UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended September 26, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 1-11427
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 04-2942374
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Main Street
Groton, Massachusetts, 01471
----------------------------
(Address of principal executive offices)
(Zip Code)
(978) 448-6111
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 and 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
--- ---
The number of common shares of the Registrant outstanding on October 29, 1998
was 14,374,994.
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- ----------------------------
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
<CAPTION>
(unaudited)
Sept. 26, June 27,
1998 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,073 $ 10,823
Accounts receivable - net 53,833 50,985
Inventories 21,953 20,970
Direct mail advertising and prepaid expenses 16,143 12,289
Deferred income tax benefit 5,993 5,993
-------- --------
Total current assets 99,995 101,060
Property and equipment - net 55,266 51,930
Property held for sale 1,131 1,131
Deferred income tax benefit 2,652 2,652
Goodwill - net 76,047 75,586
Other assets - net 72,826 75,218
-------- --------
TOTAL ASSETS $307,917 $307,577
======== ========
LIABILITIES AND STOCKHOLDERS'EQUITY
Current Liabilities
Accounts payable $ 18,532 $ 16,038
Accrued expenses 35,084 34,639
-------- --------
Total current liabilities 53,616 50,677
Revolving line of credit 134,500 141,000
Deferred income taxes 1,391 1,395
STOCKHOLDERS'EQUITY
Common stock 15,201 15,185
Additional paid-in capital 45,415 44,559
Cumulative foreign currency translation adj. (2,543) (2,337)
Retained earnings 74,575 71,962
-------- --------
Total 132,648 129,369
Less: Treasury stock (14,238) (14,864)
-------- --------
Stockholders' Equity 118,410 114,505
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $307,917 $307,577
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Ended
Sept. 26, Sept. 27,
1998 1997
--------- ---------
<S> <C> <C>
NET SALES $112,686 $ 75,615
OPERATING EXPENSES:
Cost of sales 41,912 29,011
Selling and advertising 43,044 24,856
General and administrative 16,451 12,160
-------- --------
Total operating expenses 101,407 66,027
INCOME FROM OPERATIONS 11,279 9,588
OTHER INCOME/(EXPENSE):
Interest income 27 65
Interest expense (2,179) (477)
Gain on pension settlement - 556
-------- --------
INCOME BEFORE TAXES 9,127 9,732
PROVISION FOR INCOME TAXES 3,649 3,771
-------- --------
NET INCOME 5,478 5,961
-------- --------
OTHER COMPREHENSIVE INCOME, net of tax (124) (8)
-------- --------
COMPREHENSIVE INCOME $ 5,354 $ 5,953
======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share .38 .44
======== ========
Diluted Earnings Per Share .37 .43
======== ========
Dividends .20 .20
======== ========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 14,327 13,646
Plus incremental shares from assumed
conversion of stock options 480 305
-------- --------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 14,807 13,951
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
<CAPTION>
Three Months Ended
Sept. 26, Sept. 27,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,478 $ 5,961
Adjustments to reconcile net income to cash:
Depreciation 3,412 2,616
Amortization 3,050 837
Loss on disposal of asset 31 -
Deferred income taxes 38 (284)
Gain on pension settlement - 556
Exit costs (740) -
Other non-cash items 2,218 326
Changes in assets and liabilities:
Accounts receivable (3,152) (3,592)
Inventories and prepaid expenses (5,479) (4,632)
Accounts payable 2,461 (123)
Accrued expenses (296) 3,623
--------- ---------
Net cash provided by operating activities 7,021 5,288
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (6,383) (2,658)
Acquisition of business lines - net of cash acquired (164) -
Other assets (32) 418
--------- ---------
Net cash used in investing activities (6,579) (2,240)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt (17,000) (5,000)
Proceeds from credit line 10,500 2,000
Proceeds from issuing common stock 257 844
Purchase of treasury stock (58) -
Dividends paid (2,864) (2,728)
--------- ---------
Net cash used in financing activities (9,165) (4,884)
EFFECT OF EXCHANGE RATE ON CASH (27) (35)
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,750) (1,871)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,823 7,365
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,073 $ 5,494
========= =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation/Accounting Policies
- --------------------------------------------
The consolidated financial statements contained in this report are unaudited
(except for June 27, 1998 amounts) but reflect all adjustments, consisting only
of normal recurring adjustments, which are, in the opinion of management,
necessary for a fair statement of the results of the interim periods reflected.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to applicable rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements
included herein should be read in conjunction with the financial statements and
notes thereto, and the Independent Auditors' Report in the Company's Annual
Report on Form 10-K for the fiscal year ended June 27, 1998. Reference is made
to the accounting policies of the Company described in the notes to the
consolidated financial statements in the Company's Annual Report on Form 10-K
for the fiscal year ended June 27, 1998. The Company has consistently followed
those policies in preparing this report. The results of operations for the
interim period reported herein are not necessarily indicative of results to be
expected for the full year.
2. Acquisitions
- ----------------
On December 23, 1997, the Company acquired all of the outstanding common
stock of Rapidforms, Inc. ("Rapidforms") for consideration of approximately
$82,136,000 in cash (net of cash acquired). As part of the purchase accounting
for the Rapidforms acquisition and included in the allocation of the
acquisition cost, a liability of $4,000,000 was recorded to cover the
anticipated costs related to a plan to close redundant Rapidforms'
manufacturing and warehouse facilities and to reduce manufacturing personnel.
Approximately $3,700,000 of the liability is allocated for employee termination
benefits and approximately $300,000 for termination of certain contractual
obligations. The liability associated with the Rapidforms integration plan
remaining as of September 26, 1998 was $2,836,000.
On June 3, 1998, the Company acquired all of the outstanding common stock of
McBee Systems, Inc. and all of the assets of McBee Systems of Canada, Inc.
(collectively "McBee") for consideration of approximately $48,529,000 in cash
(net of cash acquired), and 382,352 shares of Company common stock valued at
approximately $12,600,000, for an aggregate purchase price of $61,129,000.
Purchase price allocations and useful lives are still subject to final
valuations. The Company does not believe these initial allocations will change
materially.
As part of the purchase accounting for the McBee acquisition and included in
the allocation of the acquisition costs, a liability of $2,642,000 was recorded
to cover anticipated costs (primarily employee termination benefits) related to
a plan to close redundant McBee manufacturing and warehouse facilities and to
reduce manufacturing personnel. As of September 26, 1998, the remaining McBee
integration liability was $2,594,000.
<PAGE>
3. Inventories
- --------------
Inventories are carried at the lower of first-in, first-out cost or market.
Inventories at September 26, 1998 and September 27, 1997 consisted of:
<TABLE>
<CAPTION>
(unaudited)
Sept. 26, June 28,
1998 1998
----------- -----------
<S> <C> <C>
Raw paper $ 1,969,000 $ 1,622,000
Business forms, related office products
and shipping, warehouse and packaging
supplies 19,984,000 19,348,000
---------- -----------
Total $21,953,000 $20,970,000
=========== ===========
</TABLE>
4.Financial Instruments
- -------------------------------
In order to effectively fix the interest rate on a portion of the debt
outstanding under the revolving line of credit, the Company has entered into
interest rate swap agreements with several of the banks party to the credit
agreement. These swap agreements contain notional principal amounts and other
terms determined with respect to the Company's forecasts of future cash flows
and borrowing requirements. At September 26, 1998, the notional principal
amount outstanding of the interest rate swap agreements totaled $115 million
with a fair value of $(1,651,000).
In order to minimize the Company's exposure to foreign currency fluctuations
with respect to intercompany loans to foreign subsidiaries and affiliates, the
Company has entered into short-term forward exchange rate contracts with a
major commercial bank in currency amounts directly corresponding to the short-
term intercompany loan amounts. At September 26, 1998, the Company had
outstanding forward exchange rate contracts for $1.9 million worth of Pounds
Sterling and $91,000 worth of French Francs. The fair value of these contracts
is nominal, and approximated the carrying value.
As of September 26, 1998 and June 27, 1998, the carrying value of all other
financial instruments approximates fair value.
<PAGE>
5.New Accounting Pronouncements
- -------------------------------
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." The
Company has adopted this Statement in the current fiscal year. In the current
period approximately $350,000 in costs which previously would have been
expensed have been capitalized under the caption "Property and equipment, net."
The Company also implemented the disclosure standard SFAS No. 130 "Reporting
Comprehensive Income" in the first quarter of fiscal 1999. The AICPA has also
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." The policies promulgated by this statement had previously been
followed by the Company and thus its implementation will not impact the
financial statements.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131 "Disclosures about Segments of an Enterprise and Related Information." In
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits." In June, 1998, the FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The former two statements are considered to be "disclosure only" standards and
are not anticipated to have a material impact on the consolidated financial
statements (these will be implemented in fiscal 1999). The latter standard
does have a direct impact on the consolidated financial statements and will be
adopted by the Company in fiscal year 1999. Yet, in the Company's situation,
such impact is not considered likely to be material in nature.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
- -------------------------------------------------------------------
and Results of Operations
- ---------------------------------
Overview
- --------
New England Business Service, Inc. (the "Company"), a Delaware corporation
founded in 1952, incorporated in Massachusetts in 1956 and reincorporated in
Delaware in 1986, designs, produces and distributes business forms, checks,
envelopes, labels, greeting cards, signs, stationery and related printed
products and distributes packaging, shipping and warehouse supplies, software,
work clothing and other business products through mail order, direct sales,
telesales, dealers and the internet to small businesses throughout the United
States, Canada, the United Kingdom and France.
Any sentence followed by an asterisk (*) in this section constitutes a
forward-looking statement which 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."
Results of Operations
- ---------------------
Net sales increased $37.1 million or 49% to $112.7 million in the first
quarter of fiscal 1999 from $75.6 million in last year's first quarter. The
sales increase was composed of approximately a $35.0 million or 46.2% increase
associated with the acquisition of Rapidforms, Inc. ("Rapidforms"), McBee
Systems, Inc. and all of the assets of McBee Systems of Canada, Inc.
(collectively "McBee") during fiscal year 1998, and a $2.1 million or 2.8%
increase in sales of the Company's other business units. McBee and Rapidforms
were acquired subsequent to the end of last year's first quarter.
For the first quarter of fiscal 1999, cost of sales decreased to 37.2% of
sales from 38.4% in last year's comparable period. This decrease was due
primarily to a non-recurring increase in freight costs in the previous year's
quarter as a result of the UPS strike, an increase in revenue generated by
higher margin products associated with the recent acquisition of McBee and
increased efficiencies in the Company's U.S and Canadian operating units
primarily selling business forms and related printed products. Cost of sales as
a percent of sales is anticipated to decline slightly during the year due to
anticipated efficiency improvements resulting from manufacturing integration
activities with recently acquired companies.*
<PAGE
Selling and advertising expense increased to 38.2% of sales in the first
quarter of fiscal 1999 from 32.9% of sales in last year's comparable quarter.
The increase was due primarily to the fact that the direct sales force employed
by McBee generates a higher selling and advertising expense as a percentage of
sales than in the Company's other businesses. In addition, amortization
expense related to the intangible assets of acquisitions climbed from 1.1% of
sales in the first quarter of fiscal year 1998 to 2.6% of sales in the first
quarter of fiscal 1999. Selling and advertising expense as a percentage of
sales is expected to remain consistent with the first quarter for the remainder
of the fiscal year.*
General and administrative expense decreased to 14.6% of sales in the first
quarter of fiscal 1999 from 16.1% in last year's comparable quarter. The
decline was principally the result of a lower ratio of general and
administrative expense to sales associated with the Company's recently acquired
businesses. Even with the decline above, during the first quarter, the Company
continued to increase spending levels associated with its program to re-
engineer financial and operational information systems. General and
administrative expenses as a percent of sales is expected to remain consistent
with the first quarter throughout the remainder of the fiscal year.*
Interest expense increased to 1.9% of sales in the first quarter of fiscal
1999 from .6% of sales in the prior year's comparable quarter. This increase
in expense was attributable to debt incurred to finance the acquisitions of
Rapidforms and McBee during fiscal year 1998.
The provision for income taxes as a percentage of pre-tax income increased to
40% in the first quarter of 1999 from 38.7% in the comparable quarter in fiscal
year 1998 due to changes in effective state tax rates as a result of a change
in the mix of businesses in various states.
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." The
Company has adopted this Statement in the current fiscal year. In the current
period approximately $350,000 in costs which previously would have been
expensed have been capitalized under the caption "Property and equipment, net."
