurance
subsidiary.
In 1993 and 1994, the Company also began placing greater emphasis on the
development of new products and services and additional lines of business.
The Company's strategy is to diversify and broaden its scope to become an
innovative marketing and servicing organization operating through multiple
strategic business units. To accomplish this strategy, the Company named a
new senior management team, expanded and enhanced the infrastructure of the
Company and accelerated the development of new products and services and new
areas of business. In 1994, the Company incurred significant research and
product development expenses in developing these new products and new areas
of business. While expansion of the business and the development of new
areas of business has not contributed significantly to revenues in 1994, the
Company expects to begin recognizing revenues from certain of these new
products and businesses in 1995.
In September 1994, SafeCard acquired Wright Express Corporation ("Wright
Express"), a leading provider of information processing, management and
financial services to petroleum companies and transportation fleets in the
United States. The Wright Express Universal Fleet Card is the nation's most
widely accepted electronic fleet fueling credit card and is accepted at
approximately 90,000 fueling locations.
SafeCard is also developing a credit card marketing and servicing
business. In November 1994 the Company entered into an exclusive multi-year
marketing and servicing agreement with the PGA Tour. The Company will manage
the PGA Tour Partners program which will include a co-branded credit card
funded by SunTrust BankCard, N.A. The Company will also provide card
acquisition and customer servicing to SunTrust. The Company hopes to expand
this business by partnering with other national brands.
For information regarding the Company's results of operations and
financial condition, see Item 6. Selected Financial Data, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Item 8. Financial Statements and Supplementary Data.
References herein to the years 1994, 1993 and 1992 refer to the
Company's fiscal years ended October 31.
Credit Card Enhancement Services
Hot-Line Credit Card Loss Notification Service
Hot-Line is the Company's original service and has been its major source
of revenue and earnings. Through the Hot-Line program, a subscriber
registers his/her credit cards with the Company. If a subscriber notifies
the Company of the loss or theft of his/her credit cards, the Company
retrieves (or, if cards have not previously been registered, obtains) the
necessary card registration information, and then promptly notifies the
credit card issuers of the loss, simultaneously requesting replacement. The
Company generally charges an annual membership fee of $15 for a single year
subscription. The Company also sells multi-year subscriptions, generally
for three year periods at a price of $39 to $45, which provide for payment
in advance of the full subscription price. The Company sometimes offers to
subscribers an initial trial period at either no fee or a nominal fee.
In most states Hot-Line includes liability insurance against fraudulent
use of credit cards, issuance of fraud-deterrent stickers to be affixed to
credit cards, notification to card issuers of a subscriber's address change,
and in some instances, issuance of an emergency medical card containing a
microfilm history of certain medical data provided by the subscriber. The
Company will also wire a $100 to $1,500 cash advance or send an airplane
ticket to subscribers under certain conditions. Such advances and the cost
of such tickets are typically repayable in thirty days. Other services
available to subscribers include a nationwide toll-free message service
(similar to an answering service) and a lost key return service.
During 1994, 1993 and 1992, Hot-Line provided 70%, 73% and 73%,
respectively, of the Company's subscription revenue. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Fee-Based Credit Card Services
The Company, through arrangements with certain credit card issuers,
markets fee-based credit cards ("Fee Card") on behalf of the issuer,
generally to the issuer's existing no fee cardholders. For an annual fee of
$15 to $25, cardholders who elect to subscribe to the fee-based credit cards
typically receive a new credit card (to replace the no fee card) and various
services such as credit card registration, discounts on travel, insurance
and other services provided or obtained by the Company. The card issuer is
responsible for the collection of all charges made to the credit card and
may also provide additional services to the cardholder. During 1994, 1993
and 1992, Fee Card programs provided 15%, 13% and 12%, respectively, of the
Company's subscription revenue. See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Reminder Services
The Company also offers date reminder services ("Reminder Services")
which provide subscribers, by mail, a monthly computer-generated reminder
listing personal dates and events registered by the subscriber in addition
to standard holidays. Subscribers add dates and events as desired, either by
mail or by calling the Company's operations center. The Reminder Services
include either a large plastic-laminated wall calendar, and/or a personal
Desk Appointment Book and/or a Pocket Appointment Book. During 1994, 1993
and 1992, Reminder Services provided less than 10% of the Company's
subscription revenue.
CreditLine Services
CreditLine is a personal credit information service. Subscribers
receive a comprehensive personal credit report biography either annually or
upon request. The subscriber's credit information is obtained from national
credit bureaus and reorganized into a user-friendly format. The annual fee
is typically $29. The Company also sometimes markets CreditLine in
conjunction with other services at higher prices. The credit reporting
business is subject to existing regulation, as well as possible future
regulation. During 1994, 1993 and 1992, CreditLine Services provided less
than 10% of the Company's subscription revenue.
The Company began marketing CreditLine in 1989. The Company marketed
CreditLine pursuant to an agreement (the "CreditLine Agreement") with
CreditLine Corporation, a corporation owned by Peter and Steven J. Halmos,
the Company's co-founders, and their families. Profits or losses are shared
50% by the Company and 50% by CreditLine Corporation. In June 1993, the
Company was notified by CreditLine Corporation that the license agreement
under which the Company markets certain credit information products and
services known as CreditLine would not be renewed effective November 1, 1993.
However, the Company believes it has certain continuing marketing rights
under the license agreement. The CreditLine Agreement is the subject of
litigation between Peter Halmos and related entities and the Company. See
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes 12 and 14 of Notes to Consolidated Financial
Statements under Item 8. Financial Statements and Supplementary Data.
Discount Travel Service
The Company offers a discount travel service, either separately or in
conjunction with other programs. During 1994, 1993 and 1992, this service
provided less than 10% of the Company's subscription revenue.
Subscriber Acquisition
The Company sells subscriptions for its products and services primarily
through arrangements with credit card issuers to consumers who use credit
cards. The Company's subscriber acquisition strategy includes direct mail
(generally "Solo Mailings" and "Billing Inserts") and telephone sales. The
Company's subscriber acquisition campaigns are typically based on
internally-developed strategies, research, formats, copy and graphics and
often include multiple solicitations within an overall strategy.
The Company's Solo Mailings are generally those created and mailed
directly by the Company to holders of credit cards from listings supplied to
the Company by the issuers of such credit cards. The printing is typically
done by others under contract with SafeCard. While Solo Mailings vary in
type and content, they generally include a descriptive brochure, a letter
and other subscriber acquisition materials, as well as a postage-paid return
subscription form. Each Solo Mailing typically must be approved by the
credit card issuer and generally contains materials (i.e., letter, envelope,
etc.) bearing the credit card issuer's name and logo.
Billing Inserts are generally created by the Company and printed by
others under contract and are inserted in the monthly billing statements of
credit card issuers. Billing Inserts have the advantage of low cost
(because postage is generally paid by credit card issuers). Each Billing
Insert mailing typically must be approved by the credit card issuer. Due to
the comparatively low cost of Billing Inserts and the limitation on the
number of inserts which may be placed in any single billing statement, there
is intense competition for insert space among providers of credit card
enhancements.
The current average cost of Solo Mailings is approximately $230 per
thousand pieces of mail, as compared with about $30 per thousand pieces for
Billing Inserts. While Solo Mailings are more costly, primarily due to the
fact that the Company pays the postage, Solo Mailings typically generate a
higher response rate. In addition, Solo Mailings may be sent to all
cardholders of a card issuer, whereas Billing Inserts are mailed only to
cardholders who are receiving a statement in the month of insertion. A U.S.
postal rate increase takes effect in 1995. Since postage represents the
largest component of direct mail cost, this will have a direct impact on the
Company by increasing subscriber acquisition costs.
The Company also sells subscriptions (primarily Hot-Line) by telephone.
Although the cost of telephone sales is typically higher, as compared to
Solo Mailing and Billing Inserts, the response rates are generally higher
and the initial subscription period for telephone sales is often for more
than one year, with payment to the Company in advance. Mailings result in
both single year and multi-year subscribers, with a larger percentage being
single year.
During 1994, 1993 and 1992, approximately 50%, 54% and 58%,
respectively, of all subscriptions for Hot-Line were acquired through
telephone sales. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Subscriber acquisition costs are the Company's largest expense.
Subscriber fees are the primary source of revenue. The relationship of
these costs to subscription revenues is dependent on a variety of factors
including prices, net response rates (gross enrollments less cancellations),
marketing costs and renewal rates. These factors are affected by economic
conditions, interest rates, the number of credit cards in use, demographic
trends, consumers' propensity to buy, the degree of market penetration and
the effectiveness of subscriber acquisition concepts, copy and marketing
strategies. In addition, cardholders of certain credit card issuer clients
respond more favorably than others to similar promotions. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Relationships with Credit Card Issuers
The Company acquires its subscribers primarily through contractual
arrangements with credit card issuers (including banks and financial
services companies, major oil companies, retail department stores and
others) for the mail and telephone sales of its products and services to the
issuers' credit card customers. The Company also provides, to a limited
extent, on a wholesale basis, its services to large membership groups which
are affiliated with credit card issuers, such as oil company travel clubs.
New marketing with particular credit card issuers varies from year to year
based on both the Company's and the credit card issuer's strategies as well
as contractual requirements.
The Company has written agreements with a few large credit card issuers
which account for a large percentage of its subscription revenue.
Termination of any of these contracts would adversely affect the Company.
Contracts with Citicorp (South Dakota), N.A. and related entities
contributed 30%, 34% and 37% of the Company's consolidated subscription
revenue in 1994, 1993 and 1992, respectively. The Company has had contracts
with Citicorp since 1981. The principal Citicorp contract, as amended,
expires December 31, 1999. Citicorp has a right to terminate the contract
in the event of the sale of a majority of the shares of the Company to
specified credit card issuers, to banks and their corporate affiliates and to
entities that do not have equity of at least $25 million.
Contracts with Sears, Roebuck and Co. contributed approximately 12% and
11% of the Company's subscription revenue during 1994 and 1993, respectively
(and less than 10% in 1992). The agreement, which contains a provision for
cancellation without cause upon 90 days notice, is subject to renewal
annually.
The Company's contracts with credit card issuers generally (though not
always) have a one-year or two-year initial term, provide for automatic
annual renewal thereafter unless canceled by either party, and are subject
to the fulfillment of certain contractual obligations. These contracts
generally provide for the mail and/or telephone sales of subscriptions to
the issuer's credit card customers, for the billing (to the subscriber's
credit card account) and collection of subscription fees by the card issuers
and for payment to the card issuers of commissions or fees. In certain
cases, the Company enters into profit-sharing arrangements with credit card
issuers, in which the Company pays compensation to credit card issuers based
on profitability (as defined in the agreement with the credit card issuer) in
lieu of commissions.
Authorization for each mailing and/or telephone sales campaign typically
must be obtained by the Company from the card issuer, although some
contracts contain minimum marketing volume requirements. The Company's
ability to obtain such authorization is critical and is dependent on many
factors, including the business strategies of the credit card issuer
clients; the volume, profitability and efficiency of subscriber
acquisitions; quality and efficiency of the Company's subscriber servicing;
and competition for the limited subscriber acquisition volume which may be
allowed by any one issuer. Additional important factors in the maintenance
of these contracts are the Company's knowledge of the differing operational
requirements of each credit card issuer, including compatible data
processing software, innovative subscriber acquisition strategies,
operational efficiency and financial stability.
Credit card issuers from time to time may adopt a change in business
strategy which may affect the Company. For example, in October 1993, Shell
Oil Company and a major bank announced the joint marketing of a co-branded
credit card. In addition, certain consolidations of credit card issuers and
market share shifts have occurred and may continue to occur. To date, the
Company has not noted any material impact as a result of these changes in
business strategy.
The Company generally does not have proprietary or other rights to the
issuers' credit card customer lists should a credit card issuer terminate
its contract with the Company. In that event, with the majority of issuers,
the Company would continue to provide services to, and receive its revenue
from, existing subscribers after termination. The Company's right to
continue to bill existing subscribers after termination of the client
contract generally continues as long as there is an active credit card or
until such subscribers cancel their subscriptions or for certain
contractually specified periods of time.
Competition
Competition in securing contracts with credit card issuers for sales of
subscriptions to the issuers' cardholders -- i.e., the third party endorsed
segment of the credit card industry -- is intense. Among the factors
affecting the outcome of such competition are the quality and reliability of
the services to be offered, subscriber acquisition strategy and expertise
(which is highly dependent upon creative talents), operational capability,
reputation, financial stability of the company supplying the services, the
confidence of credit card issuers in management of the Company and the
compensation or fee paid to the credit card issuer. Additionally, the
Company must maintain security over credit card and credit data of which it
has custody.
The Company believes it has greater than 50% of the market share (within
the United States) for credit card registration. Competitors in the credit
card registration business include Signature, CUC International, American
Express and others. Fee-based credit cards are sometimes directly marketed
and/or serviced by certain credit card issuers. Certain national credit
bureaus, as well as CUC International, offer or have offered personal credit
information services in competition with CreditLine. CreditLine is dependent
upon the purchase of consumer credit data from such credit bureaus and there
is no other comparable source for such data. In addition, some of the new
products and services which the Company may be exploring, developing or
testing, are currently marketed by competitors. The Company's competition is
not limited to companies offering similar products and services. Since the
Company competes for "advertising space" of various credit card issuers, it
competes with companies who market other products and services through
credit card issuers. Certain of the Company's competitors may have greater
resources and/or other competitive advantages.
The Company's competition is not confined to any particular region of
the country.
Wright Express Corporation
On September 14, 1994 the Company acquired 100% of the outstanding
common stock of Wright Express, a leading provider of enhanced information
services to oil companies and commercial transportation fleets. The
acquisition of Wright Express was accounted for under the purchase method
and, accordingly, the results of operations of Wright Express are included
in the consolidated results of operations of the Company from the date of
acquisition. See Note 2 to Notes to Consolidated Financial Statements under
Item 8. Financial Statements and Supplementary Data.
Wright Express Universal Fleet Card
Wright Express provides transaction and information processing services
to commercial fleet owners through a national credit card network program,
the Wright Express Universal Fleet Card (the "WexCard"). These services are
generally provided through fueling stations which are owned and operated by
retail petroleum merchants. The WexCard is accepted at approximately 90,000
fueling locations in the United States including those operated by Mobil,
Texaco, Exxon, Shell and Getty. Wright Express also manages private label
fleet charge cards and co-branded WexCard fleet fueling cards for large fleet
operators such as BellSouth (its largest fleet customer with over 26,000
vehicles), DHL, Airborne Express, Federal Express and Sears.
In providing services through the WexCard, Wright Express generates
receivables from its fleet customers. These receivables relate to payments
due from fleet customers for purchases at fueling stations that accept the
WexCard. These receivables are funded through a revolving credit agreement
and payables to retail petroleum merchants and are the cause of the
significant increase in consolidated receivables over the prior year. See
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Vehicle Analysis Report
In addition to the convenience of electronically charging fuel
purchases, the WexCard includes a proprietary "Vehicle Analysis Report"
designed to assist fleet managers who monitor and control expenses. The
report can be generated on a vehicle and/or driver specific basis providing
information to managers regarding both driver and vehicle performance.
WexIndex
WexIndex is a new product being developed by Wright Express. This
product will make use of the vast amount of fuel and transaction data
accumulated by Wright Express on a daily basis. Wright Express will
analyze, interpret and format this data into a series of ongoing reports so
that economists, fleet managers, oil companies and government agencies can
make accurate projections of fuel consumption and retail prices.
Competition
Wright Express operates in a market niche with little direct
competition. Competition primarily exists in the form of oil company
credit cards. The key factor in distinguishing Wright Express from other
credit card issuers that are accepted by retail petroleum merchants is the
array of ancillary information processing services that are offered in
addition to the basic credit card service
New Products and Businesses Under Development
In 1993 and 1994, the Company began placing greater emphasis on the
development of new products and services and areas of business. The Company
is focusing on four areas which management believes will be high growth
sectors of the economy--security and convenience, travel and leisure,
consumer direct merchandising, and financial management and planning.
Consumer Marketing and Servicing
Consistent with this focus, the Company entered into an exclusive multi-
year licensing, marketing and servicing agreement in 1994 with the PGA Tour.
Under the agreement, the Company will manage and expand the existing PGA
Tour Partners program. Under the program, the Company, in conjunction with
the PGA Tour, will offer access to PGA Tour events, special members only
tournament play, golf clinics instructed by PGA Tour players and other
services.
In addition, the Company will offer a co-branded PGA Tour Partners
credit card issued through SunTrust BankCard, N.A. The Company will be
responsible for card acquisition and customer servicing while SunTrust will
fund the card receivables.
Although it is the Company's desire to add additional brands,
competition is significant in the rapidly growing credit card marketing and
servicing industry. There can be no assurance as to the success of these
ventures.
Other New Products and Services
Other new products and services are in various stages of development.
It should be noted that a risk exists that new products and services being
developed and test marketed may not be successful or may never be brought to
market. During 1994, the Company recorded research and development costs of
$7,682,000 in connection with the development of new products and areas of
business.
In addition to the new services being developed above, the Company is
continuously seeking and evaluating acquisition candidates that will
complement and enhance the Company's strategic focus.
Employees
As of December 31, 1994, the Company employed 779 persons (including 31
part-time employees), as compared to 435 employees (including 12 part-time
employees) as of December 31, 1993.
Other Information
Printing of subscriber acquisition materials is generally contracted to
commercial printers. The Company copyrights most of this material and
registers its trademarks. Telephone sales are made using the services of
independent contractors with the Company developing and dictating sales
strategies, methods and controls. These strategies, methods and controls
are subject to approval by the credit card issuers. Currently, the Company
has contracted with several independent telemarketing contractors, with one
such contractor accounting for the majority of the volume, to execute its
telephone sales using scripts and procedures provided by the Company. There
are other independent telephone sales contractors who could provide similar
services for the Company.
Certain copyrights and trademarks of the Company, such as the names
"Hot-Line" and "Wright Express Universal Fleet," may be material to its
business. The earliest expiration date of any such copyright is 2002.
Various trademarks of the Company are registered under applicable federal
law. These trademarks, which expire periodically, are subject to renewal,
and the Company presently intends to renew all such trademarks. The
agreement pursuant to which the Company marketed CreditLine provided that
logos, trademarks, tradenames, service marks and copyrights do not belong to
the Company. This agreement is subject to litigation. In June 1993, the
Company was notified by CreditLine Corporation, that the license agreement
under which the Company markets certain credit information products and
services would not be renewed on November 1, 1993. See Note 14 of Notes to
Consolidated Financial Statements under Item 8. Financial Statements and
Supplementary Data and Item 13. Certain Relationships and Related
Transactions.
No security systems/procedures are foolproof. Due to the nature of the
Company's business, many aspects of the Company's operations involve some
degree of security risk. The Company views security as a significant
function, a breach of which could have a material adverse impact on the
Company. As such, the Company places a great deal of emphasis on the
security of its assets and information.
The Company's business is not generally seasonal in nature, except that
the Company avoids subscriber acquisition campaigns prior to and during
certain holiday periods, i.e., Thanksgiving, Christmas and Independence Day.
The Company's cash receipts and disbursements are also related to the timing
of advertising campaigns.
All raw materials, primarily paper, plastic and printer's ink, are
readily available.
Subscribers to the Company's services are entitled to receive the
benefits of their subscriptions immediately; consequently, the Company has
no backlog.
Compliance with Federal, State and local laws and regulations which have
been enacted or adopted with respect to protecting the environment is not
expected to have a material impact on capital expenditures or operations of
the Company.
The Company's operations for mail and telephone sales are conducted on
a nationwide basis and the Company does not derive its revenue from any
particular geographic area of the United States. During the period 1992
through 1994, the Company did not conduct any significant operations, nor
derive any material portion of its sales or revenue, from subscribers in
foreign countries.
Item 2. PROPERTIES
During 1992, the Company relocated its headquarters and operational
facility from Ft. Lauderdale, Florida to Cheyenne, Wyoming where it owns and
occupies an approximately 115,000 square foot building on approximately 17
acres. The Company is currently expanding its Cheyenne facility, adding
approximately 28,000 square feet. See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
During 1994, the Company leased approximately 60,000 square feet of
office space and operational facilities in Jacksonville, Florida for certain
executive officers and personnel associated with the development of new
businesses. Two leases totaling an additional 50,000 square feet in
Jacksonville, Florida, were entered into in November and December 1994. In
December 1994, the Company announced its intention to move its corporate
headquarters to Jacksonville, Florida in May 1995. This move will not
impact the Cheyenne operational facility. Also in December 1994, the Company
announced that it had agreed in principle to purchase the American Express
Regional Operating Center in Jacksonville, Florida to serve as headquarters
and an operations center. The building has approximately 350,000 square feet
located on approximately 60 acres and will eventually replace the 110,000
square feet of leased space.
Wright Express currently leases a 33,000 square foot building in
Portland, Maine which serves as its headquarters and operational facility.
Item 3. LEGAL PROCEEDINGS
The Company is defending or prosecuting five complex lawsuits against
Peter Halmos, former Chairman of the Board and Executive Management
Consultant to the Company, and parties related to him. See Note 14 of Notes
to Consolidated Financial Statements under Item 8. Financial Statements and
Supplementary Data.
The Company is involved in certain other claims and litigation, which
are not currently considered material.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades on the New York Stock Exchange under
the symbol "SSI". The following table sets forth the quarterly high and low
sales prices of SafeCard's common stock as reported on the New York Stock
Exchange as well as cash dividends paid during the two years ended October
31, 1994:
Dividend
Quarter Ended High Low Paid
January 31, 1994 20.75 11.50 $.05
April 30, 1994 20.00 16.00 $.05
July 31, 1994 19.00 14.13 $.05
October 31, 1994 17.00 13.75 $.05
January 31, 1993 10.38 8.00 $.05
April 30, 1993 13.13 9.88 $.05
July 31, 1993 13.75 11.63 $.05
October 31, 1993 14.00 11.75 $.05
The closing price of the Company's stock on December 30, 1994 was $18.875.
The Company had 942 stockholders of record on December 30, 1994.
<TABLE>
Item 6. SELECTED FINANCIAL DATA
<CAPTION>
Selected Statement of Earnings Data (In thousands, except per share data)
Year ended October 31, 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Subscription revenue, net $ 173,434 $ 156,600 $ 146,265 $ 140,557 $ 124,133
Interest and other income(2) $ 15,652 $ 10,526 $ 11,916 $ 11,327 $ 10,119
Earnings before cumulative
effect of accounting change(1)(4) $ 18,021 $ 31,477 $ 22,498 $ 29,713 $ 26,863
Net earnings(1)(4) $ 20,021 $ 31,477 $ 22,498 $ 29,713 $ 26,863
Earnings per share(1)(4) $.70 $1.10 $.75 $1.02 $.93
Weighted average number of
common and common
equivalent shares(3) 28,411 28,572 30,158 29,325 29,240
Cash dividends per share $.20 $.20 $.15 $.15 $.125
Selected Balance Sheet Data(5) (In thousands)
October 31, 1994 1993 1992 1991 1990
Total cash and cash
equivalents and investments(3) $ 184,533 $170,039 $187,301 $178,670 $155,860
Total assets $ 471,833 $378,287 $377,418 $351,566 $324,726
Stockholders' equity(3) $ 217,592 $157,695 $165,498 $144,903 $199,496
</TABLE>
(1) During 1994, the Company recorded a $2,000,000 benefit ($.07 per share)
resulting from a change in its method of accounting for income taxes.
(2) During 1994, the Company recognized $4,257,000 of income from the
settlement of two lawsuits. In addition, Wright Express contributed
$2,107,000 in other operating revenues in 1994. During 1992, the Company
recognized $550,000 of income from the settlement of a lawsuit.
(3) During 1993, the Company repurchased approximately 3,470,000 shares of
its common stock at a cost of approximately $41,699,000 (see Liquidity and
Capital Resources under Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations).
(4) During 1992, the Company recorded a pre-tax charge of $17,500,000
against earnings in connection with its estimated costs of relocation from
Ft. Lauderdale, Florida to Cheyenne, Wyoming.
(5) The Company has no long-term debt, but did record, in periods ended
prior to October 31, 1992, an obligation arising from the Ft. Lauderdale
Lease (see Notes 12 and 14 of Notes to Consolidated Financial Statements
under Item 8. Financial Statements and Supplementary Data).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
References herein to the years 1994, 1993 and 1992 refer to the
Company's fiscal years ended October 31. On December 14, 1994 the Company
announced that it would change its fiscal year-end from October 31 to
December 31. The change in year-end was approved by the Board of Directors
on December 8, 1994.
Results of Operations
Subscription Revenue, Net
Year ended October 31, 1994 1993 1992
$173,434,000 $156,600,000 $146,265,000
The Company's subscription revenue is derived from payments by
subscribers for its credit card enhancement continuity services and is
reported net of an allowance for cancellations. Billings for subscriptions,
as well as expenditures for subscriber acquisition costs and commissions, are
deferred and amortized to revenue or expense, as applicable. Billings and
commissions are amortized over the related subscription periods while
subscriber acquisition costs are amortized over the estimated future periods
benefited (estimated life of the subscriber). For a description of the
Company's accounting policies see Note 1 of Notes to Consolidated Financial
Statements under Item 8. Financial Statements and Supplementary Data.
Subscription revenue, net increased 11% to $173,434,000 in 1994,
compared to $156,600,000 in 1993. This increase was due to a combination of
a price increase for certain Hot-Line subscriptions beginning in 1993 and an
increase in the number of subscribers to the Company's Hot-Line, Fee Card
and CreditLine products. Subscription revenues, net increased by 7% in 1994
over 1993 as a result of an increase in the average number of subscribers to
the Company's principal enhancement services. The price change, which began
to take effect in 1993, accounted for a 4% increase in subscription
revenues, net in 1994 compared to 1993. This price change was or will be
effective for subscribers at varying dates depending on the timing of
adoption by credit card issuers and the timing of renewals.
Subscription revenue, net increased 7% in 1993 compared to 1992. This
increase was primarily due to an increase in the number of Hot-Line
subscribers as well as growth in Fee Card and CreditLine programs.
In 1994, 1993 and 1992 Hot-Line accounted for 70%, 73% and 73%,
respectively, of subscription revenue, net. In 1994, 1993 and 1992, Fee
Card represented 15%, 13% and 12%, respectively, of the Company's net
subscription revenue. CreditLine and other services individually accounted
for less than 10% of subscription revenue, net.
In June 1993, the Company was notified by CreditLine Corporation, a
company owned by Peter Halmos and Steven J. Halmos, the Company's co-
founders, and their families, that the license agreement under which the
Company markets certain credit information products and services known as
CreditLine would not be renewed effective November 1, 1993. Notwithstanding
its termination, the Company believes that it has certain continuing
marketing rights under the CreditLine Agreement. The CreditLine Agreement,
including the continuing marketing rights, is the subject of litigation
between the Company and Peter Halmos (see Note 14 of Notes to Consolidated
Financial Statements).
In July 1993, the Company discontinued providing certain continuity
services on a wholesale basis (i.e. flat fee per customer with the Company
incurring no marketing costs or commissions) to a group of cardholders of
one of its card issuer clients. The decrease in earnings before income taxes
in 1994 as compared to 1993 due to the elimination of the wholesale program
was approximately $1,600,000. Management expects that the elimination of
the wholesale program will not affect the comparability of earnings in
future periods.
Renewal rates for single-year Hot-Line subscriptions were 76%, 75% and
77% for 1994, 1993 and 1992, respectively. Multi-year renewal rates for
Hot-Line subscriptions (primarily three year subscriptions) were 48%, 50%
and 45% for the same periods. Renewal rates for Fee Card subscriptions
(primarily marketed as single-year subscriptions) were 81%, 75% and 79% for
1994, 1993 and 1992, respectively.
Renewal rates of subscribers are affected by a variety of factors
including the mix of subscribers renewing, economic factors, changes in the
credit card industry and certain other factors, which may be beyond the
Company's control. Hot-Line single-year renewal rates have remained
relatively consistent over the last three years, although a slight decline in
1993 may have been a result of the price increase discussed above. The
Company believes that the decrease in Hot-Line multi-year renewal rates in
1994 was the result of 20% fewer subscribers coming up for renewal in 1994
compared to 1993. The computation of renewal rates was therefore more
sensitive to changes in the number of renewing subscribers. In addition,
certain of the Company's large credit card issuers had multi-year renewal
rates slightly lower than in previous periods partially as the result of
subscribers renewing into single-year subscriptions. Renewal rates may also
have been impacted by the price changes previously discussed. The increase
in the Hot-Line multi-year renewal rate in 1993 was primarily due to the
timing of renewals of a large card issuer whose overall renewal rate is above
the overall average for all card issuer clients. In addition, a billing
policy change by a large card issuer resulted in an increase in the multi-
year Hot-Line renewal rate in 1993.
Fee Card renewal rates returned to historical levels in 1994 after the
temporary decline experienced in 1993. The decrease in Fee Card renewal
rates in 1993 compared to 1992 was primarily caused by a large number of
potential renewals of certain retail card issuers which generally renew at
lower rates than petroleum card issuers.
The following table details subscriber activity for 1994, 1993 and 1992:
Beginning New Ending
Period Subscribers Subscribers Cancellations Subscribers
1994 12,043,000 4,877,000 (3,815,000) 13,105,000
1993 11,472,000 4,374,000 (3,803,000) 12,043,000
1992 10,782,000 3,723,000 (3,033,000) 11,472,000
The number of subscribers presented above has been restated from amounts
presented in prior years to exclude free trial subscriptions offered
periodically as a marketing technique. New subscribers represent fee-paying
subscribers obtained through various marketing channels. Cancellations
consist of both voluntary and involuntary membership losses. Voluntary
cancellations result from members electing to discontinue their
subscription. Involuntary cancellations result from the closure of card
accounts or other events beyond the Company's control.
Credit card issuers from time to time may adopt a change in business
strategy which may affect the Company. For example, certain card issuer
clients have changed the marketing emphasis from multi-year to single-year
subscriptions. While this change in marketing emphasis has changed the
product mix, to date, the Company has not noted any material impact on
earnings as a result of these changes or other changes in business strategy.
However, future adverse changes in business strategy by credit card issuers
could have a material impact on the earnings of the Company.
In 1993 and 1994, the Company began placing greater emphasis on the
development of additional products and services to enhance the Company's
existing range of services. The viability of products and services under
development is not assured. New products and services developed and test
marketed are frequently not successful. While the Company believes that
modest growth in Hot-Line subscription revenues through credit card issuers
may be achievable in the future, the Company anticipates that the successful
development of new products and services, new channels of distribution and
the development of new areas of business will become increasingly important
to the future revenue and earnings growth of the Company.
Other Operating Revenue
Year ended October 31, 1994 1993 1992
$2,107,000 ---- ----
Other operating revenue represents revenues derived from the operations
of Wright Express, which was acquired by the Company on September 14, 1994
(see Note 2 of Notes to Consolidated Financial Statements under Item 8.
Financial Statements and Supplementary Data).
Wright Express provides transaction and information processing services
to commercial fleet owners primarily through a national credit card network
program. These services are generally provided through fueling stations
which are owned and operated by retail petroleum merchants. Substantially
all receivables from transportation fleet services represent the cost of
products purchased by the fleet owners. Other operating revenue represents
transaction fees deducted from amounts remitted to the retail merchants and
annual fees charged to fleet customers.
Wright Express is developing a new product, the WexIndex, which will
make use of the fuel and transaction data gathered on a daily basis. Wright
Express will analyze, interpret and format this data into reports made
available to economists, fleet managers, oil companies and government
agencies for the purpose of projecting fuel consumption and retail pricing.
Interest Income
Year ended October 31, 1994 1993 1992
$8,421,000 $8,736,000 $10,022,000
Interest income decreased $315,000 or 4% in 1994 compared to 1993. The
decline reflects a strategy to shorten the overall maturity of the portfolio
which resulted in lower yields. This strategy is consistent with the
Company's plans to redeploy its assets into new products and businesses. The
decline was partially offset by rising interest rates during the latter half
of the year.
In 1993 interest income decreased $1,286,000 or 13% when compared to
1992. This decrease is primarily due to lower cash and investment balances
in 1993 as a result of the Company's repurchase of its common stock held in
treasury (see "Liquidity and Capital Resources").
Other Income
Year ended October 31, 1994 1993 1992
$5,124,000 $1,790,000 $1,894,000
Other income increased $3,334,000 or 186% in 1994 compared to 1993. The
Company recognized $4,257,000 as income from the settlement of two lawsuits
during 1994. This litigation settlement income was offset by a $684,000
decrease in gains recognized on the sale of investments.
Other income decreased $104,000 or 5% in 1993 compared to 1992. The
decrease is due to a $550,000 gain from a litigation settlement in 1992
offset by a $267,000 increase in gains from sales of investments in 1993
over 1992.
Subscriber Acquisition Costs
Year ended October 31, 1994 1993 1992
$105,981,000 $95,248,000 $86,828,000
As a percentage of
subscription revenue... 61% 61% 59%
The cost of subscriber acquisition, which represents the amortization of
deferred subscriber acquisition costs and commissions, increased
$10,733,000, or 11%, in 1994 and $8,420,000, or 10%, in 1993 primarily
because of continuing increases in expenditures in recent years made to
acquire new subscribers. These expenditures increased 6% and 18% in 1994
and 1993, respectively (see "Expenditures of Subscriber Acquisition Costs
and Commissions"). The relationship of these costs to subscription revenues
is dependent on a variety of factors including subscription fees, net
response rates (gross enrollments less cancellations), marketing costs and
renewal rates. These factors are effected by economic conditions, interest
rates, the number of credit cards in use, demographic trends, consumers'
propensity to buy, the degree of market penetration and the effectiveness of
subscriber acquisition concepts, copy and marketing strategies.
In addition, certain cardholder files respond more favorably than others
to similar promotions. In 1993, the Company noted a decline in certain net
response rates, primarily in telemarketing, which have leveled out in 1994
(see "Expenditures for Subscriber Acquisition Costs and Commissions"). This
decline, as well as the discontinuance of the wholesale services discussed
under "Subscription Revenue, Net," has increased subscriber acquisition
costs as a percentage of subscription revenue and may also cause increases
in future years.
A United States postal rate increase of 10% becomes effective in 1995.
Since postage represents the largest component of direct mail costs, this
will have a direct impact on the Company by increasing subscriber
acquisition costs. The Company is working with its card issuer clients to
better target its direct mailings and thereby reduce the impact of the
postal rate increase.
General, Administrative and Service Costs
Year ended October 31, 1994 1993 1992
$43,324,000 $29,433,000 $24,949,000
General, administrative and service costs increased $13,891,000, or 47%,
in 1994 compared to 1993. This increase is attributable to a $1,238,000
increase in legal fees, $1,676,000 of expenses attributable to the
operations of Wright Express since acquisition and an investment in Company
infrastructure (i.e., personnel and operations) necessary to support the
planned growth of the Company and the reorganization of the Company's
operations into strategic business units.
General, administrative and service costs increased $4,484,000, or 18%,
in 1993 compared to 1992. The increase was primarily the result of a
$5,400,000 increase in legal fees in 1993 over 1992 which were partially
offset by a decrease in management fees.
Legal fees in 1994 and 1993 related primarily to the Company's
litigation with Peter Halmos (see "Pending Litigation" and Note 14 of Notes
to Consolidated Financial Statements under Item 8. Financial Statements and
Supplementary Data).
Research and Product Development Costs
Year ended October 31, 1994 1993 1992
$7,682,000 ---- ----
As described under "Subscription Revenue, Net," the Company is placing
greater emphasis on the development of new products and services and the
development of new areas of business. The Company's strategy is to
diversify and broaden its scope to become an innovative marketing and
servicing organization operating through multiple strategic business units.
While the development of new products and services and the development of
areas of new business has not contributed significantly to revenues in 1994,
the Company has incurred certain direct expenses in developing these new
products and areas of business.
The Company is focusing on three strategic objectives: improvement of
the core business, internal development of new businesses and growth by
acquisitions of businesses within the Company's strategic vision. In
connection with improvement of the core business, the Company is redesigning
its marketing materials, focusing its targeting of customer groups,
emphasizing improved subscriber retention, and obtaining new card issuer
clients. In 1994, the Company entered into an agreement with Household
Credit Services to market selected Company programs to cardholders of the
popular General Motors MasterCard. In addition, the Company recently entered
into an agreement with Capital One Financial Corporation (formerly a part of
Signet Banking Corporation) to market Company programs to Capital One
cardholders. Discussions are continuing with other large card issuers.
In 1994 the Company announced a partnership with the PGA Tour and
entered into an exclusive multi-year licensing, marketing and servicing
agreement that provides for the Company to assume management of the PGA Tour
Partners program. This program allows golfers and PGA Tour fans to become
directly involved in the PGA Tour. Under the Company's direction, the PGA
Tour Partners program, which currently has approximately 85,000 members, is
expected to be significantly expanded and include special access to PGA Tour
events and tournaments and a unique co-branded PGA Tour credit card. In
December 1994, the Company entered into an agreement with SunTrust BankCard,
N.A., to issue the co-branded credit card. The Company will be responsible
for card marketing, acquisition and servicing while SunTrust will fund the
credit card receivables. The Company will begin realizing revenues from
this program in 1995.
The Company's new product and business development, as well as future
acquisitions, will be concentrated in four areas: security and convenience,
travel and leisure, consumer direct marketing and financial planning and
management. The first acquisition under this focus was Wright Express. The
Company is seeking additional acquisition candidates which operate within
these areas and complement the Company's long-term strategy. The Company
also expects to expand its credit card marketing and servicing business by
partnering with other national brands. However, there is no assurance as to
the success of such ventures.
