þ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Minnesota | 41-0216800 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
3680 Victoria St. N., Shoreview, Minnesota | 55126-2966 | |
(Address of principal executive offices) | (Zip Code) |
Common Stock, par value $1.00 per share | New York Stock Exchange | |
(Title of each class) | (Name of each exchange on which registered) |
Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
1. | Portions of our definitive proxy statement to be filed within 120 days after our fiscal year-end are incorporated by reference in Part III. |
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3
| Acquire new customers by leveraging customer referrals that we receive from our financial institution clients and from other marketing initiatives such as e-commerce and direct mail; | |
| Increase our share of the amount small businesses spend on the products and services in our portfolio; | |
| Expand in higher growth areas such as full color, web-to-print, imaging and business services, including payroll, fraud protection, web hosting and other web services, business networking and logo design; and | |
| Continue to optimize our cost and expense structure. |
4
| Continue to maintain core check revenue streams and acquire new clients; | ||
| Provide services and products that differentiate us from the competition and make us a more relevant business partner to our financial institution clients by helping them grow core deposits; and | ||
| Continue to simplify our business model and optimize our cost and expense structure. |
5
| Deluxe ID TheftBlock® a set of fraud monitoring and recovery services that provides assistance to consumers in detecting and recovering from identity theft. | ||
| Welcome Home SM Tool Kit a start-to-finish package for financial institution branch offices that captures best practices for securing lasting loyalty among customers by focusing on the first 90 days of the relationship. | ||
| Deluxe Calling SM an outbound calling program aimed at helping financial institutions generate new organic revenue growth and reduce attrition. |
| Optimize cash flow; | ||
| Maximize the lifetime value of customers by selling new features, accessories and products; and | ||
| Continue to lower our cost and expense structure. |
6
2008 | 2007 (1) | 2006 (1) | ||||||||||
Checks
|
65.4 | % | 65.8 | % | 64.3 | % | ||||||
Other printed products, including forms
|
22.5 | % | 23.6 | % | 22.6 | % | ||||||
Accessories and promotional products
|
7.4 | % | 7.4 | % | 7.6 | % | ||||||
Packaging supplies, services and other
|
4.7 | % | 3.2 | % | 5.5 | % | ||||||
|
||||||||||||
Total revenue
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
|
(1) | During the fourth quarter of 2008, our Russell & Miller retail packaging and signage business met the criteria to be classified as discontinued operations in our consolidated financial statements. As such, our results for prior years reflect the reclassification of the results of this business to discontinued operations. |
7
8
| Financial institutions seek to maintain the profits they have historically generated from their check programs, despite the decline in check usage. This has put significant pricing pressure on check printers in the past several years. | ||
| Turmoil in the financial services industry, including bank failures and consolidations, has negatively impacted order volumes. | ||
| When financial institutions consolidate through mergers and acquisitions, often the newly combined entity seeks to reduce costs by leveraging economies of scale in purchasing, including its check supply contracts. This results in check providers competing intensely on price in order to retain not only their previous business with one of the financial institutions, but also to gain the business of the other party in the merger/acquisition. | ||
| Financial institution mergers and acquisitions can also impact the duration of our contracts. Normally, the length of our contracts with financial institutions range from three to five years. However, contracts are sometimes renegotiated or bought out mid-term due to a consolidation of financial institutions. | ||
| Banks, especially larger ones, may request pre-paid product discounts made in the form of cash incentives payable at the beginning of a contract. These contract acquisition payments negatively impact check producers cash flows in the short-term. | ||
| In most situations, contracts require a contract termination payment if a financial institution cancels its contract. |
9
10
Executive | ||||||||||
Name | Age | Present Position | Officer Since | |||||||
Anthony Scarfone
|
47 | Senior Vice President, General Counsel and Secretary | 2000 | |||||||
Terry Peterson
|
44 | Vice President, Investor Relations and Chief Accounting Officer | 2005 | |||||||
Richard Greene
|
44 | Senior Vice President, Chief Financial Officer | 2006 | |||||||
Lynn Koldenhoven
|
42 | Vice President, Sales and Marketing Direct-to-Consumer | 2006 | |||||||
Lee Schram
|
47 | Chief Executive Officer | 2006 | |||||||
Pete Godich
|
44 | Vice President, Fulfillment | 2008 | |||||||
Julie Loosbrock
|
49 | Senior Vice President, Human Resources | 2008 | |||||||
Malcolm McRoberts
|
44 | Senior Vice President, Chief Information Officer | 2008 | |||||||
Tom Morefield
|
46 | Senior Vice President, Financial Services Segment Leader | 2008 | |||||||
Laura Radewald
|
48 | Vice President, Brand, Experience and Media Relations | 2008 |
11
12
| The rate of small business formations, small business confidence, consumer spending and employment levels, as well as energy costs, all have an impact on our businesses. Below average small business optimism and a decline in small business formations negatively impacted our results of operations in Small Business Services in 2008, and we expect this trend to continue, and possibly worsen, through 2009. Consumer spending and employment levels also trended negatively during 2008, resulting in some negative impact in our personal check businesses. A prolonged downturn in general economic conditions could result in additional declines in our revenue and profitability. | ||
| The failure of one or more of our larger financial institution clients, or large portions of our customer base, could adversely affect our operating results. In addition to the possibility of losing a significant contract, the inability to recover contract acquisition costs paid to one or more of our larger financial institution clients, or the inability to collect accounts receivable or contractually required contract termination payments from these financial institution clients, could have a significant negative impact on our consolidated results of operations. | ||
| There may be an increase in financial institution mergers and acquisitions during this period of economic uncertainty. Such an increase could adversely affect our operating results. Often the newly combined entity seeks to reduce costs by leveraging economies of scale in purchasing, including its check supply contracts. This results in check providers competing intensely on price in order to retain not only their previous business with one of the financial institutions, but also to gain the business of the other party in the merger/acquisition. Financial institution mergers and acquisitions can also impact the duration of our contracts. Normally, the length of our contracts with financial institutions ranges from three to five years. However, contracts are sometimes renegotiated or bought out mid-term due to a consolidation of financial institutions. | ||
| The effects of the recent economic downturn on our expected operating results and the broader U.S. market resulted in a significant reduction in our share price and led to asset impairment charges in 2008 related to trade names in our Small Business Services segment. Both before and after December 31, 2008, our common stock traded at prices lower than the December 31, 2008 closing stock price of $14.96. If such a decline in our stock price occurs in the future for a sustained period, it may be indicative of a further decline in our fair value and would likely require us to record an impairment charge for a portion of the $40.2 million of goodwill allocated to one of our reporting units. Accordingly, we believe that a non-cash goodwill impairment charge related to this reporting unit and/or further impairment charges related to our indefinite-lived trade name are reasonably possible in the future. This reporting unit had a calculated fair value which exceeded its carrying value by $2.7 million as of December 31, 2008 and our indefinite-lived trade name had a carrying value of $24.0 million as of December 31, 2008. The credit agreement governing our committed line of credit requires us to maintain a ratio of earnings before interest and taxes to interest expense of 3.0 times, as measured quarterly on an aggregate basis for the preceding four quarters. Significant impairment charges in the future could impact our ability to comply with this debt covenant, in which case, our lenders could demand immediate repayment of amounts outstanding under our line of credit. Although we would have remained in compliance with this debt covenant even if our reported pre-tax earnings for 2008 had been $52 million lower than we reported, we cannot provide definitive assurance regarding our continued compliance with this debt covenant. |
13
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18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
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76
77
78
79
80
81
82
83
84
85
86
87
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90
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93
94
95
Stock price
Dividend
High
Low
Close
$
0.25
$
15.70
$
7.52
$
14.96
0.25
19.59
12.01
14.39
0.25
24.51
17.66
17.82
0.25
33.20
18.72
19.21
$
0.25
$
40.86
$
28.93
$
32.89
0.25
42.49
28.56
36.84
0.25
44.95
33.38
40.61
0.25
33.95
25.13
33.53
Assumes Initial Investment of $100*
December 2008
*
The graph assumes that $100 was invested on December 31, 2003 in each of Deluxe common stock, the
S&P 400 MidCap Index and the DJUSIS Index, and that all dividends were reinvested.
(dollars and orders in thousands, except per share and per
order amounts)
2008
2007
2006
2005
2004
$
1,468,662
$
1,588,885
$
1,619,337
$
1,694,246
$
1,555,916
61.4
%
63.8
%
62.9
%
64.9
%
66.0
%
45.7
%
46.8
%
47.6
%
47.0
%
43.4
%
14.2
%
17.0
%
12.3
%
18.0
%
22.3
%
$
209,234
$
269,904
$
198,544
$
304,328
$
347,492
105,872
145,117
100,838
157,943
198,985
2.08
2.82
1.98
3.12
3.97
2.05
2.79
1.96
3.10
3.94
1.00
1.00
1.30
1.60
1.48
$
15,590
$
21,615
$
11,599
$
6,867
$
15,492
8.4
%
11.6
%
7.5
%
10.8
%
19.2
%
$
1,218,985
$
1,210,755
$
1,267,132
$
1,425,875
$
1,499,079
775,336
776,840
903,121
954,164
980,207
853,336
844,040
1,015,781
1,166,510
1,244,207
$
198,487
$
245,075
$
238,895
$
178,591
$
308,148
(135,773
)
(10,929
)
(32,884
)
(55,834
)
(670,805
)
(67,681
)
(224,890
)
(204,587
)
(147,816
)
369,963
(31,865
)
(32,286
)
(41,012
)
(55,570
)
(43,785
)
(104,879
)
(2,316
)
(16,521
)
(2,888
)
(624,859
)
(21,847
)
(11,288
)
(26,637
)
62,823
64,753
64,670
65,070
76,213
$
23.38
$
24.54
$
25.04
$
26.04
$
20.42
7,172
7,910
8,728
8,617
8,852
21
22
23
20
19
14
14
17
18
18
(1)
Our results of operations were impacted by the acquisition of New England Business
Service, Inc. (NEBS) on June 25, 2004. NEBS contributed revenue of $671.2 million in 2005 and
$363.2 million in 2004. We are not able to quantify NEBS revenue for 2006 through 2008 or its
contribution to operating income because of its integration with our other businesses.
(2)
Long-term obligations include both the current and long-term portions of our
long-term debt obligations, including capital leases.
(3)
Orders is our company-wide measure of volume. When portions of a customer order are
on back-order, one customer order may be fulfilled via multiple shipments. Generally, an order is
counted when the last item ordered is shipped to the customer. Orders and revenue per order in 2008
were impacted by the acquisition of Hostopia.com Inc. (Hostopia) in August 2008 because each
monthly customer billing for service fees is considered to be an order. Hostopia orders in 2008,
post-acquisition, were 1,500 and revenue per order was $8.36.
Various management initiatives to reduce our cost structure, primarily within sales and
marketing, information technology and manufacturing;
A significant reduction in employee-related costs, primarily
performance-based employee compensation; and
Higher revenue per order in Direct Checks, primarily from price increases and increased
sales of fraud protection services.
Lower volume driven by unfavorable economic conditions, primarily affecting Small Business
Services, and the continuing decline in check usage and advertising response rates, as well
as non-recurring financial institution conversion activity in 2007;
Restructuring charges and related costs in 2008 resulting from our cost reduction
initiatives;
Impairment charges in 2008 related to Small Business Services trade names and discontinued
operations;
Increased manufacturing costs, including higher delivery-related costs due to mid-2007 and
2008 postal rate increases and fuel surcharges in 2008, as well as higher materials costs due
to an unfavorable product mix; and
Lower revenue per order in Financial Services, despite a price increase in October 2008,
due to this segments competitive pricing environment.
Acquire new customers by leveraging customer referrals that we receive from our financial
institution clients and from other marketing initiatives such as e-commerce and direct mail;
Increase our share of the amount small businesses spend on the products and services in
our portfolio;
Expand in higher growth areas such as full color, web-to-print, imaging and business
services, including payroll, fraud protection, web hosting and other web services, business
networking and logo design; and
Continue to optimize our cost and expense structure.
Continue to maintain core check revenue streams and acquire new clients;
Provide services and products that differentiate us from the competition and make us a
more relevant business partner to our financial institution clients by helping them grow core
deposits; and
Continue to simplify our business model and optimize our cost and expense structure.
Deluxe ID TheftBlock® a set of fraud monitoring and recovery services that provides
assistance to consumers in detecting and recovering from identity theft.
Welcome
Home
SM
Tool Kit a start-to-finish package for financial
institution branch offices that captures best practices for securing lasting loyalty among
customers by focusing on the first 90 days of the relationship.
Deluxe Calling
SM
an outbound calling program aimed at helping financial
institutions generate new organic revenue growth and reduce attrition.
