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LOGO
FORM
10-K
Nineteen
Ninety-Seven
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 28, 1997
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-11427
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NEW ENGLAND BUSINESS SERVICE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2942374
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
01471
500 MAIN STREET (ZIP CODE)
GROTON, MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 448-6111
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock ($1.00 par value) New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [_]
The aggregate market value of the Registrant's Common Stock, par value $1.00
per share, held by stockholders who are not affiliates of the Registrant at
August 29, 1997 as computed by reference to the closing price of such stock on
that date was approximately $416,949,335.
The number of shares of Registrant's Common Stock, par value $1.00 per
share, outstanding at August 29, 1997 was 13,670,470.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement sent to stockholders in connection with the
Annual Meeting to be held on October 24, 1997 are incorporated by reference
into Items 10, 11, 12 and 13 (Part III) of this Report. Such Proxy Statement,
except for the parts therein which have been specifically incorporated by
reference, shall not be deemed "filed" for the purposes of this report on Form
10-K.
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PART I
ITEM 1. BUSINESS
Founded in 1952, New England Business Service, Inc. (which, with its branch,
NEBS Business Stationery located in the United Kingdom, and its wholly-owned
subsidiaries, Shirlite, Ltd., Standard Forms Ltd., and Standard Forms
Holdings, Ltd. of the United Kingdom, NEBS Business Forms Limited of Midland,
Ontario and SYCOM, Inc., shall be referred to as the "Company") is a Delaware
corporation with principal executive offices located at 500 Main Street,
Groton, Massachusetts 01471. The Company's main telephone number is
(508) 448-6111.
Reference is made to the information contained in Note 14, Financial
Information by Geographic Area, in the Notes to the Consolidated Financial
Statements contained in Item 8 of Part II of this Annual Report on Form 10-K
for the fiscal year ended June 28, 1997 for information regarding business
segments.
PRODUCTS
The Company's product line consists of over 1,000 standardized imprinted
manual and computer business forms, checks and check writing systems,
stationery, labels, custom forms and other printed products principally
designed and imprinted in-house. The Company also distributes more than 8,800
industrial shipping and packaging products including corrugated boxes,
polyethylene bags, tape, labels and shrink wrap and distributes supplies such
as bags, ribbons, gift wrap and bows. In addition, the Company distributes a
select line of proprietary and third-party software packages designed to meet
small business needs. Products are either specifically designed for individual
lines of business or are of a type universally used by small businesses and
professional offices. The Company's full range of products are enhanced by
high quality, fast delivery, competitive prices and extensive product
guarantees.
The Company's standard manual business forms include billing forms, work
orders, job proposals, purchase orders, invoices and personnel forms. Standard
manual business forms are designed to provide small businesses with the
financial and other business records necessary to efficiently manage a
business. The Company's stationery line, including letterhead, envelopes and
business cards, is available in a variety of formats and ink colors designed
to provide small businesses with a professional image. Checks and check
writing systems are designed to facilitate payments, the recording of
transactional information and the posting of related bookkeeping entries.
The Company also offers a full line of printed products compatible with the
software which the Company distributes and compatible with over 3,500 other
third-party computer software packages commonly used by small businesses. The
Company's computer business forms, including checks, billing forms, work
orders, purchase orders and invoices are designed to provide automated small
businesses with the records necessary to efficiently manage a business.
Promotional products, including labels, pricing tags, signage and seasonal
greeting cards are designed to fulfill a variety of selling and marketing
activities and to provide small businesses with a professional image.
Additionally, the Company has designed a line of filing systems and
appointment products specifically for use in small professional offices.
The Company's packaging and shipping supplies, including bags and bag
closures, bubble and polystyrene fill, wrapping materials, boxes, tapes and
mailers are used principally by small wholesalers, manufacturers and
distributors as containers to package, distribute and market their products.
The Company's line of retail supplies, including bags, ribbons, gift wrap and
bows are used by small retailers to package and market their products.
Additionally, the Company offers the NEBS Colors(TM) line of printed
products. NEBS Colors offers a select line of color and image coordinated
business forms and checks designed to provide small businesses with a single
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source for affordable, coordinated and professional image building materials.
The Company also offers customers a logo design service.
The Company's line of NEBS(R) proprietary software consists of easy-to-use
forms-filling packages. In addition, the Company distributes software products
including One-Write Plus(R) and Quickbooks(R) accounting software, Page
Magic(R) desktop publishing software and a line of products designed by
MySoftware Company(TM). Software distributed by the Company is designed to
perform a variety of tasks required to manage and promote a small business,
and is compatible with the full range of business forms and other printed
products offered by the Company.
PRODUCT DEVELOPMENT AND RESEARCH
The Company's products are designed principally by an in-house product
development staff or are obtained from third-party sources by in-house buyers.
The Company relies upon direct field research with customers and prospects,
focus groups, mail surveys, feedback from retail distributors, retailers,
representatives and unsolicited suggestions to generate new product ideas.
Product design efforts are accomplished or directed by Company design
personnel who employ manual and computer design methods to create products.
Product redesign efforts range from minor revisions of existing manual
business forms to the creation and design of a consistent and coordinated line
of products such as the NEBS Colors(TM) line of printed products. Throughout
the design process, the Company solicits comments and feedback from customers
and prospects, and tests market acceptance through a variety of direct mail
and selling test methods.
SALES AND MARKETING
The Company has established two distinct channels of distribution. The
Company's primary channel is direct mail order in which promotional materials
advertising the Company's products are delivered by mail to approximately
1,300,000 customers and approximately 8,000,000 prospective customers each
year under the NEBS, Chiswick, Bags & Bows, SYCOM, Main Street and Standard
Forms brand names. The Company's direct marketing efforts are supplemented by
the prospecting and account development efforts of a 29 person field sales
force and a 68 person outbound telemarketing group. A separate dealer channel
is an established, growing channel which includes a broad network of over
30,000 independent dealers.
The Company's success to date has largely been the result of effective
direct marketing and the strength of its customer relationships. Targeted mail
order marketing in combination with focused telemarketing allows the Company
to identify and penetrate numerically and geographically dispersed but, in the
aggregate, significant markets. The Company targets small businesses with 100
or fewer employees within these markets with specialized promotions and
products specifically designed to meet small business needs. In the direct
mail channel, the Company's promotional materials contain one or more order
forms to be completed by the customer and either telephoned, mailed or faxed
to the Company. Over 83% of direct marketing customer orders are received over
the Company's network of toll-free telephone and data lines. The Company has a
three-year telephone service contract with MCI Telecommunications Corporation
covering service levels and long distance rates. This contract expires in
September 1999. The Company also maintains a World Wide Web site for promotion
and order taking.
The Company's promotional materials include several reference catalogs
containing a comprehensive display of the Company's forms and checks, shipping
supplies and retail supplies product offerings. In addition the Company
utilizes smaller catalogs focused on specific products or targeted to a
specific small business segment, promotional circulars with samples, flyers,
inserts included with invoices, statements and product shipments. The Company
relies to a lesser extent on advertising space in magazines and post card
packages to generate sales leads from prospective customers. The Company
utilizes the United States or the local country postal service for
distribution of most of its advertising materials.
The Company's sophisticated and extensive marketing database and
customer/prospect lists constitutes a competitive advantage. The Company is
able to select names and plan promotional mailings based on a variety
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of customer/prospect attributes including status as customer or prospect, line
of business, product purchase history, purchase frequency or purchase dollar
volume. The Company also rents prospect lists from third-party sources.
Coated paper costs for promotional materials and postal rates for third
class mail have increased significantly over the past five years. The Company
has been able to offset the impact of postal and paper cost increases with
cost reduction programs and selective product price increases.
In addition to direct mail, the Company is expanding its penetration of the
retail marketplace through a network of participating, independent dealers.
The Company distributes a private label version of a full line of standard and
customized manual and computer forms and related products such as checks and
labels through this dealer network. The Company's participating independent
dealers typically include local printers, business forms dealers, stationers,
computer stores and system houses which number in excess of 30,000.
RAW MATERIALS, PRODUCTION AND DISTRIBUTION
The Company produces semi-finished business forms on high speed roll-fed
presses from raw paper. The Company also purchases partially printed forms
from a number of industry sources at competitive prices. The Company has a
contract for the purchase of carbonless paper with favorable terms that
expires in July 2000. The Company has no other long-term contracts with any of
its paper suppliers. The cost of paper used for products and promotional
materials constitutes, directly or indirectly, less than 20% of sales.
The Company operates printing equipment specifically designed to meet the
demands of short-run printing. Typesetting and imprinting of customer headings
are accomplished with computerized typesetters, platemaking systems, letter
presses and offset presses. In addition, the Company operates manual and semi-
automatic bindery equipment. A number of the Company's presses have been
designed or substantially modified to meet the short-run demands of small
businesses. These specialized presses allow the Company to produce small-order
quantities with greater efficiency than possible with the stock equipment
available from typical printing press equipment suppliers. The Company has
invested significantly in electronic prepress equipment and digital imaging
presses to meet the demand for short-run color printing.
The Company's Chiswick division principally utilizes a "pick and pack"
operation to aggregate stock packaging, retail and shipping products from
warehoused inventory into distinct order groups, and to package them for
shipment to the customer. The Company's packaging and shipping products are
obtained from a large number of industry sources at competitive prices.
The Company has no significant backlog of orders. The Company's objective is
to produce and ship product as expediently as possible following receipt of a
customer's order. During fiscal 1997, over 50% of forms, checks and related
products were produced and shipped within one day and 90% within four days of
order. The Company's stock packaging, shipping and related supplies are
routinely shipped within 24 hours of receipt of a customer order.
To facilitate expedient production and shipment of product, the Company
maintains significant inventories of raw paper ($586,000 at June 28, 1997),
and partially printed business forms, packaging, shipping and retail supplies,
and related office products ($10,983,000 at June 28, 1997).
The Company ships in excess of 90% of its products to customers by United
Parcel Service of America, Inc. under the terms of a multiyear contract at
scheduled contract prices. This contract expires in September 1997 and is
currently being renegotiated. To a much lesser extent, the Company uses Parcel
Post and overnight delivery services for distribution of its products to
customers. The Company bills the customer for all direct shipping and handling
charges.
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COMPETITION
The Company's primary competitors for printed products and stationery are
the approximately 25,000 local/quick printers and 16,000 business forms
dealers in the United States, Canada and the United Kingdom. In addition,
approximately 5,000 contract stationers and six major office product
superstores, operating a combined total of about 1,500 retail locations, offer
a variety of preprinted business forms to businesses in their immediate
trading area. Local printers have an advantage of physical proximity to
customers, but generally do not have the capability of producing a broad array
of products, particularly those having a complex construction. In addition,
local printers may lack the economies of scale to produce a small order for a
single customer on a cost effective basis. General purpose, preprinted
business forms offered by stationers and office products superstores are
typically price competitive with the Company's forms, but lack the design and
functionality for specific lines of business and the customized customer
information options available with the Company's products.
At present, approximately 10 to 15 major independent companies or divisions
of larger companies market business forms, stationery and supplies by mail
order in the United States and Canada. The primary competitive factors
influencing a customer's purchase decision are printing accuracy, product
guarantees, speed of delivery, breadth of product line, price and customer
service. The Company believes that it is the leading mail order marketer of
business forms to the very small business market in the United States, Canada
and the United Kingdom. The Company defines the very small business market as
companies with fewer than 20 employees.
The Company's Chiswick division principally competes with numerous local and
regional industrial supplies jobbers and distributors. The Company also
competes against several national catalog direct marketing companies that
distribute packaging, shipping and industrial supplies. The primary
competitive factors influencing a customer's purchase decision are breadth of
product line, price and speed of delivery.
EMPLOYEES
The Company had 2,164 full and part-time employees at June 28, 1997. The
Company sponsors a number of employee benefit plans including medical and
hospitalization insurance plans and a 401(k) salary deferral plan. The Company
believes its relationship with its employees to be satisfactory.
ENVIRONMENT
To the Company's knowledge, no material action or liability exists on the
date hereof arising from the Company's compliance with federal, state and
local statutes and regulations relating to protection of the environment.
ITEM 2. PROPERTIES
The Company owns land and buildings in Massachusetts, New Hampshire,
Missouri, Canada, and the United Kingdom. The Company leases manufacturing
and/or office space in Arizona, Massachusetts, Wisconsin, the United Kingdom
and France. The Company sub-leases office space to a third party in Arizona.
The Company owns land in Georgia and Arizona.
In Groton, Massachusetts, the Company owns a 126,000 square foot office
building situated on 36 acres of land. The building was constructed in 1978
and expanded in 1982. The Groton property provides office space for marketing,
administrative, information resource, purchasing, finance and executive
personnel.
In Townsend, Massachusetts, the Company owns a 130,000 square foot
manufacturing and administrative facility situated on 15 acres of land. The
building was originally constructed in 1959 and expanded from time to time
through 1989.
In Peterborough, New Hampshire, the Company owns a 128,500 square foot
manufacturing and administrative facility situated on 48 acres of land. The
building was originally constructed in 1975 and expanded in 1978.
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In Maryville, Missouri, the Company owns a 97,000 square foot manufacturing
facility situated on 50 acres of land. The building was constructed in 1980.
In Midland, Ontario, the Company owns a 105,000 square foot administrative
and manufacturing facility situated on 8 acres of land. The facility was
originally constructed in 1985 and expanded in 1989.
In Chester, England, the Company owns a 36,000 square foot office and
production facility situated on 4 acres of land. The facility was originally
constructed in 1989.
The Company owns 2.8 acres of land in Flagstaff, Arizona and 16.9 acres of
land in Douglasville, Georgia. Plans are in progress to construct a 25,000
square foot telemarketing office in Flagstaff during fiscal year 1998.
The Company also leases 199,700 square feet of administrative and warehouse
space in Sudbury, Massachusetts; 25,000 square feet in Flagstaff, Arizona;
1,000 square feet in Madison, Wisconsin for administrative purposes; 2,000
square feet in Woburn, Massachusetts for sales purposes; 22,600 square feet of
space in Romsey, England and 12,900 square feet near Tours, France for
manufacturing and administrative purposes.
The Company leases, and sub-leases to a third party, 1,390 square feet of
office space in Phoenix, Arizona.
With reference given to the 25,000 square foot telemarketing facility
currently under construction in Flagstaff, Arizona, the Company believes its
existing production and office facilities are adequate for its present and
foreseeable future needs.
ITEM 3. LEGAL PROCEEDINGS
To the Company's knowledge, no material legal proceedings are pending on the
date hereof to which the Company is a party or to which any property of the
Company is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK
Shares of the Company's Common Stock trade principally on the New York Stock
Exchange. High and low bid prices of the Company's Common Stock for each
quarter on such exchange were as follows:
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FISCAL 1997 HIGH LOW
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1st Quarter............. 19 3/8 15
2nd Quarter............. 21 5/8 17 3/8
3rd Quarter............. 26 19 5/8
4th Quarter............. 29 7/8 25 1/8
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FISCAL 1996 HIGH LOW
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1st Quarter............. 21 1/2 18
2nd Quarter............. 23 3/4 19
3rd Quarter............. 22 1/8 16 1/2
4th Quarter............. 19 5/8 14 1/2
</TABLE>
Notes 6, 7, 8 and 15 to the Consolidated Financial Statements contained in
Item 8 of this Report are incorporated herein by reference. The number of
record holders of the Company's Common Stock at August 29, 1997 was 669. The
Company estimates the number of beneficial owners of the Company's Common
Stock to be 6,000 at August 29, 1997.
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ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS AND OTHER STATISTICS)
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JUNE 28, JUNE 29, JUNE 30, JUNE 24, JUNE 25,
FOR THE FISCAL YEAR ENDED 1997(A) 1996(B) 1995(C) 1994(D) 1993
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INCOME STATISTICS
Net Sales............... $ 263,424 $ 254,954 $ 263,724 $ 251,253 $ 237,144
Income before income
taxes and accounting
changes................ 31,380 21,055 28,492 27,599 24,090
Percent of sales........ 11.9% 8.3% 10.8% 11.0% 10.2%
Taxes on income......... 12,731 8,306 11,818 12,036 9,873
Percent of sales........ 4.8% 3.3% 4.5% 4.8% 4.2%
Net income before equity
in losses of investment
and accounting
changes................ 18,649 12,749 16,674 15,563 14,217
Percent of sales........ 7.1% 5.0% 6.3% 6.2% 6.0%
Percent of stockholders'
equity................. 23.1% 16.8% 18.2% 15.6% 15.0%
Per common share........ 1.37 0.86 1.09 1.01 0.93
Net Income.............. 18,649 11,929 16,298 15,563 14,217
Percent of sales........ 7.1% 4.7% 6.2% 6.2% 6.0%
Percent of stockholders'
equity................. 23.1% 15.7% 17.8% 15.6% 15.0%
Per common share........ 1.37 0.81 1.07 1.01 0.93
Dividends per common
share.................. 0.80 0.80 0.80 0.80 0.80
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BALANCE SHEET STATISTICS
Current assets.......... $ 68,426 $ 71,334 $ 77,509 $ 85,288 $ 68,966
Current liabilities..... 33,327 27,273 32,169 30,418 25,293
Working capital......... 35,099 44,061 45,340 54,870 43,673
Current ratio........... 2.1 2.6 2.4 2.8 2.7
Total assets............ 141,196 103,542 124,546 131,691 120,624
Long-term debt.......... 27,000 0 0 0 0
Stockholders' equity.... 80,581 75,916 91,523 99,479 94,668
Average common shares
outstanding............ 13,643 14,773 15,245 15,364 15,269
Book value per common
share.................. 5.92 5.42 6.16 6.43 6.19
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OTHER FINANCIAL
STATISTICS
Capital expenditures.... $ 9,567 $ 9,388 $ 10,804 $ 6,054 $ 6,475
Depreciation and
amortization........... 9,090 10,329 12,676 11,623 9,953
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OTHER STATISTICS
Number of employees..... 2,164 2,014 2,055 2,083 2,217
Number of stockholders.. 6,000 5,800 5,600 5,700 5,400
Number of active
customers.............. 1,297,000 1,238,000 1,292,000 1,285,000 1,210,000
Facilities (in square
feet).................. 886,000 708,000 743,000 794,000 793,000
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(A) Included in the 1997 results is a $3.8 million pretax charge, or $.17 per
share, related to the closure of the Company's retail initiative with
Kinko's and a $2.2 million pretax gain, or $.10 per share, from the
curtailment of the Company's defined-benefit pension plan.
(B) Included in the 1996 results is a $3.04 million pretax charge, or $.12 per
share, related to the closure of the Company's Flagstaff, Arizona
manufacturing facility.
(C) Included in the 1995 results is a $1.96 million pretax charge, or $.07 per
share, related to integration of the Company's SYCOM subsidiary.
(D) Included in the 1994 results is a $5.45 million pretax charge, or $.21 per
share, related to a restructuring program.
See notes to consolidated financial statements contained in Item 8 of this
Annual Report on Form 10-K.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities amounted to $37.8 million in fiscal
year 1997, approximately 62.4% higher than the $23.3 million provided in 1996.
This favorable change in cash is attributable to a 56% or $6.7 million
increase in net income from year to year, in combination with an increase in
accounts payable and income taxes payable balances. In 1996, cash provided by
operating activities increased $2.0 million or 9.6% from 1995 principally due
to reductions in inventory, prepaid expenses and taxes paid.
Working capital as of June 28, 1997 amounted to $35.1 million including $7.8
million of cash and short-term investments. This balance compares to $44.1
million of working capital including cash and short-term investments of $17.4
million at the end of fiscal 1996. The decrease in working capital was due
primarily to the repurchase of 1,046,100 shares of the Company's common stock
for $17.7 million during fiscal 1997. This repurchase was effected in
accordance with the authorization to purchase up to two million shares
announced in April, 1996 and the authorization to purchase up to two million
additional shares announced in October, 1997. The increase in cash provided by
operating activities and the addition of the working capital balances of
acquired companies in 1997 partially offset the cash outflows related to the
repurchase programs. In fiscal 1996, proceeds from the divestiture of the
assets of the One Write Plus(R) software line of $4.5 million and proceeds of
$5.0 million from the sale of facilities helped to offset stock repurchase
related cash outflows of $17.9 million.
Capital expenditures of $9.6 million in 1997 represented a slight increase
from the $9.4 million expended during 1996 and a decrease from the $10.8
million expended during 1995. Capital expenditures in 1997 included
significant investments in information systems infrastructure and operating
systems. Capital expenditures in fiscal 1996 included investments in
information systems, equipment to support an expanded number of Kinko's retail
sites, and stationery printing equipment to meet product demand for the retail
channel. Expenditures in fiscal 1995 included investment in prepress equipment
and digital imaging presses for color printing. The Company expects capital
expenditures to increase significantly in fiscal year 1998 due to planned
improvements in information systems infrastructure and an existing commitment
to construct a $3.2 million telemarketing facility in Flagstaff, Arizona.*
In addition to its present cash and investment balances, the Company has
consistently generated sufficient cash internally to fund its needs for
working capital, dividends and capital expenditures. In anticipation of the
March 31, 1997 acquisition of substantially all the assets and certain
liabilities of Chiswick Trading, Inc., the Company on March 26, 1997 also
entered into a five year, $60.0 million, committed, unsecured, revolving line
of credit with two major commercial banks (The First National Bank of Boston
(now BankBoston) and Fleet National Bank). At June 28, 1997, $27.0 million was
outstanding under this line. The credit agreement contains various restrictive
covenants which, among other things, require the Company to maintain certain
minimum levels of consolidated net worth and specific consolidated debt and
fixed charge ratios. The Company anticipates that its current cash on hand,
cash flow from operations and additional availability under the line of credit
will be sufficient to meet the Company's liquidity requirements for its
operations and capital expenditures through the remainder of the year.*
However, the Company may pursue additional acquisitions from time to time
which would likely be funded through cash, issuance of stock, the obtaining of
additional credit or any combination thereof.*
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* This forward-looking statement reflects the Company's current expectations.
There can be no assurance the Company's actual performance will not differ
materially from those projected in such forward-looking statements due to
the important factors described in the section to this Management's
Discussion and Analysis of Financial Condition and Results of Operations
titled "Forward-Looking Information and Risk Factors to Future Performance."
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RESULTS OF OPERATIONS
1997 VERSUS 1996
Net sales increased $8.4 million or 3.3% to $263.4 million for fiscal year
1997 from $255.0 million in fiscal year 1996. The net sales increase included
a $15.7 million or 6.1% increase resulting from the acquisition of Standard
Forms Ltd. and Chiswick Trading, Inc. during fiscal year 1997, offset by a
$11.2 million or 4.4% decline attributable to the Company's decision to exit
its retail initiative with Kinkos, to divest the One-Write Plus(R) software
line and to reposition the Company's software line. The remainder of the sales
increase consisted of price increases of 2.0% or $5.0 million, partially
offset by a unit volume decrease of $1.0 million or 0.4%. The Company expects
significant year to year revenue growth for the first three quarters of fiscal
year 1998 due to the addition of revenues associated with its recently
acquired businesses.*
Cost of sales remained constant from 1996 to 1997 at approximately 35.7% of
sales. Improved cost of sales performance in business forms and related
products resulting from overhead cost reduction programs implemented in 1996
and 1997 was offset by a higher cost of sales associated with the businesses
acquired by the Company during 1997. The acquired businesses' higher cost of
sales is due to the nature of their products, markets and distribution methods
and is not projected to change materially in the future.* Paper prices
remained relatively stable during fiscal years 1997 and 1996 and did not have
a significant impact on cost of sales. In general, the Company anticipates
being able to offset inflationary cost increases in business form products
with cost reduction initiatives and price increases during fiscal year 1998.*
However, the Company's cost of sales as a percentage of sales for fiscal year
1998 is expected to increase by more than two percentage points due to an
increase in revenue contribution from the lower margin products associated
with the recently acquired businesses.*
Selling and advertising expenses decreased from 39.0% of sales in 1996 to
34.3% of sales in 1997. This decrease was principally the result of the
Company's decision to exit the Kinko's retail channel initiative early in
fiscal 1997, which substantially reduced selling and advertising expenditures,
as well as the sale of the One Write Plus(R) software line in late fiscal
1996, which also required a high level of selling and advertising support.
These reductions were partially offset by increased direct mail advertising
required to increase revenue growth rates in the direct mail forms business.
The Company expects to increase its level of direct mail advertising
investment to support new product introductions and to sustain the desired
level of revenue growth in the direct mail forms business; however, overall
selling and advertising expenses are expected to decline slightly as a
percentage of sales in fiscal 1998 versus fiscal 1997.*
General and administrative expenses increased from 17.0% of sales in 1996 to
17.6% of sales in 1997. The increase was primarily related to the Company's
program to re-engineer its financial and operational information systems, and
an increase in performance-based bonus plan expenses from year to year.
General and administrative expenses are expected to decline slightly as a
percentage of sales during fiscal year 1998.*
During fiscal year 1997, the Company recorded pretax exit costs of $3.8
million related to a decision to exit its retail channel initiative with
Kinko's. The pre-tax exit charges consisted of estimated costs related to
facility closures of $0.5 million, estimated equipment write-offs of $1.1
million and estimated termination benefits of $2.2 million. Approximately $1.0
million of the charges remain in appropriate reserves at June 28, 1997. The
Company anticipates that all amounts remaining will be expended during the
first half of fiscal 1998.*
During fiscal year 1997, the Company amended its defined-benefit pension
plan for the majority of its domestic employees to freeze plan participation
at December 31, 1996 and eliminate further benefit accruals after
- --------
* This forward-looking statement reflects the Company's current expectations.
There can be no assurance the Company's actual performance will not differ
materially from those projected in such forward-looking statements due to
the important factors described in the section to this Management's
Discussion and Analysis of Financial Condition and Results of Operations
titled "Forward-Looking Information and Risk Factors to Future Performance."
8
<PAGE>
June 28, 1997. A non-recurring plan curtailment gain of $2.2 million was
recorded by the Company as a result of the amendment. The plan is expected to
be terminated during the first quarter of fiscal 1998.* During fiscal 1997,
the Company terminated its existing profit-sharing plan and instituted a
transition bonus plan for the remainder of the year. The net financial impact
in fiscal 1997 was immaterial. The fiscal 1997 pension and profit sharing
terminations are expected to enhance future results, but will be partially
offset by the cost associated with enhanced 401(k) benefits for Company
employees implemented at the beginning of fiscal 1998.*
The provision for income taxes as a percentage of pretax income increased
from 1996 to 1997 due to lower tax-free interest income.
The Company will continue to seek opportunities to acquire companies,
businesses and product lines to enhance the Company's competitive position in
the marketplace or to gain access to new markets, products, competencies or
technologies.* In addition, the Company will continue to seek opportunities to
enhance the cost structure of the Company, to improve operating efficiencies,
and to fund investments in support of the Company's strategies.*
In fiscal 1997, the Company's adoption of Statement Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," was not significant to the
consolidated financial statements. As allowed by the Financial Accounting
Standards Board, the Company chose during fiscal 1997 to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations ("APB Opinion No. 25") instead of
adopting SFAS No. 123, "Accounting for Stock-Based Compensation." In fiscal
1998, the Company expects to adopt SFAS No. 128, "Earnings Per Share." The
Company does not expect any significant change to EPS to conform to SFAS
No. 128.* In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130 "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company will adopt
these statements during fiscal year 1998 and does not expect that the adoption
of these statements will have a material impact on the consolidated financial
statements.*
1996 VERSUS 1995
Net sales declined 3.3% to $255.0 million for fiscal year 1996 from $263.7
million in fiscal year 1995. Approximately 1.0% of the decline or $2.6 million
was the result of an additional week in fiscal year 1995, while 0.8% of the
decline or $2.1 million resulted from the divestiture of One-Write Plus(R)
software during the third fiscal quarter of 1996 and the repositioning of the
Company's software product line. The remaining sales decline consisted of a
unit volume decrease of approximately 5.7% or $15.2 million offset, in part,
by price increases of 4.2% or $11.1 million. The unit volume decline occurred
principally in the direct mail forms business.
Cost of sales increased from 34.4% of sales in 1995 to 35.7% of sales in
1996. This increase was the result of under-absorbed overhead due to the unit
volume decline and to the impact of a shift in product mix to lower margin
stationery products. In addition, cost of sales in 1996 included $1.4 million
of period expense pertaining to product and equipment moves associated with
the closure of the Company's Flagstaff manufacturing facility. Paper prices
remained relatively stable during fiscal year 1996 due to the nature of long-
term agreements with key suppliers.
Selling and advertising expenses decreased slightly from 39.2% in 1995 to
39.0% of sales in 1996. Increased selling and advertising expense to support
an expanded number of NEBS custom print desks in Kinko's retail
- --------
* This forward-looking statement reflects the Company's current expectations.
There can be no assurance the Company's actual performance will not differ
materially from those projected in such forward-looking statements due to
the important factors described in the section to this Management's
Discussion and Analysis of Financial Condition and Results of Operations
titled "Forward-Looking Information and Risk Factors to Future Performance."
9
<PAGE>
locations was offset by a reduction in direct mail advertising expense and
reduced expense for product development and service for the Company's software
product line resulting from the divestiture of One-Write Plus(R) software.
General and administrative expenses increased from 15.3% of sales in 1995 to
16.5% of sales in 1996. The increase was due to increased administrative
facility overhead costs, information systems investment and miscellaneous
corporate expenses.
During fiscal year 1996, the Company recorded pretax exit costs of $3.0
million or approximately $0.12 per share related to a cost reduction program.
The exit costs were associated with the closure of the Company's Flagstaff
manufacturing facility and consisted of (i) approximately $1.8 million of cash
payments for post-employment benefits in conjunction with the termination of
approximately 110 employees, and (ii) approximately $1.2 million for
anticipated non-cash facilities and equipment write-offs. The Company also
incurred a pretax exit cost of approximately $2.0 million during fiscal 1995
related to the integration of the Company's SYCOM subsidiary. The combined
cost savings of the programs were fully offset in fiscal year 1996 by
increased expense associated with the Company's product and channel
initiatives.
During 1996, the Company incurred $1.0 million in after-tax costs associated
with the write-down of its investment in GST Software, plc. It also incurred
additional after-tax costs of $2.2 million for the revaluation and divestiture
of certain of its software assets related to One-Write Plus(R) software.
In fiscal 1996 the Company's adoption of Statement of Financial Accounting
Standards (SFAS) No. 107, "Fair Value of Financial Instruments," was not
significant to the consolidated financial statements.
FORWARD-LOOKING INFORMATION AND RISK FACTORS TO FUTURE PERFORMANCE
From time to time, the Company or its representatives have made or may make
forward-looking statements that reflect the Company's current expectations,
orally or in writing, in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, elsewhere in the annual report
on Form 10-K, in other reports filed under the Securities Act of 1934, as
amended, in press releases or in statements made with the approval of an
authorized executive officer. The words or phrases "is expected," "will
continue," "anticipates," "estimates," or similar expressions in any of these
communications are intended to identify "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934 and Section
27A of the Securities Act of 1933, as enacted by the Private Securities
Litigation Reform Act of 1995.
There can be no assurance the Company's actual performance will not differ
materially from that projected in such forward-looking statements due to the
important factors described below. These factors include increasing
competition, economic cycles, technological change, paper and postal costs,
customer preferences, response rates, prospect lists, governmental
regulations, inherent risks in acquisitions, disruptions to the Company's
operating systems and reliance on vendors, all of which are described in
further detail below.
