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 December 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 January 29, 1999
was 14,488,579.
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- ----------------------------
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
<CAPTION>
(unaudited)
Dec. 26, June 27,
1998 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 4,709 $ 10,823
Accounts receivable - net 57,604 50,985
Inventories 23,323 20,970
Direct mail advertising and prepaid expenses 10,114 12,289
Deferred income tax benefit 5,993 5,993
-------- --------
Total current assets 101,743 101,060
Property and equipment - net 54,175 51,930
Property held for sale 1,899 1,131
Deferred income tax benefit 2,652 2,652
Goodwill - net 76,265 75,586
Other assets - net 70,290 75,218
-------- --------
TOTAL ASSETS $307,024 $307,577
======== ========
LIABILITIES AND STOCKHOLDERS'EQUITY
Current Liabilities
Accounts payable $ 15,626 $ 16,038
Accrued expenses 32,032 34,639
-------- --------
Total current liabilities 47,658 50,677
Revolving line of credit 132,500 141,000
Deferred income taxes 1,408 1,395
STOCKHOLDERS'EQUITY
Common stock 15,268 15,185
Additional paid-in capital 47,356 44,559
Accumulated other comprehensive income (3,106) (2,337)
Retained earnings 79,610 71,962
-------- --------
Total 139,128 129,369
Less: Treasury stock (13,670) (14,864)
-------- --------
Stockholders' Equity 125,458 114,505
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $307,024 $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 Six Months Ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $127,297 $ 81,651 $239,983 $157,266
OPERATING EXPENSES:
Cost of sales 46,587 30,457 88,499 59,468
Selling and advertising 48,567 27,740 91,162 52,596
General and administrative 17,389 12,478 34,289 24,638
-------- -------- -------- --------
Total operating expenses 112,543 70,675 213,950 136,702
INCOME FROM OPERATIONS 14,754 10,976 26,033 20,564
OTHER INCOME/(EXPENSE):
Interest income 25 42 52 107
Interest expense (2,301) (477) (4,480) (954)
Gain on pension settlement 259 - 259 556
-------- -------- -------- --------
INCOME BEFORE TAXES 12,737 10,541 21,864 20,273
PROVISION FOR INCOME TAXES 4,825 4,058 8,474 7,829
-------- -------- -------- --------
NET INCOME 7,912 6,483 13,390 12,444
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME, net of tax (563) (195) (769) (208)
-------- -------- -------- --------
COMPREHENSIVE INCOME $ 7,349 $ 6,288 $ 12,621 $ 12,236
======== ======== ======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share $ .55 $ .47 $ .93 $ .91
======== ======== ======== ========
Diluted Earnings Per Share $ .53 $ .46 $ .91 $ .89
======== ======== ======== ========
Dividends $ .20 $ .20 $ .40 $ .40
======== ======== ======== ========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 14,401 13,707 14,365 13,677
Plus incremental shares from assumed
conversion of stock options 439 364 390 314
-------- -------- -------- --------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 14,840 14,071 14,755 13,991
======== ======== ======== ========
</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>
Six Months Ended
Dec. 26 Dec. 27
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 13,390 $ 12,444
Adjustments to reconcile net income to cash:
Depreciation 6,807 5,279
Amortization 6,079 1,567
Deferred income taxes 82 (28)
Gain on pension curtailment 259 556
Other non-cash items 2,687 668
Changes in assets and liabilities:
Accounts receivable (8,784) (4,185)
Inventories and prepaid expenses 66 (1,343)
Accounts payable (342) (2,964)
Accrued expenses (3,541) 2,087
--------- ---------
Net cash provided by operating activities 16,703 14,081
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (9,637) (7,332)
Purchase of investments - (1,039)
Proceeds from sale of investments - 468
Acquisition of business (174) (82,782)
Other assets (32) (330)
--------- ---------
Net cash used in investing activities (9,843) (91,015)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt (40,000) (7,000)
Proceeds from credit line 31,500 84,500
Proceeds from issuing common stock upon stock
option exercise 1,466 1,569
Purchase of treasury stock (147) -
Dividends paid (5,742) (5,466)
--------- ---------
Net cash provided by (used in) financing (12,923) 73,603
activities
EFFECT OF EXCHANGE RATE ON CASH (51) (77)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,114) (3,408)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,823 7,365
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,709 $ 3,957
========= =========
</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 December 26, 1998 was $2,321,000.