Optimize cash flow;
Maximize the lifetime value of customers by selling new features, accessories and
products; and
Continue to lower our cost and expense structure.
We could lose a significant contract, which would have a negative impact on our
results of operations.
We may be unable to recover the value of any related unamortized contract acquisition cost
and/or accounts receivable. Contract acquisition costs, which are treated as pre-paid product
discounts, are sometimes utilized in our Financial Services segment when signing or renewing
contracts with our financial institution clients and totaled $37.7 million as of December 31,
2008. These amounts are recorded as non-current assets upon contract execution and are
amortized, generally on the straight-line basis, as reductions of revenue over the related
contract term. In most situations, the contract requires a financial institution to reimburse
us for the unamortized contract acquisition cost if it terminates its contract with us prior
to the end of the contract term. Our contract acquisition costs are comprised of amounts paid
to individual financial institutions, many of which are smaller and would not have a
significant impact on our consolidated financial statements if they were deemed
unrecoverable. However, the inability to recover amounts paid to one or more of our larger
financial institution clients could have a significant negative impact on our consolidated
results of operations.
If one or more of our financial institution clients is taken over by a financial
institution that is not one of our clients, we could lose significant business. In the case
of a cancelled contract, we may be entitled to collect a contract termination payment.
However, if a financial institution fails, we may be unable to collect that termination
payment. We have no indication at this time that any significant contract terminations are
expected.
If one or more of our larger clients were to consolidate with a financial institution that
is not one of our clients, our results of operations could be positively impacted if we
retain the client, as well as obtain the additional business from the other party in the
consolidation.
If two of our financial institution clients consolidate, the increase in general
negotiating leverage possessed by the consolidated entities sometimes results in new
contracts which are not as favorable to us as those historically negotiated with the clients
individually.
We could generate non-recurring conversion revenue. Conversions are driven by the need to
replace obsolete checks after one financial institution merges with or acquires another.
However, we presently do not have specific information that indicates that we should expect
to generate significant income from conversions.
Change
2008 vs.
2007 vs.
(in thousands, except per order amounts)
2008
2007
2006
2007
2006
$
1,468,662
$
1,588,885
$
1,619,337
(7.6
%)
(1.9
%)
62,823
64,753
64,670
(3.0
%)
0.1
%
$
23.38
$
24.54
$
25.04
(4.7
%)
(2.0
%)
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
902,149
$
1,014,281
$
1,019,357
(11.1
%)
(0.5
%)
61.4
%
63.8
%
62.9
%
(2.4
) pt.
0.9
pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
670,991
$
743,449
$
770,218
(9.7
%)
(3.5
%)
45.7
%
46.8
%
47.6
%
(1.1
) pt.
(0.8
) pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
13,400
$
4,701
$
10,479
$
8,699
$
(5,778
)
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
9,942
$
$
44,698
$
9,942
$
(44,698
)
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
1,418
$
3,773
$
4,582
$
(2,355
)
$
(809
)
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
50,421
$
55,294
$
56,661
(8.8
%)
(2.4
%)
859,833
994,597
1,103,082
(13.5
%)
(9.8
%)
5.42
%
5.02
%
4.59
%
0.40 pt.
0.43 pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
1,363
$
5,405
$
905
$
(4,042
)
$
4,500
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
54,304
$
74,898
$
41,950
(27.5
%)
78.5
%
33.9
%
34.0
%
29.4
%
(0.1) pt.
4.6 pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
851,060
$
921,657
$
949,492
(7.7
%)
(2.9
%)
90,078
132,821
87,009
(32.2
%)
52.7
%
10.6
%
14.4
%
9.2
%
(3.8) pt.
5.2 pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
430,018
$
457,292
$
458,118
(6.0
%)
(0.2
%)
65,540
74,305
46,613
(11.8
%)
59.4
%
15.2
%
16.2
%
10.2
%
(1.0) pt.
6.0 pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
187,584
$
209,936
$
211,727
(10.6
%)
(0.8
%)
53,616
62,778
64,922
(14.6
%)
(3.3
%)
28.6
%
29.9
%
30.7
%
(1.3
) pt.
(0.8
) pt.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
198,487
$
245,075
$
238,895
$
(46,588
)
$
6,180
(135,773
)
(10,929
)
(32,884
)
(124,844
)
21,955
(67,681
)
(224,890
)
(204,587
)
157,209
(20,303
)
(2,053
)
1,161
158
(3,214
)
1,003
(7,020
)
10,417
1,582
(17,437
)
8,835
995
(401
)
179
1,396
(580
)
2,971
(2,971
)
$
(6,025
)
$
10,016
$
4,732
$
(16,041
)
$
5,284
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
59,997
$
89,944
$
74,891
$
(29,947
)
$
15,053
50,441
57,077
57,035
(6,636
)
42
36,100
34,100
4,500
2,000
29,600
35,126
15,720
12,000
19,406
3,720
9,008
14,230
17,029
(5,222
)
(2,799
)
8,645
9,606
5,092
(961
)
4,514
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
10,800
$
$
$
10,800
$
1,057,460
(1,057,460
)
1,057,460
196,239
(196,239
)
196,239
4,181
19,214
9,247
(15,033
)
9,967
2,801
15,923
8,936
(13,122
)
6,987
15,513
(15,513
)
2,971
(2,971
)
(1)
During 2007, we purchased short-term marketable securities using the proceeds from
the $200.0 million debt we issued in May 2007, as well as using cash generated from operating
activities. On October 1, 2007, we sold our remaining marketable securities to repay a debt
maturity.
Change
2008 vs.
2007 vs.
(in thousands)
2008
2007
2006
2007
2006
$
$
1,057,460
$
$
(1,057,460
)
$
1,057,460
104,879
2,316
16,521
102,563
(14,205
)
51,422
52,048
66,973
(626
)
(14,925
)
45,460
99,686
(45,460
)
(54,226
)
31,865
32,286
41,012
(421
)
(8,726
)
21,847
11,288
10,559
11,288
1,755
326,582
51,362
(324,827
)
275,220
(1)
During 2007, we purchased short-term marketable securities using the proceeds from
the $200.0 million debt we issued in May 2007, as well as using cash generated from operating
activities. On October 1, 2007, we sold our remaining marketable securities to repay a debt
maturity.
December 31,
(in thousands)
2008
2007
Change
$
78,000
$
67,200
$
10,800
1,440
1,754
(314
)
773,896
775,086
(1,190
)
853,336
844,040
9,296
53,066
41,107
11,959
$
906,402
$
885,147
$
21,255
December 31,
2008
2007
Weighted-
Weighted-
average
average
interest
interest
(in thousands)
Amount
rate
Amount
rate
Change
$
773,896
5.7
%
$
773,646
5.7
%
$
250
78,000
0.9
%
67,200
5.6
%
10,800
1,440
10.4
%
3,194
10.4
%
(1,754
)
$
853,336
5.2
%
$
844,040
5.7
%
$
9,296
Total
Expiration
Commitment
(in thousands)
available
date
fee
$
275,000
July 2010
.175
%
225,000
July 2009
.225
%
500,000
(78,000
)
(10,835
)
$
411,165
(in thousands)
2008
2007
2006
$
55,516
$
71,721
$
93,664
8,808
11,984
14,633
(26,618
)
(28,189
)
(36,576
)
$
37,706
$
55,516
$
71,721
2010 and
2012 and
2014 and
(in thousands)
Total
2009
2011
2013
thereafter
$
1,010,505
$
43,844
$
87,688
$
372,063
$
506,910
78,000
78,000
1,503
1,503
19,395
9,119
9,317
959
105,893
43,399
45,955
16,539
48,816
35,065
6,959
1,954
4,838
$
1,264,112
$
210,930
$
149,919
$
391,515
$
511,748
Benefit payments for postretirement benefit plans We have contributed funds to these
plans for the purpose of funding our obligations. Thus, we have the option of paying benefits
from the assets of the plans or from the general funds of the company. Additionally, we
expect the plan assets to earn income over time. As such, we cannot predict when or if
payments from the general funds of the company will be required. As of December 31, 2008, our
postretirement benefit plans were underfunded by a total of $64.5 million.
Payments for uncertain tax positions Due to the nature of the underlying liabilities
and the extended time often needed to resolve income tax uncertainties, we cannot make
reliable estimates of the amount or timing of cash payments that may be required to settle
these liabilities. Our liability for uncertain tax positions, including accrued interest and
penalties, was $15.5 million as of December 31, 2008, excluding the tax benefits of
deductible interest.
A portion of the amount due under our deferred compensation plan Under this plan, some
employees may begin receiving payments upon the termination of employment or disability, and
we cannot predict when these events will occur. As such, $1.3 million of our deferred
compensation liability as of December 31, 2008 is excluded from the obligations shown in the
table above.
Insured environmental remediation costs As of December 31, 2008, $8.0 million of the
costs included in our environmental accruals are covered by an environmental insurance policy
which we purchased in 2002. The insurance policy does not cover properties acquired
subsequent to 2002. The insurance policy covers pre-existing conditions from third-party
claims and cost overruns through 2032 at certain owned, leased and divested sites, as well as
any new conditions discovered at certain owned or leased sites through 2012. As a result, we
expect to receive reimbursements from the insurance company for environmental remediation
costs we incur for these insured sites. The related receivables from the insurance company
are reflected in other current assets and other non-current assets in our consolidated
balance sheets based on the amounts of our environmental accruals for insured sites.
Payments to our defined contribution pension and 401(k) plans The amounts payable under
our defined contribution pension and 401(k) plans are dependent on the number of employees
providing services throughout the year, their wage rates and in the case of the 401(k) plans,
whether employees elect to participate in the plans.
Profit sharing and cash bonus payments Amounts payable under our profit sharing and
cash bonus plans are dependent on our operating performance.
Income tax payments which will be remitted on our earnings.
(in thousands)
2008
2007
$
51,004
$
9,148
20,733
23,938
19,161
21,242
13,007
19,105
24,157
23,299
$
128,062
$
96,732
Weighted-
average
Carrying
interest
(in thousands)
amount
Fair value
(1)
rate
$
299,250
$
173,250
5.00
%
274,646
96,250
5.13
%
200,000
106,000
7.38
%
78,000
78,000
0.91
%
1,440
1,440
10.41
%
$
853,336
$
454,940
5.23
%
(1)
Based on quoted market rates as of December 31, 2008, except for our capital lease
obligation which is shown at carrying value.