Increasing Competition; Pressure on Price and Margins
The Company operates in a highly competitive marketplace, in which it
competes with a variety of mail order marketers, retailers, dealers,
distributors and local printers in the marketing of business forms, stationery
and supplies to small businesses. Over the course of the past decade, mail
order providers of business forms and stationery have experienced growth in
excess manufacturing capacity. In addition, the Company has faced increasing
competition from low-price, high-volume office supply chain stores.
Improvements in the cost and quality of printing technology have increasingly
allowed dealers, distributors and local printers to gain access to products of
complex design and functionality at competitive prices. The Company currently
anticipates that these trends will continue. No assurance may be given that
competition will not have an adverse effect on the Company's business. In
addition, if any of the Company's mail order competitors were to seek to gain
or retain market share by reducing prices or increasing promotional
discounting, the Company would be compelled to reduce its prices or match the
discounts and thereby reduce its gross margin and profitability.
10
<PAGE>
Economic Cycles; Variability of Performance.
The Company's standardized forms and check business accounts for a large
majority of its sales and profitability. The forms and check industry is
highly competitive and generally characterized by mature products designed
within well-established industry standards. The Company relies, in part, on
net small business formations for growth in demand for its standardized form
and check products. As a result, the Company's growth rate is closely
correlated to the strength of its target small business market. The Company's
revenue trends and operating profitability have been materially adversely
affected by recession-related contractions in the small business economy in
the past. The Company will continue to experience quarterly and annual
variations in net sales and net income as a result of changes in the levels of
small business formations and failures or from other economic events having an
impact on small businesses generally.
Technological Change; Product Obsolescence and Risks to Competitive
Advantage.
The Company's standardized business forms and related products are designed
to provide small businesses with the financial and business records required
to manage a business. Steady technological improvements have provided small
businesses in several market segments with alternative means to enact and
record business transactions. PC-based, point-of-sale, electronic form and
electronic transaction systems have been designed to automate several of the
functions performed by the Company's products. The price and performance
characteristics of personal laser and ink-jet printing equipment have improved
markedly in the recent past, thereby allowing small businesses a cost-
competitive means to print low-quality versions of Company forms on plain
paper. In addition, the Internet has the potential to eliminate the Company's
advantage of scale in direct marketing by providing all competitors with equal
access to customers who purchase products over the Internet. In response, the
Company has focused resources on the acquisition, development and procurement
of new products less susceptible to technological obsolescence and has
aggressively moved to develop a comprehensive electronic catalog of products
to be utilized in retail-based kiosks, PC-based software and over the
Internet. It should be noted that the Company's small business customers have
proven to be relatively slow adapters of new technology which has minimized
the adverse impact of these technological trends. However, the Company may
give no assurance that continued technological change will not have a material
adverse impact on the long-term prospects for the Company's business.
Paper Costs and Postal Rates; Risks to Margins.
The cost of paper used to produce the Company's products, catalogs and
advertising materials constitutes, directly or indirectly, approximately 20%
of consolidated revenues. In addition, the Company is reliant on the U.S.
Postal Service for delivery of most of the Company's promotional materials.
Coated paper costs for promotional materials and postal rates for third class
mail have increased significantly over the past decade. In addition, certain
segments of the paper market have demonstrated considerable price volatility
over the past five years. The Company has been able to counteract the impact
of postal and paper cost increases with cost reduction programs and selected
product price increases. Due to increased competition in the small business
forms, stationery and supplies marketplace, no assurance may be given that the
Company will be able to increase product pricing to compensate for future
paper or postal cost increases. The inability to raise prices in response to
paper or postal cost increases could reduce the Company's operating
profitability and net income.
Customer Preferences; Investment Requirements & Sales Risk.
The Company's core competency is the direct marketing, manufacturing and
distribution of standardized forms and related products to small businesses.
Newly-formed small business owners are increasingly demanding custom and
color-coordinated products to create an image in addition to enabling the
management of business transactions. The relative prices charged by local
printers, contract printers and dealers for providing these custom and full-
color printed products have been declining due to technological advances in
composition systems and printing equipment. As a direct result, the cost
advantage inherent to the Company's standardized forms and related printed
products has declined. The Company is responding with focused investment in
the infrastructure
11
<PAGE>
required to sell, compose, print and distribute custom and full-color
products. This effort will include installation of an integrated and flexible
information system architecture and the re-engineering of many of the
Company's basic business functions. In addition, the Company will continue to
invest in its dealer and technology-based channels that more readily support
the interactive marketing required to sell custom and full-color products.
However, the Company can give no assurance that the rate of decline in demand
for standardized forms and related printed products will not accelerate, that
the interactive marketing investments will prove successful, or that the
information systems re-engineering effort will not result in operating
inefficiencies or unplanned expense. If any of such potential risks
materialize, the Company's future net sales and net income could be materially
adversely affected.
Response Rates and Customer Retention; Sales Risk.
Customer and prospect response rates to the Company's catalogs and
promotional materials have remained relatively stable over time. Continued
stability in prospect response and customer retention is primarily dependent
on the continued relevancy of the range of the Company's products to the small
business marketplace. New product introductions, to date, have generally
offset declines in response rates and retention attributable to product
obsolescence. However, the Company can make no assurances that its new product
introductions will continue to offset the rate of obsolescence of its
standardized forms products in the future. An increase in the rate of product
obsolescence or a decline in new product introductions could negatively impact
response rates and customer retention which, in turn, would have a materially
adverse impact on the Company's long-term financial performance.
Prospect Lists; Sales Risk.
The Company's direct mail business has been characterized by a consistent
level of average annual sales per customer. As such, net sales growth is
dependent, in part, on an increase in customers served by the Company. Growth
in the total number of direct mail customers served by the Company depends
upon continued access to high-quality lists of newly-formed small businesses.
In the past, the Company's ability to compile proprietary prospect lists was a
distinct competitive advantage. However, the external list compilation
industry has grown more sophisticated and currently markets comprehensive
lists of newly-formed businesses to the Company and its competitors. At
present, the Company relies on the speed of its delivery of promotional
materials to prospective customers to gain advantage over competitors.
However, the Company can make no assurances that its promotional material
delivery advantage will be maintained over time. A deterioration in the
Company's delivery advantage could have a materially adverse impact on the
Company's business and financial performance.
Governmental Regulations; Sales Risk.
Future governmental legislation or regulation including, but not limited to,
the following potential regulatory actions have the potential to have a
material adverse impact on the Company's business prospects: 1) institution of
privacy laws could constrain the Company's ability to mail promotional
materials or to telemarket to small businesses; 2) modification to U.S. Postal
Service regulations with the effect of increasing postal rates or reducing
postal delivery efficiency could have an adverse impact on the Company's
marketing efforts; and 3) institution of a "general sales tax", "value added
tax" or similar national tax could reduce demand for the Company's products.
Although the Company has no current knowledge or belief that such adverse
regulation, or similar governmental regulation is pending or imminent, it may
make no assurance that adverse governmental regulation will not have a
material adverse impact on the Company's business in the future.
Acquisitions; Inherent Risk.
From time to time the Company has acquired, or may acquire in the future, a
majority ownership position in a company or substantially all of the assets
related to a specific line of business. During fiscal year 1997, the Company
acquired Standard Forms Limited and the assets of Chiswick Trading, Inc.
which, in the aggregate are
12
<PAGE>
anticipated to comprise approximately 20% of the Company's future consolidated
revenues. Such acquisitions are undertaken to enhance the Company's
competitive position in the marketplace or to gain access to new markets,
products, competencies or technologies. The Company has performed in the past
and will perform in the future a business, financial and legal due diligence
review in advance of an acquisition to corroborate the assumptions critical to
projected future performance of an acquired entity and to identify the risks
inherent to such projections. However, the Company can make no assurances that
its due diligence review will identify all potential risks associated with the
purchase, integration or operation of any acquired enterprise. If any of such
potential risks materialize, the Company's future net sales and net income
could be materially adversely affected.
Operating Systems; Disasters and Disruptions.
The Company has become increasingly dependent upon its manufacturing,
administrative and computer processing infrastructure and operations to
process its high volume of small dollar value orders on an efficient, cost
competitive and profitable basis. The Company has implemented commercially
reasonable safeguards to reduce the likelihood of property loss or service
disruptions and has secured property and business interruption insurance to
minimize the adverse financial consequences arising from a select group of
risks. However, the Company can make no assurances that its infrastructure and
operations are not susceptible to loss or disruption, whether caused by (i)
intentional or unintentional acts of Company personnel or third party service
providers, or (ii) natural disasters including, but not limited to,
earthquakes, fire or severe storms. In addition, the Company can make no
assurance that its insurance coverage will adequately respond to all potential
causes of property loss or service disruption. In the event that any such acts
or disasters lead to property loss or operating system disruption for which
property and business interruption insurance coverage is unavailable or
insufficient, the Company's financial performance and long-term prospects
could be materially adversely affected.
Raw Materials and Services; Reliance on Certain Vendors
The Company has become increasingly reliant on certain individual third-
party vendors to provide raw materials and services critical to the Company's
operations in order to gain the advantage of volume-related favorable pricing
and, in some instances, favorable contract terms. Such critical vendors and
the nature of the products or services provided include, but are not limited
to, the United States Postal Service for the delivery of marketing materials,
MCI Telecommunications Corporation for the provision of toll-free telephone
services, R.R. Donnelley and Sons, Inc. for printing and processing of
marketing materials, Appleton Papers, Inc. for carbonless paper, and United
Parcel Service of America, Inc. for product delivery services. In the past,
the Company has been adversely affected by disruption in the services provided
or lack of availability of the products produced by its critical vendors
resulting from a variety of factors including labor actions, inclement
weather, disasters, systems failures and market conditions. The Company can
make no assurance that its critical vendors will remain capable of providing
the level of service or quantity of product required to support the Company's
business, nor that the Company could immediately identify alternative sources
for provision of the product or service on a similar cost basis. Any such
service disruption or product shortage could have a material adverse impact on
the Company's operating performance and net income.
Other Risks; Variability of Performance.
The Company has experienced in the past and will experience in the future
quarterly and annual variations in net sales and net income as a result of
many factors, including, but not limited to, the timing of catalog mailings,
catalog response rates, product mix, the timing and levels of selling, general
and administrative expenses, cost reduction programs, timing of holidays and
inclement weather. The Company's planned operating expenses are based on sales
forecasts. If net sales performance falls below expectations in any given
quarter or year, the Company's operating results could be materially adversely
affected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
NEW ENGLAND BUSINESS SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 28, 1997 AND JUNE 29, 1996
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 28, 1997 JUNE 29, 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 7,365 $ 6,508
Short-term investments............................ 469 10,868
Accounts receivable (less allowance for doubtful
accounts of $3,351 in 1997 and $3,343 in 1996)... 34,147 30,636
Inventories....................................... 11,569 8,675
Direct mail advertising materials and prepaid
expenses......................................... 6,976 5,176
Deferred income tax benefit....................... 7,900 9,471
-------- --------
TOTAL CURRENT ASSETS.......................... 68,426 71,334
PROPERTY AND EQUIPMENT:
Land and buildings............................... 30,678 29,761
Equipment........................................ 74,662 72,517
-------- --------
Property and equipment.......................... 105,340 102,278
Less accumulated depreciation................... (72,921) (71,266)
-------- --------
PROPERTY AND EQUIPMENT--NET.................... 32,419 31,012
PROPERTY HELD FOR SALE............................ 631 631
GOODWILL, NET..................................... 31,795 255
OTHER ASSETS (LESS ACCUMULATED AMORTIZATION OF
$1,548 IN 1997 AND $1,041 IN 1996)............... 7,925 310
-------- --------
TOTAL......................................... $141,196 $103,542
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. $ 13,872 $ 8,575
Federal and state income taxes.................... 1,555 --
Accrued profit-sharing/bonus distribution......... 1,725 1,474
Accrued payroll expense........................... 4,983 5,303
Accrued employee benefit expense.................. 3,348 6,096
Accrued exit costs/restructuring charge........... 1,006 1,387
Deferred income taxes............................. 1,062 --
Other accrued expenses............................ 5,776 4,438
-------- --------
TOTAL CURRENT LIABILITIES..................... 33,327 27,273
REVOLVING LINE OF CREDIT.......................... 27,000 --
DEFERRED INCOME TAXES............................. 288 353
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock...................................
Common stock, par value, $1 per share--authorized,
40,000,000 shares; issued, 14,615,359 shares in
1997 and 14,004,720 shares in 1996; outstanding,
13,611,770 shares in 1997 and 14,004,720 shares
in 1996.......................................... 14,616 14,005
Additional paid-in capital........................ 26,537 13,603
Cumulative foreign currency translation
adjustment....................................... (1,762) (1,761)
Retained earnings................................. 58,024 50,069
-------- --------
TOTAL......................................... 97,415 75,916
Less treasury stock, at cost--1,003,589 shares in
1997............................................. (16,834) --
-------- --------
TOTAL STOCKHOLDERS' EQUITY.................... 80,581 75,916
-------- --------
TOTAL......................................... $141,196 $103,542
======== ========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE>
NEW ENGLAND BUSINESS SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE FISCAL YEARS ENDED JUNE 28, 1997, JUNE 29, 1996 AND JUNE 30, 1995
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET SALES....................................... $263,424 $254,954 $263,724
OPERATING EXPENSES:
Cost of sales including shipping costs........ 94,048 90,974 90,673
Selling and advertising....................... 90,367 99,352 103,482
General and administrative.................... 45,949 42,164 40,418
Exit costs.................................... 3,803 3,044 1,964
-------- -------- --------
TOTAL OPERATING EXPENSES.................... 234,167 235,534 236,537
INCOME FROM OPERATIONS.......................... 29,257 19,420 27,187
OTHER INCOME:
Interest income............................... 420 1,159 1,305
Interest expense.............................. (484) (19) --
Gain on pension curtailment................... 2,187 -- --
Gain on sale of product line.................. -- 495 --
-------- -------- --------
TOTAL OTHER INCOME.......................... 2,123 1,635 1,305
INCOME BEFORE INCOME TAXES...................... 31,380 21,055 28,492
PROVISION FOR INCOME TAXES...................... 12,731 8,306 11,818
-------- -------- --------
NET INCOME BEFORE EQUITY IN LOSSES OF
INVESTMENT..................................... 18,649 12,749 16,674
EQUITY IN LOSSES OF INVESTMENT.................. -- (820) (376)
-------- -------- --------
NET INCOME...................................... $ 18,649 $ 11,929 $ 16,298
======== ======== ========
PER SHARE AMOUNTS:
NET INCOME.................................... $ 1.37 $ 0.81 $ 1.07
======== ======== ========
DIVIDENDS..................................... $ 0.80 $ 0.80 $ 0.80
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING... 13,643 14,773 15,245
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
NEW ENGLAND BUSINESS SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JUNE 28, 1997, JUNE 29, 1996 AND JUNE 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ISSUED CUMULATIVE
--------------------- FOREIGN
NUMBER AT PAR ADDITIONAL CURRENCY
OF VALUE PAID-IN TREASURY TRANSLATION RETAINED
SHARES AMOUNT CAPITAL STOCK ADJUSTMENT EARNINGS TOTAL
--------- ---------- ---------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 24, 1994.. 15,572 $ 15,572 $ 9,480 $ (1,727) $(2,152) $ 78,306 $ 99,479
Issuance of common stock
to employees pursuant
to stock plans
including tax benefit.. 198 198 2,970 1,299 4,467
Dividends paid.......... (12,192) (12,192)
Acquisition of treasury
stock.................. (16,998) (16,998)
Foreign currency
translation
adjustment............. 469 469
Net income.............. 16,298 16,298
--------- ---------- ------- -------- ------- -------- --------
BALANCE, JUNE 30, 1995.. 15,770 15,770 12,450 (17,426) (1,683) 82,412 91,523
Issuance of common stock
to employees pursuant
to stock plans
including tax benefit.. 75 75 1,153 1,102 2,330
Dividends paid.......... (11,906) (11,906)
Acquisition of treasury
stock.................. (17,882) (17,882)
Retirement of treasury
stock.................. (1,840) (1,840) 34,206 (32,366)
Foreign currency
translation
adjustment............. (78) (78)
Net income.............. 11,929 11,929
--------- ---------- ------- -------- ------- -------- --------
BALANCE, JUNE 29, 1996.. 14,005 14,005 13,603 0 (1,761) 50,069 75,916
Issuance of common stock
to employees pursuant
to stock plans
including tax benefit.. 246 246 4,899 877 6,022
Issuance of common stock
to acquire a business.. 365 365 8,035 8,400
Dividends paid.......... (10,694) (10,694)
Acquisition of treasury
stock.................. (17,711) (17,711)
Foreign currency
translation
adjustment............. (1) (1)
Net income.............. 18,649 18,649
--------- ---------- ------- -------- ------- -------- --------
BALANCE, JUNE 28, 1997.. 14,616 $ 14,616 $26,537 $(16,834) $(1,762) $ 58,024 $ 80,581
========= ========== ======= ======== ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
NEW ENGLAND BUSINESS SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE FISCAL YEARS ENDED JUNE 28, 1997, JUNE 29, 1996 AND JUNE 30, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 18,649 $ 11,929 $ 16,298
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 9,090 10,329 12,676
Gain on sale of product line.................... -- (495) --
Gain on pension curtailment..................... (2,187) -- --
Loss on disposal of equipment................... 935 302 --
Loss on equity investment....................... -- 1,355 --
Deferred income taxes........................... 2,553 (290) (5,062)
Exit costs...................................... (381) 633 1,651
Provision for losses on accounts receivable..... 2,612 3,033 3,177
Employee benefit charges........................ (143) 2,244 1,991
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable............................. 61 (4,360) (4,500)
Inventories and advertising material............ 2,566 61 (3,346)
Prepaid expenses................................ (732) 1,225 (1,267)
Accounts payable................................ 852 1,405 485
Income taxes payable............................ 2,214 (2,545) (12)
Other accrued expenses.......................... 1,674 (1,573) (881)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 37,763 23,253 21,210
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.............. (9,567) (9,388) (10,804)
Acquisition of businesses--net of cash acquired.. (40,174) -- --
Investment in unconsolidated subsidiary.......... -- -- (1,800)
Proceeds from sale of product line............... -- 4,500 --
Proceeds from sale of facilities and equipment... 406 4,985 --
Proceeds from sale of other assets............... -- 300 --
Investment in other assets, primarily software
development costs............................... -- (812) (843)
Purchases of investments......................... (3,800) (30,751) (28,438)
Proceeds from sale and maturities of
investments..................................... 14,199 31,222 54,649
-------- -------- --------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES.................................... (38,936) 56 12,764
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt................................ (13,495) (8,000) (36)
Proceeds from credit line--net of issuance
costs........................................... 39,342 8,000 --
Proceeds from issuing common stock............... 4,486 1,228 3,168
Acquisition of treasury stock.................... (17,711) (17,882) (16,998)
Dividends paid................................... (10,694) (11,907) (12,192)
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES.................................... 1,928 (28,561) (26,058)
EFFECT OF EXCHANGE RATE ON CASH.................. 102 156 232
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 857 (5,096) 8,148
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 6,508 11,604 3,456
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 7,365 $ 6,508 $ 11,604
======== ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
INTEREST PAID.................................... $ 365 $ 19 $ --
======== ======== ========
INCOME TAXES PAID................................ $ 7,553 $ 10,289 $ 13,031
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
NEW ENGLAND BUSINESS SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF CONSOLIDATION--The financial statements
are consolidated to include the accounts of New England Business Service, Inc.
and its wholly-owned subsidiaries (the "Company"). The Company operates
primarily in a single industry segment consisting of the sale of business
forms, checks, related printed products, office products and shipping,
warehouse and packaging supplies. The accounts of the Company's foreign
entities have been translated into U.S. dollars in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 52. All significant
intercompany accounts and transactions have been eliminated in consolidation.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS--The Company considers its
holdings in short-term money market accounts and certificates of deposit with
an original maturity to the Company of three months or less to be cash
equivalents.
Short-term investments are classified as available for sale securities and
reported at amortized cost, which approximates fair market value (as required
by SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities"). Short-term investments have been primarily tax-exempt municipal
debt instruments which have a fixed maturity beyond three months.
INVENTORIES--Inventories are generally carried at the lower of first-in,
first-out cost or market. At year end, inventories consisted of:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Raw paper.......................................... $ 586,000 $ 434,000
Business forms and related office products......... 10,983,000 8,241,000
------------ -----------
Total............................................ $ 11,569,000 $ 8,675,000
============ ===========
</TABLE>
DIRECT MAIL ADVERTISING--The Company expenses the production costs of
advertising at the time the advertising is initiated, except for direct-
response advertising, which is capitalized and amortized over its expected
period of future benefit. Direct-response advertising consists primarily of
product catalogs and associated mailing costs. Advertising expense included in
selling and advertising was approximately $36,411,000 in 1997, $34,007,000 in
1996 and $39,997,000 in 1995.
PROPERTY AND EQUIPMENT--Property and equipment are carried at cost.
Depreciation is computed over the estimated useful lives (three to twenty
years) of the assets using the straight-line method. Property held for sale is
stated at the lower of cost or estimated net realizable value.
GOODWILL--Goodwill acquired is being amortized on a straight-line basis over
periods of 20 to 40 years. Accumulated amortization amounted to $516,000 and
$213,000 at June 28, 1997 and June 29, 1996, respectively.
OTHER ASSETS--Other assets consist principally of purchased customer lists,
a covenant not to compete and debt issue costs and are amortized on a
straight-line basis over their estimated lives ranging from one to five years.
REVENUE RECOGNITION--Revenue is recognized from sales other than software
support contracts when a product is shipped. Revenue on software support
contracts is recognized ratably over the contract period, generally twelve
months.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS AND PURCHASED SOFTWARE--The Company
follows SFAS No. 86, "Accounting for the Cost of Computer Software to be Sold,
Leased, or Otherwise Marketed"
18
<PAGE>
("SFAS No. 86"). No software development costs were capitalized in 1997.
Software development costs of $812,000 and $519,000 were capitalized in 1996
and 1995 respectively.
Purchased software costs acquired in connection with the acquisition of the
One-Write Plus(R) ("OWP") product line were amortized in accordance with the
provisions of SFAS No. 86. Amortization expense of $1,199,000, and $1,450,000
was charged to operations in fiscal 1996 and 1995, respectively. In connection
with the sale of the OWP product line in 1996, the Company expensed the
balance of the purchased software costs remaining at the time of the sale.
There are no unamortized purchased software costs included in other assets at
June 28, 1997, and June 29, 1996.
INCOME TAXES--Income taxes are determined based on income reported in the
financial statements regardless of when such taxes are payable. Deferred
income taxes reflect the impact of temporary differences between assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. In addition, deferred tax assets and liabilities
are adjusted to reflect changes in the U.S. and applicable foreign tax laws
when enacted. Future tax benefits are recognized to the extent realization of
such benefit is more likely to occur than not.
SIGNIFICANT ESTIMATES--In the process of preparing its consolidated
financial statements, the Company estimates the appropriate carrying value of
certain assets and liabilities which are not readily apparent from other
sources. The primary estimates underlying the Company's consolidated financial
statements include allowances for doubtful accounts, inventory obsolescence,
deferrals of mail advertising costs, accruals for profit sharing,
recoverability of deferred tax assets, goodwill and other intangible assets.
Actual results may differ from these estimates.
PER SHARE AMOUNTS--Net income per share amounts are computed based upon the
weighted average number of shares of common stock and common stock equivalents
outstanding during each fiscal year. In February 1997, the Financial
Accounting Standards Board issued SFAS No. 128, "Earnings Per Share." This new
standard requires dual presentation of basic and diluted earnings per share
("EPS") on the face of the statements of consolidated income and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations. This statement will be effective in the second quarter of the
Company's 1998 fiscal year. The Company's current EPS calculation is not
expected to change significantly to conform to SFAS No. 128.
CONCENTRATION OF CREDIT RISK--The Company extends credit to approximately
1.3 million geographically dispersed customers on an unsecured basis in the
normal course of business. No individual industry or industry segment is
significant to the Company's customer base. The Company has, in place,
policies governing the extension of credit and collection of amounts due from
customers.
DERIVATIVES--The Company has entered into a variety of intercompany
transactions between members of the consolidated group (which have different
functional currencies) that present foreign currency risk. The Company has
purchased foreign currency forward contracts to minimize the effect of
fluctuating foreign currencies on its reported income; however, these
contracts do not qualify under generally accepted accounting principles for
hedge treatment. Accordingly, these contracts are carried in the financial
statements at the current forward foreign exchange rates, with the changes in
forward rates reflected directly in income. The offsetting exchange movements
on the intercompany balances are also recognized directly to income.
The Company has entered into an interest rate swap that qualifies as a
matched swap that is linked by designation with a balance sheet liability and
has opposite interest rate characteristics of such balance sheet item. Matched
interest rate swaps qualify for settlement accounting. Under settlement
accounting, periodic net cash settlements under the swap agreement are
recognized in income on an accrual basis. These settlements are offset against
interest expense in the statements of consolidated income.
INFORMATION ABOUT NONCASH INVESTING AND FINANCING ACTIVITIES--The Company
issued 365,217 shares of Company common stock, valued at approximately
$8,400,000 during fiscal year 1997, in conjunction with the
19
<PAGE>
acquisition of substantially all of the assets and assumption of certain
liabilities of Chiswick Trading, Inc. See Note 2.
IMPAIRMENT OF LONG-LIVED ASSETS--During fiscal year 1997, the Company
adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." This statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain intangibles to be disposed of. The
adoption of this standard did not have a material effect on the accompanying
consolidated financial statements.
ACCOUNTING FOR STOCK BASED COMPENSATION--SFAS No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations ("APB Opinion No. 25"). See Note 7 for the
disclosures required by SFAS No. 123.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related Information."
The Company will adopt these statements during fiscal year 1998 and does not
expect that the adoption of these statements will have a material impact on
the consolidated financial statements.
RECLASSIFICATIONS--Certain reclassifications have been made to the 1996 and
1995 financial statements to conform with the 1997 presentation.
2. ACQUISITIONS
On January 8, 1997, the Company acquired the outstanding stock of Standard
Forms Limited ("SFL"), a U.K. based company, for approximately $4,300,000. SFL
markets a line of business forms and stationery by direct mail and through a
direct sales force principally to automotive accounts in the U.K. and in
France. The acquisition was accounted for under the purchase method of
accounting. Accordingly, SFL's results of operations are included in the
accompanying financial statements from the date of acquisition. The excess
purchase price, including acquisition costs of approximately $310,000, over
the fair value of the net tangible assets acquired was $5,119,000 of which
$1,000,000 was allocated to SFL's customer list and the balance of $4,119,000
to goodwill. The goodwill is being amortized over a period of 25 years.
On March 31, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Chiswick Trading, Inc. ("Chiswick") for
consideration of approximately $34,600,000 in cash, net of cash acquired, and
approximately $8,400,000 in shares of Company common stock (365,217 shares),
for an aggregate purchase price, net of cash acquired, of approximately
$43,000,000. The Company incurred acquisition fees of approximately $400,000
associated with the acquisition. Chiswick markets a line of retail and
industrial packaging, shipping and warehouse supplies sold primarily to small
wholesalers, manufacturers and retailers. The acquisition was accounted for
under the purchase method of accounting. Accordingly, Chiswick's results of
operations are included in the accompanying financial statements from the date
of acquisition. The purchase price including acquisition costs was allocated
to the net assets acquired based on the fair value of such assets and
liabilities. The excess cost over fair value of the net tangible assets
acquired was $34,724,000 of which $6,000,000 was allocated to Chiswick's
customer list, $1,000,000 to a non-compete agreement and the balance of
$27,724,000 to goodwill. These allocations are subject to final valuations.
The Company does not believe these initial allocations will change materially.
The goodwill is being amortized over a period of 40 years.
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company for the years ended June 28,
1997 and June 29, 1996 as though the acquisitions had occurred on the first
day of the respective fiscal year. The pro forma operating results are
presented for comparative purposes
20
<PAGE>
only and do not purport to present the Company's actual operating results had
the acquisitions been consummated on June 30, 1996 or July 1, 1995, or results
which may occur in the future.
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net sales.......................................... $303,190,000 $304,352,000
Net income......................................... 18,835,000 11,883,000
Net income per share............................... 1.35 0.79
</TABLE>
3. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
On July 8, 1994, the Company acquired a 19 percent equity interest in GST
Software, plc ("GST") for $1,800,000 together with an option to acquire the
balance of GST shares. In addition, the Company advanced GST approximately
$250,000 in the form of a note.
During the first quarter of fiscal year 1996, the Company revalued its 19
percent equity interest in GST. Accordingly, the Company's investment in GST
was written down to $0 as of September 30, 1995. In January, 1996, the Company
sold its 19 percent equity interest in GST for $300,000. The revaluation and
subsequent sale resulted in a $820,000 loss, net of related income tax benefit
of $535,000, and is included in the consolidated statements of income as
equity in losses of investment.
4. DEBT OBLIGATIONS AND LEASES
During March 1997, the Company terminated two existing lines of credit in
the total amount of $20,000,000 and entered into a five year, $60,000,000
committed, unsecured, revolving line of credit agreement with two major
commercial banks. Under this credit agreement, the Company has the option to
borrow at the Eurodollar rate plus a spread or the agent bank's base lending
rate prevailing from time to time. The effective Eurodollar based interest
rate at June 28, 1997 was 6.1%. The credit agreement contains various
restrictive covenants which, among other things, require the Company to
maintain certain minimum levels of consolidated net worth and specific
consolidated debt and fixed charge ratios. At June 28, 1997, $27,000,000 was
outstanding under this line. Deferred debt issue costs are amortized over the
term of the agreement.
The Company leases facilities and equipment under long-term operating leases
with both related and non-related parties. The related party leases pertain to
an officer of the Company and were entered into pursuant to the acquisition of
Chiswick. The future minimum rental commitments for operating leases of
certain facilities and equipment are as follows:
<TABLE>
<CAPTION>
THIRD RELATED-
FISCAL YEAR ENDED JUNE PARTIES PARTIES TOTAL
---------------------- ------- --------- ----------
<S> <C> <C> <C>
1998............................................ 543,000 999,000 $1,542,000
1999............................................ 460,000 999,000 1,459,000
2000............................................ 113,000 1,013,000 1,126,000
2001............................................ 77,000 1,058,000 1,135,000
2002............................................ 77,000 1,058,000 1,135,000
Thereafter...................................... 9,000 5,281,000 5,290,000
</TABLE>
Total rental expense was $1,053,000 ($184,000 to related parties), $860,000
and $774,000, in 1997, 1996, and 1995, respectively.
5. FINANCIAL INSTRUMENTS
In order to minimize the exposure to foreign currency fluctuations with
respect to the short-term intercompany loans created to fund the operating
cash requirements of SFL (see Note 2), the Company entered into forward
exchange rate contracts for the amount of the loans and associated interest.
At June 28, 1997, the Company had outstanding forward rate contracts for
$1,657,000 worth of Pound Sterling and $88,000 worth of French Francs. The
fair value of these contracts is nominal, and approximated the carrying value.
Gains or losses on these contracts have been immaterial.