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 $48,518,000 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 $61,118,000.
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. The liability associated with the McBee
integration plan remaining as of December 26, 1998 was $1,983,000.
Should the integration liabilities for McBee and Rapidforms be settled at
amounts less than their original estimates, the excess will reduce the amount
of recorded goodwill.
<PAGE>
3. Inventories
- --------------
Inventories are carried at the lower of first-in, first-out cost or market.
Inventories at December 26, 1998 and June 27, 1998 consisted of:
<TABLE>
<CAPTION>
(unaudited)
Dec. 26, June 27,
1998 1998
----------- -----------
<S> <C> <C>
Raw paper $ 1,935,000 $ 1,622,000
Business forms, related office products
and shipping, warehouse and packaging
supplies 21,388,000 19,348,000
---------- -----------
Total $23,323,000 $20,970,000
=========== ===========
</TABLE>
4. 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
year-to-date period approximately $751,000 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 year 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 year 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 1955 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 $45.6 million or 55.9% to $127.3 million in the second
quarter of fiscal year 1999 from $81.7 million in last year's second quarter.
The sales increase was composed of approximately a $41.3 million, or 50.6%,
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 $4.3 million, or 5.3%,
increase in sales of the Company's other business units. Sales in fiscal year
1999 were aided by favorable customer response to the recently launched Company
Colors(tm) line of work wear. The second quarter of the fiscal year also is
the primary time period for seasonal sales of holiday cards for both Rapidforms
and the Company's other business units. McBee and Rapidforms were acquired
subsequent to the end of last year's first quarter.
Net sales increased $82.7 million or 52.6% to $240.0 million for the first
six months of fiscal year 1999 from $157.3 million in last year's first six
months. The sales increase was composed of approximately a $76.3 million, or
48.5%, increase associated with the acquisition of Rapidforms and McBee during
fiscal year 1998, and a $6.4 million, or 4.1%, increase in sales of the
Company's other business units.
<PAGE
For the second quarter of fiscal year 1999, cost of sales decreased to 36.6%
of sales from 37.3% in last year's comparable period. This decrease was due to
an increase in revenue generated by higher margin products associated with the
recent acquisition of McBee, the addition of Rapidforms' holiday card business
to the results this year and increased efficiencies in the Company's U.S and
Canadian operating units primarily selling business forms and related printed
products. These factors counteracted the impact of $422,000 in costs incurred
in fiscal year 1999 in conjunction with activities related to integration of
manufacturing facilities between Rapidforms, McBee and the Company's other
plants. Cost of sales as a percent of sales is anticipated to remain
consistent with the second quarter's results for the remainder of the fiscal
year, due to anticipated efficiency improvements resulting from manufacturing
integration activities with recently acquired companies.*
For the first six months of fiscal year 1999, cost of sales decreased to
36.9% of sales from 37.8% in last year's comparable period. This decrease was
due to similar reasons as in the second quarter results enumerated above, as
well as a non-recurring increase in freight costs in the previous year's first
quarter as a result of the UPS strike. Costs of $882,000 were also incurred
during the six months of fiscal year 1999 related to plant integration
activities between Rapidforms, McBee and the Company's other plants.