The Company also implemented the disclosure standard SFAS No. 130 "Reporting
Comprehensive Income" in the first quarter of fiscal 1999. The AICPA has also
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." The policies promulgated by this statement had previously been
followed by the Company and thus its implementation will not impact the
financial statements.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131 "Disclosures about Segments of an Enterprise and Related Information." In
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits." In June, 1998, the FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The former two statements are considered to be "disclosure only" standards and
are not anticipated to have a material impact on the consolidated financial
statements (these will be implemented in fiscal 1999). The latter standard
does have a direct impact on the consolidated financial statements and will be
adopted by the Company in fiscal year 1999. Yet, in the Company's situation,
such impact is not considered likely to be material in nature.
<PAGE
YEAR 2000
- ---------
During fiscal year 1996, the Company established a five year plan to upgrade
the majority of its critical operational information systems. This information
systems reengineering plan was developed to enhance system performance and to
address Year 2000 issues. The Company has experienced delays in certain facets
of the reengineering effort, and as a result has modified its Year 2000 plan to
focus on system remediation rather than system replacement. The majority of the
Company's operational information systems have been inventoried and assessed
for Year 2000 compliance, and approximately 40% of the Company's mission
critical systems have been remediated as of September 26, 1998. The Company
believes, based on available information, that it will be able to complete the
remediation of all critical operating systems by June 1999, which is expected
to leave an appropriate amount of time prior to the advent of the Year 2000 to
perform detailed system testing and compliance verification.*
In addition, the Company is communicating with key suppliers, vendors and
business partners in order to assess their ability to maintain normal
operations in the Year 2000. Such key suppliers include, but are not limited
to, MCI WorldCom, R.R. Donnelley and Sons, Appleton Papers, and United Parcel
Service of America, Inc. To the extent that the Company is not satisfied with
the status of a vendor's Year 2000 compliance or remediation plans, the Company
expects to develop and implement appropriate contingency plans.* Such
contingency plans will include the development of alternative sources for the
product or service provided by the non-compliant vendor. In addition, the
Company will monitor the Year 2000 activities of U.S., Canadian and U.K. postal
services and pertinent local and regional utilities. However, due to the lack
of alternative sources for such services the Company can make no assurances
that Year 2000 related disruptions in postal, electrical or similar services
would not have a material adverse effect on the Company's financial performance
or long-term prospects.
The Company has also inventoried and assessed the majority of the systems
associated with the functioning of its plant, property and equipment. The
date-related issues associated with the proper functioning of such assets are
insignificant and are not expected to represent a material risk to the
Company.* Further, the Company has approximately 1.9 million active
customers, and the failure of any one customer due to a Year 2000 issue would
not have a material adverse impact on the Company's financial performance or
long-term prospects.*
The Company's cash outlays for capital improvements and period expenses
associated with the information systems reengineering project and for Year
2000 compliance were projected to cumulatively total $21 million during fiscal
years 1997 through 2000, of which over one-half has been spent as of September
26, 1998. Due to the modification of the Company's plans to focus on
remediation rather than replacement, an additional $6 million has been
allocated in the Company plans for remediation in fiscal year 1999 and a
similar amount is likely to be allocated in fiscal year 2000. While the Year
2000 issue involves additional costs to the Company, the Company believes,
based on available information, that it will be able to manage the Year 2000
transition of its internal systems without having any material adverse effect
on its business operations or financial prospects.*
<PAGE
For a further discussion of the risks and uncertainties associated with the
Year 2000 issue and the Company's reliance on individual third-party vendors to
provide raw materials and services critical to the Company's operation, see
"Forward Looking Information and Risk Factors to Future Performance" included
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the three months ended September
26, 1998 was $ 7.0 million and represented an increase of $1.7 million from the
$5.3 million provided in the comparable period last year. The increase in
operating cash flow was primarily the result of an increase in non-cash
amortization charges between the comparable periods, offset by increased
investment in working capital balances.
Working capital at September 26, 1998 amounted to $46.4 million, including
$2.1 million of cash and short term investments. At June 27, 1998, working
capital amounted to $50.4 million, including cash and short term investments of
$10.8 million. The $4.0 million decrease in working capital during the quarter
reflected use of the cash balances available at the end of the year to pay off
long-term debt shortly after June 27, 1998. The $2.1 million of cash at
September 26, 1998 is more reflective of the balance the Company intends to
maintain to support operations on an ongoing basis.*
Capital expenditures for the three months ended September 26, 1998 were $6.4
million versus the $2.7 million expended during last year's comparable period.
Capital expenditures in the first quarters of fiscal 1999 and fiscal 1998
included significant expenditures for information systems infrastructure,
including an upgrade to the Company's mainframe computer in 1998. In addition
to increased expenditures related to a plan to upgrade the Company's
information systems, the Company constructed a $1.7 million addition to their
facilities in Midland, Ontario in the first quarter of fiscal 1999.
Significant upgrades to workspaces and furniture in the Groton, Massachusetts
facility also took place during the first quarter in order to accommodate more
employees at that location. The Company anticipates that total capital outlays
will approximate $17.0 million in fiscal year 1999, an increase of $3.7 million
or 28% over the $13.3 million expended during fiscal year 1998.*
In addition to its present cash and short-term 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 acquisitions in 1998, the Company amended on several occasions the terms of
its committed, unsecured, revolving line of credit agreement, amending the
credit agreement in May, 1998 to increase the total committed line to $165
million. At September 26, 1998, the Company had $134.5 million of outstanding
debt under this credit facility. 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.
<PAGE
In order to effectively fix the interest rate on a portion of the debt
outstanding under the revolving line of credit, the Company has entered into
interest rate swap agreements with several of the banks party to the credit
agreement. These swap agreements contain notional principal amounts and other
terms determined with respect to the Company's forecasts of future cash flows
and borrowing requirements. At September 26, 1998, the notional principal
amount outstanding of the interest rate swap agreements totaled $115 million.
In order to minimize the Company's exposure to foreign currency fluctuations
with respect to intercompany loans to foreign subsidiaries and affiliates, the
Company has entered into short-term forward exchange rate contracts with a
major commercial bank in currency amounts directly corresponding to the short-
term intercompany loan amounts. At September 26, 1998, the Company had
outstanding forward exchange rate contracts for $1.9 million worth of Pounds
Sterling and $91,000 worth of French Francs.
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 during fiscal year 1999.* However, the Company may pursue
additional acquisitions from time to time which would likely be funded through
the use of available cash, the issuance of stock, the obtaining of additional
credit, or any combination thereof.*
<PAGE>
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 this Quarterly
Report on Form 10-Q, 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
important factors including but not limited to those 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, Year 2000 risks to computer 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, checks,
stationery and business supplies to small businesses. Over the course of the
past decade, providers of business forms, checks, 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
can be given that competition will not have an adverse effect on the Company's
business. In addition, if any of the Company's competitors were to seek to
gain or retain market share by reducing prices or increasing promotional
discounting, the Company could be compelled to reduce its prices or match the
discounts and thereby reduce its gross margin and profitability.
Economic Cycles; Variability of Performance.
The Company's standardized forms and check business accounts for a 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.
<PAGE>
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
to-date proven to be relatively slow adopters of new technology which has
minimized the adverse impact of these technological trends. However, the
Company can 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 30% 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, checks, stationery and supplies marketplace, no assurance can 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.
<PAGE
Customer Preferences; Investment Requirements & Sales Risk.
The Company's core business is the direct marketing, manufacturing and
distribution of standardized forms, checks, 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 required to sell, compose, print and
distribute custom and full-color products. This effort includes installation
of an integrated and flexible information system architecture and the
reengineering of many of the Company's basic business functions. In addition,
the Company expects to continue to invest in its direct sales, 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
reengineering 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.
<PAGE>
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) enactment
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, of a material nature, or similar governmental regulation is
pending or imminent, it can 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. 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.
<PAGE
Computer Systems; Year 2000 Impact
The Company and its vendors have become increasingly reliant on computer
systems to process transactions and to provide relevant business information.
The majority of computer systems designed prior to the mid-1990s are
susceptible to a well publicized problem associated with an inability to
process date related information beyond the Year 2000. Without proactive
modifications to routines and programs, many systems of the Company and its
vendors could be rendered useless as early as June of 1999. The Company has
created a comprehensive plan to address the Year 2000 issue with respect to
both internal systems and to systems employed by critical vendors. However,
the Company can make no assurance that all Year 2000 risks to Company and
critical vendor systems can be identified and successfully negated through
modification of existing programs or other means prior to June of 1999. In the
event that any Year 2000 program deficiencies remain undetected, or in the
event that any programming modifications do not adequately address the Year
2000 issues, the Company or its vendors could experience critical operating
system failures. Any such operating system failures could have a material
adverse impact on the Company's financial performance and long-term prospects.
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,
governmental postal services for the delivery of marketing materials and in
some countries, customer packages, MCI WorldCom 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.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
The Company is exposed to a number of market risks, primarily the effects
of changes in foreign currency exchange rates and interest rates. Investments
in and loans and advances to foreign subsidiaries and branches, and their
resultant operations, denominated in foreign currencies, create exposures to
changes in exchange rates. The Company's utilization of its revolving line of
credit creates an exposure to changes in interest rates. The effect of changes
in exchange rates and interest rates on the Company's earnings generally has
been small relative to other factors that also affect earnings, such as
business unit sales and operating margins. For more information on these
market risks and financial exposures, see Note 1 and Note 5 of the Notes to
Consolidated Financial Statements included in the Annual Report on Form 10-K
for the year ended June 27, 1998. The Company does not hold or issue financial
instruments for trading, profit or speculative purposes.
In order to minimize the Company's exposure to foreign currency fluctuations
with respect to the short-term intercompany loans created to fund the
operating cash requirements of the Company's European operations (see Note 2
in the Notes to Consolidated Financial Statements included in the Annual Report
on Form 10-K for the year ended June 27, 1998), the Company has entered into
forward exchange rate contracts for the amount of the loans and associated
interest. The currencies hedged are the British pound and the French franc.
While there is no specified repayment date for the loans, the forward exchange
rate contracts are of limited duration and are replaced periodically as they
mature.
In order to effectively convert the interest rate of a portion of the
Company's debt from a Eurodollar based floating rate to a fixed rate, the
company has entered into interest rate swap agreements with major
commercial banks. Although the Company is exposed to credit and market risk in
the event of future nonperformance by any of the banks, management has no
reason to believe that such an event will occur.
Upon reviewing its derivatives and other foreign currency and interest rate
instruments, based on historical foreign currency rate movements and the fair
value of market-rate sensitive instruments at year-end, the Company does not
believe that near term changes in foreign currency or interest rates will have
a material impact on its future earnings, fair values or cash flows.
<PAGE
PART II - OTHER INFORMATION
- ---------------------------
Item 1. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
Item 5. OTHER INFORMATION
- --------------------------
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits
Exhibit No. Description
---------- -----------
3.2 By-Laws of the Registrant, as amended.
10.1 NEBS 1997 Key Employee and Eligible Director Stock Option
and Stock Appreciation Rights Plan dated July 25, 1997,
amended through October 23, 1998 (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).
10.2 New England Business Service, Inc. Stock Compensation Plan
dated July 25, 1994, amended through October 23, 1998.
10.3 Supplemental Retirement Plan for Executive Employees of
New England Business Service, Inc. effective January 4,
1999
11 Statement re: computation of per share earnings.
27 Financial Data Schedule
b. Reports on Form 8-K.
Not applicable
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
(Registrant)
November 10, 1998 /s/Daniel M. Junius
- ----------------- --------------------
Date Daniel M. Junius
Senior Vice President-Chief
Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE>
Exhibit 11
----------
New England Business Service, Inc.
Statement Re Computation of Per Share Earnings
(In Thousands Except Per Share Data)
(unaudited)
<CAPTION>
Three Months Ended
Sept. 26, Sept. 27,
1998 1997
-------- --------
<S> <C> <C>
Net Income (a) $5,478 $5,961
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (b) 14,327 13,646
Plus incremental shares from assumed
conversion of stock options 480 305
-------- --------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING(c) 14,807 13,951
======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share (a)/(b) $ .38 $ .44
======== ========
Diluted Earnings Per Share (a)/(c) $ .37 $ .43
======== ========
</TABLE>
<TABLE> <S> <C>
<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 SEPTEMBER 26, 1998 AND 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> 3-MOS
<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> SEP-26-1998
<CASH> 2,073
<SECURITIES> 0
<RECEIVABLES> 57,854
<ALLOWANCES> 4,021
<INVENTORY> 21,953
<CURRENT-ASSETS> 99,995
<PP&E> 137,615
<DEPRECIATION> 82,349
<TOTAL-ASSETS> 307,917
<CURRENT-LIABILITIES> 53,616
<BONDS> 0
0
0
<COMMON> 15,201
<OTHER-SE> 103,209
<TOTAL-LIABILITY-AND-EQUITY> 307,917
<SALES> 112,686
<TOTAL-REVENUES> 112,686
<CGS> 41,912
<TOTAL-COSTS> 41,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 919
<INTEREST-EXPENSE> 2,179
<INCOME-PRETAX> 9,127
<INCOME-TAX> 3,649
<INCOME-CONTINUING> 5,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,478
<EPS-PRIMARY> .38
<EPS-DILUTED> .37
</TABLE>
AMENDED AND RESTATED
(Through October 23, 1998)
BY-LAWS
OF
NEW ENGLAND BUSINESS SERVICE, INC.