Minneapolis, Minnesota
February 18, 2009
Year Ended December 31,
2008
2007
2006
$
1,468,662
$
1,588,885
$
1,619,337
14,867
(368
)
1,942
551,646
574,972
598,038
566,513
574,604
599,980
902,149
1,014,281
1,019,357
670,991
743,449
770,218
13,400
4,701
10,479
9,942
44,698
(1,418
)
(3,773
)
(4,582
)
209,234
269,904
198,544
(50,421
)
(55,294
)
(56,661
)
1,363
5,405
905
160,176
220,015
142,788
54,304
74,898
41,950
105,872
145,117
100,838
(4,238
)
(1,602
)
116
$
101,634
$
143,515
$
100,954
$
2.08
$
2.82
$
1.98
(0.08
)
(0.03
)
2.00
2.79
1.98
$
2.05
$
2.79
$
1.96
(0.08
)
(0.03
)
1.97
2.76
1.96
$
1.00
$
1.00
$
1.30
Year Ended December 31,
2008
2007
2006
$
101,634
$
143,515
$
100,954
1,383
2,281
2,559
(269
)
(25,540
)
(6,094
)
(2,447
)
(2,468
)
5,943
6,156
(5,247
)
3,263
255
268
(89
)
(25,908
)
3,138
2,724
$
75,726
$
146,653
$
103,678
$
(837
)
$
(1,356
)
$
(1,493
)
151
15,757
3,659
1,512
1,491
(3,666
)
(3,708
)
(191
)
63
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)
(in thousands)
Retained
Accumulated
Common shares
Additional
earnings
other
Total
Number
Par
paid-in
(accumulated
comprehensive
shareholders
of shares
value
capital
deficit)
loss
equity (deficit
)
50,735
$
50,735
$
37,864
$
(159,401
)
$
(11,224
)
$
(82,026
)
100,954
100,954
(66,973
)
(66,973
)
810
810
8,126
8,936
728
728
(1,919
)
(1,919
)
(31
)
(31
)
(724
)
(755
)
5
5
6,026
6,031
(269
)
(269
)
(33,373
)
(33,373
)
2,559
2,559
255
255
179
179
51,519
51,519
50,101
(125,420
)
(41,873
)
(65,673
)
143,515
143,515
(52,048
)
(52,048
)
767
767
15,971
16,738
297
297
(359
)
(359
)
(10,929
)
(11,288
)
(40
)
(40
)
(1,354
)
(1,394
)
11,710
11,710
(745
)
(69
)
(814
)
(3,074
)
(3,074
)
242
(242
)
(2,406
)
(2,406
)
2,281
2,281
3,263
3,263
51,887
51,887
65,796
(37,530
)
(39,046
)
41,107
101,634
101,634
(51,422
)
(51,422
)
380
380
2,542
2,922
(2,468
)
(2,468
)
(1,054
)
(1,054
)
(20,793
)
(21,847
)
(82
)
(82
)
(1,639
)
(1,721
)
10,769
10,769
(22,044
)
(22,044
)
1,383
1,383
(5,247
)
(5,247
)
51,131
$
51,131
$
54,207
$
12,682
$
(64,954
)
$
53,066
Year Ended December 31,
2008
2007
2006
$
101,634
$
143,515
$
100,954
4,238
1,602
(116
)
21,881
21,786
25,298
42,079
45,774
59,237
9,942
44,698
26,618
28,189
36,576
9,683
13,533
6,191
(790
)
5,280
(37,375
)
21,912
14,772
3,802
10,578
6,065
(1,709
)
321
(1,264
)
(1,234
)
(1,807
)
3,719
28,728
5,404
(1,665
)
(6,995
)
(9,768
)
667
(7,781
)
(9,008
)
(14,230
)
(17,029
)
(34,430
)
(22,668
)
5,650
198,487
245,075
238,895
(31,865
)
(32,286
)
(41,012
)
(104,879
)
(2,316
)
(16,521
)
(3,637
)
(1,057,460
)
1,057,460
4,181
19,214
9,247
15,513
427
4,459
(111
)
(135,773
)
(10,929
)
(32,884
)
10,800
(45,460
)
(99,686
)
196,329
(1,755
)
(326,582
)
(51,362
)
(6,370
)
(3,006
)
3,285
2,801
15,923
8,936
112
1,242
1,213
(21,847
)
(11,288
)
(51,422
)
(52,048
)
(66,973
)
(67,681
)
(224,890
)
(204,587
)
(2,053
)
1,161
158
995
(401
)
179
2,971
(6,025
)
10,016
4,732
21,615
11,599
6,867
$
15,590
$
21,615
$
11,599
(in thousands)
2008
2007
$
74,502
$
91,145
(5,930
)
(6,877
)
$
68,572
$
84,268
(in thousands)
2008
2007
2006
$
6,877
$
7,915
$
7,676
7,756
8,233
8,732
(8,703
)
(9,271
)
(8,493
)
$
5,930
$
6,877
$
7,915
(in thousands)
2008
2007
$
4,047
$
4,510
10,807
11,046
6,608
8,271
21,462
23,827
4,329
6,091
$
25,791
$
29,918
(in thousands)
2008
2007
$
35,097
$
35,895
133,865
133,664
300,029
295,197
468,991
464,756
(340,886
)
(325,896
)
$
128,105
$
138,860
2008
2007
Gross
Net
Gross
Net
carrying
Accumulated
carrying
carrying
Accumulated
carrying
(in thousands)
amount
amortization
amount
amount
amortization
amount
$
24,000
$
$
24,000
$
59,400
$
$
59,400
315,493
(260,320
)
55,173
278,782
(243,472
)
35,310
125,530
(96,963
)
28,567
110,165
(85,199
)
24,966
30,900
(22,792
)
8,108
30,900
(19,016
)
11,884
54,861
(19,920
)
34,941
29,569
(16,123
)
13,446
8,505
(5,213
)
3,292
7,667
(4,410
)
3,257
535,289
(405,208
)
130,081
457,083
(368,220
)
88,863
$
559,289
$
(405,208
)
$
154,081
$
516,483
$
(368,220
)
$
148,263
2008
2007
2006
Weighted-
Weighted-
Weighted-
average
average
average
amortization
amortization
amortization
(in thousands)
Amount
period
Amount
period
Amount
period
$
39,418
3 years
$
17,394
4 years
$
18,984
3 years
19,292
11 years
4,200
5 years
1,016
9 years
1,400
5 years
900
3 years
$
60,626
6 years
$
17,394
4 years
$
24,584
4 years
(1)
This goodwill is deductible for income tax purposes.
Small
Business
Direct
(in thousands)
Services
Checks
Total
$
507,935
$
82,237
$
590,172
(5,864
)
(5,864
)
(915
)
(915
)
711
711
576
576
243
243
502,686
82,237
584,923
68,555
68,555
1,359
1,359
(1,436
)
(1,436
)
(357
)
(357
)
$
570,807
$
82,237
$
653,044
Fair value measurements using
Fair value
Quoted prices in
Significant
as of
active markets
Significant other
unobservable
measurement
for identical
observable
inputs
(in thousands)
date
assets (Level 1)
inputs (Level 2)
(Level 3)
$
24,296
$
$
$
24,296
25,845
25,845
1,306,718
1,306,718
678
678
74,503
74,503
2,494,281
2,494,281
(1)
Fair value represents the fair value of reporting units to which goodwill is
assigned. Because the fair value of each of our reporting units was
greater than its carrying value, the implied fair value of goodwill was not required to be calculated.
(in thousands)
2008
2007
$
37,706
$
55,516
20,189
24,148
21,980
28,246
$
79,875
$
107,910
(in thousands)
2008
2007
2006
$
55,516
$
71,721
$
93,664
8,808
11,984
14,633
(26,618
)
(28,189
)
(36,576
)
$
37,706
$
55,516
$
71,721
(1)
Contract acquisition costs are accrued upon contract execution. Cash payments made
for contract acquisition costs were $9,008 in 2008, $14,230 in 2007 and $17,029 in 2006.
(in thousands)
2008
2007
$
29,113
$
20,397
26,078
23,285
20,379
5,050
15,061
39,995
12,176
16,960
5,394
5,414
34,398
38,874
$
142,599
$
149,975
(in thousands)
2008
2007
2006
$
50,441
$
57,077
$
57,035
59,997
89,944
74,891
(in thousands, except per share amounts)
2008
2007
2006
$
105,872
$
145,117
$
100,838
50,905
51,436
51,001
$
2.08
$
2.82
$
1.98
$
105,872
$
145,117
$
100,838
(367
)
(10
)
(584
)
$
105,505
$
145,107
$
100,254
50,905
51,436
51,001
445
496
229
51,350
51,932
51,230
$
2.05
$
2.79
$
1.96
3,505
2,124
3,028
(in thousands)
2008
2007
$
852
$
1,419
36
2,361
120
155
608
371
1,862
(330
)
(836
)
$
678
$
5,940
(in thousands)
2008
2007
2006
$
14,378
$
17,482
$
20,368
$
(3,031
)
$
(2,360
)
$
(226
)
(3,416
)
543
2,209
758
(201
)
$
(4,238
)
$
(1,602
)
$
116
NEBS
2004
acquisition
2006
2007
2008
(in thousands)
initiatives
related
initiatives
initiatives
initiatives
Total
$
10
$
6,533
$
$
$
$
6,543
438
10,701
11,139
(229
)
(229
)
(10
)
(5,146
)
(1,086
)
(6,242
)
1,825
9,386
11,211
158
6,928
7,086
(656
)
(1,415
)
(562
)
(2,633
)
(1,133
)
(7,804
)
(1,677
)
(10,614
)
36
325
4,689
5,050
5
253
26,134
26,392
(1
)
(27
)
(843
)
(1,531
)
(2,402
)
(16
)
(108
)
(3,764
)
(4,773
)
(8,661
)
$
$
19
$
195
$
335
$
19,830
$
20,379
$
5,850
$
30,243
$
10,864
$
7,181
$
26,134
$
80,272
(531
)
(840
)
(1,671
)
(1,405
)
(1,531
)
(5,978
)
(5,319
)
(29,384
)
(8,998
)
(5,441
)
(4,773
)
(53,915
)
$
$
19
$
195
$
335
$
19,830
$
20,379
Operating
lease
Employee severance benefits
obligations
Small
Small
Business
Financial
Direct
Business
(in thousands)
Services
Services
Checks
Corporate
(1)
Services
Total
$
3,835
$
$
10
$
$
2,698
$
6,543
2,754
3,261
128
4,949
47
11,139
(4
)
(165
)
(60
)
(229
)
(4,281
)
(393
)
(10
)
(408
)
(1,150
)
(6,242
)
2,304
2,703
128
4,481
1,595
11,211
2,625
1,049
3,412
7,086
(233
)
(471
)
(142
)
(1,236
)
(551
)
(2,633
)
633
378
32
(1,043
)
(3,328
)
(2,706
)
(18
)
(3,554
)
(1,008
)
(10,614
)
2,001
953
2,060
36
5,050
7,076
3,579
341
15,187
209
26,392
(637
)
(405
)
(2
)
(1,357
)
(1
)
(2,402
)
378
739
61
(1,178
)
(4,844
)
(1,249
)
(249
)
(2,303
)
(16
)
(8,661
)
$
3,974
$
3,617
$
151
$
12,409
$
228
$
20,379
$
39,448
$
10,285
$
3,051
$
24,361
$
3,127
$
80,272
(1,057
)
(1,465
)
(242
)
(2,662
)
(552
)
(5,978
)
1,011
1,117
93
(2,221
)
(35,428
)
(6,320
)
(2,751
)
(7,069
)
(2,347
)
(53,915
)
$
3,974
$
3,617
$
151
$
12,409
$
228
$
20,379
(1)
As discussed in Note 17: Business segment information, corporate costs are allocated
to our business segments. As such, the net Corporate restructuring charges are reflected in the
business segment operating income presented in Note 17 in accordance with our allocation
methodology.
(in thousands)
2008
2007
2006
$
47,714
$
60,454
$
74,357
7,380
9,164
4,968
55,094
69,618
79,325
(790
)
5,280
(37,375
)
$
54,304
$
74,898
$
41,950
2008
2007
2006
35.0
%
35.0
%
35.0
%
2.7
%
2.7
%
0.4
%
1.1
%
0.2
%
0.7
%
(3.5
%)
(1.7
%)
(1.8
%)
(1.6
%)
(1.5
%)
(1.4
%)
(1.7
%)
(0.7
%)
(1.6
%)
33.9
%
34.0
%
29.4
%
(1)
During 2006, accruals related to unresolved tax contingencies more than offset net
accrual reversals of $1.5 million related to settled issues, primarily resulting from the
expiration of the statute of limitations in various state income tax jurisdictions.
(2)
During 2006, we reduced our provision for income taxes $5.0 million for the true-up
of certain deferred income tax balances. As this item was not material to our current or prior
periods, we recorded a one-time, discrete benefit to our provision for income taxes for the year
ended December 31, 2006.
(3)
Relates to amendments to prior year income tax returns claiming refunds primarily
associated with the funding of medical costs through our voluntary employee beneficiary association
(VEBA) trust, as well as state income tax credits and related interest.