Restructuring Costs
Year ended October 31, 1994 1993 1992
$7,900,000 ---- ----
In April 1994, the Company announced a reorganization of its operations
and named a new senior management team. As part of the reorganization, nine
senior executives left the Company and management decided to close the Fort
Lauderdale sales office. As a result of this reorganization, the Company
recorded a restructuring charge of $3,500,000 to cover severance agreements
and the termination of the lease. The Company also recorded a charge of
$4,400,000 paid to Steven J. Halmos, the Company's co-founder, to terminate
an advisory and consulting contract (see Note 12 of Notes to Consolidated
Financial Statements under Item 8. Financial Statements and Supplementary
Data).
Estimated Relocation Expenses
Year ended October 31, 1994 1993 1992
---- ---- $17,500,000
As discussed in Note 6 of Notes to Consolidated Financial Statements
under Item 8. Financial Statements and Supplementary Data, the Company
physically relocated, over a period of several months during the second half
of 1992, its headquarters and operations center from Ft. Lauderdale, Florida
to Cheyenne, Wyoming, and recorded a $17,500,000 pre-tax charge to earnings
in 1992 in connection with the move.
In December 1994, the Company announced its intention to officially
relocate its corporate headquarters from Cheyenne, Wyoming to Jacksonville,
Florida in May 1995. The move will not impact the operations center in
Cheyenne.
Provision for Income Taxes
Year ended October 31, 1994 1993 1992
$6,178,000 $10,968,000 $6,406,000
Effective November 1, 1993, the Company prospectively adopted Statement
of Financial Accounting Standards No. 109, "Accounting For Income Taxes"
("FAS 109"). The adoption of FAS 109 required a change from the deferred
method to the liability method of accounting for income taxes. The impact
of the adoption of FAS 109 had a cumulative positive effect on the Company's
reported earnings in 1994 of $2,000,000. This positive impact was primarily
the result of deferred income taxes being provided in prior periods at tax
rates higher than those currently in effect.
For information regarding the Company's effective income tax rate and
deferred income tax assets and liabilities see Notes 1 and 10 of Notes to
Consolidated Financial Statements under Item 8. Financial Statements and
Supplementary Data.
Liquidity and Capital Resources
Historically, the Company has generated the cash needed to finance its
operations and growth from its earnings. The Company's primary capital
requirements are to fund subscriber acquisition marketing programs, support
the development of new products and services and fund acquisitions. In
addition, Wright Express requires capital resources to fund receivable
balances on its fleet credit cards.
Cash flow provided by operating activities was $47,046,000 in 1994
compared to $28,845,000 in 1993. The increase in cash flow from operations
is the result of (i) a reduction in taxes paid, net of refunds, of
$24,527,000, principally as a result of recognition of increased compensation
expense for tax purposes from the exercise of non-qualified stock options
during 1994, (ii) a $12,131,000 increase in net cash received from
subscribers, (iii) a net cash contribution from the operations of Wright
Express since the date of acquisition of $4,341,000, and (iv) litigation
settlements received during 1994 of $4,257,000. The net cash contributed
from the operations of Wright Express results primarily from the timing of
the collections of receivables during the interim period since the date of
the acquisition. These increases in cash flow from operations were
partially offset by increases in cash expenditures for subscriber
acquisition, commissions and operations. The increase in net cash received
from subscribers is primarily due to an increase in net billings over the
prior year.
Cash flow provided by operating activities for 1993 was $28,845,000
compared to $19,172,000, in 1992. The increase in 1993 over 1992 is
primarily a result of increases in net cash received from subscribers and
interest received, partially offset by increases in cash expenditures for
subscriber acquisition, commissions and operations.
Cash flow used in investing activities was $48,523,000 in 1994 compared
to $7,714,000 provided by investing activities in 1993. In September 1994,
the Company expended $35,276,000 (net of cash acquired) to purchase Wright
Express. Net acquisitions of property and equipment increased by $7,325,000
in 1994 over 1993, principally to enhance the Company's information
technology platform and improve customer service capabilities. In addition,
the Company is currently expanding and renovating its operations center in
Cheyenne, Wyoming to allow for expected growth and to provide for improved
customer service capabilities. Through October 31, 1994, approximately
$750,000 has been expended by the Company on this project. Expenditures
through February 1995, the anticipated date of completion, are expected to
be approximately $10,000,000.
Cash flow provided by investing activities was $7,714,000 in 1993
compared to cash flows used in investing activities of $20,410,000 in 1992.
In connection with the Company's relocation to Cheyenne, Wyoming in 1992,
the Company made capital expenditures of approximately $6,400,000 to
renovate and upgrade the Cheyenne facility and to purchase equipment for that
facility. Proceeds from sales and maturities of investment securities, net
of purchases, decreased by $22,463,000 from 1993 to 1992. In 1992
additional funds were required to support operations and to finance the
relocation of the Company.
Cash flow provided by financing activities amounted to $16,063,000 in
1994 compared to $41,432,000 used in financing activities in 1993. In 1993
the Board of Directors authorized the Company to repurchase up to 6,000,000
shares of its outstanding common stock through October 31, 1994. During
1994, the Company repurchased approximately 37,000 shares for $483,000. In
1993, the Company repurchased approximately 3,470,000 shares for
$41,699,000.
In 1994 stock options were exercised to acquire approximately 4,934,000
shares of the Company's common stock. Cash received from the exercise of
these options amounted to $24,658,000. In 1993 options were exercised for
the purchase of approximately 960,000 shares contributing $5,380,000 of cash
to the Company. In connection with the increase in the number of options
exercised in 1994, primarily from the exercise of Steven J. Halmos (see Note
12 of Notes to Consolidated Financial Statements under Item 8. Financial
Statements and Supplementary Data), the Company incurred a net operating
loss for tax purposes. As a result of the net operating loss generated in
1994, the Company has applied for a refund of income taxes paid during the
year. Any excess net operating loss not utilized in 1994 may be carried
forward to offset future years' tax liabilities subject to certain
limitations. As a result, the Company has additional net operating loss
carryforwards of $23,117,000 at October 31, 1994 available to offset income
taxes payable in future periods.
At October 31, 1994, the Company had $11,793,000 of revolving debt
outstanding. This debt was assumed in the acquisition of Wright Express
(see Note 7 of Notes to Consolidated Financial Statements under Item 8.
Financial Statements and Supplementary Data) and is used to finance the
operations of that subsidiary. Prior to the acquisition of Wright Express,
the Company did not have any debt outstanding.
Cash flow used in financing activities amounted to $41,432,000 in 1993
compared to $2,733,000 used in financing activities in 1992. This increase
is explained in the preceding paragraphs.
The Company believes that its cash flow from operations and the
Company's cash and investment balances (which totaled $184,533,000, of which
$11,900,000 is restricted, as of October 31, 1994) are adequate to meet the
Company's current liquidity needs.
Billings to Subscribers, Net
Net billings were $189,925,000 in 1994 compared to $173,769,000 in 1993
and $150,495,000 in 1992. The 9% increase in 1994 over 1993 and 15%
increase in 1993 as compared to 1992 was primarily due to the combination of
increases in subscribers and subscription fees as discussed in "Subscription
Revenue, Net."
Expenditures for Subscriber Acquisition Costs and Commissions
Subscriber acquisition expenditures directly relate to the acquisition
of new subscribers through "direct response" type marketing campaigns and
include payments for telemarketing, printing, postage, mailing services,
certain direct salaries and other direct costs incurred to acquire new
subscribers.
Expenditures for subscriber acquisition costs increased $4,312,000, or
7%, in 1994 as compared to 1993. This increase is primarily due to an
increase in the level of direct-mail and telemarketing programs initiated
during the year. However, the rate of increase in expenditures was less
than that in the previous year due to a decline in telemarketing volume which
began in the fourth quarter of 1993 and leveled off in 1994. The decrease
in telemarketing volume is due primarily to reduced volume with certain non-
bank credit card issuer clients. The decrease in volume relates to the
decline in certain net response rates discussed under "Results of Operations
- - Subscriber Acquisition Costs."
Expenditures for subscriber acquisition costs increased $8,652,000, or
16%, in 1993 over 1992. Total subscriber acquisition campaign volume (mail
and telephone contacts) increased in 1993 as compared to 1992. Contributing
to the higher volumes were increases in telemarketing hours of approximately
9% and a 22% increase in direct mail volume in 1993 as compared to 1992. The
increase in telemarketing hours occurred during the first three quarters of
1993, while in the fourth quarter of 1993, telemarketing hours declined 23%
compared to the prior year.
The volume and type of subscriber acquisition expenditures, as well as
enrollments, fluctuate periodically and such fluctuations are not unusual.
Due to timing differences between periods, there may not always be a direct
correlation between subscriber acquisition expenditures and new enrollments
in a particular period. In addition, historical response rates may not be an
indication of future response rates.
Commissions paid to credit card issuers were $52,412,000 in 1994 as
compared to $49,511,000 in 1993 and $41,024,000 in 1992. The 6% increase in
1994 as compared to 1993 and the 21% increase in commissions in 1993 over
1992 were primarily the result of increases in billings (see "Billings to
Subscribers, Net").
Pending Litigation
The Company is defending or prosecuting five complex lawsuits against
Peter Halmos, former Chairman of the Board and Executive Management
Consultant to the Company, and parties related to him (see Note 14 of Notes
to Consolidated Financial Statements under Item 8. Financial Statements and
Supplementary Data). The Company believes that it has proper and meritorious
defenses in these lawsuits which it intends vigorously to pursue. Peter
Halmos is also a plaintiff in two other lawsuits, one against an officer and
one against a director of the Company, in which the Company is not named as
a defendant.
As a result of the Peter Halmos-related litigation, the Company has
incurred substantial legal fees and, to some extent, had a diversion of its
executives' attention. The litigation has also had an impact on the
Company's business. Management is seeking to reduce, to the extent it deems
reasonable and feasible, the adverse effects of these lawsuits, but there
can be no assurance that such efforts will be successful. The Company does
not expect the litigation to affect its ability to service its customers.
Resolution of any or all of the Peter Halmos-related litigation could
have a material impact (either favorable or unfavorable depending on the
outcome) upon the results of operations and financial condition of the
Company.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements Page
Financial Statements:
Report of Independent Accountants 25
Consolidated Balance Sheet as of October 31, 1994 and 1993 26
Consolidated Statement of Earnings for the
three years ended October 31, 1994 27
Consolidated Statement of Changes in Stockholders' Equity for
the three years ended October 31, 1994 28
Consolidated Statement of Cash Flows for the
three years ended October 31, 1994 29
Notes to Consolidated Financial Statements 30-46
Financial Statement Schedules:
For the three years ended October 31, 1994
VIII - Valuation and Qualifying Accounts 53
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of SafeCard Services, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of SafeCard Services, Inc. and its subsidiaries at October 31, 1994
and 1993, and the results of their operations and their cash flows for each
of the three years in the period ended October 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 14 to the consolidated financial statements, the
Company's former Executive Management Consultant has asserted certain claims
against the Company. The ultimate outcome of these claims cannot presently
be determined.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" in November 1993.
PRICE WATERHOUSE LLP
Denver, Colorado
December 5, 1994
SafeCard Services, Inc.
Consolidated Balance Sheet
(in thousands, except share data)
October 31, 1994 1993
Assets
Cash and cash equivalents $ 17,921 $ 3,335
Investment securities 166,704
Securities available for sale 166,612
Receivables, net 42,449 12,846
Income taxes receivable 2,114 5,252
Deferred subscriber acquisition
costs and related commissions 195,397 180,937
Property and equipment, net 16,410 8,420
Excess of cost over fair value
of net assets acquired 28,739
Other assets 2,191 793
------- -------
Total assets $471,833 $378,287
======= =======
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 30,833 $ 14,961
Accrued expenses 24,654 16,573
Subscribers' advance payments 158,554 142,063
Allowance for cancellations 7,656 8,893
Deferred income taxes 20,751 38,102
Notes payable to bank 11,793
------- -------
Total liabilities 254,241 220,592
Stockholders' Equity
Common stock--authorized 35,000,000
shares ($.01 par value); 34,946,000
shares issued (34,196,000 in 1993);
28,933,599 shares outstanding
(24,118,184 in 1993) 349 342
Additional paid-in capital 41,058 15,990
Retained earnings 225,459 220,898
Unrealized loss on securities
available for sale (607)
------- -------
266,259 237,230
Less cost of common shares in treasury
(6,012,401 in 1994 and 10,077,816 in 1993) (48,667) (79,535)
------- -------
Total stockholders' equity 217,592 157,695
------- -------
Commitments and contingencies (Note 14) ------- -------
Total liabilities and
stockholders' equity $471,833 $378,287
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
SafeCard Services, Inc.
Consolidated Statement of Earnings
(in thousands, except share data)
Year ended October 31, 1994 1993 1992
Revenues
Subscription revenue, net $173,434 $156,600 $146,265
Other operating revenue 2,107
Interest income 8,421 8,736 10,022
Other income 5,124 1,790 1,894
------- ------- -------
189,086 167,126 158,181
------- ------- -------
Costs and expenses
Subscriber acquisition costs 105,981 95,248 86,828
General, administrative
and service costs 43,324 29,433 24,949
Research and product
development costs 7,682
Restructuring costs 7,900
Estimated relocation expenses 17,500
------- ------- -------
164,887 124,681 129,277
------- ------- -------
Earnings before income taxes 24,199 42,445 28,904
Provision for income taxes 6,178 10,968 6,406
------- ------- -------
Earnings before cumulative
effect of change in accounting
for income taxes 18,021 31,477 22,498
Cumulative effect of change in
accounting for income taxes 2,000
------- ------- -------
Net earnings $ 20,021 $ 31,477 $ 22,498
------- ------- -------
Earnings per share:
Earnings before cumulative
effect of accounting change $.63 $1.10 $.75
Cumulative effect of accounting
change .07
--- ---- ---
Net earnings $.70 $1.10 $.75
=== ==== ===
Weighted average number of common
and common equivalent shares 28,411,000 28,572,000 30,158,000
The accompanying notes are an integral part of these consolidated financial
statements
<TABLE>
SafeCard Services, Inc.
Consolidated Statement of Changes In Stockholders' Equity
(in thousands, except share data)
<CAPTION>
Unrealized
Gain (Loss) on Common Stock
Common Stock Additional Securities in Treasury Total
-------------------- Paid-in Retained Available ------------------------- Stockholders'
Shares Amount Capital Earnings for sale Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1991 33,130,148 $ 331 $ 7,326 $ 176,009 (6,772,427) $( 38,763) $ 144,903
Net earnings 22,498 22,498
Cash dividends paid,
$.15 per share (3,973) (3,973)
Exercise of employee
stock options 295,900 3 1,624 54,662 313 1,940
Tax benefit from exercise
of employee stock options 675 675
Purchase of treasury stock (62,250) (545) (545)
---------- ---- ------ ------ ----- ---------- -------- --------
Balance at October 31, 1992 33,426,048 334 9,625 194,534 (6,780,015) ( 38,995) 165,498
Net earnings 31,477 31,477
Cash dividends paid,
$.20 per share (5,113) (5,113)
Exercise of employee
stock options 769,952 8 4,213 172,059 1,159 5,380
Tax benefit from exercise
of employee stock options 2,152 2,152
Purchase of treasury stock (3,469,860) (41,699) (41,699)
---------- ---- ------ ------- ----- ---------- -------- -------
Balance at October 31, 1993 34,196,000 342 15,990 220,898 (10,077,816) ( 79,535) 157,695
Net earnings 20,021 20,021
Cash dividends paid,
$.20 per share (5,320) (5,320)
Exercise of employee
stock options 750,000 7 3,440 (10,140) 4,090,165 31,351 24,658
Tax benefit from exercise
of employee stock options 21,628 21,628
Issuance of restricted
common stock 11,950
Change in unrealized gain
(loss) on securities
available for sale $ (607) (607)
Purchase of treasury stock (36,700) (483) (483)
--------- ----- ------- --------- ----- --------- -------- ---------
Balance at October 31, 1994 34,946,000 $ 349 $ 41,058 $ 225,459 $ (607) (6,012,401) $( 48,667) $217,592
========== ==== ======= ======== ===== ========== ======== =======
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
SafeCard Services, Inc.
Consolidated Statement of Cash Flows
(in thousands)
Year ended October 31, 1994 1993 1992
Cash Flows From Operating Activities
Net cash received from subscribers $ 187,727 $ 175,596 $ 153,303
Net cash received from other
operating revenue sources 4,341
Cash expenditures for subscriber
acquisition costs, commissions
and operations (166,315) (137,537) (120,306)
Relocation expenditures (1,753) (6,104)
Interest received 13,922 13,952 10,675
Interest paid (428)
Income taxes paid, net of
refunds received 3,114 (21,413) (18,518)
Gain from litigation settlements 4,257 550
------- ------- -------
Net cash provided by operating activities 47,046 28,845 19,172
------- ------- -------
Cash Flows From Investing Activities
Purchases of investment securities (96,986) (63,174) (167,760)
Proceeds from sales of investment
securities 73,748 64,539 119,284
Proceeds from maturing investment
securities 18,035 7,068 34,446
Cost of acquisitions, net of
cash acquired (35,276)
Acquisition of property
and equipment, net (8,044) (719) (6,380)
------- ------ -------
Net cash (used in) provided by
investing activities (48,523) 7,714 (20,410)
------- ------ -------
Cash Flows From Financing Activities
Net repayments on notes payable to bank (2,792)
Proceeds from exercise of stock options 24,658 5,380 1,940
Dividends paid (5,320) (5,113) (3,973)
Payments for purchase of treasury shares (483) (41,699) (545)
Other (155)
------- ------- -------
Net cash provided by (used in)
financing activities 16,063 (41,432) (2,733)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents 14,586 (4,873) (3,971)
Cash and cash equivalents at
beginning of period 3,335 8,208 12,179
------- ------- -------
Cash and cash equivalents at
end of period $ 17,921 $ 3,335 $ 8,208
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
SafeCard Services, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
SafeCard Services, Inc. ("SafeCard" or the "Company") is an information-based
marketing and servicing company. Subscriptions for continuity services are
principally marketed through credit card issuers by mail or telephone.
SafeCard's principal service is credit card registration and loss
notification ("Hot-Line"), whereby SafeCard gives prompt notice to credit
card issuers upon being informed that a subscriber's credit cards have been
lost or stolen. Subscriptions for continuity services typically continue
annually or periodically unless canceled by the subscriber. SafeCard also
markets other continuity services including those related to fee-based
credit cards ("Fee Card"), reminder services, a personal credit information
service ("CreditLine") and others. SafeCard is also developing new lines of
business including credit card marketing and servicing and direct mail
marketing services which are expected to become a significant component of
SafeCard's overall operations in future years.
The Company believes that a classified balance sheet does not accurately
reflect the Company's operating cycle and results in financial ratios that
are not meaningful due to the mix of its assets including marketable
investment securities, deferred subscriber acquisition costs and related
commissions, and deferred subscribers' advance payments. As a result, the
1994 presentation of the Company's balance sheet is presented in an
unclassified format. The applicable 1993 financial information has been
restated to conform to this change. Certain other changes have been made in
the presentation of 1993 and 1992 financial information to conform with 1994
presentation.
References herein to the years 1994, 1993 and 1992 refer to the Company's
fiscal years ended October 31.
Principles of Consolidation
The consolidated financial statements include the accounts of SafeCard and
its subsidiaries, after elimination of intercompany accounts and
transactions. On September 14, 1994, the Company acquired 100% of the
outstanding common stock of Wright Express Corporation ("Wright Express").
The transaction was accounted for under the purchase method and accordingly
the consolidated financial statements include the results of operations of
Wright Express from the date of purchase (see Note 2 - Acquisition).
Cash and Cash Equivalents
Cash and cash equivalents include cash-on-hand, demand deposits and short-
term investments with original maturities of three months or less.
Investment Securities
Investments in securities, which consist primarily of tax-exempt municipal
securities, were carried at cost in 1993, adjusted for the amortization of
any premium or accretion of any discount. In May 1993, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 115, ("FAS 115") "Accounting for Certain Investments in Debt and Equity
Securities." FAS 115 requires that all investments in debt and equity
securities that fall within its scope be classified as either held to
maturity, trading or available for sale. Management elected early adoption
of FAS 115 as of October 31, 1994 and has classified its entire securities
portfolio as "available for sale." Securities classified as available for
sale are stated at market value with any unrealized gains or losses included
as a separate component of stockholders' equity.
Approximately $11,900,000 of securities available for sale at October 31,
1994 were held in escrow for advance payments of multi-year subscriptions
(see "Revenue Recognition/Cost Amortization") or pursuant to the CreditLine
Agreement (see Note 12 - Transactions with Related Parties).
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Maintenance and repairs are charged to expense while betterments are
capitalized. Depreciation is computed using the straight-line method over
the assets' estimated useful lives. Estimated useful lives range from 3 to
7 years for equipment, furniture and fixtures to 30 years for buildings.
Capitalized leasehold improvements are amortized over the estimated useful
life of the asset, or the lease term, whichever is shorter.
Excess of Cost Over Fair Value of Net Assets Acquired
Excess of cost over fair value of net assets acquired represents the
difference between the purchase price of Wright Express and the value of
the net assets acquired in the acquisition. Such excess of cost over fair
value of net assets acquired is being amortized on a straight-line basis over
25 years.
Revenue Recognition/Cost Amortization
Subscription Revenue and Commission Expense
The Company generally receives advance payments from subscribers for its
products and services. The subscription period and advance payments are
generally for periods of 12 or 36 months. These advance payments, less an
appropriate allowance for cancellations, are deferred and amortized to
revenue ratably over the subscription period. Credit card issuers earn
commissions based on percentages of subscription billings or other profit
sharing arrangements. Such commissions, less an appropriate allowance for
cancellations, are also deferred and amortized to expense ratably over the
subscription period.
The allowance for cancellations, net of related commissions, relates to
amounts which may be refunded at a future time to subscribers who may cancel
their subscriptions prior to the completion of the subscription period.
Previously paid commissions related to canceled subscriptions are reimbursed
to the Company by the credit card issuer.
The Company previously followed an internal policy of restricting use of all
advance payments for multi-year subscriptions by placing them in escrow. In
March 1994, the Company changed its policy such that it now places funds in
escrow when required contractually by credit card issuer clients. The
contractual requirement as of October 31, 1994 was approximately
$10,300,000. Restricted funds are released ratably over the subscription
period (which coincides with the period of revenue recognition) and are
invested primarily in tax-exempt municipal securities.
Subscriber Acquisition Costs
Subscriber acquisition expenditures directly relate to the acquisition of new
subscribers through "direct response" type marketing campaigns and primarily
include payments for telemarketing, printing, postage, mailing services,
certain direct salaries and other direct costs incurred to acquire new
subscribers. These expenditures are deferred and amortized to expense in
proportion to expected revenue over the expected subscription periods,
including renewal periods (life of subscriber). Historically, a significant
percentage of the Company's subscribers renew for additional years beyond
the initial subscription period. Renewal rates for single-year Hot-Line
subscriptions were between 75% and 77% during the period 1992 through 1994.
Multi-year Hot-Line renewal rates (primarily three year subscriptions) were
between 45% and 50% during the same period. Renewal rates for Fee Card,
which to date has primarily been marketed as a single-year program, were
between 75% and 81% during the same period. Based on the Company's renewal
rate experience, subscriber acquisition expenditures are amortized to expense
using an accelerated rate of amortization to reflect subscriber attrition
over renewal periods. Expenditures relating to the acquisition of Hot-Line
and Fee Card subscribers are generally amortized over a 10-12 year period;
other program expenditures are generally amortized over a 3 year period
(see Note 8 - Subscriber Acquisition Costs).
In December 1993, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 93-7, "Reporting on Advertising
Costs" which is effective for the Company on November 1, 1994. The
Company's historical method of amortizing such advertising costs is similar
to the method prescribed by this SOP. The SOP, which, among other things,
deals with the reporting of advertising costs for companies in the direct
response industry, is not expected to have a material effect on the
Company's reported earnings or financial position.
Income Taxes
Effective November 1, 1993, the Company prospectively adopted Statement of
Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." Adoption of FAS 109 required a change from the deferred method to
the liability method of accounting for income taxes. One of the principal
differences of the liability method from the deferred method used in previous
financial statements is that changes in tax laws and rates are reflected in
income from continuing operations in the period such changes are enacted.
The impact of the adoption of FAS 109 had a cumulative positive effect on the
Company's reported earnings in 1994 of $2,000,000.
Earnings Per Share
Earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
(common stock issuable upon exercise of stock options) outstanding.
2. Acquisition
On September 14, 1994, the Company acquired 100% of the outstanding common
stock of Wright Express, a leading provider of information processing,
management and financial services to petroleum companies and transportation
fleets in the United States, for $35,500,000 in cash. The acquisition was
accounted for under the purchase method and accordingly the results of
operations of Wright Express are included in the Company's consolidated
financial statements from the date of acquisition.
In connection with the acquisition, the Company recorded $28, 891,000 of
excess of cost over fair value of net assets acquired. This excess is
being amortized on a straight-line basis over 25 years. Amortization expense
through October 31, 1994 was $152,000.
The following presents the pro forma results of operations of the Company and
Wright Express as if combined throughout the years ended October 31, 1994
and 1993 (pro forma amounts are unaudited):
Year ended October 31,
1994 1993
Revenues, net $ 200,955,000 $ 178,386,000
Costs and expenses 176,060,000 135,904,000
Earnings before provision for income
taxes and cumulative effect
of accounting change $ 24,895,000 $ 42,482,000
------------ ------------
Net earnings 20,149,000 31,496,000
---------- ----------
Earnings per share $ .71 $ 1.10
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented, nor are they intended to be a projection of future results.
3. Investments
The Company's investment portfolio is invested primarily in tax-exempt
municipal bonds. Because there is not a regularly published source of
accurate current market values for tax-exempt municipal bonds, the Company's
investment adviser estimates market values for the Company's securities
available for sale and investment securities using a pricing matrix commonly
used in the municipal bond industry, or in certain cases, by soliciting
quotations from municipal bond dealers.
The financial statement carrying amount, gross unrealized gains, gross
unrealized losses and estimated market value of the Company's securities
available for sale and investment securities were as follows:
Securities available
for sale October 31, 1994
---------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
Tax-exempt
municipal bonds $ 167,219,000 $ 500,000 $ 1,107,000 $ 166,612,000
Investment securities October 31, 1993
--------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
Tax-exempt
municipal bonds $ 166,524,000 $ 3,389,000 $ 78,000 $ 169,835,000
Other 180,000 180,000
----------- --------- ------- -----------
$ 166,704,000 $ 3,389,000 $ 78,000 $ 170,015,000
=========== ========= ======= ===========
Maturities of the Company's investment portfolio at October 31, 1994 were as
follows:
Carrying Market
Value Value
Within one year $ 39,098,000 $ 39,249,000
One to five years 119,416,000 118,401,000
More than five years 8,705,000 8,962,000
----------- ------------
$ 167,219,000 $ 166,612,000
=========== ===========
Gross realized gains on investment securities totaled $620,000, $1,290,000
and $1,013,000 for the years 1994, 1993 and 1992, respectively. Gross
realized losses on sales of investment securities totaled $27,000, $12,000
and $2,000 for the years 1994, 1993 and 1992, respectively. Gains and losses
on sales of securities are computed on the specific identification basis and
are included as a component of other income.
4. Receivables, net
Receivables and the related allowance for doubtful accounts were as follows:
October 31, 1994 1993
Receivables for transportation
fleet services $ 30,027,000
Receivables for continuity services 9,831,000 $ 8,593,000
Accrued interest receivable 4,186,000 4,403,000
----------- -----------
44,044,000 12,996,000
Allowance for doubtful accounts (1,595,000) (150,000)
----------- -----------
$ 42,449,000 $ 12,846,000
=========== ===========
The receivables for transportation fleet services primarily relate to amounts
due from customers of Wright Express for fleet fueling and other
transportation services.
5. Property and Equipment
Property and equipment consisted of the following:
October 31, 1994 1993
Equipment, furniture and fixtures $ 11,367,000 $ 4,390,000
Building 5,268,000 5,215,000
Construction in progress 2,045,000
Land 447,000 447,000
----------- -----------
19,127,000 10,052,000
Less: accumulated
depreciation (2,717,000) (1,632,000)
----------- -----------
$ 16,410,000 $ 8,420,000
=========== ===========
Construction in progress relates to improvements and additions being added to
the Company's operations center in Cheyenne, Wyoming and enhancements to the
Company's technology platform. All costs associated with these projects are
being capitalized as construction in progress and will begin to be
depreciated when the improvements and additions are placed in service.
6. Estimated Relocation Expenses
During 1992, the Company relocated its headquarters and operational facility
from Ft. Lauderdale, Florida to Cheyenne, Wyoming. In connection with the
relocation, the Company recorded pre-tax charges against earnings of
$17,500,000 in 1992. These charges included the Company's estimated cost of
moving the Company's operations and certain employees from Ft. Lauderdale to
Cheyenne, certain other one-time costs associated with the relocation and
the Company's then estimated net obligation under a contested lease ("the
Ft. Lauderdale Lease") of its former Ft. Lauderdale headquarters. The
Company no longer occupies these premises and is no longer making payments
on the Ft. Lauderdale Lease, which is now the subject of litigation (see
Note 14 - Commitments and Contingencies). Included within "Accrued expenses"
as of October 31, 1994 and 1993 is approximately $10,500,000 relating
primarily to the Ft. Lauderdale Lease.
7. Notes Payable to Bank
Notes payable to bank represents a revolving loan agreement assumed in
connection with the acquisition of Wright Express (see Note 2 -
Acquisition). The agreement, as originally structured, provided for maximum
borrowings equal to the lesser of $17,500,000 or an amount based on a
percentage of eligible accounts receivable as defined therein.
Interest on the outstanding borrowings is, at Wright Express' option, either
the bank's prime rate minus 0.5% or the London Interbank Offering Rate
("LIBOR"), plus 1.0%. Wright Express pays a fee of 0.25% per annum on the
average daily unused portion of the line of credit. Borrowings are secured
by substantially all assets of Wright Express. The revolving line of credit
expires in June 1996.
At October 31, 1994, the Company had the following amounts outstanding with
related interest rates under the revolving line of credit:
Amount Rate
LIBOR based loan $ 8,600,000 5.875%
LIBOR based loan 3,000,000 6.063%
Prime rate based loan 193,000 7.250%
----------
$ 11,793,000
==========
In November 1994, the revolving credit agreement was amended increasing the
available line to $27,500,000 and decreasing the LIBOR rate to LIBOR plus
0.625%. The Company was also added as a guarantor under the amended
agreement.
8. Subscriber Acquisition Costs and Commissions
Deferred subscriber acquisition costs and related commissions were as
follows:
October 31, 1994 1993
Hot-Line $ 123,775,000 $ 121,061,000
Fee Card 9,185,000 5,470,000
Other services 18,796,000 13,432,000
----------- -----------
Total deferred subscriber
acquisition costs 151,756,000 139,963,000
Commissions 43,641,000 40,974,000
----------- -----------
Total deferred subscriber
acquisition costs
and commissions $ 195,397,000 $ 180,937,000
=========== ===========
9. Restructuring Costs
In April 1994, the Company announced a reorganization of its operations and
named a new senior management team. As a part of the reorganization, nine
senior executives left the Company and management closed the Ft. Lauderdale
sales office. As a result of this reorganization, the Company recorded a
restructuring charge of $3,500,000 to cover severance agreements and a lease
termination. In addition, the Company recorded an additional charge of
$4,400,000 paid to Steven J. Halmos, the Company's co-founder (see Note 12 -
Transactions with Related Parties). At October 31, 1994 the remaining
balance of these reserves of $2,378,000 was included in "Accrued expenses."
10. Income Taxes
As discussed in Note 1, the Company changed its method of accounting for
income taxes as of November 1, 1993. The components of the provision for
income taxes for the years ended October 31, 1994, 1993 and 1992 were as
follows:
Year ended October 31, 1994 1993 1992
Current
Federal $13,032,000 $15,608,000 $15,255,000
State 272,000 101,000 2,547,000
---------- ---------- ----------
Total current 13,304,000 15,709,000 17,802,000
---------- ---------- ----------
Deferred
Federal (7,640,000) (3,588,000) (9,894,000)
State 514,000 (1,153,000) (1,502,000)
---------- ---------- ----------
Total deferred (7,126,000) (4,741,000) (11,396,000)
---------- ---------- -----------
Total $ 6,178,000 $10,968,000 $ 6,406,000
========== ========== ===========
The following is a reconciliation of the statutory U.S. federal income tax
rate and the Company's effective income tax rate:
Year ended October 31, 1994 1993 1992
Statutory federal income tax rate 35.0% 34.8% 34.0%
Increase (reduction) in tax
rates resulting from:
State income tax, net of federal benefit 2.1 1.2 2.4
Tax-exempt interest income (10.8) (6.8) (13.8)
Reversal of prior years' deferred taxes
at the rates in effect at that time (2.9) (1.1)
Other (.8) (.5) .7
----- ---- -----
Effective tax rate 25.5% 25.8% 22.2%
==== ==== ====
As a result of legislation enacted in August 1993, the federal corporate
income tax rate increased from 34% to 35% effective January 1, 1993. This
resulted in a blended federal tax rate for 1993 of 34.8%.
The components of the Company's deferred income tax assets and liabilities
under FAS 109 were as follows:
October 31, November 1,
1994 1993
Deferred tax liabilities
Subscriber acquisition costs $71,585,000 $68,391,000
Depreciation 549,000 382,000
---------- ----------
72,134,000 68,773,000
---------- ----------
Deferred tax assets
Multi-year subscription revenues 36,226,000 29,051,000
Relocation expenses 3,749,000 3,736,000
Net operating loss carryforwards 8,217,000
Reminder/reference subscription revenue 1,195,000 (1,945,000)
Other 1,996,000 1,829,000
---------- ----------
51,383,000 32,671,000
---------- ----------
Net deferred tax liability $20,751,000 $36,102,000
========== ==========
The deferred income tax benefit for 1993 and 1992 (under prior accounting
method) resulted from the following items:
Year ended October 31, 1993 1992
Subscriber costs, net $ 450,000 $( 15,000)
Multi-year subscription revenues (7,310,000) (7,993,000)
Reminder/reference subscription
revenue 1,952,000 1,194,000
Relocation expenses 698,000 (4,389,000)
Other (531,000) (193,000)
---------- ----------
$(4,741,000) $(11,396,000)
========== ===========
At October 31, 1994, the Company had $23,117,000 of net operating loss
carryforwards for tax purposes which, if unused, will expire in 2009.
<TABLE>
11. Common Stock And Stock Options
<CAPTION>
The following table represents information for the previous three years with
respect to options granted and outstanding as follows:
Shares Under Option
--------------------------------------------------------------------
Outstanding Outstanding
Option at beginning at end of
Price Range of period Granted Canceled Exercised Period
<S> <C> <C> <C> <C> <C> <C>
Year ended October 31, 1992
1979 Plan $ 5.875 141,040 141,040
Outside Directors' Options $ 5.513-9.00 300,000 (100,000) 200,000
1987 Plan $ 5.875 424,000 (75,900) 348,100
1989 Executive Options $ 5.125 1,100,000 (120,000) 980,000
1989 Employee Stock Option Plan $ 6.00 429,669 (14,003) (54,662) 361,004
Peter & Steven J. Halmos $ 5.125-5.50 5,850,000 5,850,000
1991 Employee Stock Option Plan $ 9.00 162,000 (24,000) 138,000
--------- ------- -------- ---------
8,406,709 (38,003) (350,562) 8,018,144
--------- ------- -------- ---------
Year ended October 31, 1993
1979 Plan $ 5.875 141,040 (141,040)
Outside Directors' Options $ 6.375-13.00 200,000 200,000 (100,000) 300,000
1987 Plan $ 5.875 348,100 (348,100)
1989 Executive Options $ 5.125 980,000 (230,000) 750,000
1989 Employee Stock Option Plan $ 6.00 361,004 (5,333) (102,671) 253,000
Peter & Steven J. Halmos $ 5.125-5.50 5,850,000 (1,950,000) 3,900,000
1991 Employee Stock Option Plan $ 9.00 138,000 (24,333) (38,334) 75,333
1992 Employee Stock Option Plan $ 8.875 75,000 (12,500) 62,500
--------- ------- ---------- -------- ---------
8,018,144 275,000 (1,992,166) (960,145) 5,340,833
--------- ------- ---------- -------- ---------
Year ended October 31, 1994
Outside Directors' Options $ 9.00-13.00 300,000 300,000
1989 Executive Options $ 5.125 750,000 (750,000)
1989 Employee Stock Option Plan $ 6.00 253,000 (234,000) 19,000
Steven J. Halmos $ 5.125-5.50 3,900,000 (3,900,000)
1991 Employee Stock Option Plan $ 9.00 75,333 (15,001) (36,333) 23,999
1992 Employee Stock Option Plan $ 8.875 62,500 (13,335) (14,164) 35,001
1994 Long-Term Stock-Based
Incentive Plan $ 12.625-18.375 2,315,000 (3,000) 2,312,000
Employee Stock Option Plan $ 16.50 42,700 (2,700) 40,000
--------- --------- --------- ---------- ---------
5,340,833 2,357,700 (34,036) (4,934,497) 2,730,000
========= ========= ========= ========== =========
<FN>
All shares outstanding are exercisable and no additional shares are available
for granting options under each plan except as noted below.