21
<PAGE>
On April 30, 1997, the Company entered into an interest rate swap agreement
with a major bank, having a notional principal amount of $15,000,000 through
May 5, 1998, and $5,000,000 thereafter. The agreement expires on May 4, 1999.
The swap agreement effectively converts the interest rate of a portion of the
Company's debt from a Eurodollar based floating rate to a 6.52% fixed rate.
The estimated fair value of the swap was ($92,000) at June 28, 1997. Although
the Company is exposed to credit and market risk in the event of future non-
performance by the bank, management has no reason to believe that such an
event will occur.
As of June 28, 1997 and June 29, 1996, the carrying value of all other
financial instruments approximates their fair value.
6. EQUITY TRANSACTIONS
The Company has issued a stock purchase right to stockholders for each
outstanding share of common stock of the Company. Each right becomes
exercisable upon the occurrence of certain events, as provided in the Rights
Agreement, and entitles the registered holder to purchase from the Company a
"Unit" consisting of one one-hundredth of a share of "Preferred Stock" at a
Purchase Price of $75.00 per Unit, subject to adjustment to prevent dilution.
In addition, upon the occurrence of certain events, the registered holder will
thereafter have the right to receive, upon payment of the Purchase Price,
additional shares of common stock and/or cash and/or other securities, as
provided in the Rights Agreement. The rights will expire on October 20, 2004.
The Company may redeem the rights at a price of $.01 per right.
On October 20, 1994, the Company announced a plan to repurchase up to
$22,000,000 of its common stock in the open market. The October 1994
repurchase plan terminated on June 30, 1995. As of June 30, 1995, the Company
had purchased 881,750 shares at a cumulative cost of approximately $16,998,000
against this plan. On April 29, 1996, the Company announced a plan to
repurchase up to two million additional shares of the Company's stock over a
two year period. As of June 29, 1996, 984,900 shares, at a cumulative cost of
approximately $17,882,000, had been repurchased. The Company subsequently
retired all shares in treasury as of June 29, 1996. During fiscal 1997, the
Company repurchased an additional 1,015,100 shares for approximately
$16,679,000, which completed the April 1996 repurchase plan. On October 25,
1996, the Company announced a plan to repurchase up to two million additional
shares of the Company's common stock over a two year period. As of June 28,
1997, 41,000 shares had been purchased under the October 1996 plan at a
cumulative cost of approximately $1,032,000.
On March 31, 1997, the Company issued 365,217 shares of Company common stock
in conjunction with the acquisition of substantially all of the assets and
assumption of certain liabilities of Chiswick, details of which are provided
in Note 2 to these financial statements.
There are 1,000,000 authorized and unissued shares of $1.00 par value
preferred stock.
7. STOCK OPTIONS
At the October 1994 annual meeting, the stockholders ratified the NEBS 1994
Key Employee and Eligible Director Stock Option and Stock Appreciation Rights
Plan (the "1994 Plan") and the New England Business Service, Inc. Stock
Compensation Plan (the "Stock Compensation Plan"). Under the 1994 Plan,
options or stock appreciation rights for up to 1,200,000 shares of common
stock may be granted. At June 28, 1997, 75,933 shares are reserved under this
plan for granting of future options. Stock options are granted to purchase
stock at fair market value as of the date the option is granted. Each option
is exercisable in full in terms ranging from one to four years from the date
of grant and the options expire no later than ten years from the date of the
grant. In addition, the plan permits the holder of a stock option to make
payment for optioned shares by surrendering shares of the Company's common
stock valued at their fair market value on the date of surrender. Under the
Stock Compensation Plan, up to 300,000 shares of common stock may be issued in
lieu of cash compensation to directors and employees. At June 28, 1997,
294,934 shares are reserved under this plan for future issuance.
22
<PAGE>
At the October 1990 annual meeting, the stockholders ratified the NEBS 1990
Key Employee Stock Option and Stock Appreciation Rights Plan (the "1990
Plan"). Under the 1990 Plan, options or stock appreciation rights for up to
1,000,000 shares of common stock may be granted. At June 28, 1997, 95,157
shares are reserved under this plan for granting of future options.
The Company had an incentive stock option and stock appreciation rights plan
ratified by the stockholders at the October 1980 annual meeting ("the 1980
Plan") under which key employees could be granted stock options or stock
options and stock appreciation rights for up to 900,000 shares of common
stock. The 1980 Plan expired in 1990, although certain outstanding options are
still exercisable.
There were no outstanding stock appreciation rights under any of the plans
during 1997, 1996 or 1995.
Options for 624,538 and 744,271 shares were exercisable under all option
arrangements at June 28, 1997 and June 29, 1996, respectively.
A summary of stock option activity under the Company's stock option plans
during 1997, 1996, and 1995 follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF PER SHARE AVERAGE
SHARES OPTION PRICE EXERCISE PRICE
--------- ------------ --------------
<S> <C> <C> <C>
June 24, 1994......................... 1,140,743 $14.50-25.25 $17.14
Granted............................. 373,976 17.50-18.75 18.00
Exercised........................... (197,333) 14.50-20.75 15.80
Expired............................. (92,874) 14.75-25.25 19.70
---------
June 30, 1995......................... 1,224,512 14.50-25.25 17.49
Granted............................. 615,194 18.38-20.75 19.40
Exercised........................... (70,579) 14.50-20.75 15.91
Expired............................. (469,418) 14.75-25.25 17.52
---------
June 29, 1996......................... 1,299,709 14.75-25.25 18.47
Granted............................. 720,432 15.38-26.38 21.69
Exercised........................... (245,436) 14.75-22.25 17.31
Expired............................. (112,210) 15.38-25.25 21.45
---------
June 28, 1997......................... 1,662,495 14.75-26.38 19.89
=========
</TABLE>
The following table presents information with regard to all stock options
outstanding at June 28, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ---------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
-------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$14.75-15.88............ 431,858 5.2 $15.27 167,679 $15.10
17.50-19.75............ 552,269 3.8 18.30 308,035 18.49
20.13-22.25............ 262,868 4.5 20.85 148,824 20.81
25.75-26.38............ 415,500 9.8 26.19 -- --
--------- --- ------ ------- ------
14.75-26.38............ 1,662,495 4.8 $19.89 624,538 $18.14
========= === ====== ======= ======
</TABLE>
The Company applies APB Opinion No. 25 to account for its various stock
plans. Accordingly, pursuant to the terms of the plans, no compensation cost
has been recognized for the stock plans. However, if the Company had
determined compensation cost for stock option grants issued during 1997 and
1996 under the provisions of
23
<PAGE>
SFAS No. 123, the Company's net income and net income per share would have
been reduced to the pro forma amounts shown below:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net income
As reported........................................ $18,649,000 $11,929,000
Pro forma.......................................... 17,999,000 11,496,000
Net income per share
As reported........................................ $ 1.37 $ 0.81
Pro forma.......................................... 1.32 0.77
</TABLE>
The pro forma net income reflects the compensation cost only for those
options granted during 1997 and 1996. Compensation cost is reflected over a
stock option's vesting period and compensation cost for options granted prior
to June 30, 1995 is not considered. Therefore, the full potential impact of
compensation cost for the Company's stock plans under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above.
The fair value of each stock option granted in 1997 and 1996 under the
Company stock option plans was estimated on the date of grant using the Black-
Scholes option-pricing model. The following key assumptions were used to value
grants issued for each year:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE AVERAGE DIVIDEND
RISK FREE RATE EXPECTED LIFE VOLATILITY YIELD
-------------- ------------- ---------- --------
<S> <C> <C> <C> <C>
1996........................ 6.28% 7.5 years 25.37% 4.1%
1997........................ 6.28% 7.5 years 29.91% 3.7%
</TABLE>
The weighted-average fair values per share of stock options granted during
1997 and 1996 were $6.40 and $4.71 respectively. It should be noted that the
option pricing model used was designed to value readily tradable stock options
with relatively short lives. The options granted to employees are not tradable
and have contractual lives of up to ten years. However, management believes
that the assumptions used and the model applied to value the awards yields a
reasonable estimate of the fair value of the grants made under the
circumstances.
8. PROFIT-SHARING AND 401(K)PLANS
The Company and its subsidiaries maintained a profit-sharing plan for
substantially all employees who completed one year of service. Distributions
were based on net income and payments were made five times a year. For 1997,
1996, and 1995, distributions under the plans (which were charged to general
and administrative expense) aggregated $1,138,000, $3,489,000, and $3,620,000,
respectively. The Company terminated this plan during 1997. In conjunction
with the termination of this plan, the Company instituted a transition plan,
under which substantially all employees received a predetermined portion of
their salary during the third and fourth quarters of fiscal 1997. Payments
under the transition plan amounted to $1,908,000 and were also charged to
general and administrative expense.
The Company maintained a 401(k) plan covering substantially all domestic
employees who had completed one year of service. Contributions to the plan
were made by way of participant salary deferrals and Company matching
contributions of cash or shares of common stock equal, in the case of non-
retail employees, to one-half of participant deferrals subject to a maximum of
3% of eligible pay, and in the case of retail employees, to 100% of
participant deferrals subject to a maximum of 5% of eligible pay. The
Company's matching contributions (generally from treasury shares) totaled
52,511 shares in 1997, 57,966 shares in 1996, and 76,286 shares in 1995 with a
fair market value of approximately $877,000, $1,103,000, and $1,337,000,
respectively (which were charged to general and administrative expense). At
June 28, 1997, 16,974 shares are reserved for issuance under the 401(k) plan.
24
<PAGE>
Effective July 1, 1997, the terms of the 401(k) plan were modified. The
Company instituted a contribution of 3% of eligible pay to all domestic
employees, regardless of the level of an employee's deferrals. In addition,
the Company's matching contribution for an employee with greater than five
years of service was increased to 100% of the participant's deferrals to a
maximum of 6% of eligible pay. In addition, the Company eliminated the one
year of service standard for plan eligibility and eliminated the "retail
employee" designation.
9. PENSION PLANS
The Company has a defined-benefit, trusteed pension plan (the "DB Plan")
which provides retirement benefits for the majority of its domestic employees.
Benefits under the DB Plan are primarily based on an employee's compensation
during the five years before retirement and number of years of service. The
Company funds current pension cost up to the maximum deductible amount allowed
by the Internal Revenue Code. The Company's Canadian subsidiary has a similar
plan for its employees. The amounts are not significant.
The components of net pension expense/(income) for 1997, 1996, and 1995 are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits earned during
the period........................ $ 635,000 $ 1,564,000 $ 1,481,000
Interest cost on projected benefit
obligation........................ 1,879,000 2,169,000 1,886,000
Actual return on plan assets....... (1,746,000) (4,557,000) (3,753,000)
Net amortization and deferral...... (1,903,000) 1,834,000 1,008,000
----------- ----------- -----------
Net pension expense/(income)..... $(1,135,000) $ 1,010,000 $ 622,000
=========== =========== ===========
</TABLE>
The following table sets forth the DB Plan's funded status and obligations
as of June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $31,563,000 in 1997 and
$21,042,000 in 1996........................... $ 31,563,000 $ 21,450,000
============ ============
Projected benefit obligation..................... $(31,563,000) $(29,925,000)
Plan assets at fair value........................ 33,196,000 31,997,000
------------ ------------
Plan assets in excess of projected benefit
obligation...................................... 1,633,000 2,072,000
Add prior service cost........................... -- 1,797,000
Less:
Unamortized net asset at transition............ (1,115,000) 1,377,000
Unrecognized net gain.......................... (1,073,000) 6,369,000
------------ ------------
Net pension liability (included in accrued
employee benefit expense)................... $ (555,000) $ (3,877,000)
============ ============
</TABLE>
The DB Plan assets were primarily invested in money-market funds and
treasury securities at June 28, 1997 and common stocks and bonds at June 29,
1996. Assumptions used for accounting purposes as of June 28, 1997 and June
29, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Discount rate...................................................... 6.9% 8.0%
Rate of increase in compensation levels............................ 3.0% 5.0%
Expected long-term rate of return on assets........................ 9.0% 9.0%
</TABLE>
During the second quarter of 1997, the Company amended its DB Plan. The
amendment specifically froze plan participation at December 31, 1996 and
eliminated further benefit accruals after June 28, 1997. The
25
<PAGE>
Company currently expects to terminate the plan during the first quarter of
fiscal 1998. The Company recorded a plan curtailment gain of $2,187,000 as a
component of other income during 1997 associated with the plan amendment.
In addition, the Company has a supplemental executive retirement plan which
is currently unfunded. Executive employees are eligible to become members of
the plan upon designation by the Board of Directors. Benefits under the plan
are based on the employees' annual earnings and years of service. Provision
for this benefit is charged to operations over the employees' term of
employment. The amounts are not significant.
10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, ("SFAS No. 106"), requires the accrual of postretirement benefits
other than pensions (such as health care benefits) during the years an
employee provides service to the Company. The Company sponsors a defined
benefit postretirement plan that provides health and dental care benefits for
retired Company officers. The plan is contributory and retirees' contributions
are adjusted annually.
The following table sets forth the plan's funded status and obligations as
of June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................... $ 538,000 $ 461,000
Eligible active plan participants.................. -- 79,000
Other active plan participants..................... 448,000 414,000
---------- ----------
Total............................................ 986,000 954,000
Plan assets at fair value............................ -- --
Accumulated postretirement benefit obligation in
excess of plan assets............................... 986,000 954,000
Unrecognized net gain................................ 91,000 48,000
---------- ----------
Net postretirement liability (included in accrued
employee benefit expense)....................... $1,077,000 $1,002,000
========== ==========
</TABLE>
The components of net periodic postretirement benefits cost for 1997, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Service cost.................................. $ 43,000 $40,000 $ 27,000
Interest on accumulated postretirement benefit
obligation................................... 75,000 64,000 58,000
Amortization of gain.......................... (3,000) (9,000) (15,000)
-------- ------- --------
Net periodic postretirement cost............ $115,000 $95,000 $ 70,000
======== ======= ========
</TABLE>
For measurement purposes, a 10% annual rate of increase in the cost of
providing medical benefits was assumed in 1997, with a reduction of 1% per
year to a trend rate of 6% for fiscal 2001.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.8% in 1997 and 1996.
The health care cost trend has a significant effect on the amounts reported.
An increase of 1% in the rate of increase would have had an effect of
increasing the APBO by $158,000 and the net periodic postretirement benefits
cost by $18,000.
26
<PAGE>
11. EXIT COSTS
During the third quarter of fiscal 1995, the Company made the decision to
close its Wisconsin based SYCOM subsidiary and to integrate SYCOM's activities
into other of the Company's operations. As such, the Company recorded a
$1,964,000 pretax charge for exit costs associated with the SYCOM closure. The
charge consisted of facilities and equipment write-offs of approximately
$792,000 and termination benefits of approximately $1,172,000. Approximately
100 employees were terminated as a result of the facility closing. As of June
28, 1997, the payment of termination benefits and the closure of the facility
has been completed.
During the first quarter of fiscal year 1996, the Company implemented a plan
to restructure operations, including the closure of the company's Flagstaff,
Arizona manufacturing facility. The accompanying consolidated statements of
income include a pretax charge of approximately $3,044,000 for exit costs
associated with this plan. The charge consists of costs related to the closure
of the Flagstaff facility of $1,224,000 and termination benefits of
$1,820,000. Approximately 110 employees were terminated as a result of the
facility closing. As of June 28, 1997, the payment of termination benefits and
the closure of the manufacturing operations has been completed.
During the first quarter of fiscal year 1997, the Company reached a joint
decision with Kinko's Corporation to pursue a new strategy for its retail
channel initiative. This decision resulted in the closure of the Company's 75
existing NEBS manned print desks in Kinko's stores, its administrative offices
in Phoenix and its stationery plant in Scottsdale, Arizona. The accompanying
consolidated statements of income include a $3,803,000 pretax charge for exit
costs associated with this plan recognized during the year ended June 28,
1997.
The $3,803,000 pretax charge for exit costs consisted of estimated costs
related to facility closures of $485,000, estimated equipment write-offs of
$1,105,000 and estimated termination benefits of $2,213,000. Approximately 230
employees have been terminated as a result of the restructuring plan.
The balance of the reserve for exit costs at June 28, 1997 amounted to
$1,006,000 and represents specifically identified employee termination
benefits, equipment write-offs and facility closure costs. Cash payments
related to the reserve for exit costs are expected to be substantially
completed during fiscal year 1998.
12. SALE OF PRODUCT LINE
During the third quarter of fiscal 1996, the Company completed the sale of
selected assets of its Software and Services Division for $4,500,000 resulting
in a gain of approximately $495,000. The asset sale included the rights to the
Company's One-Write Plus accounting package and the Company's software
development and technical support organizations.
13. INCOME TAXES
The components of income before income taxes were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
United States............................ $30,149,000 $19,735,000 $26,900,000
Foreign.................................. 1,231,000 1,320,000 1,592,000
----------- ----------- -----------
Total.................................. $31,380,000 $21,055,000 $28,492,000
=========== =========== ===========
</TABLE>
27
<PAGE>
Provisions for income taxes under SFAS No. 109 in 1997, 1996 and 1995 consist
of:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
Currently payable:
Federal............................... $ 7,350,000 $5,217,000 $11,931,000
State................................. 2,376,000 2,353,000 4,232,000
Foreign............................... 436,000 1,019,000 684,000
----------- ---------- -----------
Total............................... 10,162,000 8,589,000 16,847,000
Deferred................................ 2,569,000 (283,000) (5,029,000)
----------- ---------- -----------
Total............................... $12,731,000 $8,306,000 $11,818,000
=========== ========== ===========
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax asset (liability) as of June 28, 1997 and June 29, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- ---------------------
CURRENT NONCURRENT CURRENT NONCURRENT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Amortization of intangible
assets.................... $1,456,000 $1,535,000
Pension plans.............. 345,000 1,778,000
Accrued vacation........... 956,000 1,200,000
Allowance for doubtful
accounts.................. 1,212,000 1,257,000
Accrued expenses........... 1,508,000 855,000
Accrued exit costs......... 15,000 809,000
Sales returns and
allowances................ 405,000 450,000
Inventory.................. 910,000 611,000
Postretirement benefits.... 434,000 418,000
Depreciation............... 124,000 --
Other...................... 535,000 558,000
Deferred tax liabilities:
Depreciation............... -- -- $ (27,000)
Deferred mail advertising.. (983,000) -- --
Other...................... (79,000) $(288,000) -- (326,000)
---------- --------- ---------- ---------
Net deferred tax asset
(liability)................. $6,838,000 $(288,000) $9,471,000 $(353,000)
========== ========= ========== =========
</TABLE>
A reconciliation of the provisions for income taxes to the U.S. Federal
income tax statutory rates follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate......................................... 35.0% 35.0% 35.0%
State income taxes (less federal tax benefits)............. 6.2 6.3 6.5
Other--net................................................. (0.6) (1.9) 0.0
---- ---- ----
Effective tax rate....................................... 40.6% 39.4% 41.5%
==== ==== ====
</TABLE>
28
<PAGE>
14. FINANCIAL INFORMATION BY GEOGRAPHIC AREA
The Company markets its products directly to small businesses and
professional offices in the United States, Canada, France and the United
Kingdom. Income from operations represents net sales less all identifiable
operating expenses. Investment income, interest expense and income taxes are
excluded from geographic area operating data. Sales or transfers between
geographic areas were not material. General corporate expenses are included
under the Company's domestic operations.
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL CONSOLIDATED
-------- ------------- ------------
<S> <C> <C> <C>
1997
Net sales............................. $237,130 $26,294 $263,424
Income from operations................ 28,718 539 29,257
Identifiable assets................... 115,125 26,071 141,196
1996
Net sales............................. 233,462 21,492 254,954
Income from operations................ 18,754 666 19,420
Identifiable assets................... 82,921 20,621 103,542
1995
Net sales............................. 241,844 21,880 263,724
Income from operations................ 26,511 676 27,187
Identifiable assets................... 103,868 20,678 124,546
</TABLE>
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following financial information is in thousands of dollars except per
share amounts.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1997
Net sales........................ $60,702 $63,203 $64,127 $75,392 $263,424
Gross profit..................... 38,741 42,557 41,441 46,637 169,376
Income before income taxes....... 1,147 9,435 10,003 10,795 31,380
Net income....................... 678 5,700 6,004 6,267 18,649
Earnings per share............... .05 .43 .45 .45 1.37
======= ======= ======= ======= ========
Dividends per share.............. $ .20 $ .20 $ .20 $ .20 $ .80
======= ======= ======= ======= ========
1996
Net sales........................ $63,788 $67,158 $63,100 $60,908 $254,954
Gross profit..................... 41,558 44,278 39,202 38,942 163,980
Income before income taxes....... 1,868 6,612 5,739 6,836 21,055
Net income....................... 541 3,912 3,708 3,768 11,929
Earnings per share............... .04 .26 .25 .26 .81
======= ======= ======= ======= ========
Dividends per share.............. $ .20 $ .20 $ .20 $ .20 $ .80
======= ======= ======= ======= ========
</TABLE>
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of New England Business Service,
Inc.:
We have audited the accompanying consolidated balance sheets of New England
Business Service, Inc. and subsidiaries as of June 28, 1997 and June 29, 1996
and the related statements of consolidated income, consolidated stockholders'
equity, and consolidated cash flows for each of the three years in the period
ended June 28, 1997. Our audits also included the financial statement
schedules listed in the Index at Item 14(a)(2). These financial statements and
financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of New England Business Service,
Inc. and subsidiaries as of June 28, 1997 and June 29, 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended June 28, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
August 4, 1997
30
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
Robert J. Murray, age 56, was elected Chief Executive Officer and Chairman
of the Board in December 1995. Mr. Murray has been a director of the Company
since 1991. Mr. Murray retired from The Gillette Company in 1995 having been
with that company for more than 34 years. From January 1, 1991 until his
retirement in 1995, Mr. Murray was Executive Vice President, North Atlantic
Group of The Gillette Company. During 1990, he served as Vice President,
Chairman's Office, of Gillette and from 1985 to 1989 as Chairman of the Board
of Management of Braun AG, one of Gillette's German subsidiaries. Mr. Murray
is a director of Fleet National Bank, LoJack Corporation, North American
Mortgage, Hannaford Bros. Co. and Allmerica Financial Corporation.
Peter A. Brooke, age 68, has been a director of the Company since 1989. He
also served in that capacity from 1970 to 1983. His principal occupation for
more than five years prior to December 31, 1995, was as Chairman and Chief
Executive Officer of Advent International Corporation. In January 1996, Mr.
Brooke retired as Chief Executive Officer of Advent International but remains
as Chairman of its Board of Directors. Advent International Corporation is an
international venture capital management firm. Mr. Brooke is also a director
of Unitrode Corporation.
Robert L. Gable, age 66, has been a director of the Company since July 1996.
Mr. Gable has been Chairman and Chief Executive Officer of Unitrode
Corporation since 1990. From 1988 to 1990, Mr. Gable was a management
consultant. From 1985 until 1988, Mr. Gable was President and Chief Executive
Officer of Computervision Corporation.
Benjamin H. Lacy, age 71, has been a director of the Company since 1970. His
principal occupation is as President of the Clipper Ship Foundation, Inc., a
grant-making charitable foundation. Prior to his retirement in May, 1995, Mr.
Lacy was of counsel to the law firm of Hill & Barlow, a Professional
Corporation, which has served as general counsel to the Company since 1973.
Herbert W. Moller, age 55, has been a director of the Company since July
1996. Mr. Moller has held several positions at The Gillette Company since
1966. Mr. Moller has been the Vice President, Finance and Strategic Planning,
Gillette North Atlantic Group, since 1992. From 1989 through 1992, Mr. Moller
was Vice President of Management Information Systems at The Gillette Company.
Jay R. Rhoads, Jr., age 72, has been a director of the Company since its
incorporation in 1955. He served as President from 1965 to 1971, as Chief
Executive Officer from 1965 to 1975 and as Chairman of the Board from 1971 to
1987. Mr. Rhoads is the brother of Richard H. Rhoads.
Richard H. Rhoads, age 67, joined the Company in 1965 and has been a
director since 1970. From 1975 to 1991, he was Chief Executive Officer. His
principal occupation since 1988 was his position as Chairman of the Board, a
position from which he retired in 1995. Since 1980, Mr. Rhoads has served as a
member of the Executive Committee of the Board. Mr. Rhoads is the brother of
Jay R. Rhoads, Jr.
Brian E. Stern, age 49, has been a director of the Company since April 1995.
Mr. Stern has been President of the Office Document Products Group and
Corporate Senior Vice President of Xerox Corporation since 1994. From 1993 to
1994, Mr. Stern was President of the Personal Document Products Division of
Xerox. From 1992
31
<PAGE>
to 1993, Mr. Stern was Vice President of Corporate Business Strategy of Xerox
and from 1990 to 1992, Vice President, Finance, Development and Manufacturing
of Xerox.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers are elected to office by the Board of
Directors at the first board meeting following the Annual Meeting of
Stockholders or at other board meetings as appropriate. Robert J. Murray,
George P. Allman, Edward M. Bolesky, Robert S. Brown, John F. Fairbanks,
Steven G. Schlerf and Robert D. Warren were elected to office on October 25,
1996. Theodore Pasquarello was elected to office on April 25, 1997. Each
officer holds office until the first meeting of the Board following the next
Annual Meeting and until a successor is chosen. Information regarding Robert
J. Murray can be found in the above section titled "Directors of the Company."
Information on the other executive officers is below.
George P. Allman, age 55, joined the Company in February 1996 and was
elected at that time Vice President--Retail Sales and Operations. In October
1996, Mr. Allman was elected Vice President--Diversified Operations. In 1984,
Mr. Allman founded GPA Associates, Inc., and served as President from 1984 to
1994. During 1995, Mr. Allman was a private investor.
Edward M. Bolesky, age 51, joined the Company in 1981 and has served in
numerous capacities in operations and administration. In 1991, Mr. Bolesky was
elected Vice President--Sales. In 1993, he was elected Vice President--General
Manager, Administration and Customer Relations. In 1994, he was elected Vice
President--General Manager, Operations. In 1995, he was elected Vice
President--General Manager, Manufacturing and Information Systems. In 1996,
Mr. Bolesky was elected to his current office of Vice President--Direct
Marketing/Telesales and Service.
Robert S. Brown, age 49, joined the Company in 1971 and has held various
positions in operations and marketing in the United States and Canada. In
1992, Mr. Brown was elected Vice President--General Manager, Marketing. In
1994, he was elected Vice President--General Manager, Subsidiaries. In 1996,
Mr. Brown was elected to the position of Vice President--Circulation and
International.
John F. Fairbanks, age 36, joined the Company in 1994 as Treasurer and
Secretary. In January 1996, Mr. Fairbanks was elected Vice President--
Corporate Controller. In October 1996, Mr. Fairbanks was elected Vice
President--Chief Financial Officer. Prior to joining the Company, Mr.
Fairbanks was Vice President & Treasurer of M/A-COM, Inc. from 1992 until
1994.
Theodore Pasquarello, age 47, joined the Company in April 1997 as Executive
Vice President and President of the Chiswick division. Prior to joining the
Company, Mr. Pasquarello was the founder of Chiswick Trading, Inc., and had
been President of such for over five years.
Steven G. Schlerf, age 45, joined the Company in 1979 and has served in a
variety of capacities in manufacturing and operations. Mr. Schlerf was elected
Vice President--Image Manufacturing and Product Development in 1995, and Vice
President--Manufacturing and Technical Operations in 1996.
Robert D. Warren, age 46, joined the Company in April 1996 as Vice
President, Business Management, Business Solutions. In October 1996, he was
elected Vice President--Business Management and Development. Mr. Warren was
previously Vice President, Marketing for Gillette Stationery Products, North
America, and General Manager for Gillette Stationery Products of Canada from
1988 until 1992.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Information regarding compliance with Section 16(a) beneficial ownership
reporting requirements located on page 5 of the Company's Proxy Statement for
Annual Meeting of Stockholders to be held October 24, 1997 is incorporated
herein by reference.
32
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Compensation of Officers and Directors" located on
pages 6 to 10 of the Company's Proxy Statement for Annual Meeting of
Stockholders to be held October 24, 1997 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Voting Securities" located on pages 1 and 2 of the
Company's Proxy Statement for Annual Meeting of Stockholders to be held
October 24, 1997 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" located on page 5 of the
Company's Proxy Statement for Annual Meeting of Stockholders to be held
October 24, 1997 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements are located in this Report under
Item 8 for the fiscal year ended June 28, 1997.
(1) Independent Auditors' Report
(2) Consolidated Balance Sheets as of June 28, 1997 and June 29, 1996
(3) Statements of Consolidated Income for the fiscal years ended June 28,
1997, June 29, 1996, and June 30, 1995
(4) Statements of Consolidated Stockholders' Equity for the fiscal years
ended June 28, 1997, June 29, 1996, and June 30, 1995
(5) Statements of Consolidated Cash Flows for the fiscal years ended June
28, 1997, June 29, 1996 and June 28, 1995
(6) Notes to Consolidated Financial Statements
(a)(2) The following financial statement schedules are filed as part of this
report and are located on the following pages:
<TABLE>
<S> <C>
Schedule II Valuation and Qualifying Accounts.......................... 38
Schedules I, III, IV, and V are omitted as they are not applicable or not
required under Regulation S-X
</TABLE>
(a)(3) Exhibits required to be filed by Item 601 of Regulation S-K:
<TABLE>
<C> <S>
(2) Not applicable.
(3)(a) Certificate of Incorporation of the Registrant. (Incorporated by
reference to the Company's Current Report on Form 8-K dated October
31, 1986.)
(3)(b) Certificate of Merger of New England Business Service, Inc. (a
Massachusetts corporation) and the Company, dated October 24, 1986
amending the Certificate of Incorporation of the Company by adding
Articles 14 and 15 thereto. (Incorporated by reference to the
Company's Current Report on Form 8-K dated October 31, 1986.)
(3)(c) Certificate of Designations, Preferences and Rights of Series A
Participating Preferred Stock of the Company, dated October 27,
1989. (Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995, filed September
15, 1995.)
</TABLE>
33
<PAGE>
<TABLE>
<C> <S>
(3)(d) By-Laws of the Registrant, as amended. (Incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 1995, filed February 8, 1996.)
(4)(a) Specimen stock certificate for shares of Common Stock, par value
$1.00 per share. (Incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995, filed
September 15, 1995.)
(4)(b) Amended and Restated Rights Agreement, dated as of October 27, 1989
as amended as of October 20, 1994 (the "Rights Agreement"), between
New England Business Service, Inc. and The First National Bank of
Boston (now BankBoston), National Association, as rights agent,
including as Exhibit B the forms of Rights Certificate Election to
Exercise. (Incorporated by reference to Exhibit 4 of the Company's
current report on Form 8-K dated October 25, 1994.)
(9) Not applicable.
(10)(a) NEBS 1990 Key Employee Stock Option and Stock Appreciation Rights
Plan dated July 27, 1990. (Incorporated by reference to Exhibit
(10)(a) to the Company's Annual Report on Form 10-K for the fiscal
year ended June 29, 1990, filed September 14, 1990.)
(10)(b) Revolving Credit Agreement dated as of March 26, 1997, by and among
New England Business Service, Inc., The First National Bank of
Boston (now BankBoston) and Fleet National Bank (together with
certain other financial institutions, the Banks), The First
National Bank of Boston (now BankBoston), as agent for the Banks,
and Fleet National Bank, as documentation agent for the Banks.
(Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated April 15, 1997.)
(10)(c) NEBS Deferred Compensation Plan for Outside Directors. (Incorporated
by reference to Exhibit (10)(d) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 25, 1982, filed September
23, 1982.)
(10)(d) NEBS 1994 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan dated July 22, 1994. (Incorporated by
reference to Exhibit (10)(f) to the Company's Annual Report on Form
10-K for the fiscal year ended June 24, 1994, filed September 16,
1994.)
(10)(e) New England Business Service, Inc. Stock Compensation Plan dated
July 25, 1994. (Incorporated by reference to Exhibit (10)(g) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
24, 1994, filed September 16, 1994.)
(10)(f) New England Business Service, Inc. Deferred Compensation Plan dated
June 25, 1994. (Incorporated by reference to Exhibit (10)(g) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1995, filed September 15, 1995.)
(10)(g) Supplemental Retirement Plan for Executive Employees of New England
Business Service, Inc. dated July 1, 1991, as amended June 24,
1994. (Incorporated by reference to Exhibit (10)(h) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1995, filed September 15, 1995.)
(10)(h) Executive Bonus Plan for 1997. (Incorporated by reference to Exhibit
(10)(n) to the Company's Annual Report on Form 10-K for the fiscal
year ended June 29, 1996, filed September 11, 1996.)
(10)(i) Executive Bonus Plan for 1998.
(10)(j) Asset Purchase Agreement by and among New England Business Service,
Inc., Chiswick Trading, Inc. and Theodore Pasquarello dated as of
March 31, 1997. (Incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated April 15, 1997.)
(10)(k) Lease between Theodore Pasquarello, as Trustee of the E.B. Realty
Trust (Landlord) and New England Business Service, Inc. (Tenant)
for the land and improvements located at 33 Union Avenue, Sudbury,
MA 01776. (Incorporated by reference to Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 29, 1997 filed May 13, 1997.)
</TABLE>
34
<PAGE>
<TABLE>
<C> <S>
(10)(l) Lease between Theodore Pasquarello and Eileen Pasquarello, as
Trustees of The Paris Trust (Landlord) and New England Business
Service, Inc. (Tenant) for the land and improvements located at 31
Union Avenue, Sudbury, MA 01776. (Incorporated by reference to
Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended March 29, 1997 filed May 13, 1997.)
(10)(m) Separation Agreement dated October 25, 1996 between the Company and
Russell V. Corsini, Jr.
(10)(n) Employment Agreement dated March 31, 1997 between the Company and
Theodore Pasquarello.
(10)(o) Change in Control agreement dated November 27, 1996 between the
Company and Robert J. Murray.
(10)(p) Change in Control agreement dated November 27, 1996 between the
Company and John F. Fairbanks.
(10)(q) Change in Control agreement dated November 27, 1996 between the
Company and George P. Allman.
(10)(r) Change in Control agreement dated November 27, 1996 between the
Company and Robert D. Warren.
(10)(s) Change in Control agreement dated November 27, 1996 between the
Company and Robert S. Brown.
(10)(t) Change in Control agreement dated November 27, 1996 between the
Company and Edward M. Bolesky.
(10)(u) Change in Control agreement dated November 27, 1996 between the
Company and Steven G. Schlerf.
(10)(v) Change in Control agreement dated April 2, 1997 between the Company
and Theodore Pasquarello.
(10)(w) Lease between Theodore Pasquarello and Eileen Pasquarello, as
Trustees of The Paris Trust (Landlord) and New England Business
Service, Inc. (Tenant) for the land and improvements located at 25
Union Avenue, Sudbury, MA 01776.
(10)(x) NEBS 1997 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan dated July 25, 1997.
(11) Statement re Computation of Per Share Earnings.
(12) Not applicable.
(13) Not applicable.
(16) Not applicable.
(18) Not applicable.
(21) List of Subsidiaries.
(22) Not applicable.
(23) Consent of Deloitte & Touche LLP.
(24) Not applicable.
(27) Article 5 Financial Data Schedule.
(28) Not applicable.
</TABLE>
35
<PAGE>
Location of Documents Pertaining to Management Contracts and Compensatory
Plans and Arrangements:
<TABLE>
<C> <S>
(1) NEBS 1990 Key Employee Stock Option and Stock Appreciation Rights Plan:
Exhibit (10)(a) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 29, 1990, filed September 14, 1990.
(2) NEBS 1994 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan: Exhibit (10)(f) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 24, 1994, filed
September 16, 1994.
(3) New England Business Service, Inc. Stock Compensation Plan: Exhibit
(10)(g) to the Company's Annual Report on Form 10-K for the fiscal
year ended June 24, 1994, filed September 16, 1994.
(4) New England Business Service, Inc. Deferred Compensation Plan: Exhibit
(10)(g) to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995, filed September 15, 1995.
(5) Supplemental Retirement Plan for Executive Employees of New England
Business Service, Inc.: Exhibit (10)(h) to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995, filed September
15, 1995.
(6) Executive Bonus Plan for 1997: Exhibit (10)(n) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 29, 1996, filed
September 11, 1996.
(7) Executive Bonus Plan for 1998: Exhibit (10)(i) to this Annual Report on
Form 10-K.
(8) Separation Agreement between the Company and Russell V. Corsini, Jr.:
Exhibit (10)(m) to this Annual Report on Form 10-K.
(9) Employment Agreement between the Company and Theodore Pasquarello:
Exhibit (10)(n) to this Annual Report on Form 10-K.
(10) Change in Control Agreement between the Company and Robert J. Murray:
Exhibit (10)(o) to this Annual Report on Form 10-K.
(11) Change in Control Agreement between the Company and John F. Fairbanks:
Exhibit (10)(p) to this Annual Report on Form 10-K.
(12) Change in Control Agreement between the Company and George P. Allman:
Exhibit (10)(q) to this Annual Report on Form 10-K.
(13) Change in Control Agreement between the Company and Robert D. Warren:
Exhibit (10)(r) to this Annual Report on Form 10-K.
(14) Change in Control Agreement between the Company and Robert S. Brown:
Exhibit (10)(s) to this Annual Report on Form 10-K.
(15) Change in Control Agreement between the Company and Edward M. Bolesky:
Exhibit (10)(t) to this Annual Report on Form 10-K.
(16) Change in Control Agreement between the Company and Steven G. Schlerf:
Exhibit (10)(u) to this Annual Report on Form 10-K.
(17) Change in Control Agreement between the Company and Theodore
Pasquarello: Exhibit (10)(v) to this Annual Report on Form 10-K.
(18) NEBS 1997 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan: Exhibit (10)(x) to this Annual Report on
Form 10-K.
</TABLE>
(b) Reports on Form 8-K
On June 13, 1997, on Form 8-K/A, the Company filed financial statements and
pro forma financial information relative to the acquisition of substantially
all of the assets and assumption of certain liabilities of Chiswick Trading,
Inc.
36
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
New England Business Service, Inc.
(Registrant)
/s/ Robert J. Murray
By __________________________________
(ROBERT J. MURRAY, CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER)
Date: September 12, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE
/s/ Robert J. Murray Chairman, President, September 12,
- ------------------------------------- Chief Executive 1997
(ROBERT J. MURRAY) Officer and
Director (Principal
Executive Officer)
/s/ Peter A. Brooke Director September 12,
- ------------------------------------- 1997
(PETER A. BROOKE)
/s/ Robert L. Gable Director September 12,
- ------------------------------------- 1997
(ROBERT L. GABLE)
/s/ Benjamin H. Lacy Director September 12,
- ------------------------------------- 1997
(BENJAMIN H. LACY)
/s/ Herbert W. Moller Director September 12,
- ------------------------------------- 1997
(HERBERT W. MOLLER)
/s/ Jay R. Rhoads, Jr. Director September 12,
- ------------------------------------- 1997
(JAY R. RHOADS, JR.)
/s/ Richard H. Rhoads Director September 12,
- ------------------------------------- 1997
(RICHARD H. RHOADS)
/s/ Brian E. Stern Director September 12,
- ------------------------------------- 1997
(BRIAN E. STERN)
/s/ John F. Fairbanks Vice President-- September 12,
- ------------------------------------- Chief Financial 1997
(JOHN F. FAIRBANKS) Officer (Principal
Financial and
Accounting Officer)
37
<PAGE>
SCHEDULE II
NEW ENGLAND BUSINESS SERVICE, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(000'S OMITTED)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED DEDUCTIONS BALANCE AT
BEGINNING CHARGED TO OTHER FROM END OF
PERIOD TO INCOME ACCOUNTS(1) RESERVES(2) PERIOD
---------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Reserves deducted from
assets to which they
apply:
For doubtful accounts
receivable:
Year ended June 30,
1995................. 3,012 3,177 0 2,885 3,304
Year ended June 29,
1996................. 3,304 3,033 0 2,994 3,343
Year ended June 28,
1997................. 3,343 2,612 0 2,604 3,351
Reserves included in
liabilities:
For sales returns and
allowances:
Year ended June 30,
1995................. 1,078 990 0 1,078 990
Year ended June 29,
1996................. 990 1,072 0 990 1,072
Year ended June 28,
1997................. 1,072 993 0 1,072 993
</TABLE>
- --------
(1) Recovery of accounts previously written off.
(2) Accounts written off.
38
<PAGE>
EXHIBIT 10(I)
1998 NEBS EXECUTIVE BONUS PLAN
(EFFECTIVE AS OF JUNE 29, 1997)
This Executive Bonus Plan was adopted by the Board of Directors of New
England Business Service, Inc. (the "Company") on July 25, 1997 upon the
recommendation of its Organization and Compensation Committee for the purpose of
providing incentive compensation for the senior executives and managers of the
Company and its subsidiaries. This Plan shall be governed by the following
definitions and calculations.
I Participants. The Participants in the Plan for the 1998 fiscal year of
-------------
the Company (the "Year") and their respective Target Bonus Percentages
shall be as follows:
A. Officers of the Company.
------------------------
Chairman, President & Chief Executive Officer 70%
Vice President, Diversified Operations 50%
Treasurer & Secretary 50%
Vice President, Information Systems 50%
Vice President, Direct Marketing,
Telesales & Service 50%
Vice President, Circulation & International 50%
Vice President, Chief Financial Officer 50%
Vice President, Human Resources 50%
Executive Vice President, NEBS
President, Chiswick Division 50%
Vice President, Manufacturing and
Technical Operations 50%
Vice President, Business Management &
Development 50%
<PAGE>
B. CEOs of Subsidiaries
--------------------
Managing Director,
NEBS Business Stationery 40%
President and Chief Executive,
NEBS Business Forms, Ltd. 40%
C. Corporate Controller
--------------------
Corporate Controller 40%
II. Target Bonus. The Target Bonus payable to a Participant with respect to
------------
the Year shall be an amount arrived at by multiplying his base annual
salary at the end of the Year by his Target Bonus Percentage.
III. Actual Bonus. The Actual Bonus of each Participant shall be
------------
calculated based on actual results vs. targeted objectives.
A. Chairman, President & Chief Executive Officer
1. The actual bonus of this Participant shall be the sum of the
following:
(a) Each 1% by which consolidated net sales are more than 95% up
to 105% of the targeted consolidated net sales for the Year
equals 7.0% of his base salary, plus each 1% by which
consolidated net sales are more than 105% of the targeted
consolidated net sales for the Year equals 3.5% of his base
salary; and
(b) Each 1% by which consolidated net income is more than 95% up
to 105% of the targeted consolidated net income for the Year
equals 7.0% of his base salary, plus each 1% by which
consolidated net income is more than 105% of the targeted
consolidated net income for the Year equals 3.5% of his base
salary; and
2. No bonuses shall be paid to this Officer if the Company's
consolidated net income for the Year is less than 90% of the
targeted net income objective.
B. Vice President, Business Management & Development; Vice President,
Chief Financial Officer; Vice President, Human Resources; Vice
President, Information Systems; Vice President, Manufacturing and
Technical Operations; Treasurer & Secretary.
<PAGE>
1. The actual bonus of each of these Participants shall be the sum
of the following:
(a) Each 1% by which consolidated net sales are more than 95% up
to 105% of the targeted consolidated net sales for the Year
equals 3.5% of his base salary, plus each 1% by which
consolidated net sales are more than 105% of the targeted
consolidated net sales for the Year equals 1.75% of his base
salary; and
(b) Each 1% by which consolidated net income is more than 95% up
to 105% of the targeted consolidated net income for the Year
equals 3.5% of his base salary, plus each 1% by which
consolidated net income is more than 105% of the targeted
consolidated net income for the Year equals 1.75% of his base
salary; and
(c) 15% of his base salary based on his Quantitative and/or
Qualitative Measurements (MBOs) as determined by the
Chairman, President & Chief Executive Officer.
The Qualitative Measures (MBOs) described in item c above are capped at 100%
attainment of the target.
2. No bonus shall be paid to any of these Officers if the Company's
consolidated net income for the Year is less than 90% of the
targeted net income objective.
C. Executive Vice President, Chiswick Division; Vice President,
Circulation & International; Vice President, Direct Marketing,
Telesales & Service: Vice President, Diversified Operations.
1. The actual bonus of these Participants shall be the sum of the
following:
(a) Each 1% by which channel net sales are more than 95% up to
105% of the targeted channel net sales for the Year equals
3.5% of his base salary, plus 1% by which channel net sales
are more than 105% of the targeted channel net sales for the
Year equals 1.75% of his base salary; and
(b) Each 1% by which consolidated net income is more than 95% up
to 105% of the targeted consolidated net income for the Year
equals 3.5% of his base salary, plus each 1% by which
consolidated net income is more than 105% of the targeted
consolidated net income for the Year equals 1.75% of his base
salary; and
<PAGE>
(c) 15% of his or her base salary based on his Quantitative
and/or Qualitative Measurements (MBOs) as determined by the
Chairman, President & Chief Executive Officer.
The Qualitative Measures (MBOs) described in item c above are capped at 100%
attainment of the target.
2. No bonus shall be paid to any of these Officers if the Company's
consolidated net earnings for the Year is less than 90% of the
targeted net income objective.
D. Subsidiary Business Units: President, Chief Executive; Managing
Director.
1. The actual bonus of both of these Participants shall be the sum
of the following:
(a) Each 1% by which subsidiary net sales are more than 95% up to
105% of the targeted subsidiary net sales for the Year equals
2.8% of his base salary, plus each 1% by which subsidiary net
sales are more than 105% of the targeted subsidiary net sales
for the Year equals 1.4% of his base salary; and
(b) Each 1% by which consolidated net income is more than 95% up
to 105% of the targeted consolidated net sales for the Year
equals 2.8% of his base salary, plus each 1% by which
consolidated net income is more than 105% of the targeted
consolidated net income for the Year equals 1.4% of his base
salary; and
(c) 12% of his base salary based on his Quantitative and/or
Qualitative Measurements (MBOs) as determined by the
Chairman, President & Chief Executive Officer.
The Qualitative Measures (MBOs) described in item c above are capped at 100%
attainment of the target.
2. No bonus shall be paid if the Company's consolidated net income
for the Year is less than 90% of the targeted net income
objective.
E. Corporate Controller.
1. The actual bonus of this Participant shall be the sum of the
following:
(a) Each 1% by which consolidated net sales are more than 95% up
to 105% of the targeted consolidated net sales for the Year
equals 2.8% of his base salary, plus each 1% by which
consolidated net sales are more than 105% of the targeted
consolidated net
<PAGE>
sales for the Year equals 1.4% of his base salary; and
(b) Each 1% by which consolidated net income is more than 95% up
to 105% of the targeted consolidated net income for the Year
equals 2.8% of his base salary, plus each 1% by which
consolidated net income is more than 105% of the targeted
consolidated net income for the Year equals 1.4% of his base
salary; and
(c) 12% of his base salary based on his Qualitative and/or
Qualitative Measurements (MBOs) as determined by the
Chairman, President & Chief Executive Officer.
The Qualitative Measures (MBOs) described in item c above are capped at 100%
attainment of the target.
2. No bonus shall be paid if the company's consolidated earnings for
the Year is less than 90% of the targeted net income objective.
IV. Bonus Payouts
-------------
25% of the net payout will be in the form of NEBS Stock with a share price
which is established at the close of trading on the New York Stock Exchange
on the third business day following the issuance of the press release
disclosing the Company's financial results for the fourth quarter of the
Year. All bonus payments will be made within 60 days after the close of the
Year.
V. Certain Definitions and Other Provisions.
-----------------------------------------
A. All references to "net" sales shall refer to consolidated net sales of
the Company or net sales of a subsidiary business unit or business
unit, as the case may be, as reported or used in calculating the
Company's audited consolidated earnings.
B. For purposes of calculating the actual bonuses, consolidated net income
for the Year shall mean such consolidated income, after taxes and after
provision for executive bonuses under this Plan, determined in
accordance with all of the accounting policies employed in the
preparation of the Company's audited financial statements for the Year.
C. Actual or targeted consolidated net income, actual targeted
consolidated sales, or the actual or targeted net sales of any
subsidiary business unit or business unit may, at the discretion of the
Organization and Compensation Committee, be adjusted to eliminate the
effect of (a) either the acquisition or the divestiture by the Company
of any subsidiary or division during the Year,
<PAGE>
and/or (b) the imposition during the Year by Massachusetts or any other
state or states of sales taxes on services, materials or supplies
purchased by the Company or any subsidiary of the Company the effect of
which is not allowed for in the Company's annual budget for the 1998
fiscal year or (c) any abatement of taxes or material increase or
decrease in Federal or State corporate tax rates. It is the intention
of the Organization and Compensation Committee that any such
discretionary adjustment shall be made by it, and shall be announced to
the affected Participants, promptly after the occurrence of the
motivating event, but failure to act promptly shall not deprive the
Committee of its power to make such an adjustment at a later date.
D. Should a Participant die, retire, or become totally disabled during the
Year, he or his estate shall be entitled to receive a bonus pro-rated
in accordance with the percentage of his annual salary earned from the
beginning of the Year up to the date of death, retirement or
disability. Should a Participant's employment by the Company or a
subsidiary business unit be terminated for any other reason, payment of
any bonus hereunder for the year in which such termination occurs is at
the sole discretion of the Organization and Compensation Committee.
E. If a Participant assumes a new position during the Year, the
Organization and Compensation Committee may make an appropriate
adjustment in his target bonus and/or the means of calculating his
actual bonus, effective from and after that event.
F. If a Change of Control event (as defined in Section 11 of the Company's
1994 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan) occurs, the Company will within sixty (60)
days following such event pay to each Participant a pro-rated bonus
through the date thereof as hereinafter provided, whereupon this Plan
will terminate. The portion of the bonus based on factors other than
Qualitative Measurements shall be calculated based on a comparison of
(i) actual results of the Company through the end of the calendar
quarter next preceding the Change in Control event to (ii) the targeted
quarterly performance criteria set forth on the schedules attached
hereto. The portion of the bonus based on Qualitative Measurements will
be calculated through the end of the calendar quarter next preceding
the Change of Control event to the extent equitable and reasonably
practicable in the judgment of the Organization and Compensation
Committee. Qualitative Measurements for which such calculation is not
equitable or reasonably practicable will be disregarded and the
percentage of the bonus otherwise allocated thereto under the terms
hereof will be reallocated in even percentages to the Sales and
Earnings components of the bonus calculation. After determining the
full year bonus based on the extent to which the aforesaid quarterly
targets have been achieved, the amount of the full year bonus will be
pro-rated by multiplying
<PAGE>
the same by a fraction the numerator of which is the number of days
between the beginning of the fiscal year and the date of the Change of
Control event and the denominator of which would be 365. The
determination of the amount of any bonus payable under this paragraph
shall be made by the Organization and Compensation Committee and its
determination shall be final and binding on the Company and all
Participants.
G. In the event of any material, unusual and non-recurring charge to
income purchase or sale of any material business unit by the Company,
or other material event affecting the ability of the Participants to
achieve the performance targets established under this Plan, the
Organization and Compensation Committee shall review such performance
targets and make such adjustments with respect thereto as it deems
reasonable and equitable in light of the purposes of this Plan. Any and
all adjustments made by the Organization and Compensation Committee
under this paragraph shall be final and binding on the Company and all
Participants.
H. The Organization and Compensation Committee may in its discretion
terminate the Plan as of the end of any fiscal quarter. If the Plan is
so terminated, the Company shall pay out bonuses to the Participants in
such amounts as are appropriate and equitable in light of the Company's
and Participants' performance through the end of such quarter and the
targets established hereunder. The determination of the amount of any
bonuses payable under this paragraph shall be made by the Organization
and Compensation Committee in line with the objectives set for each
Participant, and its determination shall be final and binding on the
Company and all Participants.
I. The Qualitative Measures referred to herein and the application of
certain of the provisions hereof are described in the FY98 MBO
Scorecards prepared by the Compensation Manager.
J. This Plan shall be effective commencing June 29, 1997.
Attachments:
Set of Schedules - FY98 MBO Scorecards (TBD)
<PAGE>
M E M O R A N D U M
To: Russell V. Corsini, Jr. Date: October 25, 1996
From: Robert J. Murray Subject: Employment
Agreement
The following is an outline of the employment agreement between you and NEBS.
The provisions illustrated below constitute the total benefits which will be
provided to you as part of your agreement.
1. PAY/STATUS INFORMATION
----------------------
(a) Your last day of regular work in Groton will be November 1, 1996. You
will then work on special projects as mutually agreed.
(b) You will receive your current, regular pay (on a monthly basis) for a
period of eight (8) months following your last day of work in Groton. This
will encompass the period of November 2, 1996 through June 30, 1997.
(c) You will continue your employment with NEBS from July 1, 1997 to July
24, 2003 with compensation equal to $4,166.66 per month, or $50,000 on an
annualized basis. This compensation will be paid to you on a monthly basis
until such time you reach the age of 60 (subject to (d) below). You would
then be eligible to officially retire from active employment with NEBS and
begin collecting retirement benefits and applicable fringe benefits.
(d) You will be paid $50,000 by NEBS from July 1, 1997 through June 30,
1998 regardless of any other employment you may obtain during that period.
After June 30, 1998, however, if you obtain employment (before your
official retirement from NEBS) comparable to your current position and
compensation, this package will end. For purposes of this agreement,
comparable employment shall be defined as follows: a position that pays a
base salary of at least $200,000 annually; if a position you obtain
includes a bonus, any bonus amounts in excess of 50% of your base salary
shall be counted as part of base salary for purposes of determining
comparable employment under this agreement. If you obtain a position that
pays a base salary of $150,000 or more, your annual compensation from NEBS
shall be reduced on a dollar for dollar basis, except that you shall be
paid no less than $10,000 annually during the term of this agreement as
long as your position is not comparable as defined above. The $200,000
salary figure used to define comparable employment
<PAGE>
Russell V. Corsini, Jr.
October 25, 1996
Page 2
shall be adjusted annually beginning in calendar year 1998 according to the
Social Security Cost of Living Adjustment. You agree that you shall be
responsible for reporting to NEBS any change in your position that would
require an adjustment in compensation under this agreement.
2. PAYCHECK DISTRIBUTION
---------------------
(a) If you have your pay automatically deposited, this process will
continue through your final separation or retirement date. Your paystub
will be mailed to your home on regularly scheduled paydays.
(b) If you do not have automatic deposit, your paycheck will be mailed to
your home.
3. EXECUTIVE BONUS DISTRIBUTION
----------------------------
You will be eligible to receive a FY97 Executive Bonus payout, prorated
through November 1, 1996, if such a payout is earned based on the
attainment of the Company's FY97 revenue and earnings goals at such time as
all other payments are made under the plan.
4. OUTPLACEMENT ASSISTANCE
-----------------------
(a) You will receive appropriate stationery items to assist in resume
preparation and job search process.
(b) To assist you in your search for a new job, NEBS will provide you with
outplacement counseling at a cost not to exceed 15% of your base pay
($202,700 x .15 = $30,405), by a company of your choice, through June 30,
1998.
5. MEDICAL/DENTAL PLAN
-------------------
(a) Continuation Should you leave the Company before age 60:
--------------------------------------------------------
Medical/Dental/Vision Plan Coverage available to NEBS employees (if
applicable) will remain in effect through your last day worked (including
your time as an employee under this agreement) plus 30 days. Normal payroll
deductions for your share of the premium will continue to be deducted from
your pay on a pretax basis. Any other payments available to employees, such
as the benefit bonus, shall be paid to you (if you are eligible).
Should you become eligible for group medical/dental coverage from a new
employer, please notify Corporate Compensation and Benefits.
<PAGE>
Russell V. Corsini, Jr.
October 25, 1996
Page 3
Should you leave the Company before age 60 you will be provided with
appropriate COBRA information.
6. FRINGE BENEFIT ELIGIBILITY
--------------------------
You will be eligible for the benefits described in the Fringe Benefits
Summary for NEBS Officers if you remain actively employed by the Company
through retirement as described in Section 2.
These are some of the post-retirement benefits currently available to
retired NEBS officers upon attainment of early retirement at age 60:
* Health Insurance
* Dental Insurance
* Lahey Clinic Physicals
* NEBS Matching Gift Program
Please note the following additional provisions of your fringe benefit
eligibility:
In the event of your death, medical/dental insurance will continue for your
spouse until her death, subject to a change in NEBS' group benefit
policies. Coverage for any other eligible dependents will continue until
they reach the age of 19 (25 if full-time students).
Your group life benefit will be based on your annualized salary in force at
the time of your death.
You will remain eligible for employee discounts while you are employed by
NEBS.
You will remain eligible to participate in the NEBS Matching Gifts program
while you are employed by NEBS.
7. FLEXIBLE SPENDING ACCOUNTS
--------------------------
Payroll deductions for Health Care Flexible Spending Accounts will continue
during your employment on a pre-tax basis, if elected.
8. LIFE INSURANCE
--------------
Your basic, supplemental, and dependent life insurance will end effective
with your retirement date or date you leave the Company before age 60.
While you are
<PAGE>
Russell V. Corsini, Jr.
October 25, 1996
Page 4
employed by the Company your group life plan will be based on your
annualized salary in force at the time of your death.
9. ACCIDENTAL DEATH AND DISMEMBERMENT
----------------------------------
Your coverage under this plan ends on your retirement date or date you
leave the Company before age 60. There is no conversion opportunity under
this plan.
10. BUSINESS TRAVEL ACCIDENT INSURANCE
----------------------------------
Your coverage under this program ends on your retirement date or date you
leave the Company before age 60. There is no conversion opportunity under
this plan.
11. DISABILITY PROGRAMS
-------------------
Short-Term Disability coverage ceases on your retirement date or date you
leave the Company before age 60. Long-Term Disability insurance ceases 31
days after your retirement date or date you leave the Company before age
60. There is no conversion opportunity under these plans.
12. INVESTMENT PLUS 401(k) PLAN
---------------------------
If you are currently participating in the Investment Plus Plan your
contributions will cease on your retirement date or date you leave the
Company before age 60. If you have an account balance, you will receive
more information regarding your plan distribution options within six weeks
of your termination date.
If you have any questions, please call Seth Canter, Corporate Compensation
and Benefits Department, (508) 448-6111, Ext. 3446.
13. STOCK OPTIONS
-------------
As you possess unexercised grants, you will have until the official end of
the option(s) or July 24, 2003, whichever is earlier, to exercise those
options. Your stock option grants will continue to vest during your
employment.
14. PENSION BENEFITS
----------------
You will receive a retirement benefit in accordance with the NEBS
retirement plans as amended from time to time. According to the plan(s) in
effect at the time of this agreement, your benefit would be based on 21+
years of service with the Company (assuming you remain at NEBS in the
status described above until age 60). Your actual retirement benefit under
this plan would be calculated by averaging your
<PAGE>
earnings over the highest
five years of compensation of the last ten years of your employment.
Your estimated retirement benefit is as follows:
---------
* Effective July 25, 2003 you will be eligible for an "early"
retirement benefit of approximately $3,504.21 per month.
* Effective July 25, 2008 you will be eligible for the retirement
benefit of approximately $5,153.00 per month.
Please note that the above figures are used for illustrative purposes only
and that your actual benefits at the time of your retirement may differ.
Should you wish additional information regarding your NEBS' pension
benefits, please contact Seth Canter in the Corporate Compensation and
Benefits Department.
15. VACATION
--------
You will continue to earn vacation time through June 30, 1997. You will be
paid for the vacation time you have accrued as of June 30, 1997 in a
separate check. No vacation time will be accrued after July 1, 1997.
16. FINANCIAL COUNSELING
--------------------
You may continue to use the financial planning services of G. W. Wade, Inc.
while you are employed by NEBS.
17. EMPLOYEE ASSISTANCE PROGRAM
---------------------------
You and your eligible dependents may continue to use this benefit during
your separation period. The name and telephone number of the EAP consultant
are as follows:
Laupheimer Associates
(800) 558-5509
18. HOME ADDRESS
------------
In order for the Company to distribute income tax statements, Investment
Plus statements, pension benefits, and other distributions, it is essential
for your to keep the Human Resources Department informed of your correct
home address by writing to:
<PAGE>
Russell V. Corsini, Jr.
October 25, 1996
Page 6
NEBS, Inc.
Attn: Marsha Beers
Corporate Compensation and Benefits Dept.
500 Main Street
Groton, MA 01471
19. USE AND DISCLOSURE OF TRADE SECRETS AND OTHER CONFIDENTIAL
----------------------------------------------------------
INFORMATION.
------------
You represent that to the best of your knowledge, you do not now have, and
you agree that you shall promptly return to NEBS, anything tangible or
electronically kept or stored which constitutes, represents, evidences or
records any trade secret or other confidential information of NEBS,
retaining no copies thereof. You agree that you will not any time after
November 1, 1996, directly or indirectly, use or disclose to any person any
trade secrets or other confidential information of NEBS.
The term "trade secret or other confidential information" shall mean any
secret or confidential scientific, design, process, procedures, formula,
invention or improvement, including without limitation, marketing plans or
strategies, product development plans, business acquisition plans, new
personnel acquisition plans, technical processes, research and development
processes, and each of the Company's customer lists. Also, this includes
and is not limited to any new market development plans and/or plans for
strategic alliances either domestic or international.
If you enter into any employment with a competitor of NEBS prior to June
30, 1998, or if you use or disclose trade secrets or other confidential
information of NEBS as defined in the preceding paragraph at any time, your
severance pay and benefits will be immediately terminated. Companies or
other entities that shall be considered competitors of NEBS for purposes of
this section shall be determined by NEBS in its sole discretion.
If you have any questions regarding your benefits please contact Seth Canter at
Groton ext. 3446.
New England Business Service, Inc.
By: /s/ Robert J. Murray Dated: December 5, 1996
--------------------- ----------------
Robert J. Murray
/s/ Russell V. Corsini, Jr. Dated: December 10, 1996
---------------------------- -----------------
Russell V. Corsini, Jr.
<PAGE>
EXHIBIT 10(n)
[LOGO]
[LETTERHEAD APPEARS HERE]
March 31, 1997
Mr. Theodore Pasquarello
74 Fox Run
Sudbury, Massachusetts 01776
Dear Ted:
We are all pleased that you will be joining us at NEBS. Although we have
discussed many of these details already, this letter will outline some of the
terms of your employment by New England Business Service, Inc. ("NEBS")
following the execution of the Asset Purchase Agreement among NEBS, you and
Chiswick Trading, Inc.