Selling and advertising expense increased to 38.2% of sales in the second
quarter of fiscal year 1999 from 34.0% of sales in last year's comparable
quarter. The increase was due primarily to the direct sales force employed by
McBee which generates a higher selling and advertising expense as a percentage
of sales than in the Company's other businesses. The Company also incurred
$125,000 in costs during the quarter in connection with efforts to harmonize
product offerings between Rapidforms, McBee and the Company. In addition,
amortization expense related to the intangible assets of acquisitions climbed
from 0.9% of sales in the second quarter of fiscal year 1998 to 2.4% of sales
in the second quarter of fiscal year 1999. Selling and advertising expense as
a percentage of sales is expected to remain consistent with the second quarter
for the remainder of the fiscal year.*
Selling and advertising expense increased to 38.0% of sales in the first six
months of fiscal year 1999 from 33.4% of sales in last year's comparable
period. The increase was due to similar reasons as outlined above regarding the
second quarter results: the addition of McBee, $325,000 of costs related to
product harmonization and the increase in amortization expenses from year to
year.
General and administrative expense decreased to 13.7% of sales in the second
quarter of fiscal year 1999 from 15.3% 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. This mix change offset $183,000 of general and administrative
spending related primarily to systems integration efforts between Rapidforms,
McBee and the Company. Even with the decline above, during the second quarter,
the Company continued to increase spending levels associated with its program
to re-engineer financial and operational information systems. General and
administrative expense as a percent of sales is expected to remain consistent
with the second quarter throughout the remainder of the fiscal year.*
<PAGE
General and administrative expense decreased to 14.3% of sales in the first six
months of fiscal year 1999 from 15.7% 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, offset in part by spending for systems integration between
Rapidforms, McBee and the Company of $367,000.
Interest expense increased to 1.8% of sales in the second quarter of fiscal
year 1999 and 1.9% for the first six months of the year from 0.6% of sales in
the prior year's comparable periods. 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 decreased to
37.9% in the second quarter of 1999 from 38.5% 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, particularly due to the
addition of Rapidforms and McBee. On a year-to-date basis, the overall tax
rate has remained consistent at 38.8% this year compared to 38.6% in the prior
year. The Company is beginning to employ strategies to lower the overall tax
rate by taking advantage of opportunities the recently acquired businesses
allow.
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
year-to-date period approximately $751,000 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 year 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 year 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 45% of the Company's mission
critical systems have been remediated as of December 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 December
26, 1998. Due to the modification of the Company's plans to focus on
remediation rather than replacement, an additional $7 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 six months ended December 26,
1998 was $ 16.7 million and represented an increase of $2.6 million from the
$14.1 million provided in the comparable period last year. The increase in
operating cash flow was the result of an increase in net income and non-cash
depreciation and amortization charges between the comparable periods, offset by
increased investment in working capital.
Working capital at December 26, 1998 amounted to $54.1 million, including
$4.7 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 $3.7 million increase in working capital during the year is
principally the result of increased receivables due to the Company's recent
seasonal holiday card sales and increases in inventory due to a build up for
the beginning of the new calendar year, which is generally a busy period,
offset by the use of the cash balances available at the end of the year to pay
off long-term debt shortly after June 27, 1998. The Company intends to try to
maintain cash and short term investment balances under $5.0 million to support
operations on an ongoing basis while at the same time minimizing debt.*
Capital expenditures for the six months ended December 26, 1998 were $9.6
million versus the $7.3 million expended during last year's comparable period.
Capital expenditures in the first two quarters of fiscal year 1999 and fiscal
year 1998 included significant expenditures for information systems
infrastructure, including an upgrade to the Company's mainframe computer in
1998. In addition the Company constructed a $1.7 million addition to their
facility in Midland, Ontario in the first quarter of fiscal year 1999.
Significant upgrades to workspaces and furniture in the Groton, Massachusetts
facility also took place during the first quarter of fiscal year 1999 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 December 26, 1998, the Company had $132.5 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. The Company is currently in
compliance with these covenants.