Of the options to purchase 23,999 shares outstanding under the 1991 Employee
Stock Option Plan, options to purchase 7,831 shares were exercisable at
October 31, 1994, and the remaining options to purchase 16,168 shares vest
in 1995. Of the options to purchase 35,001 shares outstanding under the 1992
Employee Stock Option Plan, options to purchase 6,666 shares were
exercisable at October 31, 1994, and the remaining options to purchase
28,335 shares vest in 1995. Of the options to purchase 2,312,000 shares
outstanding under the 1994 Long-Term Stock-Based Incentive Plan (as amended,
the "1994 Plan"), options to purchase 133,333 shares were exercisable at
October 31, 1994. A portion of the stock options outstanding under the 1994
Plan vest over time (becoming fully vested in two or four years) beginning
in 1995 and a portion vests based on certain stock price hurdles. In
addition, options to purchase 525,400 shares have been granted as of October
31, 1994 that were subject to stockholder approval of an increase in the
number of shares issuable under the 1994 Plan. Of the options to purchase
40,000 shares outstanding under the Employee Stock Option Plan, none were
exercisable at October 31, 1994. All outstanding options under this plan in
1994 vest in July 1995.
In addition to the options granted under the 1994 Plan as discussed above,
11,950 shares of restricted stock have been awarded under the 1994 Plan
through October 31, 1994. An additional 2,000 shares of restricted stock
have been awarded subject to stockholder approval of the amendment to
increase the number of shares authorized for issuance under the 1994 Plan.
The Company recorded $123,000 of restricted stock expense in 1994. Except
for the restricted stock awarded to the Chairman and Chief Executive Officer
which will fully vest by December 1, 1996, all of the outstanding shares of
restricted stock will vest no later than October 31, 1995
In connection with the exercise of options to purchase common stock, certain
employees exchanged 94,332 and 18,134 shares of common stock in lieu of cash
in 1994 and 1993, respectively. The exchanged shares are deducted from the
number of shares issued upon the exercise of employee stock options for
purposes of presentation in the consolidated statement of changes in
stockholders' equity.
The 1994 Plan was approved by the stockholders at the 1994 Annual Meeting of
Stockholders held on March 7, 1994. The 1994 Plan provides for the award of
stock options, stock appreciation rights and restricted stock covering a
maximum of 2,400,000 shares. The Company's Chairman and Chief Executive
Officer has been granted a ten-year option to purchase 1,000,000 of these
shares. The Company is seeking stockholder approval at the 1995 Annual
Meeting of Stockholders of an amendment to increase the number of shares
available for issuance under the 1994 Plan by 1,340,000 shares.
All stock options granted in 1994 and in prior years, except for the grants
under the Employee Stock Option Plan, were administered by the Board of
Directors or a committee thereof and had an exercise price based on the
market price of the Company's common stock on the date of grant. The
Employee Stock Option Plan is administered by a committee of Company
officers who are not eligible to participate in this plan. As of October
31, 1994, options to acquire 466,830 shares were exercisable under the option
plans. As of October 31, 1994, 3,255,400 of the shares held in treasury
were reserved for the issuance of shares under the above described stock
options.
</TABLE>
12. Transactions with Related Parties
Until his resignation as Chief Executive Officer and a Director on December
19, 1992, Steven J. Halmos, the Company's co-founder, provided his services
to the Company through High Plains Capital Corporation ("HPCC"), a company
owned by himself and his brother, Peter Halmos, the Company's other co-
founder. After that date, Steven J. Halmos, acting in the capacity of an
Advisor on Marketing and Operational Strategy, provided services directly to
the Company pursuant to a written agreement with the Company (as amended and
restated as of April 1, 1993, the "Steven J. Halmos Agreement"). On May 26,
1994, the Company reached a settlement with Steven J. Halmos to terminate
the Steven J. Halmos Agreement and various other agreements between the
Company and Mr. Halmos that provided for payments to Mr. Halmos of $2,000,000
a year through March 31, 1998. The settlement, which arose in connection
with the Company's management restructuring in April 1994 and a resulting
decision to cease using Mr. Halmos' services, resulted in a $4,400,000 cash
payment to Mr. Halmos and charge to 1994 earnings. Subsequent to his
termination Mr. Halmos exercised options to purchase 3,900,000 shares of the
Company's common stock. Stockholders' equity increased $37,800,000
resulting from the exercise of such options and the related tax benefit (see
Note 11 - Common Stock and Stock Options). In 1993, the Company paid Steven
J. Halmos (or HPCC for Steven J. Halmos' services) a total of approximately
$2,100,000. In 1992 the aggregate fee paid to HPCC for Steven J. Halmos'
services was approximately $2,700,000, with an additional $1,500,000 being
paid to HPCC for the services of Peter Halmos.
In 1993 the Company also entered into an agreement that called for Steven J.
Halmos to sell the 1,645,760 shares of Company stock he owned at that time
(this representing approximately 6.2% of total outstanding shares at April
1, 1993) to the Company as part of the Company's stock repurchase program.
The shares were acquired by the Company on April 21, 1993 for a price of
$11.50 per share, a price equal to the average trading price of the
Company's common stock over a specific period of days following public
disclosure of the repurchase.
The Company markets its CreditLine product pursuant to an agreement (as
amended, the "CreditLine Agreement") with CreditLine Corporation ("CLC"),
a corporation owned by Steven J. Halmos and Peter Halmos, the Company's co-
founders, and their families. The CreditLine Agreement grants the Company an
exclusive license to market CreditLine through certain credit card issuers
(including all issuers with which the Company has contractual relationships)
and provides that profits and losses, if any, are shared equally between CLC
and the Company. Net CreditLine billings to subscribers totaled
approximately $22,900,000, $15,800,000 and $9,700,000 while marketing and
other expenditures totaled $17,400,000, $13,400,000 and $6,200,000 in 1994,
1993 and 1992, respectively. In June 1993, the Company was notified by CLC
that the CreditLine Agreement would not be renewed effective November 1,
1993.
Notwithstanding its termination, the CreditLine Agreement gives the Company
the perpetual right to continue to service existing CreditLine subscribers
and to participate in the resulting income. In addition, an amendment to
the CreditLine Agreement provides that the Company has the perpetual right to
market CreditLine, and participate in the resulting income, through all of
its existing card issuer clients with which it either had a CreditLine
marketing agreement on November 1, 1993 or entered into such a marketing
agreement within the following three years. The CreditLine Agreement is the
subject of litigation as described in Note 14 - Commitments and
Contingencies.
In 1994 CreditLine and certain services marketed in conjunction with
CreditLine, accounted for approximately $9,100,000 or 5.3% of the Company's
subscription revenues and approximately $2,800,000 or 11.6% of the Company's
pre-tax earnings. In 1993 such services accounted for approximately
$6,500,000 or 4.2% and $1,900,000 or 4.5% of the Company's subscription
revenues and pre-tax earnings, respectively. In 1992 such services
accounted for approximately $4,500,000 or 3.1% and $1,200,000 or 4.2% of the
Company's subscription revenues and pre-tax earnings, respectively.
The CreditLine Agreement provides for the creation of an escrow in the case
of certain disputes between the parties. Effective September 1993, the
Company began depositing its share and CLC's share of CreditLine profits in
escrow accounts. As of October 31, 1994, approximately $1,600,000 of the
Company's securities available for sale have been deposited in the escrow
account (see Note 1 - Summary of Significant Accounting Policies).
The Company made payments under the Ft. Lauderdale Lease to a partnership
consisting of Peter Halmos and Steven J. Halmos (the "Halmos Partnership").
Payments made to the Halmos Partnership for the years 1993 and 1992 for the
land and building, were approximately $700,000 and $1,200,000, respectively.
No payments were made to the Halmos Partnership in 1994. During 1992 the
Company also leased warehouse space from the Halmos Partnership and made
lease payments of approximately $47,000. The warehouse leases were month-to-
month and were terminated in 1992. The Company no longer occupies the
operations center and is no longer making payments on the Ft. Lauderdale
Lease which is now the subject of litigation (see Note 14 - Commitments and
Contingencies).
In October 1993, the Company renewed a consulting agreement with the
Dilenschneider Group, Inc. ("DGI"), to provide public relations counsel and
advice to the Company in 1994 for an annual retainer of $180,000. A director
of the Company is the majority owner and chief executive officer of DGI. In
October 1994, the Company entered into an agreement with DGI for public
affairs and public relations assistance during 1995 for an annual retainer
of $100,000.
During 1994, DGI consulted on and assisted with investor relations for a
monthly fee of $12,500. In addition, another director of the Company
provided investor relations consulting services to the Company during 1994
for a monthly retainer of $4,167. These consulting arrangements were
terminated effective October 31, 1994.
In September 1994, the Company acquired Wright Express (see Note 2 -
Acquisition). The Company's Chairman and Chief Executive Officer was a
director of Wright Express prior to the acquisition. During negotiations
between the Company and Wright Express, the Company's Chairman did not attend
any meetings or participate in any discussions of the Board of Directors of
Wright Express and abstained from voting on the acquisition by the Company's
Board of Directors.
13. Employee Benefit Plan
In June 1993, the Company implemented a 401(k) and Profit-Sharing Plan for
its employees who are at least 20 years of age, have worked at least 1,000
hours in the past year and have completed one year of service. The Company
matches 50% of each employee's contribution, up to a maximum of 4% of each
employee's salary. Continuation of, and contributions to, the 401(k) and
Profit-Sharing Plan are voluntary, at the discretion of the Company and are
paid to each eligible employee's account. The total expense recorded under
the Plan in 1994 and 1993 was approximately $385,000 and $240,000,
respectively.
Prior to 1993, the Company maintained a Simplified Employer Pension Plan
("SEP/IRA") for its employees over 21 years of age, who had worked for the
Company for some period of time in any three of the previous five calendar
years. Amounts recorded for the Company's contributions to the SEP/IRA for
1993 and 1992 were $75,000 and $402,000, respectively.
14. Commitments and Contingencies
Contracts
The Company has written agreements with a few large credit card issuers which
account for a large percentage of its subscription revenue. Termination of
any of these contracts would adversely affect the Company. Contracts with
Citicorp (South Dakota), N.A. and related entities contributed 30%, 34% and
37% of the Company's consolidated subscription revenue in 1994, 1993 and
1992, respectively. The principal Citicorp contract, as amended, expires
December 31, 1999. Citicorp has a right to terminate the contract in the
event of the sale of a majority of the shares of the Company to specified
credit card issuers, to banks and their corporate affiliates and to entities
that do not have equity of at least $25,000,000.
Contracts with Sears, Roebuck and Co. contributed approximately 12% and 11%
of the Company's consolidated subscription revenue in 1994 and 1993,
respectively (and less than 10% in 1992). The contracts, which contain a
provision for cancellation without cause by either party upon 90 days notice,
is subject to renewal annually.
During the year, the Company entered into operating leases for facilities in
Jacksonville, Florida in the normal course of business. Rent expense for
1994 was $283,000. There was no rental expense for 1993 or 1992. The
following is a schedule of future minimum rental payments required under
operating leases having initial or remaining non-cancelable lease terms in
excess of one year at October 31, 1994:
1995 $ 1,522,000
1996 1,424,000
1997 1,386,000
1998 482,000
1999 390,000
Thereafter 1,243,000
---------
$ 6,447,000
=========
Pending Litigation
The Company is defending or prosecuting five complex lawsuits involving Peter
Halmos, former Chairman of the Board and Executive Management Consultant to
the Company, and various parties related to him. Peter Halmos is also a
plaintiff in two other lawsuits, one against an officer and one against a
director of the Company. The five cases in which the Company is a party
are as follows:
A suit initiated by Peter Halmos, related entities, and Myron Cherry (a
former lawyer for the Company) in April 1993 in Cook County Circuit
Court in Illinois against the Company and one of its directors,
purporting to state claims aggregating in excess of $100 million,
principally relating to alleged rights to "incentive compensation,"
stock options or their equivalent, indemnification, wrongful termination
and defamation. The Company and the director moved to dismiss this
lawsuit. In November 1993, the court granted the motions to dismiss
all parts of the complaint, but gave the plaintiffs leave to replead,
which they did. Again in March 1994, the court granted the motions to
dismiss all of the complaints but permitted the plaintiffs to replead
which they did in June 1994. The Company and the director have filed
motions seeking dismissal of the second amended complaint.
A suit by Peter Halmos, purportedly in the name of Halmos Trading &
Investment Company, against the Company, one of its officers and one of
its directors in Circuit Court in Broward County, Florida, making a
variety of claims related to the contested lease of the Company's former
Ft. Lauderdale headquarters. The Company has vacated the building,
ceased making payments related to the Ft. Lauderdale lease and has
filed counterclaims. The court has denied motions to dismiss filed by
both Peter Halmos and the Company. In May 1994, the court dismissed
Peter Halmos' amended counterclaim for breach of contract for indemnity
and intentional infliction of emotional distress but gave leave to
amend. In June 1994 Peter Halmos filed a second amended counterclaim
purporting to state claims for intentional infliction of emotional
distress, fraud and negligent misrepresentation and declaratory judgment
based on alleged breach of contract for indemnity or, in the
alternative, promissory estoppel, related to indemnification of legal
expenses in this lawsuit. The Company's motion to dismiss the second
amended counterclaim was denied, and it has filed an answer to the
second amended counterclaim. Discovery is proceeding. No trial date
has yet been set.
A suit which seeks monetary damages and certain equitable relief filed
by the Company in August 1993 in Laramie County Circuit Court in
Wyoming against Peter Halmos and related entities alleging that Peter
Halmos dominated and controlled the Company, breached his fiduciary
duties to the Company, and misappropriated material non-public
information to make $48 million in profits on sales of Company stock.
Discovery is proceeding. In March 1994, Mr. Halmos and related entities
filed a counterclaim in which claims are made of conspiracy in
restraint of trade, monopolization and attempted monopolization, unfair
competition and restraint of trade, breach of contract for indemnity and
intentional infliction of emotional distress. The Company's motion to
sever the conspiracy, monopolization and restraint of trade claims was
granted in May 1994. The claims for the conspiracy, monopolization,
restraint of trade and unfair competition were dismissed without
prejudice in June 1994.
A suit by Peter Halmos, purportedly in his name and in the name of
CreditLine Corporation and Continuity Marketing Corporation against the
Company, one of its officers and three of its directors in United
States District Court in the Southern District of Florida, in September
1994, seeking monetary damages and certain equitable relief purporting
to state various tort claims, state and federal antitrust claims and
claims of copyright infringement. The claims principally relate to the
allegation by Peter Halmos and his companies that SafeCard has taken
action to prevent him from being a successful competitor. On December
9, 1994 the Company and its directors moved to dismiss the lawsuit.
A suit by Peter Halmos, as trustee for the Peter A. Halmos revocable
trust dated January 24, 1990 and the Halmos Foundation, Inc.,
individually and James L. Binder as custodian for Elizabeth Binder;
Edward Dubois; Sheila Ann Dubois, as personal representative of the
Estate of Winifred Dubois; G. Neal Goolsby, John E. Masters,
individually and as custodian for Gregory Halmos and Nicholas Halmos;
and J.B. McKinney on behalf of themselves and all others similarly
situated against SafeCard, one of its officers, one of its former
officers and three of its directors in the United States District Court
for the Southern District of Florida in December 1994. This
litigation seeks monetary damages and certain equitable relief and
involves claims by a putative class of sellers of SafeCard stock for the
period January 11, 1993 through December 8, 1994 for alleged violations
of the federal and states securities laws in connection with alleged
improprieties in SafeCard's investor relations program. Peter Halmos
has filed individual claims in connection with the sale of stock by the
two trusts controlled by him. The Company intends to file an
appropriate response to the complaint.
The Company believes that it has proper and meritorious defenses in these
lawsuits which it intends to vigorously pursue. Resolution of any or all of
the Peter Halmos-related litigation could have a material impact (either
favorable or unfavorable depending on the outcome) upon the Company's
operations, liquidity and financial condition.
During 1994, the Company recognized $4,257,000 in other income from the
settlement of two lawsuits. The Company is involved in certain other claims
and litigation which are not considered material to the operations of the
Company.
15. Statement Of Cash Flows
The following is a reconciliation of net earnings to net cash provided by
operating activities:
Year ended October 31, 1994 1993 1992
Net Earnings $20,021,000 $31,477,000 $22,498,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Cumulative effect of change
in accounting for income
taxes (2,000,000)
Depreciation 1,197,000 864,000 769,000
Amortization of excess of cost
over fair value of net
assets acquired 152,000
Restructuring costs, net 1,978,000
Income tax expense 6,178,000 10,968,000 6,406,000
Income taxes paid, net of
refunds received 3,114,000 (16,161,000) (18,518,000)
Restricted stock expense 123,000
Net decrease (increase) in
receivables 3,763,000 (627,000) (4,427,000)
Net amortization of bond
premiums/discounts 5,281,000 5,233,000 2,439,000
Provision for uncollectible
accounts and commissions 307,000 (250,000) 137,000
Billings to subscribers, net 189,925,000 173,769,000 150,495,000
Amortization of subscribers'
advance payments to revenue (173,434,000) (156,600,000) (146,265,000)
Expenditures for subscriber
acquisition costs (68,029,000) (63,717,000) (55,065,000)
Payment of commissions, net (52,412,000) (49,511,000) (41,024,000)
Amortization of subscriber
acquisition costs 56,236,000 51,075,000 46,516,000
Amortization of commissions 49,745,000 44,173,000 40,312,000
Net (decrease) increase in
allowance for cancellations (1,237,000) 1,306,000 597,000
Net increase (decrease) in
accounts payable and
accrued expenses 7,868,000 (2,459,000) 15,680,000
Gains on sales of investment
securities, net (593,000) (1,277,000) (1,011,000)
(Gain) loss on sale/disposition
of equipment (12,000) (117,000) 271,000
Net (increase) decrease in
other assets (1,125,000) 699,000 (638,000)
----------- ----------- -----------
Net cash provided by
operating activities $ 47,046,000 $ 28,845,000 $ 19,172,000
=========== =========== ===========
<TABLE>
16. Unaudited Quarterly Financial Data
<CAPTION>
Quarters Ended
1994 January 31 April 30 July 31 October 31
<S> <C> <C> <C> <C>
Subscription revenue, net $41,391,000 $42,555,000 $44,169,000 $45,319,000
Gross profit $15,954,000 $16,573,000 $17,268,000 $17,658,000
Earnings before cumulative
effect of change in accounting
for income taxes $ 6,444,000 $ 3,804,000 $ 6,635,000 $ 1,138,000
Net earnings (A) $ 8,444,000 $ 3,804,000 $ 6,635,000 $ 1,138,000
Earnings per share before
cumulative effect of change
in accounting for income taxes $.24 $.14 $.23 $.04
Net earnings per share (A) $.31 $.14 $.23 $.04
Weighted average number
of common and common
equivalent shares 27,608,000 27,761,000 28,768,000 29,229,000
Subscribers at period end 12,229,000 12,635,000 12,876,000 13,105,000
Quarters Ended
1993 January 31 April 30 July 31 October 31
Subscription revenue, net $37,570,000 $39,116,000 $39,717,000 $40,197,000
Gross profit $15,409,000 $15,334,000 $15,392,000 $15,217,000
Net earnings $ 8,896,000 $ 8,528,000 $ 7,492,000 $ 6,561,000
Earnings per share $.30 $.29 $.27 $.24
Weighted average number
of common and common
equivalent shares 29,312,000 29,360,000 27,814,000 27,465,000
Subscribers at period end 11,940,000 11,928,000 11,825,000 12,043,000
<FN>
(A) The first quarter of 1994 includes a $2,000,000 positive effect on net
earnings from a change in the Company's method of accounting for income
taxes.
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this item with regard to Directors and
Executive Officers who are also Directors is incorporated by reference to
the Company's definitive proxy statement which is to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with
the Company's Annual Meeting of Stockholders.
Other Executive Officer information is as follows:
NAME POSITION AGE
John R. Birk President and Chief Operating Officer, 43
from January 1, 1995 to present; President
and Chief Executive Officer of Wright Express
Corporation, from August 1992 to December
1994; President and Chief Operating Officer
of Advo, Inc., the nation's largest direct
mail marketing company, from February 1989
to April 1992; Executive Vice President &
Chief Operating Officer of Advo, Inc., from
September 1988 to February 1989.
G. Thomas Frankland Vice Chairman and Chief Financial Officer, 48
from May 1994 to present; Partner of Price
Waterhouse, independent public accountants,
from July 1980 to April 1994.
Robert M. Frechette Executive Vice President - Sales, from 55
April 1994 to present; Senior Vice
President - U. S. Acceptance Group of
MasterCard International, from 1991 to
1994; Vice President - General
Merchandise Manager of Montgomery Ward
from 1987 to 1991.
Susan R. Gottesmann Senior Vice President - Human Resources, 49
from March 1994 to present; Vice President
of Human Resources and Public Affairs of
American Express, from 1988 to February 1994.
Richard M. Interdonato Executive Vice President - Operations, 46
from April 1994 to present; President
of Intec International, Inc., manufacturer
of specialty lubricants from January 1993
to March 1994; Senior Vice President of
American Express managing the Optima Card
Operations Center, from 1987 to 1992.
Marc F. Joseph Senior Vice President - Law, from February 36
1994 to present; Senior Vice President -
General Counsel of Merrill Lynch Credit
Corporation, from September 1989 to
February 1994.
Francis J. Marino Vice Chairman, from February 1994 to 51
present; Senior member of the law firm
of Mahoney Adams & Criser, P. A.,
from January 1990 to January 1994.
Donelyn N. Merritt, Jr. Senior Vice President - Corporate 39
Development & Strategy, from May 1994
to present; Principal of a private
consulting firm primarily concentrating
on strategy development and implementation,
from 1986 to May 1994; Consultant with Boston
Consulting Group, a strategic consulting
firm, from 1983 to 1986.
Dorothy S. Schechter Executive Vice President - Marketing, 42
from January 1994 to present; Senior
Vice President of Card Product Marketing
for AT&T Universal Card Services, from
October 1989 to January 1994; Vice President
of Mellon Bank, from October 1989 to June 1980.
Harry Strauss Executive Vice President - Information 54
Technology, from July 1994 to present;
Principle of Microtec Planning, a technical
and management consulting firm, from 1980
to June 1994.
David C. Thompson Senior Vice President & Controller, 39
from June 1994 to present; Vice President
and Chief Financial Officer of the bank
card division of Fidelity Investments,
from February 1992 to June 1994;
Vice President and Controller for a
regional operating center of American
Express, from October 1988 to February 1992.
Item 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement which is to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with
the Company's Annual Meeting of Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement which is to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with
the Company's Annual Meeting of Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement which is to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with
the Company's Annual Meeting of Stockholders.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Certain of the agreements listed below are the subject of litigation
with Peter Halmos and parties related to him.
(a)1. Financial Statements
The Consolidated Financial Statements and Notes thereto required by
Item 8 are listed in the Index set forth in Item 8. Financial Statements
and Supplementary Data.
(a)2. Financial Statement Schedules
The Financial Statement Schedules required by Item 8 are listed in
the Index set forth in Item 8. Financial Statements and Supplementary Data.
(a)3. Exhibits
3(a) SafeCard Services, Incorporated's Certificate of
Incorporation, incorporated by reference to Exhibit 3(a) of the Company's
Annual Report on Form 10-K for its fiscal year ended October 31, 1992.
3(b) SafeCard Services, Incorporated's Certificate of Amendment of
Certificate of Incorporation, as filed with the Secretary of State of
Delaware, Division of Corporations on August 20, 1987, incorporated by
reference to Exhibit 3(g) of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 1987.
3(c) SafeCard Services Insurance Company's Certificate of
Incorporation, incorporated by reference to Exhibit 3(e) of the Company's
Annual Report on Form 10-K for its fiscal year ended October 31, 1987.
3(d) SafeCard Services Insurance Company's By-Laws, incorporated by
reference to Exhibit 3(f) of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 1987.
3(e) SafeCard Services, Incorporated By-Laws as amended through
December 31, 1994.
Management Contracts and Compensatory Plans
10(a) Form of Non-Qualified Stock Option Agreement dated August
30, 1989 between the Company and an outside director, incorporated by
reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q
for its fiscal quarter ended July 31, 1989.
10(b) Form of Non-Qualified Stock Option Agreement dated
October 16, 1991 between the Company and an outside director, incorporated
by reference to Exhibit 10(n) of the Company's Annual Report on Form 10-K
for its fiscal year ended October 31, 1991.
10(c) Form of Non-Qualified 1991 Employee Stock Option Plan
dated October 16, 1991 between the Company and twenty key employees,
incorporated by reference to Exhibit 10(o) of the Company's Annual Report on
Form 10-K for its fiscal year ended October 31, 1991.
10(d) Board of Directors' Resolution dated December 6, 1991
establishing a non-employee director retirement plan, incorporated by
reference to Exhibit 10(s) of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 1991.
10(e) Indemnification Agreements for certain of the Company's
Directors dated October 2, 1992 incorporated by reference to Exhibit 10(x)
to the Company's Annual Report on Form 10-K for its fiscal year ended
October 31, 1992.
10(f) Indemnification Agreements for two of the Company's
Directors dated February 11, 1993 and September 1, 1993, incorporated by
reference to Exhibit 10(ai) of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 1993.
10(g) Forms of Non-Qualified Stock Option Agreements dated
February 11, 1993 and September 1, 1993 between the Company and two outside
directors, incorporated by reference to Exhibit 10(aj) of the Company's
Annual Report on Form 10-K for its fiscal year ended October 31, 1993.
10(h) 1994 Long Term Stock-Based Incentive Plan, incorporated
by reference to the Company's 1993 definitive proxy statement.
10(i) Second Amendment to the 1994 Long Term Stock-Based
Incentive Plan.
10(j) Employment Agreement, effective as of December 1, 1993,
between the Company and Paul G. Kahn, incorporated by reference to Exhibit
1 of the Company's Current Report on Form 8-K filed on December 6, 1993.
10(k) Employment Agreement, effective as of February 1, 1994,
between the Company and Francis J. Marino, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended January
31, 1994.
10(l) Amendment to Exhibit 3 of the Employment Agreement,
effective as of February 1, 1994, between the Company and Francis J. Marino.
10(m) Employment Agreement as of May 2, 1994, between the
Company and G. Thomas Frankland, incorporated by reference to Exhibit 10(a)
of the Company's Quarterly Report for its fiscal quarter ended April 30,
1994.
10(n) Amendment to Exhibit 3 of the Employment Agreement,
effective as of May 2, 1994, between the Company and G. Thomas Frankland.
10(o) Indemnification Agreement as of April 7, 1994, between
the Company and one outside director, incorporated by reference to Exhibit
10(b) of the Company's Quarterly Report for its fiscal quarter ended April
30, 1994.
10(p) Non-Qualified Stock Option Agreement as of April 7, 1994,
between the Company and one outside director, incorporated by reference to
Exhibit 10(c) of the Company's Quarterly Report for its fiscal quarter ended
April 30, 1994.
10(q) Employment Agreement, effective as of September 14, 1994,
between the Company and John R. Birk.
10(r) Amendment, effective as of January 1, 1995, to Employment
Agreement, between the Company and John R. Birk.
10(s) Executive Deferred Compensation Plan.
10(t) Form of Executive Agreement between the Company and
certain senior officers.
10(u) Form of Non-Qualified Stock Option Agreement under the
1994 Long Term Stock-Based Incentive Plan between the Company and certain
officers of the Company.
Other Material Contracts
10(v) Termination Agreement dated as of May 26, 1994 between
the Company and Steven J. Halmos and Recission Agreement made and entered
into as of June 9, 1994 between the Company and Steven J. Halmos,
incorporated by reference to Exhibit 10(e) from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1994.
10(w) Agreement with Citicorp (South Dakota), N.A., effective
January 1, 1989, incorporated by reference to the Company's Form 8 Amendment
No. 3, dated November 10, 1989, to its Quarterly Report on Form 10-Q for its
fiscal quarter ended April 30, 1989.
10(x) Second Amendment to Agreement with Citicorp (South
Dakota), N.A. dated March 31, 1992 incorporated by reference to Exhibit
10(b) to the Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended April 30, 1992.
10(y) Third Amendment to the Agreement with Citibank (South
Dakota), N.A., dated August 30, 1993, incorporated by reference to Exhibit
10(ah) of the Company's Annual Report on Form 10-K for its fiscal year ended
October 31, 1993.
10(z) Agreement with Peter Halmos, dated November 1, 1988,
regarding a marketing license for credit information services, incorporated
by reference to Exhibit 10(e) of the Company's Annual Report on Form 10-K,
for its fiscal year ended October 31, 1988.
10(aa) First Amendment to Agreement, dated January 25, 1991,
regarding marketing license for credit information services, incorporated by
reference to Exhibit 10(m) of the Company's Annual Report on Form 10-K for
its fiscal year ended October 31, 1990.
10(ab) Letter Agreement dated January 27, 1992, between
CreditLine Corporation and the Company, incorporated by reference to Exhibit
10(q) of the Company's Annual Report on Form 10-K for its fiscal year ended
October 31, 1991.
10(ac) Confirmation Agreement between Peter Halmos, High Plains
Capital Corporation, CreditLine Corporation and the Company dated January
27, 1992, incorporated by reference to Exhibit 10(r) of the Company's Annual
Report on Form 10-K for its fiscal year ended October 31, 1991.
10(ad) Public Relations Consulting Agreement dated October 25,
1994 between the Dilenschneider Group, Inc. and the Company.
10(ae) Special Projects Public Relations Consulting Agreement
dated December 14, 1994 between the Company and the Dilenschneider Group,
Inc.
.
11(a) Computation of Primary Earnings Per Share.
11(b) Computation of Fully Diluted Earnings Per Share.
22 Subsidiaries of the Registrant.
23 Consent of Independent Accountants to incorporation by
reference of their report in Prospectuses constituting part of Registration
Statements on Forms S-3 and S-8.
24 Powers of Attorney.
27 Financial Data Schedule
(b) Reports on Form 8-K
(b)1 Announcement of the completion of the acquisition of Wright
Express Corporation of South Portland, Maine dated September 29, 1994.
<TABLE>
SAFECARD SERVICES, INC. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions
-------------------------------
Balance Charged to Charged to Balance
at beginning costs and other at end of
Description of period expenses accounts Deductions period
<S> <C> <C> <C> <C> <C>
Reserves deducted
from assets to which
they apply:
Year ended October 31, 1994
Accounts receivable $150,000 $307,000 $1,138,000 a $1,595,000
Deferred commissions 297,000 297,000
Allowance for cancellations 8,893,000 37,810,000 d $(39,047,000) e 7,656,000
Unrealized loss on securities
available for sale 607,000 b 607,000
Year ended October 31, 1993
Accounts receivable 350,000 (200,000)c 150,000
Deferred commissions 347,000 (50,000)c 297,000
Allowance for cancellations 7,587,000 35,529,000 d (34,223,000)e 8,893,000
Year ended October 31, 1992
Accounts receivable 296,000 137,000 (83,000)f 350,000
Deferred commissions 350,000 (3,000)f 347,000
Deferred subscriber
acquisition costs 800,000 (800,000)g
Allowance for cancellations 6,990,000 22,830,000 d (22,233,000)e 7,587,000
<FN>
(a) Balance recorded in the acquisition of Wright Express.
(b) Adjustment to record securities available for
sale portfolio at market value in accordance with FAS 115.
(c) Reversal of uncollectible accounts receivable or commissions reserves.
(d) Charged to balance sheet accounts "Deferred
subscriber acquisition - commission" and "Subscriber advance payments."
(e) Charges for refunds upon subscriber cancellations.
(f) Uncollectible accounts receivable or commissions written-off.
(g) Reserve balance written-off against deferred subscriber acquisition cost
balance.
</TABLE>
SIGNATURES
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.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
--------------------------------
Paul G. Kahn
Chairman and Chief Executive
Officer
January 16, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date Signature Title
January 16, 1995 PAUL G. KAHN Director, Chairman and
------------------ Chief Executive Officer
Paul G. Kahn
January 16, 1995 * Director
--------------------
William T. Bacon, Jr.
January 16, 1995 * Director
--------------------
Marshall L. Burman
January 16, 1995 * Director
------------------------
Robert L. Dilenschneider
January 16, 1995 * Director
------------------------
Eugene Miller
January 16, 1995 * Director
----------------------
Thomas F. Petway, III
January 16, 1995 G. THOMAS FRANKLAND Vice Chairman and
------------------- Chief Financial Officer
G. Thomas Frankland (Principal Financial and
Accounting Officer)
January 16, 1995 G. THOMAS FRANKLAND
-------------------
G. Thomas Frankland
* Attorney in Fact
By signing his name hereto, G. Thomas Frankland, does sign this document
on behalf of each of the persons indicated by an asterisk above, pursuant to
Powers of Attorney duly executed by such persons and filed with the
Securities and Exchange Commission herewith
Exhibit Index
Exhibit Page Numbers
3(a) SafeCard Services, Incorporated's Incorporated by reference to
Certificate of Incorporation Exhibit 3(a) of the Company's
Annual Report on Form 10-K for
its fiscal year ended October
31, 1992.
3(b) SafeCard Services, Incorporated's Incorporated by reference to
Certificate of Amendment of Exhibit 3(g) of the Company's
Certificate of Incorporation, as Annual Report on Form 10-k filed
with the Secretary of State for its fiscal year ended
of Delaware, Division of Corporations October 31, 1987.
on August 20, 1987.
3(c) SafeCard Services Insurance Incorporated by reference to
Company's Certificate of Incorporation. Exhibit 3(e) of the Company's
Annual Report on Form 10-K for
its fiscal year ended October
31, 1987.
3(d) SafeCard Services Insurance Incorporated by reference to
Company's By-Laws. Exhibit 3(f) of the Company's
Annual Report on Form 10-K for
its fiscal year ended October
31, 1987.
3(e) SafeCard Services, Incorporated 60 - 71
By-Laws as amended through December
31, 1994.
Management Contracts and Compensatory Plans
10(a) Form of Non-Qualified Stock Incorporated by reference to
Option Agreement dated August 30, Exhibit 10(a) of the Company's
1989 between the Company and an Quarterly Report on Form 10-Q
outside director. for its fiscal quarter ended
July 31, 1989.
10(b) Form of Non-Qualified Stock Incorporated by reference to
Option Agreement dated October 16, Exhibit 10(n) of the Company's
1991 between the Company and an Annual Report on Form 10-K for
outside director. its fiscal year ended October
31, 1991.
10(c) Form of Non-Qualified 1991 Incorporated by reference to
Employee Stock Option Plan dated Exhibit 10(o) of the Company's
October 16, 1991 between the Company Annual Report on Form 10-K for
and twenty key employees. its fiscal year ended October
31, 1991.
10(d) Board of Directors' Resolution Incorporated by reference to
dated December 6, 1991 establishing Exhibit 10(s) of the Company's
a non-employee director retirement plan. Annual Report on Form 10-K for
its fiscal year ended October
31, 1991.
10(e) Indemnification Agreements for Incorporated by reference to
certain of the Company's Directors Exhibit 10(x) to the Company's
dated October 2, 1992. Annual Report on Form 10-K for
its fiscal year ended October
31, 1992.
10(f) Indemnification Agreements Incorporated by reference to
for two of the Company's Directors Exhibit 10(ai) of the Company's
dated February 11, 1993 and September Annual Report on Form 10-K for
1, 1993. its fiscal year ended October
31, 1993.
10(g) Forms of Non-Qualified Stock Incorporated by reference to
Option Agreements dated February Exhibit 10(aj) of the Company's
11, 1993 and September 1, 1993 Annual Report on Form 10-K for
between the Company and two its fiscal year ended October
outside directors. 31, 1993.
10(h) 1994 Long Term Stock-Based Incorporated by reference to the
Incentive Plan. Company's 1993 definitive proxy
statement.
10(i) Second Amendment to the 72
1994 Long Term Stock-Based
Incentive Plan.
10(j) Employment Agreement, Incorporated by reference to
effective as of December 1, 1993, Exhibit 1 of the Company's
between the Company and Paul G. Kahn. Current Report on Form 8-K filed
on December 6, 1993.
10(k) Employment Agreement, effective Incorporated by reference to the
as of February 1, 1994, between the Company's Quarterly Report on
Company and Francis J. Marino. Form 10-Q for the fiscal quarter
ended January 31, 1994.
10(l) Amendment to Exhibit 3 of the 73 - 78
Employment Agreement, effective as
of February 1, 1994, between the
Company and Francis J. Marino.
10(m) Employment Agreement as of Incorporated by reference to
May 2, 1994, between the Company Exhibit 10(a) of the Company's
and G. Thomas Frankland. Quarterly Report for its fiscal
quarter ended April 30, 1994.
10(n) Amendment to Exhibit 3 of the 79 - 84
Employment Agreement, effective as
of May 2, 1994, between the Company
and G. Thomas Frankland.
10(o) Indemnification Agreement as of Incorporated by reference to
April 7, 1994, between the Company Exhibit 10(b) of the Company's
and one outside director. Quarterly Report for its fiscal
quarter ended April 30, 1994.
10(p) Non-Qualified Stock Option Incorporated by reference to
Agreement as of April 7, 1994, between Exhibit 10(c) of the Company's
the Company and one outside director. Quarterly Report for its fiscal
quarter ended April 30, 1994.
10(q) Employment Agreement, effective 85 - 125
as of September 14, 1995, between the
Company and John R. Birk.
10(r) Amendment, effective as of 126 - 135
January 1, 1995, to Employment
Agreement, between the Company and
John R. Birk.
10(s) Executive Deferred Compensation Plan. 136 - 146
10(t) Form of Executive Agreement between 147 - 157
the Company and certain senior officers.
10(u) Form of Non-Qualified Stock 158 - 163
Option Agreement under the 1994 Long
Term Stock-Based Incentive Plan between
the Company and certain officers
of the Company.
Other Material Contracts
10(v) Termination Agreement dated as Incorporated by reference
of May 26, 1994 between the Company to Exhibit 10(e) from the
and Steven J. Halmos and Recission Company's Quarterly Report
Agreement made and entered into as on Form 10-Q for the fiscal
of June 9, 1994 between the Company quarter ended July 31,1994.
and Steven J. Halmos.