You will be employed by NEBS at an annual salary of $200,000 per year with
the title of Executive Vice President of NEBS and President of its Chiswick
Division. As Executive Vice President, you also will be eligible to receive
bonuses pursuant to NEBS' Executive Bonus Plan. In addition, upon your
employment by NEBS, you will receive a standard change of control agreement
that specifies the protection and benefits available to you in the event of a
material change in the ownership of NEBS stock.
I am pleased to confirm that upon joining the Company you will be granted
an option to purchase 50,000 shares of NEBS stock, which will consist of
incentive stock options at fair market value to the extent permissible under
applicable regulations and which will vest annually over a four-year period.
You also will be eligible to receive, from time to time, additional stock option
grants at the discretion of the Company's Board of Directors or Stock Option
Committee.
NEBS further agrees that, effective from the date of this letter, it will
employ you for not less than a period of two years. If you are terminated by
the Company for any reason other than cause, you shall be entitled to receive
(i) separation pay for the remainder of your initial two-year term of employment
or (ii) the standard NEBS separation package available to officers of the
Company, whichever is greater. For purposes of your employment, cause shall be
defined as gross negligence or willful malfeasance of your duties, or material
breach of any policy of the Company that is not unlawful to perform or adhere to
and failure to correct such breach within 20 days after notice from NEBS.
Voluntary termination of your employment with NEBS shall not entitle you to
separation pay or benefits, unless such termination is the result of a reduction
in your salary not applied to other officers of NEBS or a diminution of your
position or responsibilities.
In the event you are terminated within this two-year period and choose to
receive separation pay pursuant to this agreement, the Company shall allow any
granted but unvested stock options to continue to vest during the separation pay
period. To the extent that options under the initial grant of 50,000 shares do
not vest following involuntary termination within the two-year period, NEBS
shall compensate you by making a lump sum payment equal to the difference
between the option price and the fair market value of the same number of shares
as of the date of your termination. In addition, you will continue to receive
those fringe benefits available to all officers of NEBS as long as you are not
otherwise regularly employed.
<PAGE>
Mr. Theodore Pasquarello March 31, 1997
Page 2
If NEBS terminates your employment within two years of the date of this
letter, NEBS will maintain health insurance for you and your family under its
current group health policy to the extent that such continuation is permissible
under federal rules and regulations and the terms and conditions of agreements
with the Company's insurance providers. You agree to reimburse NEBS for its
direct cost of such coverage.
This letter is neither intended to provide a comprehensive list of the
fringe benefits that will be available to you as an officer and employee of
NEBS--we will provide you with that information as appropriate--nor is it
intended to address all of your obligations to NEBS, such as your non-
competition commitments. This letter was designed to note those areas in which
the terms of your employment will differ from standard provisions that may be
applicable to other officers of the Company.
If you agree with the terms as stated in this letter agreement, please
countersign both originals below and return one to me. You may keep the other
for your files.
If you have any questions or concerns, please feel free to call me. We
look forward to you joining the team at NEBS.
Sincerely,
/s/ Robert J. Murray
--------------------
Robert J. Murray
Chairman and Chief Executive Officer
Agreed and accepted:
/s/ Theodore Pasquarello
- ------------------------
Theodore Pasquarello
Dated:
cc: Mr. Robert H. Glaudel,
Vice President, Human Resources
<PAGE>
EXHIBIT 10(O)
November 27, 1996
Robert J. Murray
81 Atlantic Avenue
Cohasset, MA 02025
Dear Bob:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the Company
or you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a Person
(as hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall
-----------------
continue in effect until JULY 1, 2001; provided, however, that this Agreement
shall continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change in
control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a change in control of the
Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events described in
---------------------------------------
Section 3 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in section 5 hereof
upon the termination of your employment with the Company within twenty-four (24)
months after such event, unless such termination is (a) because of your death,
(b) by the Company for Cause, Disability or Retirement or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by an officer or other
person authorized by the Board to act on its behalf in this matter which
specifically identifies the manner in which it is believed that you have not
substantially performed your duties, or (b) the willful engaging by you in
illegal conduct which is materially and demonstrably injurious to the Company.
For purposes of this paragraph (iii), no act, or failure to act, on your part
shall be considered "willful" unless done, or omitted to be done, by you without
reasonable belief that your action or omission was in, or not opposed to, the
best interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by you in good faith and in the best interests of the
Company. It is also expressly understood that your attention to matters not
directly related to the business of the Company shall not provide a basis for
termination for Cause so long as the Board has approved your engagement in such
activities. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than two-
thirds of the entire membership of the Board at a meeting of the Board called
and held for the purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of the conduct set forth
above in (a) or (b) of this paragraph (iii) and specifying the particulars
thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that
there has been an adverse change in your status or position(s) as an officer of
the Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (v) below (and, if applicable, paragraph (iii) above);
and for purposes of this Agreement, no such purported termination shall be
effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees. Notwithstanding anything
contained in this Agreement to the contrary, a termination by you of your
employment for any reason during the 45-day period immediately following the
45th day after the occurrence of the first event constituting a change in
control shall be deemed to be a termination for Good Reason for purposes of this
Agreement.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
-------------------
control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24)
months after a change in control of the Company, as defined in Section 3 above,
shall have occurred, your employment by the Company shall be terminated (a) by
the Company other than for Cause, ' Disability or Retirement or (b) by you for
Good Reason, then the Company shall pay to you, no later than the fifth day
following the Date of Termination, without regard to any contrary provisions of
any Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Company's Executive
Bonus Plan, Management Incentive Plan, Profit Sharing Plan or similar bonus
plan, during the period consisting of the 5 most recent consecutive calendar
years (or fewer than 5, if applicable) ending on or before the date of the
change of control. For purposes of computing payment under this Agreement,
compensation for any partial calendar year, including the year during which a
change of control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter defined), to
have such Person assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such assent by the later of
(A) three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business combination in which
the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any other
payments which you have the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504 (a) of
the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Vice-President, Human Resources of the Company, with a
copy to Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA
02110, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and an officer or other person authorized by the Board to
act on its behalf in this matter. No waiver by either party hereto at any time
of any breach by the other party hereto of, or of compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/ John F. Fairbanks
----------------------
John F. Fairbanks,
VP, Chief Financial Officer
on behalf of NEBS, Inc. Board of
Directors
Agreed to this 11th day
Of December, 1996.
/s/ Robert J. Murray
- --------------------
Robert J. Murray
81 Atlantic Avenue
Cohasset, MA 02025
13
<PAGE>
EXHIBIT 10(P)
November 27, 1996
Mr. John F. Fairbanks
12 Fieldstone Drive
Westford, MA 01886
Dear John:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the Company
or you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a Person
(as hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall
-----------------
continue in effect until JULY 1, 2001; provided, however, that this Agreement
shall continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change in
control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a change in control of the
Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events described in
---------------------------------------
Section 3 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in section 5 hereof
upon the termination of your employment with the Company within twenty-four (24)
months after such event, unless such termination is (a) because of your death,
(b) by the Company for Cause, Disability or Retirement or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to the
business of the Company shall not provide a basis for termination for Cause so
long as the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there
has been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the
---------------------
Company or by you following a change in control shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a
-------------------
change in control shall mean (a) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
you shall not have returned to the performance of your duties on a full-time
basis during such thirty (30) day period), (b) if your employment is to be
terminated by the Company for Cause or by you pursuant to Sections 4 (iv) (F)
and 6 hereof or for any other Good Reason, the date specified in the Notice of
Termination, or (c) if your employment is to be terminated by the Company for
any reason other than Cause, the date specified in the Notice of Termination,
which in no event shall be a date earlier than ninety (90) days after the date
on which a Notice of Termination is given, unless an earlier date has been
expressly agreed to by you in writing either in advance of, or after, receiving
such Notice of Termination. In the case of termination by the Company of your
employment for Cause, if you have not previously expressly agreed in writing to
the termination, then within thirty (30) days after receipt by you of the Notice
of Termination with respect thereto, you may notify the Company that a dispute
exists concerning the termination, in which event the Date of Termination shall
be the date set either by mutual written agreement of the parties or by the
arbitrators in a proceeding as provided in Section 13 hereof. During the
pendency of any such dispute, the Company will continue to pay you your full
compensation in effect just prior to the time the Notice of Termination is given
(or, if higher, as in effect immediately prior to the change in control) and
until the dispute is resolved in accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24) months
after a change in control of the Company, as defined in Section 3 above, shall
have occurred, your employment by the Company shall be terminated (a) by the
Company other than for Cause, ' Disability or Retirement or (b) by you for Good
Reason, then the Company shall pay to you, no later than the fifth day following
the Date of Termination, without regard to any contrary provisions of any Plan,
the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years (or
fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter defined), to
have such Person assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such assent by the later of
(A) three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if any
of the payments provided for in this Agreement, together with any other payments
which you have the right to receive from the Company or any corporation which is
a member of an "affiliated group" (as defined in Section 1504 (a) of the
Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b) of
the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/ Robert J. Murray
----------------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 6th day
Of December, 1996
/s/John F. Fairbanks
- --------------------
Mr. John F. Fairbanks
12 Fieldstone Drive
Westford, MA 01886
13
<PAGE>
EXHIBIT 10(Q)
November 27, 1996
Mr. George P. Allman
86 Glandore Road
Westwood, MA 02090
Dear George:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the Company
or you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a Person
(as hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall
-----------------
continue in effect until JULY 1, 2001; provided, however, that this Agreement
shall continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change in
control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a change in control of the
Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events described in
---------------------------------------
Section 3 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in section 5 hereof
upon the termination of your employment with the Company within twenty-four (24)
months after such event, unless such termination is (a) because of your death,
(b) by the Company for Cause, Disability or Retirement or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to the
business of the Company shall not provide a basis for termination for Cause so
long as the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there
has been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
-------------------
control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24)
months after a change in control of the Company, as defined in Section 3 above,
shall have occurred, your employment by the Company shall be terminated (a) by
the Company other than for Cause, ' Disability or Retirement or (b) by you for
Good Reason, then the Company shall pay to you, no later than the fifth day
following the Date of Termination, without regard to any contrary provisions of
any Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years (or
fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter defined), to
have such Person assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such assent by the later of
(A) three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business combination in which
the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any other
payments which you have the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504 (a) of
the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/ Robert J. Murray
-------------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 11th day
Of December, 1996
/s/ George P. Allman
- --------------------
Mr. George P. Allman
86 Glandore Road
Westwood, MA 02090
13
<PAGE>
EXHIBIT 10(R)
November 27, 1996
Mr. Robert D. Warren
60 Nobscot Road
Weston, MA 02193
Dear Bob:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the
Company or you may terminate your employment at any time, subject to the
Company's providing the benefits hereinafter specified in accordance with the
terms hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a
Person (as hereinafter defined) for more than 25% of the combined voting power
of the Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall
-----------------
continue in effect until JULY 1, 2001; provided, however, that this Agreement
shall continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change in
control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a change in control of the
Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events
---------------------------------------
described in Section 3 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in section 5
hereof upon the termination of your employment with the Company within twenty-
four (24) months after such event, unless such termination is (a) because of
your death, (b) by the Company for Cause, Disability or Retirement or (c) by you
other than for Good Reason (as all such capitalized terms are hereinafter
defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to the
business of the Company shall not provide a basis for termination for Cause so
long as the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your
-----------
employment for "Good Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there
has been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (v) below (and, if applicable, paragraph (iii) above);
and for purposes of this Agreement, no such purported termination shall be
effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend
to matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
-------------------
control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24)
months after a change in control of the Company, as defined in Section 3 above,
shall have occurred, your employment by the Company shall be terminated (a) by
the Company other than for Cause, ' Disability or Retirement or (b) by you for
Good Reason, then the Company shall pay to you, no later than the fifth day
following the Date of Termination, without regard to any contrary provisions of
any Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in effect
just prior to the time a Notice of Termination is given (or, if higher, as in
effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years
(or fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five
business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person assent to the fulfillment of the Company's
obligations under this Agreement. Failure of such Person to furnish such assent
by the later of (A) three business days prior to the time such Person becomes a
Successor or (B) two business days after such Person receives a written request
to so assent shall constitute Good Reason for termination by you of your
employment if a change in control of the Company occurs or has occurred. For
purposes of this Agreement, "Successor" shall mean any Person that succeeds to,
or has the practical ability to control (either immediately or with the passage
of time), the Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any other
payments which you have the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504 (a) of
the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10.Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/Robert J. Murray
--------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 6th day
Of December, 1996
/s/ Robert D. Warren
- --------------------
Mr. Robert D. Warren
60 Nobscot Road
Weston, MA 02193
13
<PAGE>
EXHIBIT 10(5)
November 27, 1996
Mr. Robert S. Brown
158 Rolling Acres Road
Lunenburg, MA 01462
Dear Bob:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the
Company or you may terminate your employment at any time, subject to the
Company's providing the benefits hereinafter specified in accordance with the
terms hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a
Person (as hereinafter defined) for more than 25% of the combined voting power
of the Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall
-----------------
continue in effect until JULY 1, 2001; provided, however, that this Agreement
shall continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change in
control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a change in control of the
Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") ceasing for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events
---------------------------------------
described in Section 3 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in section 5
hereof upon the termination of your employment with the Company within twenty-
four (24) months after such event, unless such termination is (a) because of
your death, (b) by the Company for Cause, Disability or Retirement or (c) by you
other than for Good Reason (as all such capitalized terms are hereinafter
defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to the
business of the Company shall not provide a basis for termination for Cause so
long as the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there has
been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change
-------------------
in control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24)
months after a change in control of the Company, as defined in Section 3 above,
shall have occurred, your employment by the Company shall be terminated (a) by
the Company other than for Cause, ' Disability or Retirement or (b) by you for
Good Reason, then the Company shall pay to you, no later than the fifth day
following the Date of Termination, without regard to any contrary provisions of
any Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years
(or fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five
business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person assent to the fulfillment of the Company's
obligations under this Agreement. Failure of such Person to furnish such assent
by the later of (A) three business days prior to the time such Person becomes a
Successor or (B) two business days after such Person receives a written request
to so assent shall constitute Good Reason for termination by you of your
employment if a change in control of the Company occurs or has occurred. For
purposes of this Agreement, "Successor" shall mean any Person that succeeds to,
or has the practical ability to control (either immediately or with the passage
of time), the Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any other
payments which you have the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504 (a) of
the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/Robert J. Murray
--------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 5th day
Of December, 1996
/s/ Robert S. Brown
- -------------------
Mr. Robert S. Brown
158 Rolling Acres Road
Lunenburg, MA 01462
13
<PAGE>
EXHIBIT 10(T)
November 27, 1996
Mr. Edward M. Bolesky
7 Skylar Drive
Southboro, MA 01772
Dear Ed:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the Company
or you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a Person
(as hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall continue in effect until JULY 1, 2001; provided, however, that this
Agreement shall continue in effect for a period of twenty-four (24) months after
a change in control of the Company, as defined in Section 3 hereof, if such
change in control shall have occurred during the term of this Agreement.
Notwithstanding anything in this Section 2 to the contrary, this Agreement shall
terminate if you or the Company terminate your employment prior to a change in
control of the Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events described in
---------------------------------------
Section 3 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in section 5 hereof
upon the termination of your employment with the Company within twenty-four (24)
months after such event, unless such termination is (a) because of your death,
(b) by the Company for Cause, Disability or Retirement or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also expressly
understood that your attention to matters not directly related to the business
of the Company shall not provide a basis for termination for Cause so long as
the Board has approved your engagement in such activities. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than two-thirds of the entire membership of
the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of the conduct set forth above in (a) or (b) of this
paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there has
been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the number
of paid vacation days to which you are then entitled in accordance with the
Company's normal vacation policy as in effect immediately prior to the change in
control;
(E) the Company's requiring you to be based at an office that is greater
than 50 miles from where your office is located immediately prior to the change
in control except for required travel on the Company's business to an extent
substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment which is
not effected pursuant to a Notice of Termination satisfying the requirements of
paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change
-------------------
in control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24) months
after a change in control of the Company, as defined in Section 3 above, shall
have occurred, your employment by the Company shall be terminated (a) by the
Company other than for Cause, ' Disability or Retirement or (b) by you for Good
Reason, then the Company shall pay to you, no later than the fifth day following
the Date of Termination, without regard to any contrary provisions of any Plan,
the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years
(or fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter defined), to
have such Person assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such assent by the later of
(A) three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business combination in which
the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any other
payments which you have the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504 (a) of
the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/ Robert J. Murray
--------------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 4th day
Of December, 1996
/s/ Edward M. Bolesky
- ---------------------
Mr. Edward M. Bolesky
7 Skylar Drive
Southboro, MA 01772
13
<PAGE>
EXHIBIT 10 (U)
November 27, 1996
Mr. Steven G. Schlerf
13 Story Book Lane
Amherst, NH 03031
Dear Steve:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the Company
or you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a Person
(as hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall
-----------------
continue in effect until JULY 1, 2001; provided, however, that this Agreement
shall continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change in
control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 2 to the contrary, this Agreement shall terminate if
you or the Company terminate your employment prior to a change in control of the
Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events described
---------------------------------------
in Section 3 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in section 5 hereof
upon the termination of your employment with the Company within twenty-four (24)
months after such event, unless such termination is (a) because of your death,
(b) by the Company for Cause, Disability or Retirement or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to the
business of the Company shall not provide a basis for termination for Cause so
long as the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there has
been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
-------------------
control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24) months
after a change in control of the Company, as defined in Section 3 above, shall
have occurred, your employment by the Company shall be terminated (a) by the
Company other than for Cause, ' Disability or Retirement or (b) by you for Good
Reason, then the Company shall pay to you, no later than the fifth day following
the Date of Termination, without regard to any contrary provisions of any Plan,
the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years
(or fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter defined), to
have such Person assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such assent by the later of
(A) three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business combination in which
the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if any
of the payments provided for in this Agreement, together with any other payments
which you have the right to receive from the Company or any corporation which is
a member of an "affiliated group" (as defined in Section 1504 (a) of the
Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b) of
the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/ Robert J. Murray
----------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 6th day
Of December, 1996
/s/ Steven G. Schlerf
- ---------------------
Mr. Steven G. Schlerf
13 Story Book Lane
Amherst, NH 03031
13
<PAGE>
EXHIBIT 10(V)
April 2, 1997
Mr. Theodore Pasquarello
74 Fox Run
Sudbury, Massachusetts 01776
Dear Ted:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders. In this connection, the Company recognizes that,
as is the case with many publicly held corporations, the possibility of a change
in control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders receive a proposal
for transfer of control of the Company, that you be able to assess and advise
the Board whether such proposal would be in the best interests of the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
-------------------------------------------------
(i) Except as otherwise provided in paragraph (ii) below, the Company
or you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE>
(ii) In the event a tender offer or exchange offer is made by a Person
(as hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Outstanding Company Voting Securities"), including
shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree
that you will not leave the employ of the Company (other than as a result of
Disability or upon Retirement, as such terms are hereinafter defined) and will
render the services contemplated in the recitals to this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a change in
control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a
wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and
-----------------
shall continue in effect until JULY 1, 2001; provided, however, that this
Agreement shall continue in effect for a period of twenty-four (24) months after
a change in control of the Company, as defined in Section 3 hereof, if such
change in control shall have occurred during the term of this Agreement.
Notwithstanding anything in this Section 2 to the contrary, this Agreement shall
terminate if you or the Company terminate your employment prior to a change in
control of the Company as provided in Section 1 (i) above.
3. Change in Control. For the purpose of this Agreement a "Change in Control"
-----------------
shall mean:
(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (i) the then outstanding shares of the Stock or (ii) the combined voting
power of the Outstanding Company Voting Securities; provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c)
of this paragraph are satisfied; or
2
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director (other
than a director designated by a Person who has entered into an agreement within
the Company to effect a transaction described in clauses (a) or (c) of this
Section) subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote or resolution of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or merger in
substantially the same proportions as their ownership, immediately prior to such
consolidation or merger, of the Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35% or more of the Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger and/or the combined voting power of
the then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon (A)
the rejection of such agreement of consolidation or merger by the stockholders
of the Company or (B) its abandonment by either party thereto in accordance with
its terms; or
3
<PAGE>
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following the such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other entity to vote generally in the election of its directors
(or other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs), and (C) at least a majority of the members of the
board of directors or group of persons having the general power to direct the
affairs of such corporation or other entity were members of the Incumbent Board
at the time of the execution of the initial agreement of action of the Board
providing for such sale or other disposition of assets of the Company; provided,
that any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to this
subsection shall be divested upon the abandonment by the Company of such
dissolution, or such sale of or other disposition of assets, as the case may be.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you,
acquiring, directly or indirectly, 35% or more of the combined voting power of
the Company's Outstanding Voting Securities.
4. Termination Following Change in Control. If any of the events described in
---------------------------------------
Section 3 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in section 5 hereof
upon the termination of your employment with the Company within twenty-four (24)
months after such event, unless such termination is (a) because of your death,
(b) by the Company for Cause, Disability or Retirement or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4
<PAGE>
(i) Disability. Termination by the company of your employment based
----------
on "Disability" shall mean termination because of your absence from your duties
with the Company on a full time basis for one hundred twenty (120) consecutive
days as a result of your incapacity due to physical or mental illness, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
----------
employment based on "Retirement" shall mean termination on or after your normal
retirement date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change in
control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
-----
"Cause" shall mean termination upon (a) the willful and continued failure by you
to perform substantially your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness) after
a demand for substantial performance is delivered to you by the Chairman of the
Board or President of the Company which specifically identifies the manner in
which such executive believes that you have not substantially performed your
duties, or (b) the willful engaging by you in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph (iii), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you without reasonable belief
that your action or omission was in, or not opposed to, the best interests of
the Company. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to the
business of the Company shall not provide a basis for termination for Cause so
long as the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of the conduct set forth above in (a) or
(b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
5
<PAGE>
(A) a determination by you, in your reasonable judgment, that there
has been an adverse change in your status or position(s) as an officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned) or the assignment to you of any duties or responsibilities which
are inconsistent with such status or position(s), or any removal of you from or
any failure to reappoint or reelect you to such position(s) (except in
connection with the termination of your employment for Cause, Disability or
Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the change in control, or the taking of any action, or
the failure to act, by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to you as is
the case on the date of the change in control or which would materially reduce
your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
the Company's normal vacation policy as in effect immediately prior to the
change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior to the
change in control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 6
hereof;
(G) any purported termination by the Company of your employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of paragraph (v) below (and, if applicable, paragraph (iii) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
6
<PAGE>
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which, prior to the change in control, you were permitted by the Board
to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company
---------------------
or by you following a change in control shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
-------------------
control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis during
such thirty (30) day period), (b) if your employment is to be terminated by the
Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for
any other Good Reason, the date specified in the Notice of Termination, or (c)
if your employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event shall
be a date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 13 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is resolved in
accordance with Section 13.
7
<PAGE>
5. Compensation Upon Termination or During Disability; other Agreements.
--------------------------------------------------------------------
(i) During any period following a change in control of the Company
that you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4(i) and
4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary through
the Date of Termination at the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24)
months after a change in control of the Company, as defined in Section 3 above,
shall have occurred, your employment by the Company shall be terminated (a) by
the Company other than for Cause, ' Disability or Retirement or (b) by you for
Good Reason, then the Company shall pay to you, no later than the fifth day
following the Date of Termination, without regard to any contrary provisions of
any Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if higher,
as in effect immediately prior to the change in control) and (y) any benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of your
calendar year earnings from the Company, consisting for the purposes of this
Agreement of base salary and any bonus paid pursuant to the Executive Bonus
Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan,
during the period consisting of the 5 most recent consecutive calendar years
(or fewer than 5, if applicable) ending on or before the date of the change of
control. For purposes of computing payment under this Agreement, compensation
for any partial calendar year, including the year during which a change of
control occurs, shall be annualized.
8
<PAGE>
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your employment
by the Company shall be terminated (a) by the Company other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Company shall
maintain in full force and effect, for the continued benefit of you and your
dependents for a period terminating on the earliest of (a) thirty months after
the Date of Termination, (b) the commencement date of equivalent benefits from a
new employer or (c) your normal retirement date under the terms of the
Retirement Plan, all insured and self-insured employee welfare benefit Plans in
which you were entitled to participate immediately prior to the Date of
Termination, provided that your continued participation is possible under the
general terms and provisions of such Plans (and any applicable funding media)
and you continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any such
Plan is barred, the Company, at its sole cost and expense, shall arrange to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance is not available at a
reasonable cost to the Company, the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such Plans. If, at the end
of three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have not
previously received or are not then receiving equivalent benefits from a new
employer, the Company shall arrange, at its sole cost and expense, to enable you
to convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Company may apply
for such conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.
9
<PAGE>
6. Successors; Binding Agreement.
-----------------------------
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter defined), to
have such Person assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such assent by the later of
(A) three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business combination in which
the Company ceases to exist.
7. Fees and Expenses; Mitigation.
-----------------------------
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company, including, without
limitation, (a) all such fees and expenses, if any, incurred in contesting or
disputing any termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8 hereof or (b) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and non-
appealable order setting forth the determination that the position taken by you
was frivolous or advanced by you in bad faith.
10
<PAGE>
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
-----
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any other
payments which you have the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section 1504 (a) of
the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 28OG (b) (2) of the Code) , the payments
pursuant to this Agreement shall be reduced (reducing first the payments under
Section 5 (iii) (B) ) to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any reduction in the
payments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the payment for tax
reporting purposes.
9. Survival. The respective obligations of, and benefits afforded to, the
--------
Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set forth
below his signature, provided that all notices to the Company shall be directed
to the attention of the Chairman of the Board of the Company, with a copy to
Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
11
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Massachusetts.
12. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with
-----------
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
---------------------
employment with the Company, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Company, any
proprietary processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect upon the business or
operations of the Company and its subsidiaries, taken as a whole; it being
understood, however, that the obligations of this Section 14 shall not apply to
the extent that the aforesaid matters (a) are disclosed in circumstances where
you are legally required to do so or (b) become generally known to and available
for use by the public otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12
<PAGE>
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By /s/ Robert J. Murray
-------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 3rd day
Of April, 1997
/s/ Theodore Pasquarello
- ------------------------
Mr. Theodore Pasquarello
74 Fox Run
Sudbury, Massachusetts 01776
13
<PAGE>
EXHIBIT 10(w)
LEASE
-----
LANDLORD: Theodore Pasquarello and Eileen Pasquarello,
as Trustees of The Paris Trust
TENANT: New England Business Service, Inc.
PREMISES: The land and improvements located
thereon and consisting of a 33,000 square foot
building (the "Building") located at 25 Union Avenue,
Sudbury, MA 01776 and more particularly
described on Exhibit A
---------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I REFERENCE DATA
1.1 Subjects Referred to........................................... 1
ARTICLE II PREMISES
2.1 Lease of Premises.............................................. 3
ARTICLE III TERM OF THE LEASE
3.1 As-Is Condition................................................ 3
3.2 Commencement and Expiration of Term............................ 3
ARTICLE IV FIXED RENT
4.1 Fixed Rent..................................................... 4
ARTICLE V TAX CHARGES
5.1 Definitions.................................................... 4
5.2 Additional Rent................................................ 5
5.3 Refund of Taxes................................................ 5
5.4 Permitted Contests............................................. 5
ARTICLE VI OPERATING EXPENSES
6.1 Definitions.................................................... 6
6.2 Additional Rent................................................ 6
ARTICLE VII USE OF PREMISES
7.1 Permitted Uses................................................. 7
7.2 Installations and Alterations by Tenant........................ 7
ARTICLE VIII ASSIGNMENT AND SUBLETTING
8.1 Prohibition.................................................... 9
8.2 Other Requirements and Provisions.............................. 10
</TABLE>
<PAGE>
-2-
<TABLE>
<S> <C>
ARTICLE IX RESPONSIBILITY FOR REPAIRS AND
CONDITION OF PREMISES
9.1 Landlord Repairs and Maintenance............................... 11
9.2 Tenant's Agreement............................................. 12
9.3 Heavy Machinery................................................ 12
9.4 Utilities...................................................... 13
9.5 Interruption or Curtailment of Services........................ 13
ARTICLE X INDEMNITY AND INSURANCE
10.1 Tenant's Indemnity............................................. 13
10.2 Insurance...................................................... 14
10.3 Tenant's Risk.................................................. 15
10.4 Injury Caused by Third Parties................................. 15
10.5 Landlord's Insurance........................................... 15
ARTICLE XI LANDLORD'S ACCESS TO PREMISES
11.1 Landlord's Rights.............................................. 15
ARTICLE XII DAMAGE OR DESTRUCTION
12.1 Restoration.................................................... 16
12.2 Rent........................................................... 17
ARTICLE XIII CONDEMNATION
13.1 Termination of Lease........................................... 17
13.2 Awards......................................................... 18
ARTICLE XIV DEFAULT
14.1 Tenant's Default............................................... 18
ARTICLE XV MISCELLANEOUS PROVISIONS
15.1 Extra Hazardous Use............................................ 22
15.2 Waiver......................................................... 23
15.3 Covenant of Quiet Enjoyment.................................... 23
15.4 Force Majeure, etc............................................. 23
15.5 Assignment of Rents and Transfer of Title...................... 24
15.6 Rules and Regulations.......................................... 24
15.7 Additional Charges............................................. 24
15.8 Invalidity of Particular Provisions............................ 24
</TABLE>
<PAGE>
-3-
<TABLE>
<S> <C>
15.9 Provisions Binding............................................ 25
15.10 Notices....................................................... 25
15.11 When Lease Becomes Binding.................................... 25
15.12 Paragraph Headings............................................ 25
15.13 Rights of Mortgagee and Ground Lessor......................... 25
15.14 Estoppel Certificates......................................... 27
15.15 Remedying Defaults............................................ 27
15.16 Holding Over.................................................. 28
15.17 Surrender of Premises......................................... 28
15.18 Payments by Tenant............................................ 28
ARTICLE XVI BROKERAGE
16.1 Brokerage..................................................... 28
ARTICLE XVII ENVIRONMENTAL MATTERS
17.1 Indemnification............................................... 29
17.2 Third Party Claims............................................ 30
17.3 Response Actions.............................................. 31
17.4 Successors and Assigns........................................ 32
ARTICLE XVIII EXCULPATORY CLAUSE
18.1 Limitation on Liability....................................... 32
18.2 Actions Against Landlord...................................... 32
ARTICLE XIX SUBMISSION TO JURISDICTION, ETC.
19.1 Governing Law................................................. 33
19.2 Recovery of Fees.............................................. 33
</TABLE>
<PAGE>
LEASE
-----
This Lease is entered into as of this 23rd day of July, 1997, by and
between Theodore Pasquarello and Eileen Pasquarello, not individually but as
Trustees of The Paris Trust under Declaration of Trust dated October 30, 1981
(hereinafter referred to as "Landlord") and New England Business Service, Inc.,
a Delaware corporation (hereinafter referred to as "Tenant").
WHEREAS, Landlord is the owner of the Premises, as defined in Paragraph 1.1
hereof; and
WHEREAS, Tenant desires to lease the Premises from Landlord and Landlord
desires to lease such Premises to Tenant;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter contained, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
agree as follows:
ARTICLE I
---------
REFERENCE DATA
1.1: SUBJECTS REFERRED TO.