2008
2007
Deferred
Deferred
Deferred
tax
Deferred
tax
(in thousands)
tax assets
liabilities
tax assets
liabilities
$
$
26,627
$
$
21,793
26,657
24,326
7,664
9,800
781
2,840
44,164
33,106
13,393
10,959
4,535
5,279
4,080
4,982
3,168
2,137
4,445
2,953
4,995
3,040
73,785
64,682
64,298
58,959
(769
)
(632
)
$
73,016
$
64,682
$
63,666
$
58,959
(in thousands)
2008
2007
2006
$
4,296
$
2,766
$
2,025
4,987
10,425
3,379
400
342
787
$
9,683
$
13,533
$
6,191
$
3,475
$
4,709
$
1,826
2008
2007
2006
3.0
4.8
4.6
3.8
4.4
4.2
33.2
26.1
22.1
4.6
4.5
4.7
Weighted-
Aggregate
average
Weighted-
intrinsic
remaining
Number of
average exercise
value (in
contractual
option shares
price
thousands)
term (years)
2,960,385
$
38.46
795,700
25.83
(295,485
)
19.19
(393,642
)
36.53
3,066,958
37.27
914,425
32.73
(425,777
)
31.36
(271,377
)
37.89
3,284,229
36.85
662,164
22.15
(19,164
)
20.24
(821,834
)
38.05
3,105,395
33.50
$
2
3.2
2,265,244
$
40.46
1,988,907
40.78
1,977,119
37.43
$
1.9
Weighted-
Aggregate
average
Weighted-
intrinsic
remaining
Number of
average grant
value (in
contractual
units
date fair value
thousands)
term (years)
126,101
$
35.68
15,938
22.38
(20,307
)
35.44
(41,875
)
35.23
79,857
33.31
10,743
34.71
(37,490
)
34.53
53,110
32.73
102,991
23.42
(10,720
)
25.79
145,381
26.65
$
2,175
3.8
Weighted-
Number of
average grant
shares
date fair value
82,883
$
40.70
401,630
25.51
(20,958
)
36.90
(85,462
)
28.99
378,093
27.52
250,150
33.00
(87,133
)
29.09
(36,977
)
30.10
504,133
29.78
242,993
22.08
(245,331
)
30.46
(48,866
)
27.48
452,929
25.53
(in thousands)
2008
2007
2006
$
623
$
23,081
$
3,825
11,614
10,761
11,313
7,936
6,426
6,976
Postretirement
(in thousands)
benefit plan
Pension plans
$
119,478
$
9,901
156
222
7,011
514
15,775
(185
)
(10,779
)
(557
)
1,664
338
1,095
133,305
11,328
94
7,955
497
(1,945
)
248
(10,936
)
(543
)
(902
)
692
(1,367
)
$
129,165
$
9,261
$
88,243
$
5,999
14,504
109
463
(234
)
1,025
102,747
7,362
(34,019
)
(113
)
299
(219
)
(902
)
(1,215
)
$
68,728
$
5,212
$
(30,558
)
$
(3,966
)
$
(60,437
)
$
(4,049
)
Postretirement benefit
plan
Pension plans
(in thousands)
2008
2007
2008
2007
$
$
$
$
178
1,126
324
60,437
30,558
2,923
3,820
Postretirement benefit
plan
Pension plans
(in thousands)
2008
2007
2008
2007
$
(36,062
)
$
(40,021
)
$
$
128,062
96,732
825
492
(34,403
)
(20,924
)
(261
)
(162
)
$
57,597
$
35,787
$
564
$
330
(in thousands)
2008
2007
$
51,004
$
9,148
20,733
23,938
19,161
21,242
13,007
19,105
24,157
23,299
$
128,062
$
96,732
Postretirement
Pension
(in thousands)
benefit plan
plans
$
(3,959
)
$
14,042
1,190
$
10,083
$
1,190
(in thousands)
2008
2007
$
9,261
$
10,448
9,261
10,448
5,212
6,304
Postretirement benefit plan
Pension plans
(in thousands)
2008
2007
2006
2008
2007
2006
$
94
$
156
$
1,000
$
$
223
$
209
7,955
7,011
7,338
497
514
473
(8,732
)
(8,264
)
(7,690
)
(265
)
(262
)
(300
)
(3,959
)
(3,959
)
(2,841
)
9,477
9,857
9,992
8
7
9
4,835
4,801
7,799
240
482
391
221
$
4,835
$
4,801
$
7,799
$
461
$
482
$
391
Postretirement benefit plan
Pension plans
2008
2007
2008
2007
6.60
%
6.20
%
4.06% - 6.60
%
4.43% - 6.20
%
Postretirement benefit plan
Pension plans
2008
2007
2006
2008
2007
2006
6.20
%
5.75
%
5.50
%
4.43% - 6.20
%
4.43% - 5.75
%
4.50% -5.50
%
8.50
%
8.75
%
8.75
%
4.50
%
4.50
%
6.25
%
3.50
%
2008
2007
2006
Participants
Participants
Participants
Participants
Participants
Participants
under age 65
over age 65
under age 65
over age 65
under age 65
over age 65
7.50
%
8.50
%
8.25
%
9.25
%
9.00
%
10.00
%
5.25
%
5.25
%
5.25
%
5.25
%
5.25
%
5.25
%
2012
2014
2012
2014
2012
2014
One-
One-
percentage-
percentage-
point
point
(in thousands)
increase
decrease
$
151
$
(135
)
2,633
(2,353
)
Postretirement benefit
plan
Pension plans
2008
2007
2008
2007
69
%
79
%
7
%
31
%
21
%
100
%
86
%
7
%
100
%
100
%
100
%
100
%
Pension
Postretirement benefit plan
plans
Gross
Expected
Net
benefit
Medicare
benefit
Gross benefit
(in thousands)
payments
subsidy
payments
payments
$
11,600
$
1,000
$
10,600
$
6,392
12,200
1,100
11,100
320
12,600
1,100
11,500
310
13,000
1,300
11,700
310
13,100
1,400
11,700
300
64,300
7,500
56,800
1,460
(in thousands)
2008
2007
$
299,250
$
299,062
274,646
274,584
200,000
200,000
1,440
773,896
775,086
78,000
67,200
1,440
1,754
79,440
68,954
$
853,336
$
844,040
Capital
Operating
(in thousands)
lease
leases
$
1,503
$
9,119
6,465
2,852
792
167
1,503
$
19,395
(63
)
$
1,440
(in thousands)
2008
2007
2006
$
9,811
$
9,143
$
11,024
(2,028
)
(2,058
)
(2,200
)
$
7,783
$
7,085
$
8,824
(in thousands)
2008
2007
$
11,574
$
11,574
(10,823
)
(9,821
)
$
751
$
1,753
Total
Expiration
Commitment
(in thousands)
available
date
fee
$
275,000
July 2010
.175
%
225,000
July 2009
.225
%
500,000
(78,000
)
(10,835
)
$
411,165
(in thousands)
2008
2007
2006
$
22,858
$
25,305
$
28,398
(81,019
)
(61,422
)
(61,993
)
(47
)
(58,161
)
(36,117
)
(33,642
)
(7,498
)
(8,881
)
(11,162
)
242
705
5,952
2,689
$
(64,954
)
$
(39,046
)
$
(41,873
)
Reportable business segments
Small
Business
Financial
Direct
(in thousands)
Services
Services
Checks
Corporate
Consolidated
2008
$
851,060
$
430,018
$
187,584
$
$
1,468,662
2007
921,657
457,292
209,936
1,588,885
2006
949,492
458,118
211,727
1,619,337
2008
90,078
65,540
53,616
209,234
2007
132,821
74,305
62,778
269,904
2006
87,009
46,613
64,922
198,544
2008
49,947
9,664
4,349
63,960
2007
52,830
9,936
4,794
67,560
2006
62,879
14,548
7,108
84,535
2008
9,942
9,942
2007
2006
18,285
26,413
44,698
2008
785,555
47,872
100,535
285,023
1,218,985
2007
750,483
66,475
102,452
291,345
1,210,755
2006
784,815
90,075
105,041
287,201
1,267,132
2008
31,865
31,865
2007
32,286
32,286
2006
41,012
41,012
(in thousands)
2008
2007
2006
$
960,837
$
1,045,008
$
1,041,523
328,990
374,138
366,691
109,773
118,181
122,635
69,062
51,558
88,488
$
1,468,662
$
1,588,885
$
1,619,337
(in thousands)
2008
2007
2006
$
1,397,759
$
1,517,322
$
1,550,507
70,903
71,563
68,830
$
1,468,662
$
1,588,885
$
1,619,337
$
1,036,140
$
1,005,145
$
1,052,257
15,759
13,665
12,758
$
1,051,899
$
1,018,810
$
1,065,015
We could lose a significant contract, which would have a negative impact on our
results of operations.
We may be unable to recover the value of any related unamortized contract acquisition cost
and/or accounts receivable. Contract acquisition costs, which are treated as pre-paid product
discounts, are sometimes utilized in
our Financial Services segment when signing or renewing contracts with our financial
institution clients and totaled $37.7 million as of December 31, 2008. These amounts are
recorded as non-current assets upon contract execution and are amortized, generally on the
straight-line basis, as reductions of revenue over the related contract term. In most
situations, the contract requires a financial institution to reimburse us for the unamortized
contract acquisition cost if it terminates its contract with us prior to the end of the
contract term. Our contract acquisition costs are comprised of amounts paid to individual
financial institutions, many of which are smaller and would not have a significant impact on
our consolidated financial statements if they were deemed unrecoverable. However, the
inability to recover amounts paid to one or more of our larger financial institution clients
could have a significant negative impact on our consolidated results of operations.
If one or more of our financial institution clients is taken over by a financial
institution that is not one of our clients, we could lose significant business. In the case
of a cancelled contract, we may be entitled to collect a contract termination payment.
However, if a financial institution fails, we may be unable to collect that termination
payment. We have no indication at this time that any significant contract terminations are
expected.
If one or more of our larger clients were to consolidate with a financial institution that
is not one of our clients, our results of operations could be positively impacted if we
retain the client, as well as obtain the additional business from the other party in the
consolidation.
If two of our financial institution clients consolidate, the increase in general
negotiating leverage possessed by the consolidated entities sometimes results in new
contracts which are not as favorable to us as those historically negotiated with the clients
individually.
We could generate non-recurring conversion revenue. Conversions are driven by the need to
replace obsolete checks after one financial institution merges with or acquires another.
However, we presently do not have specific information that indicates that we should expect
to generate significant income from conversions.
(in thousands, except per share amounts)
2008 Quarter Ended
March 31
June 30
(1)
September 30
(2)
December 31
(3)
$
377,077
$
363,992
$
362,714
$
364,879
234,139
226,832
212,624
228,554
27,317
32,617
13,760
27,940
0.53
0.64
0.27
0.55
0.53
0.63
0.27
0.55
0.25
0.25
0.25
0.25
2007 Quarter Ended
March 31
(4)
June 30
September 30
(5)
December 31
(6)
$
399,432
$
395,312
$
384,385
$
409,756
253,120
255,481
243,815
261,865
35,228
35,975
32,160
40,152
0.69
0.70
0.62
0.78
0.68
0.69
0.62
0.77
0.25
0.25
0.25
0.25
(1)
2008 second quarter results include net pre-tax restructuring charges of $2.0
million related to our cost reduction initiatives. Results also include a $1.1 million reduction in
income tax expense for discrete items, primarily adjustments to uncertain tax positions.
(2)
2008 third quarter results include net pre-tax restructuring charges of $21.6
million related to our cost reduction initiatives, as well as asset impairment charges of $9.7
million related to trade names in our Small Business Services segment. Results also include a $1.8
million reduction in income tax expense for discrete items, primarily related to the settlement of
amounts due to us under a tax sharing agreement related to the spin-off of our eFunds business in
2000, as well as receivables related to amendments to prior year tax returns.
(3)
2008 fourth quarter results include net pre-tax restructuring charges of $5.1
million related to our cost reduction initiatives, as well as an asset impairment charge of $0.3
million related to a trade name in our Small Business Services segment.
(4)
2007 first quarter results include income tax expense of $1.2 million for discrete
items, primarily the non-deductible write-off of goodwill related to the sale of our industrial
packaging product line, partially offset by the final settlement of an uncertain tax position.
(5)
2007 third quarter results include net pre-tax restructuring charges of $2.1 million
related to our cost reduction initiatives. Results also include a $1.3 million reduction in income
tax expense for discrete items, primarily the reconciliation of our 2006 federal income tax return
to our 2006 income tax provision.
(6)
2007 fourth quarter results include net pre-tax restructuring charges of $2.7
million related to our cost reduction initiatives. Results also include a $1.8 million reduction in
income tax expense for discrete items, primarily adjustments to receivables related to amendments
to prior year income tax returns.
96
97
Number of securities
remaining available
for future issuance
Number of securities
under equity
to be issued upon
Weighted-average
compensation plans
exercise of
exercise price of
(excluding securities
outstanding options,
outstanding options,
reflected in the first
Plan category
warrants and rights
warrants and rights
column)
3,250,776
(1)
$
32.00
(1)
7,939,983
(2)
None
None
None
3,250,776
$
32.00
7,939,983
(1)
Includes awards granted under our 2008 Stock Incentive Plan and our previous stock
incentive plans adopted in 2000, as amended, and in 1994. The number of securities to be issued
upon exercise of outstanding options, warrants and rights includes outstanding stock options of
3,105,395 and restricted stock unit awards of 145,381.
(2)
Includes 4,201,191 shares reserved for issuance under our Amended and Restated 2000
Employee Stock Purchase Plan. Of the total available for future issuance, 3,738,792 shares remain
available for issuance under our 2008 Stock Incentive Plan. Under this plan, full value awards such
as restricted stock, restricted stock units and share-based performance awards reduce the number of
shares available for issuance by a factor of 2.29, or if such an award were forfeited or terminated
without delivery of the shares, the number of shares that again become eligible for issuance would
be multiplied by a factor of 2.29.