10(w) Agreement with Citicorp (South Incorporated by reference to the
Dakota), N.A., effective January 1, 1989. Company's Form 8 Amendment No.
3, dated November 10, 1989, to
its Quarterly Report on Form
10-Q for its fiscal quarter
ended April 30, 1989.
10(x) Second Amendment to Agreement Incorporated by reference to
with Citicorp (South Dakota), N.A. Exhibit 10(b) to the Company's
dated March 31, 1992. Quarterly Report on Form 10-Q
for its fiscal quarter ended
April 30, 1992.
10(y) Third Amendment to the Agreement Incorporated by reference to
with Citibank (South Dakota), N.A., Exhibit 10(ah) of the Company's
dated August 30, 1993. Annual Report on Form 10-K for
its fiscal year ended October
31, 1993.
10(z) Agreement with Peter Halmos, Incorporated by reference to
dated November 1, 1988, regarding Exhibit 10(e) of the Company's
a marketing license for credit Annual Report on Form 10-K, for
information services. its fiscal year ended October
31, 1988.
10(aa) First Amendment to Agreement, Incorporated by reference to
dated January 25, 1991, regarding Exhibit 10(m) of the Company's
marketing license for credit Annual Report on Form 10-K for
information services. its fiscal year ended October
31, 1990.
10(ab) Letter Agreement dated Incorporated by reference to
January 27, 1992, between CreditLine Exhibit 10(q) of the Company's
Corporation and the Company. Annual Report on Form 10-K for
its fiscal year ended October
31, 1991.
10(ac) Confirmation Agreement Incorporated by reference to
between Peter Halmos, High Plains Exhibit 10(r) of the Company's
Capital Corporation, CreditLine Annual Report on Form 10-K
Corporation and the Company dated for its fiscal year ended
January 27, 1992. October 31, 1991.
10(ad) Public Relations Consulting 164 - 169
Agreement dated October 25, 1994
between the Dilenschneider Group,
Inc. and the Company.
10(ae) Special Projects Public 170 - 172
Relations Consulting Agreement dated
December 14, 1994 between the Company
and the Dilenschneider Group, Inc.
11(a)Computation of Primary 173
Earnings Per Share.
11(b) Computation of Fully Diluted 174
Earnings Per Share.
22 Subsidiaries of the Registrant 175
23 Consent of Independent Accountants to 176
incorporation by reference of their report in
Prospectuses constituting part of Registration
Statements on Forms S-3 and S-8.
24 Powers of Attorney 177 - 181
27 Financial Data Schedule 182
EXHIBITS
PAGE LEFT BLANK
Exhibit 3(e)
BY-LAWS
OF
SAFECARD SERVICES, INCORPORATED
As Amended and Restated through December 31, 1994
-----------
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall
be established and maintained in the City of Dover, County of Kent,
State of Delaware.
Section 2. Other offices. The corporation may have other
offices, either within or without the State of Delaware, at such
place or places as the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of
stockholders for the election of directors and for such other
business as may be stated in the notice of the meeting, shall be
held at such place, either within or without the State of Delaware,
and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting. In
the event the Board of Directors fails to so determine the time,
date and place of meeting, the annual meeting of stockholders shall
be held at the offices of corporate counsel LEIBOWITZ & PLATZER, in
the City, County and State of New York on the 31st day of January
at 10 A.M.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business
day. At each annual meeting, the stockholders entitled to vote
shall elect a Board of Directors and then may transact such other
corporate business as shall be stated in the notice of the meeting.
Section 2. Other Meetings. Meetings of stockholders for
any purpose other than the election of directors may be held at
such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting.
Section 3. At each annual meeting, the stockholders shall
elect by plurality vote a board of directors and transact such
other business as may properly be brought before the meeting.
Section 4. Written notice of the annual meeting stating
the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10)
nor more than fifty (50) days before the date of the meeting.
Section 5. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise
prescribed by statute or by the certificate of incorporation, may
be called by the chairman, and shall be called by the president or
secretary at the request in writing of a majority of the board of
directors. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor
more than fifty (50) days before the date of the meeting, to each
stockholder entitled to vote at such meeting unless waived in
writing by each stockholder.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty-one percent of the stock
issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except
as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting
at which a quorum shall be present or represented any business may
be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the
meeting.
Section 9. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which
by express provision of the statutes or of the certificate of
incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such
question.
Section 10. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each
share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years from
its date, unless the proxy provides for a longer period.
Section 11. Action without meeting. Except as otherwise
provided by the Certificate of Incorporation, whenever the vote of
stockholders at a meeting thereof is required or permitted to be
taken in connection with any corporate action by any provisions of
the statutes or of the Certificate of Incorporation or of these By-
laws, the meeting and vote of stockholders may be dispensed with,
if all the stockholders who would have been entitled to vote upon
the action if such meeting were held, shall consent in writing to
such corporate action being taken.
Section 12. Notice of Stockholder Proposals. (a) At an
annual meeting of the stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall
have been brought before the annual meeting (i) by, or at the
direction of, the Board of Directors or (ii) by any stockholder of
record of the corporation who complies with the notice procedures
set forth in this Section 12 of these By-laws. For a proposal to
be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the
Secretary of the corporation. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal
executive offices of the corporation not less than sixty (60) days
nor more than ninety (90) days prior to the scheduled annual
meeting, regardless of any postponements, deferrals or adjournments
of that meeting to a later date; provided, however, that if less
than seventy (70) days' notice or prior public disclosure of the
date of the scheduled annual meeting is given or made, notice by
the stockholder to be timely must be so delivered or received not
later than the close of business on the tenth (10th) day following
the earlier of the day on which such notice of the date of the
scheduled annual meeting was mailed or the day on which such public
disclosure was made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the proposal
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and
address, as they appear on the corporation's books, of the
stockholders proposing such business and any other stockholders
known by such stockholder to be supporting such proposal, (iii) the
class and number of shares of the corporation's stock which are
beneficially owned by the stockholder on the date of such
stockholder notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such
stockholder notice, and (iv) any financial interest of the
stockholder in such proposal.
(b) If the presiding officer determines that a stockholder
proposal was not made in accordance with the terms of this Section
12, he shall so declare at the annual meeting and any such proposal
shall not be acted upon at the annual meeting.
(c) This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of
officers, directors and committees of the Board of Directors, but,
in connection with such reports, no business shall be acted upon at
such annual meeting unless stated, filed and received as herein
provided.
Section 13. Director Nominations. Nominations for the
election of directors may be made by the Board of Directors or a
nominating committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors
generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons
for election as directors at a meeting only if written notice of
such stockholder's intent to make such nomination or nominations
has been given, either by personal delivery or by United States
mail, postage pre-paid, to the Secretary of the corporation not
later than (i) with respect to an election to be held at an annual
meeting of stockholders, not less than sixty (60) days nor more
than ninety (90) days prior to the scheduled annual meeting,
regardless of any postponements, deferrals or adjournments of that
meeting to a later date; provided, however, that if less than
seventy (70) days' notice or prior public disclosure of the date of
the scheduled annual meeting is given or made, notice by the
stockholder to be timely must be so delivered or received not later
than the close of business on the tenth (10th) day following the
earlier of the day on which such notice of the date of the
scheduled annual meeting was mailed or the day on which such public
disclosure was made, and (ii) with respect to an election to be
held at a special meeting of stockholders for the election of
directors, the close of business on the tenth (10th) day following
the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that
the stockholder is a holder of record of stock of the corporation
entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission as then in effect; and (e) the
consent of each nominee to serve as a director of the corporation
if so elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute
the whole board shall be not less than three nor more than eleven.
The first board shall consist of five directors. Thereafter, within
the limits above specified, the number of directors shall be
determined solely by resolution of the board of directors. The
directors shall be elected at the annual meeting of the
stockholders. The directors shall be divided into three (3)
classes, each class to be as equal in number as possible; the term
of office of the first class shall expire on the day of the annual
meeting of stockholders of this Corporation to be held in 1982; the
term of office of the second class shall expire on the day of the
annual meeting of stockholders to be held in 1983; and that of the
third class on the day of the annual meeting of stockholders to be
held in 1984. At each annual election after such classification,
the number of directors equal to the number of the class whose term
expires on the day of such election shall be elected for a term of
three (3) years. In the case of any increase in the number of
directors of the Corporation, the additional directors shall be so
classified that all classes of directors shall be increased equally
as nearly as possible. Directors need not be stockholders. The
provisions of this section with respect to the sole power of the
Board of Directors to determine the number of directors which will
constitute the entire Board and with respect to the classified
Board of Directors shall not be amended, altered, repealed or
otherwise changed without the approval of three-fourths of the
outstanding voting stock of the Corporation.
Section 2. Resignations. Any director, member of a
committee or other officer may resign at any time. Such
resignation shall be made in writing, and shall take effect at the
time specified therein, and if no time be specified, at the time of
its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
Section 3. Vacancies. If the office of any director,
member of a committee or other officer becomes vacant, the
remaining directors in office, though less than a quorum by a
majority vote, may appoint any qualified person to fill such
vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
Section 4. Removal. Any director or directors of the
Corporation may be removed only as provided in the Certificate of
Incorporation.
Section 5. Newly Created Directorships. Any directorship
newly-created by the Board of Directors pursuant to Section 1 of
Article III of these By-laws shall be filled exclusively by a
majority of the directors then in office, though less than a
quorum, or by the sole remaining director. Any directorship newly-
created by the stockholders after amendment, alteration or repeal
of Section 1 of Article III of the By-laws (duly adopted by the
stockholders in accordance with the terms thereof) may be filled by
the stockholders. In either case, for so long as the directors of
the Corporation are divided into classes, any director chosen under
this Section 5 shall hold office until the next election of the
class for which such director shall have been chosen and until his
successor shall have been elected and qualified.
Section 6. Powers. The Board of Directors shall exercise
all of the powers of the corporation except such as are by law, or
by the Certificate of Incorporation of the corporation or by these
By-laws conferred upon or reserved to the stockholders.
Section 7. Committees. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole board,
designate one or more committees, each committee to consist of two
or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any
meeting of the committee. Any such committee, to the extent
provided in the resolution or in the By-laws of the corporation,
shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all
papers which may require it; provided, however, the By-laws may
provide that in the absence or disqualification of any member of
such committee or committees, the member or members thereof present
at any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any
such absent or disqualified member.
Section 8. Meetings. The Board of Directors of the
corporation may hold meetings, both regular and special, either
within or without the State of Delaware. The newly elected
directors may hold their first meeting for the purpose of
organization and the transaction of business, if a quorum be
present, immediately after the annual meeting of the stockholders;
or the time and place of such meeting may be fixed by consent in
writing of all the directors.
Regular meetings of the directors may be held without notice
at such places and times as shall be determined from time to time
by resolution of the directors.
Special meetings of the Board may be called by the Chairman or
by the President or Secretary on the written request of any two
directors and shall be held at such place or places as may be
determined by the directors or as shall be stated in the call of
the meeting. Notice of any special meeting shall be given to each
director at least (a) twelve (12) hours before the meeting if given
by telephone or if delivered at his residence or usual place of
business by telex, telecopy, telegraph or similar means or (b)
three (3) days before the meeting if delivered by mail to the
director's residence or usual place of business. Such notice shall
be deemed to be delivered when deposited in the United States mail
so addressed, with postage pre-paid, or when transmitted if sent by
telex, telecopy, telegraph or similar means. Neither the business
to be transacted at, nor the purpose of, any special meeting of the
Board of Directors need be specified in the notice or waiver of
notice of such meeting.
Any director may waive notice of any meeting by a writing
signed by the director entitled to the notice and filed with the
minutes or corporate records. The attendance or participation of
the director at a meeting shall constitute waiver of notice of such
meeting, unless the director at the beginning of the meeting or
promptly upon his arrival objects to holding the meeting or
transacting business at the meeting.
Section 9. Quorum. A majority of the directors shall
constitute a quorum for the transaction of business. If at any
meeting of the board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time
until a quorum is obtained, and no further notice thereof need be
given other than by announcement at the meeting which shall be so
adjourned.
Section 10. Compensation. The Board of Directors shall
have the authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the
corporation in any capacity.
Section 11. Action without meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting, if prior
to such action a written consent thereto is signed by all members
of the board, or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation
shall be a chief executive officer, a chief financial officer and
a secretary, all of whom shall be elected by the Board of Directors
and who shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a
chairman, a president, and one or more vice chairmen as they may
deem proper. The chief executive officer is authorized to appoint
such officers on an interim basis, subject to election by the Board
of Directors at its next meeting. None of the officers of the
corporation need be directors. The officers shall be elected at
the first meeting of the Board of Directors after each annual
meeting. More than two offices may be held by the same person.
Section 2. Other officers and agents. Executive vice
presidents and senior vice presidents may be appointed by the
chairman, the chief executive officer or the Board of Directors as
may be deemed advisable. Vice presidents, a treasurer, assistant
vice presidents, assistant secretaries, assistant treasurers and
other officers and agents may be appointed by the chairman, the
chief executive officer, any vice chairman, the president or the
Board of Directors as may be deemed advisable. Such officers shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time by
the appointing officer, such other appropriate officer or by the
Board of Directors as the case may be. Whenever any officer of the
corporation ceases to be an employee of the corporation, he or she
shall immediately cease to be an officer of the corporation without
any further action by such officer, any other appropriate officer
or the Board of Directors.
Section 3. Chairman. The chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the
Board of Directors and shall have and perform such other duties as
from time to time may be assigned by the Board of Directors. The
chairman shall have general authority to execute bonds, deeds,
contracts and other documents in the name and on behalf of the
corporation and shall perform all such other acts and duties as are
incident to the office or are properly required of such chairman by
the Board of Directors.
Section 4. Chief Executive Officer. The chief executive
officer of the corporation shall have general and active management
of the business of the corporation in accordance with the
objectives and policies established by and subject to the control
of the Board of Directors and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The
chief executive officer shall have authority to suspend or to
remove any employee, agent or appointed officer of the corporation
and to suspend for cause any officer of the corporation elected by
the Board of Directors and, in the case of the suspension for cause
of any such elected officer, to recommend to the Board of Directors
what further action should be taken. The chief executive officer
shall have general authority to execute bonds, deeds, contracts and
other documents in the name and on behalf of the corporation and
shall make reports to the Board of Directors and the stockholders
and shall perform all such other duties as are incident to the
office or are properly required of the chief executive officer by
the Board of Directors. In the absence of the chairman, the chief
executive officer shall perform and exercise the authority of the
chairman. In the absence of the chairman and the chief executive
officer, the vice chairman designated by the chief executive
officer as the most senior officer of the corporation may perform
the duties and exercise the authority of the chairman and the chief
executive officer, subject to the Board of Directors' right to make
the designation or supersede any designation so made.
Section 5. Vice Chairman. Each vice chairman shall have
the general and active management of certain functions of the
business of the corporation as assigned by the chairman, the chief
executive officer or the Board of Directors and shall exercise all
powers delegated to such vice chairman in accordance with the
objectives and policies established by the Board of Directors. A
vice chairman shall have general authority to execute bonds, deeds,
contracts and other documents in the name and on behalf of the
corporation, shall have authority to suspend or to remove any
employee, agent or any appointed officer reporting to such vice
chairman and shall perform all such other duties as are incident to
the office or are properly required of such vice chairman by the
Board of Directors.
Section 6. President. The president shall have the general
executive powers and such other duties as assigned by the chairman,
the chief executive officer or the Board of Directors and shall
exercise all powers delegated to the president in accordance with
the objectives and policies established by the Board of Directors.
The president shall have general authority to execute bonds, deeds,
contracts and other documents in the name and on behalf of the
corporation, shall have authority to suspend or to remove any
employee, agent or any appointed officer reporting to the president
and shall perform all such other duties as are incident to the
office or are properly required of the president by the Board of
Directors.
Section 7. Chief Financial Officer. The chief financial
officer shall have the custody of the corporate funds and
securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. The chief
financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation in such depositaries
as may be designated by the Board of Directors. The chief financial
officer shall perform all other necessary acts and duties in
connection with the administration of the financial affairs of the
corporation.
The chief financial officer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, the
chairman or the chief executive officer, taking proper vouchers for
such disbursements and shall deliver to the chief executive officer
and the Board of Directors at the regular meetings of the Board of
Directors, or whenever they may request it, an account of all
transactions as well as the financial condition of the corporation.
If required by the Board of Directors, the chief financial officer
shall give the corporation a bond for the faithful discharge of his
or her duties in such amount and with such surety as the Board
shall prescribe.
Section 8. Senior Vice President, Executive Vice
President, and Vice President. Each senior vice president,
executive vice president, and vice president shall have such powers
and shall perform such duties as shall be assigned by the Board of
Directors, the chairman, the chief executive officer, the president
or the vice chairman to whom such officer reports.
Section 9. Secretary. The secretary shall give, or cause
to be given, notice of all meetings of stockholders and directors,
and all other notices required by law or by these By-laws, and in
case of his or her absence or refusal or neglect so to do, any such
notice may be given by any person thereunto directed by the
chairman, chief executive officer, or by the directors, or
stockholders, upon whose requisition the meeting is called as
provided in these By-laws. He or she shall record all the
proceedings of the meetings of the corporation and of the directors
in a book to be kept for that purpose, and shall perform such other
duties as may be assigned by the directors, the chairman or the
chief executive officer. The secretary shall have the custody of
the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the Board of
Directors, the chairman, or the chief executive officer, and attest
the same.
Section 10. Treasurer, Assistant Treasurers and Assistant
Secretaries. A treasurer, assistant treasurers and assistant
secretaries, if any, shall have such powers and shall perform such
duties as shall be assigned to them, respectively, by the Board of
Directors, the chairman, the chief executive officer, the president
or the vice chairman to whom such person reports.
Section 11. Compensation. The salaries and other
compensation of all officers elected by the Board of Directors
shall be fixed by the Board of Directors or by a committee of board
members designated for that purpose by the Board of Directors.
Compensation of appointed officers, other employees and agents
shall be fixed by or under the authority of the chairman or the
chief executive officer in accordance with the objectives and
policies established by the Board of Directors. No member of the
Board of Directors shall be disqualified from voting on
compensation of officers by reason of the fact that he or she is an
officer as well as a director, except that such director's vote
shall not be counted in fixing his or her own compensation.
ARTICLE V
MISCELLANEOUS
Section 1. Certificates of stock. Certificates of stock,
signed by the chairman or vice-chairman of the board of directors,
if they be elected, president or vice-president, and the treasurer
or an assistant treasurer, or secretary or an assistant secretary,
shall be issued to each stockholder certifying the number of shares
owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or
its employee, or (2) by a registrar other than the corporation or
its employee, the signatures of such officers may be facsimiles.
Section 2. Lost certificates. A new certificate of stock
may be issued in the place of any certificate theretofore issued by
the corporation, alleged to have been lost or destroyed, and the
directors may, in their discretion, require the owner of the lost
or destroyed certificate, or his legal representatives, to give the
corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against
any claim that may be made against it on account of the alleged
loss of any such certificate, or the issuance of any such new
certificate.
Section 3. Transfer of shares. The shares of stock of the
corporation shall be transferable only upon its books by the
holders thereof in person or by their duly authorized attorneys or
legal representatives, and upon such transfer the old certificates
shall be surrendered to the corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers,
or to such other person as the directors may designate, by whom
they shall be cancelled, and new certificates shall thereupon be
issued. A record shall be made of each transfer and whenever a
transfer shall be made for collateral security, and not absolutely,
it shall be so expressed in the event of the transfer.
Section 4. Stockholders record date. In order that the
corporation may determine the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other
action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the board
of directors may fix a new record date for the adjourned meeting.
Section 5. Dividends. Subject to the provisions of the
Certificate of Incorporation, the board of directors may, out of
funds legally available therefor at any regular or special meeting,
declare dividends upon the capital stock of the corporation as and
when they deem expedient. Before declaring any dividend there may
be set apart out of any funds of the corporation available for
dividends, such sum or sums as the directors from time to time in
their discretion deem proper for working capital or as a reserve
fund to meet contingencies or for equalizing dividends or for such
other purposes as the directors shall deem conducive to the
interests of the corporation.
Section 6. Seal. The corporate seal shall be circular in
form and shall contain the name of the corporation, the year of its
creation and the words "CORPORATE SEAL DELAWARE." Said seal may be
used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Fiscal year. The fiscal year of the
corporation shall be determined by resolution of the board of
directors.
Section 8. Checks. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such
officer or officers, agent or agents of the corporation, and in
such manner as shall be determined from time to time by resolution
of the board of directors.
Section 9. Notice and waiver of notice. Whenever any
notice is required by these By-laws to be given, personal notice is
not meant unless expressly so stated, and any notice so required
shall be deemed to be sufficient if given by depositing the same in
the United States mail, postage pre-paid, addressed to the person
entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on
the day of such mailing. Stockholders not entitled to vote shall
not be entitled to receive notice of any meetings except as
otherwise provided by statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate
of Incorporation of the corporation or these By-laws, a waiver
thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
Section 10. Indemnification of directors, officers and
others. Each person who is or was a director or officer of the
corporation or a subsidiary of the corporation and each person who
serves or may have served at the request of the corporation as a
director or officer or another corporation, partnership, joint
venture, trust or other enterprise (and the heirs, executors,
administrators and estates of any such persons), shall be
indemnified by the corporation in accordance with, and to the
fullest extent authorized by, the provisions of the General
Corporation Law of the State of Delaware as it may from time to
time be amended. Each person who is or was an employee or agent of
this corporation, and each person who serves or may have served as
an employee or agent of another corporation, partnership, joint
venture trust or other enterprise, may be similarly indemnified at
the discretion of the board of directors.
Section 11. Annual statements. The Board of Directors
shall present at each annual meeting, and at any special meeting of
the stockholders when called for by vote of the stockholders, a
full and clear statement of the business and condition of the
corporation.
ARTICLE VI
AMENDMENTS
Except as otherwise provided in Section 1 of Article III of
these By-laws, these By-laws may be amended or repealed or new By-
laws adopted (a) at any annual or special meeting of the
stockholders by the affirmative vote of the holders of two-thirds
of the stock issued and outstanding and entitled to vote thereat,
or (b) by the affirmative vote of a majority of the Board of
Directors.
Exhibit 10(i)
Second Amendment
to
SafeCard Services, Incorporated
1994 Long Term Stock-Based Incentive Plan
WHEREAS, on December 4, 1993, the Compensation Committee of
SafeCard Services, Incorporated (the "Company") approved, and the
Company's Board of Directors adopted, the Company's 1994 Long Term
Stock-Based Incentive Plan (the "1994 Plan"), subject to
stockholder approval;
WHEREAS, on January 24, 1994, the Compensation Committee
approved, and the Company's Board of Directors adopted, an
amendment to the 1994 Plan;
WHEREAS, on March 7, 1994, the stockholders of the Company
approved the 1994 Plan, as amended, at the Company's 1994 annual
meeting of stockholders.
WHEREAS, the Compensation Committee desires to approve, and
the Company's Board of Directors desires to adopt, a second
amendment to the 1994 Plan.
RESOLVED, effective as of April 6, 1994, the 1994 Plan hereby
is amended so that the definition of "Fair Market Value" appearing
at Section 2.14 is deleted in its entirety, and the following is
inserted in lieu thereof:
2.14 "Fair Market Value" on any date
means the closing sales price of the Shares
on such date on the principal national
securities exchange on which such Shares are
listed or admitted to trading, or if such
Shares are not so listed or admitted to
trading, the per share closing bid price on
such date as quoted on the National
Association of Securities Dealers Automated
Quotation System or such other market in
which such prices are regularly quoted, or if
there have been no published bid quotation
with respect to Shares on such date, the Fair
Market Value shall be the value established
by the Board in good faith and, in the case
of an Incentive Stock Option, in accordance
with Section 422 of the Code.
Exhibit 10(l)
Amendment
to
Exhibit 3, Stock Option Agreement,
to the Employment Agreement between
SafeCard Services, Incorporated
and Francis J. Marino
WHEREAS, on January 24, 1994, the 1994 Plan Committee awarded,
and the Board of Directors approved, the award under the 1994 Long
Term Stock-Based Incentive Plan (the "Plan") of Options (as defined
under the Plan) to purchase 300,000 shares to Francis J. Marino
(the "Marino Award"), such Options to be non-qualified for federal
tax purposes;
WHEREAS, on September 9, 1994, the Compensation Committee
adopted and the Board of Directors approved an amendment to the
Marino Award so that 21,122 shares of the 300,000 shares subject to
the Marino Award shall be an Incentive Stock Option, the remaining
Options subject to the Marino Award to be non-qualified for tax
purposes and all other terms and conditions of the Marino Award to
remain in full force and effect; and
NOW THEREFORE, to effectuate the intent of the foregoing,
Exhibit 3, Stock Option Agreement, to the Employment Agreement
between the Company and Francis J. Marino hereby is amended and
restated as follows:
Exhibit 3
STOCK OPTION AGREEMENT
FOR FRANCIS J. MARINO
THIS AGREEMENT, made as of the 24th day of January,
1994 (the "Grant Date"), between SafeCard Services,
Incorporated, a Delaware corporation (the "Company"), and
Francis J. Marino (the "Optionee").
WHEREAS, the Company has adopted the 1994 Long Term
Stock-Based Incentive Plan (the "Plan") in order to
provide additional incentive to selected officers,
employees and directors of the Company; and
WHEREAS, the committee responsible for
administration of the Plan has determined to grant
options to the Optionee as provided herein;
NOW, THEREFORE, the parties hereto agree as
follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants to the
Optionee the right and option (the "Nonqualified Option")
to purchase all or any part of an aggregate of 158,878
whole shares of common stock of the Company, par value
$.01 ("Shares"), subject to, and in accordance with, the
terms and conditions set forth in this Agreement. The
Nonqualified Option is not intended to qualify as an
incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the
"Code").
1.2 The Company hereby further grants to
the Optionee the right and option (the "ISO") to purchase
all or any part of an aggregate of 21,122 Shares, subject
to, and in accordance with, the terms and conditions set
forth in this Agreement. The ISO is intended to qualify
as an incentive stock option within the meaning of
Section 422 of the Code and shall be so construed;
provided however, that nothing in this Agreement shall be
interpreted as a representation, guaranty or other
undertaking on the part of the Company that the Option is
or will be determined to be an incentive stock option
within the meaning of Section 422 of the Code.
1.3 The ISO and the Nonqualified Option
collectively shall be referred to herein as the
"Options."
2. Purchase Price.
---------------
The price at which the Optionee shall be
entitled to purchase Shares upon the exercise of the
Options shall be $18.94 per Share.
3. Duration of Options.
--------------------
The Options shall be exercisable to the extent
and in the manner provided herein for a period of ten
(10) years from the Grant Date (the "Exercise Term");
provided, however, that the Options may be earlier
terminated as provided in Section 6 thereof.
4. Exercisability of Options.
--------------------------
Unless otherwise provided in this Agreement,
the Options shall entitle the Optionee to purchase, in
whole at any time or in part from time to time, 25% of
the total number of Shares covered by the Options after
the expiration of one (1) year from the Grant Date and an
additional 25% of the total number of Shares covered by
the Options after the expiration of each of the second,
third and fourth anniversaries of the Grant Date, and
each such right of purchase shall be cumulative and shall
continue, unless sooner exercised or terminated as herein
provided, during the remaining period of the Exercise
Term. Any fractional number of shares resulting from the
application of the percentages set forth in this Section
4 shall be rounded to the next higher whole number of
Shares.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions
of this Agreement, the Options may be exercised by
delivery of written notice to the Company, at its
principal executive office. Such notice shall state that
the Optionee is electing to exercise the Options and the
number of Shares in respect of which the Options is being
exercised and shall be signed by the person or persons
exercising the Options. If requested by the Committee,
such person or persons shall (i) deliver this Agreement
to the Secretary of the Company who shall endorse thereon
a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to
exercise the Options.
5.2 The notice of exercise described in
Section 5.1 shall be accompanied by payment of the full
purchase price for the Shares in respect of which the
Options is being exercised, in cash or by certified
check.
5.3 Upon receipt of the notice of
exercise and any payment or other documentation as may be
necessary pursuant to Section 5.2 relating to the Shares
in respect of which the Options is being exercised, the
Company shall take such action as may be necessary to
effect the transfer to the Optionee of the number of
Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to
be the holder of, or to have any of the rights of a
holder with respect to any Shares subject to the Options
until (i) the Options shall have been exercised pursuant
to the terms of this Agreement and the Optionee shall
have paid the full purchase price for the number of
Shares in respect of which the Options was exercised,
(ii) the Company shall have issued and delivered the
Shares to the Optionee, and (iii) the Optionee's name
shall have been entered as a stockholder of record on the
books of the Company, whereupon the Optionee shall have
full voting and other ownership rights with respect to
such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason
or Termination other than for Cause, Death or Disability.
In the event the Company terminates the Optionee's
employment other than for Cause (as defined in the
Employment Agreement between the Company and the Optionee
dated as of the date hereof (the "Employment
Agreement")), death or Disability (as defined in the
Employment Agreement), or if the Optionee terminates his
employment for Good Reason (as defined in the Employment
Agreement) the Options, to the extent not yet vested
shall fully vest, and the Optionee may at any time within
thirty (30) days after such termination, exercise the
Option.
6.2 Death or Disability. In the event of
the Disability of the Optionee or in the event the
employment of the Optionee is terminated as a result of
his death, the Optionee may at any time within one (1)
year after such Disability or termination of employment,
exercise the Options to the extent, but only to the
extent, that the Options or portion thereof was
exercisable on the date of such Disability or termination
of employment. In the event of the Optionee's death, the
Options shall be exercisable, to the extent provided in
the Plan and this Agreement by the legatee or legatees
under the Optionee's will, or by the Optionee's personal
representatives or distributees, and such person or
persons shall be substituted for the Optionee each time
the Optionee is referred to herein.
6.3 Expiration of Employment Term. In
the event the Optionee's Employment Term (as defined in
Section 1.01 of the Employment Agreement) is not
extended, the Options to the extent not yet vested shall
vest and the Optionee may at any time up to thirty (30)
days after the expiration of the Employment Term,
exercise the Options.
6.4 Other Termination of Employment. If
the employment of the Optionee is terminated for any
reason other than the reasons set forth in Sections 6.1,
6.2 and 6.3, the Options shall terminate on the date of
the Optionee's termination of employment whether or not
exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary
contained in this Agreement, in the event of a Change in
Control (as defined in the Employment Agreement), the
Options, to the extent not yet vested, shall fully vest
and shall become immediately and fully exercisable.
8. Nontransferability.
-------------------
The Options shall not be transferable other
than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as
defined in the Code. During the lifetime of the Optionee,
the Options shall be exercisable only by the Optionee.
9. No Right to Continued Employment.
---------------------------------
Nothing in this Agreement or the Plan shall be
interpreted or construed to confer upon the Optionee any
right with respect to continuance of employment by the
Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the
committee administering the Plan may make appropriate
adjustments to the number and class of Shares or other
stock or securities subject to the Options and the
purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in
accordance with the provisions of the Plan and shall be
final and binding for all purposes of the Plan and this
Agreement.
11. Disqualifying Dispositions.
---------------------------
If the Optionee makes a disposition, within the meaning
of Section 424(c) of the Code and the regulations promulgated
thereunder, of any Share or Shares issued to the Optionee pursuant
to his exercise of the ISO within the two-year period commencing on
the day after the Grant Date or within the one-year period
commencing on the day after the date of transfer of such Share or
Shares to the Optionee pursuant to such exercise, the Optionee
shall within ten (10) days after such disposition, notify the
Company thereof, by delivery of a written notice to the Secretary
of the Company and immediately deliver to the Company the amount of
all applicable withholding taxes under federal, state or local law.
12. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a
copy of the Plan and agrees to be bound by all the terms
and provisions thereof.
13. Modification of Agreement.
--------------------------
This Agreement may be modified, amended,
suspended or terminated, and any terms or conditions may
be waived, but only by a written instrument executed by
the parties hereto.
14. Severability.
-------------
Should any provision of this Agreement be held
by a court of competent jurisdiction to be unenforceable
or invalid for any reason, the remaining provisions of
this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.
15. Governing Law.
--------------
The validity, interpretation, construction and
performance of this Agreement shall be governed by the
laws of the State of Delaware without giving effect to
the conflicts of laws principles thereof.
16. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of
and be binding upon any successor to the Company. This
Agreement shall inure to the benefit of the Optionee's
legal representatives. All obligations imposed upon the
Optionee and all rights granted to the Company tinder
this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
17. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise
under, or as a result of, or in any way relate to, the
interpretation, construction or application of this
Agreement shall be determined by the committee
administering the Plan. Any determination made hereunder
shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
------------------------------
Paul G. Kahn
Chief Executive Officer
FRANCIS J. MARINO
_______________________________
Francis J. Marino
Optionee
Exhibit 10(n)
Amendment
to
Exhibit 3, Stock Option Agreement,
to the Employment Agreement between
SafeCard Services, Incorporated
and G. Thomas Frankland
WHEREAS, on April 14, 1994, the 1994 Plan Committee awarded,
and the Board of Directors approved, the award under the 1994 Long
Term Stock-Based Incentive Plan (the "Plan") of Options (as defined
under the Plan) to purchase 300,000 shares to G. Thomas Frankland
(the "Frankland Award"), such Options to be deemed granted as of
May 2, 1994 and to be non-qualified for federal tax purposes;
WHEREAS, on September 9, 1994, the Compensation Committee
adopted and the Board of Directors approved an amendment to the
Frankland Award so that 22,377 shares of the 300,000 shares subject
to the Frankland Award shall be an Incentive Stock Option, such
Incentive Stock Option to be deemed granted as of May 2, 1994, the
remaining Options subject to the Frankland Award to be non-
qualified for tax purposes and all other terms and conditions of
the Frankland Award to remain in full force and effect; and
NOW THEREFORE, to effectuate the intent of the foregoing,
Exhibit 3, Stock Option Agreement, to the Employment Agreement
between the Company and G. Thomas Frankland hereby is amended and
restated as follows:
Exhibit 3
STOCK OPTION AGREEMENT
FOR G. THOMAS FRANKLAND
THIS AGREEMENT, made as of the 2nd day of May, 1994
(the "Grant Date"), between SafeCard Services,
Incorporated, a Delaware corporation (the "Company"), and
G. Thomas Frankland (the "Optionee").
WHEREAS, the Company has adopted the 1994 Long Term
Stock-Based Incentive Plan (the "Plan") in order to
provide additional incentive to selected officers,
employees and directors of the Company; and
WHEREAS, the committee responsible for
administration of the Plan has determined to grant
options to the Optionee as provided herein;
NOW, THEREFORE, the parties hereto agree as
follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants to the
Optionee the right and option (the "Nonqualified Option")
to purchase all or any part of an aggregate of 157,623
whole shares of common stock of the Company, par value
$.01 ("Shares"), subject to, and in accordance with, the
terms and conditions set forth in this Agreement. The
Nonqualified Option is not intended to qualify as an
incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the
"Code").
1.2 The Company hereby further grants to
the Optionee the right and option (the "ISO") to purchase
all or any part of an aggregate of 22,377 Shares, subject
to, and in accordance with, the terms and conditions set
forth in this Agreement. The ISO is intended to qualify
as an incentive stock option within the meaning of
Section 422 of the Code and shall be so construed;
provided however, that nothing in this Agreement shall be
interpreted as a representation, guaranty or other
undertaking on the part of the Company that the Option is
or will be determined to be an incentive stock option
within the meaning of Section 422 of the Code.
1.3 The ISO and the Nonqualified Option
collectively shall be referred to herein as the
"Options."
2. Purchase Price.
---------------
The price at which the Optionee shall be
entitled to purchase Shares upon the exercise of the
Options shall be the closing price per Share on the New
York Stock Exchange on May 2, 1994.
3. Duration of Options.
--------------------
The Options shall be exercisable to the extent
and in the manner provided herein for a period of ten
(10) years from the Grant Date (the "Exercise Term");
provided, however, that the Options may be earlier
terminated as provided in Section 6 thereof.
4. Exercisability of Options.
--------------------------
Unless otherwise provided in this Agreement,
the Options shall entitle the Optionee to purchase, in
whole at any time or in part from time to time, 25% of
the total number of Shares covered by the Options after
the expiration of one (1) year from the Grant Date and an
additional 25% of the total number of Shares covered by
the Options after the expiration of each of the second,
third and fourth anniversaries of the Grant Date, and
each such right of purchase shall be cumulative and shall
continue, unless sooner exercised or terminated as herein
provided, during the remaining period of the Exercise
Term. Any fractional number of shares resulting from the
application of the percentages set forth in this Section
4 shall be rounded to the next higher whole number of
Shares.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions
of this Agreement, the Options may be exercised by
delivery of written notice to the Company, at its
principal executive office. Such notice shall state that
the Optionee is electing to exercise the Options and the
number of Shares in respect of which the Options is being
exercised and shall be signed by the person or persons
exercising the Options. If requested by the Committee,
such person or persons shall (i) deliver this Agreement
to the Secretary of the Company who shall endorse thereon
a notation of such exercise and (ii) provide satisfactory
proof as to the right of such person or persons to
exercise the Options.
5.2 The notice of exercise described in
Section 5.1 shall be accompanied by payment of the full
purchase price for the Shares in respect of which the
Options is being exercised, in cash or by certified
check.
5.3 Upon receipt of the notice of
exercise and any payment or other documentation as may be
necessary pursuant to Section 5.2 relating to the Shares
in respect of which the Options is being exercised, the
Company shall take such action as may be necessary to
effect the transfer to the Optionee of the number of
Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to
be the holder of, or to have any of the rights of a
holder with respect to any Shares subject to the Options
until (i) the Options shall have been exercised pursuant
to the terms of this Agreement and the Optionee shall
have paid the full purchase price for the number of
Shares in respect of which the Options was exercised,
(ii) the Company shall have issued and delivered the
Shares to the Optionee, and (iii) the Optionee's name
shall have been entered as a stockholder of record on the
books of the Company, whereupon the Optionee shall have
full voting and other ownership rights with respect to
such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason
or Termination other than for Cause, Death or Disability.
