Exhibit 10.2
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Deluxe Corporation, a Minnesota corporation
(the "Company") and Xxxxxxxx X. Xxxxxx (the "Executive"), dated as of the 2nd
day of April, 2001 (the "Effective Date").
I. Certain Definitions.
A. "Affiliate" shall mean a company controlled directly or
indirectly by the Company where "control" shall mean the
right, either directly or indirectly, to elect a majority of
the directors thereof without the consent or acquiescence of
any third party.
B. "Board" shall mean the Board of Directors of the Company.
C. "Cause" shall mean:
1. the willful and continued failure of the Executive to
perform substantially the Executive's duties with the
Company and its Affiliates (other than any such
failure resulting from incapacity due to physical or
mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination
for Good Reason by the Executive), after a written
demand for substantial performance is delivered to
the Executive by the Board which specifically
identifies the manner in which the Board believes
that the Executive has not substantially performed
the Executive's duties, or
2. the Executive's conviction of a felony or the willful
engaging by the Executive in (a) other illegal
conduct relating to the business or assets of the
Company, or (b) gross misconduct which is materially
injurious to the Company or its Affiliates.
For purposes of this definition, (a) no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done,
or omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in the
best interests of the Company and (b) in the event of a dispute
concerning the application of this provision, no
claim by the Company that Cause exists shall be given effect unless the
Company establishes to the Committee by clear and convincing evidence
that Cause exists. Any act, or failure to act, based upon instructions
given by the Board or upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
D. "Committee" shall mean the Compensation Committee of the
Company's Board.
E. "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company or its Affiliates, as the
case may be, on a full-time basis for 180 consecutive business
days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal
representative.
F. "Good Reason" shall mean:
1. except with Executive's written consent given in his
discretion, (a) the assignment to the Executive of
any duties materially inconsistent with the
Executive's position (including status, offices,
titles and reporting requirements), authority, duties
or responsibilities or (b) any other action by the
Company which results in a material diminution in the
Executive's position (or positions) with the Company
or its Affiliates, excluding for this purpose an
isolated, insubstantial or inadvertent action not
taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof
given by the Executive and excluding any diminution
attributable to the fact that the Company is no
longer a public company;
2. any material reduction in the Executive's aggregate
compensation and incentive opportunities, or any
failure by the Company to pay the Executive any
portion of the Executive's compensation when such
compensation is due, other than an isolated,
insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
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3. the Company's requiring the Executive to be based at
any location more than 50 miles from the location at
which the Executive is based as of the Effective
Date;
4. any purported termination by the Company of the
Executive's employment which is not effected pursuant
to a Notice of Termination satisfying the
requirements of this Agreement. For purposes of this
Agreement, no such purported termination shall be
effective;
5. any failure by the Company to comply with and satisfy
VII.C. of this Agreement; or
6. any request or requirement by the Company or its
Affiliates that the Executive take any action or omit
to take any action that is inconsistent with or in
violation of the Company's ethical guidelines and
policies as in effect from time to time or any
professional ethical guidelines or principles that
may be applicable to the Executive.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute a consent to, or a
waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
II. Retention Payment.
A. Subject to Section II.B. hereof, if the Executive remains in
the employ of the Company through December 31, 2002, the
Company shall pay to the Executive the sum of $2,900,000 (the
"Retention Payment") by January 31, 2003, plus interest
thereon from April 1, 2000 to the date of payment, at a rate
of 8% per annum.
B. If, prior to December 31, 2002, the Executive's employment is
terminated (a) by the Company without Cause, (b) by the
Executive for Good Reason or (c) due to the Executive's death
or Disability, then the Company shall pay to the Executive,
within ten business days following the Date of Termination,
the Retention Payment, plus
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interest thereon from April 1, 2000 to the date of payment, at
a rate of 8% per annum.
III. Termination of Employment.
A. Notice of Termination. Any purported termination of the
Executive's employment (other than by reason of death) shall
be communicated by Notice of Termination to the other party
hereto given in accordance with the terms of this Agreement.
For purposes of this Agreement, a "Notice of Termination"
means a written notice which (1) to the extent applicable,
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (2) if the
Date of Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the
giving of such notice). Further, a Notice of Termination for
Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct
described in subparagraph I.C.1. or I.C.2. above, and
specifying the particulars thereof in reasonable detail. The
failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which
contributes to a showing of Disability, Good Reason or Cause
shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's
rights hereunder;
B. Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, however, that
if the Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death of
the Executive.