ARTICLE ONE
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders shall be
held on the fourth Friday of October in each year (or if that be a legal
holiday in the place where the meeting is to be held, on the next succeeding
full business day), or on such later date to which the Directors or the
Chairman of the Board or the President shall postpone such meeting, at the
hour fixed by the Directors or the Chairman of the Board or the President
and stated in the notice of the meeting. The purposes for which the annual
meeting is to be held, in addition to those prescribed by law, by the
Certificate of Incorporation or by these By-laws, may be specified by the
Directors or the Chairman of the Board or the President. If no annual
meeting is held in accordance with the foregoing provisions, the Directors
shall cause the meeting to be held as soon thereafter as convenient.
Section 2. Special Meetings. Special meetings of the stockholder may be
called by the Chairman of the Board, the President or the Directors. No
call of a special meeting of the stockholders shall be required if such
notice of the meeting shall have been waived in writing (including a
telegram) by every stockholder entitled to notice thereof, or by his
attorney thereunto authorized.
Section 3. Place of Meetings. All meetings of stockholders shall be held
at the principal office of the corporation unless a different place (within
the United States) is fixed by the Directors or the Chairman of the Board or
the President and stated in the notice of the meeting.
Section 4. Notices. Except as otherwise provided by law, notice of all
meetings of stockholders shall be given as follows, to wit: A written
notice, stating the place, day and hour thereof, shall be given by the
Secretary (or person or persons calling the meeting), not less than 10 nor
more than sixty days before the meeting, to each stockholder entitled to
vote thereat and to each stockholder who, by law, the Certificate of
Incorporation, or these By-laws, is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by
mailing it postage prepaid, and addressed to such stockholder at his address
as it appears upon the books of the corporation. Notices of all meetings of
stockholders shall state the purposes for which the meetings are called. No
notice need be given to any stockholder if a written waiver
<PAGE>
of notice, executed before or after the meeting by the stockholder or his
attorney thereunto authorized, is filed with the records of the meeting.
Section 5. Quorum. At any meeting of stockholders a quorum for the
transaction of business shall consist of one or more individuals appearing
in person and/or as proxies and owning and/or representing a majority of the
shares of the corporation then outstanding and entitled to vote, provided
that in the absence of a quorum, the stockholders may, by majority vote,
adjourn the meeting from time to time until a quorum shall be present.
Section 6. Voting and Proxies. Each stockholder shall have one vote for
each share of stock entitled to vote, and a proportionate vote for any
fractional share entitled to vote, held by him of record according to the
records of the corporation, unless otherwise provided by the Certificate of
Incorporation or by resolution or resolutions of the Board of Directors
establishing rights of Preferred Stock as provided for in the Certificate of
Incorporation. Stockholders may vote either in person or by written proxy
dated not more than three years before the meeting named therein, unless the
proxy provides for a longer period. Proxies shall be filed with the
Secretary before being voted at any meeting or any adjournment thereof.
Every proxy must be signed by the stockholder or by his attorney-in-fact. A
proxy purporting to be executed by or on behalf of a stockholder shall be
deemed valid unless challenged at or prior to its exercise.
Section 7. Action at Meeting. When a quorum is present, the action of the
stockholders on any matter properly brought before such meeting shall be
decided by the holders of a majority of the stock present or represented and
entitled to vote and voting on such matter, except where a different vote is
required by law, the Certificate of Incorporation or these By-laws. Any
election by stockholders shall be determined by a majority of the votes cast
by the stockholders entitled to vote at the election. No ballot shall be
required for such election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
Section 8. Special Action. Any action to be taken by the stockholders may
be taken without a meeting if all stockholders entitled to vote on the
matter consent to the action by a writing filed with the records of the
meetings of stockholders. Such consent shall be treated for all purposes as
a vote at a meeting.
Section 9. Record Date. The Directors may fix in advance a time which
shall be not more than sixty days prior to (a) the date of any meeting of
stockholders and not less than ten days prior to such meeting, (b) the date
for the payment of any dividend or the making of any distribution to
stockholders, or (c) the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record
date for determining the stockholders having the right to notice of and to
vote at such meeting and any adjournment thereof, the right to receive such
dividend or distribution, or the right to give consent or dissent. The Board
of Directors may fix a new record date, or confirm an existing record date,
for the purpose of determining the stockholders entitled to vote at any
adjourned or postponed meeting. In each such case only stockholders of
<PAGE> 2
record on such record date shall have such right, notwithstanding any
transfer of stock on the books of the corporation after the record date.
Section 10. Stockholder List. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane
to the meeting, during ordinary business hours, for a period of at least ten
days prior to the meeting, either at a place within the city or other
municipality or community where the meeting is to be held, which place shall
be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by this Section or the books of the
corporation, or to vote at any meeting of stockholders.
ARTICLE TWO
Directors
Section 1. Powers. The Board of Directors, subject to any action at any
time taken by such stockholders as then have the right to vote, shall have
the entire charge, control and management of the corporation, its property
and business and may exercise all or any of its power.
Section 2. Election. A Board of Directors of such number, not less than 3,
nor more than 9, as shall be fixed by the stockholders, shall be elected by
the stockholders at the annual meeting.
Section 3. Vacancies. Any vacancy at any time existing in the Board may be
filled by the Board at any meeting. The stockholders having voting power
may, at a special meeting called at least in part for the purpose, choose a
successor to a Director whose office is vacant, and the person so chosen
shall displace any successor chosen by the Directors.
Section 4. Enlargement of the Board. The number of the Board of Directors
may be increased and one or more additional Directors elected at any special
meeting of the stockholders, called at least in part for the purpose, or by
the Directors by vote of a majority of the Directors then in office.
Section 5. Tenure. Except as otherwise provided by law, by the Certificate
of Incorporation or by these By-laws, Directors shall hold office until the
next annual meeting of stockholders and thereafter until their successors
are chosen and qualified. Any Director may resign by delivering his written
resignation to the corporation at its
<PAGE> 3
principal office or to the Chairman of the Board, the President or the
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some
other event.
Section 6. Removal. A Director may be removed from office with or without
cause by vote of a majority of the stockholders entitled to vote in the
election of Directors.
Section 7. Annual Meetings. Immediately after each annual meeting of
stockholders and at the place thereof, if a quorum of the Directors elected
at such meeting is present, there shall be a meeting of the Directors
without notice; but if such a quorum of the Directors elected thereat is not
present at such meeting, or if present does not proceed immediately
thereafter to hold a meeting of the Directors, the annual meeting of the
Directors shall be called in the manner hereinafter provided with respect to
the call of special meetings of Directors.
Section 8. Regular Meetings. Regular meetings of the Directors may be held
at such times and places as shall from time to time be fixed by resolution
of the Board and no notice need be given of regular meetings held at times
and places so fixed, provided however, that any resolution relating to the
holding of regular meetings shall remain in force only until the next annual
meeting of stockholders, and that if at any meeting of Directors at which a
resolution is adopted fixing the times or place or places for any regular
meetings any Director is absent, no meeting shall be held pursuant to such
resolution until either each such absent Director has in writing or by
telegram approved the resolution or seven days have elapsed after a copy of
the resolution certified by the Secretary has been mailed postage prepaid,
addressed to each such absent Director at his last known home or business
address.
Section 9. Special Meetings. Special meetings of the Directors may be
called by the Chairman of the Board, the President, the Treasurer or any two
Directors and shall be held at the place designated in the call thereof.
Section 10. Notices. Notices of any special meeting of the Directors shall
be given by the Secretary to each Director, by mailing to him, postage
prepaid, and addressed to him at his address as registered on the books of
the corporation, or if not so registered at his last known home or business
address, a written notice of such meeting at least four days before the
meeting or by delivering such notice to him at least forty-eight hours
before the meeting or by sending to him at least forty-eight hours before
the meeting, by prepaid telegram addressed to him at such address, notice of
such meeting. If the Secretary refuses or neglects for more than twenty-
four hours after receipt of the call to give notice of such special meeting,
or if the office of the Secretary is vacant or the Secretary is
incapacitated, such notice may be given by the officer or one of the
Directors calling the meeting. Notice need not be given to any Director if
a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Director who attends the
meeting without protesting prior thereto
<PAGE> 4
or at its commencement the lack of notice to him. A notice or waiver of
notice of a Directors' meeting need not specify the purpose of the meeting.
Section 11. Quorum. At any meeting of the Directors a majority of the
number of Directors required to constitute a full Board, as fixed in or
determined pursuant to these By-laws as then in effect, shall constitute a
quorum for the transaction of business; provided always that any number of
Directors (whether one or more and whether or not constituting a quorum)
present at any meeting or at any adjourned meeting may make any reasonable
adjournment thereof.
Section 12. Action at Meeting. At any meeting of the Directors at which a
quorum is present, the action of the Directors on any matter brought before
the meeting shall be decided by the vote of a majority of those present and
voting, unless a different vote is required by law, the Certificate of
Incorporation, or these By-laws.
Section 13. Special Action. Any action by the Directors may be taken
without a meeting if a written consent thereto is signed by all the
Directors and filed with the records of the Directors' meetings. Such
consent shall be treated as a vote of the Directors for all purposes.
Section 14. Committees. The Directors may, by vote of a majority of the
number of Directors required to constitute a full Board as fixed in or
determined pursuant to these By-laws as then in effect, elect from their
number an executive or other committees and may by like vote delegate
thereto some or all of their powers except those which by law, the
Certificate of Incorporation or these By-laws they are prohibited from
delegating. Except as the Directors may otherwise determine, any such
committee may make rules for the conduct of its business, but unless
otherwise provided by the Directors or in such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these By-
laws for the Directors.
ARTICLE THREE
Officers
Section 1. Enumeration. The officers of the corporation shall be a
President, a Treasurer, a Secretary, and such Vice Presidents, Assistant
Treasurers, Assistant Secretaries, and other officers as may from time to
time be determined by the Directors.
Section 2. Election. The President, Treasurer and Secretary shall be
elected annually by the Directors at their first meeting following the
annual meeting of stockholders. Other officers may be chosen by the
Directors at such meeting or at any other meeting.
Section 3. Qualification. The President may, but need not be, a Director.
No officer need be a stockholder. Any two or more offices may be held by
the same person, provided that the President and the Secretary shall not be
the same person. Any officer
<PAGE> 5
may be required by the Directors to give bond for the faithful performance
of his duties to the corporation in such amount and with such sureties as
the Directors may determine.
Section 4. Tenure. Except as otherwise provided by law, by the Certificate
of Incorporation or by these By-laws, the President, Treasurer and Secretary
shall hold office until the first meeting of the Directors following the
annual meeting of stockholders, and thereafter until his successor is chosen
and qualified. Other officers shall hold office until the first meeting of
the Directors following the annual meeting of stockholders unless a shorter
term is specified in the vote choosing or appointing them. Any officer may
resign by delivering his written resignation to the corporation at its
principal office or to the Chairman of the Board, the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some
other event.
Section 5. Removal. The Directors may remove any officer with or without
cause by a vote of a majority of the entire number of Directors then in
office, provided, that an officer may be removed for cause only after
reasonable notice and opportunity to be heard by the Board of Directors
prior to action thereon.
Section 6. Chairman of the Board. If the Directors shall appoint a
Chairman of the Board, he shall preside at all meetings of the Board and of
the stockholders at which he shall be present. In the absence or disability
of the President, the powers and duties of the President shall be exercised
and performed by the Chairman of the Board. He shall, subject to the Board
of Directors, be responsible for the long-range planning of the corporation.
He shall perform such duties and have such powers additional to the
foregoing as the Board shall from time to time designate.