In the event the Company terminates the Optionee's
employment other than for Cause (as defined in the
Employment Agreement between the Company and the Optionee
dated as of the date hereof (the "Employment
Agreement")), death or Disability (as defined in the
Employment Agreement), or if the Optionee terminates his
employment for Good Reason (as defined in the Employment
Agreement) the Options, to the extent not yet vested
shall fully vest, and the Optionee may at any time within
thirty (30) days after such termination, exercise the
Option.
6.2 Death or Disability. In the event of
the Disability of the Optionee or in the event the
employment of the Optionee is terminated as a result of
his death, the Optionee may at any time within one (1)
year after such Disability or termination of employment,
exercise the Options to the extent, but only to the
extent, that the Options or portion thereof was
exercisable on the date of such Disability or termination
of employment. In the event of the Optionee's death, the
Options shall be exercisable, to the extent provided in
the Plan and this Agreement by the legatee or legatees
under the Optionee's will, or by the Optionee's personal
representatives or distributees, and such person or
persons shall be substituted for the Optionee each time
the Optionee is referred to herein.
6.3 Expiration of Employment Term. In
the event the Optionee's Employment Term (as defined in
Section 1.01 of the Employment Agreement) is not
extended, the Options to the extent not yet vested shall
vest and the Optionee may at any time up to thirty (30)
days after the expiration of the Employment Term,
exercise the Options.
6.4 Other Termination of Employment. If
the employment of the Optionee is terminated for any
reason other than the reasons set forth in Sections 6.1,
6.2 and 6.3, the Options shall terminate on the date of
the Optionee's termination of employment whether or not
exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary
contained in this Agreement, in the event of a Change in
Control (as defined in the Employment Agreement), the
Options, to the extent not yet vested, shall fully vest
and shall become immediately and fully exercisable.
8. Nontransferability.
-------------------
The Options shall not be transferable other
than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as
defined in the Code. During the lifetime of the Optionee,
the Options shall be exercisable only by the Optionee.
9. No Right to Continued Employment.
---------------------------------
Nothing in this Agreement or the Plan shall be
interpreted or construed to confer upon the Optionee any
right with respect to continuance of employment by the
Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the
committee administering the Plan may make appropriate
adjustments to the number and class of Shares or other
stock or securities subject to the Options and the
purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in
accordance with the provisions of the Plan and shall be
final and binding for all purposes of the Plan and this
Agreement.
11. Disqualifying Dispositions.
---------------------------
If the Optionee makes a disposition,
within the meaning of Section 424(c) of the Code and the
regulations promulgated thereunder, of any Share or
Shares issued to the Optionee pursuant to his exercise of
the ISO within the two-year period commencing on the day
after the Grant Date or within the one-year period
commencing on the day after the date of transfer of such
Share or Shares to the Optionee pursuant to such
exercise, the Optionee shall within ten (10) days after
such disposition, notify the Company thereof, by delivery
of a written notice to the Secretary of the Company and
immediately deliver to the Company the amount of all
applicable withholding taxes under federal, state or
local law.
12. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a
copy of the Plan and agrees to be bound by all the terms
and provisions thereof.
13. Modification of Agreement.
--------------------------
This Agreement may be modified, amended,
suspended or terminated, and any terms or conditions may
be waived, but only by a written instrument executed by
the parties hereto.
14. Severability.
-------------
Should any provision of this Agreement be held
by a court of competent jurisdiction to be unenforceable
or invalid for any reason, the remaining provisions of
this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their
terms.
15. Governing Law.
--------------
The validity, interpretation, construction and
performance of this Agreement shall be governed by the
laws of the State of Delaware without giving effect to
the conflicts of laws principles thereof.
16. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of
and be binding upon any successor to the Company. This
Agreement shall inure to the benefit of the Optionee's
legal representatives. All obligations imposed upon the
Optionee and all rights granted to the Company tinder
this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
17. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise
under, or as a result of, or in any way relate to, the
interpretation, construction or application of this
Agreement shall be determined by the committee
administering the Plan. Any determination made hereunder
shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
-------------------------------
Paul G. Kahn
Chief Executive Officer
G. THOMAS FRANKLAND
_______________________________
G. Thomas Frankland
Optionee
Exhibit 10(q)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, effective as of the closing of the
transactions contemplated by the merger agreement dated July 25,
1994 among SafeCard Services, Incorporated (the "Company"), KHAC,
Inc. and Wright Express Corporation ("WEX") (the "Merger
Agreement") (such closing date referred to herein as the "Effective
Date"), by and between the Company and John R. Birk (the
"Executive"),
WHEREAS, the Company desires to obtain the services of the
Executive, and the Executive is willing to render such services, in
accordance with the terms hereinafter set forth; and
WHEREAS, the Board of Directors of the Company (the "Board")
by appropriate resolutions has authorized the employment of the
Executive as provided for in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the Company and the Executive agree as follows:
ARTICLE I
Term of Agreement
1.01 Term. The initial term of employment under this
Agreement shall be for the period commencing on the Effective Date
and ending three (3) years from the Effective Date; provided,
however, that commencing on the third anniversary of the Effective
Date and on each anniversary of the Effective Date thereafter, the
term of this Agreement shall automatically be extended for one (1)
year unless either the Company or the Executive shall have given
written notice to the other at least one hundred eighty (180) days
prior thereto that the term of this Agreement shall not be so
extended. The initial term of employment and any extension thereof
shall be referred to as the "Employment Term."
ARTICLE II
Position and Duties
2.01 Position. The Executive shall be employed as the
President and Chief Executive Officer of WEX, which shall be a
wholly-owned subsidiary of the Company, or shall have such other
position as is mutually agreed to by the Executive and the Company
from time to time.
2.02 Duties. The Executive agrees to perform the duties,
undertake the responsibilities and exercise the authority
customarily associated with the position described in Section 2.01.
The Company and the Executive agree that the Executive shall report
directly to the Chairman of the Board and Chief Executive Officer
of the Company, Paul G. Kahn. Excluding periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees
that during the Employment Term, he shall devote his full business
time to the business and affairs of the Company and to the duties
and responsibilities assigned to him hereunder. The Executive may
(i) with the written permission of the Board of Directors serve on
corporate boards, (ii) serve on civic or charitable boards or
committees, (iii) manage personal investments, and (iv) deliver
lectures and teach at educational institutions so long as such
activities do not significantly interfere with the performance of
the Executive's duties and responsibilities hereunder.
ARTICLE III
Compensation
3.01 Base Salary. The Company agrees to pay or cause to be
paid to the Executive during the Employment Term a base salary at
the rate of $275,000 per annum or such larger amount as the Board
of Directors may from time to time determine (as increased from
time to time, the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices
applicable to its executives and shall be reviewed at least
annually by the Board of Directors and may be further increased
(but not decreased) in such amounts as the Board of Directors in
its discretion may decide.
3.02 Sign-On Bonus. The Company shall deliver to the
Executive upon the Effective Date the following:
(a) a one-time cash bonus of $32,000, and
(b) 1,000 shares of common stock of the Company, par value
$.01 (the "Restricted Shares"), which shall be subject
to the terms, conditions and restrictions described
below.
(c) If the Executive's continuous employment with the
Company shall terminate for any reason specified in
Section 6.03 or 6.02 prior to the six month
anniversary of the Effective Date, all rights of the
Executive to the Restricted Shares shall terminate.
The restrictions set forth in this Section 3.02 shall
lapse on the six month anniversary date, provided the
Executive is employed by the Company under this
Agreement on such date.
(d) Restricted Shares subject to the restrictions imposed
by clause (c) hereof shall not be sold, assigned,
transferred, pledged, hypothecated, or otherwise
disposed of prior to the lapse of restrictions
applicable to such Restricted Shares.
3.03 Short-Term Incentives. The Executive shall receive an
annual bonus for performance during the 1994 calendar year in an
amount determined in substantial accordance with the WEX management
bonus plan applicable to the Executive prior to the Effective Date.
Beginning January 1, 1995, the Executive shall receive an annual
bonus in an amount determined in substantial accordance with the
Short Term Incentive Plan for the President/COO level contained in
"Suggested Approach to the Executive Compensation Program" prepared
by Hewitt Associates ("Hewitt"), dated September 7, 1993, as
amended to date and from time to time hereafter with the consent of
the Executive (the "Short Term Incentive Plan"). The annual bonus
shall be payable at such time as other bonuses are payable under
the Short Term Incentive Plan, unless the Executive shall otherwise
elect to defer the receipt of such annual bonus.
ARTICLE IV
Other Benefits
4.01 Long Term Incentives; Parity Incentives. The
Executive shall be granted options to purchase 150,000 shares of
the common stock of the Company subject to the terms and conditions
set forth in the option agreements attached as Exhibits 1, 2 and 3
hereto and made a part hereof. The Executive shall also be
eligible to participate, on terms comparable to those applicable to
other senior executives of the Company, in such other long-term
incentive compensation plans maintained by the Company which
provide opportunities to receive compensation in addition to annual
base salary to senior executives of the Company.
4.02 Executive Benefits. Subject to the terms of such
plans, the Executive will be covered under all retirement, medical,
dental and vision care, short-term and long-term disability, life
insurance, accident insurance and other benefit plans maintained
from time to time by the Company for its senior executives.
4.03 Disability Insurance. The Company shall use its best
efforts to secure and maintain throughout the Employment Term a
commercially available policy providing disability income to the
Executive for the period beginning on the date the Executive
experiences a Disability as defined in Section 6.04 and ending on
the earlier of (i) the date on which the Disability ceases, (ii)
the Executive's death or (iii) the date on which the Executive
attains age 65, in an amount equal to 70% of his then current Base
Salary ("Disability Income") payable in accordance with normal
payroll practices for senior executives of the Company then in
effect during the period of his Disability. Except as provided in
Section 6.02 or pursuant to a disability benefit program maintained
by the Company, the Executive shall not be entitled to receive and
the Company shall not be obligated to pay the Executive any other
compensation, including, but not limited to Base Salary or annual
bonus, in respect of a period during which the Executive is
receiving Disability Income. The disability benefit provided
pursuant to this Section 4.03 shall be integrated with the
Company's standard disability benefit programs so that upon the
Disability of the Executive in no event shall the Executive be
entitled to any amount in excess of his Disability Income.
4.04 Life Insurance. The Company shall use its best
efforts to secure one or more policies of standard term life
insurance on the life of the Executive from a "AAA" rated provider
providing, in the aggregate, a face amount of not less than
$1,000,000 in the event of the Executive's death during the
Employment Term (with a provision for double indemnity in the case
of accidental death) (the "Death Benefit") payable to a beneficiary
chosen by the Executive and to maintain such policy or policies in
effect throughout the Employment Term, and to assign such policy to
or pursuant to the directions of the Executive at the termination
of the Executive's employment. The life insurance benefit provided
pursuant to this Section 4.04 shall be integrated with the
Company's normal life insurance benefit program so that upon the
death of the Executive during the Employment Term in no event shall
the Executive's Beneficiary (as hereinafter defined) be entitled to
receive an amount in excess of the Death Benefit.
4.05 Vacation and Sick Leave. The Executive shall be
entitled to annual vacation in accordance with the policies as
periodically established by the Board of Directors for similarly
situated executives of the Company, which shall in no event be less
than twenty-five days per year. The Executive shall be entitled to
sick leave (without loss of pay) in accordance with the Company's
policies as in effect from time to time.
4.06 Expenses. The Company shall reimburse the Executive
for all reasonable travel, entertainment and other business
expenses incurred by him in accordance with Company policy
regarding travel, entertainment and business expenses in connection
with the performance of the Executive's duties under this Agreement
during the Employment Term, such reimbursement to be made in
accordance with the Company's policy and practice relating to
reimbursement of senior executives.
4.07 Executive Allowance. The Executive shall be entitled
to an annual allowance, not to exceed $12,500 for an automobile and
professional counseling (including professional services of a
financial, legal or accounting nature). On a monthly basis, the
Executive may elect, in his discretion, either to receive a car
allowance of $500 a month or to present itemized accounts of
automobile lease expenses for reimbursement. The Company will pay
such amounts as expenses are incurred upon presentation by the
Executive of an itemized account of expenses for professional
counseling.
4.08 Supplemental Retirement Benefit. The Company agrees
to enter into a Trust Agreement for the benefit of the Executive
providing for the establishment of a grantor trust (the "Rabbi
Trust"). The Company agrees to contribute 6.7 percent of the
Executive's Base Salary to the Rabbi Trust on the first anniversary
date and on each succeeding anniversary date occurring during the
Employment Term. Amounts contributed to the Rabbi Trust, plus any
investment gains, and minus any investment losses, shall be paid to
the Executive (i) upon his termination of employment other than by
the Company for Cause or (ii) if the Executive's employment is
terminated by the Company for Cause, on the first date following
such termination on which the Executive has attained age 65;
provided, however, that the amount payable hereunder shall be
reduced by the amount of any vested Company provided qualified
retirement plan benefit (other than an account balance attributable
to the Executive's contributions to a cash or deferred arrangement)
calculated as a lump sum payable at the same time as the benefit
hereunder using reasonable actuarial assumptions.
ARTICLE V
Relocation
5.01 Relocation Expenses. If it becomes necessary in the
performance of the Executive's duties and responsibilities for the
Executive to relocate from Portland, Maine area, the Executive
shall be entitled to the relocation benefits provided in accordance
with the Company's Relocation Guidelines dated June 22, 1994;
provided, however, that Section IV.H of such guidelines shall be
modified so that (a) the term "original purchase price" shall
include the original purchase price plus the value of all capital
improvements made to the Executive's residence and (b) the maximum
loss on sale payment shall be 15% percent of the Executive's Base
Salary.
5.02 Interim Expenses. During the period beginning on the
date hereof and ending on the date on which the Executive relocates
(the "Interim Period"), the Executive agrees to spend such time at
the Company's offices in Jacksonville and Cheyenne as is reasonably
necessary to perform the Executive's duties and responsibilities
under this Agreement. The Company agrees to reimburse the Executive
for all reasonable travel costs incurred during the Interim Period
commuting between the Portland, Maine area, the Jacksonville,
Florida area and the Company's offices in Cheyenne, Wyoming.
ARTICLE VI
Termination of Employment
6.01 Voluntary Resignation for Good Reason or Termination
Other than for Cause, Death or Disability. If, during the
Employment Term, the Company terminates the Executive's employment
other than for Cause, death or Disability or if the Executive
resigns his employment for Good Reason, the Company shall provide
the following to the Executive:
(a) as soon as practicable after the Termination Date (as
hereinafter defined) a lump sum cash payment equal to
the aggregate of the following:
(i) the portion of the Executive's then current Base
Salary accrued to the Termination Date but unpaid
as of the Termination Date (the "Unpaid Salary");
plus
(ii) an amount equal to the highest amount of
incentive compensation, including annual bonus,
received or deferred by the Executive for any
bonus period during the Employment Term (or, if
the Termination Date occurs prior to the
completion of the first period with respect to
which the Executive would be entitled to an
annual bonus under Section 3.03 of this
Agreement (the "First Bonus Period"), incentive
compensation equal to the amount the Executive
would have received under the Company's Short
Term Incentive Plan if the maximum target levels
were achieved), reduced pro rata for that portion
of the current bonus period not completed as of
the end of the month in which the Termination
Date occurs (the "Pro Rated Bonus"); plus
(iii) severance pay in an amount equal to 150% of the
sum, of (A) the Executive's then current Base
Salary plus (B) an amount equal to the highest
incentive compensation, including annual bonus,
received or deferred by the Executive for any
bonus period during the Employment Term;
provided, however, if the Termination Date occurs
prior to the completion of the First Bonus Period
the incentive compensation in clause (B) shall
equal the amount the Executive would have
received under the Company's Short Term Incentive
Plan if the maximum performance levels were
achieved; and provided, further, that if the
termination occurs within three (3) years
following a Change in Control, 300% shall be
substituted for 150% (the "Severance Amount").
If the Executive's termination of employment occurs
after a reduction in all or any part of the Executive's
compensation provided under Article III, the amounts
payable to him pursuant to this Section 6.01 shall be
based upon his compensation before the reduction.
(b) The amount and value of his entire plan account and
interest under any investment plan or stock ownership
plan, and all employer contributions made or payable to
any such plan for his account prior to the end of the
month in which the Termination Date occurs shall be
deemed vested and payable to him. Such payment or
distribution shall be in accordance with the elections
made by the Executive.
(c) All stock options, stock appreciation rights,
restricted stock, and other incentive compensation
granted to the Executive by the Company shall
immediately vest in their entirety, and the Executive
may exercise all such options and rights, and shall
receive payments and distributions accordingly.
6.02 Termination in the Event of Death or Disability. If
during the Employment Term, the Company terminates the Executive's
employment due to the Executive's death or Disability, the Company
shall provide the following to the Executive (or his Beneficiary):
(a) as soon as practicable after the Termination Date a
lump sum cash payment equal to the sum of the Unpaid
Salary plus the Pro Rated Bonus.
(b) The amount and value of his entire plan account and
interest under any investment plan or stock ownership
plan, and all employer contributions made or payable to
any such plan for his account prior to the end of the
month in which the Termination Date occurs shall be
deemed vested and payable to him. Such payment or
distribution shall be in accordance with the elections
made by the Executive.
(c) All stock options, stock appreciation rights,
restricted stock, and other incentive compensation
granted to the Executive by the Company shall, to the
extent vested, remain outstanding for one (1) year from
the Termination Date. In the event that (i) the
Company terminates the Executive's employment due to
Disability and (ii) the Disability ceases (such that
the Executive is no longer entitled to receive
Disability Income) prior to the termination of the
Employment Term, the Company will continue to pay the
Executive an amount equal to the Disability Income for
the remainder of the then current Employment Term.
6.03 Termination for Cause or Voluntary Resignation other
than for Good Reason. Except as otherwise set forth in Section 4.08
or this Section 6.03, all obligations of the Company under this
Agreement shall cease if, during the Employment Term, the Company
terminates the Executive for Cause or the Executive resigns his
employment for other than Good Reason. Upon such termination the
Executive shall be entitled to receive, in a lump sum cash payment
as soon as practicable after the Termination Date, an amount equal
to the Unpaid Salary.
6.04 Payments Upon the Executive's Termination. The
foregoing payments upon the Executive's termination shall
constitute the exclusive payments due the Executive upon
termination from his employment with the Company under this
Agreement or otherwise; provided, however, that except as stated
above, such payments shall have no effect on any benefits which may
be payable to the Executive under any plan of the Company which
provides benefits after termination of employment, other than
severance pay or salary continuation pursuant to a Company plan
which amount shall be reduced by the amount of the Severance Amount
or other severance pay received by the Executive pursuant to this
Agreement. The Executive shall not be required to mitigate the
amount of any payment provided for after a Change in Control by
seeking other employment or otherwise, nor shall the amount of any
such payment be reduced by any compensation earned by the Executive
as the result of employment by another employer after the
Termination Date.
ARTICLE VII
Certain Definitions
7.01 "Beneficiary" means the person or trust designated in
writing by the Executive to receive any payments due under this
Agreement in the event of the Executive's death and if no such
person or trust is designated, the Executive's estate.
7.02 "Cause" means (a) the Executive's material breach of
this Agreement, (b) conviction of the Executive for (i) any crime
constituting a felony in the jurisdiction in which committed, (ii)
any crime involving moral turpitude (whether or not a felony), or
(iii) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company
(whether or not a felony), (c) the adjudication of the Executive as
bankrupt, (d) the failure or refusal of the Executive to follow the
lawful and proper directives of the Board of Directors, or (e)
willful malfeasance or gross misconduct by the Executive which
damages the Company; provided, however that the Company shall not
be deemed to have Cause pursuant to clauses (a) or (d) unless the
Company gives the Executive written notice that the specified
conduct or event has occurred and the Executive fails to cure the
conduct or event within thirty (30) days after receipt of such
notice. Termination of the Executive for Cause shall be
communicated by a Notice of Termination. For purposes of this
Agreement, a "Notice of Termination" shall mean delivery to the
Executive of a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the
Company's Board of Directors at a meeting of the Board called and
held for the purpose (after reasonable notice to the Executive and
reasonable opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board prior to such
vote), of finding that in the good faith opinion of the Board the
Executive was guilty of conduct constituting Cause and specifying
the particulars thereof in detail, including, with respect to the
conduct or event described in clauses (a) or (d), that the
Executive failed to cure such conduct or event during the thirty-
day period following the date on which the Company gave written
notice of the conduct or event referred to in clauses (a) or (d).
For purposes of this Agreement, no such purported termination of
the Executive's employment shall be effective without such Notice
of Termination.
7.03 "Change in Control" means the occurrence of any one of
the following events: (i) when the Company acquires actual
knowledge that any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than an employee benefit plan
established or maintained by the Company or any of its affiliates,
is or becomes the beneficial owner (as defined in Rule 13d-3 of the
Exchange Act) directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then-outstanding securities, (ii) upon the first purchase
of the Company's common stock pursuant to a tender or exchange
offer (other than a tender or exchange offer made by the Company or
an employee benefit plan established or maintained by the Company
or any of its affiliates), (iii) upon the approval by the Company's
stockholders of (A) a merger or consolidation of the Company with
or into another corporation (other than a merger or consolidation
in which the Company is the surviving corporation and which does
not result in any capital reorganization or reclassification or
other change in the Company's then-outstanding shares of common
stock), (B) a sale or disposition of all or substantially all of
the Company's assets or (C) a plan of liquidation or dissolution of
the Company, or (iv) if during any period of two (2) consecutive
years, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least two-thirds
thereof, unless the election or nomination for the election by the
Company's stockholders of each new director was approved by a vote
of at least two-thirds of the directors then still in office who
were directors at the beginning of the period; provided however,
that notwithstanding the above, a "Change in Control" shall not be
deemed to occur if the events in this Section 7.03, (x) are
accompanied or preceded, within the previous year, by a public
disclosure made by or on behalf of the acquiring person, which
disclosure has been approved or agreed to by the Company, of a
proposal with respect to such events, including the terms of such
proposal, and (y) are approved by a vote of at least a majority of
the directors then still in office who were directors on the date
immediately after the Effective Date.
7.04 "Disability" means any medically determinable physical
or mental impairment that renders the Executive substantially
unable to perform all of the Executive's duties required under
Article I hereof for 180 days out of any 360-day period. The date
of the Disability is the date on which the Executive is certified
as having incurred a Disability by a physician mutually acceptable
to the Executive (or the Executive's representative) and the
Company.
7.05 "Good Reason" means
(a) at any time during the Employment Term, whether or not
there has been a Change in Control, the occurrence of
any one of the following events:
(i) The assignment to the Executive by the Company of
duties inconsistent with the Executive's duties
and responsibilities (including reporting
responsibilities) as Chief Executive Officer and
President of WEX (or such other position to which
the Executive may be promoted from time to time)
or any adverse change to the Executive's title or
any material reduction in his duties or
responsibilities, except in connection with the
termination of the Executive's employment for
Cause, Disability or as a result of the
Executive's death or by the Executive other than
for Good Reason;
(ii) A reduction by the Company in the Executive's
Base Salary as in effect at the commencement of
the Employment Term or as the same may be
increased from time to time during the term of
this Agreement;
(iii) A failure by the Company to continue either (A)
the Short Term Incentive Plan described in
Section 3.03 hereof (provided that such plan may
be modified from time to time but shall be deemed
terminated if it does not remain substantially in
the form proposed by Hewitt) or (B) plans
providing the Executive with, in the aggregate,
substantially similar benefits ("Substitute
Plans"), or a failure by the Company to continue
the Executive as a participant in the Short Term
Incentive Plan on at least the same basis as the
Executive participates at the commencement of the
Employment Period or in the Substitute Plan on at
least the same basis as the Executive
participates at the date of adoption of the
Substitute Plan;
(iv) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or
assign of the Company or any person acquiring
substantially all of the Company's assets;
(v) Any material breach by the Company of this
Agreement; or
(vi) A failure by the Company to continue in effect
either (A) any material benefit or compensation
plan or stock option plan (including any pension,
profit sharing, bonus, life insurance, health,
accidental death or dismemberment or disability
plan) in which the Executive is participating, or
(B) plans providing the Executive with, in the
aggregate, substantially similar benefits or the
taking of any action by the Company which would
adversely affect the Executive's participation in
or materially reduce the Executive's benefits
under any such plan; or
(b) following a Change in Control, the occurrence during
the Employment Term of the taking of any action by the
Company which would deprive the Executive of any
material fringe benefit enjoyed by the Executive
immediately prior to the Change in Control;
provided, however, except with respect to the events described in
Section 7.05(a)(ii),(iv),(vi) or 7.05(b), Good Reason shall not be
deemed to occur unless the Executive gives the Company written
notice that the specified conduct or event has occurred and the
Company fails to cure the conduct or event within thirty (30) days
of the receipt of such notice.
7.06 "Termination Date" means the date as of which the
Executive's employment with the Company is terminated by the
Company or by the Executive for any reason which, except in the
event of the Executive's death, shall be specified in a written
notice of termination received by either party from the other.
ARTICLE VIII
Executive Covenants
8.01 Confidential Information. The Executive agrees and
understands that in the Executive's position with the Company, the
Executive will be exposed to and receive information relating to
the confidential affairs of the Company or any of its affiliates,
including but not limited to business and marketing plans,
membership lists, products, promotions, development, financing,
expansion plans, business policies and practices, and information
considered by the Company or any of its affiliates to be
confidential and in the nature of trade secrets. The Executive
agrees that during the Employment Term and thereafter the Executive
will keep such information confidential and not disclose such
information to any third person or entity without the prior written
consent of the Company. The Executive shall not be liable for the
inadvertent or accidental disclosure of such information, if such
disclosure occurs despite the exercise of a reasonable degree of
care. This confidentiality covenant shall not apply to any
knowledge or information that: (i) is or becomes available to
others, other than as a result of a breach by the Executive of this
Section 8.01; (ii) was available to the Executive on a
nonconfidential basis prior to its disclosure to the Executive
through his status as an officer or director of the Company; or
(iii) becomes available to the Executive on a nonconfidential basis
from a third party who is not bound by any confidentiality
obligation to the Company. This confidentiality covenant has no
temporal, geographical or territorial restriction. Upon termination
of this Agreement, the Executive will promptly supply to the
Company, all property, keys, notes, memoranda, writings, lists,
files, reports, customer lists, machines, technical data or any
other tangible product or document which has been produced by,
received by or otherwise submitted to the Executive during or prior
to the Employment Term.
8.02 Ownership of Trade Secrets. The Executive agrees that
any trade secret, invention, improvement, patent, patent
application or writing, and any program, method, process, systems
or novel technique or idea (whether or not capable of being
trademarked, copyrighted or patented), conceived, devised,
developed, or otherwise obtained by the Executive during the
Employment Term, shall be and become the property of the Company
and the Executive agrees to give the Company prompt written notice
of his conception, invention, authorship, development or
acquisition of any such trade secret, invention, improvement,
patent application, writing, program, method, process, system or
novel technique or idea and to execute such instruments or
transfer, assignment, conveyance or confirmation and such other
documents and to do all appropriate lawful acts as may be requested
by the Company to transfer, assign, confirm, and perfect in the
Company all legally protectable rights in any such trade secret,
invention, improvement, patent, patent application, writing,
program, method, process, system or novel technique or idea.
8.03 Non-Compete. By and in consideration of the Base
Salary, bonus and other benefits to be provided by the Company
hereunder, and further in consideration of the Executive's exposure
to the proprietary information of the Company or any of its
affiliates, the Executive agrees that the Executive will not, while
employed by the Company, and for a period of twelve (12) months
after termination of employment hereunder, directly or indirectly
own, manage, operate, join, control, be employed by, or participate
in the ownership, management, operation or control of or be
connected in any manner, including but not limited to holding the
positions of shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor, with any
Competing Enterprise (as hereinafter defined); provided, however,
that the Executive may invest in stocks, bonds, or other securities
of a Competing Enterprise (but without otherwise participating in
the business thereof) if (i) such stocks, bonds, or other
securities are listed on any national securities exchange or are
registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (or any successor statute thereto); and (ii) his
investment does not exceed, in the case of any class of the capital
stock of any one issuer, 5% of the issued and outstanding shares,
or in the case of bonds or other securities, 5% of the aggregate
principal amount thereof issued and outstanding.
8.04 Competing Enterprise. For purposes of this Agreement,
the term "Competing Enterprise" shall mean any person, corporation,
partnership or other entity engaged in a business in the United
States or in any foreign jurisdiction in which the Company or any
of its affiliates is engaged in business on the date of the
termination of this Agreement, in each case which is in competition
with any of the businesses of the Company or any of its affiliates
as of the date of the termination of this Agreement.
8.05 Non-Solicitation; Published Statements. The Executive
agrees that (i) if his employment is terminated for any reason he
will not for a period until the expiration of the covenant
contained in Section 8.03 hereof, directly or indirectly, solicit
for employment, including without limitation recommending to any
subsequent employer the solicitation for employment of, or employ
any key employee employed by the Company or any of its affiliates,
including without limitation WEX, and (ii) at any time during his
employment and for a period until the expiration of the covenant
contained in Section 8.03 hereof, publish any statement or make any
statement (under circumstances reasonably likely to become public
or that he might reasonably expect to become public) critical of
the Company, or any of its affiliates (including its officers and
directors), or otherwise maligning the business or reputation of
the Company or any of its affiliates.
8.06 Effect of Breach. The Executive further agrees that
any breach of the terms of this Article VIII would result in
irreparable injury and damage to the Company for which the Company
would have no adequate remedy at law; the Executive therefore also
agrees that in the event of said breach or any threat of breach,
the Company shall be entitled to an immediate injunction and
restraining order to prevent such breach and/or threatened breach
and/or continued breach by the Executive and/or any and all persons
and/or entities acting for and/or with the Executive, without
having to prove damages (or post any bond), in addition to any
other remedies to which the Company may be entitled at law or in
equity. The terms of this Article shall not prevent the Company
from pursuing any other available remedies for any breach or
threatened breach hereof, including but not limited to the recovery
of damages from the Executive. The Executive and the Company
further agree that the provisions of the covenant not to compete
are reasonable. Should a court or arbitrator determine, however,
that any provision of the covenant not to compete is unreasonable,
either in period of time, geographical area, or otherwise, the
parties hereto agree that the covenant should be interpreted and
enforced to the maximum extent which such court or arbitrator deems
reasonable.
8.07 Survival. The provisions of this Article VIII shall
survive any termination of this Agreement and the Employment Term,
and the existence of any claim or cause of action by the Executive
against the Company whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants and agreements of this Article VIII.
ARTICLE IX
Taxes
9.01 Taxes. Any amounts payable to the Executive hereunder
shall be paid to the Executive subject to all applicable taxes
required to be withheld by the Company pursuant to federal, state
or local law. The Executive or his Beneficiary, if applicable,
shall be solely responsible for all taxes imposed on the Executive
or his Beneficiary by reason of his receipt of any amounts of
compensation or benefits payable to the Executive hereunder.
9.02 Excise Tax Payments. In the event that any payment or
benefit (within the meaning of Section 28OG(b)(2) of the Internal
Revenue Code of 1986, as amended ("the "Code")) to the Executive or
for his benefit paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or a
Change in Control of the Company (a "Payment" or "Payments"), would
be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then the Executive will be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes, including Excise Tax,
imposed on the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. All determinations as to amounts payable to the Executive
under this Section 9.02 shall be made in accordance with Sections
28OG and 4999 of the Code and any rulings and regulations
promulgated thereunder and shall be made within thirty (30) days
after the Termination Date by the Company's independent auditors,
whose determinations shall be binding on the Executive and the
Company.
ARTICLE X
Miscellaneous
10.01 Arbitration. Any controversy or claim arising out of
or relating to this Agreement or the breach of this Agreement that
cannot be resolved by the Executive and the Company, including (i)
any dispute as to the calculation of the amounts payable pursuant
to Article VI or Section 9.02 or (ii) any entitlement under Section
10.02(a), shall, at the request of either the Executive or the
Company, be submitted to arbitration in Delaware in accordance with
Delaware law and the procedures of the American Arbitration
Association. The determination of the arbitrator(s) shall be
conclusive and, subject to the provision for indemnification in
Section 10.02, binding on the Company and the Executive and,
subject to Section 10.09, judgment may be entered on the
arbitrator(s)' award in any court having jurisdiction.
10.02 Fees, Expenses and Indemnification.
(a) The Company shall pay all reasonable legal fees and
related expenses (including the costs of experts,
evidence and counsel) incurred by the Executive as a
result of (i) the Executive's hearing before the Board
as contemplated in Section 7.02 of this Agreement or
(ii) the Executive's seeking to obtain or enforce any
right or benefit provided by this Agreement, provided
the Executive substantially prevails in the
proceeding.
(b) The Company shall indemnify the Executive as set forth
in the Indemnity Agreement attached as Exhibit 4 and
made a part thereof.
10.03 Assignment, Successors. This Agreement shall be
binding upon the Company and its successors and assigns and the
Executive and his Beneficiary.
10.04 Severability. If all or any part of this Agreement is
declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity shall not serve to
invalidate any portion of this Agreement not declared to be
unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed
in a manner which will give effect to the terms of such paragraph
or part of a paragraph to the fullest extent possible while
remaining lawful and valid.
10.05 Amendment and Waiver. This Agreement shall not be
altered, amended or modified except by written instrument executed
by the Company and the Executive. A waiver of any term, covenant,
agreement or condition contained in this Agreement shall not be
deemed a waiver of any other term, covenant, agreement or
condition, and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of
any later default thereof or of any other term, covenant, agreement
or condition.
10.06 Notices. All notices and other communications
required hereunder shall be in writing and delivered by hand or by
first class registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company: SafeCard Services, Incorporated
202 ATP Tour Boulevard
Ponte Vedra Beach, Florida 32082
Attention: Chairman
If to the Executive: John R. Birk
18 Neal Street
Portland, Maine 04102
Any party may from time to time designate a new address by notice
given in accordance with this Section 10.06. Notice and
communications shall be effective when actually received by the
addressee.
10.07 Counterpart Originals. This Agreement may be executed
in several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same
instrument.
10.08 Entire Agreement. This Agreement and the Exhibits
attached hereto and made a part hereof forms the entire agreement
between the parties hereto with respect to any severance payments
and with respect to the subject matter contained in this Agreement.
10.09 Applicable Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of
Delaware without giving effect to the conflicts of law principles
thereof. Subject to the parties' agreement to arbitrate disputes
set forth in Section 10.01, the Executive and the Company hereby
irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Delaware or the United
States of America located in the State of Delaware for any actions,
suits or proceedings arising out of or relating to this Agreement
and the transactions contemplated hereby (and the parties agree not
to commence any action, suit or proceeding relating hereto except
in such courts), and further agree that service of any process,
summons, notice or documents by United States registered mail to
either party in accordance with Section 10.06 hereof shall be
effective service or process for any action, suit or proceeding
brought against the other party in any such court and, absent any
statute, rule or order to the contrary, that each party shall have
thirty (30) days from actual receipt of any complaint to answer or
otherwise plead with respect thereto. The parties hereby
irrevocably and unconditionally waive any objection to the laying
of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby, in the courts of
the State of Delaware or the United States of America located in
the State of Delaware, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
-----------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
JOHN R. BIRK
------------------------------
Executive
Exhibit 1
STOCK OPTION AGREEMENT
FOR JOHN R. BIRK
THIS AGREEMENT, made as of the Effective Date (as defined in
the employment agreement to which this Agreement is an exhibit (the
"Employment Agreement")), between SafeCard Services, Incorporated,
a Delaware corporation (the "Company"), and John R. Birk (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Long Term Stock-
Based Incentive Plan (the "Plan") in order to provide additional
incentive to selected officers, employees and directors of the
Company; and
WHEREAS, the committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants the Optionee the right
and option (the "Option") to purchase all or any part of an
aggregate of 65,000 whole shares of common stock of the Company,
par value $.01 ("Shares"), subject to approval by the Company's
stockholders of the issuance of additional shares of common stock
of the Company pursuant to the Plan and further subject to, and in
accordance with, the terms and conditions set forth in this
Agreement.
1.2 In the event that the transactions contemplated
by the Merger Agreement (as defined in the Employment Agreement)
are not consummated, this Agreement and the Option granted
hereunder shall be null and void and shall have no effect.
1.3 The Option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the
Code.
2. Purchase Price.
---------------
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be the closing price
per Share on the New York Stock Exchange on the Effective Date.
3. Duration of Option.
-------------------
The Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the
Effective Date (the "Exercise Term"); provided, however, that the
Option may be earlier terminated as provided in Section 6 thereof.
4. Exercisability of Option.
-------------------------
Unless otherwise provided in this Agreement, the Option shall
entitle the Optionee to purchase, in whole at any time or in part
from time to time, 25% of the total number of Shares covered by the
Option after the expiration of one (1) year from the Effective Date
and an additional 25% of the total number of Shares covered by the
Option after the expiration of each of the second, third and fourth
anniversaries of the Effective Date, and each such right of
purchase shall be cumulative and shall continue, unless sooner
exercised or terminated as herein provided, during the remaining
period of the Exercise Term. Any fractional number of shares
resulting from the application of the percentages set forth in this
Section 4 shall be rounded to the next higher whole number of
Shares.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions of this
Agreement, the Option may be exercised by delivery of written
notice to the Company, at its principal executive office. Such
notice shall state that the Optionee is electing to exercise the
Option and the number of Shares in respect of which the Option is
being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person
or persons shall (i) deliver this Agreement to the Secretary of the
Company who shall endorse thereon a notation of such exercise and
(ii) provide satisfactory proof as to the right of such person or
persons to exercise the Option.