98
99
100
101
102
Exhibit
Method of
Number
Description
Filing
Purchase Agreement, dated September 28, 2004, by and among us and
J.P. Morgan Securities Inc. and Wachovia Capital Markets, LLC, as
representatives of the several initial purchasers listed in
Schedule 1 of the Purchase Agreement (incorporated by reference
to Exhibit 1.1 to the Current Report on Form 8-K filed with the
Commission on October 4, 2004)
*
Agreement and Plan of Merger, dated as of May 17, 2004, by and
among us, Hudson Acquisition Corporation and New England Business
Service, Inc. (incorporated by reference to Exhibit (d)(1) to the
Deluxe Corporation Schedule TO-T filed with the Commission on May
25, 2004)
*
Agreement and Plan of Merger, dated as of June 18, 2008, by and
among us, Deluxe Business Operations, Inc., Helix Merger Corp.
and Hostopia.com Inc. (excluding schedules which we agree to
furnish to the Commission upon request) (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed
with the Commission on June 23, 2008)
*
Articles of Incorporation (incorporated by reference to the
Annual Report on Form 10-K for the year ended December 31, 1990)
*
Bylaws (incorporated by reference to Exhibit 3.2 to the Current
Report on Form 8-K filed with the Commission on October 23, 2008)
*
Amended and Restated Rights Agreement, dated as of December 20,
2006, by and between us and Wells Fargo Bank, National
Association, as Rights Agent, which includes as Exhibit A
thereto, the Form of Rights Certificate (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K filed
with the Commission on December 21, 2006)
*
First Supplemental Indenture dated as of December 4, 2002, by and
between us and Wells Fargo Bank Minnesota, N.A. (formerly,
Norwest Bank Minnesota, National Association), as trustee
(incorporated by reference to Exhibit 4.1 to the Form 8-K filed
with the Commission on December 5, 2002)
*
Exhibit
Method of
Number
Description
Filing
Indenture, dated as of April 30, 2003, by and between us and
Wells Fargo Bank Minnesota, N.A. (formerly Norwest Bank
Minnesota, National Association), as trustee (incorporated by
reference to Exhibit 4.8 to the Registration Statement on Form
S-3 (Registration No. 333-104858) filed with the Commission on
April 30, 2003)
*
Form of Officers Certificate and Company Order authorizing the
2014 Notes, series B (incorporated by reference to Exhibit 4.9 to
the Registration Statement on Form S-4 (Registration No.
333-120381) filed with the Commission on November 12, 2004)
*
Specimen of 5 1/8% notes due 2014, series B (incorporated by
reference to Exhibit 4.10 to the Registration Statement on Form
S-4 (Registration No. 333-120381) filed with the Commission on
November 12, 2004)
*
Indenture, dated as of May 14, 2007, by and between us and The
Bank of New York Trust Company, N.A., as trustee (including form
of 7.375% Senior Notes due 2015) (incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K filed with the
Commission on May 15, 2007)
*
Registration Rights Agreement, dated May 14, 2007, by and between
us and J.P. Morgan Securities Inc., as representative of the
several initial purchasers listed in Schedule I to the Purchase
Agreement related to the 7.375% Senior Notes due 2015
(incorporated by reference to Exhibit 4.2 to the Current Report
on Form 8-K filed with the Commission on May 15, 2007)
*
Specimen of 7.375% Senior Notes due 2015 (included in Exhibit 4.6)
*
2008 Annual Incentive Plan (incorporated by reference to
Appendix A of our definitive proxy statement filed with the
Commission on March 13, 2008)**
*
2008 Stock Incentive Plan (incorporated by reference to
Appendix B of our definitive proxy statement filed with the
Commission on March 13, 2008)**
*
First Amendment to Deluxe Corporation Non-employee Director Stock
and Deferral Plan**
Filed herewith
Amended and Restated 2000 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.18 to the Annual Report
on Form 10-K for the year ended December 31, 2001)**
*
Deluxe Corporation Deferred Compensation Plan (2008 Restatement)**
Filed herewith
Deluxe Corporation Deferred Compensation Plan Trust (incorporated
by reference to Exhibit 4.3 to the Form S-8 filed January 7,
2002)**
*
Deluxe Corporation Executive Deferred Compensation Plan for
Employee Retention and Other Eligible Arrangements (incorporated
by reference to Exhibit 10.24 to the Quarterly Report on Form
10-Q for the quarter ended June 30, 2000)**
*
Exhibit
Method of
Number
Description
Filing
Deluxe Corporation Supplemental Benefit Plan (incorporated by
reference to Exhibit (10)(B) to the Annual Report on Form 10-K
for the year ended December 31, 1995)**
*
First Amendment to the Deluxe Corporation Supplemental Benefit
Plan (2001 Restatement) (incorporated by reference to Exhibit
10.19 to the Annual Report on Form 10-K for the year ended
December 31, 2001)**
*
Description of modification to the Deluxe Corporation
Non-Employee Director Retirement and Deferred Compensation Plan
(incorporated by reference to Exhibit 10.10 to the Annual Report
on Form 10-K for the year ended December 31, 1997)**
*
Description of Non-employee Director Compensation Arrangements,
updated April 30, 2008 (incorporated by reference to Exhibit 10.1
to the Quarterly Report on Form 10-Q for the quarter ended June
30, 2008)**
*
Form of Severance Agreement entered into between Deluxe and the
following executive officers: Anthony Scarfone, Terry Peterson,
Richard Greene, Lynn Koldenhoven, Pete Godich, Julie Loosbrock,
Malcolm McRoberts, Tom Morefield and Laura Radewald (incorporated
by reference to Exhibit 10.17 to the Annual Report on Form 10-K
for the year ended December 31, 2000)**
*
Form of Executive Retention Agreement entered into between Deluxe
and the following executive officers: Anthony Scarfone and
Richard Greene (incorporated by reference to Exhibit 10.19 to the
Annual Report on Form 10-K for the year ended December 31,
2000)**
*
Form of Executive Retention Agreement between Deluxe and Lee
Schram (incorporated by reference to Exhibit 99.2 to the Current
Report on Form 8-K filed with the Commission on April 17, 2006)**
*
Form of Executive Retention Agreement, dated as of August 8,
2007, by and between Deluxe and Lee J. Schram (incorporated by
reference to Exhibit 99.1 to the Current Report on Form 8-K filed
with the Commission on August 10, 2007)**
*
Form of Executive Retention Agreement entered into between Deluxe
and each Senior Vice President (incorporated by reference to
Exhibit 99.2 to the Current Report on Form 8-K filed with the
Commission on August 10, 2007)**
*
Form of Executive Retention Agreement entered into between Deluxe
and each Vice President designated as an executive officer
(incorporated by reference to Exhibit 99.3 to the Current Report
on Form 8-K filed with the Commission on August 10, 2007)**
*
Form of Addendum to Executive Retention and Severance Agreements
Relating to Section 409A of the Internal Revenue Code**
Filed herewith
Form of Agreement for Awards Payable in Restricted Stock Units
(incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K filed with the Commission on January 28, 2005)**
*
Exhibit
Method of
Number
Description
Filing
Form of Agreement for Awards Payable in Restricted Stock Units
(rev. 12/08)**
Filed herewith
Form of Non-employee Director Non-qualified Stock Option
Agreement (incorporated by reference to Exhibit 10.19 to the
Annual Report on Form 10-K for the year ended December 31,
2004)**
*
Form of Agreement as to Award of Restricted Common Stock
(Non-Employee Director Grants) (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed with the
Commission on October 27, 2006)**
*
Form of Non-Employee Director Restricted Stock Award Agreement
(ver. 4/07) (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10Q for the quarter ended March 31,
2007)**
*
Form of Non-qualified Stock Option Agreement (incorporated by
reference to Exhibit 10.21 to the Annual Report on Form 10-K for
the year ended December 31, 2004)**
Form of Non-qualified Stock Option Agreement (as amended February
2006) (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the Commission on February 21,
2006)**
*
Form of Restricted Stock Award Agreement (Two-Year Retention
Term) (incorporated by reference to Exhibit 10.3 to the Current
Report on Form 8-K filed with the Commission on February 21,
2006)**
*
Form of Non-Qualified Stock Option Agreement (version 2/07)
(incorporated by reference to exhibit 10.28 to the Annual Report
on Form 10-K for the year ended December 31, 2006)**
*
Form of Performance Accelerated Restricted Stock Award Agreement
(version 2/07) (incorporated by reference to Exhibit 10.29 to the
Annual Report on Form 10-K for the year ended December 31,
2006)**
*
Employment Agreement dated as of April 10, 2006, between Deluxe
and Lee Schram (incorporated by reference to Exhibit 99.1 to the
Current Report on Form 8-K filed with the Commission on April 17,
2006)**
*
Offer letter, dated as of September 15, 2006, between Deluxe and
Richard S. Greene (incorporated by reference to Exhibit 10.1 to
the Quarterly Report on Form 10-Q for the quarter ended September
30, 2006)**
*
Statement re: Computation of Ratios
Filed herewith
Subsidiaries of the Registrant
Filed herewith
Exhibit
Method of
Number
Description
Filing
Consent of Independent Registered Public Accounting Firm
Filed herewith
Power of Attorney
Filed herewith
CEO Certification of Periodic Report pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Filed herewith
CFO Certification of Periodic Report pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Filed herewith
CEO and CFO Certification of Periodic Report pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Furnished herewith
*
Incorporated by reference
**
Denotes compensatory plan or management contract
103
104
DELUXE CORPORATION
Date: February 18, 2009
By:
/s/ Lee Schram
Lee Schram
Chief Executive Officer
Signature
Title
*
Stephen P. Nachtsheim
Director
*
Mary Ann ODwyer
Director
*
Martyn R. Redgrave
Director
/s/ Lee Schram
Lee Schram
Attorney-in-Fact
105
Exhibit No.