<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 December 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 December 26, 1998, the Company had
outstanding forward exchange rate contracts for $ 2.0 million worth of Pound
Sterling and $98,000 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 have increased steadily over the past few
years until recently. In addition, certain segments of the paper market have
demonstrated considerable price volatility in that same time period. Postal
rates for third class mail have also increased sporadically and at times
significantly in the past decade. 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, margins on new product introductions, 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 are no specified repayment dates 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
- ------------------------------------------------------------
a. The Annual Meeting of Stockholders was held on October 23, 1998.
b. See Item 4(c) below.
c. The stockholders fixed the number of Directors to be elected at seven
and elected the following as Directors:
For Authority Withheld
--- ------------------
Robert J. Murray 13,388,568 37,277
Robert L. Gable 13,424,577 1,268
Benjamin H. Lacy 13,389,616 36,229
Herbert W. Moller 13,077,377 348,468
Richard H. Rhoads 13,385,577 40,268
Brian E. Stern 13,424,237 1,268
M. Anne Szostak 13,077,237 348,608
The stockholders voted to ratify the selection of Deloitte & Touche LLP
as independent auditors of the Company for the fiscal year ending June 27, 1999
For Against Abstain
--- ------- -------
13,415,292 1,022 9,531
d. Not applicable.
<PAGE
Item 5. OTHER INFORMATION
- --------------------------
Proposals of stockholders intended to be presented at the 1999 Annual Meeting
of Stockholders must be received by the Company, at its offices at 500 Main
Street, Groton, Massachusetts 01471, no later than May 14, 1999, in order to be
considered for inclusion in the Proxy Statement and form of proxy relating to
that meeting in accordance with Rule 14a-8 promulgated under the Securities
Exchange Act of 1934. If a stockholder intends to submit a proposal at the
1999 Annual Meeting of Stockholders outside of the processes of Rule 14a-8, and
fails to notify the Company at the foregoing address of such intention no later
than July 28, 1999, the proxy solicited by the Board of Directors with respect
to such meeting may grant discretionary authority to the proxies named therein
to vote with respect to such matter.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits
Exhibit No. Description
---------- -----------
10(a) Change in Control agreement dated November 18, 1998 between
the Company and Daniel M. Junius.
10(b) Second Amendment to Amended and Restated Revolving Credit
Agreement dated as of January 8, 1999, by and among New
England Business Service, Inc., BankBoston, N.A. and Fleet
National Bank (together with certain other financial
institutions, the "Banks"), BankBoston, N.A., as agent for
the Banks, and Fleet National Bank, as documentation agent
for the Banks.
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)
February 9, 1999 /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>
Six Months Ended
Dec. 26, Dec. 27,
1998 1997
-------- --------
<S> <C> <C>
Net Income (a) $13,390 $12,444
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (b) 14,365 13,677
Plus incremental shares from assumed
conversion of stock options 390 314
-------- --------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING(c) 14,755 13,991
======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share (a)/(b) $ .93 $ .91
======== ========
Diluted Earnings Per Share (a)/(c) $ .91 $ .89
======== ========
</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 DECEMBER 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> 9-MOS
<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> DEC-26-1998
<CASH> 4,709
<SECURITIES> 0
<RECEIVABLES> 62,401
<ALLOWANCES> 4,797
<INVENTORY> 23,323
<CURRENT-ASSETS> 101,743
<PP&E> 139,388
<DEPRECIATION> 85,213
<TOTAL-ASSETS> 307,024
<CURRENT-LIABILITIES> 47,658
<BONDS> 0
0
0
<COMMON> 15,268
<OTHER-SE> 110,190
<TOTAL-LIABILITY-AND-EQUITY> 307,024
<SALES> 239,983
<TOTAL-REVENUES> 239,983
<CGS> 88,499
<TOTAL-COSTS> 88,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,074
<INTEREST-EXPENSE> 4,480
<INCOME-PRETAX> 21,864
<INCOME-TAX> 8,474
<INCOME-CONTINUING> 13,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,390
<EPS-PRIMARY> .93
<EPS-DILUTED> .91
</TABLE>
October 23, 1998
Mr. Daniel M. Junius
12 Crestwood Court
Amherst, NH 03031
Dear Dan:
New England Business Service, Inc., a Delaware corporation (the
"Company"), considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders. In this connection, the
Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that
such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the
Company's management to their assigned duties without distraction in
circumstances arising from the possibility of a change in control of the
Company. In particular, the Board believes it important, should the
Company or its shareholders receive a proposal for transfer of control of
the Company, that you be able to assess and advise the Board whether such
proposal would be in the best interests of the Company and its
shareholders and to take such other action regarding such proposal as the
Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this letter
agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event
your employment with the Company is terminated subsequent to a "change in
control" of the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(i) Except as otherwise provided in paragraph (ii) below, the Company or
you may terminate your employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance with the terms
hereof.