---------------------
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
LANDLORD'S ADDRESS: 490 Boston Post Road
Sudbury, MA 01776
Attention: Theodore Pasquarello
TENANT'S
ORIGINAL ADDRESS: 500 Main Street
Groton, MA 01471
<PAGE>
-2-
PREMISES: The land and improvements located thereon and
consisting of a 33,000 square foot building (the
"Building") located at 25 Union Avenue, Sudbury, MA
01776 and more particularly described on Exhibit A
---------
COMMENCEMENT DATE: July 23, 1997
FIXED RENT:
Period Rent
------ ----
Commencement Date- $165,000 annually, payable in equal monthly
3/31/2000 installments of $13,750
4/1/2000-3/31/2003 $174,900 annually, payable in equal monthly
installments of $14,575
4/1/2003-3/31/2007 $185,394 annually, payable in equal monthly
installments of $15,449.50
TENANT'S SHARE OF
OPERATING EXPENSES:
Period Tenant's Share of Operating Expenses
------ ------------------------------------
Commencement Date- $16,500 annually, payable in equal monthly
3/31/2000 installments of $1,375
4/1/2000-3/31/2003 $17,490 annually, payable in equal monthly
installments of $1,457.50
4/1/2003-3/31/2007 $18,539.40 annually, payable in equal monthly
installments of $1,544.95
<PAGE>
-3-
PERMITTED USE: Warehousing, storage and distribution of materials
in connection with or relating to Tenant's current
business as conducted as of the date of this Lease.
Permitted Use includes general office use in
connection with warehousing, storage and
distribution activities.
PUBLIC LIABILITY
INSURANCE LIMITS: $5,000,000 per occurrence for bodily injury
(including death) and $1,000,000 per occurrence for
property damage
ARTICLE II
----------
PREMISES
--------
2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant and
-----------------
Tenant hereby accepts from Landlord, the Premises, for the Term of this Lease
and subject to any and all existing encumbrances, conditions, covenants,
easements, restrictions, rights of way and other matters of record and to such
matters as may be disclosed by inspection or survey and subject to and with the
benefit of the terms, covenants, conditions and provisions of this Lease.
Attached hereto as Exhibit B is a copy of a title policy dated July 23, 1997
---------
insuring the Premises. Landlord makes no representation or warranty concerning
title to the Premises.
ARTICLE III
-----------
TERM OF THE LEASE
-----------------
3.1 AS-IS CONDITION. Tenant agrees that it has inspected and examined,
---------------
or caused to be inspected and examined, the Premises and that it is fully
familiar and satisfied with the physical condition and state of repair thereof,
and Tenant does hereby agree to accept the Premises in their existing condition
and state of repair "as is". Except as expressly otherwise provided herein,
Landlord shall have no obligation to do any work or make any installation or
alteration of any kind to the Premises. Nothing in the foregoing sentence shall
be construed to reduce Landlord's obligations under (S)9.1 below. Except as
otherwise expressly set forth in this Lease, any work performed in the Premises
by Tenant shall be done at Tenant's sole cost and expense, in accordance with
the terms of (S)7.2.
3.2 COMMENCEMENT AND EXPIRATION OF TERM. The term of this Lease (herein
-----------------------------------
referred to as the "Term") shall commence on the
<PAGE>
-4-
Commencement Date, as defined in (S)1.1 and shall terminate on March 31, 2007,
unless sooner terminated as herein provided (the "Expiration Date").
ARTICLE IV
----------
FIXED RENT
----------
4.1 FIXED RENT. (A) Tenant agrees to pay to Landlord, or as directed by
----------
Landlord, without offset, abatement, deduction or demand (except as otherwise
provided in (S)9.5) the Fixed Rent. The Fixed Rent shall be payable in lawful
money of the United States, in equal monthly installments, in advance, on the
first day of each and every calendar month during the Term of this Lease at
Landlord's Address, or at such other place as Landlord shall from time to time
designate by notice.
(B) Fixed Rent for any partial month shall be prorated on a daily basis.
(C) If any installment of Fixed Rent, additional rent or any other sums
due hereunder are not paid when due and such failure shall continue for ten (10)
days after notice thereof, Tenant shall pay on demand, in addition to any other
additional charges due under this Lease, an administrative fee equal to 2% of
the overdue payment (the "Late Fee"). Notwithstanding the foregoing, if any
installment of Fixed Rent, additional rent or any other sums due hereunder are
not paid by the due date on two or more occasions during any 12-month period,
Landlord shall thereafter have the right to charge a Late Fee if any such sums
are not paid within ten (10) days of the due date.
ARTICLE V
---------
TAX CHARGES
-----------
5.1 DEFINITIONS.
-----------
For purposes of this Article V, "Real Estate Taxes" shall mean all or any
of the real estate taxes and assessments imposed on the Premises for the then
current Tax Year by any governmental authority having jurisdiction upon the
Premises and Building, or any tax or assessment to the extent hereafter imposed
in substitution for such real estate taxes and/or assessments. Real Estate Taxes
exclude income taxes and all estate, succession, inheritance and transfer taxes.
The term "Tax Year" shall mean the period from July 1, 1997 through June 30,
1998 and each subsequent fiscal year thereafter.
5.2 ADDITIONAL RENT. Tenant shall pay to Landlord during the Term of this
---------------
Lease, as additional rent, all Real Estate Taxes. If any Tax Year is
<PAGE>
-5-
only partially within the Term, all payments pursuant hereto shall be
appropriately prorated, based on the portion of the Tax Year which is within the
Term. Landlord shall send to Tenant copies of the tax bills for the Premises
promptly upon receipt thereof and Tenant shall remit the full payment of such
tax bill directly to Landlord within fifteen (15) days of receipt of such bill.
Notwithstanding the foregoing, Tenant may elect to pay all Real Estate Taxes
directly to the applicable taxing authority provided that (i) Tenant shall
notify Landlord within 15 days of its receipt of the tax bill that Tenant has
elected to pay the tax bill directly to the taxing authority; (ii) Tenant shall
deliver to Landlord receipted copies of such paid bills no later than ten (10)
days prior to the date when due; and (iii) any failure by Tenant to pay Real
Estate Taxes as required by this Article V shall be deemed a default under
(S)14.1(A)(1) and Tenant shall be liable for all costs and expenses incurred by
Landlord as a result of any breach by Tenant of its obligations under this
Article V.
5.3 REFUND OF TAXES. If Landlord receives any refund of Real Estate
---------------
Taxes for any Tax Year for which Tenant has made a payment pursuant hereto,
Landlord shall (after deducting from such refund all reasonable expenses,
including reasonable attorneys' fees, incurred in connection therewith) pay
Tenant, if Tenant is not in default hereunder, the remainder of the refund.
5.4 PERMITTED CONTESTS. Notwithstanding anything to the contrary herein,
------------------
Tenant shall have the right, subject to the conditions stated below, to contest
by appropriate legal proceedings the amount or validity of any Real Estate
Taxes. During the pendency of such legal proceedings, Tenant shall not be
required to pay the contested Real Estate Taxes, provided that the following
conditions are satisfied:
(a) The proceedings stay the collection, realization or enforcement of any
such contested Real Estate Tax;
(b) The delay in any such payment, does not subject the Premises, or any
portion thereof, to any liens or possible sale, forfeiture,
foreclosure or loss (including loss of appeal rights related to such
contest);
(c) Tenant shall escrow amount(s) equal to the Real Estate Taxes that
would have been due and payable but for such proceedings, and any
interest accruing thereon and any additions thereto;
(d) Tenant shall indemnify and hold harmless Landlord against any losses,
damages, costs, and expenses (including reasonable attorneys' fees and
disbursements) suffered by Landlord as a result of such contest;
<PAGE>
-6-
(e) Tenant shall not settle any such proceedings on terms that would
adversely affect Landlord in any respect without Landlord's prior
written consent;
(f) Tenant shall promptly provide Landlord with copies of all pleadings,
agreements and other written communications resulting from such
proceedings.
ARTICLE VI
----------
OPERATING EXPENSES
------------------
6.1 DEFINITIONS.
-----------
For purposes of this Article VI, "Operating Expenses" shall mean all
expenses reasonably incurred by Landlord, on an accrual basis, for the operation
and maintenance of the Premises and all expenses incurred as a result of
Landlord's compliance with any of its obligations hereunder, and shall include
(without limitation), depreciation of any expenditure for any capital
improvement which is intended to result in a reduction of Operating Expenses and
any and all expenses incurred by Landlord in connection with compliance with any
law, rule, order, ordinance, regulation or requirement of any governmental
authority having or asserting jurisdiction or any order, rule, requirement or
regulation of any utility company, insurer of Landlord or the New England Fire
Insurance Rating Association (or successor organization) first applicable after
the date hereof.
6.2 ADDITIONAL RENT. Tenant shall pay to Landlord during the Term of this
---------------
Lease, as additional rent, Tenant's Share of Operating Expenses (as defined in
Article I hereof) in the same manner as described in (S)4.1 for the payment of
Fixed Rent. Except as otherwise set forth in (S)9.1(B), in no event shall
Tenant's Share of Operating Expenses exceed the amounts set forth in Article I
hereof.
ARTICLE VII
-----------
USE OF PREMISES
---------------
7.1 PERMITTED USES. (A) Tenant agrees that the Premises shall be used
--------------
and occupied by Tenant solely for the Permitted Uses or for any uses permitted
by applicable zoning laws, provided that Tenant obtains Landlord's prior written
consent, which consent shall not be unreasonably withheld.
<PAGE>
-7-
(B) Tenant agrees to conform to the following provisions during the Term
of this Lease:
(1) Tenant will not place on the exterior of the Premises (including
both interior and exterior surfaces of doors and interior surfaces of windows)
or on any part of the Building outside the Premises, any sign, symbol,
advertisement or the like which is visible to public view outside of the
Premises without the prior written consent of Landlord, which consent shall not
be unreasonably withheld or delayed.
(2) Tenant shall not perform any act or carry on any practice which
may injure the Premises or cause any offensive odors or loud noise or cause a
nuisance.
(3) Tenant shall, in its use of the Premises, subject to Landlord's
compliance with Article IX, comply with all applicable laws and rules, orders,
regulations and requirements of all governmental and quasi-governmental
authorities having or asserting jurisdiction and any insurer of Landlord or of
all or any part of the Building.
7.2 INSTALLATIONS AND ALTERATIONS BY TENANT. (A) Tenant shall not make
----------------------------------------
or perform, or permit the making or performance of, any alterations,
improvements, additions or other physical changes in or about the Premises
(collectively, "Alterations") (other than non-structural Alterations to the
interior of the Premises costing less than $20,000 in the aggregate during any
12 month period and not affecting Building systems or reducing the value or
utility of the Building) without Landlord's prior written consent. Landlord
agrees not to unreasonably withhold its consent to any Alterations which are
nonstructural, do not involve the Building's systems and are not visible from
outside the Building, provided that such Alterations do not reduce the value or
utility of the Building. All Alterations shall be done at Tenant's expense and
at such times and in accordance with any reasonable rules and regulations
established by Landlord. Prior to making any Alterations, Tenant (i) shall
submit to Landlord plans and specifications for each proposed Alteration, (ii)
shall, at its expense, obtain all permits, approvals and certificates required
by any governmental or quasi-governmental bodies, and (iii) shall furnish to
Landlord duplicate original policies of worker's compensation insurance
(covering all persons to be employed by Tenant and Tenant's contractors and
subcontractors in connection with such Alteration) and comprehensive public
liability (including property damage coverage) insurance in such form, with such
companies, for such periods and in such amounts as Landlord may reasonably
require, naming Landlord and its agents as additional insureds. All materials
and equipment to be incorporated in the Building as a result of all alterations
or improvements shall be of at least comparable quality to the then existing
improvements. No such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
<PAGE>
-8-
All work performed by Tenant to the Premises shall be done in compliance with
all applicable laws and regulations.
(B) All Alterations and all fixtures, paneling, partitions, railings,
equipment and like installations installed in the Building at any time either by
Tenant or by Landlord on Tenant's behalf shall, upon installation, become the
property of Landlord (unless otherwise agreed in writing by Landlord and Tenant)
and remain upon and be surrendered with the Premises unless Landlord, by notice
to Tenant given on or before the expiration of the Term of this Lease, elects to
relinquish Landlord's right thereto and to have them removed by Tenant, in which
event, they shall be removed by Tenant at the expiration or earlier termination
of the Term of this Lease and at Tenant's expense. Tenant shall repair any
damage to the Premises or the Building caused by any removal of such
Alterations.
(C) All trade fixtures, articles of personal property and all business
machinery and equipment and furniture owned or installed by Tenant solely at its
expense in the Premises ("Tenant's Removable Property") shall, remain the
property of Tenant and may be removed by Tenant at any time prior to the
expiration of this Lease, provided that Tenant, at its expense, shall repair any
damage to the Premises or the Building caused by any installation and/or removal
of Tenant's Removable Property.
(D) Notice is hereby given that Landlord shall not be liable for any labor
or materials furnished or to be furnished to Tenant. Tenant shall not permit any
mechanic's or other lien for any such labor or materials to attach to or affect
the reversion or other estate or interest of Landlord in and to the Premises.
Whenever and as often as any mechanic's lien shall have been filed against the
Premises based upon any act of, or for work claimed to have been done for, or
materials furnished to, Tenant, or of, for or to anyone claiming through Tenant,
Tenant shall forthwith take such action, by bonding, deposit or payment, as will
remove or satisfy the lien.
ARTICLE VIII
------------
ASSIGNMENT AND SUBLETTING
-------------------------
8.1 PROHIBITION. Tenant covenants and agrees that neither this Lease nor
------------
the term and estate hereby granted, nor any interest herein or therein, will be
assigned (including, without limitation, by operation of law), mortgaged,
pledged, encumbered or otherwise transferred, and that neither the Premises nor
any part thereof will be encumbered in any manner by reason of any act or
omission on the part of Tenant, or used or occupied or permitted to be used or
occupied by anyone other than Tenant or for any use or purpose except as may be
permitted by (S)7.1, or be sublet (which term, without limitation, shall include
granting of concessions, licenses and the like)
<PAGE>
-9-
in whole or in part, without, in each instance, Tenant having first received the
express written consent of Landlord. Landlord agrees that it will not withhold
or delay consent to subletting by a third party if, in Landlord's reasonable
discretion, Landlord is reasonably satisfied that (i) the identity of such third
party is of a type and character suitable for a suburban warehouse/office
building, and (ii) the type of business that such third party proposes to
operate in the Premises is permitted under applicable zoning regulations. If
this Lease be assigned, or if the Premises or any part thereof be sublet or
occupied by anyone other than Tenant, Landlord may collect rent and other
charges from the assignee, subtenant or occupant, and apply the net amount
collected to the Fixed Rent and other charges herein reserved, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver of this
covenant, the acceptance of the assignee, subtenant or occupant as a tenant or a
release of Tenant from the further performance by Tenant of its obligations
hereunder. The consent by Landlord to an assignment or subletting shall in no
way be construed to relieve Tenant or any successor from obtaining the express
consent in writing of Landlord to any further assignment or subletting.
Notwithstanding anything to the contrary in the foregoing, no consent of
Landlord shall be required for (i) any sublease or occupancy agreement with an
entity controlled by, under common control with or controlling Tenant; (ii) a
pledge or assignment of Tenant's interest in this Lease pursuant to a leasehold
mortgage; or (iii) an assignment of the Lease to any successor of Tenant by
merger, consolidation or acquisition of all or substantially all the stock or
assets of Tenant; provided that (A) Tenant shall deliver to Landlord at least 30
days' advance notice of any such sublease or occupancy agreement or such
leasehold mortgage; (B) Tenant shall provide Landlord with complete copies of
any leasehold mortgage promptly after the execution of any such mortgage; (C) in
the case of a merger, consolidation or sale, the net worth of Tenant's successor
(determined in accordance with generally accepted accounting principles)
immediately after such merger, consolidation or sale is equal to or greater than
$60,000,000; and (D) Tenant shall remain liable for the performance of Tenant's
obligations hereunder during the balance of the Term.
In any case where Landlord shall consent to such assignment, subletting or
use, Tenant shall remain fully liable for Tenant's obligations under this Lease,
including, without limitation, the obligation to pay the rent and other amounts
provided under this Lease. At Landlord's election, it shall be a condition of
the validity of any such assignment, that, upon Landlord's request, the assignee
shall agree directly with Landlord, in form reasonably satisfactory to Landlord,
to be bound by all the obligations of Tenant, including, without limitation, the
obligation to pay rent and other amounts provided under this Lease and the
covenant against further assignment, subletting and use.
8.2 OTHER REQUIREMENTS AND PROVISIONS.
----------------------------------
<PAGE>
-10-
(A) No assignment of this Lease shall be effective unless and until Tenant
delivers to Landlord duplicate originals of the instrument of assignment
(wherein the assignee assumes the performance of Tenant's obligations under this
Lease) and any accompanying documents.
(B) No sublease (or other occupancy agreement) of all or any part of the
Premises shall be effective unless and until Tenant delivers to Landlord
duplicate originals of the instrument of sublease and any accompanying documents
(wherein the sublessee (or other occupier) assumes the performance of Tenant's
obligations as to the subleased space). Any such sublease (or other occupancy
agreement) shall be subject and subordinate to this Lease.
(C) Any assignment or sublease shall neither release Tenant from its
liability for the performance of Tenant's obligations hereunder during the
balance of the Term of this Lease nor constitute Landlord's consent to any
further assignment or sublet of this Lease. If a sublease to which Landlord has
consented is assigned or all or any portion of the Premises is further sublet
without in each instance, the prior consent of Landlord, then Tenant shall
immediately terminate such sublease, or arrange for the termination thereof, and
proceed expeditiously to have the occupant thereunder dispossessed.
(D) Tenant shall pay to Landlord, promptly upon demand therefor, all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Landlord in connection with any
assignment of this Lease or sublease of all or any part of the Premises.
(E) Any profit resulting from any such assignment or subletting shall be
100% payable to Landlord.
ARTICLE IX
----------
RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES
----------------------------------------------------
9.1 LANDLORD REPAIRS AND MAINTENANCE.
--------------------------------
(A) Landlord agrees to keep in good working order, condition and repair
the roof (but not the ceiling in the Building), foundation, exterior walls and
structure of the Building. Landlord shall also be responsible for landscaping of
the Premises and repairs to and maintenance of the common driveways and parking
areas located on the Premises, including lighting of such areas and removal of
snow and ice.
<PAGE>
-11-
(B) Landlord shall keep in good working order, condition and repair the
existing septic, heating, ventilating and air-conditioning systems servicing the
Building in place as of the Commencement Date, (collectively, the "Building
Systems"). Tenant shall pay Landlord, as additional rent, and in the manner set
forth below, (i)for all costs incurred by Landlord in connection with any and
all maintenance performed on the Building Systems during the Term of this Lease
(but not for replacements or other items of a capital nature), and (ii)for all
costs incurred by Landlord in connection with any repairs or replacements
(including without limitation items of a capital nature) made to the Building
Systems during the period commencing on the fifth (5th) anniversary of the
Commencement Date and continuing through the remainder of the Term of this
Lease. Landlord shall submit to Tenant copies of Landlord's invoices detailing
any such costs and Tenant shall pay to Landlord the entire amount of such costs,
as additional rent, within thirty (30) days of receipt of Landlord's invoices.
Any amounts paid by Tenant under the terms of this (S)9.1(B) shall not be deemed
to be payment of Tenant's Share of Operating Expenses, and shall be in addition
to Tenant's obligations under Article VI.
(C) Landlord shall in no event be responsible to Tenant for the
replacement of glass in the Building or for the doors leading to the Building
(except to the extent any damage thereto is caused by Landlord), or for any
condition in the Premises or the Building caused by any negligence or misconduct
of Tenant, its employees, agents, invitees or contractors (including any non-
permitted use thereof). Except as otherwise provided in this Lease, Landlord
shall not be responsible for making any other improvements or repairs to the
Building. Landlord shall not be liable for any failure to make repairs which,
under the provisions of this Section 9.1 or elsewhere in this Lease, Landlord
has undertaken to make, unless Tenant has given notice to Landlord of the need
to make such repairs and Landlord has failed to commence to make such repairs
within a reasonable time after receipt of such notice, or fails to proceed with
reasonable due diligence to complete such repairs.
9.2 TENANT'S AGREEMENT. (A) Tenant will keep the Premises in good order,
-------------------
condition and repair, reasonable wear and tear excepted, excepting only those
repairs for which Landlord is responsible under the terms of this Lease or which
are necessitated by the occurrence of a fire or other casualty or by the
exercise of the power of eminent domain; and Tenant shall surrender the
Premises, at the end of the Term of this Lease, in such condition. Without
limitation, Tenant shall maintain and use the Premises in accordance with all
reasonable, rules and regulations of Landlord and all governmental agencies
having jurisdiction and shall, at Tenant's own expense, obtain all permits,
licenses and the like required by applicable law for Tenant's use of the
Premises, other than occupancy permits of general
<PAGE>
-12-
application. Tenant shall be responsible for the provision of adequate security
to the Premises and to Tenant's personnel. Tenant shall be responsible for the
cost of repairs which may be made necessary by reason of damage to the Premises
caused by Tenant or its contractors or invitees.
(B) If repairs are required to be made by Tenant pursuant to the terms
hereof and are not made within the time periods allowed hereunder, Landlord may
demand that Tenant make the same forthwith, and, if Tenant refuses or neglects
to commence such repairs and complete the same with reasonable dispatch after
such demand, Landlord may (but shall not be required to) make or cause such
repairs to be made at Tenant's expense and shall not be responsible to Tenant
for any loss or damage that may occur to Tenant's stock or business by reason
thereof unless caused by Landlord's negligence or willful misconduct.
9.3 HEAVY MACHINERY. Any moving of machinery or equipment by Tenant shall
---------------
be at the sole risk and hazard of Tenant, and Tenant will exonerate, indemnify
and save Landlord harmless against and from any liability, loss, injury, claim
or suit resulting directly or indirectly from such moving.
9.4 UTILITIES. Tenant shall pay directly to the proper authorities
---------
charged with the collection thereof all charges for water, septic, gas,
electricity, telephone and other utilities or services used or consumed on the
Premises, all such charges to be paid as the same from time to time become due.
9.5 INTERRUPTION OR CURTAILMENT OF SERVICES. Upon reasonable advance
---------------------------------------
notice to Tenant (except in case of emergency), Landlord reserves the right to
temporarily interrupt, curtail, stop or suspend (a) the heating and air
conditioning services in the Building and (b) the operation of the plumbing and
electric systems in the Building, when necessary by reason of accident or
emergency, or for repairs, alterations, maintenance, replacements or
improvements in the reasonable judgment of Landlord desirable or necessary to be
made, or by reason of difficulty or inability in securing supplies or labor, or
strikes, or any other cause beyond the reasonable control of Landlord, whether
such other cause be similar or dissimilar to those hereinabove specifically
mentioned, until said cause has been removed. This Lease shall not be affected
or any of the Tenant's obligations hereunder reduced, and the Landlord shall
have no responsibility or liability for any such interruption, curtailment,
stoppage, or suspension of services or systems as in this Section 9.5 above
provided, except that (i) Landlord shall exercise reasonable diligence to
eliminate the cause of same as soon as reasonably practicable; (ii) Landlord
shall use diligent efforts to minimize any interruption of Tenant's use and
enjoyment of the Premises, and (iii) if all of the Premises are rendered unfit
for occupancy by Tenant for thirty
<PAGE>
-13-
(30) consecutive days, the Fixed Rent shall abate from and after the thirty (30)
days and until the Premises are again rendered fit for Tenant's occupancy.
ARTICLE X
---------
INDEMNITY AND INSURANCE
-----------------------
10.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made
-------------------
effective according to law, Tenant agrees to indemnify and save harmless
Landlord and Landlord's agents, affiliates, contractors and the employees of the
foregoing from and against all claims of whatever nature arising from any act,
omission or negligence of Tenant or Tenant's contractors, licensees, invitees,
agents, servants or employees or arising from any accident, injury or damage
whatsoever caused to any person, or to the property of any person, occurring on
account of or based upon the act, omission or negligence or misconduct of Tenant
or Tenant's contractors, licensees, invitees, agents servants or employees or
arising from any breach by Tenant of the terms and conditions of this Lease.
This indemnity and hold harmless agreement shall include indemnity against all
costs, expenses and liabilities (including, but not limited to, reasonable
attorney's fees and disbursements) incurred in connection with any such claim or
proceeding brought thereon and the defense thereof. Tenant's liability
hereunder shall survive any expiration or termination of this Lease. Nothing in
the foregoing shall be construed to include indemnity with respect to any claim
of whatever nature to the extent (and only to the extent) caused by the gross
negligence or willful misconduct of Landlord, Landlord's agents, affiliates,
contractors and employees or by a failure of Landlord to perform its obligations
hereunder. Nothing in this Section 10.1 shall be construed to reduce or
otherwise affect Landlord's obligations pursuant to Article XVII hereof.
10.2 INSURANCE. (A) Tenant agrees to maintain in full force, from the
----------
date upon which Tenant first enters the Premises for any reason throughout the
Term of this Lease and thereafter so long as Tenant is in occupancy of any part
of the Premises, (i) "all risk" property insurance covering all present and
future Tenant's Removable Property and Tenant's improvements and betterments to
a limit of not less than the full replacement cost thereof and (ii) a policy of
general liability and property damage insurance (including broad form
contractual liability, independent contractor's hazard and completed operations
coverage) in respect of the Premises and the conduct or operation of business
therein, with Landlord and any permitted mortgagee under Section 15.13 hereof of
which Tenant has received written notice, including John Hancock Mutual Life
Insurance Company, (and such other persons as are in privity of estate with
Landlord as may be set out in notice from time to time) named as an additional
insured, and with limits of not less than the amount of Public Liability
Insurance specified in Section 1.1. Tenant shall deliver to Landlord
certificates of insurance and receipts evidencing
<PAGE>
-14-
payment of the premiums for such insurance on or before the Commencement Date
and annually thereafter. Each such policy shall be noncancellable and
nonamendable with respect to Landlord and Landlord's said designees without
twenty (20) days' prior notice to Landlord.
(B) Tenant hereby waives and releases Landlord from any and all
liabilities, claims and losses on account of damage to Tenant's Removable
Property for which Landlord is or may be held liable to the extent Tenant either
is required to maintain insurance pursuant to Section 10.2(A) or actually
receives insurance proceeds on account thereof. Landlord hereby waives and
releases Tenant from any and all liabilities, claims and losses on account of
damage to the Building for which Tenant is or may be held liable to the extent
Landlord actually receives insurance proceeds on account thereof or to the
extent Landlord would have received such proceeds had Landlord maintained the
insurance required by Section 10.5 of this Lease. Each party hereto shall secure
waiver of subrogation endorsements from their respective insurance carriers.
10.3 TENANT'S RISK. Except as provided herein, to the maximum extent this
--------------
agreement may be made effective according to law, Tenant agrees to use and
occupy the Premises and to use such other portions of the Building as Tenant is
herein given the right to use at Tenant's own risk; and Landlord shall have no
responsibility or liability for any loss of or damage to Tenant's Removable
Property or for any other property of any kind, nature and description which may
be in or upon the Premises or the Building. The provisions of this Section
shall be applicable from and after the execution of this Lease and until the end
of the Term of this Lease, and during such further period as Tenant may use or
be in occupancy of any part of the Premises or of the Building.
10.4 INJURY CAUSED BY THIRD PARTIES. To the maximum extent this agreement
-------------------------------
may be made effective according to law, Tenant agrees that Landlord shall not be
responsible or liable to Tenant, or to those claiming by, through or under
Tenant, for any loss or damage that may be occasioned by or through the acts or
omissions of any third parties, except to the extent (and only to the extent)
caused by the gross negligence or willful misconduct of Landlord, Landlord's
agents, affiliates, contractors and employees.
10.5 LANDLORD'S INSURANCE. Landlord shall insure the Building against
--------------------
damage or destruction by fire or other casualties insurable under a standard
"all risk" endorsement in an amount equal to one hundred percent (100%) of the
replacement cost of the Building (exclusive of footings and foundations).
Landlord agrees to maintain a policy of commercial general liability and
property damage insurance in commercially reasonable limits. The costs of all
insurance carried by Landlord with respect to the Premises shall be Operating
Expenses.
<PAGE>
-15-
ARTICLE XI
----------
LANDLORD'S ACCESS TO PREMISES
-----------------------------
11.1 LANDLORD'S RIGHTS. Landlord shall have the right upon reasonable
------------------
advance notice to enter the Premises at all reasonable hours for the purpose of
inspecting or making repairs to the Premises, and Landlord shall also have the
right to make access available at all reasonable hours to prospective or
existing mortgagees, purchasers or, during the last 12 months of the term,
prospective tenants of any part of the Premises. Notwithstanding the foregoing,
Landlord shall have the right to enter the Premises at any time without notice
in the event of an emergency. Any exercise of Landlord's right of entry under
this Section 11.1 shall be conducted at such times and in such manner as to
minimize interference with Tenant's operations on the Premises.
ARTICLE XII
-----------
DAMAGE OR DESTRUCTION
---------------------
12.1 RESTORATION. (A) If the Building is totally or partially damaged or
------------
destroyed, thereby rendering the Building totally or partially inaccessible or
unusable, then (unless such damage was caused by Tenant, its agents, employees,
invitees, or contractors) Landlord shall diligently repair and restore the
Building, to substantially the same condition it was in prior to such damage or
destruction and only to the extent of insurance proceeds received by Landlord;
provided, however, that if in Landlord's reasonable judgment such repair and
restoration cannot be completed within ninety (90) days after the occurrence of
such damage or destruction (taking into account the time needed for effecting a
satisfactory settlement with any insurance company involved, removal of debris,
preparation of plans and issuance of all required governmental permits), then
Landlord shall have the right, at its sole option, to terminate this Lease by
giving written notice of termination within forty-five (45) days after the
occurrence of such damage or destruction. Landlord shall notify Tenant within
45 days whether Landlord intends to repair and whether Landlord anticipates that
repairs to the Premises will exceed 180 days to bring to completion. If
Landlord's notice states that such repairs are not expected to be completed
within 180 days, Tenant shall be entitled to terminate this Lease by notice to
Landlord given within fifteen (15) days of receipt of Landlord's notice, and
this Lease shall then terminate as if such date were the date of the ordinary
expiration of the Term. In addition, in the event that Landlord has not
completed the repairs required of it under this Section 12.1(A) within one-
hundred eighty (180) days of the damage or destruction, such period to be
subject to extension pursuant to (S)15.4 (but in no event extended beyond a
total of 270 days), Tenant shall have the right, at its option, to terminate
this Lease by delivering written notice of termination to
<PAGE>
-16-
Landlord within thirty (30) days after the expiration of such one hundred eighty
day period, as the same may be extended as set forth above.
(B) Notwithstanding anything herein to the contrary, Landlord shall not be
obligated to restore the Building and shall have the right to terminate this
Lease if (1) the holder of any Mortgage (as such term is defined in Section
15.13 hereof) fails or refuses to make insurance proceeds available for such
repair and restoration, or (2) the cost of repairing and restoring the Building
would exceed fifty percent (50%) of the replacement value of the Building. If
Landlord is released from its obligation to restore the Building as a result of
this subsection (B) but fails to terminate this Lease, Landlord shall promptly
notify Tenant and Tenant shall have the option to terminate this Lease by
written notice to Landlord.