Description
First Amendment to Deluxe Corporation Non-employee Director
Stock and Deferral Plan
Deluxe Corporation Deferred Compensation Plan (2008 Restatement)
Form of Addendum to Executive Retention and Severance
Agreements Relating to Section 409A of the Internal Revenue
Code
Form of Agreement for Awards Payable in Restricted Stock Units
(rev. 12/08)
Statement re: Computation of Ratios
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Power of Attorney
CEO Certification of Periodic Report pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
CFO Certification of Periodic Report pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
CEO and CFO Certification of Periodic Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
DELUXE CORPORATION
|
||||
By: | ||||
Anthony C. Scarfone | ||||
Secretary |
2
Page | ||||||
SECTION 1 |
RESTATEMENT AND PURPOSE
|
1 | ||||
|
||||||
1.1. Restatement
|
1 | |||||
1.2. Purpose
|
1 | |||||
1.3. Effective Date
|
1 | |||||
|
||||||
SECTION 2 |
DEFINITIONS
|
1 | ||||
|
||||||
2.1. Definitions
|
1 | |||||
2.2. Transition Rule
|
5 | |||||
|
||||||
SECTION 3 |
ELIGIBILITY FOR PARTICIPATION
|
5 | ||||
|
||||||
SECTION 4 |
ENROLLMENT AND ELECTIONS
|
6 | ||||
|
||||||
4.1. Initial Enrollment
|
6 | |||||
4.2. Election to Defer
|
6 | |||||
4.3. Special Rule for New Hires
|
7 | |||||
4.4. 409A Transition Rule
|
8 | |||||
|
||||||
SECTION 5 |
DEFERRAL ACCOUNTS
|
8 | ||||
|
||||||
5.1. Participant Deferral Accounts
|
8 | |||||
5.2. Employee Benefit Plan Equivalent
|
8 | |||||
5.3. Investment Options
|
8 | |||||
5.4. Charges Against Deferral Accounts
|
9 | |||||
5.5. Contractual Obligation
|
9 | |||||
5.6. Unsecured Interest
|
9 | |||||
|
||||||
SECTION 6 |
PAYMENT OF DEFERRED AMOUNTS
|
9 | ||||
|
||||||
6.1. Event of Maturity
|
9 | |||||
6.2. Form of Distribution
|
10 | |||||
6.2.1. Form of Payment
|
10 | |||||
6.2.2. Time of Payment
|
11 | |||||
6.2.3. Default
|
12 | |||||
6.2.4. New Designation
|
12 | |||||
6.2.5. In-Service Distribution Accounts
|
13 | |||||
6.2.6. Code Section 162(m) Delay
|
14 | |||||
6.3. Distribution of Taxable Amounts
|
14 | |||||
6.4. Tax Withholding
|
14 | |||||
6.5. Special Rule for eFunds Participants
|
15 | |||||
|
||||||
SECTION 7 |
UNFORESEEABLE EMERGENCY
|
16 |
Page | ||||||
SECTION 8 |
BENEFICIARY
|
17 | ||||
|
||||||
SECTION 9 |
NONTRANSFERABILITY
|
17 | ||||
|
||||||
SECTION 10 |
DETERMINATIONS RULES AND REGULATIONS
|
17 | ||||
|
||||||
10.1. Determinations
|
17 | |||||
10.2. Claims Procedure
|
18 | |||||
10.2.1. Initial Claim
|
18 | |||||
10.2.2. Notice of Initial Adverse Determination
|
18 | |||||
10.2.3. Request for Review
|
18 | |||||
10.2.4. Claim on Review
|
18 | |||||
10.2.5. Notice of Adverse Determination for Claim on Review
|
19 | |||||
10.3. Rules and Regulations
|
19 | |||||
10.3.1. Adoption of Rules
|
19 | |||||
10.3.2. Specific Rules
|
20 | |||||
10.4. Deadline to File Claim
|
21 | |||||
10.5. Exhaustion of Administrative Remedies
|
21 | |||||
10.5.1. Deadline to File Legal Action
|
21 | |||||
10.6. Knowledge of Fact by Participant Imputed to Beneficiary
|
21 | |||||
|
||||||
SECTION 11 |
ADMINISTRATION
|
21 | ||||
|
||||||
11.1. Company
|
21 | |||||
11.1.1. Chief Executive Officer
|
21 | |||||
11.1.2. Committee
|
21 | |||||
11.1.3. Management Committee
|
22 | |||||
11.2. Conflict of Interest
|
23 | |||||
11.3. Dual Capacity
|
23 | |||||
11.4. Administrator
|
24 | |||||
11.5. Named Fiduciaries
|
24 | |||||
11.6. Service of Process
|
24 | |||||
11.7. Administrative Expenses
|
24 | |||||
11.8. Rules, Policies and Procedures
|
24 | |||||
11.9. Method of Executing Instruments
|
24 | |||||
11.10. Information Furnished by Participants
|
24 | |||||
|
||||||
SECTION 12 |
AMENDMENT AND TERMINATION
|
24 | ||||
|
||||||
SECTION 13 |
LIFE INSURANCE CONTRACT
|
25 | ||||
|
||||||
SECTION 14 |
CHANGE IN CONTROL
|
25 | ||||
|
||||||
14.1. Distributions upon Change in Control
|
25 | |||||
14.2. Definitions and Special Rules
|
26 | |||||
|
||||||
SECTION 15 |
NO VESTED RIGHTS
|
27 | ||||
|
||||||
SECTION 16 |
APPLICABLE LAW
|
27 |
- ii -
(a) | Affiliate means a business entity which is a member of the Controlled Group and is recognized as an Affiliate by the Management Committee for the purposes |
of this Plan. | |||
(b) | Base Salary means the base salary scheduled to be paid to a Participant during a Plan Year without regard to any Incentive Compensation, or any portion deferred under this Plan. | ||
(c) | Change in Control is defined in Section 14. | ||
(d) | Code means the Internal Revenue Code of 1986, and all regulations, revenue rulings, and other forms of authoritative guidance issued pursuant thereto. | ||
(e) | Controlled Group means the Company and all other business entities, whether or not incorporated, which, together with the Company, would be considered a single employer under section 414(b) or (c) of the Code. | ||
(f) | Committee means the Compensation Committee of the Board of Directors of the Company. | ||
(g) | Deferral Account means the separate bookkeeping account representing the unfunded and unsecured general obligation of Company established with respect to each Participant to which is credited the dollar amounts specified in Section 5 and from which are subtracted payments made pursuant to Sections 6 and 7. | ||
(h) | Disability means, as to a Participant who is an employee of the Company, a determination of disability under Companys Long Term Disability Plan. If the Participant is an employee of an Affiliate, Disability means as to such Participant, a determination of disability under the Long Term Disability Plan of such Affiliate, or, if no such Plan exists, then under the Long Term Disability Plan of the Company as if such Participant were a participant in such plan. If the Company discontinues its Long Term Disability Plan, then Disability shall mean long term disability as defined in any other Plan of the Company which generally defines long term disability for purposes of such other plan. In no event, however, shall a Participant be considered to have a Disability for purposes of this Plan until such time as such Participant is entitled to begin (or would be entitled to begin, if such Participant were a participant in the relevant plan) receipt of benefits under such long term disability or other relevant plan. Effective January 1, 2009, a Participant shall not be considered to have a Disability unless the condition constituting Disability is a medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than twelve months, and the Participant either has been receiving disability payments under any plan (including a short-term disability plan or practice) of the Company or an Affiliate for at least three months, or, if he or she is not eligible to participate in any disability plan, is unable to engage in any substantial gainful activity. | ||
(i) | Eligible Employee means an employee of the Company or its Affiliates who (i) is an officer or assistant officer, or (ii) has significant management or professional responsibilities, and (iii) who is highly compensated. Subject to the limitations |
- 2 -
contained in Section 3, the Management Committee from time to time may (i) establish rules governing the eligibility of employees of the Company and its Affiliates to participate in the Plan and, such rules, if adopted, shall be deemed to further define or amend, as the case may be, the definition of Eligible Employee herein, and (ii) permit certain employees of the Company and its Affiliates, who would not otherwise be eligible to participate in the Plan, to participate in the Plan. | |||
(j) | ERISA means the Employee Retirement Income Security Act of 1974, and all regulations and other forms of authoritative guidance issued pursuant thereto. | ||
(k) | Event of Maturity means any of the occurrences described in Section 6.1 by reason of which a Participant or Beneficiary may become entitled to a distribution from the Plan. | ||
(l) | Incentive Compensation means the incentive, bonus, and similar compensation that is paid to a Participant based on performance or other factors during a Plan Year without regard to any portion deferred under this Plan. Incentive Compensation shall not include any awards made under the 2000 Stock Incentive Plan, or any subparts thereof, until such time as the Management Committee determines that all or a portion of such compensation is Incentive Compensation. | ||
(m) | In-Service Distribution Account means an account to which a Participant allocates a portion of his or her Deferral Account in accordance with Section 6.2.5. Except for distribution in Section 6.2.5, or as otherwise provided in this Plan, an In-Service Distribution Account shall be treated as part of the Participants Deferral Account for all purposes of the Plan. | ||
(n) | Installment Amount means the portion of a Participants Deferral Account that is to be paid during a period designated pursuant to Section 6.2.1 by the Participant in writing at the time of his or her enrollment or otherwise made in accordance with this Plan. Installment Amounts may, with the consent of the Management Committee, be expressed either in dollars or as a percentage of the Participants total Deferral Account, and if the Installment Amount is expressed in dollars and is less than the total Deferral Account, the Installment Amount shall be equal to the Deferral Account. | ||
(o) | Management Committee means the Management Committee formed by the Chief Executive Officer pursuant to Section 11 of the Plan. | ||
(p) | Participant means any Eligible Employee who is affirmatively selected by the Management Committee and who elects to participate in the Plan. | ||
(q) | Plan Year means the twelve-month period coinciding with the Companys fiscal year and ending on each December 31. | ||
(r) | Selected Distribution Date shall mean the date that is designated in accordance with this Plan by the Participant in writing at the time of his or her enrollment as |
- 3 -
the date for the payment or commencement of payments of his or her Deferral Account. To the extent permitted by the Management Committee, a Participant may designate either the date of his Termination of Employment, January 1 of the year following his or her Termination of Employment as the Selected Distribution Date, January 1 of a specified year (whether or not Termination of Employment has occurred), or any other date permitted by the Management Committee that complies with section 409A of the Code. In the absence of an effective election of any other date, a Participants Selected Distribution Date shall be the date of his or her Termination of Employment. | |||
(s) | Termination of Employment means a complete severance of a Participants employment relationship with the Company and all Affiliates. Effective January 1, 2009, a Participant shall not be considered to have incurred a Termination of Employment until the Participant has incurred a separation from service as determined in accordance with section 409A of the Code. By way of illustration, and without limiting the generality of the foregoing, the following principals shall apply in determining whether a Participant has incurred a separation from service: |
(i) | The Participant shall not be considered to have separated from service so long as the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Company under an applicable statute or by contract. | ||
(ii) | Regardless of whether his or her employment has been formally terminated, the Participant will be considered to have separated from service as of the date it is reasonably anticipated that no further services will be performed by the Participant for the Company, or that the level of bona fide services the Participant will perform after such date will permanently decrease to less than 50 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period of employment if the Participant has been employed for less than 36 months). For purposes of the preceding test, during any paid leave of absence the Participant shall be considered to have been performing services at the level commensurate with the amount of compensation received, and unpaid leaves of absence shall be disregarded. | ||
(iii) | For purposes of determining whether the Participant has separated from service, all services provided for the Company, or for any entity that is a member of the Controlled Group (including any Affiliate), shall be taken into account, whether provided as an employee or as a consultant or other independent contractor; provided that the Participant shall not be considered to have not separated from service solely by reason of service as a non-employee director of the Company or any other such entity. Solely for purposes of this Section 2.1(r), the term Controlled Group shall be modified by substituting 50 percent for 80 percent for all |
- 4 -
purposes of section 414(b) and (c) of the Code (and section 1563 to the extent incorporated therein). | |||
(iv) | A Participant who is employed by an Affiliate, and continues to be employed by the Affiliate following a stock sale, spin-off, or other transaction that causes the Participants employer to cease to be a member of the Controlled Group, shall not be considered to have incurred a Termination of Employment as a result of such transaction. A Participant who ceases to be employed by the Company or any member of the Controlled Group as a result of a sale of substantially all of the assets constituting a division, facility, or separate line of business, shall be considered to have incurred a Termination of Employment unless the Company (or Affiliate selling such assets) and the purchaser agree in writing, not later than the closing date of such transaction, that all Participants affected by such transaction shall not be considered to have incurred a Termination of Employment, and that the purchaser agrees to assume the obligation for payment of the Deferral Accounts of all such Participants in accordance with the Plan, unless the transaction constitutes a Change in Control with respect to such Participants and Section 14.1 applies. |
- 5 -
(a) | Shall specify the form in which distribution of the Deferral Account attributable to that enrollment shall be made under Section 6 (and if such designation is not clearly made to the contrary, shall be deemed to have been an election of a single lump sum distribution). | ||
(b) | Shall specify the time at which distribution shall be made which shall, subject to Section 6 hereof, be the later of such Participants Selected Distribution Date or such Participants Termination of Employment. | ||
(c) | Shall be made upon forms furnished by the Company, shall be made at such time as the Company shall determine and shall conform to such other procedural and substantive rules as the Company shall prescribe from time to time. | ||
(d) | Shall be irrevocable once it has been accepted by the Chief Executive Officer of the Company pursuant to Section 4.2(a), except to the extent that a new designation is made effective in accordance with Section 2.2 or 6.2.4. | ||
(e) | Shall contain a deferral election made in accordance with Section 4.2. |
(a) | Shall be irrevocable for the Plan Year with respect to which it is made once it has been accepted by the Chief Executive Officer of the Company or his or her designee; provided that an election for a Plan Year that has not been accepted by the last day of the last day of the preceding Plan Year shall be void. | ||
(b) | Shall designate the amount or portion of the Participants Incentive Compensation which is earned during that Plan Year (without regard to whether it would be paid |
- 6 -
during that or a subsequent Plan Year) which shall not be paid to the Participant but instead shall be accumulated in this Plan under Section 5 and distributed from this Plan under Section 6. Such designation shall be in a minimum amount of $1,000. If expressed as a percentage, such percentage shall not exceed fifty percent (50%) of such Participants Incentive Compensation. If expressed as a dollar amount, such dollar amount shall not exceed the dollar amount equivalent of fifty percent (50%) of such Participants targeted Incentive Compensation. If a dollar amount is elected, such election shall be reduced dollar for dollar if the Incentive Compensation declared, net of any applicable tax withholding, is less than the election. | |||
(c) | Shall designate the amount or portion of the Participants Base Salary which is earned during that Plan Year (without regard to whether it would be paid during that or a subsequent Plan Year) which shall not be paid to the Participant but instead shall be accumulated in this Plan under Section 5 and distributed from this Plan under Section 6. Such designation shall be in a minimum amount of $1,000, and may be up to 100 percent (100%) of such Participants Base Salary, less (i) all FICA, federal, state and/or local income tax liabilities, and (ii) all other amounts withheld from the Participants Base Salary, including without limitation elective deferrals and contributions to any other employee benefit plan, whether before or after tax, and repayment of any loans. The amount withheld pursuant to clause (ii) shall be determined as of the last day of the immediately preceding Plan Year, and by making a deferral election the Participant agrees not to increase the amount of any such withholding if the effect would be to reduce the portion of his or her Base Salary that is deferred. | ||