<PAGE> 1
(ii) In the event a tender offer or exchange offer is made by a
Person (as hereinafter defined) for more than 25% of the combined voting
power of the Company's outstanding securities ordinarily having the right
to vote at elections of directors ("Outstanding Company Voting
Securities"), including shares of common stock ($1.00 par value) of the
Company (the "Stock"), you agree that you will not leave the employ of the
Company (other than as a result of Disability or upon Retirement, as such
terms are hereinafter defined) and will render the services contemplated
in the recitals to this Agreement until such tender offer or exchange
offer has been abandoned or terminated or a change in control of the
Company, as defined in Section 3 hereof, has occurred. For purposes of
this Agreement, the term "Person" shall mean and include any individual,
corporation, partnership, group, association or other "person", as such
term is defined in Section 3(a)(9) and as used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the
Company, a wholly owned subsidiary of the Company or any employee benefit
plan(s) sponsored by the Company or a subsidiary of the Company.
2. Term of Agreement.
This Agreement shall commence on the date hereof and shall continue in
effect until July 1, 2001; provided, however, that this Agreement shall
continue in effect for a period of twenty-four (24) months after a change
in control of the Company, as defined in Section 3 hereof, if such change
in control shall have occurred during the term of this Agreement.
Notwithstanding anything in this Section 2 to the contrary, this Agreement
shall terminate if you or the Company terminate your employment prior to a
change in control of the Company as provided in Section 1 (i) above.
3. Change in Control.
For the purpose of this Agreement a "Change in Control" shall mean:
(a) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
35% or more of either (i) the then outstanding shares of the Stock or (ii)
the combined voting power of the Outstanding Company Voting Securities;
provided, however, that the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the Company
(excluding an acquisition by virtue of the exercise of a conversion
privilege); (B) any acquisition by the Company or by any corporation
controlled by the Company; (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any
corporation pursuant to a consolidation or merger, if, following such
consolidation or merger, the conditions describe in clauses (i), (ii) and
(iii) of subsection (c) of this paragraph are satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") ceasing for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director (other than a director designated by a Person who has
entered into an agreement within the Company to effect a transaction
described in clauses (a) or (c) of this Section) subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote or resolution of at least a majority
of the directors then comprising the Incumbent
<PAGE> 2
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual
or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Adoption by the Board of a resolution approving an
agreement of consolidation of the Company with or merger of the Company
into another corporation or business entity in each case, unless,
following such consolidation or merger, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such consolidation or merger and/or the
combined voting power of the then outstanding voting securities of such
corporation or business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the
affairs of such entity) is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Stock and Outstanding
Company Voting Securities immediately prior to such consolidation or
merger in substantially the same proportions as their ownership,
immediately prior to such consolidation or merger, of the Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding the Company, any employee benefit plan (or related trust) of
the Company or such corporation or other business entity resulting from
such consolidation or merger and any Person beneficially owning,
immediately prior to such consolidation or merger, directly or indirectly,
35% or more of the Stock or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such consolidation or merger and/or the
combined voting power of the then outstanding voting securities of such
corporation or business entity entitled to vote generally in the election
of its directors (or other persons having the general power to direct the