5.2 The notice of exercise described in Section 5.1
shall be accompanied by payment of the full purchase price for the
Shares in respect of which the Option is being exercised, in cash
or by certified check.
5.3 Upon receipt of the notice of exercise and any
payment or other documentation as may be necessary pursuant to
Section 5.2 or the plan relating to the Shares in respect of which
the Option is being exercised, the Company shall take such action
as may be necessary to effect the transfer to the Optionee of the
number of Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to
any Shares subject to the Option until (i) the Option shall have
been exercised pursuant to the terms of this Agreement and the
Optionee shall have paid the full purchase price for the number of
Shares in respect of which the Option was exercised, (ii) the
Company shall have issued and delivered the Shares to the Optionee,
and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the
Optionee shall have full voting and other ownership rights with
respect to such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason or
Termination other than for Cause, Death or Disability. In the
event the Company terminates the Optionee's employment other than
for Cause, death or Disability (as defined in the Employment
Agreement), or if the Optionee terminates his employment for Good
Reason (as defined in the Employment Agreement) the Option, to the
extent not yet vested shall fully vest, and the Optionee may at any
time within thirty (30) days after such termination, exercise the
Option.
6.2 Death or Disability. In the event of the
Disability of the Optionee or in the event the employment of the
Optionee is terminated as a result of his death, the Optionee may
at any time within one (1) year after such Disability or
termination of employment, exercise the Option to the extent, but
only to the extent, that the Option or portion thereof was
exercisable on the date of such Disability or termination of
employment. In the event of the Optionee's death, the Option shall
be exercisable, to the extent provided in the Plan and this
Agreement by the legatee or legatees under the Optionee's will, or
by the Optionee's personal representatives or distributees, and
such person or persons shall be substituted for the Optionee each
time the Optionee is referred to herein.
6.3 Expiration of Employment Term. In the event the
Optionee's Employment Term (as defined in Section 1.01 of the
Employment Agreement) is not extended, the Option to the extent not
yet vested shall vest and the Optionee may at any time up to thirty
(30) days after the expiration of the Employment Term, exercise the
Option.
6.4 Other Termination of Employment. If the
employment of the Optionee is terminated for any reason other than
the reasons set forth in Sections 5.01., 5.02 and 5.03, the Option
shall terminate on the date of the Optionee's termination of
employment whether or not exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Change in Control (as defined in the
Employment Agreement), the Option, to the extent not yet vested,
shall fully vest and shall become immediately and fully
exercisable.
8. Nontransferability.
-------------------
The Option shall not be transferable other than by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code. During the
lifetime of the Optionee, the Option shall be exercisable only by
the Optionee.
9. No Right to Continued Employment.
---------------------------------
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of employment by the Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the committee
administering the Plan may make appropriate adjustments to the
number and class of Shares or other stock or securities subject to
the Option and the purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in accordance
with the provisions of the Plan and shall be final and binding for
all purposes of the Plan and this Agreement.
11. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a copy of the
Plan and agrees to be bound by all the terms and provisions
thereof.
12. Modification of Agreement.
--------------------------
This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
13. Severability.
-------------
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
14. Governing, Law.
---------------
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Delaware without giving effect to the conflicts of laws principles
thereof.
15. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to the
Company under this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
16. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the committee administering the Plan. Any determination made
hereunder shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
------------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
--------------------------------
John R. Birk
Optionee
Exhibit 2
STOCK OPTION AGREEMENT
FOR JOHN R. BIRK
THIS AGREEMENT, made as of the Effective Date (as defined in
the employment agreement to which this Agreement is an exhibit (the
"Employment Agreement")), between SafeCard Services, Incorporated,
a Delaware corporation (the "Company"), and John R. Birk (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Long Term Stock-
Based Incentive Plan (the "Plan") in order to provide additional
incentive to selected officers, employees and directors of the
Company; and
WHEREAS, the committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants Optionee the right and
option (the "Option") to purchase all or any part of an aggregate
of 60,000 whole shares of common stock of the Company, par value
$.01 ("Shares"), subject to approval by the Company's stockholders
of the issuance of additional shares of common stock of the Company
pursuant to the Plan and further subject to, and in accordance
with, the terms and conditions set forth in this Agreement.
1.2 In the event that the transactions contemplated
by the Merger Agreement (as defined in the Employment Agreement)
are not consummated, this Agreement and the Option granted shall
hereunder be null and void and shall have no effect.
1.3 The Option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the
Code.
2. Purchase Price.
---------------
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be the closing price
per Share on the New York Stock Exchange on the Effective Date.
3. Duration of Option.
-------------------
The Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the
Effective Date (the "Exercise Term"); provided, however, that the
Option may be earlier terminated as provided in Section 6 hereof.
4. Exercisability of Option.
-------------------------
Unless otherwise provided in this Agreement, the Option shall
entitle the Optionee to purchase, in whole at any time or in part
from time to time, 20,000 Shares when the price of the Shares has
traded at or above $21.00 for twenty (20) consecutive trading days;
20,000 Shares when the price of the Shares has traded at or above
$24.00 for twenty (20) consecutive trading days; and 20,000 Shares
when the price of the Shares has traded at or above $27.00 for
twenty (20) consecutive trading days; provided, however, that the
Option may not be exercised, in whole or in part, prior to the
first anniversary of the Effective Date, and provided further, that
the Option shall in all events fully vest on the ninth anniversary
of the Effective Date. For purposes of this Section 4, each
trading day on which the Company has acquired Shares in market
transactions, whether pursuant to a stock repurchase program or
otherwise, shall be excluded from the calculation of consecutive
trading days.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions of this
Agreement, the Option may be exercised by delivery of written
notice to the Company, at its principal executive office. Such
notice shall state that the Optionee is electing to exercise the
Option and the number of Shares in respect of which the Option is
being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person
or persons shall (i) deliver this Agreement to the Secretary of the
Company who shall endorse thereon a notation of such exercise and
(ii) provide satisfactory proof as to the right of such person or
persons to exercise the Option.
5.2 The notice of exercise described in Section 5.1
shall be accompanied by payment of the full purchase price for the
Shares in respect of which the Option is being exercised, in cash
or by certified check.
5.3 Upon receipt of the notice of exercise and any
payment or other documentation as may be necessary pursuant to
Section 5.2 or the Plan relating to the Shares in respect of which
the Option is being exercised, the Company shall take such action
as may be necessary to effect the transfer to the Optionee of the
number of Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to
any Shares subject to the Option until (i) the Option shall have
been exercised pursuant to the terms of this Agreement and the
Optionee shall have paid the full purchase price for the number of
Shares in respect of which the Option was exercised, (ii) the
Company shall have issued and delivered the Shares to the Optionee,
and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the
Optionee shall have full voting and other ownership rights with
respect to such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason or
Termination other than for Cause, Death or Disability. In the
event the Company terminates the Optionee's employment other than
for Cause (as defined in the Employment Agreement), death or
Disability (as defined in the Employment Agreement), or if the
Optionee terminates his employment for Good Reason (as defined in
the Employment Agreement) the Option, to the extent not yet vested
shall fully vest, and the Optionee may at any time within thirty
(30) days after such termination, exercise the Option.
6.2 Death or Disability. In the event of the
Disability of the Optionee or in the event the employment of the
Optionee is terminated as a result of his death, the Optionee may
at any time within one (1) year after such Disability or
termination of employment, exercise the Option to the extent, but
only to the extent, that the Option or portion thereof was
exercisable on the date of such Disability or termination of
employment. In the event of the Optionee's death, the Option shall
be exercisable, to the extent provided in the Plan and this
Agreement, by the legatee or legatees under the Optionee's will, or
by the Optionee's personal representatives or distributees, and
such person or persons shall be substituted for the Optionee each
time the Optionee is referred to herein.
6.3 Other Termination of Employment. If the
employment of the Optionee is terminated for any reason other than
the reasons set forth in Sections 5.01 and 5.02, the Option shall
terminate on the date of the Optionee's termination of employment
whether or not exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Change in Control (as defined in the
Employment Agreement), the Option, to the extent not yet vested,
shall fully vest and shall become immediately and fully
exercisable.
8. Nontransferability.
-------------------
The Option shall not be transferable other than by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code. During the
lifetime of the Optionee, the Option shall be exercisable only by
the Optionee.
9. No Plight to Continued Employment.
----------------------------------
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of employment by the Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the committee
administering the Plan may make appropriate adjustments to the
number and class of Shares or other stock or securities subject to
the Option and the purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in accordance
with the provisions of the Plan and shall be final and binding for
all purposes of the Plan and this Agreement.
11. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a copy of the
Plan and agrees to be bound by all the terms and provisions
thereof.
12. Modification of Agreement.
--------------------------
This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
13. Severability.
-------------
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
14. Governing Law.
--------------
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Delaware without giving effect to the conflicts of laws principles
thereof.
15. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to the
Company under this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
16. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the committee administering the Plan. Any determination made
hereunder shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
-----------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
------------------------------
John R. Birk
Optionee
Exhibit 3
STOCK OPTION AGREEMENT
FOR JOHN R. BIRK
THIS AGREEMENT, made as of the Effective Date (as defined in
the employment agreement to which this Agreement is an exhibit (the
"Employment Agreement")), between SafeCard Services, Incorporated,
a Delaware corporation (the "Company"), and John R. Birk (the
"Optionee").
WHEREAS, the Company has adopted the 1994 Long Term Stock-
Based Incentive Plan (the "Plan") in order to provide additional
incentive to selected officers, employees and directors of the
Company; and
WHEREAS, the committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants the Optionee the right
and option (the "Option") to purchase all or any part of an
aggregate of 25,000 whole shares of common stock of the Company,
par value $.01 ("Shares"), subject to approval by the Company's
stockholders of the increase in the number of shares of the
Company's common stock issuable pursuant to the Plan and further
subject to, and in accordance with, the terms and conditions set
forth in this Agreement.
1.2 In the event that the transactions contemplated
by the Merger Agreement (as defined in the Employment Agreement)
are not consummated, this Agreement and the Option granted
hereunder shall be null and void and shall have no effect.
1.3 The Option is intended to qualify as an
incentive stock option within the meaning of Section 422 of the
Code and shall be so construed; provided however, that nothing in
this Agreement shall be interpreted as a representation, guaranty
or other undertaking on the part of the Company that the Option is
or will be determined to be an incentive stock option within the
meaning of Section 422 of the Code.
2. Purchase Price.
---------------
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be the closing price
per Share on the New York Stock Exchange on the Effective Date.
3. Duration of Option.
-------------------
The Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the
Effective Date (the "Exercise Term"); provided, however, that the
Option may be earlier terminated as provided in Section 6 thereof.
4. Exercisability of Option.
-------------------------
Unless otherwise provided in this Agreement, the Option shall
entitle the Optionee to purchase, in whole at any time or in part
from time to time, 25% of the total number of Shares covered by the
Option after the expiration of one (1) year from the Effective Date
and an additional 25% of the total number of Shares covered by the
Option after the expiration of each of the second, third and fourth
anniversaries of the Effective Date, and each such right of
purchase shall be cumulative and shall continue, unless sooner
exercised or terminated as herein provided, during the remaining
period of the Exercise Term. Any fractional number of shares
resulting from the application of the percentages set forth in this
Section 4 shall be rounded to the next higher whole number of
Shares.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions of this
Agreement, the Option may be exercised by delivery of written
notice to the Company, at its principal executive office. Such
notice shall state that the Optionee is electing to exercise the
Option and the number of Shares in respect of which the Option is
being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person
or persons shall (i) deliver this Agreement to the Secretary of the
Company who shall endorse thereon a notation of such exercise and
(ii) provide satisfactory proof as to the right of such person or
persons to exercise the Option.
5.2 The notice of exercise described in Section 5.1
shall be accompanied by payment of the full purchase price for the
Shares in respect of which the Option is being exercised, in cash
or by certified check.
5.3 Upon receipt of the notice of exercise and any
payment or other documentation as may be necessary pursuant to
Section 5.2 or the plan relating to the Shares in respect of which
the Option is being exercised, the Company shall take such action
as may be necessary to effect the transfer to the Optionee of the
number of Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to
any Shares subject to the Option until (i) the Option shall have
been exercised pursuant to the terms of this Agreement and the
Optionee shall have paid the full purchase price for the number of
Shares in respect of which the Option was exercised, (ii) the
Company shall have issued and delivered the Shares to the Optionee,
and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company, whereupon the
Optionee shall have full voting and other ownership rights with
respect to such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason or
Termination other than for Cause, Death or Disability. In the
event the Company terminates the Optionee's employment other than
for Cause, death or Disability (as defined in the Employment
Agreement), or if the Optionee terminates his employment for Good
Reason (as defined in the Employment Agreement) the Option, to the
extent not yet vested shall fully vest, and the Optionee may at any
time within thirty (30) days after such termination, exercise the
Option.
6.2 Death or Disability. In the event of the
Disability of the Optionee or in the event the employment of the
Optionee is terminated as a result of his death, the Optionee may
at any time within one (1) year after such Disability or
termination of employment, exercise the Option to the extent, but
only to the extent, that the Option or portion thereof was
exercisable on the date of such Disability or termination of
employment. In the event of the Optionee's death, the Option shall
be exercisable, to the extent provided in the Plan and this
Agreement by the legatee or legatees under the Optionee's will, or
by the Optionee's personal representatives or distributees, and
such person or persons shall be substituted for the Optionee each
time the Optionee is referred to herein.
6.3 Expiration of Employment Term. In the event the
Optionee's Employment Term (as defined in Section 1.01 of the
Employment Agreement) is not extended, the Option to the extent not
yet vested shall vest and the Optionee may at any time up to thirty
(30) days after the expiration of the Employment Term, exercise the
Option.
6.4 Other Termination of Employment. If the
employment of the Optionee is terminated for any reason other than
the reasons set forth in Sections 5.01., 5.02 and 5.03, the Option
shall terminate on the date of the Optionee's termination of
employment whether or not exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Change in Control (as defined in the
Employment Agreement), the Option, to the extent not yet vested,
shall fully vest and shall become immediately and fully
exercisable.
8. Nontransferability.
-------------------
The Option shall not be transferable other than by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code. During the
lifetime of the Optionee, the Option shall be exercisable only by
the Optionee.
9. No Right to Continued Employment.
---------------------------------
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of employment by the Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the committee
administering the Plan may make appropriate adjustments to the
number and class of Shares or other stock or securities subject to
the Option and the purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in accordance
with the provisions of the Plan and shall be final and binding for
all purposes of the Plan and this Agreement.
11. Disqualifying Dispositions.
---------------------------
If the Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and the regulations promulgated
thereunder, of any Share or Shares issued to the Optionee pursuant
to his exercise of the Option within the two-year period commencing
on the day after the Grant Date or within the one-year period
commencing on the day after the date of transfer of such Share or
Shares to the Optionee pursuant to such exercise, the Optionee
shall within ten (10) days after such disposition, notify the
Company thereof, by delivery of a written notice to the Secretary
of the Company and immediately deliver to the Company the amount of
all applicable withholding taxes under federal, state or local law.
12. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a copy of the
Plan and agrees to be bound by all the terms and provisions
thereof.
13. Modification of Agreement.
--------------------------
This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
14. Severability.
-------------
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
15. Governing Law.
--------------
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Delaware without giving effect to the conflicts of laws principles
thereof.
16. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to the
Company under this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
17. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the committee administering the Plan. Any determination made
hereunder shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
-------------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
-------------------------------
John R. Birk
Optionee
Exhibit 4
INDEMNITY AGREEMENT
-------------------
AGREEMENT, effective as of the Effective Date (as defined in
the Employment Agreement), between SafeCard Services, Incorporated,
a Delaware corporation (the "Company"), and John R. Birk (the
"Indemnitee").
WHEREAS, it is essential to the Company to retain and attract
as directors and officers the most capable persons available;
WHEREAS, Indemnitee is an officer of the Company or of a
subsidiary of the Company;
WHEREAS, both the Company and Indemnitee recognize the
increased risk of litigation and other claims being asserted
against directors and officers of public companies in today's
environment;
WHEREAS, the By-laws (the "By-laws") and Certificate of
Incorporation (the "Certificate") of the Company require the
Company to indemnify and advance expenses to its directors and
officers to the fullest extent permitted by law, and the Indemnitee
has agreed to serve as a director and/or an officer of the Company
in part in reliance on such provisions in the By-laws and
Certificate;
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance
Indemnitee's continued service to the Company in an effective
manner and Indemnitee's reliance on the foregoing provisions in the
By-laws and Certificate, and in part to provide Indemnitee with
specific contractual assurance that the protection promised by such
provisions in the By-laws and Certificate will be available to
Indemnitee (regardless of, among other things, any amendment to or
revocation of such provisions in the By-laws or Certificate or any
change in the composition of the Company's Board of Directors (the
"Board") or acquisition transaction relating to the Company), the
Company wishes to provide in this Agreement for the indemnification
of and the advancing of expenses to Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement, and, to
the extent insurance is maintained, for the continued coverage of
Indemnitee under Company directors' and officers' liability
insurance policies;
NOW, THEREFORE, in consideration of the premises and of
Indemnitee continuing to serve the Company directly or, at its
request, with another enterprise, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Certain Definitions:
(a) Change in Control: shall be deemed to have
occurred upon any of the following events:
(i) The acquisition in one or more transactions
by any "Person" (as the term person is used
for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as
amended (the "1934 Act"), of "Beneficial
Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of
twenty-five percent (25%) or more of the
combined voting power of the Company's then
outstanding voting securities (the "Voting
Securities"), provided, however, that for
purposes of this Section l(a)(i), the
Voting Securities acquired directly from
the Company by any Person shall be excluded
from the determination of such Person's
Beneficial Ownership of Voting Securities
(but such Voting Securities shall be
included in the calculation of the total
number of Voting Securities then
outstanding); or
(ii) The individuals who, as of the Effective
Date, are members of the Board (the
"Incumbent Board"), cease for any reason to
constitute at least two-thirds of the
Board; provided, however, that if the
election, or nomination for election by the
Company's stockholders, of any new director
was approved by a vote of at least two
-thirds of the Incumbent Board, such new
director shall, for purposes of this
Agreement, be considered as a member of the
Incumbent Board; or
(iii) Approval by stockholders of the Company of
(A) a merger or consolidation involving the
Company if the stockholders of the Company
immediately before such merger or
consolidation do not own, directly or
indirectly immediately following such
merger or consolidation, more than seventy
-five percent (75%) of the combined voting
power of the outstanding voting securities
of the corporation resulting from such
merger or consolidation in substantially
the same proportion as their ownership of
the Voting Securities immediately before
such merger or consolidation or (B) a
complete liquidation or dissolution of the
Company or an agreement for the sale or
other disposition of all or substantially
all of the assets of the Company.
(iv) Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur solely
because twenty-five percent (25%) or more
of the then outstanding Voting Securities
is acquired by (i) a trustee or other
fiduciary holding securities under one or
more employee benefit plans maintained by
the Company or any of its subsidiaries or
(ii) any corporation that, immediately
prior to such acquisition, is owned
directly or indirectly by the stockholders
of the Company in the same proportion as
their ownership of stock in the Company
immediately prior to such acquisition;
(v) Moreover, notwithstanding the foregoing, a
Change in Control shall not be deemed to
occur solely because any Person (the
"Subject Person") acquired Beneficial
Ownership of more than the permitted amount
of the outstanding Voting Securities as a
result of the acquisition of Voting
Securities by the Company which, by
reducing the number of Voting Securities
outstanding, increases the proportional
number of shares Beneficially Owned by the
Subject Person, provided that if a Change
in Control would occur (but for the
operation of this sentence) as a result of
the acquisition of Voting Securities by the
Company, and after such share acquisition
by the Company, the Subject Person becomes
the Beneficial Owner of any additional
Voting Securities which increases the
percentage of the then outstanding Voting
Securities Beneficially Owned by the
Subject Person, then a Change in Control
shall occur.
(b) Claim: any threatened, pending or completed
action, suit or proceeding, whether civil,
criminal, administrative or investigative or
other, including, without limitation, an action
by or in the right of any other corporation of
any type or kind, domestic or foreign or any
partnership, joint venture, trust, employee
benefit plan or other enterprise, whether
predicated on foreign, federal, state or local
law and whether formal or informal.
(c) Expenses: include attorneys' fees and all other
costs, charges and expenses paid or incurred in
connection with investigating, defending, being
a witness in or participating in (including on
appeal), or preparing to defend, be a witness in
or participate in any Claim relating to any
Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence
related to the fact that Indemnitee is or was or
has agreed to become a director, officer,
employee, agent or fiduciary of the Company, or
is or was serving or has agreed to serve in any
capacity, at the request of the Company, in any
other corporation, partnership, joint venture,
trust, employee benefit plan or other
enterprise, or by reason of anything done or not
done by Indemnitee in any such capacity.
(e) Potential Change in Control: shall be deemed to
have occurred if (i) the Company enters into an
agreement or arrangement, the consummation of
which would result in the occurrence of a Change
in Control; or (ii) the Board adopts a
resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control
has occurred.
(f) Voting Securities: any securities of the Company
that vote generally in the election of
directors.
2. Basic Indemnification Arrangement:
----------------------------------
(a) In the event Indemnitee was, is or becomes a
party to or witness or other participant in, or
is threatened to be made a party to or witness
or other participant in, a Claim by reason of
(or arising in part out of an Indemnifiable
Event, the Company shall indemnity Indemnitee
(without regard to the negligence or other fault
of the Indemnitee) to the fullest extent
permitted by applicable law, as soon as
practicable but in no event later than thirty
days after written demand is presented to the
Company, against any and all Expenses,
judgments, fines, penalties, excise taxes and
amounts paid or to be paid in settlement
(including all interest, assessments and other
charges paid or payable in connection with or in
respect of such Expenses, judgments, fines,
penalties, excise taxes or amounts paid or to be
paid in settlement) of such Claim. If
Indemnitee makes a request to be indemnified
under this Agreement, the Board of Directors
(acting by a quorum consisting of directors who
are not parties to the Claim with respect to an
Indemnifiable Event or, if such a quorum is not
obtainable, acting upon an opinion in writing of
independent legal counsel ("Board Action"))
shall, as soon as practicable but in no event
later than thirty days after such request,
authorize such indemnification. Notwithstanding
anything in the Certificate, the By-laws or this
Agreement to the contrary, following a Change in
Control, Indemnitee shall be entitled to
indemnification pursuant to this Agreement in
connection with any claim initiated by
Indemnitee.
(b) Notwithstanding anything in the Certificate, the
By-laws or this Agreement to the contrary, if so
requested by Indemnitee, the Company shall
advance (within two business days of such
request) any and all Expenses relating to a
Claim to Indemnitee (an "Expense Advance"), upon
the receipt of a written undertaking by or on
behalf of Indemnitee to repay such written
undertaking by or on behalf of Indemnitee to
repay such Expense Advance if a judgment or
other final adjudication or determination
adverse to Indemnitee establishes that
Indemnitee, with respect to such claim, is not
eligible for indemnification.
(c) If there has been no Board Action or Arbitration
(as defined in Section 3), or if Board Action
determines that Indemnitee would not be
permitted to be indemnified, in any respect, in
whole or in part, in accordance with Section
2(a) of this Agreement, Indemnitee shall have
the right to commence litigation in the court
that is hearing the action or proceeding
relating to the Claim for which indemnification
is sought or in any court in the States of
Delaware or Florida having subject matter
jurisdiction thereof and in which venue is
proper seeking an initial determination by the
court or challenging any Board Action or any
aspect thereof, and the Company hereby consents
to service of process and to appear in any such
proceeding. Notwithstanding anything in the
Certificate, the By-laws or this Agreement to
the contrary, if Indemnitee has commenced legal
proceedings in a court of competent jurisdiction
or Arbitration to secure a determination that
Indemnitee should be indemnified under this
Agreement, the By-laws of the Company or
applicable law, any Board Action under which
Indemnitee would not be permitted to be
indemnified in accordance with Section 2(a) of
this Agreement shall not be binding. Any Board
Action not followed by such litigation or
Arbitration shall be conclusive and binding on
the Company and Indemnitee.
3. Change in Control. The Company agrees that if there
is a Change in Control, Indemnitee, by giving written notice to the
Company and the American Arbitration Association (the "Notice"),
may require that any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by arbitration (the "Arbitration") in Fort Lauderdale, Florida in
accordance with the Rules of the American Arbitration Association
(the "Rules"). The Arbitration shall be conducted by a panel of
three arbitrators selected in accordance with the Rules within
thirty days of delivery of the Notice. The decision of the panel
shall be made as soon as practicable after the panel has been
selected, and the parties agree to use their reasonable efforts to
cause the panel to deliver its decision within ninety days of its
selection. The Company shall pay all fees and expenses of the
Arbitration. The Arbitration shall be conclusive and binding on
the Company and Indemnitee, and the Company or Indemnitee may cause
judgment upon the award rendered by the arbitrators to be entered
in any court having jurisdiction thereof.
4. Establishment of Trust. In the event of a Potential
Change in Control or a Change in Control, the Company shall,
promptly upon written request, by Indemnitee, create a Trust for
the benefit of Indemnitee and from time to time, upon written
request of Indemnitee to the Company, shall fund such Trust in an
amount, as set forth in such request, sufficient to satisfy any and
all Expenses reasonably anticipated at the time of each such
request to be incurred in connection with investigating, preparing
for and defending any Claim relating to an Indemnifiable Event, and
any and all judgments, fines, penalties and settlement amounts of
any and all Claims relating to an Indemnifiable Event from time to
time actually paid or claimed, reasonably anticipated or proposed
to be paid. The terms of the Trust shall provide that upon a
Change in Control (i) the Trust shall not be revoked or the
principal thereof invaded, without the written consent of
Indemnitee; (ii) the Trustee shall advance, within two business
days of a request by Indemnitee, any and all Expenses to
Indemnitee, not advanced directly by the Company to Indemnitee (and
Indemnitee hereby agrees to reimburse the Trust under the
circumstances under which Indemnitee would be required to reimburse
the Company under Section 2(b) of this Agreement); (iii) the Trust
shall continue to be funded by the Company in accordance with the
funding obligation set forth above; (iv) the Trustee shall promptly
pay to Indemnitee all amounts for which Indemnitee shall be
entitled to indemnification pursuant to this Agreement or
otherwise; and (v) all unexpended funds in such Trust shall revert
to the Company upon a final determination by Board Action or
Arbitration or a court of competent jurisdiction, as the case may
be, that Indemnitee has been fully indemnified under the terms of
this Agreement. The Trustee shall be chosen by indemnitee.
Nothing in this Section 4 shall relieve the Company of any of its
obligations under this Agreement.
5. Indemnification For Additional Expenses. The Company
shall indemnity Indemnitee against any and all expenses (including
attorneys' fees) and, if requested by Indemnitee, shall (within two
business days of such request) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any claim
asserted by or action brought by Indemnitee for (i) indemnification
or advance payment of Expenses by the Company under law, this
Agreement, or any other agreement or By-law of the Company now or
hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability
insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as
the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled
under any provision of this Agreement to indemnification by the
Company for some or a portion of the Expenses, judgments' fines,
penalties, excise taxes and amounts paid or to be paid in
settlement of a Claim but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for
the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or
otherwise in defense of any or all Claims relating in whole or in
part to an Indemnifiable Event or in defense of any issue or matter
therein, including, without limitation, dismissal without
prejudice, Indemnitee shall be indemnified against any and all
Expenses, judgments, fines, penalties, excise taxes and amounts
paid or to be paid in settlement of such Claim. In connection with
any determination by Board Action, Arbitration or a court of
competent jurisdiction that Indemnitee is not entitled to be
indemnified hereunder, the burden of proof shall be on the Company
to establish that Indemnitee is not so entitled.
7. No Presumption. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment,
order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere or its equivalent,
shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted
by applicable law or this Agreement.
8. Contribution. In the event that the indemnification
provided for in this Agreement is unavailable to Indemnitee for any
reason whatsoever, the Company, in lieu of indemnifying Indemnitee,
shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any
Claim deemed fair and reasonable in light of all of the
circumstances of such action by Board Action or Arbitration or by
the court before which such action was brought in order to reflect
(i) the relative benefits received by the Company and Indemnitee as
a result of the event(s) and/or transactions(s) giving cause to
such action; and/or (ii) the relative fault of the Company (and its
other directors, officers, employees and agents) and Indemnitee in
connection with such event(s) and/or transaction(s). Indemnitee's
right to contribution under this Paragraph 8 shall be determined in
accordance with, pursuant to and in the same manner as, the
provisions in Paragraphs 2 and 3 hereof relating to Indemnitee's
right to indemnification under this Agreement.
9. Notice to the Company by Indemnitee. Indemnitee
agrees to notify the Company promptly in writing upon being served
with or having actual knowledge of any citation, summons,
compliant, indictment or any other similar document relating to any
action which may result in a claim of indemnification or
contribution hereunder.
10. Non-exclusive, Etc. The rights of the Indemnitee
hereunder shall be in addition to any other rights Indemnitee may
have under the Company's Certificate or By-laws or the Delaware
General Corporation Law or otherwise, and nothing herein shall be
deemed to diminish or otherwise restrict Indemnitee's right to
indemnification under any such other provision. To the extent
applicable law or the Certificate of Incorporation or the By-laws
of the Company, as in effect on the date hereof or at any time in
the future, permit greater indemnification than as provided for in
this Agreement, the parties hereto agree that Indemnitee shall
enjoy by this Agreement the greater benefits so afforded by such
law or provision of the Certificate of Incorporation or By-laws and
this Agreement shall be deemed amended without any further action
by the Company or Indemnitee to grant such greater benefits.
Indemnitee may elect to have Indemnitee's rights hereunder
interpreted on the basis of applicable law in effect at the time of
execution of this Agreement, at the time of the occurrence of the
Indemnifiable Event giving rise to a Claim or at the time
indemnification is sought.
11. Liability Insurance.
--------------------
(a) To the extent the Company maintains at any time
an insurance policy or policies providing
directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or
policies, in accordance with its or their terms,
to the maximum extent of the coverage available
for any other Company director or officer under
such insurance policy. The purchase and
maintenance of such insurance shall not in any
way limit or affect the rights and obligations
of the parties hereto, and the execution and
delivery of this Agreement shall not in any way
be construed to limit or affect the rights and
obligations of the Company and/or of the other
parties under any such insurance policy.
(b) For seven years after the Indemnitee no longer
serves as a director or officer of the Company,
the Company shall continue to provide directors'
and officers' liability coverage for liabilities
of the Indemnitee occurring during his service
with the Company on terms no less favorable in
terms of coverage and amount than such insurance
maintained by the Company at the date of the
Indemnitee's separation from the Company. In
the event such coverage is not available, the
maximum available coverage shall be maintained
pursuant to this covenant.
12. Period of Limitations. No legal action shall be
brought and no cause of action shall be asserted by or an behalf of
the Company or any affiliate of the Company against Indemnitee,
Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action
of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action
within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
13. Amendments, Etc. No supplement, modification or
amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
14. Subrogation. In the event of payment under this
Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery with respect to such
payment of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
15. No Duplication of Payments. The Company shall not be
liable under this Agreement to make any payment in connection with
any Claim made against Indemnitee to the extent Indemnitee has
otherwise actually received payment (under any insurance policy,
By-law or otherwise) of the amounts otherwise indemnifiable
hereunder.
16. Binding Effect, Etc. This Agreement shall be binding
upon and inure to the benefit of and be enforceable against and by
the parties hereto and their respective successors, assigns
(including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the
business and/or assets of the Company), spouses, heirs and personal
and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger,
consolidation or, otherwise) to all, substantially all, or a
substantial part, of the business and/or assets of the Company, by
written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues
to serve as a director and/or officer of the Company or of any
other enterprise at the Company's request.
17. Severability. The provisions of this Agreement shall
be severable in the event that any of the provisions thereof
(including any provision within a single section, paragraph or
sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted
by law.
18. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing
and shall be deemed to have been duly given when delivered by hand
or when mailed by certified registered mall, return receipt
requested, with postage prepaid:
A. If to Indemnitee, to: John R. Birk
97 Darling Avenue
South Portland, Maine 04106
or to such other person or address which Indemnitee shall furnish
to the Company in writing pursuant to the above.
B. If to the Company, to: SafeCard Services, Inc.
202 ATP Tour Boulevard
Ponte Vedra Beach, Florida 32082
Attention: Chief Executive Officer
or to such person or address as the Company shall furnish to
lndemnitee in writing pursuant to the above.
19. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State
of Delaware applicable to contracts made and to be performed in
such State without giving effect to the principles of conflicts of
laws.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the Effective Date.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
-------------------------------
Paul G. Kahn
Chief Executive Officer
INDEMNITEE
JOHN R. BIRK
-------------------------------
John R. Birk
Exhibit 10(r)
Amendment
to
to the Employment Agreement between
SafeCard Services, Incorporated
and John R. Birk
WHEREAS, on September 14, 1994, SafeCard Services,
Incorporated (the "Company") entered into an Employment Agreement
with John R. Birk to serve as President and Chief Executive Officer
of Wright Express Corporation, a wholly owned subsidiary of the
Company.
WHEREAS, as of January 1, 1995, the Company promoted John R.
Birk to President and Chief Operating Officer of the Company.
NOW THEREFORE, to revise the Employment Agreement to reflect
the foregoing promotion, the Employment Agreement between the
Company and John R. Birk hereby is amended as follows:
1. Section 2.01 shall be replaced with the following:
2.01 Position. The Executive shall be employed
as the President and Chief Operating Officer
of the Company or shall have such other
position as is mutually agreed to by the
Executive and the Company from time to time.
2. Section 3.01 shall be amended such that the rate of
Base Salary shall be increased from $275,000 to
$365,050 per annum.
3. The following sentence shall be added as the second
sentence of Section 4.01:
As of December 9, 1994, the Executive shall be
granted additional options to purchase 150,000
shares of the common stock of the Company
subject to the terms and conditions set forth
in the option agreements attached as Exhibits
4 and 5 hereto and made a part hereof.
4. Section 4.04 shall be amended such that the face
amount of the term life insurance policies on the
life of the Executive is not less than $1,250,000.
5. Section 7.05(a)(i) shall be replaced with the
following:
(i) The assignment to the Executive by the
Company of duties inconsistent with the
Executive's duties and responsibilities
(including reporting responsibilities and
relationships) as President and Chief
Operating Officer of the Company (or such
other position to which the Executive may
be promoted from time to time) or any
adverse change to the Executive's title
or any material reduction in his duties
or responsibilities, except in connection
with the termination of the Executive's
employment for Cause, Disability or as a
result of the Executive's death or by the
Executive other than for Good Reason;
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
------------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
-------------------------------
John R. Birk
Executive
Exhibit 5
STOCK OPTION AGREEMENT
FOR JOHN R. BIRK
THIS AGREEMENT, made as of December 9, 1994 (the "Grant
Date"), between SafeCard Services, Incorporated, a Delaware
corporation (the "Company") and John R. Birk (the "Optionee").
WHEREAS, the Company has adopted the 1994 Long Term
Stock-Based Incentive Plan (the "Plan") in order to provide
additional incentive to selected officers, employees and directors
of the Company; and
WHEREAS, the committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate
of 90,000 whole shares of common stock of the Company, par value
$.01 ("Shares"), subject to approval by the Company's stockholders
of the issuance of additional shares of common stock of the Company
pursuant to the Plan and further subject to, and in accordance
with, the terms and conditions set forth in this Agreement.
1.2 The Option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the
Code.
2. Purchase Price.
---------------
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be the closing price
per Share on the New York Stock Exchange on the Grant Date,
$15.875.
3. Duration of Option.
-------------------
The Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the
Grant Date (the "Exercise Term"); provided, however, that the
Option may be earlier terminated as provided in Section 6 thereof.
4. Exercisability of Option.
-------------------------
Unless otherwise provided in this Agreement, the Option shall
entitle the Optionee to purchase, in whole at any time or in part
from time to time, 25% of the total number of Shares covered by the
Option after the expiration of one (1) year from the Grant Date and
an additional 25% of the total number of Shares covered by the
Option after the expiration of each of the second, third and fourth
anniversaries of the Grant Date, and each such right of purchase
shall be cumulative and shall continue, unless sooner exercised or
terminated as herein provided, during the remaining period of the
Exercise Term. Any fractional number of shares resulting from the
application of the percentages set forth in this Section 4 shall be
rounded to the next higher whole number of Shares.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions of this
Agreement, the Option may be exercised by delivery of written
notice to the Company, at its principal executive office. Such
notice shall state that the Optionee is electing to exercise the
Option and the number of Shares in respect of which the Option is
being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person
or persons shall (i) deliver this Agreement to the Secretary of the
Company who shall endorse thereon a notation of such exercise and
(ii) provide satisfactory proof as to the right of such person or
persons to exercise the Option.
5.2 The notice of exercise described in Section 5.1
shall be accompanied by payment of the full purchase price for the
Shares in respect of which the Option is being exercised, in cash
or by certified check.
5.3 Upon receipt of the notice of exercise and any
payment or other documentation as may be necessary pursuant to
Section 5.2 or the plan relating to the Shares in respect of which
the Option is being exercised, the Company shall take such action
as may be necessary to effect the transfer to the Optionee of the
number of Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to be the holder
of, or to have any of the rights of a holder with respect to any
Shares subject to the Option until (i) the Option shall have been
exercised pursuant to the terms of this Agreement and the Optionee
shall have paid the full purchase price for the number of Shares in
respect of which the Option was exercised, (ii) the Company shall
have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record
on the books of the Company, whereupon the Optionee shall have full
voting and other ownership rights with respect to such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason or Termination
other than for Cause, Death or Disability. In the event the
Company terminates the Optionee's employment other than for Cause,
death or Disability (as defined in the Employment Agreement), or if
the Optionee terminates his employment for Good Reason (as defined
in the Employment Agreement) the Option, to the extent not yet
vested shall fully vest, and the Optionee may at any time within
thirty (30) days after such termination, exercise the Option.