Section 7. President. In the absence or disability of the Chairman of the
Board, the President shall, when present, preside at all meetings of the
stockholders and of the Directors. Except as otherwise expressly provided
by these By-laws or by action of the Board, it shall be the duty of the
President, and he shall have the power, to see that all orders and
resolutions of the Directors are carried into effect. The President, as
soon as reasonably possible after the close of each fiscal year, shall
submit to the Directors a report of the operations of the corporation for
such year and a statement of its affairs and shall from time to time report
to the Directors all matters within his knowledge which the interests of the
corporation may require to be brought to its notice. The President shall
perform such duties and have such powers additional to the foregoing as the
Directors shall designate.
Section 8. Vice Presidents. Each Vice President shall have such powers and
perform such duties as the Directors shall from time to time designate.
Section 9. Treasurer. The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositaries as shall be designated by the
Directors or in the absence of such
<PAGE> 6
designation in such depositaries as he shall from time to time deem proper.
He shall disburse the funds of the corporation as shall be ordered by the
Directors, taking proper vouchers for such disbursements. He shall promptly
render to the President and to the Directors such statements of his
transactions and accounts as the President and Directors respectively may
from time to time require. The Treasurer shall perform such duties and have
such powers additional to the foregoing as the Directors may designate.
Section 10. Assistant Treasurer. In the absence or disability of the
Treasurer, his powers and duties shall be performed by the Assistant
Treasurer, if only one, or if more than one, by the one designated for the
purpose by the Directors. Each Assistant Treasurer shall have such other
powers and perform such other duties as the Directors shall from time to
time designate.
Section 11. Secretary and Assistant Secretary. The Secretary or an
Assistant Secretary, if one be elected, shall record all proceedings of the
stockholders in a book to be kept therefor and, if there be no Secretary or
Assistant Secretary of the Board of Directors, shall also record all
proceedings of the Directors in a book to be kept therefor. If there be
more than one Assistant Secretary, then the one designated to so record such
proceedings by the Directors shall do so, otherwise a Temporary Secretary
designated by the person presiding at a meeting, shall perform the duties of
the Secretary. Unless the Directors shall appoint a transfer agent and/or
registrar or other officer or officers for the purpose, the Secretary shall
be charged with the duties of keeping or causing to be kept, accurate
records of all stock outstanding, stock certificates issued and stock
transfers; and, subject to such other duties or different rules as shall be
adopted from time to time by the Directors, such records may be kept solely
in the stock certificate books. The Secretary and each Assistant Secretary
shall have such other powers and perform such other duties additional to the
foregoing as the Directors may from time to time designate.
ARTICLE FOUR
Provisions Relating to Capital Stock
Section 1. Certificates of Stock. The shares of the corporation shall be
represented by a certificate or shall be uncertificated. Certificates shall
be signed by, or in the name of the corporation by, the Chairman or Vice-
Chairman of the Board of Directors, or the President or a Vice President and
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares, or upon the books and records of the corporation in the
case of uncertificated partly paid shares, shall be set forth the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated.
If the corporation shall be authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences
and relative, participating, optional or other special rights of each class
of stock or series thereof
<PAGE> 7
and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back
of the certificate which the corporation shall issue to represent such class
or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of
stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof
and the qualifications, limitations or restrictions of such preferences
and/or rights.
Any of or all the signatures on a certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 2. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions
from the registered owner of uncertificated shares such uncertificated
shares shall be cancelled and issuance of new equivalent uncertificated
shares or certificate shares shall be made to the person entitled thereto
and the transaction shall be recorded upon the books of the corporation.
Section 3. Equitable Interests Not Recognized. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as
the holder in fact thereof and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any
other person except as may be otherwise expressly provided by law.
Section 4. Lost or Destroyed Certificates. The Directors of the
corporation may, subject to any contrary provision of law, determine the
conditions upon which a new certificate of stock may be issued in place of
any certificate alleged to have been lost, stolen, destroyed, or mutilated.
<PAGE> 8
ARTICLE FIVE
Stock in Other Corporations
Except as the Directors may otherwise designate, the Chairman of the Board,
President or Treasurer may waive notice of, and appoint any person or
persons to act as proxy or attorney-in-fact for this corporation (with or
without power of substitution) at any meeting of stockholders or
shareholders of any other corporation or organization the securities of
which may be held by the corporation.
ARTICLE SIX
Inspection of Records
Books, accounts, documents and records of the corporation shall be open to
inspection by any Director at all times during the usual hours of business.
The original, or attested copies, of the Certificate of Incorporation, By-
laws and records of all meeting of the incorporators and stockholders, and
the stock and transfer records, which shall contain the names of all
stockholders and the record address and the amount of stock held by each,
shall be kept in Massachusetts at the principal office of the corporation,
or at an office of its transfer agent or of the Secretary. Said copies and
records need not be all kept in the same office. They shall be available at
all reasonable times to the inspection of any stockholder for any proper
purpose but not to secure a list of stockholders for the purpose of selling
said list or copies thereof or of using the same for a purpose other than in
the interest of the applicant, as a stockholder, relative to the affairs of
the corporation.
ARTICLE SEVEN
Checks, Notes, Drafts and Other Instruments
Checks, notes, drafts and other instruments for the payment of money drawn
or endorsed in the name of the corporation may be signed by any officer or
officers or person or person authorized by the Directors to sign the same.
No officer or person shall sign any such instrument as aforesaid unless
authorized by the Directors to do so.
ARTICLE EIGHT
Seal
The seal of the corporation shall be circular in form, bearing its name, the
word "Delaware," and the year of its incorporation. The Treasurer shall
have custody of the seal and may affix it (as may any other officer
authorized by the Directors) to any instrument requiring the corporate seal.
<PAGE> 9
ARTICLE NINE
Fiscal Year
The fiscal year of the Corporation shall be the year ending with the last
Saturday of June in each year.
ARTICLE TEN
Amendments
These By-laws may at any time be amended by vote of the stockholders,
provided that notice of the substance of the proposed amendment is stated in
the notice of the meeting. If authorized by the Certificate of
Incorporation, the Directors may also make, amend, or repeal these By-laws
in whole or in part, except with respect to any provisions thereof which by
law, the Certificate of Incorporation, or these By-laws requires action by
the stockholders. Not later than the time of giving notice of the meeting
of stockholders next following the making, amending or repealing by the
Directors of any By-law, notice thereof stating the substance of such change
shall be given to all stockholders entitled to vote on amending the By-laws.
Any By-law adopted by the Directors may be amended or repealed by the
stockholders.
ARTICLE ELEVEN
Indemnification
Section 1. Right to Indemnification. Each person who was or is made a
party to or is otherwise involved (including, without limitation, as a
witness) in any actual or threatened action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that such person is or was a Director
or officer of the corporation or that, being or having been such a Director
or officer of the Corporation, such person is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to any employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as such a Director or officer or in any other capacity
while serving as such a Director or officer, shall be indemnified and held
harmless by the corporation to the full extent permitted by the Delaware
General Corporation Law (the "DGCL"), as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the corporation to provide broader indemnification
rights than permitted prior thereto), or by other applicable law as then in
effect, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a Director or officer and shall inure to the
benefit of the indemnitee's
<PAGE> 10
heirs, executors and administrators; provided, however, that except as
provided in Section 2 of this ARTICLE ELEVEN with respect to proceedings
seeking to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by any such indemnitee only if such proceeding (or part
thereof) was authorized or ratified by the Board of Directors. The right to
indemnification conferred in this Section shall be a contract right and
shall include the right to be paid by the corporation the expenses incurred
in defending (or otherwise appearing in) any such proceeding in advance of
its final disposition (hereinafter an "advancement of expenses"); provided,
however, that an advancement of expenses shall be made only upon delivery to
the corporation of an undertaking (hereinafter an "undertaking"), by or on
behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be
indemnified for such expenses under this Section or otherwise.
Section 2. Right of Indemnitee to Bring Suit. If a claim under Section 1
of this ARTICLE ELEVEN is not paid in full by the corporation within 60 days
after a written claim has been received by the corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be 20 days, the indemnitee may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the indemnitee shall be entitled to be paid also the expense
of prosecuting or defending such suit. The indemnitee shall be presumed to
be entitled to indemnification under this ARTICLE ELEVEN upon submission of
a written claim (and, in an action brought to enforce a claim for an
advancement of expenses, where the required undertaking has been tendered to
the corporation), and thereafter the corporation shall have the burden of
proof that the indemnitee is not so entitled. Neither the failure of the
corporation (including the Board of Directors, independent legal counsel or
the stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the
circumstances nor an actual determination by the corporation (including the
Board of Directors, independent legal counsel or the stockholders) that the
indemnitee is not entitled to indemnification shall be a defense to the suit
or create a presumption that the indemnitee is not so entitled.
Section 3. Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred by this ARTICLE ELEVEN shall not be
exclusive of any other right that any person may have or hereafter acquire
under any statute, agreement, vote of stockholders or disinterested
Directors, provisions of the Certificate of Incorporation or By-laws of the
corporation or otherwise. Notwithstanding any amendment to or repeal of
this ARTICLE ELEVEN, any indemnitee shall be entitled to indemnification in
accordance with the provisions hereof with respect to any acts or omissions
of such indemnitee occurring prior to such amendment or repeal.
<PAGE> 11
Section 4. Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any Director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such
expense, liability or loss under the DGCL.
ARTICLE TWELVE
Principal and Registered Offices
Section 1. Principal Office. The corporation's principal office shall be
500 Main Street, Groton, Massachusetts or such other place as the Board of
Directors may designate.
Section 2. Registered Office. The corporation's registered office shall be
229 South State Street, City of Dover, County of Kent, Delaware, or such
other place as the Board of Directors may designate.
<PAGE> 12
12
12
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)
Amended Through October 23, 1998
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
---------------------------
(a) Purpose. The purpose of the Plan is to provide a means whereby New
-------
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
<PAGE>
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
---------------
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
--------------
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
-2-
<PAGE>
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
-----
(a) Shares Reserved under the Plan. Subject to the provisions of
------------------------------
clause (c) below, the stock which shall be the subject of the options and
appreciation
-3-
<PAGE>
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
-----------------------------------------------------
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
--------------------------------------------
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
-4-
<PAGE>
such holder. After any such adjustment, the term "Stock" shall be deemed to mean
the Stock as so adjusted.
4. Eligibility
-----------
(a) Employees. All employees of the Company or of any subsidiary
---------
("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
------------------
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
-5-
<PAGE>
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
-------------------------------
(a) Number of Shares and Maximum Fair Market Value. Each Option
----------------------------------------------
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
------------
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
-6-
<PAGE>
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
---------------------
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
--------
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
--------------
whole or in part until one (1) year after its date of grant. The Committee may,
in
-7-
<PAGE>
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.
-----------------------------------------------------
(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 unless the Board determines, in
its sole discretion and upon such terms as it deems appropriate, that such
Employee Option shall continue to be exercisable for a period after such
cessation of employment (but in no event for a period beyond the remainder of
the term thereof). 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
-8-
<PAGE>
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
-9-
<PAGE>
term thereof, or for three months following such termination, whichever period
is shorter.
(g) Assignability of Options and Stock Appreciation Rights. No
------------------------------------------------------
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
-10-
<PAGE>
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
------------------
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
----------------------------------------------
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
---------------------------
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
-11-
<PAGE>
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
-------------------------
(a) In General. A stock appreciation right is a right granted to the
----------
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.
----------------------------------------------------------------
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
-12-
<PAGE>
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
----------------------------------
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
------------------------
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.
----------------------------------------------------------------------
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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<PAGE>
limitation, all or a portion of the amount not delivered may be delivered in a
later year or years.
7. Replacement Options
-------------------
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
--------------
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
-14-
<PAGE>
"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.
-15-
<PAGE>
9. Amendment
---------
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.
-16-
<PAGE>
10. Effective Date and Term of Plan
-------------------------------
(a) Effective Date. The Plan shall become effective on the date of its
--------------
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.1 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
------------
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
-----------------
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%
- -----------------
1 The Plan was approved by the Board at a meeting held on July 25, 1997, and by
the requisite vote of stockholders at the Annual Meeting of Stockholders held
on October 24, 1997.
-17-
<PAGE>
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
-18-
<PAGE>
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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<PAGE>
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
-20-
<PAGE>
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
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<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-
NEW ENGLAND BUSINESS SERVICE, INC.
STOCK COMPENSATION PLAN
(Amended and Restated through October 23, 1998)
Section 1. Purpose. The purpose of this Stock Compensation Plan
(the "Plan") of New England Business Service, Inc. (the "Company") is
to provide for the mandatory or voluntary receipt of shares of the
Company's Common Stock, valued at full market value as of the date of
grant, in lieu of an equivalent amount of cash, in payment (in whole
or in part) of certain types of regular, bonus or other special
compensation payable to directors of the Company and officers and
other key employees of the Company and its subsidiaries, thereby
creating, encouraging and facilitating increased ownership of Common
Stock by such directors and key employees and, through such
ownership, enhancing the identity of interest between them and the
Company's shareholders.