affairs of such entity) and (iii) at least a majority of the members of
the board of directors (or other group of persons having the general power
to direct the affairs of the corporation or other business entity)
resulting from such consolidation or merger were members of the Incumbent
Board at the time of the execution of the initial agreement providing for
such consolidation or merger; provided, that any right to receive
compensation pursuant to Section 5 below which shall vest by reason of the
action of the Board pursuant to this subsection (c) shall be divested upon
(A) the rejection of such agreement of consolidation or merger by the
stockholders of the Company or (B) its abandonment by either party thereto
in accordance with its terms; or
(d) Adoption by the requisite majority of the whole Board, or
by the holders of such majority of stock of the Company as is required by
law or by the Certificate of Incorporation or By-Laws of the Company as
then in effect, of a resolution or consent authorizing (i) the dissolution
of the Company or (ii) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a
corporation or other business entity with respect to which, following the
such sale or other disposition, (A) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and/or the
combined voting power of the outstanding voting securities of such
<PAGE> 3
corporation or other entity to vote generally in the election of its
directors (or other persons having the general power to direct its
affairs) is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the Stock and/or Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding the
Company and any employee benefit plan (or related trust) of the Company or
such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Stock and/or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly,
35% or more of, respectively, the then outstanding shares of common stock
of such corporation and/or the combined voting power of the then
outstanding voting securities of such corporation or other business entity
entitled to vote generally in the election of directors (or other persons
having the general power to direct its affairs), and (C) at least a
majority of the members of the board of directors or group of persons
having the general power to direct the affairs of such corporation or
other entity were members of the Incumbent Board at the time of the
execution of the initial agreement of action of the Board providing for
such sale or other disposition of assets of the Company; provided, that
any right to receive compensation pursuant to Section 5 below which shall
vest by reason of the action of the Board or the stockholders pursuant to
this subsection shall be divested upon the abandonment by the Company of
such dissolution, or such sale of or other disposition of assets, as the
case may be.
Notwithstanding anything in the foregoing to the contrary, no change in
control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction which results in you, or a group of Persons
which includes you, acquiring, directly or indirectly, 35% or more of the
combined voting power of the Company's Outstanding Voting Securities.
4. Termination Following Change in Control.
If any of the events described in Section 3 hereof constituting a change
in control of the Company shall have occurred, you shall be entitled to
the benefits provided in section 5 hereof upon the termination of your
employment with the Company within twenty-four (24) months after such
event, unless such termination is (a) because of your death, (b) by the
Company for Cause, Disability or Retirement or (c) by you other than for
Good Reason (as all such capitalized terms are hereinafter defined).
(i) Disability. Termination by the company of your employment based
on "Disability" shall mean termination because of your absence from your
duties with the Company on a full time basis for one hundred twenty (120)
consecutive days as a result of your incapacity due to physical or mental
illness, unless within thirty (30) days after Notice of Termination (as
hereinafter defined) is given to you following such absence you shall have
returned to the full time performance of your duties.
(ii) Retirement. Termination by you or by the Company of your
employment based
<PAGE> 4
on "Retirement" shall mean termination on or after your normal retirement
date as defined in the Company's Pension Plan (or any successor or
substitute plan or plans of the Company put into effect prior to a change
in control) (the "Pension Plan").