(d) | Shall be made upon forms furnished by the Company, shall be made at such time as the Company shall determine, shall be made before the beginning of the Plan Year with respect to which it is made and shall conform to such other procedural and substantive rules as the Company shall prescribe from time to time. |
- 7 -
(a) | Base Salary deferrals and Incentive Compensation deferrals made pursuant to Section 4, above; | ||
(b) | Employee Benefit Plan Equivalents as provided by Section 5.2 below; and | ||
(c) | Gains or losses on deemed investment options as provided by Section 5.3 below. |
- 8 -
(a) | The Participants death; |
- 9 -
(b) | The Participants Disability; or | ||
(c) | The occurrence of the Selected Distribution Date. Notwithstanding the foregoing, if a Selected Distribution Date that was elected prior to January 1, 2009, occurs prior to Termination of Employment other than by reason of death or Disability, the Event of Maturity shall be postponed until the Participants Termination of Employment. Effective for Selected Distribution Dates elected on or after January 1, 2009 (including new Selected Distribution Dates elected pursuant to Section 6.2.4), the preceding sentence shall not apply, and the Event of Maturity shall be the Selected Distribution Date even if the Participant is still employed on the Selected Distribution Date. If the Participants Selected Distribution Date occurs while the Participant is still employed, and if the Management Committee determines that the Participant is eligible to continue to make deferral elections for Plan Years after the last Plan Year prior to the Selected Distribution Date, a new Deferral Account shall be established for the Participant to which all amounts deferred for such Plan Years, and any earnings thereon, shall be credited, and the Participant may elect a new Selected Distribution Date, and method of distribution, for such new Deferral Account prior to the beginning of the Plan Year that includes the original Selected Distribution Date. |
(a) | Term Certain Installments to Participant . Subject to Section 6.2.1(d), below, if the distributee is a Participant and the Installment Amount on the date of the applicable Event of Maturity (without giving effect to any gains or losses under Section 5.1(c) after such date) is at least Fifty Thousand Dollars ($50,000), in a series of monthly installments payable over a period not less than two (2) years and not more than ten (10) years, commencing as of the day specified in Section 6.2.2 and continuing on the first day of each succeeding month until the Installment Amount is paid in full. If the Participant elects installments, his or her account shall continue to be credited or charged with investment results pursuant to Section 5.3, and the amount of each monthly installment during a year shall be equal to (i) the remaining balance of the Installment Amount on the last day of the preceding year, divided by the number of years for which installments remain to be paid or, in the case of installments to be paid in the first year to a Participant whose Selected Distribution Date was the day of his or her Termination of Employment, the Installment Amount at the end of the month in which the |
- 10 -
Termination of Employment occurs, in either case divided by (ii) the number of monthly installments to be paid in such year; provided that the final monthly installment shall be equal to the entire remaining balance of the Installment Amount. The entire series of installments shall be considered a single payment for purposes of section 409A of the Code. | |||
(b) | Lump Sum . If the distributee is either a Participant or Beneficiary (except as provided in Section 6.2.1(a)), in a single lump sum payment. Payment to a Beneficiary shall in all events be made in a lump sum, regardless of whether the Participant elected payment in installments and regardless of whether installment payments have begun at the time of death. | ||
(c) | Lump Sum Distribution Notwithstanding Designation . If a Participants total Installment Amount is less than Fifty Thousand Dollars ($50,000) on the Event of Maturity, then, regardless of whether the Participant elected to have his or her Deferral Account paid in installments pursuant to Section 6.2.1(a), such Participants entire Deferral Account shall be paid in a single lump sum pursuant to the provisions of Section 6.2.1(b) above. |
(a) | Selected Distribution Date . Except as otherwise provided in this Section 6.2.2, payment shall be made or commenced within ninety (90) days after the Participants Selected Distribution Date. | ||
(b) | Death . Upon the death of a Participant before his or her entire Deferral Account has been distributed, payment of the remaining balance of the Deferral Account shall be made to the Beneficiary within ninety (90) days after the Participants death. | ||
(c) | Disability . If the payment is made on account of the Participants Disability, payment shall be made in a single lump sum as if the Participant had a Termination of Employment as provided in paragraph (a) above, within ninety (90) days of the commencement of such Disability. | ||
(d) | Selected Distribution Date Designated Before 2009 . If a Selected Distribution Date elected prior to January 1, 2009, occurs prior to the Participants Termination of Employment, payment shall be made or commenced within ninety (90) days after the Participants Termination of Employment. | ||
(e) | Six Month Delay in Distributions to Key Employees . If a Participants Event of Maturity is, or is defined by, the Participants Termination of Employment and the Participant is a key employee, as hereinafter defined, then no distribution shall be made to the Participant until the first business day that is at least six months after the Termination of Employment. If the distribution is to be made in the form of a lump sum, then the Participants Deferral Account shall continue to be credited with earnings or losses based upon the investment options elected |
- 11 -
(which may be changed during such six month period in accordance with Section 5.3) until distributed. If the distribution is to be made in installments, then all installments that would otherwise have been paid during such six month period shall be accumulated and paid in a lump sum, without interest, at the end of such six month period. If the Participant dies during the six month period, the delay required by this Section 6.2.2(e) shall not apply to payments to the Participants Beneficiary. For purposes of this Section 6.2.2(e) a key employee shall mean any Participant who is a key employee as defined by section 416(i) of the Code (disregarding section 416(i)(5)). Whether a Participant is a key employee shall determined as of the last day of each Plan Year, based upon the Participants total compensation during the Plan Year then ending and the Participants status as an officer or shareholder at any time during such Plan Year, and a Participant who is determined to be a key employee on the last day of a Plan Year shall be subject to this Section 6.2.2(e) if the Participant incurs a Termination of Employment during the twelve (12) months commencing on April 1 of the following Plan Year. For purposes of determining a Participants status as a key employee, the Participants compensation shall mean total compensation required to be reported as taxable income in Box 1 of Form W-2 (or its equivalent), increased by all pre-tax deferrals and contributions pursuant to section 402(g), 125, or 132(f) of the Code, provided that compensation paid to a nonresident alien which is not effectively connected with the conduct of a trade or business within the United States shall not be included. For avoidance of doubt and without limiting the generality of the last sentence of Section 1.3, this Section 6.2.2(e) shall not apply to the portion of a Participants Deferral Account that consists of amounts credited to the Deferral Account prior to January 1, 2005 and the earnings thereon, and such portion shall be distributed without the six month delay required by this Section 6.2.2(e). | |||
(f) | No Election of Year of Payment . In any case in which the ninety (90) day period during which payment is to be made overlaps two calendar years, the Participant or Beneficiary shall not be permitted to elect, directly or indirectly, the year in which the payment shall be made. |
- 12 -
(a) | When a Participant first elects to have an amount credited to an In-Service Distribution Account, the Participant shall specify a distribution date for the In-Service Distribution Account (the In-Service Distribution Date), which shall be January 1 of a year that is at least three years after the first amount is credited to the In-Service Distribution Account. | ||
(b) | The balance in an In-Service Distribution Account shall be distributed either in a lump sum on the In-Service Distribution Date, or, if the Participant so elects at the same time the In-Service Distribution date is specified, in a series of monthly installments payable over a period not less than two (2) years and not more than five (5) years commencing on the In-Service Distribution Date, calculated in accordance with Section 6.2.1(a) as if the entire balance in the In-Service Distribution Account were the Installment Amount (without regard to the requirement that the minimum account balance for installment payments may not be less than $50,000). | ||
(c) | If a Participant incurs a Termination of Employment for any reason, including death or Disability, either prior to the In-Service Distribution Date, or while an In-Service Distribution Account is being paid in installments, the remaining balance of the In-Service Distribution Account shall be distributed in the same manner as the Participants Deferral Account. |
- 13 -
(d) | A Participant may not elect to have any portion of the deferrals for any Plan Year allocated to an In-Service Distribution Account beginning with the Plan Year that includes the In-Service Distribution Date, and any such election shall be void and the amount of the deferral shall instead be allocated to the Deferral Account. | ||
(e) | A Participant may have up to two separate In-Service Distribution Accounts at any one time, with different In-Service Distribution Dates and/or distribution methods. A Participant may change the In-Service Distribution Date, or the method of distribution of the In-Service Distribution Account, by filing a new designation in accordance with Section 6.2.4 at least one year prior to the original In-Service Distribution Date; provided that if any portion of the In-Service Distribution Account represents amounts deferred on or after January 1, 2005, no change may be made (including changing the form of payment only) unless the new designation changes the In-Service Distribution Date to a date that is at least five years later than the original In-Service Distribution Date. |
- 14 -
(a) | The spin off of eFunds shall not constitute a Termination of Employment for purposes of this Plan and payment shall not be made or commenced to eFunds Participants based on the occurrence of the spin off. | ||
(b) | Unless eligible for distribution before the spin off, eFunds Participants shall not be eligible for payments of Deferral Accounts from the Plan until they have an Event of Maturity occurring after the spin off. Termination of Employment by eFunds (including all of its affiliates, defined as any business entity which is affiliated in ownership with eFunds and is recognized as an affiliate of eFunds by the Management Committee for purposes of this Plan) shall constitute a Termination of Employment for purposes of this Plan with respect to eFunds Participants. | ||
(c) | The deferral elections of eFunds Participants shall immediately and automatically terminate upon occurrence of the spin off and there shall be no further deferrals of compensation for such eFunds Participants into this Plan. There shall also be no further Employee Benefit Plan Equivalents credited to the eFunds Participants Deferral Accounts after the spin off, except any credits reflecting deferrals occurring before the spin off. Deferrals related to Incentive Compensation earned before the spin off (even if paid after the spin off) will be credited to the eFunds Participants accounts in accordance with the terms of their deferral elections for the 2000 Plan Year. | ||
(d) | All other provisions of the Plan shall remain in effect as to the eFunds Participants who shall become inactive Participants, including but not limited to the ability to allocate Deferral Accounts among Investment Options as provided at Section 5.3 and the crediting or debiting of such Deferral Accounts to reflect such Investment Options as provided at Section 5.1(c). | ||
(e) | The Company may at any time amend the Plan to terminate the participation of the eFunds Participants and distribute the account balances of all of the eFunds Participants in lump sum payments. In the event that any eFunds Participant is subsequently employed by an Affiliate and becomes a Participant, the balance of his or her account attributable to his or her prior employment by eFunds shall remain separate and shall be governed by the provisions of this Section 6.3. It is the intention of the Company that the accounts of the eFunds Participants, having been fully accrued and vested prior to January 1, 2005, shall be exempt from Section 409A of the Code. |
- 15 -
(a) | First, reduce the portion of the Participants Base Salary or Incentive Compensation that the Participant has elected to defer for the Plan Year by the amount reasonably necessary to satisfy such need. | ||
(b) | Second, to the extent that the financial need cannot be satisfied by terminating the Participants deferral election, provide that all or a portion of the Deferral Account shall be paid immediately in a lump sum payment, in an amount not to exceed the amount necessary to satisfy the remaining financial need, and any taxes imposed upon such payment. | ||
(c) | In the case of a Participant receiving installment payments, provide for the present value of all or a portion of such installments to be paid immediately in a lump sum payment, in an amount not to exceed the amount necessary to satisfy the remaining financial need, and any taxes imposed upon such payment. |
- 16 -
- 17 -
(a) | If the claim is denied in whole or in part, the Management Committee shall notify the claimant of the adverse benefit determination within ninety (90) days after receipt of the claim. | ||
(b) | The ninety (90) day period for making the claim determination may be extended for ninety (90) days if the Management Committee determines that special circumstances require an extension of time for determination of the claim, provided that the Management Committee notifies the claimant, prior to the expiration of the initial ninety (90) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made. |
(a) | the specific reasons for the adverse determination; | ||
(b) | references to the specific provisions of the Plan (or other applicable Plan document) on which the adverse determination is based; | ||
(c) | a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and | ||
(d) | a description of the claims review procedure, including the time limits applicable to such procedure, and a statement of the claimants right to bring a civil action under section 502(a) of ERISA following an adverse determination on review, subject to Section 10.6. |
- 18 -
(a) | The sixty (60) day period for deciding the claim on review may be extended for sixty (60) days if the Management Committee determines that special circumstances require an extension of time for determination of the claim, provided that the Management Committee notifies the claimant, prior to the expiration of the initial sixty (60) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made. | ||
(b) | In the event that the time period is extended due to a claimants failure to submit information necessary to decide a claim on review, the claimant shall have sixty (60) days within which to provide the necessary information and the period for making the claim determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information or, if earlier, the expiration of sixty (60) days. | ||
(c) | The Management Committees review of a denied claim shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. |
(a) | the specific reasons for the denial; | ||