Section 2. Definitions. In addition to the terms defined elsewhere
in the Plan, the following shall be defined terms under the Plan:
2.01. "Award" means any award of Stock granted to a Participant
under the Plan.
2.02. "Board" means the Board of Directors of the Company.
2.03. "Code" means the Internal Revenue Code of 1986, as amended
from time to time. Reference to any provision of the Code shall be
deemed to include successor provisions thereto and regulations
thereunder.
2.04. "Committee" means the Organization and Compensation Committee
of the Board, or such other Board committee as may be designated by
the Board to administer the Plan, provided, however, that the
Committee shall always consist of two or more directors, 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 Exchange 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 or a successor regulation. A
majority of the Committee members present at any meeting at which a
quorum is present, and any acts approved in writing by all members
without a meeting, shall constitute acts of the Committee.
2.05. "Company" is defined in Section 1.
2.06. "Covered Employee" has the same meaning as set forth in
section 162(m) of the Code, and successor provisions.
2.07. "Employee" means any salaried employee, including officer-
employees, of the Company or any Subsidiary.
<PAGE>
2.08. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the
Exchange Act shall be deemed to include successor provisions thereto
and regulations thereunder.
2.09. "Participant" means a person who, as a director of the Company
or an Employee has been granted an Award under the Plan.
2.10. "Plan" is defined in Section 1.
2.11. "Rule 16b-3" means Rule 16b-3, as from time to time amended
and applicable to Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
2.12. "Stock" means the Common Stock, $1.00 par value, of the
Company and such other securities of the Company as may be
substituted for Stock pursuant to Section 4 below.
2.13. "Subsidiary" means any corporation with respect to which the
Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock. In addition, any
other related entity may be designated by the Board as a Subsidiary,
provided such entity's financial statements would be consolidated
with those of the Company under generally accepted accounting
principles.
2.14. "Year" means a fiscal year of the Company.
Section 3. Administration.
3.01. Authority of the Committee. The Plan shall be administered by
the Committee. The Committee shall have full and final authority to
take the following actions, in each case subject to and consistent
with the provisions of the Plan:
i. to select and designate Employees as Participants;
ii. to designate Subsidiaries;
iii. to determine the Awards to be granted to each Employee-
Participant;
iv. to determine whether, to what extent, and under what
circumstances an Award will be deferred either automatically, at the
election of the Committee, or at the election of the Participant;
v. to prescribe the form of any Award agreements which need not be
identical for each Participant;
vi. to adopt, amend, suspend, waive, and rescind such rules and
regulations not inconsistent with the specific terms of the Plan, and
appoint such agents, as the Committee may deem necessary or advisable
to administer the Plan;
<PAGE> 2
vii. to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and
any Award, rules and regulations, Award Agreement, or other
instrument hereunder; and
viii. to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
3.02 Manner of Exercise of Committee Authority. Unless authority is
otherwise reserved under the terms of the Plan, or applicable law,
the Committee shall have full and sole discretion in exercising its
authority under the Plan. Any action of the Committee with respect
to the Plan shall be final, conclusive, and binding on all persons,
including the Company, Subsidiaries, Participants and any person
claiming any rights under the Plan from or through any Participant.
The express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as
limiting any power or authority of the Committee. A consent signed
by all members of the Committee shall constitute the act of the
Committee without the necessity, in such event, of holding a meeting.
3.03 Limitation of Liability. Each member of the Committee shall be
entitled, in good faith, to rely or act upon any report or other
information furnished to him by any officer or other employee of the
Company or any Subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration
of the Plan. No member of the Committee, nor any officer or employee
of the Company acting on behalf of the Committee, shall be personally
liable for any activity, determination, or interpretation taken or
made in good faith with respect to the Plan and all members of the
Committee and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified
and protected by the Company with respect to any such action,
determination, or interpretation.
Section 4. Shares Subject to the Plan. The total number of shares
of Stock reserved and available for Awards under the Plan shall be
300,000. If the Company shall 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 shall
thereafter be reserved and available for Awards under the Plan shall
be adjusted accordingly.
Section 5. Eligibility. Awards may be granted only to individuals
who are directors of the Company or Employees.
Section 6. Awards.
6.01. General. All shares of Stock issued pursuant to Awards shall
be issued in lieu of cash compensation equal in value to the Fair
Market Value of such shares on the date of the Award. The Fair
Market Value of a share of Stock on the date of an Award
<PAGE> 3
shall be the last sales price per share of the Stock as reported on
the New York Stock Exchange prior to the date of the Award or, if the
Stock is not then listed on the New York Stock Exchange or if no
price has been so reported within one week prior to the date of such
Award, such market value shall be determined by a principal market
maker for the Stock designed by the Committee. Awards may be granted
on the terms and conditions set forth in this Section 6. In
addition, the Committee may impose on any Award to an Employee, at
the date of grant, such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall
determine.
6.02. Performance Awards. The Committee is authorized to grant
Performance Awards to Employees on the following terms and
conditions:
i. Award and Conditions. Performance Awards to Covered Employees
are intended to be "qualified performance-based compensation" within
the meaning of section 162(m) of the Code and shall be paid solely on
account of the attainment of one or more pre-established performance
goals (within the meaning of section 162(m) (4)(C) and any
regulations relating thereto) determined by the Committee.
ii. The payout of any such Award to a Covered Employee may be
reduced, but not increased, based on the degree of attainment of
other performance criteria or otherwise at the discretion of the
Committee.
iii. Other Terms. Subject to Section 6.05 below, a Performance
Award shall be denominated and payable in shares of Stock, and have
such other terms as shall be determined by the Committee.
iv. The satisfaction of the performance goals on account of which a
Performance Award is to be made, shall be certified by the Committee
before such Award is made.
6.03. Awards of Stock in Payment of Directors' Compensation.
6.03.1 Elective Awards. The Committee is authorized to make awards
of Stock to non-employee Directors who elect to receive such Stock in
lieu of all or part of their retainers or fees on the following terms
and conditions: Such elections shall be made by a written notice of
election signed by the electing Director and delivered or mailed to
the Chief Financial Officer, Treasurer or Secretary of the Company
and shall specify either (a) the annual retainer or retainers or
meeting attendance fee or fees which shall be paid in whole or in
part in Stock, and the percentage of each such retainer or fee which
shall be paid in Stock; or (b) that all or certain specified payments
to be received within each twelve-month period commencing on the
first day of a specified calendar month (or a specified portion of
such payments) shall continue to be paid in Stock until such election
is amended or revoked by another notice given in the same manner.
6.03.2 Mandatory Awards. Notwithstanding the provisions of Section
6.03.1, from and after October 23, 1998 fifty percent (50%) of each
non-employee Director's annual retainer will be paid by an award of
Stock hereunder in lieu of payment in cash.
<PAGE> 4
Awards pursuant to this Section shall automatically be made each year
on the tenth day following the date on which the non-employee
Director is elected to the Board by the stockholders or by the other
directors.
6.04. Other Awards. The Committee is authorized to grant to
Employees such other Awards as are deemed by the Committee to be
consistent with the purposes of the Plan, including, without
limitation, Stock issued to Employees in lieu of cash bonuses or
portions of bonuses.
6.05. Stand-Alone, Tandem, and Substitute Awards. Awards to
Employees granted under the Plan may, in the discretion of the
Committee, be granted either alone or, as a part of or in tandem
with, or in substitution for, any award granted under any other plan
of the Company, or any Subsidiary, or any other right of a
Participant to receive payment from the Company or any Subsidiary.
If an Award is granted in substitution for another award, the
Committee shall require the surrender of such other award in
consideration for the grant of the new Award hereunder. Awards
granted in addition to or as a part of or in tandem with other awards
may be granted either as of the same time as or a different time from
the grant of such other awards.
Section 7. General Restrictions Applicable to Awards.
7.01. Restrictions Under Rule 16b-3.
7.01.1. Six-Month Holding Period. Unless a Participant could
otherwise transfer Stock without incurring liability under Section
16(b) of the Exchange Act, shares of Stock issued under the Plan
shall be held for at least six months from the date of acquisition.
7.01.2. Compliance with Rule 16b-3. It is the intent of the Company
that this Plan comply in all respects with Rule 16b-3 in connection
with any Award granted to a person who is subject to Section 16 of
the Exchange Act. Accordingly, if any provision of this Plan or any
Award Agreement does not comply with the requirements of Rule 16b-3
as then applicable to any such person, such provision shall be
construed or deemed amended to the extent necessary to conform to
such requirements with respect to such person.
7.02. Registration and Listing Compliance. The Company shall not be
obligated to distribute any Shares with respect to any Award in a
transaction subject to regulatory approval, registration, or any
other applicable requirement of federal or state law, or subject to a
listing requirement under any listing or similar agreement between
the Company and any national securities exchange, until such laws,
regulations, and contractual obligations of the Company have been
complied with in full, although the Company shall be obligated to use
its best efforts to obtain any such approval and comply with such
requirements as promptly as practicable.
<PAGE> 5
7.03. Stock Certificates. All shares of Stock delivered under the
Plan pursuant to any Award shall be subject to such stop-transfer
order and other restrictions as the Committee may deem advisable
under applicable federal or state laws, or rules and regulations
thereunder, and the rules of NASDAQ or any national securities
exchange on which the Stock is listed. The Committee may cause a
legend or legends to be placed on any certificates representing
shares of Stock to make appropriate reference to such restrictions or
any other restrictions that may be applicable to such shares. In
addition, during any period in which shares of Stock are subject to
restrictions under the terms of the Plan or any Award Agreement the
Committee may require the Participant to enter into an agreement
providing that certificates representing any shares of Stock issuable
or issued pursuant to an Award shall remain in the physical custody
of the Company or such other person as the Committee may designate.
Section 8. Amendments. The Board may amend, alter, suspend,
discontinue or terminate the Plan without the consent of stockholders
or Participants, except that any such amendment, alteration,
suspension, discontinuation, or termination shall be subject to the
approval of the Company's stockholders within one year after such
Board action if such stockholder approval is required by any federal
or state law or regulation or the rules of New York Stock Exchange or
any other stock exchange on which the Stock may be listed, or if the
Board in its discretion determines that obtaining such stockholder
approval is for any reason advisable.
Section 9. General Provisions.
9.01. No Stockholder Rights. No Award shall confer on any
Participant any of the rights of a stockholder of the Company unless
and until shares of Stock are duly issued or transferred to the
participant in accordance with the terms of the Award.
9.02. Tax Withholding. The Company or any Subsidiary is authorized
to withhold from any Award granted, or any payroll or other payment
to a Participant, amounts of withholding and other taxes due with
respect thereto, and to take such other action as the Committee may
deem necessary or advisable to enable the Company and Participants to
satisfy obligations for the payment of withholding taxes and other
tax liabilities relating to any Award. This authority shall include
authority to withhold or receive Shares or other property and to make
cash payments in respect thereof in satisfaction of Participant's tax
obligations.
9.03. No Right to Employment. Nothing contained in the Plan or any
Award Agreement shall confer, and no grant of an Award shall be
construed as conferring, upon any employee any right to continue in
the employ of the Company or any Subsidiary or to interfere in any
way with the right of the Company or any Subsidiary to terminate his
employment at any time or increase or decrease his compensation from
the rate in existence at the time of granting of an Award.
9.04. Other Compensatory Arrangements. The Company or any
Subsidiary shall be permitted to adopt other or additional
compensation arrangements (which may
<PAGE> 6
include arrangements which relate to Awards), and such arrangements
may be either generally applicable or applicable only in specific
cases.
9.05. Fractional Shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee
shall determine whether cash or other property shall be issued or
paid in lieu of fractional shares or whether such fractional Shares
or any rights thereto shall be forfeited or otherwise eliminated.
9.06. Governing Law. The validity, construction, and effect of the
Plan, any rules and regulations relating to the Plan, and any Award
Agreement shall be determined in accordance with the laws of the
State of Delaware, without giving effect to principles of conflicts
of laws, and applicable federal law.
Section 10. Effective Date and Duration. The Plan shall become
effective as of June 25, 1994, provided, however, that within one
year after such date, the Plan shall have been approved by the
affirmative vote of the holders of a majority of the shares of Stock
present or represented and entitled to vote (and the affirmative vote
of a majority of the shares of Stock voting) at a meeting of the
Company's stockholders, or any adjournment thereof. 1 If so approved
the Plan shall continue in force until June 24, 2004.