(iii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (a) the willful and continued failure
by you to perform substantially your duties with the Company (other than
any such failure resulting from your incapacity due to physical or mental
illness) after a demand for substantial performance is delivered to you by
the Chairman of the Board or President of the Company which specifically
identifies the manner in which such executive believes that you have not
substantially performed your duties, or (b) the willful engaging by you in
illegal conduct which is materially and demonstrably injurious to the
Company. For purposes of this paragraph (iii), no act, or failure to act,
on your part shall be considered "willful" unless done, or omitted to be
done, by you without reasonable belief that your action or omission was
in, or not opposed to, the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by you
in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related
to the business of the Company shall not provide a basis for termination
for Cause so long as the Board has approved your engagement in such
activities. Notwithstanding the foregoing, you shall not be deemed to
have been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the entire membership of the Board at
a meeting of the Board called and held for the purpose (after reasonable
notice to you and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of the conduct set forth above in (a) or (b) of this
paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
Reason" shall mean termination based on:
(A) a determination by you, in your reasonable judgment, that there
has been an adverse change in your status or position(s) as an officer of
the Company as in effect immediately prior to the change in control,
including, without limitation, any adverse change in your status or
position as a result of a diminution in your duties or responsibilities
(other than, if applicable, any such change directly attributable to the
fact that the Company is no longer publicly owned) or the assignment to
you of any duties or responsibilities which are inconsistent with such
status or position(s), or any removal of you from or any failure to
reappoint or reelect you to such position(s) (except in connection with
the termination of your employment for Cause, Disability or Retirement or
as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control;
<PAGE> 5
(C) the failure by the Company to continue in effect any Plan (as
hereinafter defined, excluding any stock option plan) in which you are
participating at the time of the change in control of the Company (or
Plans providing you with at least substantially similar benefits) other
than as a result of the normal expiration of any such Plan in accordance
with its terms as in effect at the time of the change in control, or the
taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any of such Plans on at
least as favorable a basis to you as is the case on the date of the change
in control or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit enjoyed by
you at the time of the change in control;
(D) the failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance
with the Company's normal vacation policy as in effect immediately prior
to the change in control;
(E) the Company's requiring you to be based at an office that is
greater than 50 miles from where your office is located immediately prior
to the change in control except for required travel on the Company's
business to an extent substantially consistent with the business travel
obligations which you undertook on behalf of the Company prior to the
change in control;
(F) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section
6 hereof;
(G) any purported termination by the Company of your employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (v) below (and, if applicable, paragraph (iii)
above); and for purposes of this Agreement, no such purported termination
shall be effective; or
(H) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of
the Company which, prior to the change in control, you were permitted by
the Board to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan
such as an incentive, stock option or restricted stock plan or any
employee benefit plan such as a thrift, pension, profit sharing, medical,
disability, accident, life insurance plan or a relocation plan or policy
or any other plan, program or policy of the Company intended to benefit
employees.
<PAGE> 6
(v) Notice of Termination. Any purported termination by the Company or
by you following a change in control shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
control shall mean (a) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that you shall not have returned to the performance of your
duties on a full-time basis during such thirty (30) day period), (b) if
your employment is to be terminated by the Company for Cause or by you
pursuant to Sections 4 (iv) (F) and 6 hereof or for any other Good Reason,
the date specified in the Notice of Termination, or (c) if your employment
is to be terminated by the Company for any reason other than Cause, the
date specified in the Notice of Termination, which in no event shall be a
date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to
by you in writing either in advance of, or after, receiving such Notice of
Termination. In the case of termination by the Company of your employment
for Cause, if you have not previously expressly agreed in writing to the
termination, then within thirty (30) days after receipt by you of the
Notice of Termination with respect thereto, you may notify the Company
that a dispute exists concerning the termination, in which event the Date
of Termination shall be the date set either by mutual written agreement of
the parties or by the arbitrators in a proceeding as provided in Section
13 hereof. During the pendency of any such dispute, the Company will
continue to pay you your full compensation in effect just prior to the
time the Notice of Termination is given (or, if higher, as in effect
immediately prior to the change in control) and until the dispute is
resolved in accordance with Section 13.