12.2 RENT. If the Lease is terminated pursuant to Section 12.1 above,
-----
then all Fixed Rent and additional rent shall be apportioned (based on the
portion of the Building which is usable after such damage or destruction) and
paid to the date of termination. If this Lease is not terminated as a result of
such damage or destruction, then until such repair and restoration of the
Building is substantially complete, Tenant shall be required to pay the Fixed
Rent, additional rent and other sums due hereunder only for the portion of the
Building that is fit for Tenant's occupancy while such repair and restoration
are being made. Landlord shall bear the expenses of repairing and restoring the
Building; provided, however, that Landlord shall not be required to repair or
restore any alteration, improvement or addition previously made by Tenant at
Tenant's expense or any of Tenant's Removable Property. Notwithstanding
anything in this Lease to the contrary, if any damage or destruction to the
Premises was caused by the act or omission of Tenant or any agent, employee,
contractor or invitee of Tenant, then Tenant shall pay the amount by which such
expenses of repair or restoration to the Premises exceed the insurance proceeds,
if any, actually received by Landlord on account of such damage or destruction.
ARTICLE XIII
------------
CONDEMNATION
------------
13.1 TERMINATION OF LEASE. If the Premises or the Building or the means
---------------------
of access thereto are totally taken or condemned by any governmental or quasi-
governmental authority for any public or quasi-public use or purpose, thereby
rendering the Premises totally or substantially inaccessible or unusable, or are
sold under threat of such a taking or condemnation (collectively, "condemned"),
then this Lease shall terminate on the date title thereto vests in such
authority and Fixed Rent and additional rent shall be apportioned as of such
date. In the event that either (i) Tenant's reasonable means of access to the
Premises is taken or condemned or (ii) only a
<PAGE>
-17-
"substantial part" of the Premises is taken or condemned, either Landlord or
Tenant, at its option, by delivery of notice to the other party within 30 days
following the date on which Tenant shall receive notice of vesting of title, may
terminate this Lease as of the date of vesting of title. A "substantial part"
shall be 60 percent or more of the Premises. In the event either Landlord or
Tenant does not elect to exercise such termination option, this Lease shall
remain in effect, except the Fixed Rent and additional rent shall be abated as
of the date of vesting of title in an amount apportioned according to the
portion (measured in square feet) of the Premises so condemned or taken, and
Landlord and Tenant shall execute an amendment to this Lease specifying the new
Fixed Rent and additional rent. In the event of any taking or condemnation and
if neither Landlord nor Tenant exercises its option to terminate, Landlord, at
its expense, will restore the remaining portion of the Premises with reasonable
diligence to at least the condition existing prior to such condemnation or
taking.
13.2 AWARDS. All awards, damages and other compensation paid by any
-------
governmental or quasi-governmental authority on account of any condemnation
shall belong to Landlord, and Tenant assigns to Landlord all rights to such
awards, damages and compensation. Tenant shall not make any claim against
Landlord or the authority for any portion of such award, damages or compensation
attributable to damage to the Premises, value of the unexpired portion of the
Term of this Lease, loss of profits or goodwill, leasehold improvements or
severance damages. Nothing contained herein, however, shall prevent Tenant from
pursuing a separate claim against the authority for the value of improvements,
alterations, additions, furnishings and trade fixtures installed in the Building
at Tenant's expense and for relocation expenses.
ARTICLE XIV
-----------
DEFAULT
-------
14.1 TENANT'S DEFAULT. (A) If at any time subsequent to the date of this
-----------------
Lease any one or more of the following events (herein referred to as a "Default
of Tenant") shall happen:
(1) Tenant shall fail to pay Fixed Rent, additional rent or any other
amounts payable under this Lease, when due and such failure shall
continue for ten (10) days after notice thereof, except that if
Landlord gives such notice twice in any period of twelve
successive months, thereafter no such notice shall be required;
or
(2) Tenant shall neglect or fail to perform or observe any other
covenant herein contained on Tenant's part to be
<PAGE>
-18-
performed or observed and Tenant shall fail to remedy the same
within thirty (30) days after notice to Tenant specifying such
neglect or failure, or if such failure is of such a nature that
Tenant cannot reasonably remedy the same within such thirty (30)
day period, Tenant shall fail to commence promptly to remedy the
same and to prosecute such remedy to completion with diligence
and continuity, but in no event longer than ninety (90) days
after notice to Tenant; or
(3) Tenant's leasehold interest in the Premises shall be taken on
execution or by other process of law directed against Tenant; or
(4) Tenant shall make an assignment for the benefit of creditors or
shall file a voluntary petition in bankruptcy or shall be
adjudicated bankrupt or insolvent, or shall file any petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for
itself under any present or future Federal, State, or other
statute, law or regulation for the relief of debtors, or shall
seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties, or shall admit in writing its
inability to pay its debts generally as they become due; or
(5) A petition shall be filed against Tenant in bankruptcy or under
any other law seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar
relief under any present or future Federal, State or other
statute, law or regulation and shall remain undismissed or
unstayed for an aggregate of ninety (90) days (whether or not
consecutive), or if any debtor in possession trustee, receiver or
liquidator of Tenant or of all or any substantial part of its
properties or of the Premises shall be appointed without the
consent or acquiescence of Tenant, respectively and such
appointment shall remain unvacated or unstayed for an aggregate
of ninety (90) days (whether or not consecutive);
(6) A Default of Tenant shall occur under either (i) that certain
Lease between Landlord, as landlord and Tenant, as tenant for
premises located at 31 Union Avenue, Sudbury; or (ii) that
certain Lease between Theodore Pasquarello,
<PAGE>
-19-
as Trustee of the E. B. Realty Trust (the "E. B. Trust
Landlord"), as landlord and Tenant, as tenant for the land and
improvements located thereon at 33 Union Avenue, Sudbury;
then in any such case (a) if such Default of Tenant shall occur prior to the
Commencement Date, this Lease shall ipso facto, and without further act on the
---- -----
part of the Landlord, terminate, and (b) if such Default of Tenant shall occur
after the Commencement Date, Landlord or Landlord's agent may immediately, or at
any time thereafter, without demand or notice, enter into and upon the Premises,
or any part thereof in the name of the whole, and repossess the same and upon
such entry this Lease shall terminate or Landlord may terminate this Lease at
any time thereafter by notice to Tenant, specifying a date not less than five
(5) days after the giving of such notice on which this Lease shall terminate and
this Lease shall come to an end on the date specified therein as fully and
completely as if such date were the date herein originally fixed for the
expiration of the Term of this Lease (Tenant hereby waiving any rights of
redemption under M.G.L. ch. 186, sec. 11), and Tenant will then quit and
surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
(B) If this Lease shall have been terminated as provided in this Article,
or if any execution or attachment shall be issued against Tenant or any of
Tenant's property whereupon the Premises shall be taken or occupied by someone
other than Tenant, then Landlord may, without notice, reenter the Premises,
either by summary proceedings, ejectment or otherwise, and remove and dispossess
Tenant and all other persons and any and all property from the Premises, as if
this Lease had not been made, and Tenant hereby waives the service of notice of
intention to reenter or to institute legal proceedings to that end.
(C) In the event of any termination of this Lease, Tenant shall pay the
Fixed Rent, additional rent and all other amounts payable hereunder up to the
time of such termination, and thereafter Tenant, until the end of what would
have been the Term of this Lease in the absence of such termination, and whether
or not the Premises shall have been relet, shall be liable to Landlord for, and
shall pay to Landlord, as liquidated current damages, the Fixed Rent, additional
rent and all other amounts payable hereunder had such termination not occurred,
less the net proceeds, if any, of any reletting of the Premises, after deducting
all reasonable expenses in connection with such reletting, including, without
limitation, all reasonable repossession costs, brokerage commissions, legal
expenses, advertising and marketing costs, expenses of employees, alteration and
tenant improvement costs and expenses of preparation for such reletting. Tenant
shall pay such damages to Landlord monthly on the days on which the Fixed Rent
and additional rent would have
<PAGE>
-20-
been payable hereunder had this Lease not been terminated. Landlord shall use
reasonable efforts to relet the Premises.
(D) At any time after the termination of this Lease, whether or not
Landlord shall have collected any damages pursuant to Section 14.1(C), as
liquidated final damages, and in lieu of all damages payable by Tenant pursuant
to Section 14.1(C) thereafter, at Landlord's election, Tenant shall pay to
Landlord an amount which at the time of such election represents the then value
of the excess, if any, of (1) the Fixed Rent, additional rent and all other
amounts which would have been payable by Tenant hereunder (conclusively
presuming the annual payments with respect to real estate taxes and expense
escalation obligations to be the same as were payable for the preceding year)
for the period commencing with the date of Landlord's election and ending with
the date contemplated as the expiration date hereof if this Lease had not so
terminated, over (2) the aggregate fair rental value of the Premises for the
same perio d.
(E) In case of any Default of Tenant, reentry or expiration and
dispossession by summary proceedings or otherwise, Landlord may (1) relet the
Premises or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may in Landlord's good faith judgment be
equal to or less than or exceed the period which would otherwise have reasonable
constituted the balance of the Term of this Lease and may grant reasonable
concessions of free rent to the extent that Landlord considers advisable and
necessary to relet the same, and (2) may make such alterations, repairs and
decoration in and to the Premises as Landlord in its reasonable judgment
considers advisable and necessary for the purpose of reletting the Premises, and
the making of such alterations, repairs and decorations shall not operate or be
construed to release Tenant from liability hereunder. Landlord shall in no event
be liable in any way whatsoever for failure to relet the Premises, or in the
event that the Premises are relet, for failure to collect the rent under such
reletting provided Landlord uses reasonable efforts to collect the rent. Tenant
hereby expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed, or
in the event of Landlord obtaining possession of the Premises, by reason of the
violation by Tenant of any of the covenants and conditions of this Lease.
(F) The specified remedies to which Landlord may resort hereunder are not
intended to be exclusive of any remedies or means of redress to which Landlord
may at any time be entitled lawfully, and Landlord may invoke any remedy
(including the remedy of specific performance) allowed at law or in equity as if
specific remedies were not herein provided.
(G) All reasonable costs and expenses incurred by or on behalf of Landlord
(including, without limitation, reasonable attorneys' fees and
<PAGE>
-21-
expenses) in enforcing its rights hereunder or occasioned by any Default of
Tenant shall be paid by Tenant promptly upon demand.
ARTICLE XV
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 EXTRA HAZARDOUS USE. (A) Tenant covenants and agrees that Tenant
--------------------
will not do or permit anything to be done in or upon the Premises, or bring in
anything or keep anything therein, which would increase the rate of property or
liability insurance of the Premises or of the Building above the standard rate
applicable to Premises as of the Commencement Date being occupied for the
Permitted Use; and Tenant further agrees that, in the event that Tenant shall do
or permit any of the foregoing, Tenant will promptly pay to Landlord, on demand,
any such resulting increase.
(B) Tenant shall not (either with or without negligence) cause or permit
the escape, disposal or release of any hazardous substances, or materials.
Tenant shall not allow the storage or use of hazardous substances or materials
on or in the Premises in any manner, nor allow to be brought into any portion of
the Building any such materials or substances except for hazardous substances or
materials disclosed in writing to the Landlord for use in the ordinary course of
the conduct of the Permitted Use, all such substances or materials to be used
and stored in compliance with applicable laws and regulations. Tenant shall not
store any flammable substances in the Premises, unless such flammable substances
are stored in areas with in-rack sprinkling. Any such hazardous substances or
flammable substances shall be stored, used and disposed of in accordance with
all applicable laws and regulations. Without limitation, hazardous substances
and materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., M.G.L. Chapter 21E and any other applicable federal, state or
local laws and the regulations adopted under these acts. If any lender or
governmental agency shall ever require testing to ascertain whether or not there
has been any release of hazardous materials as a result of a breach by Tenant of
the provisions of this (S)15.1(B), then the reasonable costs thereof shall be
reimbursed by Tenant to Landlord upon demand as additional charges. In addition,
Tenant shall execute affidavits, representations and the like from time to time
at Landlord's reasonable request concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the Premises. In
all events, Tenant shall indemnify Landlord from and against any and all
Environmental Damages (as defined in (S)17.1) asserted by any third party or
governmental authority and either resulting from any violation by Tenant (or its
employees, agents, invitees, or contractors) of any environmental laws
pertaining to the Premises or caused by Tenant (or its agents, employees,
invitees, or contractors) or persons acting under the
<PAGE>
-22-
direction of Tenant or by any third parties' storage, use or release of
hazardous substances or materials on or in the Premises during the Term of this
Lease (except to the extent caused by Landlord or persons acting under the
direction of Landlord). The within covenants shall survive the expiration or
earlier termination of the Term of this Lease. Nothing in this Section 15.1
shall be construed to reduce or otherwise affect Landlord's obligations pursuant
to Article XVII hereof. In the event of any conflict between this Section and
Article XVII, the provisions of
Article XVII shall control.
15.2 WAIVER. The failure of either Landlord or Tenant to insist in any
-------
one or more instances upon the strict performance of any one or more of the
obligations of this Lease, or to exercise any election herein contained, shall
not be construed as a waiver or relinquishment for the future of the performance
of such one or more obligations of this Lease or of the right to exercise such
election, and such right to insist upon strict performance shall continue and
remain in full force and effect with respect to any subsequent breach, act or
omission. The receipt by Landlord of Fixed Rent, additional rent or other
payments due hereunder or partial payments thereof with knowledge of breach by
Tenant of any obligation of this Lease shall not be deemed a waiver of such
breach.
15.3 COVENANT OF QUIET ENJOYMENT. Landlord covenants that, if Tenant
----------------------------
shall timely perform all of its obligations hereunder, then, subject to the
provisions of this Lease, Tenant shall, during the Term of this Lease, peaceably
and quietly occupy and enjoy the full possession of the Premises without
hindrance by Landlord or any party claiming through or under Landlord.
15.4 FORCE MAJEURE, ETC. (A) If either Tenant or Landlord is in any way
-------------------
delayed or prevented from performing any of its obligations under this Lease
(excluding any monetary obligations of Tenant, including without limitation
Tenant's obligation to pay Fixed Rent and additional rent) due to fire, act of
God, governmental act or failure to act, strike, labor dispute, inability to
procure materials, war or any other cause beyond such party's reasonable control
(whether similar or dissimilar to the foregoing events), then the time for
performance of such obligation shall be excused for the period equal to the
period of such delay or prevention and extended for a period equal to the period
of such delay or prevention.
(B) In no event shall either party be liable to the other for any indirect
or consequential damages suffered by either from any cause whatsoever.
15.5 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. (A) If Landlord shall
-----------------------------------------
assign Landlord's interest in this Lease or in the rents payable hereunder to
the holder of a mortgage covering the Premises (regardless of whether or not
such assignment is conditional in nature), then such
<PAGE>
-23-
assignment shall not be construed as an assumption by the assignee of any of the
obligations of Landlord hereunder unless such assignee (1) by notice sent to
Tenant, specifically otherwise elects, or (2) forecloses on its mortgage, or (3)
takes possession of the Premises.
(B) In the event of any transfer of title to the Premises by Landlord,
Landlord shall thereafter be released from the performance and observance of all
covenants and obligations hereunder occurring after the date of such transfer
and the transferee shall be deemed the Landlord under this Lease from and after
the date of such transfers, except for the provisions of Articles XVII and XX
(which shall not be binding upon the transferee), provided that in no event
shall the original Landlord be relieved of any obligations pursuant to Article
XVII, which obligations shall survive any such transfer in the manner and to the
extent set forth in (S)17.1.
15.6 RULES AND REGULATIONS. Tenant shall abide by all reasonable rules
---------------------
and regulations reasonably established by Landlord from time to time for the
operation of the Premises. Landlord agrees to use reasonable efforts to insure
that any such rules and regulations are uniformly enforced, but Landlord shall
not be liable to Tenant for the violation of any such rules or regulations by
any other tenant or occupant of the Premises or persons conducting business with
such tenant or occupant.
15.7 ADDITIONAL CHARGES. If Tenant shall fail to pay when due any sums
------------------
under this Lease, Landlord shall have the same rights and remedies as Landlord
has hereunder for failure to pay Fixed Rent.
15.8 INVALIDITY OF PARTICULAR PROVISIONS. If any provision of this
-----------------------------------
Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, then the remainder of this Lease and the
application of such provision to persons or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby.
15.9 PROVISIONS BINDING. Except as herein otherwise provided, the
------------------
provisions of this Lease shall be binding upon and shall inure to the benefit of
the parties hereto and each of their respective successors and assigns, subject
to the provisions herein restricting assignment or subletting.
15.10 NOTICES. All notices or other permitted or required communications
-------
hereunder shall be in writing and shall be deemed duly given when delivered in
person (with receipt therefor), or when sent by Express Mail or overnight
courier service (provided a receipt will be obtained) or by certified or
registered mail, return receipt requested, postage prepaid to the following
addresses:
<PAGE>
-24-
If to Landlord, addressed to Landlord at Landlord's Address (or to such
other address or addresses as may from time to time hereafter be designated
by Landlord by notice).
If to Tenant, addressed to Tenant at Tenant's Original Address.
15.11 WHEN LEASE BECOMES BINDING. The submission of this document for
---------------------------
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall become
effective and binding only upon the execution and delivery hereof by both
Landlord and Tenant. All negotiations, consideration, representations and
understandings between Landlord and Tenant are incorporated herein and this
Lease expressly supersedes any proposals or other written documents relating
hereto. This Lease may be modified or altered only by written agreement signed
by Landlord and Tenant, and no act or omission of any employee or agent of
Landlord shall alter, change or modify any of the provisions hereof. This Lease
shall not be recorded, but Landlord shall, on request from Tenant, execute and
acknowledge, a Notice of Lease pursuant to M.G.L. Chapter 183, (S)4.
15.12 PARAGRAPH HEADINGS. The paragraph headings throughout this Lease
-------------------
are for convenience and reference only, and the words contained therein shall in
no way be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this Lease.
15.13 RIGHTS OF MORTGAGEE AND GROUND LESSOR. (A) This Lease is subject
--------------------------------------
and subordinate to the lien, provisions, operation and effect of all mortgages,
deeds of trust, ground leases or other security instruments which may now
encumber the Building or the Premises (collectively, "Mortgages"; individually,
"Mortgage"), to all funds and indebtedness intended to be secured thereby, and
to all renewals, extensions, modifications, recastings or refinancings thereof.
The holder of any Mortgage to which this Lease is subordinate shall have the
right (subject to any required approval of the holder of any superior Mortgage)
at any time to declare this Lease to be superior to the lien, provisions,
operation and effect of such Mortgage and Tenant shall execute, acknowledge and
deliver all documents required by such holder in confirmation thereof provided
such documents are in form and substance reasonably satisfactory to Tenant. The
holder of any Mortgage placed on the Premises after the date of this Lease may
elect to subordinate this Lease to such Mortgage, provided that the holder shall
deliver to Tenant a Non-disturbance and Attornment Agreement, on a commercially
reasonable form, whereby such holder agrees not to disturb Tenant's rights under
this Lease provided that Tenant is not in default beyond applicable cure periods
hereunder. Tenant acknowledges that The First National Bank of Boston (the
"Bank") is a permitted mortgagee of the Landlord under this Lease. The notice
address of the Bank is: 100 Federal Street, Boston, MA 02110,
<PAGE>
-25-
Attention Elise Pricone. Landlord agrees to use reasonable efforts to obtain
from the Bank, a Non-disturbance Agreement, on form reasonably satisfactory to
the Bank, within 90 days of the Commencement Date of this Lease.
(B) In confirmation of the foregoing subordination, Tenant shall at
Landlord's request promptly execute any requisite or appropriate document. If
the Premises are sold at foreclosure or transferred by a deed-in-lieu of
foreclosure, then, at the request of such purchaser, Tenant shall attorn to such
purchaser and shall recognize such purchaser as the landlord under this Lease
provided that such purchaser agrees not to disturb Tenant's possession of the
Premises and agrees to be bound by and assume Landlord's obligations hereunder
except such purchaser shall not be (1) bound by any payment of the Fixed Rent or
additional payments due hereunder for more than one (1) month in advance, (2)
bound by any amendment of this Lease made without the consent of the holder of
each Mortgage existing as of the date of such amendment provided Tenant had
notice of such Mortgage, (3) liable for damages for any breach, act or omission
of any prior landlord, and (4) subject to any offsets or defenses which Tenant
might have against any prior landlord. Within fifteen (15) days after the
request of such purchaser, Tenant shall execute, acknowledge and deliver
confirmation of such attornment and non-disturbance agreement in form reasonably
acceptable to Tenant.
(C) After Tenant receives notice from any person, firm or other entity
that it holds a Mortgage on the Building or the Premises, no notice from Tenant
to Landlord alleging any default by Landlord shall be effective unless and until
a copy of the same is given to such holder, provided that Tenant shall have been
furnished with the name and address of such holder. Any such holder shall have
thirty (30) days after its receipt of notice from Tenant of a default by
Landlord under this Lease to cure such default before Tenant may exercise any
remedy hereunder. The curing of any of Landlord's defaults by such holder shall
be treated as performance by Landlord.
15.14 ESTOPPEL CERTIFICATES. At any time and from time to time upon not
----------------------
less than fifteen (15) days prior written notice, Tenant and each subtenant or
assignee of Tenant or occupant of the Premises shall execute, acknowledge and
deliver to Landlord and/or any other person or entity designated by Landlord, an
estoppel certificate (1) certifying that this Lease is unmodified and in full
force and effect (or if there have been modifications, that this Lease is in
full force and effect as modified and stating the modifications), (2) stating
the dates to which the rent and any other charges have been paid, (3) stating
whether or not, to the best of Tenant's knowledge, Landlord is in default in the
performance of any obligation of Landlord contained in this Lease, and, if so,
specifying the nature of such default, (4) stating the address to which notices
are to be sent, and (5) certifying to such other matters as Landlord may
reasonably request. Tenant acknowledges
<PAGE>
-26-
that time is of the essence to the delivery of such statements. Upon request,
Tenant agrees to furnish Landlord with Tenant's current annual reports and any
other financial information of Tenant as Landlord may reasonably request from
time to time.
15.15 REMEDYING DEFAULTS. Upon five business days' notice to Tenant,
-------------------
Landlord shall have the right, but shall not be required, to pay such sums or
perform such acts which may be necessary or appropriate by reason of the failure
or neglect of Tenant to perform any of its obligations under this Lease beyond
any applicable notice and grace period hereunder. If Landlord, in connection
with the foregoing, makes any reasonable expenditures or incurs any obligations
for the payment of money, Tenant agrees to pay to Landlord within five (5) days
of demand all such sums. After a Default of Tenant in the payment of Fixed
Rent, additional rent or other amounts payable hereunder, such amounts shall, at
the option of Landlord, bear interest from the due date thereof at a rate equal
to five percent (5%) over the rate of interest reported from time to time in the
Wall Street Journal as being the "prime rate" then in effect and shall be
payable by Tenant to Landlord on demand by Landlord. Notwithstanding anything
to the contrary contained herein, the interest to be paid by Tenant to Landlord
hereunder shall be limited to the then maximum legal rate thereof.
15.16 HOLDING OVER. If Tenant does not immediately surrender the Premises
-------------
upon the expiration or earlier termination of the Term of this Lease, then
Tenant shall become a tenant by the month and the rent shall be increased to
150% of the monthly installments of Fixed Rent, additional rent and all other
amounts that would have been payable pursuant to the provisions of this Lease if
the Term of this Lease had continued during such holdover period. Such rent
shall be computed on a monthly basis and shall be payable on the first day of
such holdover period and the first day of each calendar month thereafter during
such holdover period until the Premises have been vacated. Landlord's
acceptance of such rent shall not in any manner adversely affect Landlord's
other rights and remedies, including Landlord's right to evict Tenant and to
recover damages.
15.17. SURRENDER OF PREMISES. Upon the expiration or earlier termination
----------------------
of the Term of this Lease, Tenant shall peaceably quit and surrender to Landlord
the Premises in good order and condition, together with all alterations,
additions and improvements which may have been made or installed in, on or to
the Premises prior to or during the Term of this Lease (subject, however, to the
provisions of Section 7.2(B)), excepting only ordinary wear and use, eminent
domain, and damage by fire or other casualty. Tenant shall remove all of
Tenant's Removable Property and all items specified by Landlord pursuant to
Section 7.2(B) and shall, at its expense, repair and restore the Premises to the
condition existing prior to installation and repair any damage to the Premises
or the Building due to such removal. Any of
<PAGE>
-27-
Tenant's Removable Property which shall remain in the Building or on the
Premises after the expiration or termination of the Term of this Lease shall be
deemed conclusively to have been abandoned, and either may be retained by
Landlord as its property or may be disposed of, at Tenant's sole cost and
expense, in such manner as Landlord may see fit.
15.18. PAYMENTS BY TENANT. All amounts payable by Tenant under the terms
-------------------
of this Lease, including without limitation, all payments of Fixed Rent,
additional rent under Articles V and VI and all payments under (S)9.1(B), shall
be paid to Landlord without offset, abatement, deduction or demand.
ARTICLE XVI
-----------
BROKERAGE
---------
16.1 BROKERAGE. Landlord and Tenant each represent to the other that it
---------
has dealt with no broker in connection with this Lease. Landlord and Tenant
each agree to indemnify and hold the other harmless from any brokerage
commission, and any other loss, damage or expense, including reasonable
attorneys' fees, resulting from any dealings by such party in breach of the
foregoing representation.
ARTICLE XVII
------------
ENVIRONMENTAL MATTERS
---------------------
17.1 INDEMNIFICATION. Landlord shall defend (with counsel selected by
---------------
Landlord) and indemnify Tenant from and against any and all Environmental
Damages (as defined below) asserted by any third party (including, without
limitation, any sub-tenant, assignee or other successor to Tenant's interest
hereunder but only to the extent Landlord would have been liable to Tenant
hereunder in the absence of any such sublease, assignment or other transfer) or
governmental authority. Landlord's obligations under this Article XVII shall
survive and continue in full force and effect (subject only to any applicable
statutes of limitations) for a period of three (3) years from the expiration
date of this Lease (the "Termination Date"), except that Landlord's indemnity
obligations under this Article XVII as to matters caused directly by Landlord or
persons acting under the direction of Landlord during the Term of this Lease
shall survive beyond the Termination Date and that if there are any pending
claims under the terms of this Article XVII existing on the Termination Date
(whether or not asserted in a case of law) or if there is any response action
which Landlord is obligated to perform under (S)17.3 and of which Landlord has
received notice on or before the Termination Date, Landlord's obligations under
this Article XVII solely as to such pending claims or such
<PAGE>
-28-
response action, shall be extended until such time as the pending claims have
been resolved or such response action has been completed, respectively.
"Environmental Damages" means all claims, judgments, damages, losses,
penalties, fines, liabilities (including as well strict liability),
encumbrances, liens, costs, and expenses of investigation and defense of any
claim, whether or not such claim is ultimately defeated, and of any good faith
settlement, of whatever kind or nature, contingent or otherwise, matured or
unmatured, foreseeable or unforseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' fees and response costs, any
of which are incurred at any time as a result of the existence of oil or
hazardous materials upon, about or beneath the Premises and/or any properties
downgradient from or cross-gradient to the Premises, or migrating or threatening
to migrate to or from the Premises, and any violation by Landlord of any
applicable environmental law pertaining to the Premises (except as specifically
provided in the next paragraph).
The foregoing indemnity shall not apply to any Environmental Damages
resulting from, relating to, or arising out of the release or threat of release
of oil or hazardous materials resulting from Tenant's (or its employees',
agents' invitees' or contractors') violation of any environmental laws or caused
by Tenant's use, operation, or occupation of the Premises or from any breach by
Tenant of the provisions of (S)15.1 of this Lease or by any third parties'
storage, use or release of hazardous substances or materials on or in the
Premises during the Term of this Lease (unless directly caused by Landlord).
17.2 THIRD PARTY CLAIMS.
------------------
(A) If any third party shall notify either Landlord or Tenant with respect
to any matter (a "Third Party Claim") which may give rise to a claim for
-----------------
indemnification against Landlord under this Article XVII or a claim for
indemnification against Tenant under (S)15.1, then the party receiving notice
shall promptly notify the other party in writing; provided, however, that no
-------- -------
delay in notifying the other party shall relieve that party from any obligation
hereunder unless (and then solely to the extent) such party is prejudiced.
(B) Landlord agrees to defend Third Party Claims which arise solely out of
Landlord's indemnity obligations under (S)17.1 and so long as Landlord is
conducting the defense of the Third Party Claim in accordance with Section 17.1
above, (i) Tenant may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) Tenant will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of Landlord, and
(iii) Landlord will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of Tenant (not to be withheld unreasonably).
<PAGE>
-29-
(C) If Landlord does not defend against the Third Party Claim as required
by (S)17.2(B), however, (i) Tenant may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (provided that Landlord
may participate in any such action, at its own expense, and Landlord shall have
the right to reject any settlement proposal by Tenant), (ii) Landlord will
reimburse Tenant promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' fees and expenses), and
(iii) Landlord will remain responsible for any Environmental Damages Tenant may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the extent (and only to the extent) provided in this
Article XVII.
(D) Tenant agrees to defend Third Party Claims which arise out of Tenant's
indemnity obligations under (S)15.1 and so long as Tenant is conducting the
defense of the Third Party Claim in accordance with Section 15.1, (i) Landlord
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (ii) Landlord will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of Tenant (not to be withheld
unreasonably), and (iii) Tenant will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of Landlord (not to be withheld unreasonably).
(E) If Tenant does not defend against the Third Party Claim as required by
(S)17.2(D), however, (i) Landlord may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (provided that Tenant may
participate in any such action, at its own expense), (ii) Tenant will reimburse
Landlord promptly and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (iii)
Tenant will remain responsible for any Environmental Damages Landlord may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article XVII and in
Section 15.1.
17.3 RESPONSE ACTIONS. If Tenant or Landlord is required by applicable law
----------------
to remediate oil or hazardous materials on or under the Premises or migrating or
threatening to migrate through, under or beyond the Premises, or to take any
other response actions related to the Premises and/or any migration or threat of
migration, then Landlord shall promptly undertake all such response actions in
accordance with all applicable laws. Upon completion of each response action,
Landlord shall reasonably restore any affected portion of the Premises to the
condition existing prior to the
<PAGE>
-30-
commencement of such response action. If the response action is the result of
any breach by Tenant of the terms of (S)15.1 or otherwise results from any
environmental condition occurring during the Term of this Lease for which Tenant
is responsible under the terms of (S)15.1, Tenant shall reimburse promptly and
periodically Landlord, as additional rent, for all costs incurred by Landlord in
connection with such response action.
Tenant agrees, upon reasonable prior written notice from Landlord, to grant
Landlord or its contractors access to the Premises to carry out such response
actions as Landlord deems appropriate, provided, however, that Landlord shall
use reasonable efforts to prevent any interruption of Tenant's (or any permitted
subtenant's or assignee's) conduct of business at the Premises. Landlord agrees
to coordinate its activities with Tenant so as to minimize any inconvenience to
or interruption of the normal use and enjoyment of the Premises by Tenant and by
any permitted subtenant and/or assignee consistent with Landlord's obligations
hereunder and under any applicable judgment, decree or settlement.