___________________________
1 The Plan was approved by the requisite vote of stockholders at the
Annual Meeting of Stockholders held on October 28, 1994
<PAGE> 7
7
7
_________________________________________________________________
New England Business Service, Inc.
Supplemental Executive Retirement Plan
_________________________________________________________________
Effective January 4, 1999
<PAGE
NEW ENGLAND BUSINESS SERVICE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
_____________________________________________________________
ARTICLE I - ESTABLISHMENT OF THE PLAN
1.1 Name of Plan 1
1.2 Effective Date 1
1.3 Purpose 1
1.4 Restricted Coverage 1
1.5 Plan Unfunded 1
ARTICLE II - DEFINITIONS
2.1 Accrued Benefit 2
2.2 Average Final Compensation 2
2.3 Benefit Commencement Date 2
2.4 Board 2
2.5 Change in Control 2
2.6 Code 6
2.7 Committee 6
2.8 Company 6
2.9 Compensation 6
2.10 Disability 7
2.11 Early Retirement Date 7
2.12 Effective Date 7
2.13 Entry Date 7
2.14 ERISA 7
2.15 Executive 7
2.16 Good Cause 7
2.17 Incumbent Board 8
2.18 Normal Retirement Date 8
2.19 Participant 8
2.20 Plan 8
2.21 Plan Administrator 8
2.22 Plan Year 8
2.23 Separation from Service 8
2.24 Service 9
2.25 Surviving Spouse 9
TABLE OF CONTENTS
(continued)
_______________________________________________________________
ARTICLE II - DEFINITIONS (continued)
2.26 Trust 9
2.27 Vested Benefit 9
2.28 Vesting Percentage 9
2.29 Year of Benefit Service 9
ARTICLE III - PARTICIPATION
3.1 Eligibility Requirements 10
3.2 Entry and Re-Entry Into the Plan 10
ARTICLE IV - RETIREMENT BENEFITS
4.1 Amount, Timing, and Form of Benefits 11
ARTICLE V - VESTING AND FORFEITURES
5.1 Vesting Percentage 12
5.2 Vested Benefit 12
5.3 Forfeitures 12
5.4 Amendment of Vesting Provisions 12
5.5 Forfeiture of Vested Benefits 13
ARTICLE VI - RETIREMENT BENEFITS
6.1 Normal Retirement Benefit 15
6.2 Determination of Accrued Benefit 15
6.3 Adjustment for Early Retirement 16
6.4 Adjustment for Late Retirement 16
6.5 Disability Retirement 16
ARTICLE VII - BENEFIT COMMENCEMENT DATE
7.1 Eligibility for Payment 17
7.2 Benefit Commencement Date 17
ARTICLE VIII - BENEFIT FORMS AVAILABLE
8.1 Forms of Benefits for Participants 19
8.2 Life Annuity Benefit Election 19
<PAGE>
TABLE OF CONTENTS
(continued)
_____________________________________________________________
ARTICLE IX - DEATH BENEFITS
9.1 Death Prior to Benefit Commencement 20
9.2 Death After Benefit Commencement 20
ARTICLE X - ADMINISTRATION
10.1 Plan Administration 21
10.2 Indemnification 21
10.3 Ownership of Assets 22
10.4 Expenses 22
ARTICLE XI - TRUST AGREEMENT; LIQUIDITY FUND
11.1 Trust Fund 23
11.2 Liquidity Fund 23
ARTICLE XII - AMENDMENT OF THE PLAN
12.1 Amendment 24
12.2 Effect of Amendment on Vesting 24
ARTICLE XIII - TERMINATION OF THE PLAN
13.1 Termination 25
13.2 Benefits after Plan Termination 25
ARTICLE XIV - MISCELLANEOUS
14.1 Limitations of Rights; Employment
Relationship 26
14.2 Determination of Benefits, Claims
Procedure, and Administration 26
14.3 Arbitration 27
14.4 Non-Assignability of Benefits 28
14.5 Facility of Payments 28
14.6 Obligations to Withhold and Pay Taxes 29
14.7 Representations 29
14.8 Severability 29
14.9 Applicable Law 29
14.10 Successor Employers 30
APPENDIX - DESIGNATION OF PARTICIPANTS 31
<PAGE>
ARTICLE I
ESTABLISHMENT OF THE PLAN
_________________________________________________________________
1.1 Name of Plan
The Plan shall be known as the New England Business Service,
Inc. Supplemental Executive Retirement Plan.
1.2 Effective Date
The Effective Date of the Plan is January 4, 1999.
1.3 Purpose
The Company intends this Plan to provide certain retirement
income benefits (as described herein) to certain Executives
(as identified from time to time in the Appendix hereto) of
the Company. Such benefits are intended to supplement the
retirement income benefits provided to a Participant by the
Company through its other broad-based retirement programs
and Social Security benefits.
1.4 Restricted Coverage
Participation in this Plan shall be limited to Executives,
so that for purposes of Title I of ERISA the Plan shall at
all times cover only employees who make up a select group of
management or highly compensated employees whose positions
with the Company allow them to have a significant effect on
the Company's results of operations by the performance of
services of major importance in the management, operation,
and development of the Company's business.
1.5 Plan Unfunded
This Plan is intended to be unfunded for purposes of (a)
Title I of ERISA and (b) taxation of vested accrued benefits
pursuant to the Code.
<PAGE> 1
ARTICLE II
DEFINITIONS
______________________________________________________________________
The following terms shall have the meanings specified below unless the
context otherwise requires:
2.1 "Accrued Benefit" shall mean the portion of a Participant's
normal retirement benefit that has accrued as of any date
pursuant to Section 6.2.
2.2 "Average Final Compensation" shall mean the sum of (a) the
Participant's annual base salary at the time of his
Separation from Service and (b) the average of a
Participant's bonuses for the three Plan Years in which
the Participant's greatest bonus is received during his
final five Plan Years of Service.
2.3 "Benefit Commencement Date" shall mean the date as of which
benefits hereunder first become payable, in accordance
with the provisions of Article VII, to or with respect to a
Participant.
2.4 "Board" shall mean the Board of Directors of the Company.
2.5 "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% or
more of either
(i) the then outstanding shares of the
Company's common stock (the "Common 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);
<PAGE> 2
(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,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the 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 a 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 cor
poration 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 sub
stantially all of the individuals and entities
who were the beneficial owners, respectively, of
the Common 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
<PAGE>
Common Stock and/or Outstanding Company Voting
Securities, as the case may be;
(ii) no Person, excluding
(A) the Company;
(B) any employee benefit plan (or related
trust) of the Company;
(C) such corporation or other business
entity resulting from such consoli
dation or merger, and
(D) any Person beneficially owning,
immediately prior to such consoli
dation or merger, directly or
indirectly, 35% or more of the Common
Stock and/or Outstanding Company
Voting Securities, as the case may
be,
beneficially owns, directly or indirectly,
35% or more of the then outstanding shares
of common stock of the corporation resulting
from such consolidation or merger, or the
combined voting power of the then out
standing 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 which shall vest by reason of the
action of the Board pursuant to this
paragraph (c) shall be divested, with respect
to any such right not already exercised, 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.
(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
<PAGE> 4
(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 or other 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 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 Common Stock
and/or Outstanding Company Voting
Securities, as the case may be) beneficially
owns, directly or indirectly, 35% or more
of 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 the affairs of such
entity); 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
5
of the Board providing for such sale or
other disposition of assets of the Company;
provided that any right which shall vest by
reason of the action of the Board or the
stockholders pursuant to this paragraph (d)
shall be divested, with respect to any such
right not already exercised, upon the
abandonment of the Company of such
dissolution, or such sale or other
disposition of assets, as the case may be.
A Change in Control shall not occur upon the mere re-incorporation
of the Company in another state.
2.6 "Code" shall mean the Internal Revenue Code of 1986 as amended,
and including all regulations thereunder.
2.7 "Committee" shall mean the Organization and Compensation
Committee of the Board of Directors of the Company.
2.8 "Company" shall mean New England Business Service, Inc. and, in
the event of a Change in Control, each successor to and assign of New
England Business Service, Inc.
2.9 "Compensation" shall mean those elements of a Participant's
total remuneration from the Company which are pensionable under this
Plan.
(a) Compensation shall include only base salary and bonuses
earned by a Participant for personal services rendered to
the Company for any Plan Year, regardless of when such
remuneration is actually paid (or would be paid if not
deferred pursuant to any deferred compensation plan).
Compensation shall include:
(i) amounts deferred under any deferred compensation
plan, and
(ii) amounts contributed from the Participant's
remuneration under any plan maintained by the
Company pursuant to Code Sections 125, 132, or
401(k).
(b) Compensation shall not include:
(i) employer contributions to any employee benefit
plan (including without limitation this Plan) and
all benefits provided under any such plan, and
<PAGE> 6
(ii) the value of or any income from any types of
equity-based compensation programs (including
without limitation stock options, stock
appreciation rights, and restricted stock)
except for the portion of any bonus paid in the
medium of Company Stock.
2.10 "Disability" (and "Disabled") shall mean a Participant's
inability, on account of a physical or mental impairment or condition,
substantially to perform the material duties of his position as an
Executive despite reasonable accommodations made or proposed by the
Company, provided that (a) such inability and impairment or condition
are established to the satisfaction of the Board, and (b) the
Participant is receiving benefits under a Company Disability Plan.
2.11 "Early Retirement Date" shall mean the first day of any month
following the later of (a) the Participant's 55th birthday and (b)
either (i) the completion of his fifth Year of Benefit Service, or (ii)
his separation from service either (A) upon or following the occurrence
of a Change in Control or (B) as the result of either a Disability or an
involuntary termination without Good Cause.
2.12 "Effective Date" shall mean the date specified as such in
Section 1.2 above.
2.13 "Entry Date" shall mean the date on which an Executive becomes
a Participant in the Plan as provided in Article III.
2.14 "ERISA" shall mean Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended, and including all
regulations thereunder.
2.15 "Executive" shall mean any employee of the Company who is a
member of a select group of management or highly compensated employees
of the Company, and who is recommended for participation in the Plan by
the Chief Executive Officer of the Company and approved by the
Committee.
2.16 "Good Cause" shall mean a Participant's:
(a) Willful and continuing failure substantially to perform
duties assigned in good faith from time to time by the
Company, provided that such failure is not solely the
result of
<PAGE> 7
(i) a Disability;
(ii) a leave of absence either granted in writing by
the Company or guaranteed by applicable law; or
(iii) some other reason agreed to in advance by the
Board.
(b) Willful conduct which is demonstrably and materially
injurious to the Company.
(c) Conviction of a felony or a misdemeanor involving the
theft, misappropriation, or embezzlement of property of the Company.
For purposes of this Section 2.16, the term "Board" shall include the
board of directors (or body with a similar function) of the Company's
successor following a Change in Control.
2.17 "Incumbent Board" shall mean the Board, as defined in Section
2.5, which is in place as of the Effective Date of this Plan.
2.18 "Normal Retirement Date" shall mean the first day of the month
coincident with or next following a Participant's 65th birthday.
2.19 "Participant" shall mean any Executive who is covered by this
Plan in accordance with the provisions of Article III.
2.20 "Plan" shall mean the New England Business Service, Inc.
Supplemental Executive Retirement Plan, as stated herein and as amended
or supplemented from time to time.
2.21 "Plan Administrator" shall mean the committee appointed to
administer the Plan pursuant to Section 10.1 of this Plan.
2.22 "Plan Year" shall mean the Company's fiscal year, ending on the
last Friday of each June following the Effective Date while this Plan
remains in effect, provided that for purposes of the definitions of
"Average Final Compensation" and "Year of Benefit Service", "Plan Year"
shall include all such periods before or after the Effective Date of the
Plan.
<PAGE> 8
2.23 "Separation from Service" shall mean the termination of a
Participant's Service for any reason, including the death of the
Participant.
2.24 "Service" shall mean a Participant's period of employment with
the Company.
2.25 "Surviving Spouse" shall mean the spouse of a Participant as of
the earlier of (a) the Participant's Benefit Commencement Date or (b)
his date of death, entitled to received benefits under the Plan as
provided in Sections 8.1 and 9.1 of the Plan.
2.26 "Trust" shall mean, in the event of a Change in Control, the
trust created under the New England Business Service, Inc. Supplemental
Executive Retirement Plan Trust Agreement.
2.27 "Vested Benefit" shall mean the portion of a Participant's
Accrued Benefit calculated in accordance with Article V of this Plan.
2.28 "Vesting Percentage" shall mean the percentage determined in
accordance with Section 5.1 of this Plan.