(b) | references to the specific provisions of the Plan (or other applicable Plan document) on which the adverse determination is based; | ||
(c) | a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimants claim for benefits; | ||
(d) | a statement describing any voluntary appeal procedures offered by the Plan and the claimants right to obtain information about such procedures; and | ||
(e) | a statement of the claimants right to bring an action under section 502(a) of ERISA, subject to Section 10.6. |
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(a) | No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the established claim procedures. The Management Committee may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Management Committee upon request. | ||
(b) | All decisions on claims and on requests for a review of denied claims shall be made by the Management Committee unless delegated as provided for in the Plan, in which case references in this Section 10 to the Management Committee shall be treated as references to the Management Committees delegate. | ||
(c) | Claimants may be represented by a lawyer or other representative at their own expense, but the Management Committee reserves the right to require the claimant to furnish written authorization and establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant. A claimants representative shall be entitled to copies of all notices given to the claimant. | ||
(d) | The decision of the Management Committee on a claim and on a request for a review of a denied claim may be provided to the claimant in electronic form instead of in writing at the discretion of the Management Committee. | ||
(e) | In connection with the review of a denied claim, the claimant or the claimants representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimants claim for benefits. | ||
(f) | The time period within which a benefit determination will be made shall begin to run at the time a claim or request for review is filed in accordance with the claims procedures, without regard to whether all the information necessary to make a benefit determination accompanies the filing. | ||
(g) | The claims and review procedures shall be administered with appropriate safeguards so that benefit claim determinations are made in accordance with governing plan documents and, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants. | ||
(h) | For the purpose of this Section, a document, record, or other information shall be considered relevant if such document, record, or other information: (i) was relied upon in making the benefit determination; (ii) was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; (iii) demonstrates compliance with the administration processes and safeguards designed to ensure that the benefit claim determination was made in accordance with governing plan documents and that, where appropriate, the Plan provisions have been applied consistently with respect to |
- 20 -
similarly situated claimants; and (iv) constitutes a statement of policy or guidance with respect to the Plan concerning the denied treatment option or benefit for the claimants diagnosis, without regard to whether such advice or statement was relied upon in making the benefit determination. | |||
(i) | The Management Committee may, in its discretion, rely on any applicable statute of limitation or deadline as a basis for denial of any claim. |
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(a) | to amend or to terminate this Plan; and | ||
(b) | to consent to the adoption of the Plan by other business entities; to establish conditions and limitations upon such adoption of the Plan by other business entities. |
(a) | Appointment and Removal . The Management Committee, subject to the direction of the Committee and the Chief Executive Officer, shall have all of the functions and authorities generally assigned in this Plan to the Company. The Management Committee shall consist of one or members as may be determined and appointed from time to time by the Chief Executive Officer of the Company and they shall serve at the pleasure of such Chief Executive Officer and the Committee. | ||
(b) | Automatic Removal . If any individual who is a member of the Management Committee is a director, officer or employee when appointed as a member of the Management Committee, then such individual shall be automatically removed as a member of the Management Committee at the earliest time such individual ceases to be a director, officer or employee. This removal shall occur automatically and without any requirement for action by the Chief Executive Officer of the Company or any notice to the individual so removed. | ||
(c) | Authority . The Management Committee may elect such officers as the Management Committee may decide upon. In addition to the other authorities delegated elsewhere in this Plan to the Management Committee, the Management Committee shall: |
(i) | establish rules for the functioning of the Management Committee, including the times and places for holding meetings, the notices to be given in respect of such meetings and the number of members who shall constitute a quorum for the transaction of business, | ||
(ii) | organize and delegate to such of its members as it shall select authority to execute or authenticate rules, advisory opinions or instructions, and other instruments adopted or authorized by the Management Committee; adopt such bylaws or regulations as it deems desirable for the conduct of its affairs; appoint a secretary, who need not be a member of the Management Committee, to keep its records and otherwise assist the Management Committee in the performance of its duties; keep a record of all its proceedings and acts and keep all books of account, records and other data as may be necessary for the proper administration of the Plan, | ||
(iii) | determine from the records of the Company and its Affiliates the compensation, service records, status and other facts regarding Participants and other employees, |
- 22 -
(iv) | cause to be compiled at least annually, from the records of the Management Committee and the reports and accountings of the Company and its Affiliates, a report or accounting of the status of the Plan and the Deferral Accounts of the Participants, and make it available to each Participant who shall have the right to examine that part of such report or accounting (or a true and correct copy of such part) which sets forth the Participants benefits, | ||
(v) | prescribe forms to be used for applications for participation, benefits, notifications, etc., as may be required in the administration of the Plan, | ||
(vi) | set up such rules as are deemed necessary to carry out the terms of this Plan, | ||
(vii) | resolve all questions of administration of the Plan not specifically referred to in this Section, | ||
(viii) | delegate or redelegate to one or more persons, jointly or severally, and whether or not such persons are members of the Management Committee or employees of the Company, such functions assigned to the Management Committee hereunder as it may from time to time deem advisable, and | ||
(ix) | perform all other acts reasonably necessary for administering the Plan and carrying out the provisions of this Plan and performing the duties imposed by the Plan on it. |
(d) | Majority Decisions . If there shall at any time be three (3) or more members of the Management Committee serving hereunder who are qualified to perform a particular act, the same may be performed, on behalf of all, by a majority of those qualified, with or without the concurrence of the minority. No person who failed to join or concur in such act shall be held liable for the consequences thereof, except to the extent that liability is imposed under ERISA. |
- 23 -
- 24 -
(a) | The date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Company or Affiliate that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of such corporation. If any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company or Affiliate, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a change in the effective control of the corporation pursuant to this paragraph or paragraph (b)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this paragraph. This paragraph applies only when there is a transfer or issuance of stock of the Company or Affiliate and stock in such corporation remains outstanding after the transaction. |
- 25 -
(b) | The date any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company or Affiliate possessing 30 percent or more of the total voting power of the stock of such corporation. | ||
(c) | The date a majority of members of the Companys (but not any Affiliates) board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the corporations board of directors before the date of the appointment or election. | ||
(d) | The date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company or Affiliate that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the corporation immediately before such acquisition or acquisitions; provided that a Change in Control shall not result from a transfer of assets by the Company or an Affiliate to (i) a shareholder of the corporation (immediately prior to the transfer) in exchange for or with respect to the corporations stock, (ii) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the transferor corporation immediately following the transfer, (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the transferring corporation immediately following the transfer, or (iv) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person or group of persons described in clause (iii) For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. |
(a) | Persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company or Affiliate. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. | ||
(b) | If any one person, or more than one person acting as a group, owns stock of the |
- 26 -
Company or Affiliate possessing 30 percent or more of the total voting power of the stock of such corporation, the acquisition of additional control of the Company or Affiliate by the same person or persons will not be considered to cause a Change in Control pursuant to paragraph (a) or (b) of Section 14.1. | |||
(c) | The definition of Change in Control contained in this Section 14 is intended to conform to the definition of a change in control event as set forth in section 409A and the regulations thereunder, and shall be so construed. To the maximum extent permitted by law, a transaction shall not be considered to constitute a Change in Control unless it also constitutes a change in control event for purposes of section 409A, and a transaction that constitutes a change in control event for purposes of section 409A shall be considered a Change in Control. |
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2
3
EXECUTIVE: | ||||||||
|
||||||||
|
Name: | |||||||
Dated Signed: | ||||||||
|
4
(i) | you have received disability benefits for a period of not less than three months under a long or short-term disability plan or policy (or both), and are eligible for benefits under the long-term disability plan of the Corporation or any Affiliate of which you are employed at the time of such disability; or | ||
(ii) | in the event that your employer does not have a long-term disability plan in effect at such time, you are unable to engage in any substantial gainful activity. |
(i) | You have breached your obligations of confidentiality to the Corporation or any of its Affiliates; | ||
(ii) | You have otherwise failed to perform your employment duties and do not cure such failure within thirty (30) days after receipt of specific written notice thereof; | ||
(iii) | You commit an act, or omit to take action, in bad faith which results in material detriment to the Corporation or any of its Affiliates; | ||
(iv) | You have had excessive absences unrelated to illness or vacation (excessive shall be defined in accordance with local employment customs); | ||
(v) | You have committed fraud, misappropriation, embezzlement or other act of dishonesty in connection with the Corporation or any of its Affiliates or its or their businesses; |
(vi) | You have been convicted or have pleaded guilty or nolo contendere to criminal misconduct constituting a felony or a gross misdemeanor, which gross misdemeanor involves a breach of ethics, moral turpitude, or immoral or other conduct reflecting adversely upon the reputation or interest of the Corporation or its Affiliates; | ||
(vii) | Your use of narcotics, liquor or illicit drugs has had a detrimental effect on performance of employment responsibilities; or | ||
(viii) | You are in default under any agreement between you and the Corporation or any of its Affiliates. |
(i) | for purposes of Treas. Reg. §1.409A-1(h)(1)(ii), an employee shall be considered to have incurred a separation from service on the date on which it is reasonably anticipated that the level of bona fide services the employee will perform after such date (whether as an employee or as an independent contractor) will permanently decrease to less than 50 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the employee has been providing services to the employer less than 36 months); and | ||
(ii) | for purposes of identifying specified employees the safe harbor definition of compensation contained in Treas. Reg. §1.415(c)-2(d)(4) (compensation required to be reported on Form W-2 plus elective deferrals) shall be used, and compensation paid to a nonresident alien that is not effectively connected with the conduct of a trade or business within the United States shall be excluded. |
Year Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||
Earnings:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Income from continuing operations before
income taxes
|
$ | 160,176 | $ | 220,015 | $ | 142,788 | $ | 250,223 | $ | 316,453 | $ | 299,380 | ||||||||||||
|
||||||||||||||||||||||||
Interest expense (excluding capitalized interest)
(1)
|
50,421 | 55,294 | 56,661 | 56,604 | 32,851 | 19,241 | ||||||||||||||||||
|
||||||||||||||||||||||||
Portion of rent expense under long-term operating
leases representative of an interest factor
|
3,147 | 2,900 | 3,526 | 4,642 | 4,875 | 2,478 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Total earnings
|
$ | 213,744 | $ | 278,209 | $ | 202,975 | $ | 311,469 | $ | 354,179 | $ | 321,099 | ||||||||||||
|
||||||||||||||||||||||||
Fixed charges:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Interest expense (including capitalized interest)
(1)
|
$ | 50,421 | $ | 55,294 | $ | 57,051 | $ | 57,399 | $ | 33,299 | $ | 19,241 | ||||||||||||
|
||||||||||||||||||||||||
Portion of rent expense under long-term operating
leases representative of an interest factor
|
3,147 | 2,900 | 3,526 | 4,642 | 4,875 | 2,478 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Total fixed charges
|
$ | 53,568 | $ | 58,194 | $ | 60,577 | $ | 62,041 | $ | 38,174 | $ | 21,719 | ||||||||||||
|
||||||||||||||||||||||||
Ratio of earnings to fixed charges
|
4.0 | 4.8 | 3.4 | 5.0 | 9.3 | 14.8 |
(1) | Does not include interest expense related to uncertain positions recorded under Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, which we adopted on January 1, 2007. |
Date | ||
|
||
/s/ Lee Schram
|
2/18/2009 | |
|
||
Lee Schram, Director and
|
||
Principal Executive Officer
|
||
|
||
/s/ Richard S. Greene
|
2/18/2009 | |
|
||
Richard S. Greene, Principal Financial
Officer
|
||
|
||
/s/ Terry D. Peterson
|
2/18/2009 | |
|
||
Terry D. Peterson, Principal Accounting
Officer
|
||
|
||
/s/ Ronald C. Baldwin
|
2/18/2009 | |
|
||
Ronald C. Baldwin, Director
|
||
|
||
/s/ Charles A. Haggerty
|
2/18/2009 | |
|
||
Charles A. Haggerty, Director
|
||
|
||
/s/ Isaiah Harris, Jr.
|
2/18/2009 | |
|
||
Isaiah Harris, Jr., Director
|
||
|
||
/s/ Don J. McGrath
|
2/18/2009 | |
|
||
Don J. McGrath, Director
|
||
|
||
/s/ Cheryl Mayberry McKissack
|
2/18/2009 | |
|
||
Cheryl Mayberry McKissack, Director
|
||
|
||
/s/ Neil J. Metviner
|
2/18/2009 | |
|
||
Neil J. Metviner, Director
|
||
|
||
/s/ Stephen P. Nachtsheim
|
2/18/2009 | |
|
||
Stephen P. Nachtsheim, Director
|
||
|
||
/s/ Mary Ann ODwyer
|
2/18/2009 | |
|
||
Mary Ann ODwyer, Director
|
||
|
||
/s/ Martyn R. Redgrave
|
2/18/2009 | |
|
||
Martyn R. Redgrave, Director
|
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: February 18, 2009 | /s/ Lee J. Schram | |||
Lee J. Schram | ||||
Chief Executive Officer | ||||
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: February 18, 2009 | /s/ Richard S. Greene | |||
Richard S. Greene | ||||
Chief Financial Officer | ||||
(1) | the Annual Report on Form 10-K of the Company for the year ended December 31, 2008 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and | |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: February 18, 2009 | /s/ Lee J. Schram | |||
Lee J. Schram | ||||
Chief Executive Officer | ||||
/s/ Richard S. Greene | ||||
Richard S. Greene | ||||
Chief Financial Officer | ||||