17.4 SUCCESSORS AND ASSIGNS. This Article XVII is binding upon and inures
----------------------
to the benefit of Landlord and Tenant only. The parties acknowledge that
certain of Landlord's obligations under this Article XVII are secured by a
limited Guaranty of Theodore Pasquarello dated March 31, 1997. In the event
that this Lease is assigned or the Premises are sublet by Tenant as permitted
hereunder, then Landlord's obligations under this Article XVII shall thereafter
be owed only to New England Business Service, Inc. and not to any of Tenant's
subtenants, successors, transferees, or assigns. In the event the Premises are
acquired by a mortgagee of the Premises at foreclosure sale or by a deed-in-lieu
of foreclosure, the provisions of this Article XVII shall not apply to such
mortgagee.
ARTICLE XVIII
-------------
EXCULPATORY CLAUSE
------------------
18.1 LIMITATION ON LIABILITY. Notwithstanding anything to the contrary
-----------------------
herein, Landlord's liability for its negligence or failure to perform its
obligations hereunder including all of Landlord's obligations under (S)17 shall
be limited to its interest in the Premises. Tenant shall neither seek to
enforce nor enforce any judgment or other remedy against any other asset of
Landlord or any individual who holds any interest in Landlord.
18.2 ACTIONS AGAINST LANDLORD. In any claim made by Tenant against
------------------------
Landlord alleging that Landlord has acted unreasonably where Landlord had an
obligation to act reasonably, Tenant shall have no right to recover damages
(except as permitted under (S)19.2) from Landlord and
<PAGE>
-31-
Tenant's sole and exclusive recourse against Landlord shall be an action seeking
specific performance of Landlord's obligation to act reasonably.
ARTICLE XIX
-----------
SUBMISSION TO JURISDICTION, ETC.
--------------------------------
19.1 GOVERNING LAW. This Lease shall be construed in accordance with the
-------------
laws of the Commonwealth of Massachusetts. All actions or proceedings relating,
directly or indirectly, to this Lease shall be litigated only in courts located
within the Commonwealth of Massachusetts. Landlord, Tenant, their partners,
trustees, and their successors and assigns hereby subject themselves to the
jurisdiction of any state or federal court located within the Commonwealth of
Massachusetts.
19.2 RECOVERY OF FEES. If either party commences any action or proceeding
----------------
against the other in connection with this Lease and such action or proceeding is
disposed of, by settlement, judgment or otherwise, the prevailing party shall be
entitled to recover from the other its reasonable disbursements (including
reasonable attorneys' fees) and the reasonable fees and disbursements of
consultants or experts incurred in connection with such action or proceedings.
<PAGE>
-32-
IN WITNESS WHEREOF, each of Landlord and Tenant has caused this Lease to be
duly executed as of the date first written above
LANDLORD:
By: /s/ Theodore Pasquarello
-------------------------
Theodore Pasquarello, not
individually but as Trustee of
The Paris Trust
By: /s/ Eileen Pasquarello
-----------------------
Eileen Pasquarello, not
individually but as Trustee of
The Paris Trust
TENANT:
NEW ENGLAND BUSINESS
SERVICE, INC.
By: /s/ John F. Fairbanks
----------------------
Name:John F. Fairbanks
Title:V.P., Chief Financial Officer
<PAGE>
LIST OF EXHIBITS
EXHIBIT A Legal Description of Premises
EXHIBIT B Title Policy
<PAGE>
NEW ENGLAND BUSINESS SERVICE, INC.
NEBS 1997 KEY EMPLOYEE AND ELIGIBLE DIRECTOR
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
-----------------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
1. PURPOSE AND GENERAL MATTERS....................................... 1
---------------------------
(a) Purpose..................................................... 1
(b) General Matters............................................. 2
2. ADMINISTRATION.................................................... 2
- ------------------
3. STOCK............................................................. 3
- ---------
(a) Shares Reserved under the Plan.............................. 3
(b) Status of Shares in Terminated or Surrendered Options........ 4
(c) Adjustment of Shares Reserved under the Plan................. 4
4. ELIGIBILITY....................................................... 5
- ---------------
(a) Employees................................................... 5
(b) Eligible Directors.......................................... 5
5. TERMS AND CONDITIONS OF OPTIONS................................... 6
- -----------------------------------
(a) Number of Shares and Maximum Fair Market Value............... 6
(b) Option Price................................................. 6
(c) Expiration of Options........................................ 7
(d) Exercise..................................................... 7
(e) Waiting Period............................................... 7
(f) Termination of Employment or Eligible Director Status........ 8
(g) Assignability of Options and Stock Appreciation Rights....... 10
(h) Stockholder Rights........................................... 11
(i) Securities Law Compliance and Other Conditions............... 11
(j) Non-Incentive Stock Options.................................. 11
6. STOCK APPRECIATION RIGHTS........................................ 12
- ------------------------------
(a) In General................................................... 12
(b) Committee's Power to Include Appreciation Rights in Option
Grant........................................................ 12
(c) Form of Appreciation Distributions........................... 13
(d) Tax Withholding Required..................................... 13
(e) Committee's Power to Limit Annual Amount of Appreciation
Distributions................................................ 12
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
7. REPLACEMENT OPTIONS............................................. 14
- ------------------------
8. REORGANIZATION.................................................. 14
- -------------------
9. AMENDMENT....................................................... 14
- --------------
10. EFFECTIVE DATE AND TERM OF PLAN................................. 15
- ------------------------------------
(a) Effective Date............................................. 17
(b) Term of Plan............................................... 17
11. CHANGE IN CONTROL............................................... 17
- ----------------------
</TABLE>
-ii-
<PAGE>
Exhibit 10(X)
NEW ENGLAND BUSINESS SERVICE, INC.
NEBS 1997 KEY EMPLOYEE AND ELIGIBLE DIRECTOR
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
(Including Amendment and Restatement of
the NEBS 1990 Key Employee Stock Option and Stock Appreciation Rights Plan
and the NEBS 1994 Key Employee and Eligible Director Stock Option and
Stock Appreciation Rights Plan)
July 25, 1997
The NEBS 1997 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan (the "Plan") amends and restates: (a) the NEBS 1990
Key Employee Stock Option and Stock Appreciation Rights Plan (the "1990 Plan"),
and (b) the NEBS 1994 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan (the "1994 Plan"). All shares reserved but not
allocated for options under the 1990 Plan and the 1994 Plan are available for
issuance under the Plan. Any option granted under the 1990 Plan or the 1994
Plan may be amended by the Committee (as defined below) in accordance with the
terms of the Plan.
1. Purpose and General Matters
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(a) Purpose. The purpose of the Plan is to provide a means whereby New
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England Business Service, Inc. (the "Company"), by granting options to purchase
stock in the Company and stock appreciation rights in connection with certain of
such options, can attract and retain persons of ability as key employees of the
Company or any subsidiary (as defined below) of the Company and as non-employee
directors of the Company. It is also the purpose of the Plan
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to provide a performance incentive to option holders and to encourage stock
ownership in the Company by such key employees and non-employee directors.
(b) General Matters. It is intended that options granted under the
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Plan shall constitute either "incentive stock options," within the meaning of
Section 422 of the Internal Revenue Code of 1986, as from time to time amended
(the "Code"), or "non-incentive stock options," as determined by the Committee
appointed pursuant to Section 2 of the Plan in its sole discretion and indicated
on each form of option agreement (the "Option Agreement"), and the terms of the
Plan and Option Agreements shall be construed accordingly; provided, however,
that non-employee directors shall be granted non-incentive stock options only.
Except as otherwise provided herein, the words parent and subsidiary shall be
interpreted in accordance with Section 422 and Section 424 of the Code.
2. Administration
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The Plan shall be administered and interpreted by a committee (the
"Committee") appointed by (and serving at the pleasure of) the Company's Board
of Directors (the "Board"). The Committee shall consist of not less than two
members of the Board, each of whom while serving as such shall be a person who
in the opinion of counsel to the Company is (i) a "Non-Employee Director," as
such term is used in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), and (ii) an "Outside Director," as such term is
used in regulation 1.162-27(e)(3) under Section 162(m) of the Code. The acts of
a majority of the Committee members present at any meeting at which a quorum
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is present, and any acts approved in writing by all members without a meeting,
shall constitute acts of the Committee.
Subject to the provisions of the Plan, the Committee shall determine with
respect to options granted to employees of the Company or any subsidiary:
(a) the employees to whom options shall be granted;
(b) the number of shares to be optioned to each employee;
(c) whether any option granted hereunder to an employee shall be an
incentive stock option or a non-incentive stock option;
(d) whether or not any option granted hereunder to an employee shall
contain stock appreciation rights (as provided in Section 6 below); and
(e) the terms and conditions of each agreement between the Company and the
employee to whom the Company has granted any option under the Plan.
Consistent with the foregoing, the Committee shall have full authority to
administer the Plan, including authority to interpret and construe any
provisions of the Plan and to adopt rules and regulations for administering the
Plan, as it may deem necessary. Decisions of the Committee shall be final and
binding on all persons who have an interest in the Plan.
No members of the Committee or of the Board shall be held liable for any
action or determination made in good faith with respect to the Plan or any
option or stock appreciation right granted hereunder.
3. Stock
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(a) Shares Reserved under the Plan. Subject to the provisions of
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clause (c) below, the stock which shall be the subject of the options and
appreciation
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rights granted under the Plan shall be shares of the Company's
Common Stock, par value $1 per share (the "Stock"), and the total number of
shares of Stock as to which options may be granted under the Plan shall not
exceed 1,474,559.
(b) Status of Shares in Terminated or Surrendered Options. If any
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outstanding option under the Plan (including any options issued under the 1990
Plan or the 1994 Plan) expires or is terminated for any reason, or is
surrendered pursuant to Section 6 below, then the shares of Stock allocable to
the unexercised or surrendered portion of such option, less any shares
distributed in payment of stock appreciation rights upon such surrender, shall
be added to the remaining number of shares as to which future options may be
granted under the Plan.
(c) Adjustment of Shares Reserved under the Plan. If the Company shall
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combine or split the Stock or shall declare thereon any dividend payable in
shares of Stock, or shall reclassify or take any other action of a similar
nature affecting the Stock, then the number and class of shares of Stock which
may thereafter be optioned (in the aggregate and to any participant) shall be
adjusted accordingly, and, in the case of each option outstanding at the time of
any such action, the number and class of shares which may thereafter be
purchased pursuant to such option and the option price per share (and any stock
appreciation right related thereto) shall be adjusted to such extent as may be
determined by the Board, upon recommendation of the Committee, to be necessary
to maintain unimpaired and unenlarged the rights of the holder of such option,
and any such determination shall be conclusive and binding upon
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such holder. After any such adjustment, the term "Stock" shall be deemed to mean
the Stock as so adjusted.
4. Eligibility
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(a) Employees. All employees of the Company or of any subsidiary
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("Employees") shall be eligible to participate in the Plan and to receive grants
of stock options ("Employee Options") hereunder, except that no Employee shall
be granted an incentive stock option if, at the time the option is granted, such
Employee owns stock of the Company which, taking into account the attribution
rules of Section 424(d) of the Code, possesses more than ten per cent (10%) of
the total combined voting power of all classes of the Company's stock then
outstanding. Officers and directors of the Company or of any subsidiary who are
full-time Employees and who otherwise meet the foregoing terms of eligibility
shall be eligible to participate in the Plan and to receive grants of Employee
Options hereunder.
(b) Eligible Directors. "Eligible Directors" shall mean directors of
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the Company who are directors on the date of grant and who are not Employees.
All options granted under the Plan to Eligible Directors shall be non-incentive
stock options within the meaning of Section 422 of the Code.
Each Eligible Director who is such on the 10th day following the date on
which each Annual Meeting of the Stockholders of the Company (the "Annual
Meeting") is held during the term of the Plan shall on such 10th day be granted
a stock option (a "Director Option") to purchase 1,000 shares of Stock; provided
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that the first such grant to each Eligible Director shall be of an option to
purchase 3,000 shares of Stock.
The date of grant of a Director Option under the Plan to an Eligible
Director shall be the applicable day referred to immediately above.
5. Terms and Conditions of Options
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(a) Number of Shares and Maximum Fair Market Value. Each Option
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Agreement shall state the total number of shares to which it pertains. The
maximum number of shares of Stock with respect to which Employee Options may be
granted under the Plan to any Employee during any single calendar year shall be
100,000 shares. The aggregate fair market value (determined at the time the
option is granted) of the Stock with respect to which incentive stock options
become exercisable for the first time by an individual during any calendar year
(under all the plans of his or her employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000.
(b) Option Price. Each Option Agreement shall state a single option
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price applicable to all of the shares to which it pertains. The option price per
share shall be the fair market value (the "Fair Market Value") of a share of
Stock on the day the option is granted. For purposes of determining the option
price (and for all other valuation purposes under the Plan) the Fair Market
Value of a share of Stock shall be the last sales price per share of the Stock
as reported on the New York Stock Exchange prior to the date on which such
option is granted (or on or prior to the date as to which such other valuation
is made), or, if the Stock is not then listed on the New York Stock Exchange or
if no price has been
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so reported within one week prior to the date of such issuance (or within one
week prior to such other valuation date), such market value shall be as
determined by a principal market maker for the Stock designated by the
Committee.
(c) Expiration of Options. Each Option Agreement shall state the date
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on which it shall expire, which (i) shall be ten (10) years from the date of
grant in the case of Director Options; (ii) shall not be more than ten (10)
years from the date of grant for Employee Options; and (iii) shall otherwise be
as determined by the Committee.
(d) Exercise. Any option may be exercised by the holder thereof (or
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his personal representative if exercised pursuant to clause (iii) of subsection
(f) below) or any transferee permitted by clause (g) below by giving notice in
writing of such exercise to the Chief Financial Officer of the Company during
the period that it is exercisable. The option price for the number of shares
for which the option is exercised shall be due and payable at the time of such
exercise. It shall be payable in United States dollars and may be paid in cash
or by certified check, bank cashier's check, the surrendering of shares of the
Company's Stock (which shall be valued at its Fair Market Value on the date of
surrender in accordance with Section 5(b) of the Plan) or any other means
approved by the Chief Financial Officer. The time of exercise of any option
shall be the time at which such notice of exercise and payment are received by
the Chief Financial Officer.
(e) Waiting Period. Each Director Option shall not be exercisable in
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whole or in part until one (1) year after its date of grant. The Committee may,
in
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its discretion, provide that an Employee Option may not be exercised in whole or
in part for any period or periods of time specified by the Committee. Except as
so provided, any option may be exercised in whole at any time or in part from
time to time during its term, provided that no option may be exercised for less
than ten (10) shares unless the issue of a lesser number is sufficient to
exhaust the option. Notwithstanding anything to the contrary in the Plan or in
any Option Agreement (but subject to the provisions of Section 11 below), the
right to purchase all of the remaining shares under each option granted under
the Plan that is outstanding on the date of occurrence of a Change in Control
(as defined in Section 11 below) of the Company shall vest and become
exercisable immediately upon the occurrence of such Change in Control.
(f) Termination of Employment or Eligible Director Status.
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(i) Except after a Change in Control, each Employee Option held by an
Employee whose employment terminates other than by reason of retirement or death
shall expire upon such cessation of employment. Each Employee Option held by an
Employee whose employment terminates upon or following a Change in Control shall
remain exercisable for a period of time as provided in clause (v) below.
(ii) Subject to clause (iii) of this sub-section (f) and Section 8 below,
if an Employee retires holding an unexpired incentive stock option, such option
shall be exercisable by him or her during the remainder of the term thereof or
during the three (3) months following retirement, whichever period is shorter,
and only as to not more than the number of shares as to which it was exercisable
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immediately prior to retirement. If an Employee retires holding an unexpired
non-incentive stock option, such option shall be exercisable by him or her
during the remainder of the term thereof or for two (2) years following
retirement, whichever period is shorter, and only as to not more than the number
of shares as to which it was exercisable immediately prior to retirement.
(iii) Subject to Section 8 below, if an optionee dies holding an unexpired
Employee or Director Option, such option shall be exercisable by his or her
personal representative as to not more than the number of shares as to which it
was exercisable immediately prior to such optionee's death, during, and only
during, the period beginning with such death and ending with the earlier of the
first anniversary of such death or the expiration date of the option.
(iv) Subject to clause (iii) of this sub-section (f) and Section 8 below,
if an Eligible Director ceases to serve as a director of the Company for any
reason other than death while holding an unexpired Director Option, such option
shall be exercisable by him or her during the remainder of the term thereof or
for two (2) years following the date that he or she ceases to serve as a
director of the Company, whichever period is shorter, and only as to not more
than the number of shares as to which it was exercisable immediately prior to
such date of cessation of service as a director.
(v) Subject to clause (iii) of this sub-section (f) and Section 8 below,
if an Employee's employment terminates upon or within six months following a
Change in Control, any unexpired Employee Option held by such Employee at the
time of his or her termination shall remain exercisable for the remainder of the
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term thereof, or for three months following such termination, whichever period
is shorter.
(g) Assignability of Options and Stock Appreciation Rights. No
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incentive stock option (or stock appreciation right related thereto) shall be
assignable or transferable except by will or by the laws of descent and
distribution as provided in clause (iii) of sub-section (f) above. During the
lifetime of an optionee, any incentive stock option (and stock appreciation
rights related thereto) granted to him or her shall be exercisable only by the
optionee; provided that such option (and related stock appreciation rights)
shall be exercisable on behalf of the optionee by his or her legal
representative if the optionee is mentally incompetent.
Notwithstanding the foregoing, Director Options shall be transferable
(subject to any terms and conditions imposed by the Committee) by the optionee,
either directly or in trust, to one or more members of the optionee's immediate
family, or to a family partnership or other entity for the exclusive benefit of
one or more members of the optionee's immediate family. The Committee may grant
employees non-incentive stock options and related stock appreciation rights
transferable (subject to any terms and conditions imposed by the Committee) by
the optionee, either directly or in trust, to one or more members of the
optionee's immediate family, or to a family partnership or other entity for the
exclusive benefit of one or more members of the optionee's immediate family.
Following any transfer permitted pursuant to this paragraph, of which the
optionee has notified the Committee in writing, such option or stock
appreciation right may be
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exercised by the transferee(s), subject to all terms and conditions of the
Option Agreement. For these purposes, the members of the optionee's immediate
family include only the optionee's: (i) spouse and lineal descendants of spouse;
(ii) lineal descendants and spouses of lineal descendants; (iii) lineal
ancestors and spouses of lineal ancestors; and (iv) siblings, and spouses and
children of such siblings.
(h) Stockholder Rights. No person shall have any rights as a
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stockholder with respect to the shares of Stock subject to any option granted
under the Plan until he or she shall have been issued a stock certificate for
such shares.
(i) Securities Law Compliance and Other Conditions. The Committee may
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include in each Option Agreement such requirements as it may deem necessary or
advisable to assure compliance with all applicable state and federal securities
laws and regulations. Any Option Agreement may contain such other provisions
(not inconsistent with the express provisions of the Plan) as the Committee
shall deem advisable.
(j) Non-Incentive Stock Options. Notwithstanding any other provisions
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of this Plan, the Committee may grant options which in one or more respects do
not meet the requirements for incentive stock options established by Section 422
of the Code. The Committee shall indicate in each Option Agreement whether an
incentive stock option within the meaning of Section 422 of the Code or a non-
incentive stock option is thereby granted. Except as to Director Options and as
otherwise provided in this Plan, the Committee, in its sole discretion, shall
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establish the terms and conditions for each non-incentive stock option which it
grants. Such terms and conditions may, but need not, include some or all of the
provisions of this Plan with respect to incentive stock options. If the
Committee grants an option which in all respects meets the requirements for
incentive stock options it may nonetheless designate such option a non-incentive
stock option in the Option Agreement. No shares of Stock or other compensation
shall be delivered pursuant to the exercise of a non-incentive stock option
(whether by the optionee or a transferee) unless arrangements satisfactory to
the Company's Chief Financial Officer have been made for any required federal,
state or local income tax or other withholdings.
6. Stock Appreciation Rights
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(a) In General. A stock appreciation right is a right granted to the
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holder of an Employee Option granted under this Plan to receive, pursuant to the
terms of the right, an amount payable in shares of Stock, or, at the election of
the Committee, cash or a combination of cash and shares of Stock, in each case
equal to the increase in the value of the shares covered by the option to which
the stock appreciation right is related, all as more particularly set forth
below in this Section 6.
(b) Committee's Power to Include Appreciation Rights in Option Grant.
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Any Employee Option Agreement may provide that the option holder is entitled to
receive, with respect to all or a stated percentage of the shares of Stock
purchasable thereunder from time to time (or any portion thereof) and subject to
the surrender of the option to purchase such shares, an appreciation
distribution
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by the Company in an amount equal to the difference between the Fair Market
Value, on the date of such surrender, of the shares of Stock as to which such
option is surrendered and the aggregate option price for such shares. Such
surrender shall be deemed to have occurred as of the date the Chief Financial
Officer of the Company receives written notice of such surrender.
(c) Form of Appreciation Distributions. If the option is so
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surrendered, in whole or in part, the appreciation distribution to which the
option holder is entitled shall be made in the form of shares of Stock, provided
that the Committee shall be entitled, in its sole discretion, to discharge the
Company's obligation by the payment of cash, or partly by the payment of cash
and partly by the delivery of shares of Stock, so long as the total value of
such payment is equal to the aggregate value of the shares of Stock which the
surrendering optionee is entitled to receive.
(d) Tax Withholding Required. No shares of Stock shall be delivered or
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cash payment made in discharge of a stock appreciation right unless arrangements
satisfactory to the Company's Chief Financial Officer have been made for any
required federal, state or local income tax or other withholdings.
(e) Committee's Power to Limit Annual Amount of Appreciation Distributions.
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Notwithstanding any other provision of the Plan, the Committee may, from time to
time, determine the maximum amount of cash or Stock which may be delivered upon
exercise of stock appreciation rights in any year. The Committee may further
determine that, if the amount to be received by an option holder exercising any
such rights is reduced in any year by reason of this
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limitation, all or a portion of the amount not delivered may be delivered in a
later year or years.
7. Replacement Options
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The Committee may permit the voluntary surrender of all or a portion of any
Employee Option granted under this Plan conditioned upon the granting to the
option holder of a new Employee Option issued under the Plan for the same or a
different number of shares. The new option (which may contain stock
appreciation rights) shall be exercisable at such price, during such period and
in accordance with such other terms and conditions as the Committee may
determine, consistent with the provisions of this Plan, without regard to the
price, period of exercise, or other terms or conditions of the option
surrendered.
8. Reorganization
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In case of any one or more reclassifications, changes, or exchanges of
outstanding shares of the Company's Stock (other than as provided in sub-section
(c) of Section 3), or consolidations of the Company with, or mergers of the
Company into, other corporations, or other recapitalizations or reorganizations
(other than consolidations with a subsidiary in which the Company is the
continuing corporation and which do not result in any reclassifications, change
or exchange of outstanding shares of the Company's Stock), or in case of any one
or more sales or conveyances to another corporation of the property of the
Company as an entirety, or substantially as an entirety (any and all of which
are hereinafter in this section called
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"Reorganizations"), the holder of each option then or thereafter outstanding
shall have the right, upon any subsequent exercise thereof, to acquire the same
kind and amount of securities and property which such holder would then hold if
such holder had exercised such option immediately before the first of such
Reorganizations and continued to hold all securities and property which came to
such holder as a result of that and subsequent Reorganizations, less all
securities and property surrendered or canceled pursuant to any of same (the
rights provided by Section 3(c) and this Section 8 being continuing and
cumulative) except that, notwithstanding any provision of clause (ii), (iii),
(iv) or (v) of subsection (f) of Section 5 to the contrary, the Board shall have
the right, upon no less than thirty (30) days' notice to the holder of each
outstanding option, to terminate the period in which all outstanding options may
be exercised at the time of such Reorganization. Such notice shall be effective
when mailed to such option holder by certified or registered mail addressed to
him or her at the holder's address of record or when delivered in hand to such
option holder. In such event all outstanding options, other than options as to
which one of the events referred to in Sections 5(f)(ii), (iii) or (iv) has
occurred, may be exercised, in whole or in part, and all outstanding options as
to which one of the events referred to in Sections 5(f)(ii), (iii) or (iv) has
occurred may be exercised, but only to the extent therein permitted, and only at
any time prior to such Reorganization. A liquidation shall be deemed a
Reorganization for the foregoing purposes.
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9. Amendment
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The Board may alter, amend, suspend or terminate the Plan at any time and
from time to time and may alter and amend all Option Agreements granted
hereunder, except that any such action requiring shareholder approval under Rule
16b-3 of the Securities and Exchange Act of 1934, the Code or any regulation
thereunder, or the rules of the New York Stock Exchange or any stock exchange on
which the Stock is traded will be subject to shareholder approval or
ratification. No amendment of the Plan or of any Option Agreement may, without
the consent of the holder of an outstanding option granted under the Plan,
adversely affect the rights of such holder under such option.
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10. Effective Date and Term of Plan
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(a) Effective Date. The Plan shall become effective on the date of its
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approval by the Board (the "Effective Date"), but before any options granted
under the Plan shall become exercisable, the Plan must be approved by the
holders of at least a majority of the Company's outstanding voting stock
represented and voting at a duly held meeting at which a quorum is present,
provided the shares voting for approval also constitute at least a majority of
the required quorum. If such stockholder approval is not obtained, then any
options previously granted under the Plan shall terminate and no further options
shall be granted. Subject to such limitation, the Committee may grant Employee
Options under the Plan at any time after the Effective Date and before the date
fixed herein for termination of the Plan and Director Options shall be granted
as provided under the Plan.
(b) Term of Plan. The Plan shall terminate on the 10th anniversary of
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the Effective Date. Any options outstanding under the Plan at the time of its
termination shall continue to have force and effect in accordance with the
provisions set forth in the Option Agreements evidencing such options.
11. Change in Control
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For the purpose of this Plan a "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Sections 13(d)(3) or 14(d)(2) of the Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 35%
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or more of either (i) the then outstanding shares of the Stock or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of the directors (the "Outstanding
Company Voting Securities"); provided, however, that the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise of a conversion
privilege); (B) any acquisition by the Company or by any corporation controlled
by the Company; (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company; or (D) any acquisition by any corporation pursuant to a
consolidation or merger, if, following such consolidation or merger, the
conditions described in clauses (i), (ii), and (iii) of subsection (c) of this
Section are satisfied; or
(b) Individuals who, as of the effective date of the Plan determined
pursuant to Section 10(a) above, constitute the Board (the "Incumbent Board")
ceasing for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to such effective
date whose election, or nomination for election by the Company's shareholders,
was approved by a vote or resolution of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual
or threatened
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solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting securities of such corporation or business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and Outstanding Company
Voting Securities immediately prior to such consolidation or
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merger in substantially the same proportions as their ownership, immediately
prior to such consolidation or merger, of the Stock and/or Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company or such corporation
or other business entity resulting from such consolidation or merger and any
Person beneficially owning, immediately prior to such consolidation or merger,
directly or indirectly, 35% or more of the Stock and/or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 35% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such consolidation or merger or the
combined voting power of the then outstanding voting securities of such
corporation or business entity entitled to vote generally in the election of its
directors (or other persons having the general power to direct the affairs of
such entity) and (iii) at least a majority of the members of the board of
directors (or other group of persons having the general power to direct the
affairs of the corporation or other business entity) resulting from such
consolidation or merger were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such consolidation or merger;
provided that any right to purchase shares of Stock which shall vest by reason
of the action of the Board pursuant to this subsection (c) shall be divested,
with respect to any shares not already purchased by the optionee or his or her
personal representative or transferee, upon (A) the rejection of such agreement
of consolidation or merger by the stockholders of the Company or (B) its
abandonment by either party thereto in accordance with its terms; or
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of
the Company, other than to a corporation or other business entity with respect
to which, following such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation
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or other entity entitled to vote generally in the election of its directors (or
other persons having the general power to direct its affairs) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportions as their ownership,
immediately prior to such sale or other disposition, of the Stock and/or
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 35%
or more of, respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding voting
securities of such corporation or other business entity entitled to vote
generally in the election of directors (or other persons having the general
power to direct its affairs) and (C) at least a majority of the members of the
board of directors (or other group of persons having the general power to direct
the affairs of such corporation or other entity) were members of the Incumbent
Board at the time of the execution of the initial agreement or action of the
Board providing for such sale or other disposition of assets of the Company;
provided that any right to purchase shares of Stock which shall vest by reason
of the action of the Board or the stockholders pursuant to this
-21-
<PAGE>
subsection (d) shall be divested, with respect to any shares not already
purchased by the optionee or his or her personal representative or transferee,
upon the abandonment by the Company of such dissolution, or such sale or other
disposition of assets, as the case may be.
-22-
<PAGE>
EXHIBIT 11
NEW ENGLAND BUSINESS SERVICE, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 28, 1997
-----------------
FULLY
PRIMARY DILUTED
------- -------
<S> <C> <C>
SHARES
Weighted Average Shares of Common Stock................ 13,397 13,397
Add:
Common Stock Equivalents in the form of Stock
Options.............................................. 246 391
------- -------
Weighted Average Common Stock and Common Stock
Equivalents............................................ 13,643 13,788
======= =======
EARNINGS
Earnings per Consolidated Statement of Income.......... $18,649 $18,649
======= =======
Earnings per Share..................................... $ 1.37 $ 1.35
======= =======
</TABLE>
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
- --------------------------- -----------------------------
NEBS Business Forms Limited (Canada)
Shirlite, Ltd. (United Kingdom)
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
New England Business Service, Inc.:
We consent to the incorporation by reference in Registration Statement Nos. 2-
69422, 2-72662, 33-38925, 33-43900 and 33-56227 and 333-32719 of New England
Business Service, Inc. on Form S-8 and Registration Statement No. 333-26499 of
New England Business Service, Inc. on Form S-3 of our report dated August 4,
1997, appearing in this Annual Report on Form 10-K of New England Business
Service, Inc. for the year ended June 28, 1997.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
September 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF NEW ENGLAND BUSINESS SERVICE, INC. AND ITS
SUBSIDIARIES AS OF JUNE 28, 1997 AMD THE RELATED STATEMENTS OF CONSOLIDATED
INCOME AND CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> JUN-28-1997
<CASH> 7,365
<SECURITIES> 469
<RECEIVABLES> 37,498
<ALLOWANCES> (3,351)
<INVENTORY> 11,569
<CURRENT-ASSETS> 68,426
<PP&E> 105,340
<DEPRECIATION> 72,921
<TOTAL-ASSETS> 141,196
<CURRENT-LIABILITIES> 33,327
<BONDS> 0
0
0
<COMMON> 14,616
<OTHER-SE> 65,965
<TOTAL-LIABILITY-AND-EQUITY> 141,196
<SALES> 263,424
<TOTAL-REVENUES> 263,424
<CGS> 94,048
<TOTAL-COSTS> 94,048
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,612
<INTEREST-EXPENSE> 484
<INCOME-PRETAX> 31,380
<INCOME-TAX> 12,731
<INCOME-CONTINUING> 18,649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,649
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.35
</TABLE>