C. Dispute Concerning Termination. If within 15 days after any
Notice of Termination is given, or, if later, prior to the
Date of Termination,
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the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination,
the Date of Termination shall be extended until the date on
which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order
or decree of an arbitrator or a court of competent
jurisdiction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal has
been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute given by
the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with
reasonable diligence.
IV. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its
Affiliates and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its
Affiliates.
V. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company
may have against the Executive or others. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may incur in good faith as a result of any
contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about
the amount of any payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code"). Such payments shall be made within five
(5) business days after delivery of the Executive's written requests
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
VI. Certain Additional Payments by the Company.
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A. Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined
that any payment or benefit received or to be received by the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or any
other plan, arrangement or agreement, but determined without
regard to any additional payments required under this Section
VI) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section VI.A., if it shall be determined
that the Executive is entitled to a Gross-Up Payment, but that
the Executive, after taking into account the Payments and the
Gross-Up Payment, would not receive a net increase in
after-tax benefit of at least $50,000 (taking into account
both income taxes and any Excise Tax) as compared to the net
after-tax benefit the Executive would receive if the Gross-Up
Payment were eliminated and the Payments were reduced, in the
aggregate, to an amount (the "Reduced Amount") such that the
receipt of Payments would not give rise to any Excise Tax,
then no Gross-Up Payment shall be made to the Executive and
the Payments, in the aggregate, shall be reduced to the
Reduced Amount. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) all of the Payments shall be treated as
"parachute payments" (within the meaning of Section 280G(b) of
the Code) unless, in the opinion of tax counsel ("Tax
Counsel") reasonably acceptable to the Executive and selected
by the Accounting Firm (as defined below), such payments or
benefits (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b)(4)(A) of the
Code, (ii) all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax unless, in the opinion of Tax
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Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the
Code) in excess of the "base amount" (as defined in Section
280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax,
and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm
in accordance with the principals of Sections 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of
Executive's residence on the Date of Termination (or if there
is no Date of Termination, then the date on which the Gross-Up
Payment is calculated for purposes of this Section VI.A.), net
of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
B. Subject to the provisions of Section VI. C., all
determinations required to be made under this Section VI,
including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
the Company's independent auditors (the "Accounting Firm")
which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the
receipt of notice from the Executive that a Payment has been
made or will be required, as the case may be, or such earlier
time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section VI.,
shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to Section VI.C. and the
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Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
C. The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the
date on which he gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
1. give the Company any information reasonably requested
by the Company relating to such claim,
2. take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
3. cooperate with the Company in good faith in order to
effectively contest such claim, and
4. permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
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expenses. Without limitation on the foregoing provisions of
this Section VI.C., the Company shall control all proceedings
taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
D. If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section VI.C., the Executive
becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company's complying
with the requirements of Section VI.C.) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of any amount advanced by
the Company pursuant to Section VI.C., a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount
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of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
E. The Gross-Up Payment shall be made not later than the fifth
day following the date on which the Retention Payment is paid;
provided, however, that if the amount of such Gross-Up
Payment, and the limitation on such payments set forth in
Section VI.A. hereof, cannot be finally determined on or
before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the
Accounting Firm, of the minimum amount of such Gross-Up
Payment to which the Executive is clearly entitled and shall
pay the remainder of such payments (together with interest on
the unpaid remainder (or on all such payments to the extent
the Company fails to make such payments when due) at 120% of
the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after such day. In the
event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the
Company (together with interest at 120% of the rate provided
in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Agreement, the Company shall
provide the Executive with a written statement setting forth
the manner in which such payments were calculated and the
basis for such calculations including, without limitation, any
opinions or other advice the Company has received from Tax
Counsel, the Accounting Firm or other advisors or consultants
(and any such opinions or advice which are in writing shall be
attached to the statement).
VII. Successors.
A. This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
If the Executive shall die while any amount would still be
payable to the Executive hereunder if the
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Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
B. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
C. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and shall include any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
VIII. Miscellaneous.
A. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, without
reference to principles of conflict of laws. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
B. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Xxxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
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If to the Company:
Deluxe Corporation
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or
regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure
to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason, shall not
be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
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F. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or
total performance after the expiration of the term of this
Agreement shall survive such expiration.
G. All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Committee and shall
be in writing. Any denial by the Committee of a claim for
benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement
relied upon. The Committee shall afford a reasonable
opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the
Executive's claims has been denied.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
Deluxe Corporation Executive
By:
-------------------------------- --------------------------------
Xxxxxx X. Xxxxxx, Xx. Xxxxxxxx X. Xxxxxx
Chairman, Compensation Committee
of the Board of Directors
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