6.2 Death or Disability. In the event of the Disability
of the Optionee or in the event the employment of the Optionee is
terminated as a result of his death, the Optionee may at any time
within one (1) year after such Disability or termination of
employment, exercise the Option to the extent, but only to the
extent, that the Option or portion thereof was exercisable on the
date of such Disability or termination of employment. In the event
of the Optionee's death, the Option shall be exercisable, to the
extent provided in the Plan and this Agreement by the legatee or
legatees under the Optionee's will, or by the Optionee's personal
representatives or distributees, and such person or persons shall
be substituted for the Optionee each time the Optionee is referred
to herein.
6.3 Expiration of Employment Term. In the event the
Optionee's Employment Term (as defined in Section 1.01 of the
Employment Agreement) is not extended, the Option to the extent not
yet vested shall vest and the Optionee may at any time up to thirty
(30) days after the expiration of the Employment Term, exercise the
Option.
6.4 Other Termination of Employment. If the employment
of the Optionee is terminated for any reason other than the reasons
set forth in Sections 6.1., 6.2 and 6.3, the Option shall terminate
on the date of the Optionee's termination of employment whether or
not exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Change in Control (as defined in the
Employment Agreement), the Option, to the extent not yet vested,
shall fully vest and shall become immediately and fully
exercisable.
8. Nontransferability.
-------------------
The Option shall not be transferable other than by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code. During the
lifetime of the Optionee, the Option shall be exercisable only by
the Optionee.
9. No Right to Continued Employment.
---------------------------------
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of employment by the Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the committee
administering the Plan may make appropriate adjustments to the
number and class of Shares or other stock or securities subject to
the Option and the purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in accordance
with the provisions of the Plan and shall be final and binding for
all purposes of the Plan and this Agreement.
11. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.
12. Modification of Agreement.
--------------------------
This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
13. Severability.
-------------
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
14. Governing, Law.
---------------
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Delaware without giving effect to the conflicts of laws principles
thereof.
15. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to the
Company under this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
16. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the committee administering the Plan. Any determination made
hereunder shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
---------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
---------------------------
John R. Birk
Optionee
Exhibit 6
STOCK OPTION AGREEMENT
FOR JOHN R. BIRK
THIS AGREEMENT, made as of December 9, 1994 (the "Grant
Date"), between SafeCard Services, Incorporated, a Delaware
corporation (the "Company"), and John R. Birk (the "Optionee").
WHEREAS, the Company has adopted the 1994 Long Term
Stock-Based Incentive Plan (the "Plan") in order to provide
additional incentive to selected officers, employees and directors
of the Company; and
WHEREAS, the committee responsible for administration of the
Plan has determined to grant an option to the Optionee as provided
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
----------------
1.1 The Company hereby grants Optionee the right and
option (the "Option") to purchase all or any part of an aggregate
of 60,000 whole shares of common stock of the Company, par value
$.01 ("Shares"), subject to approval by the Company's stockholders
of the issuance of additional shares of common stock of the Company
pursuant to the Plan and further subject to, and in accordance
with, the terms and conditions set forth in this Agreement.
1.2 The Option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the
Code.
2. Purchase Price.
---------------
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be the closing price
per Share on the New York Stock Exchange on the Grant Date,
$15.875.
3. Duration of Option.
-------------------
The Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the
Grant Date (the "Exercise Term"); provided, however, that the
Option may be earlier terminated as provided in Section 6 hereof.
4. Exercisability of Option.
-------------------------
Unless otherwise provided in this Agreement, the Option shall
entitle the Optionee to purchase, in whole at any time or in part
from time to time, 20,000 Shares when the price of the Shares has
traded at or above $21.00 for twenty (20) consecutive trading days;
20,000 Shares when the price of the Shares has traded at or above
$24.00 for twenty (20) consecutive trading days; and 20,000 Shares
when the price of the Shares has traded at or above $27.00 for
twenty (20) consecutive trading days; provided, however, that the
Option may not be exercised, in whole or in part, prior to the
first anniversary of the Grant Date, and provided further, that the
Option shall in all events fully vest on the ninth anniversary of
the Grant Date. For purposes of this Section 4, each trading day
on which the Company has acquired Shares in market transactions,
whether pursuant to a stock repurchase program or otherwise, shall
be excluded from the calculation of consecutive trading days.
5. Manner of Exercise and Payment.
-------------------------------
5.1 Subject to the terms and conditions of this
Agreement, the Option may be exercised by delivery of written
notice to the Company, at its principal executive office. Such
notice shall state that the Optionee is electing to exercise the
Option and the number of Shares in respect of which the Option is
being exercised and shall be signed by the person or persons
exercising the Option. If requested by the Committee, such person
or persons shall (i) deliver this Agreement to the Secretary of the
Company who shall endorse thereon a notation of such exercise and
(ii) provide satisfactory proof as to the right of such person or
persons to exercise the Option.
5.2 The notice of exercise described in Section 5.1
shall be accompanied by payment of the full purchase price for the
Shares in respect of which the Option is being exercised, in cash
or by certified check.
5.3 Upon receipt of the notice of exercise and any
payment or other documentation as may be necessary pursuant to
Section 5.2 or the Plan relating to the Shares in respect of which
the Option is being exercised, the Company shall take such action
as may be necessary to effect the transfer to the Optionee of the
number of Shares as to which such exercise was effective.
5.4 The Optionee shall not be deemed to be the holder
of, or to have any of the rights of a holder with respect to any
Shares subject to the Option until (i) the Option shall have been
exercised pursuant to the terms of this Agreement and the Optionee
shall have paid the full purchase price for the number of Shares in
respect of which the Option was exercised, (ii) the Company shall
have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record
on the books of the Company, whereupon the Optionee shall have full
voting and other ownership rights with respect to such Shares.
6. Termination of Employment.
--------------------------
6.1 Voluntary Resignation for Good Reason or Termination
other than for Cause, Death or Disability. In the event the
Company terminates the Optionee's employment other than for Cause
(as defined in the Employment Agreement), death or Disability (as
defined in the Employment Agreement), or if the Optionee terminates
his employment for Good Reason (as defined in the Employment
Agreement) the Option, to the extent not yet vested shall fully
vest, and the Optionee may at any time within thirty (30) days
after such termination, exercise the Option.
6.2 Death or Disability. In the event of the Disability
of the Optionee or in the event the employment of the Optionee is
terminated as a result of his death, the Optionee may at any time
within one (1) year after such Disability or termination of
employment, exercise the Option to the extent, but only to the
extent, that the Option or portion thereof was exercisable on the
date of such Disability or termination of employment. In the event
of the Optionee's death, the Option shall be exercisable, to the
extent provided in the Plan and this Agreement, by the legatee or
legatees under the Optionee's will, or by the Optionee's personal
representatives or distributees, and such person or persons shall
be substituted for the Optionee each time the Optionee is referred
to herein.
6.3 Other Termination of Employment. If the employment
of the Optionee is terminated for any reason other than the reasons
set forth in Sections 6.1 and 6.2, the Option shall terminate on
the date of the Optionee's termination of employment whether or not
exercisable.
7. Effect of Change in Control.
----------------------------
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Change in Control (as defined in the
Employment Agreement), the Option, to the extent not yet vested,
shall fully vest and shall become immediately and fully
exercisable.
8. Nontransferability.
-------------------
The Option shall not be transferable other than by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code. During the
lifetime of the Optionee, the Option shall be exercisable only by
the Optionee.
9. No Right to Continued Employment.
---------------------------------
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of employment by the Company.
10. Adjustments.
------------
In the event of a Change in Capitalization, the committee
administering the Plan may make appropriate adjustments to the
number and class of Shares or other stock or securities subject to
the Option and the purchase price for such Shares or other stock or
securities. The committee's adjustment shall be made in accordance
with the provisions of the Plan and shall be final and binding for
all purposes of the Plan and this Agreement.
11. Optionee Bound by the Plan.
---------------------------
The Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.
12. Modification of Agreement.
--------------------------
This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
13. Severability.
-------------
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
14. Governing Law.
--------------
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Delaware without giving effect to the conflicts of laws principles
thereof.
15. Successors in Interest.
-----------------------
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to the
Company under this Agreement shall be final, binding and conclusive
upon the Optionee's heirs, executors, administrators and
successors.
16. Resolution of Disputes.
-----------------------
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the committee administering the Plan. Any determination made
hereunder shall be final, binding and conclusive on the Optionee
and Company for all purposes.
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
-----------------------------
Paul G. Kahn
Chief Executive Officer
JOHN R. BIRK
------------------------------
John R. Birk
Optionee
Exhibit 10(s)
SAFECARD SERVICES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE 1
THE PLAN
1.1 Name. This plan is effective as of December 1,
1993, and shall be known as the SAFECARD SERVICES, INC. EXECUTIVE
DEFERRED COMPENSATION PLAN ("Plan").
1.2 Purpose. The Company and certain of its executives
have entered into employment agreements (the employment agreement
as to each executive is referred to as the "Employment Agreement"
and are collectively referred to as the "Employment Agreements").
Under the terms of the Employment Agreements, the Company agreed to
provide these executives with a supplemental retirement benefit.
It is the purpose of this Plan to provide to participants the
supplemental retirement benefit set forth in the Employment
Agreements. The Plan is established to provide participants with
supplemental deferred compensation, to recognize each participant's
service to the Company, and to encourage him to continue employment
with the Company. It is intended to be an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees for
purposes of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The parties acknowledge and agree that this
Plan supersedes the provisions of the Employment Agreement of the
participant with respect to any supplemental retirement benefit or
deferred compensation benefit.
ARTICLE 2
DEFINITIONS
Whenever used in the Plan, the following words and
phrases shall have the meanings set forth below unless the context
plainly requires a different meaning. When the defined meaning is
intended, the term is capitalized:
2.1 "Anniversary Date" for a Plan Year shall mean the
last day of the Plan Year.
2.2 "Base Salary" for a Plan Year shall mean the Base
Salary of the Participant set forth in Section 3.01 of the
Employment Agreement between the Participant and the Company as in
effect as of the Anniversary Date of the Plan Year.
2.3 "Beneficiary" means that person or persons
determined under Section 4.3 to receive the payment on behalf of a
deceased Participant.
2.4 "Code" means the Internal Revenue Code of 1986, as
amended.
2.5 "Company" shall have the following meaning:
2.5.1 "Company" shall mean SAFECARD SERVICES, INC.
2.5.2 In addition, unless the context indicates
otherwise, as used in this Plan the term "Company" shall
also mean and include any other entity that has been
granted permission by SAFECARD SERVICES, INC. to
participate in this Plan. This permission shall be
granted under such conditions and upon such conditions as
SAFECARD SERVICES, INC. deems appropriate. Wright
Express Corporation, a subsidiary of SAFECARD SERVICES,
INC. has adopted this plan with the consent of SAFECARD
SERVICES, INC.
2.6 "Deferral Account" means the account maintained on
the books of the Company as described in Article 3.
2.7 "Deferral Account Benefit" means the benefit at the
date of determination described in Article 4.
2.8 "Participant" means only an executive of the Company
who is specifically designated as a Participant. The list of
Participants as of the Effective Date is set forth on Schedule "A"
attached hereto. The Chairman of the Company shall have full
discretion by an amendment to Schedule "A" to add additional
participants to this Plan.
2.9 "Plan Year" for the first Plan Year shall be a
thirteen month period from December 1, 1993 to December 31, 1994.
Thereafter, the Plan Year shall mean the calendar year from January
1 through December 31.
2.10 "Reasonable Cause" means:
2.10.1 The Participant's material breach of his or
her employment agreement with the Company; or
2.10.2 The conviction of the Participant for:
(1) any crime constituting a felony in the
jurisdiction in which committed;
(2) any crime involving moral turpitude
(whether or not a felony); or
(3) any other criminal act against the Company
involving dishonesty or willful misconduct intended
to injure the Company (whether or not a felony).
2.10.3 The adjudication of the Participant as
bankrupt; or
2.10.4 The failure or refusal of the Participant
to follow the lawful and proper directives of the Board
of Directors of the Company; or
2.10.5 Willful malfeasance or gross misconduct by
the Participant which damages the Company.
Notwithstanding the foregoing, the Company shall not be deemed to
have Reasonable Cause pursuant to Sections 2.10.1 or 2.10.4 unless
the Company gives the Participant written notice that the specified
conduct or event has occurred and the Participant fails to cure the
conduct or event within thirty (30) days after receipt of such
notice.
2.11 "Termination of Employment" means the Participant's
ceasing to render services to the Company for any reason
whatsoever, voluntary or involuntary, including by reason of death
or disability.
ARTICLE 3
DEFERRAL ACCOUNT
3.1 Establishment and Determination of Account. The
Company shall establish a Deferral Account on its books for each
Participant. The Deferral Account balance as of any date is the
difference between (i) the Initial Deferral Account described in
Section 3.1.1 as of that date and (ii) the Offset described in
Section 3.1.2 as of that date:
3.1.1 Initial Deferral Account. The Initial
Deferral Account as of any date is the sum of (i) the
aggregate contributions described in Section 3.1.1.1, and
(ii) net investment earnings accrued on such
contributions under Section 3.1.1.2 to that date.
3.1.1.1 Deferral Contribution. As of the
Anniversary Date of each Plan Year (and as of the date
of Termination of Employment if such date is other
than an Anniversary Date), the Company shall credit to
the Deferral Account an amount equal to 6.7 percent of
the Base Salary of the Participant for that Plan Year
if an Anniversary Date, or 6.7 percent of the Base
Salary paid during the Plan Year for service through
the date of Termination of Employment in the case of
a contribution as of the date of Termination of
Employment.
3.1.1.2 Investment Earnings. As of the
Anniversary Date of each Plan Year, and as of the date
the Deferral Account Benefit is payable under Article
4, the Company shall credit as investment earnings the
amount that would have been earned (whether a net gain
or loss) had the Deferral Account as valued as of the
last preceding Anniversary Date (after taking into
account the contribution credit under Section 3.1.1.1
for the last preceding Plan Year) received a rate of
return for the period equal to the investment
experience for that period of the SafeCard Services,
Inc. Umbrella Trust.
3.1.2 Offset. The sum as of any date of (i) the
value as of such date of the accounts of the Participant
in all defined contribution plans within the meaning of
Section 3(34) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ever maintained by the
Company (including the present value of any such
accounts that have previously been distributed to
Participant), but excluding any such account to the
extent that account consists of contributions (and
earnings thereon) made under a salary reduction agreement
to a plan described in Code Section 401(k), and (ii) the
actuarial present value as of that date of the accrued
benefit of the Participant in all defined benefit plans
within the meaning of Section 3(35) of ERISA ever
maintained by the Company (including the present value of
any prior distributions made to Participant under any
such plan), expressed in the form of a lump sum payment.
The determination of present values shall be made using
the basis for actuarial equivalence set forth in each
plan to the extent the plan is a defined benefit plan but
in all cases the determination shall use as an interest
rate the Pension Benefit Guaranty Corporation interest
rates for determining the lump sum value of a benefit on
plan termination as of the first day of the calendar year
as of which the determination is being made.
3.2 Statement of Accounts. The Company shall provide to
the Participant, within one hundred twenty (120) days after the
close of each Plan Year, a statement in such form as the Company
may determine setting forth the balance in his Initial Deferral
Account as of the last day of the Plan Year just ended.
3.3 Accounting Device Only. The Deferral Account shall
be utilized solely as a device for the measurement and
determination of the amounts to be paid to the Participant under
this Plan. The Deferral Account shall not constitute or be treated
as a trust fund of any kind.
ARTICLE 4
PAYMENT OF DEFERRAL ACCOUNT BENEFIT
4.1 Entitlement to Benefit. A Participant shall be
entitled to his Deferral Account Benefit (described in Section 4.2)
upon Termination of Employment unless the termination is by the
Company with Reasonable Cause. If the Termination of Employment is
a termination of employment by the Company with Reasonable Cause,
the Participant shall be entitled to his Deferral Account Benefit
upon the later to occur of the following events:
4.1.1 Termination of Employment; or
4.1.2 Attainment of age 65.
4.2 Benefit Calculation/Payment. The Deferral Account
Benefit of a Participant is the Deferral Account balance of the
Participant as described in Section 3.1 as of the date the benefit
becomes payable. The Deferral Account Benefit shall be paid in a
lump sum not later than sixty (60) days after the date as of which
the benefit becomes payable. Payment shall be made to the
Participant, or if the Participant is not living at the time
payment is to be made, to the Beneficiary of the Participant.
4.3 Beneficiary Designations. A Participant shall
designate a beneficiary by filing a written notice of such
designation with the Company. A Participant may revoke or modify
the designation at any time by a further written designation.
However, no such designation, revocation or modification shall be
effective unless signed by the Participant and accepted by the
Company during the Participant's lifetime. The Participant's
beneficiary designation shall be deemed automatically revoked (i)
if the beneficiary dies prior to the Participant's death, or (ii)
if the beneficiary is the Participant's spouse and the
Participant's marriage with the spouse is legally dissolved. If
the Participant dies without a valid beneficiary designation, the
beneficiary of the Participant shall be the Participant's surviving
spouse, if any, and if none, the Participant's surviving children
and the descendants of any deceased child, by right of
representation. If neither the spouse nor any children or
descendants survive, then the beneficiary shall be the
Participant's estate.
4.4 Facility of Payment. If a benefit is payable to a
minor or person declared incompetent or to a person incapable of
handling the disposition of his or her property, the Company may
pay such benefit to the guardian, legal representative or person
having the care or custody of such minor, incompetent or person.
The Company may require proof of incompetency, minority or
guardianship as it may deem appropriate prior to distribution of
the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
ARTICLE 5
CLAIMS AND REVIEW PROCEDURES
5.1 Claims Procedure. The Company shall notify the
Participant or beneficiary ("claimant") in writing, within ninety
(90) days of his or her written application for benefits, of his or
her eligibility or noneligibility for benefits under the Plan. If
the Company determines that a claimant is not eligible for benefits
or full benefits, the notice shall set forth (1) the specific
reasons for such denial, (2) a specific reference to the provisions
of the Plan on which the denial is based, (3) a description of any
additional information or material necessary for the claimant to
perfect his or her claim, and a description of why it is needed,
and (4) an explanation of the Plan's claims review procedure and
other appropriate information as to the steps to be taken if the
claimant wishes to have the claim reviewed. If the Company
determines that there are special circumstances requiring
additional time to make a decision, the Company shall notify the
claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to
an additional ninety-day period.
5.2 Review Procedure. If a claimant is determined by
the Company not to be eligible for benefits, or if the claimant
believes that he or she is entitled to greater or different
benefits, the claimant shall have the opportunity to have such
claim reviewed by the Company by filing a petition for review with
the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific
reasons which the claimant believes entitle him or her to benefits
or to greater or different benefits. Within sixty (60) days after
receipt by the Company of the petition, the Company shall afford
the claimant (and counsel, if any) an opportunity to present his or
her position to representatives of the Company orally or in writing
as the Company shall determine, and the claimant (or counsel) shall
have the right to review the pertinent documents. The Company
shall notify the claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the claimant and
the specific provisions of the Plan on which the decision is based.
If, because of the need for a hearing, the sixty-day period is not
sufficient, the decision may be deferred for up to another sixty-
day period at the election of the Company, but notice of this
deferral shall be given to the claimant. In the event of the death
of a claimant, the same procedures shall apply to the claimant's
beneficiaries.
ARTICLE 6
ADMINISTRATION AND FINANCES
6.1 Administration. The plan shall be administered by
the Company.
6.2 Powers of the Company. The Company shall have all
powers necessary to administer the Plan, including, without
limitation, powers:
6.2.1 to interpret the provisions of the Plan;
6.2.2 to establish and revise the method of
accounting for the Plan and to maintain the accounts; and
6.2.3 to establish rules for the administration
of the Plan and to prescribe any forms required to
administer the Plan.
6.3 Actions of the Company. All determinations,
interpretations, rules, and decisions of the Company shall be
conclusive and binding upon all persons having or claiming to have
any interest or right under the Plan.
6.4 Delegation. The Company shall have the power to
delegate specific duties and responsibilities to officers or other
employees of the Company or other individuals or entities. Any
delegation by the Company may allow further delegations by the
individual or entity to whom the delegation is made. Any
delegation may be rescinded by the Company at any time. Each
person or entity to whom a duty or responsibility has been
delegated shall be responsible for the exercise of such duty or
responsibility and shall not be responsible for any act or failure
to act of any other person or entity.
6.5 Indemnification. To the extent permitted by law,
the Company shall indemnify each member of the Board of Directors
and any other employee of the Company to whom duties are assigned
with respect to this Plan against expenses (including any amount
paid in settlement) reasonably incurred by him/her in connection
with any claims against him/her by reason of his/her conduct in the
performance of his/her duties under the Plan, except in relation to
matters as to which he/she acted fraudulently or in bad faith in
the performance of such duties. The Company may also make such
advances as it may determine in its discretion for the payment of
expenses that the Company determines would be subject to the
foregoing right of indemnification. This right of indemnification
shall be in addition to any other right to which the Board or other
person may be entitled as a matter of law or otherwise, and shall
pass to the estate of a deceased person.
6.6 Reports and Records. The Company and those to whom
the Company has delegated duties under the Plan shall keep records
of all their proceedings and actions and shall maintain books of
account, records, and other data as shall be necessary for the
proper administration of the Plan and for compliance with
applicable law.
6.7 Finances. The costs of the Plan shall be borne by
the Company. The rights of the Participant (or of his Beneficiary)
to benefits under the Plan shall be solely those of an unsecured
general creditor of the Company. Any assets acquired by or held by
the Company or set aside in the SafeCard Services, Inc. Umbrella
Trust shall not be deemed to be held as security for the
performance of the obligations of the Company under this Plan.
Notwithstanding the foregoing, to the extent under the terms of the
Umbrella Trust payments are made by the Trustee of said Trust to
the Participant with respect to benefits under this Plan, such
payments shall satisfy the obligations of the Company hereunder to
the extent of the payments made.
ARTICLE 7
AMENDMENTS AND TERMINATION
The Company may amend or terminate the Plan, provided,
however, such amendment or termination shall be applicable with
respect to a specific Participant only to the extent such amendment
or termination was agreed to in writing by the Participant.
ARTICLE 8
MISCELLANEOUS
8.1 No Guaranty of Employment. The adoption and
maintenance of the Plan shall not be deemed to be a contract of
employment between the Company and the Participant. Nothing
contained herein shall give the Participant the right to continue
to be retained by the Company or to interfere with the right of the
Company to terminate the services of the Participant at any time,
nor shall it give the Company the right to require the Participant
to continue to provide services to the Company or to interfere with
the Participant's right to terminate services at any time.
8.2 Tax Withholding. The Company shall have the right
to withhold or have withheld from any payment under this Plan such
income or employment taxes as the Company determines are required
to be withheld from the benefits provided under this Plan.
8.3 Non-Alienation. This Plan shall inure to and be
binding on the successors and assigns of the Company. No benefit
payable at any time under this Plan shall be subject in any manner
to alienation, sale, transfer, assignment, pledge, attachment, or
encumbrance of any kind.
8.4 Applicable Law. The Plan and all rights hereunder
shall be governed by and construed according to the laws of Florida
except to the extent such laws are preempted by the laws of the
United States of America.
8.5 Employment Agreement. By execution of the
Acceptance of Participation and Amendment of Employment Agreement
that is part of Schedule "A" to this Plan, a Participant agrees to
be bound by the terms of this Plan and acknowledges that this Plan
amends the Employment Agreement between such Participant and the
Company by deleting Section 4.08 of the Employment Agreement which
provides for a supplemental retirement benefit but retaining all
other provisions of the Employment Agreement.
COMPANY
SAFECARD SERVICES, INC.
By
---------------------------
Title
---------------------------
<PAGE>
SCHEDULE "A"
PARTICIPANTS
The following shall each become a Participant in this
Plan upon execution of the Acceptance of Participation at the end
of this Schedule:
Paul G. Kahn
Francis J. Marino
G. Thomas Frankland
John R. Birk
ACCEPTANCE OF PARTICIPATION
AND
AMENDMENT OF EMPLOYMENT AGREEMENT
In consideration for participation in the SafeCard
Services, Inc. Executive Deferred Compensation Plan, I hereby
accept the terms of said Plan and acknowledge that said Plan
supersedes the supplemental retirement benefit provided by
Paragraph 4.08 of my Employment Agreement with SafeCard Services,
Inc. I hereby consent to the amendment by said Plan of my
Employment Agreement with SafeCard Services, Inc. by deleting
Paragraph 4.08 of my Employment Agreement. I understand that the
remaining provisions of my Employment Agreement remain in full
force and effect.
PAUL G. KAHN
----------------------------
Paul G. Kahn
FRANCIS J. MARINO
----------------------------
Francis J. Marino
G. THOMAS FRANKLAND
---------------------------
G. Thomas Frankland
JOHN R. BIRK
---------------------------
John R. Birk
Exhibit 10(t)
EXHIBIT B
EXECUTIVE AGREEMENT
THIS AGREEMENT is made and entered into as of _______ 1994 (the
"Effective Date"), by and between ______________ ("Executive") and
SafeCard Services, Incorporated, a Delaware corporation, and its
affiliated companies (the "Company").
Preliminary Statement
Executive has been employed by the Company since
__________________ and is currently employed
as_________________________________________.
The Company recognizes that Executive is a valuable resource
of the Company and the Company desires to provide Executive certain
benefits upon the occurrence of certain events as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
(a) The term "Change in Control" shall mean the
occurrence of any one of the following events:
(i) the Company's acquisition of actual knowledge
that any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than an employee benefit plan established
or maintained by the Company or any of its affiliates, is or
becomes the beneficial owner (as defined in Rule 13d-3 of the
Exchange Act) directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of
the Company's then-outstanding securities;
(ii) the first purchase of the Company's common
stock pursuant to a tender or exchange offer (other than a tender
or exchange offer made by the Company or an employee benefit plan
established or maintained by the Company or any of its affiliates);
(iii) the approval by the Company's
stockholders of (A) a merger or consolidation of the Company with
or into another corporation (other than a merger or consolidation
in which the Company is the surviving corporation and which does
not result in any capital reorganization or reclassification or
other change in the Company's then-outstanding shares of common
stock), (B) a sale or disposition of all or substantially all of
the Company's assets or (C) a plan of liquidation or dissolution of
the Company;
(iv) if during any period of two (2)
consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least
two-thirds thereof, unless the election or nomination for the
election by the Company's stockholders of each new director was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period;
or
(v) the termination of the employment of Paul G.
Kahn as Chairman and Chief Executive Officer of the Company for any
reason other than death or Disability prior to December 31, 1997;
provided, however, that notwithstanding the above, a "Change in
Control" shall not be deemed to occur if the events described in
clauses (i), (ii), (iii) and (iv) above, (x) are accompanied or
preceded, within the previous year, by a public disclosure made by
or on behalf of the acquiring person, which disclosure has been
approved or agreed to by the Company, of a proposal with respect to
such events, including the terms of such proposal, and (y) are
approved by a vote of at least a majority of the
directors then still in office who were directors on the date
immediately after the Effective Date.
(b) The term "Cause" shall mean:
(i) the failure of Executive substantially to
perform Executive's duties or responsibilities with the Company
(other than any failure due to physical or mental incapacity);
(ii) Executive's conviction of a felony;
(iii) any conduct involving moral turpitude
(whether or not a felony) or any other conduct involving
dishonesty or willful misconduct intended to injure the Company
(whether or not a felony); or
(iv) willful malfeasance or gross misconduct of
Executive in the performance of Executive's duties;
provided, however, that the Company shall not be deemed to have
Cause pursuant to clause (i) unless the Company gives Executive
written notice that the specified conduct has occurred and
Executive fails to cure the conduct within thirty (30) days after
receipt of such notice. Termination of Executive for Cause shall
be communicated by delivery to Executive of a notice specifying the
conduct or event constituting Cause, including, with respect to the
conduct described in clause (i), that Executive failed to cure such
conduct during the thirty-day period following the date on which
the Company gave Executive written notice thereof.
(c) The term "Disability" shall mean any medically
determinable physical or mental impairment that renders Executive
substantially unable to perform all of Executive's duties and
responsibilities with the Company for 180 days during any 360-day
period. The date of the Disability is the date on which
Executive is certified as having incurred a Disability by a
physician mutually acceptable to Executive (or Executive's
representative) and the Company.
(d) The term "Good Reason" shall mean the occurrence of
any one of the following events upon, or within twenty-four (24)
months after, a Change in Control:
(i) the assignment to Executive by the Company of
duties inconsistent with Executive's duties and responsibilities as
________________ and _______________, or any material adverse
change to Executive's title of _________________________ and
______________, or any material reduction in Executive's duties or
responsibilities;
(ii) a reduction by the Company in Executive's base
salary as in effect on the Effective Date or as the same may be
increased by the Company from time to time;
(iii) a failure by the Company to continue
either (A) the Incentive Compensation Plan of the Company
(provided that such plan may be modified from time to time) or (B)
any plan providing Executive with, in the aggregate,
substantially similar benefits (a "Substitute Plan"), or a
failure by the Company to continue Executive as a participant in
the Incentive Compensation Plan or in any Substitute Plan on at
least the same basis as Executive participates, as the case may be,
at the Effective Date or upon the date of adoption of the
Substitute Plan;
(iv) the failure by the Company to obtain the
specific assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of the
Company's assets;
(v) a failure by the Company to continue in effect
either (A) any material benefit or compensation plan or stock
option plan (including any pension, profit sharing, bonus, life
insurance, health, accidental death or dismemberment or disability
plan) in which Executive is participating, or (B) plans providing
Executive with, in the aggregate, substantially similar benefits or
the taking of any action by the Company which would adversely
affect Executive's participation in or materially reduce
Executive's benefits under any such plan; and
(vi) any material breach by the Company of this
Agreement;
provided, however, that except with respect to the events
described in clauses (ii), (iv), (v) or (vi) above, Good Reason
shall not be deemed to occur unless Executive gives the Company
written notice that the specified conduct or event has occurred and
the Company fails to cure the conduct or event within thirty (30)
days of the receipt of such notice. For purposes of this Section
1(d), Executive's good faith determination that any of the above
events have occurred shall be conclusive.
2. Operation of Agreement. This Agreement shall
constitute a valid and binding contract between the parties
immediately upon its execution. Nevertheless, Executive and the
Company shall have no obligations hereunder until, and only upon
the occurrence of, Executive's resignation with Good Reason or the
Company's termination of the Executive's employment other than for
Cause, death, Disability or retirement. Prior to the occurrence of
such events, the Company's employment obligations to Executive, if
any, shall not be affected by this Agreement and it is clearly
understood and agreed that Executive shall have no right on account
of this Agreement to be retained in the employ of the Company or to
be retained in any particular position in the Company.
3. Resignation with Good Reason or Termination After a
Change in Control Other Than For Cause, Death, Disability or
Retirement. If Executive resigns from the Company for Good Reason
or if, after a Change in Control, the Company terminates
Executive's employment other than for Cause, death, Disability or
retirement, Executive shall be entitled to all of the following:
(a) The Company shall make a lump sum payment of the
portion of Executive's annual base salary accrued but unpaid as of
the date of Executive's resignation or termination and any other
amounts, including but not limited to expense
reimbursement, due and owing to Executive by the Company as of such
date.
(b) The amount and value of Executive's entire plan
account and interest under the Company's 401(k) and Profit-
Sharing Plan (the "401(k) Plan"), any other retirement,
investment or stock ownership plan, and all employer
contributions made or payable to any such plan for Executive's
account prior to the end of the month in which Executive's
resignation or termination occurs shall be deemed vested and
payable to Executive. Such payment or distribution shall be in
accordance with the elections made by the Executive.
(c) All stock options, restricted stock, stock
appreciation rights, and other stock-based incentive compensation
granted to the Executive by the Company shall immediately vest in
their entirety, and Executive may exercise all such options and
rights, and shall receive payments and distributions accordingly.
(d) The Company shall make a lump sum payment equal to
one hundred percent (100%) of Executive's annual base salary in
effect immediately prior to Executive's termination or
resignation; provided that this payment will not be included in the
calculation of any of Executive's benefits including, but not
limited to, any benefits to which Executive may be eligible under
the 401(k) Plan.
(e) The Company shall pay a lump sum which will
constitute payment in full for all unused vacation to which
Executive is entitled immediately prior to Executive's
resignation or termination; provided that this payment will not be
included in the calculation of any of Executive's benefits
including, but not limited to, any benefits to which Executive may
be eligible under the 401(k) Plan.
(f) If, at the end of the fiscal year in which
Executive's resignation or termination occurred, the Company pays
awards under its Short-Term Incentive Compensation Plan to any
individual within the class to which Executive belonged
immediately prior to resignation or termination, the Company shall
pay to Executive an amount equal to the award that
Executive would have received under the Company's Short-Term
Incentive Compensation Plan but for the resignation or
termination, prorated for the length of Executive's service on the
active payroll during the fiscal year in which Executive's
resignation or termination occurred. This amount shall be paid in
a lump sum at or about the time that such awards are paid to active
employees.
(g) The Company shall provide outplacement services for
Executive at the Company's expense for a period of twelve (12)
months, provided that Executive shall have commenced
utilizing such services within three (3) months of Executive's
termination or resignation.
(h) The Company shall provide continued coverage under
the Company's medical insurance plan for up to twelve (12) months
after Executive's resignation or termination, provided that
Executive timely elects coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1986 ("COBRA"). Executive will pay
the premium for such coverage, but will be reimbursed for such
premiums by the Company upon presentation of proof of payment.
Executive understands and acknowledges that such COBRA coverage
will automatically terminate (absent legal exception) upon
Executive's becoming eligible for group coverage under another plan
of any other employer or organization, or upon Executive's failure
to pay a required premium.
Any amounts payable to Executive under this Section 3 shall be paid
to Executive subject to all applicable taxes required to be
withheld by the Company pursuant to federal, state or local law.
Executive shall be solely responsible for all taxes imposed on
Executive by reason of Executive's receipt of any amounts of
compensation or benefits payable to Executive hereunder.
4. Termination Other Than For Cause, Death, Disability or
Retirement. If the Company terminates Executive's employment
other than for Cause, death, Disability, or retirement prior to any
Change of Control, Executive shall be entitled to all of the
following:
(a) The Company shall make a lump sum payment of the
portion of Executive's annual base salary accrued but unpaid as of
the date of Executive's termination and any other amounts,
including but not limited to expense reimbursement, due and owing
to Executive by the Company as of the date of Executive's
termination.
(b) The amount and value of Executive's entire plan
account and interest under the Company's 401(k) and Profit-
Sharing Plan (the "401(k) Plan"), any other retirement,
investment or stock ownership plan, and all employer
contributions made or payable to any such plan for Executive's
account prior to the end of the month in which Executive's
termination occurs shall be deemed vested and payable to
Executive. Such payment or distribution shall be in accordance
with the elections made by the Executive.
(c) The Company shall make a lump sum payment equal to
one hundred percent (100%) of Executive's annual base salary in
effect immediately prior to Executive's termination; provided that
this payment will not be included in the calculation of any of
Executive's benefits including, but not limited to, any
benefits to which Executive may be eligible under the 401(k) Plan.
(d) The Company shall pay a lump sum which will
constitute payment in full for all unused vacation to which
Executive is entitled immediately prior to Executive's
termination; provided that this payment will not be included in the
calculation of any of Executive's benefits including, but not
limited to, any benefits to which Executive may be eligible under
the 401(k) Plan.
(e) The Company shall provide outplacement services for
Executive at the Company's expense for a period of twelve (12)
months, provided that Executive shall have commenced
utilizing such services within three (3) months of Executive's
termination.
(f) The Company shall provide continued coverage under
the Company's medical insurance plan for up to twelve (12) months
after Executive's termination, provided that Executive timely
elects coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1986 ("COBRA"). Executive will pay the
premium for such coverage, but will be reimbursed for such
premiums by the Company upon presentation of proof of payment.
Executive understands and acknowledges that such COBRA coverage
will automatically terminate (absent legal exception) upon
Executive's becoming eligible for group coverage under another plan
of any other employer or organization, or upon Executive's failure
to pay a required premium.
Any amounts payable to Executive under this Section 4 shall be paid
to Executive subject to all applicable taxes required to be
withheld by the Company pursuant to federal, state or local law.
Executive shall be solely responsible for all taxes imposed on
Executive by reason of Executive's receipt of any amounts of
compensation or benefits payable to Executive hereunder.
5. No Authorization. Executive understands and agrees that,
after Executive's resignation or termination, Executive will no
longer be authorized to incur any expenses, obligations or
liabilities on behalf of the Company.
6. Release and Covenant Not to Sue. Executive hereby agrees
that contemporaneous with Executive's acceptance of
amounts payable under Section 3 (d) through (h) or Section 4 (c)
through (f) hereof, Executive shall for [himself/herself],
[his/her] attorneys, heirs, executors, administrators, successors
and assigns, enter into a full Release and Covenant Not to Sue
Agreement ("Release Agreement") prepared by the Company. The
Release Agreement shall release and discharge the Company and any
of its subsidiaries, as well as its and their successors,
assigns, officers, directors, representatives, and employees from
and for any and all claims, including but not limited to claims of
alleged wrongful discharge or alleged employment
discrimination under any federal, state or local statute, rule or
regulation.