2.29 "Year of Benefit Service" shall mean, except as otherwise
specified in the Appendix hereto, each Plan Year subsequent to June 29,
1992 in which the Participant has any Service.
In all instances throughout this document, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
<PAGE> 9
ARTICLE III
PARTICIPATION
_______________________________________________________________________
3.1 Eligibility Requirements
Only Executives shall be eligible to become and remain Participants
in the Plan. An Executive shall become a Participant only upon
designation as a Participant in the Appendix hereto by the Committee
after recommendation by the Chief Executive Officer. A Participant
shall continue as a Participant for the purpose of accruing additional
benefits under the Plan only as long as he remains in Service as an
Executive of the Company. A Disabled Participant remains a Participant
as long as he is continuing to accrue Benefit Service while Disabled
under the provisions of Section 6.5.
3.2 Entry and Re-Entry Into the Plan
An Executive shall become a Participant on the effective date of
his designation as a Participant in the Appendix hereto. If a
Participant's Service is subsequently broken and he is later re-employed
as an Executive, he shall resume his participation in the Plan only if
he is again designated as a Participant by the Committee on an amended
Appendix hereto and only on the effective date of such new designation.
<PAGE> 10
ARTICLE IV
RETIREMENT BENEFITS
_______________________________________________________________________
4.1 Amount, Timing, and Form of Benefits
A Participant who has a Separation from Service after his Entry
Date shall be entitled to receive his Vested Benefit, as determined in
accordance with Articles V and VI, commencing on the Participant's
Benefit Commencement Date as determined in accordance with Article VII,
and payable in the form provided in Article VIII.
<PAGE> 11
ARTICLE V
VESTING AND FORFEITURES
________________________________________________________________________
5.1 Vesting Percentage
Subject to Section 5.5, a Participant's Vesting Percentage as of
any date shall be 0% until the date on which the first of the following
events occurs and thereafter it shall be 100%:
(a) A Change in Control occurs, unless such Change in Control
was approved by a resolution adopted by at least a
majority of the members of the Incumbent Board (as defined
in Section 2.5).
(b) The Participant incurs a Separation from Service, either
involuntarily without Good Cause or on account of
Disability or death.
(c) The participant attains his Early Retirement Date.
5.2 Vested Benefit
Subject to Section 5.5, a Participant's Vested Benefit under this
Plan shall be the product of his Accrued Benefit multiplied by his
Vesting Percentage.
5.3 Forfeitures
Any portion of a Participant's Accrued Benefit that is not included
in his Vested Benefit at the time of his Separation from Service shall
be immediately forfeited. If a Participant's Vested Benefit is reduced
to zero pursuant to Section 5.5, his Accrued Benefit shall be forfeited
immediately. Any amounts forfeited by a Participant shall remain the
sole and exclusive property of the Company and shall not increase the
benefits of any other Participant.
5.4 Amendment of Vesting Provisions
No amendment to the Plan shall reduce a Participant's Vested
Benefit under the Plan. An amendment may, however, increase the Service
required or impose or change any
<PAGE> 12
other requirements or conditions that a Participant must meet in order
to become vested or further vested in any Accrued Benefit to the extent
not already vested as of the date that the amendment is adopted.
5.5 Forfeiture of Vested Benefit
Notwithstanding anything to the contrary in this Plan, the Vesting
Percentage and the Vested Benefit of any Participant shall be reduced to
zero if, during the period ending on the earlier of the fifth
anniversary of his Separation from Service and the effective date of a
Change in Control, the Participant either provides Services to or
obtains an Interest in any Entity which at the time of the Participant's
Separation from Service directly Competed with any member of the Company
Group. For purposes of this Section 5.5, the following terms shall have
the following meanings:
(a) "Compete" shall mean the offer or sale of the same products
and/or services as are offered or sold by any member of the
Company Group or the offer or sale of any products and/or
services that reasonably may be used in substitution of any
products and/or services offered or sold by any member of the
Company Group.
(b) "Company Group" shall mean the Company and all of its direct
and indirect "parent corporations" and "subsidiary
corporations" within the meaning of Code Sections 424(e) and
424(f) respectively.
(c) "Entity" shall refer to every possible type of entity, whether
organized as a proprietorship, partnership, limited liability
company, corporation or otherwise.
(d) "Interest" shall refer to every type of ownership interest of
a Participant in an Entity, whether as a proprietor, partner,
member, shareholder or otherwise.
(e) "Services" shall mean the provision of any type of services
to an Entity by a Participant, whether acting as a director,
officer, employee, proprietor, partner, member, independent
contractor, or otherwise.
<PAGE> 13
Notwithstanding anything to the contrary in this Section 5.5 with
respect to any Participant the five-year forfeiture period referred to
above in this section shall be reduced to the maximum lesser period that
an arbitrator or a court of competent jurisdiction determines (in a
final award or judgment all appeals for which have either been exhausted
or waived) to be enforceable with respect to such Participant. No other
rights or obligations under this Plan of the Company or of the
prevailing Participant and no rights or obligations under this Plan of
any other Participant shall be affected by operation of this paragraph
with respect to a Participant.
<PAGE> 14
ARTICLE VI
RETIREMENT BENEFITS
6.1 Normal Retirement Benefit
A Participant who retires on or after his Normal Retirement Date
shall be entitled to an annual retirement income, paid monthly and
continuing for the Participant's lifetime, equal to the sum of (a) 2.75%
of his Average Final Compensation for each of his first ten Years of
Benefit Service, and (b) 2.00% of his Average Final Compensation for
each of his next five Years of Benefit Service.
6.2 Determination of Accrued Benefit
A Participant's Accrued Benefit as of any date shall be that
benefit, commencing on his Normal Retirement Date, determined as
follows, based on his Average Final Compensation as of the date of
determination:
(a) If the Participant is eligible for Early Retirement
The benefit shall be calculated as provided in Section 6.1,
but based on his Years of Benefit Service as of the date of
determination.
(b) If the Participant is not eligible for Early Retirement
The benefit shall be calculated as provided in Section 6.1,
but based on the Years of Benefit Service he is projected
to have earned as of his earliest Early Retirement Date
(assuming he remains in full time employment until that
date), multiplied by a fraction (not to exceed 1.0) whose
numerator is his Years of Benefit Service as of the date of
determination, and whose denominator is his projected Years
of Benefit Service as of his earliest Early Retirement
Date.
Notwithstanding the above, following a Change in Control the
Accrued Benefit of all Participants in the Plan on the date of the
Change in Control shall he determined under the provisions of Section
6.2(a) only.
<PAGE> 15
6.3 Adjustment for Early Retirement
If a Participant retires on an Early Retirement Date, his benefit
from this Plan shall be his Accrued Benefit. If the Participant elects
to receive his retirement benefit prior to his 62nd Birthday, it shall
be reduced one-half of one percent for each month by which his Benefit
Commencement Date precedes his 62nd Birthday.
6.4 Adjustment for Late Retirement
If a Participant retires after his Normal Retirement Date, he shall
receive a benefit calculated in accordance with the provisions of
Section 6.1, but based upon his Benefit Service and his Average Final
Compensation as of his Late Retirement Date.
6.5 Disability Retirement
A Participant who is Disabled as provided in Section 2.10 shall be
considered to be a retired employee on a Disability Retirement.
(a) As long as the Participant is receiving benefits under the
Company's Long Term Disability Plan, he shall receive no
benefit payments from this Plan but shall continue to earn
credit for Years of Benefit Service.
(b) Upon reaching his Normal Retirement Date (or upon the
cessation of Long Term Disability Benefits, if later), he
shall cease earning credit for Years of Benefit Service and
shall commence receiving his Normal Retirement Benefit.
Such benefit shall be based upon his Average Final
Compensation as of his date of Disability, and Years of
Benefit Service accumulated through his Benefit
Commencement Date.
(c) A Participant on Disability Retirement who is continuing to
earn credit for Years of Benefit Service under paragraph
(a) above may, upon attainment of his Early Retirement
Date, elect to retire early. He shall thereafter cease
receiving credit for additional Service under paragraph
(a), and shall instead commence receiving an Early
Retirement benefit as determined under Section 6.3, based
on his Average Final Compensation as of his date of
Disability, and his Years of Benefit Service accumulated
through his date of Early Retirement.
<PAGE> 16
ARTICLE VII
PAYMENT OF BENEFIT
________________________________________________________________________
7.1 Eligibility for Payment
A Participant's benefits shall be paid from the Plan only after
both of the following conditions are met:
(a) The occurrence of a Participant's Separation from Service.
(b) The Participant's attainment of his Early Retirement Date.
7.2 Benefit Commencement Date
(a) Time of Commencement
Unless a Participant or Surviving Spouse (as the case may
be) has made a timely election to defer payment with the
approval of the Committee pursuant to the provisions of
paragraph (b) of this Section 7.2, the Participant's Vested
Benefit under this Plan shall be paid beginning 60 days
after the date on which the conditions of Section 7.1 are
first met.
Notwithstanding the foregoing, at any time after a
Participant's Separation from Service and prior to the
earlier of
(i) payment or commencement of the Participant's
benefit pursuant to this Section 7.2, or
(ii) the date on which a Change in Control occurs,
the Company may elect unilaterally to defer payment or
commencement of all or any portion of the Participant's Benefit until
the next July following the Participant's Separation from Service date
if the Participant was a "covered employee" within the meaning of Code
Section 162(m) at the time of his Separation from Service. Any such
election by the Company may be made by the Board, the Committee, or the
Company's chief executive officer, and shall be evidenced in writing and
sent to the Participant at his last known address.
<PAGE> 17
(b) Benefit Commencement Election
Subject to the approval of the Committee (as defined in
Section 10.1), a Participant or Surviving Spouse may make a one-time
irrevocable election to defer payment of benefits to a postponed Benefit
Commencement Date on any determinable date beyond the Participant's
initial Benefit Commencement Date determined pursuant to paragraph (a)
of this Section 7.2, provided that such election is made on the form
prescribed by the Committee and is received by the Committee not later
than 30 days before such initial Benefit Commencement Date. The
Committee shall have absolute discretion to approve, disapprove, or
modify before approving any such election to defer benefits.
<PAGE> 18
ARTICLE VIII
BENEFIT FORMS AVAILABLE
________________________________________________________________________
8.1 Forms of Benefits for Participants
(a) If a Participant is Married on his Benefit Commencement
Date
Unless a Participant has made a timely election with the
approval of the Committee pursuant to Section 8.2 below to
waive the 50% joint and survivor benefit, the Participant's
benefit shall be paid as a 50% joint and survivor benefit,
under which the Participant shall receive an actuarially
reduced benefit for his lifetime, with 50% of that reduced
benefit continuing after his death to his Surviving Spouse
for the remainder of the Surviving Spouse's life.
(b) If the Participant is Not Married on his Benefit
Commencement Date
His benefit shall be paid as a life annuity, under which
his benefit as described in Section 6 shall be paid to him
as long as he shall survive, with no payments due after his
death.
8.2 Life Annuity Benefit Election
Subject to the Committee's approval, a married Participant may make
a one-time irrevocable election to receive his retirement benefit from
this Plan as a life annuity, as described in Section 8.1(b). Any such
election shall be made on the form prescribed by the Committee and must
be received by the Committee no later than 30 days before the benefit is
to be paid pursuant to Section 7.2 of the Plan (after taking into
account any election made by the Participant under paragraph (b) of
Section 7.2). The Committee shall have absolute discretion to approve
any such election by a married participant to receive his benefit in the
life annuity form.
<PAGE> 19
ARTICLE IX
DEATH BENEFITS
9.1 Death Prior to Benefit Commencement
(a) Death On or After Eligibility for Early Retirement
Upon the death of a Participant on or after his eligibility
for an Early Retirement benefit, there shall be paid to his
Surviving Spouse an immediate lifetime income equal to the
benefit the spouse would have received had the Participant
retired on the day before his death, receiving the 50%
joint and survivor benefit described in Section 8.1(a), and
then died on his actual date of death.
(b) Death Before Eligibility for Early Retirement
If the Participant is not yet eligible for Early Retirement
on his date of death, the benefit shall be the same as
described in Section 9.1(a), except that it shall be cal-
culated as if the Participant were then the age at which he
would first have become eligible for Early Retirement had he
not died (but the amount of such benefit shall be determined
by the Participant's actual number of Years of Benefit
Service and his actual Average Final Compensation at the
time of his death). The Surviving Spouse benefit under this
Section 9.1(b) shall commence on the date the Participant
would have attained Early Retirement eligibility had he
survived.