7. Return of Materials. In accordance with Executive's
existing and continuing obligations to the Company, Executive
agrees to return to the Company, on or promptly after Executive's
resignation or termination, all Company property or copies
thereof, including, but not limited to, files, records, computer
access codes, computer programs, keys, card key passes,
instruction manuals, documents, business plans and other property
which Executive received or prepared or helped to prepare in
connection with Executive's employment with the Company, and to
assign to the Company all right, title and interest in such
property, and any other inventions, discoveries or works of
authorship created by Executive within the scope and during the
course of Executive's employment.
8. Proprietary Information. Executive affirms Executive's
present and future obligation to keep all Proprietary Company
Information confidential and not to disclose it to any third party
in the future. As used in this Agreement, the term
"Proprietary Company Information" includes, but is not
necessarily limited to, technical, marketing, business, financial
or other information of the Company which constitutes trade secrets
or information not available to competitors of the
Company, the use or disclosure of which might reasonably be
construed to be contrary to the interests of the Company.
9. Confidentiality. Executive shall not at any time talk
about, write about or otherwise publicize the terms or existence of
this Agreement or any fact concerning its negotiation,
execution or implementation except with (i) an attorney who may be
advising Executive in connection with this Agreement; (ii) a
financial consultant, tax advisor or executive outplacement
counsellor; and (iii) Executive's immediate family (including
Executive's spouse and children residing with Executive) provided
that such persons agree in advance to keep said information
confidential and not to disclose it to others.
10. Arrangements Not Exclusive or Limiting. The specific
arrangements referred to herein are not intended to exclude or
limit Executive's participation in other benefits available to
executive personnel of the Company generally, or to preclude or
limit other compensation or benefits as may be provided by the
Company at any time, or to limit or reduce any compensation or
benefit to which Executive would be entitled but for this
Agreement.
11. Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate, or in any way create a lien upon
any amounts provided under this Agreement, and no payments or
benefits due hereunder shall be assignable in anticipation of
payment either by voluntary or involuntary acts or by operation of
law. So long as Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject matter hereof.
12. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company, its
successors or assigns, by operation of law or otherwise,
including without limitation any corporation or other entity or
person which shall succeed (whether directly or indirectly, by
purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, and
the Company will require any parent company or successor, by
agreement in form and substance satisfactory to Executive,
expressly to assume and agree to perform, or (in the case of a
parent company) to guarantee the performance of, this Agreement.
Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of Executive and
Executive's legal representatives, heirs, and assigns.
13. Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach of this Agreement that
cannot be resolved by Executive and the Company, including (i) any
dispute as to the calculation of the amounts payable hereunder or
(ii) any entitlement under Section 14, shall, at the instance of
either Executive or the Company, be submitted to arbitration in
Jacksonville, Florida in accordance with Delaware law and the
procedures of the American Arbitration Association. The
determination of the arbitrator(s) shall be conclusive and, subject
to the provision for indemnification in Section 14, binding on the
Company and Executive and, subject to Section 20, judgment may be
entered on the arbitrator(s)' award in any court having
jurisdiction.
14. Fees, Expenses and Indemnification.
(a) The Company shall pay all reasonable legal fees and
related expenses (including the costs of experts, evidence and
counsel) incurred by Executive as a result of Executive's seeking
to obtain or enforce any right or benefit provided by this
Agreement, provided Executive substantially prevails in the
proceeding.
(b) Notwithstanding any other provision of this
Agreement to the contrary, the Company agrees that during the term
of Executive's employment with the Company and subsequent to the
occurrence of a termination of Executive's employment, it shall
indemnify Executive and hold Executive harmless if
Executive is made or threatened to be made a party to any action or
proceeding by reason of the fact that Executive was an
employee of the Company against expenses, including attorneys' and
paralegals' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred as a result of such
action or proceeding, or any appeal thereof, if Executive acted in
good faith and in a manner that Executive reasonably believed to be
in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe that Executive's conduct was unlawful. The
Company may pay in advance any expenses, including attorneys' and
paralegals' fees, actually and reasonably incurred by Executive in
defending any action or proceeding, or any appeal thereof, upon
receipt of Executive's undertaking to repay such amounts if it is
ultimately determined that Executive is not entitled to be
indemnified by the Company as authorized under this Section 14(b).
15. Severability. If any portion of this Agreement is
declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity shall not serve to
invalidate any portion of this Agreement not declared to be
unlawful or invalid. Any section or part of a section so
declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such
section or part of a section to the fullest extent possible while
remaining lawful and valid.
16. Amendment and Waiver. This Agreement shall not be
altered, amended or modified except by written instrument
executed by the Company and Executive. A waiver of any term,
covenant, agreement or condition contained in this Agreement shall
not be deemed a waiver of any other term, covenant,
agreement or condition, and any waiver of any default in any such
term, covenant, agreement or condition shall not be deemed a waiver
of any later default thereof or of any other term,
covenant, agreement or condition.
17. Notices. All notices and other communications required
hereunder shall be in writing and delivered by hand or by first
class registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company: SafeCard Services, Incorporated
7596 Centurion Parkway
Jacksonville, Florida 32256
Attn: Chairman & CEO
If to Executive: _______________[NAME]
________________________________
________________________________
________________________________
Any party may from time to time designate a new address by notice
given in accordance with this Section. Notice and communications
shall be effective when actually received by the addressee.
18. Counterpart Originals. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same
instrument.
19. Entire Agreement. This Agreement forms the entire
agreement between the parties hereto with respect to any
severance payments and with respect to the subject matter
contained in this Agreement.
20. Applicable Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of
Delaware without giving effect to the conflict of laws
principles thereof. Subject to the parties' agreement to
arbitrate disputes set forth in Section 13, Executive and the
Company hereby irrevocably and unconditionally consent to submit to
the exclusive jurisdiction of the courts of the State of Florida or
the United States of America located in the State of Florida,
County of Duval, for any actions, suits or proceedings arising out
of or relating to this Agreement and the transactions contemplated
hereby (and the parties agree not to commence any action, suit or
proceeding relating hereto except in such
courts), and further agree that service of any process, summons,
notice or documents by United States registered mail to either
party in accordance with Section 17 shall be effective service of
process for any action, suit or proceeding brought against the
other party in any such court and, absent any statute, rule or
order to the contrary, that each party shall have thirty (30) days
from actual receipt of any complaint to answer or otherwise plead
with respect thereto. The parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the courts of the State of
Florida or the United States of America located in the State of
Florida, County of Duval, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, Executive and the Company have duly
executed this Executive Agreement as of the date first above
indicated.
________________________________________
[NAME]
SAFECARD SERVICES, INCORPORATED
By:______________________________________
Name:____________________________________
Title:___________________________________
Exhibit 10(u)
SAFECARD SERVICES, INCORPORATED
1994 LONG TERM STOCK-BASED INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
-----------------------------------------
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Option" or
"Agreement") dated as of (Date) by and between SAFECARD SERVICES,
INCORPORATED, a Delaware corporation ("SafeCard") and (NAME), a key
employee of SafeCard ("Optionee").
WHEREAS, the Board of Directors adopted and the stockholders
approved the SAFECARD SERVICES, INCORPORATED 1994 Long Term Stock-
Based Incentive Plan (the "Plan") to promote the interests of
SafeCard and its stockholders by providing incentives to its
employees by encouraging them to devote their abilities and
industry to the success of SafeCard's enterprise; and
WHEREAS, the Committee appointed to administer the Plan by the
Board of Directors (the "Committee") has determined to grant an
option to the Optionee as provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option.
----------------
SafeCard hereby irrevocably grants to Optionee the right and
option to purchase all or any part of an aggregate of (no. of
shares) shares (the "Option Shares") of SafeCard's common stock,
$.01 par value per share ("Common Stock"), on the terms and
conditions set forth in this Agreement.
2. Incorporation of the Plan by Reference.
---------------------------------------
The grant of this Option is subject to the terms and
conditions of the Plan which is incorporated herein by reference,
and the Optionee hereby acknowledges receipt of the Plan. All of
the terms of this Agreement not inconsistent with the terms of the
Plan shall apply. All capitalized terms used herein without
definition shall have the definitions given to such terms in the
Plan.
3. Term and Time of Exercise of Option; Option Price.
--------------------------------------------------
(a) This Option shall have a term of ten years, commencing on
(the "Grant Date"), and ending at the close of business on (the
"Termination Date"), except to the extent such term may be reduced
in accordance with Sections 7 and 8 hereof. Upon the Termination
Date, or upon such earlier date as may be applicable pursuant to
Sections 7 and 8, the Option shall terminate and become null and
void.
(b) Subject to Sections 7 and 8, sixty percent (60%) of the
Option Shares (the "Time-Vested Option Shares") shall become
exercisable in cumulative equal annual increments of twenty-five
percent (25%) beginning on the first anniversary of the Grant Date.
Thus, twenty-five percent (25%) of the Time-Vested Option Shares
shall become exercisable one (1) year from the Grant Date; an
additional twenty-five percent (25%) of the Time-Vested Option
Shares shall become exercisable two (2) years from the Grant Date;
an additional twenty-five percent (25%) of the Time-Vested Option
Shares shall become exercisable three (3) years from the Grant Date
and the remaining twenty-five percent (25%) of the Time-Vested
Option Shares shall become exercisable four (4) years from the
Grant Date.
(c) Subject to Sections 7 and 8, forty percent (40%) of the
Option Shares (the "Hurdle Option Shares") shall become
exercisable based on the following conditions: _____ of the Hurdle
Option Shares shall become exercisable when the per share price of
the Common Stock has traded at or above $21.00 for twenty (20)
consecutive trading days; an additional _____ of the Hurdle Option
Shares shall become exercisable when the per share price of the
Common Stock has traded at or above $24.00 for twenty (20)
consecutive trading days; and an additional _____ of the Hurdle
Option Shares shall become exercisable when the per share price of
the Common Stock has traded at or above $27.00 for twenty (20)
consecutive trading days; provided, however, that the Option may
not be exercised, in whole or in part, prior to one (1) year from
the Grant Date, and provided further, that the Option shall in all
events fully vest nine (9) years from the Grant Date. A trading
day shall mean a day on which the national securities exchanges in
the United States are open for trading of securities. For purposes
of this Section 3(c), each trading day on which SafeCard has
acquired shares of the Common Stock in market transactions, whether
pursuant to a stock repurchase program or otherwise, shall be
excluded from the calculation of consecutive trading days.
(d) This Option shall be exercisable at the purchase price
equal to $_____ per share (the "Option Price").
4. Exercise of Option.
-------------------
(a) Subject to the terms and conditions of this Agreement,
this Option may be exercised in whole or in part by delivery of a
written notice to SafeCard at its principal office, now located at
7596 Centurion Parkway, Jacksonville, Florida 32256, to the
attention of the Corporate Secretary. Such notice shall state the
election to exercise the Option and the number of Option Shares
with respect to which it is being exercised, and shall be signed by
the person or persons exercising the Option. If the person
exercising the Option is not the Optionee, he or she shall also
deliver with the notice appropriate proof of his or her right to
exercise the Option. No fractional shares may be purchased. Full
payment of the applicable Option Price shall accompany such notice.
Payment of the Option Price shall be by check payable to the order
of SafeCard, by shares of Common Stock subject to the Option or
otherwise (valued as provided in Section 4(b)), or by a combination
thereof; provided, however, that payment by shares of Common Stock
shall be permitted only for so long as a public trading market in
the Common Stock exists. For purposes of this Section 4(a), a
public trading market in the Common Stock shall be deemed to exist
if shares of the Common Stock are listed either on (i) the New York
Stock Exchange or any other national securities exchange or (ii)
the National Association of Securities Dealers ("NASD") Automated
Quotation System.
(b) If payment is made in shares of Common Stock, such shares
shall be rounded to the lowest whole number of shares, and the
balance of the Option Price shall be paid by certified check. The
value of any shares of Common Stock tendered in payment of the
Option Price shall be the mean of the high and low trading prices
for such shares (as reported in The Wall Street Journal or other
reputable publication) on the trading day preceding the date notice
of exercise is given to SafeCard. All shares of Common Stock
utilized for the payment of the Option Price shall be delivered by
Optionee free and clear of all liens and encumbrances and in
transferable form.
(c) Where the Optionee is entitled to receive Option Shares
pursuant to the exercise of this Option, SafeCard shall have the
right to require the Optionee to pay to SafeCard the amount of any
federal, state, local or other taxes which SafeCard is required to
withhold with respect to such exercise, or, in lieu thereof, in
accordance with Section 15.2 of the Plan, the Optionee may make a
written election to have withheld a portion of the Option Shares
then issuable with a value equal to the withholding taxes
determined as set forth in Section 4(b) of this Agreement.
SafeCard's method of satisfying its withholding obligations shall
be solely in the discretion of SafeCard, subject to applicable
federal, state, and local laws.
(d) Upon receipt of notice of exercise and any necessary
documentation and the payment of the Option Price, SafeCard shall
take such action as may be necessary to effect the transfer to
Optionee of certificates representing the Option Shares with
respect to which the Option has been exercised. All shares so
issued shall be fully paid and nonassessable. This Option will
remain in full force and effect to the extent it has not been
exercised or otherwise terminated.
(e) Optionee shall not be deemed for any purpose to be the
owner of any shares of the Common Stock unless and until (i) the
Option shall have been exercised pursuant to the terms hereof, (ii)
SafeCard shall have issued and delivered to the Optionee the shares
of Common Stock with respect to which the Option was exercised and
(iii) the Optionee's name shall have been entered as a stockholder
of record on the books of SafeCard. Thereupon, the Optionee shall
have full voting, dividend and other ownership rights with respect
to such shares of Common Stock.
5. Limitations on Exercise of Option.
----------------------------------
(a) Notwithstanding any other provision of this Agreement,
Option Shares shall not be issued, sold or delivered unless the
exercise of the Option and the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
(b) As a condition to the receipt of the Option Shares upon
exercise, SafeCard may require Optionee to make certain
representations and warranties as set forth in Section 14.6 of the
Plan.
6. Option Not Transferable Except in Event of Death.
-------------------------------------------------
During Optionee's lifetime, this Option shall be exercisable
only by Optionee or Optionee's guardian or legal representative,
and neither this Option nor any right hereunder shall be
transferable except by will or the laws of descent and
distribution.
7. Early Termination of Option Upon Termination of Employment.
-----------------------------------------------------------
(a) If Optionee's employment with SafeCard terminates prior
to the Termination Date for a reason other than death, Optionee
may, at any time within a period of thirty (30) days after the date
Optionee's employment with SafeCard was terminated, exercise the
Option to the extent (and only to the extent) the Option was
exercisable on the date that Optionee's employment with SafeCard
was terminated. Upon the expiration of such thirty (30) day
period, the Option shall, to the extent not previously exercised or
terminated, terminate and become null and void.
(b) If Optionee's employment with SafeCard terminates prior
to the Termination Date due solely to the death of Optionee,
Optionee's legal representative may, at any time within a period of
six (6) months after the date of Optionee's death, exercise the
Option to the extent (and only to the extent) the Option was
exercisable on the date of Optionee's death. Upon the expiration
of the foregoing six-month period, the Option shall, to the extent
not theretofore exercised or terminated, terminate and become null
and void.
(c) Notwithstanding anything contained in Sections 7(a) or
7(b), in no event may the Option be exercised after the Termination
Date.
8. Effect of Change in Control.
----------------------------
Notwithstanding anything in this Agreement to the contrary, in
the event of a Change in Control (as defined in the Plan), the
Option, to the extent not previously exercised or terminated on the
date of such Change in Control, shall become immediately and fully
exercisable.
9. Adjustment to Option Shares.
----------------------------
Option Shares shall be subject to adjustment in the event of
Change in Capitalization as set forth in Section 9 of the Plan, and
such adjustment as determined by the Committee will be final,
conclusive and binding on the Optionee.
10. Option Agreement Does Not Grant Employment Rights.
--------------------------------------------------
Neither the granting of this Option, nor the exercise thereof,
shall be construed as granting the Optionee any right with respect
to continuance of employment by SafeCard.
11. Miscellaneous.
--------------
(a) The captions and section headings used herein are for
convenience only, shall not be deemed part of this Agreement, and
shall not in any way restrict or modify the context and substance
of any section or paragraph hereof.
(b) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
(c) This Option is not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
(d) The Optionee understands that the Option Shares have not
been registered under the Securities Act of 1933 and must be held
indefinitely unless they are subsequently registered under such Act
or an exemption from such registration is available upon
disposition. SafeCard may, but shall not be required to, register
all or any part of the Option Shares. Optionee further acknowledges
that if, in the opinion of counsel to SafeCard, such a legend is or
may be required, certificates for shares issued pursuant to
exercise of this Option shall bear on their face the following
legend:
The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares
have been acquired for investment and may not be sold,
transferred, pledged or hypothecated in the absence of an
effective registration statement for the shares under the
Securities Act of 1933, as amended, unless in the opinion of
counsel to SafeCard such registration is not required.
Optionee further acknowledges that prior to registration as
provided above such a legend is required.
(e) This Agreement shall inure to the benefit of and be
binding upon SafeCard's successors and assigns. All obligations
imposed upon Optionee and all rights granted to Optionee under this
Agreement shall be binding upon Optionee's heirs, executors,
administrators, and successors.
(f) This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
(g) Should any provision of this Agreement be held by a court
of competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
(h) Notices. Any notice hereunder to SafeCard shall be
addressed to it as follows:
SafeCard Services, Inc.
7596 Centurion Parkway
Jacksonville, FL 32256
Attention: Corporate Secretary
and any notice hereunder to the Optionee shall be addressed as
follows:
[address]
subject to the right of either party to designate by written notice
to the other at any time hereafter some other address for this
purpose.
(i) The Committee shall administer and have the full
authority of SafeCard with respect to the Plan and this Option.
(j) Any dispute or disagreement which may arise under,
or as a result of, or it any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the Committee. Any determination made hereunder shall be final,
binding and conclusive of the Optionee and SafeCard for all
purposes.
IN WITNESS WHEREOF, the parties have executed this Option as
of the day and year first above written.
SAFECARD SERVICES, INCORPORATED
By __________________________
Paul G. Kahn
Chief Executive Officer
By __________________________
Optionee
Exhibit 10(ad)
October 25, 1994
Mr. Robert L. Dilenschneider
The Dilenschneider Group, Inc.
200 Park Avenue, 26th Floor
New York, NY 10166
Re: Engagement and Client Relationship Agreement
--------------------------------------------
Dear Bob:
We are pleased that The Dilenschneider Group, Inc. ("DGI") has
agreed to provide public relations and public affairs services to
SafeCard Services, Inc. (the "Company") in 1995 with respect to
various matters referred to DGI by the Company, including the
federal trademark registration of the name "Ideon" and the
reservation of the corporate name "Ideon" in Delaware, Wyoming and
New York as well as Florida and California. The Company expects
its outside consultants to provide high quality services in a cost
efficient manner. We wish to reach agreement with DGI in advance
as to the conditions and guidelines that will govern our
relationship.
The services provided by DGI to the Company will be in
accordance with the following terms and conditions:
A. Services. As public affairs and public relations
counsel, DGI will:
1. maintain an public relations database.
2. distribute mass mailings from time to time (with
Company approval).
3. distribute Company materials in response to
individual requests.
4. draft certain press releases.
5. assist in the development and implementation of
programs designed to effect and improve
understanding by the public and the employees of
the Company's objectives and achievements.
6. ensure as far as possible that the Company is kept
abreast of, and the interests of the Company and
its constituents are adequately represented before
federal and state governmental bodies in connection
with, pending legislation and regulations.
7. ensure as far as possible that the interests of the
Company are adequately represented in civic,
charitable and industry organizations on a federal,
state and local level.
8. develop and maintain a database of answers to
common questions asked by the media, shareholders
and others.
9. provide advice/counsel to the Company on public
affairs and public relations.
10. develop and help implement a plan for the Company
to meet its public affairs and public relations
objectives in its business plan.
11. handle media and other public relations inquiries.
B. Professional Fees. The Company will pay DGI a retainer
of $100,000 for services to be rendered in 1995, payable in
November 1994. We understand that you and Bob Stone will have
primary responsibility for the provision of DGI's services to
SafeCard. We are aware that during the course of DGI's engagement
it may be necessary or advisable, with our prior approval, to
delegate various portions of the Company matters to other DGI
employees.
C. Costs and Expenses. We are aware that from time to time
it may be necessary for DGI to incur certain costs or expenses
related to its representation of the Company. The Company will
reimburse DGI for costs or expenses actually incurred and
reasonably necessary for completing an assigned matter, as long as
the charges for costs and expenses are competitive with other
providers of the same products or services. Any expenditures over
$3,000 must be approved in advance by the Company. More
particularly, the Company will reimburse DGI in accordance with the
following guidelines:
1. Travel. We will reimburse DGI for expenses in
connection with out-of-town travel. Unless we approve a different
arrangement in advance, we expect to reimburse DGI for its staff's
coach class travel, on trips under four hours, and, where
necessary, for the reasonable cost of a rental car of a size
appropriate to the number of persons using it. All related travel
expenses, i.e., lodging and meals, must be reasonable under the
circumstances. We ask that DGI advance all such travel expenses
and submit bills for reimbursement.
2. Photocopying. We will reimburse DGI at a maximum of
ten cents ($0.10) per page for normal photocopying done solely for
the Company's benefit. Expedited photocopying or oversized
document photocopying will be reimbursed at a higher rate only with
the Company's prior approval. We expect that you will contract
with a photocopying service when the circumstances permit and such
photocopying service is expected to result in lower charges to the
Company.
3. Telephone. We will reimburse DGI for long distance
telephone calls made in connection with its representation of the
Company at the actual cost of such calls to DGI.
4. Postage/Courier. We will reimburse DGI for postage
at your actual cost and for the actual cost of overnight or by-hand
couriers only when such services are necessary or are requested by
the Company. We ask that DGI plan in advance so as to avoid
unnecessary use of overnight or by-hand couriers.
5. Facsimiles. We will reimburse DGI for the actual
cost of long distance facsimiles when such facsimile transmissions
are necessary or requested by the Company.
6. Other Expenses. We will reimburse DGI for such
other costs and expenses incurred by it on behalf of the Company
(for example, consulting fees and costs) if requested or agreed to
by the Company.
7. Prohibited Charges. We do not expect to bear the
costs for the following: (1) time spent to legal billing, budgets
or status reports; (2) secretarial, clerical or word processing
services, except overtime approved in advance by the Company; (3)
private limousine travel; (4) any special publications or outside
research unless we have approved the purchase of such item and
copies thereof are provided to us; and (5) legal education
seminars.
D. Billing. We ask that DGI bill the Company monthly in
arrears, for costs and expenses incurred during the previous month.
Reimbursable expenses included on each bill will be itemized and
categorized among the following: travel, meals, hotel,
telephone/facsimile service, photocopying, postage, and other (with
a description of the type of expense). DGI should maintain back-up
documentation for all expenses for the Company's review as may be
necessary. In the event that you forward invoices for certain
expenses to be paid directly by the Company, such invoices must be
accompanied by back-up documentation and a letter explaining the
purpose of the expense.
In addition, in order to allow us to efficiently coordinate
our efforts and properly monitor DGI's ongoing services, we ask
that, upon request, DGI work with us to create monthly plans
describing the services that it anticipate performing for us during
each upcoming month.
E. Involvement of the Company. We expect DGI to keep us
regularly informed of the progress of the matters for which the
firm was engaged and to discuss with us any significant potential
changes in strategy. DGI will keep us apprised of all material
developments in all Company matters and provide notice to us of
external reactions to Company events of which DGI becomes aware.
All press releases and multi-recipient mailings must be approved by
an officer designated by the Company.
F. Termination. DGI's appointment under this agreement is
to extend from January 1, 1995 to December 31, 1995 with an
automatic renewal after which it will continue indefinitely unless
either party gives 60 days' advance written notice of its desire to
terminate or modify the agreement. If terminating the
relationship, DGI will give the Company reasonable notice to permit
it to obtain alternative representation or services. In such
event, DGI will be expected to provide us reasonable assistance in
effecting a transfer of responsibilities to the new firm. If this
agreement is terminated prior to the end of 1995, DGI will refund
an amount equal to $8,333 multiplied by the number of full months
remaining on the contract.
G. Disputes. The laws of the State of Florida shall govern
the interpretation of this agreement. Florida shall be the proper
venue for any litigation arising out of this agreement.
H. Exclusivity. During 1995 and for a period of two (2)
years from the date of termination, DGI will not furnish public
affairs or public relations services to any other entity or person
engaged in business competitive with that of the Company.
The parties agree that in the event a court of competent
jurisdiction shall determine that this restrictive covenant is
unreasonable as to area or duration, the court shall determine and
order implemented a reasonable restrictive covenant as to area
and/or duration. This covenant on the part of DGI shall be
construed as an agreement independent of any other provision of
this agreement; and the existence of any claim or cause of action
of DGI against the Company, whether predicated on this agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company of this covenant.
In the event of a breach or threatened breach by DGI of its
obligations under this restrictive covenant, it acknowledges that
the Company will not have an adequate remedy at law and shall be
entitled to such equitable and injunctive relief as may be
available to restrain it from the violation of the provisions
hereof. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available for such breach
or threatened breach, including the recovery of damages from DGI.
I. Confidentiality. Under this agreement, DGI may have
access to, and may become familiar with, various trade secrets
within the meaning of the Uniform Trade Secrets Act. These trade
secrets are owned by the Company and are regularly used in the
operation of its business. All files, records, customer lists,
scripts, personnel, sales methods, procedures, concepts, programs,
response and renewal rates, products, services, operation methods
and analyses, correspondence and similar items, or copies thereof,
relating to the business of the Company, whether prepared by the
Company or otherwise coming into DGI's possession, shall not be
made available or conveyed to any third-party under any
circumstances whatsoever without the prior written consent of the
Company.
DGI agrees to forever keep secret and not disclose to others,
nor make personal use of, any information concerning the Company's
business, which may become known to it during the course of its
relationship with the Company, except as required in the course of
providing services to the Company.
It is understood that DGI cannot undertake to verify facts
supplied to it by SafeCard or factual matters included in material
prepared by DGI and approved by you. SafeCard agrees to indemnify
and hold harmless DGI from and against any and all losses, claims,
damages, expenses (including reasonable legal expenses) or
liabilities which DGI may incur (a) based upon information,
representations, reports, data or releases furnished or approved by
you or your representatives for use or release by DGI and/or (b)
resulting from disputes between DGI and third parties related to
and/or within the scope of this agreement except where attributable
to DGI's failure to use due care. You also agree to reimburse DGI
for time of staff and expenses (including legal expenses)
reasonably incurred by DGI in connection with any litigation
commenced or threatened against SafeCard (for example, in
responding to a document subpoena).
J. Intellectual Property. All material of whatsoever nature
conceived, created or prepared by DGI in the course of its
performance under this agreement shall be considered to be a work
made for hire. The Company shall be deemed to be the author of all
such material conceived, created or prepared by DGI for the Company
and the Company is entitled to the entire copyright rights and all
other proprietary rights in or relating to such material.
K. Attorney's Fees. In connection with any litigation
arising out of this agreement, the prevailing party shall be
entitled to recover all expenses incurred, including but not
limited to reasonable attorney's fees, in all jurisdictions and at
all levels, including appeals.
L. Assignment. Neither party may assign any or all of its
rights and duties under this agreement without the prior written
consent of the other party.
M. No Waiver. The failure of either party to require
performance by the other party of any provision hereof shall in no
way affect the full right to require such performance at any time
thereafter nor shall the waiver by either party of a breach of any
provision hereof be taken or held to be a waiver of any succeeding
breach of such provision or as a waiver of the provision itself.
N. Entire Agreement. This agreement is the entire agreement
between the parties and supersedes all prior agreements and
understandings between the parties relating to the subject matter
herein. This agreement may not be modified or amended except by a
writing signed by the party against whom enforcement is sought.
The terms of this agreement are superior to and shall supersede any
terms contained in any invoice, bill, statement or request
submitted by DGI.
Please review the terms of this agreement carefully, and if
you have any questions concerning the foregoing conditions, do not
hesitate to contact me. If this agreement is acceptable to you,
please acknowledge that you have reviewed it, understand it, and
desire to represent the Company on the basis of the terms of this
agreement by signing and delivering to me the enclosed copy. We
recommend that you keep a copy of this agreement in your files.
Very truly yours,
SAFECARD SERVICES, INCORPORATED
By: PAUL G. KAHN
------------------------------------
Paul G. Kahn
Chairman and Chief Executive Officer
THE ABOVE AGREEMENT IS ACCEPTED AND AGREED TO
THE DILENSCHNEIDER GROUP, INC
By: ROBERT L. DILENSCHNEIDER
--------------------------------
Robert L. Dilenschneider
Date:
-------------------------
Exhibit 10(ae)
December 14, 1994
Robert L. Dilenschneider
Dilenschneider Group, Inc.
200 Park Avenue
26th Floor
New York, New York 10166
Re: Petros and Poolside Engagement Agreement
----------------------------------------
Dear Bob:
Reference is made to the engagement and client relationship
letter agreement dated October 25, 1994 between The Dilenschneider
Group, Inc. ("DGI") and SafeCard Services, Inc. (the "Company"),
under which DGI will provide corporate public relations and public
affairs services to the Company in 1995.
DGI has also presented the Company with proposals to provide,
and has provided, market communications and promotion/publicity
services in connection with the market introduction of three new
businesses developed by the Company:
(1) a business code-named "Petros" that will market
reproductions of the worlds great museum collections
commencing with the museums of the Vatican art
collection, for which DGI will provide specific services
to be agreed to by the parties within ten days of this
letter (the "Petros Services");
(2) a business code-named "Poolside" that will be engaged in
the registration and protection of children, for which
DGI will provide specific services to be agreed to by the
parties within ten days of this letter (the "Poolside
Services"); and
(3) a business in connection with the PGA for which DGI will
provide no further services or assistance.
The Company accepts proposals for both Petros and Poolside,
and in consideration of DGI's agreement herein and the services to
be performed by DGI hereunder agrees to immediately pay DGI
$180,000.00 to be applied by DGI to work and expenses that have
already been performed or incurred on those projects. To the
extent that work and expenses performed or incurred to date on
these projects is less than $180,000.00, DGI will apply the
remainder toward future services and expenses. Within 10 days DGI
shall render to the Company a statement in accordance with the next
paragraph of this letter setting forth the services performed on
Petros and Poolside to the date of this letter.
Any additional amounts due DGI for future Petros Services or
Poolside Services shall be billed by DGI in accordance with the
next paragraph of this letter based on the hourly rates of DGI
staff members as set forth on Schedule A; expenses incurred by DGI
shall be billed and paid for under the terms and conditions of the
October 1994 Engagement Letter.
All statements for DGI's services should include a summary of
the kinds of services rendered during the relevant period
accompanied by a detailed statement in computerized or equivalent
form describing the services performed, the time expended each day
by each person, the hourly rates charged therefor, total number of
hours worked by each person and total dollar amounts charged by
each person.
Please review the terms of this agreement carefully and if you
have any questions concerning the foregoing conditions do not
hesitate to contact me. If this agreement is acceptable please
acknowledge that you have reviewed it, understand it, and desire to
represent the Company on the basis of the terms of this agreement
by signing and delivering to me the enclosed copy. We recommend
that you keep a copy of this agreement in your files.
Very truly yours,
SAFECARD SERVICES, INC.
By: PAUL G. KAHN
---------------------------
Paul G. Kahn
THE ABOVE AGREEMENT IS ACCEPTED AND AGREED TO
THE DILENSCHNEIDER GROUP, INC.
By: ROBERT L. DILENSCHNEIDER
-------------------------------
Robert L. Dilenschneider<PAGE>
Schedule A - DGI Discounted Hourly Rates
Senior Management Time $240.00 Per Hour
Principal Time $164.00 Per Hour
Account Staff/Consultants $ 60.00-100.00 Per Hour
EXHIBIT 11
Exhibit 11(a) - Computation of Primary Earnings Per Share
Years Ended October 31, 1994 1993 1992
Net Earnings $20,021,000 $31,477,000 $22,498,000
Average common shares
outstanding 26,197,000 25,499,000 26,498,000
Assumed equivalent shares
from stock options
converted to common
shares (1) 2,214,000 3,073,000 3,660,000
Total weighted average number
of common and common
equivalent shares 28,411,000 28,572,000 30,158,000
Earnings per share $ .70 $ 1.10 $ .75
(1) Earnings per share are computed using the weighted average
number of shares of common stock and common stock equivalents
(common stock issuable upon exercise of stock options) outstanding.
In computing earnings per share, the Company utilizes the treasury
stock method. This method assumes that stock options, under
certain conditions, are exercised and treasury shares are assumed
to be purchased (not to exceed 20% of the common stock outstanding)
from the proceeds using the average market price of the Company's
common stock for the period. Any excess proceeds not utilized for
the purchase of treasury shares are assumed first to reduce any
outstanding capitalized lease obligation, if any, and any
remainder invested in interest-bearing securities with net earnings
increased for the hypothetical interest savings or interest
income, net of income taxes. Due to the hypothetical interest
savings or interest income, net earnings divided by the weighted
average number of common and common equivalent shares will not
always equal earnings per share.
Exhibit 11(b) - Computation of Fully Diluted Earnings Per Share
Years Ended October 31, 1994 1993 1992
Net Earnings $21,021,000 $31,477,000 $22,498,000
Adjustment (1) 59,000
Adjusted net
earnings $21,021,000 $31,477,000 $22,557,000
Average common shares
outstanding 26,197,000 25,499,000 26,498,000
Assumed equivalent
shares from stock
options converted
to common
shares (1) 2,214,000 3,378,000 3,660,000
Total weighted average
number of common
and common equivalent
shares 28,411,000(3) 28,877,000 30,158,000
Earnings per share (2) $ .70(3) $ 1.09 $ .75
(1) Earnings per share are computed consistent with (1) on Exhibit
11(a) - Computation of Primary Earnings Per Share except in
computing fully diluted earnings per share, the treasury stock
method uses the market price of the Company's common stock at the
close of the period rather than the average market price during
the period.
(2) This calculation is submitted in accordance with Regulation S-
K item 601(b)(11) although not required by Footnote 2 to paragraph
14 of APB Opinion No. 15 because it results in dilution of less
than 3%.
(3) The weighted average number of common and common equivalent
shares and earnings per share on this exhibit are equal to the
respective amounts on Exhibit 11(a) - Computation of Primary
Earnings Per Share since the year-end market value of the
Company's stock was lower than the average market value used in
applying the treasury stock method in the computation of primary
earnings per share.
Exhibit 22
Subsidiaries of the Registrant
Wright Express Corporation
SafeCard Services Insurance Company
SafeCard Travel Services, Incorporated
SafeCard Marketing, Incorporated
All other subsidiaries are inactive and insignificant.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on
Forms S-3 and S-8 (Nos. 33-39023, 33-48317, 33-51439, 33-55581,
33-55585 and 33-57071) of SafeCard Services, Inc. of our report
dated December 5, 1994 appearing on page 25 of this Form 10-K.
PRICE WATERHOUSE LLP
Denver, Colorado
January 17, 1995
Exhibit 24
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director
or Officer of SafeCard Services, Incorporated (the "Company")
hereby constitutes and appoints, Paul G. Kahn, G. Thomas Frankland
and Francis J. Marino and each or any of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign
that certain Annual Report on Form 10-K for the Company's fiscal
year ended October 31, 1994 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
11th day of January, 1995.
ROBERT L. DILENSCHNEIDER
--------------------------
Robert L. Dilenschneider
(SEAL)
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director
or Officer of SafeCard Services, Incorporated (the "Company")
hereby constitutes and appoints, Paul G. Kahn, G. Thomas Frankland
and Francis J. Marino and each or any of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign
that certain Annual Report on Form 10-K for the Company's fiscal
year ended October 31, 1994 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
11th day of January, 1995.
THOMAS F. PETWAY, III
------------------------
Thomas F. Petway, III
(SEAL)
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director
or Officer of SafeCard Services, Incorporated (the "Company")
hereby constitutes and appoints, Paul G. Kahn, G. Thomas Frankland
and Francis J. Marino and each or any of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign
that certain Annual Report on Form 10-K for the Company's fiscal
year ended October 31, 1994 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
11th day of January, 1995.
EUGENE MILLER
-------------------
Eugene Miller
(SEAL)
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director
or Officer of SafeCard Services, Incorporated (the "Company")
hereby constitutes and appoints, Paul G. Kahn, G. Thomas Frankland
and Francis J. Marino and each or any of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign
that certain Annual Report on Form 10-K for the Company's fiscal
year ended October 31, 1994 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
11th day of January, 1995.
MARSHALL L. BURMAN
---------------------
Marshall L. Burman
(SEAL)
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director
or Officer of SafeCard Services, Incorporated (the "Company")
hereby constitutes and appoints, Paul G. Kahn, G. Thomas Frankland
and Francis J. Marino and each or any of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign
that certain Annual Report on Form 10-K for the Company's fiscal
year ended October 31, 1994 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
12th day of January, 1995.
WILLIAM T. BACON, JR.
-------------------------
William T. Bacon, Jr.
(SEAL)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 17,921,000
<SECURITIES> 166,612,000
<RECEIVABLES> 44,044,000
<ALLOWANCES> (1,595,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,127,000
<DEPRECIATION> (2,717,000)
<TOTAL-ASSETS> 471,833,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 349,000
0
0
<OTHER-SE> 217,243,000
<TOTAL-LIABILITY-AND-EQUITY> 471,833,000
<SALES> 173,434,000
<TOTAL-REVENUES> 189,086,000
<CGS> 105,981,000
<TOTAL-COSTS> 164,887,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,199,000
<INCOME-TAX> 6,178,000
<INCOME-CONTINUING> 18,021,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,000,000
<NET-INCOME> 20,021,000
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
</TABLE>