9.2 Death After Benefit Commencement
Upon the death of a Participant after his Benefit Commencement
Date, there shall be no further benefits due except as may be paid to a
Surviving Spouse under the 50% joint and survivor benefits pursuant to
Section 8.1(a).
<PAGE> 20
ARTICLE X
ADMINISTRATION
_______________________________________________________________________
10.1 Plan Administration
The Committee shall be the Plan Administrator of this Plan. Each
member shall serve at the pleasure of the Board. The Committee shall
act by majority decision of its members. The Committee shall have the
responsibility for the operation and administration of the Plan and
shall have the power and authority to:
(a) determine all matters relating to the eligibility of
persons to become Participants in the Plan;
(b) determine whether or not any Executive of the Company has
become a Participant in the Plan;
(c) determine whether and when the employment of any
Participant has been terminated and, to the extent material
to a determination of a benefit hereunder, the cause of
such termination;
(d) decide all questions which may arise from time to time with
respect to the rights under the Plan of Executives of the
Company, Participants, and any other persons who claim to
be entitled to benefits under the plan.
The Committee shall have exclusive discretionary authority to
construe and interpret the Plan document; provided, however, that in
exercising its powers and duties the Committee shall give the same
consideration to Participants and beneficiaries in like circumstances.
10.2 Indemnification
The Company agrees to indemnify and save harmless each member of
the Committee or in any other fiduciary capacity from, against, for, and
in respect of any and all damages, losses, obligations, liabilities,
liens, deficiencies, attorneys' fees, costs and expenses incident to the
performance of such person's duties unless resulting from the gross
negligence, willful misconduct, or lack of good faith of such
individual. Such indemnification shall apply to any such individual
even though at the time liability is imposed the individual was no
longer acting in a fiduciary capacity or as a member of the Committee.
<PAGE> 21
10.3 Ownership of Assets
All amounts accrued under this Plan, all property and rights
purchased with such amounts, and all income attributable to such
amounts, property, or rights shall remain (until made available to a
Participant or Surviving Spouse) solely the property and rights of the
Company (without being restricted to the provision of benefits under
this Plan), and shall be subject to the claims of the general creditors
of the Company. Except after a Change in Control, no trust is created
under this Plan and it is not otherwise funded in any manner. No
Participant or Surviving Spouse shall have any preferred claim on, or
any beneficial ownership interest in, any assets of the Company or any
Accrued Benefit under the Plan prior to the time such assets are
distributed as a Vested Benefit, and all rights created under the Plan
shall be mere unsecured contractual rights. Notwithstanding the
foregoing, nothing in this Plan shall be construed to prohibit any one
or more Participants or Surviving Spouses from purchasing insurance to
protect against loss on account of the provisions of this Section 10.3,
and the Company shall reasonably cooperate in any effort to obtain such
insurance, provided that any such insurance shall be obtained, owned,
and paid for solely by the insured persons and not by the Company.
10.4 Expenses
The Company shall pay:
(a) its share of all fees and expenses incurred in
administering the Plan;
(b) all taxes imposed on the Company in connection with the
Plan; and
(c) all costs and expenses (including reasonable attorneys'
fees) incurred by each Participant and Surviving Spouse to
enforce the terms of the Plan against the Company or to
collect a Vested Benefit under the Plan from the Company.
<PAGE> 22
ARTICLE XI
TRUST AGREEMENT; LIQUIDITY FUND
________________________________________________________________________
11.1 Trust Fund
Except after a Change in Control, no assets of the Company shall be
held in trust for any purposes under the Plan. Upon the occurrence of a
Change in Control, and from time to time (but at least once each Plan
Year) thereafter, the Company shall contribute to the Trust assets
sufficient actuarially to meet the Company's liability for all Vested
Benefits under the Plan at each time that assets are contributed.
11.2 Liquidity Fund
The Company at its sole option may from time to time maintain
liquid assets representing all or any portion of the value of its
Participants' Accrued Benefits. Any such liquidity fund shall be
invested at the discretion of the Committee, shall not be held in trust
for any Participant or Surviving Spouse, and shall in all respects
remain subject to the provisions of Section 10.3.
<PAGE> 23
ARTICLE XII
AMENDMENT OF THE PLAN
______________________________________________________________________
12.1 Amendment
The Company reserves the right to amend the Plan at any time and
from time to time. Each amendment shall be approved by the Board of
Directors of the Company. No amendment shall diminish or deprive a
Participant of any benefit already vested. The Company may amend the
Plan, and may do so retroactively if necessary, to conform the Plan to
mandatory provisions of applicable laws or regulations or as permitted
by the Internal Revenue Service or the Department of Labor.
12.2 Effect of Amendments on Vesting
Notwithstanding the provisions of the preceding Section 12.1, no
amendment to the Plan's vesting provisions shall reduce a Participant's
Vested Benefit, determined as of the later of (a) the date of execution
of such amendment, or (b) the effective date of such amendment.
<PAGE> 24
ARTICLE XIII
TERMINATION OF THE PLAN
________________________________________________________________________
13.1 Termination
The Company intends to continue the Plan indefinitely, but it does
not assume a contractual obligation to do so, and the Company may
terminate the Plan at any time, provided that no such action of the
Company shall reduce any Participant's Vested Benefit.
13.2 Benefits After Plan Termination
In the event that the Company shall terminate the Plan in whole or
in part, the rights of nonvested Participants to benefits accrued under
the Plan as of the date of such termination shall remain unvested unless
the Plan is specifically amended to provide for additional partial or
full vesting. In no event shall any person have recourse against the
Company for any reason upon termination of the Plan other than for non-
payment of Vested Benefits.
<PAGE> 25
ARTICLE XIV
MISCELLANEOUS
14.1 Limitations of Rights; Employment Relationship
The establishment of this Plan or any modification thereof, or the
accrual or vesting of any benefits, or the creation of any fund or
account, or the payment of any benefits, shall not be construed as
giving a Participant or any other person any legal or equitable right
against the Company except as provided in this Plan. In no event shall
the terms of employment of any employee be modified or in any way be
affected by the Plan.
14.2 Determination of Benefits, Claims Procedure, and Administration
(a) Claim
A person who believes that he is being denied a benefit to
which he is entitled under the Plan (hereinafter referred
to as a "Claimant") may file a written request for such
benefit with the Company, setting forth his claim. The
request must be addressed to the Committee in care of the
Company at its then principal place of business.
(b) Decision on Claim
Upon receipt of a claim, the Committee shall advise the
Claimant that a reply will be forthcoming within 90 days
and shall, in fact, deliver such reply within such period.
The Committee may, however, extend the reply period for an
additional 90 days for a reasonable cause.
If the claim is denied in whole or in part, the Committee
shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth:
(i) the specific reason or reasons for such denial;
(ii) the specific reference to pertinent provisions of
the Plan on which such denial is based;
<PAGE> 26
(iii) a description of any additional material or
information necessary for the Claimant to perfect
his claim, and an explanation of why such
material or such information is necessary;
(iv) appropriate information as to the steps to be
taken if the Claimant wishes to submit the claim
for review; and
(v) the time limits for requesting a review and for
completing any such review.
(c) Request for Review
Within 60 days after the receipt by the Claimant of the
written opinion described above, the Claimant may request
in writing that the chief executive officer of the Company
(or his designee) review the determination of the
Committee. Such request must be addressed to the chief
executive officer of the Company at the Company's then
principal place of business. The Claimant or his duly
authorized representative may, but need not, review the
pertinent documents and submit issues and comments in
writing for consideration by the chief executive officer or
his designee. If the Claimant does not request a review of
the Committee's determination by the chief executive
officer of the Company within such 60-day period, he shall
be barred and estopped from challenging the Committee's
determination.
(d) Review of Decisions
Within 60 days after receipt of a request for review, the
chief executive officer of the Company or his designee
shall review the Committee's determination. After
considering all materials presented by the Claimant, the
chief executive officer or his designee shall render a
written opinion, written in a manner calculated to be
understood by the Claimant, setting forth the specific
reasons for a decision and containing specific references
to the pertinent provisions of the Plan on which the
decision is based. If special circumstances require that
the 60-day time period be extended, the chief executive
officer or his designee shall so notify the Claimant and
shall render the decision as soon as possible, but not
later than 120 days after receipt of the request for
review.
14.3 Arbitration
<PAGE> 27
Any dispute between any person claiming benefits or any other
rights under the Plan and the Company as to the interpretation or
application of the provisions of the Plan and amounts payable hereunder
that is not finally resolved under the claims procedure described in
Section 14.2 of the Plan shall be determined exclusively by binding
arbitration in Groton, Massachusetts in accordance with the Commercial
Arbitration Rules (and not in accordance with the National Rules for the
Resolution of Employment Disputes) of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's
award in any court of competent jurisdiction. All fees and expenses of
such arbitration shall be paid by the Company.
The arbitrator shall be chosen by the parties, provided however
that if the parties cannot agree on a choice within thirty (30) days
after a demand for arbitration made by either party, the choice of an
arbitrator shall be referred to the American Arbitration Association.
Unless the parties otherwise agree, the arbitrator shall be a
Massachusetts lawyer with at least fifteen years of experience as a
specialist in employee benefits or employment law. The arbitrator shall
determine the arbitrability of the dispute if it is in controversy. The
arbitrator may consider and rule on any dispositive motions submitted by
the parties. Discovery shall be limited to such pre-hearing exchange of
information as is explicitly authorized by Chapter 251 of the
Massachusetts General Laws. The arbitrator may further limit discovery
to those items that in the judgment of the arbitrator are essential to
the determination of the matters in dispute. Except for any
stenographer and the arbitrator, attendance at the arbitration shall be
limited to the parties and their counsel and witnesses. Except as
necessary for purposes of an action to enforce, modify, or vacate the
arbitration award, all documents and other information submitted to the
arbitrator, including any transcripts of the proceedings shall be
confidential and shall not be disclosed to anyone other than the parties
and their counsel and other appropriate advisors.
14.4 Non-Assignability of Benefits
Neither the Participant nor his Surviving Spouse shall have any
power or right to transfer, assign, anticipate, hypothecate, or
otherwise encumber any part or all of the amounts payable hereunder,
which are expressly declared to be non-assignable and non-transferable.
Any such attempted assignment or transfer shall be void. No amount
payable under the Plan shall, prior to actual payment thereof, be
subject to seizure by any creditor of any such person for the payment of
any debt, judgment, or other obligation, by a proceeding at law or in
equity, or be transferable by operation of law in the event of the
bankruptcy, insolvency, divorce, or death of the Participant or his
Surviving Spouse.
<PAGE> 28
14.5 Facility of Payments
In the event that the Committee shall determine that any person to
whom a benefit is payable under the Plan is unable to care for his
affairs because of illness or accident, or is otherwise mentally or
physically incompetent or unable to give a valid receipt, the Committee
may cause the payment becoming due to be paid to the person's spouse,
child, grandchild, parent, brother or sister, or to any appropriate
individual appointed by a court of competent jurisdiction, or to any
person deemed by the Committee to have incurred expense for such person
otherwise entitled to payment.
14.6 Obligations to Withhold and Pay Taxes
Each Participant or other recipient of benefits under the Plan
shall be liable for all tax obligations, if any, with respect to any sum
received pursuant to the Plan and for accurately reporting and paying in
full all such taxes to the appropriate federal, state, and local
authorities. The Company shall have the right to deduct and withhold
from any payment due under the Plan or from other amounts owed to or
with respect to the Participant all withholding taxes and other amounts
required by law or as necessary to set off amounts owed by the
Participant to the Company.
14.7 Representations
The Company hereby does not represent or guarantee that any
particular federal, state or local income, payroll, personal property,
or other tax consequence will result from participation in this Plan. A
Participant should consult with professional tax advisors to determine
the tax consequences of his participation.
14.8 Severability
If a court of competent jurisdiction holds any provision of this
Plan to be invalid or unenforceable, the remaining provisions of the
Plan shall continue to be fully effective.
14.9 Applicable Law
This Plan shall be governed by and construed in accordance with
applicable federal law and, to the extent not preempted by such federal
law, the laws of the Commonwealth of
<PAGE> 29
Massachusetts applicable to contracts that are made and to be wholly
performed in such jurisdiction.
<PAGE> 30
14.10 Successor Employers
This Plan shall enure to the benefit of and be binding upon the
Company and its successors.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
under seal by its duly authorized representative this 2nd day of
November, 1998.
NEW ENGLAND BUSINESS SERVICE, INC.
By: /s/ Robert J. Murray
Title: Chairman, President and Chief Executive Officer
(Seal)
<PAGE> 31
31