5. Compensation Upon Termination or During Disability; other Agreements.
(i) During any period following a change in control of the Company that
you fail to perform your duties as a result of incapacity due to physical
or mental illness, you shall continue to receive your salary at the rate
then in effect and any benefits or awards under any Plans shall continue
to accrue during such period, to the extent not inconsistent with such
Plans, until your employment is terminated pursuant to and in accordance
with paragraphs 4(i) and 4 (vi) hereof. Thereafter, your benefits shall
be determined in accordance with the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Company, the Company shall pay you your salary
through the Date of Termination at the rate in effect just prior to the
time a Notice of Termination is given plus
any benefits or awards (including both the cash and stock components)
which pursuant to the terms of any Plans have been earned or become
payable, but which have not yet been paid to you. Thereupon the Company
shall have no further obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within twenty-four (24) months
after a change in control of
<PAGE> 7
the Company, as defined in Section 3 above, shall have occurred, your
employment by the Company shall be terminated (a) by the Company other
than for Cause, ' Disability or Retirement or (b) by you for Good Reason,
then the Company shall pay to you, no later than the fifth day following
the Date of Termination, without regard to any contrary provisions of any
Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given (or, if
higher, as in effect immediately prior to the change in control) and (y)
any benefits or awards (including both the cash and stock components)
which pursuant to the terms of any Plans have been earned or become
payable, but which have not yet been paid to you; and
(B) you shall receive an amount equal to 1.5 times the average of
your calendar year earnings from the Company, consisting for the purposes
of this Agreement of base salary and any bonus paid pursuant to the
Executive Bonus Plan, the Management Incentive Plan, Profit Sharing Plan
or similar bonus plan, during the period consisting of the 5 most recent
consecutive calendar years (or fewer than 5, if applicable) ending on or
before the date of the change of control. For purposes of computing
payment under this Agreement, compensation for any partial calendar year,
including the year during which a change of control occurs, shall be
annualized.
(iv) If, within twenty-four (24) months after a change in control of
the Company, as defined in Section 3 above, shall have occurred, your
employment by the Company shall be terminated (a) by the Company other
than for Cause, Disability or Retirement or (b) by you for Good Reason,
then the Company shall maintain in full force and effect, for the
continued benefit of you and your dependents for a period terminating on
the earliest of (a) thirty months after the Date of Termination, (b) the
commencement date of equivalent benefits from a new employer or (c) your
normal retirement date under the terms of the Retirement Plan, all insured
and self-insured employee welfare benefit Plans in which you were entitled
to participate immediately prior to the Date of Termination, provided that
your continued participation is possible under the general terms and
provisions of such Plans (and any applicable funding media) and you
continue to pay an amount equal to your regular contribution under such
plans for such participation. In the event that your participation in any
such Plan is barred, the Company, at its sole cost and expense, shall
arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar
(on an after-tax basis) to those which you otherwise would have been
entitled to receive under such Plans pursuant to this paragraph (iv) or,
if such insurance is not available at a reasonable cost to the Company,
the Company shall otherwise provide you and your dependents with
equivalent benefits (on an after-tax basis). You shall not be required to
pay any premiums or other charges in an amount greater than that which you
would have paid in order to participate in such Plans. If, at the end of
three years after the Termination Date, you have not reached your normal
retirement date, you are participating in any of such Plans and you have
not previously received or are not then receiving equivalent benefits from
a new employer, the Company shall arrange, at its sole cost and expense,
to enable you to convert your and your dependents' coverage under such
Plans to individual policies or programs
<PAGE> 8
upon the same terms as employees of the Company may apply for such
conversions.
(v) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by you as the result of employment by another employer after the
Date of Termination, or otherwise.
6. Successors; Binding Agreement.
(i) The Company will seek, by written request at least five business
days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person assent to the fulfillment of the Company's
obligations under this Agreement. Failure of such Person to furnish such
assent by the later of (A) three business days prior to the time such
Person becomes a Successor or (B) two business days after such Person
receives a written request to so assent shall constitute Good Reason for
termination by you of your employment if a change in control of the
Company occurs or has occurred. For purposes of this Agreement,
"Successor" shall mean any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the
Company's business directly, by merger or consolidation, or indirectly, by
purchase of the Company's voting securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die
while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there be no such designee, to
your estate.
(iii) For purposes of this Agreement, the "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any merger, consolidation or form of business combination in
which the Company ceases to exist.
7. Fees and Expenses; Mitigation.
(i) The Company shall reimburse you, on a current basis, for all
reasonable legal fees and related expenses incurred by you in connection
with the Agreement following a change in control of the Company,
including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any termination of your employment or
incurred by you in seeking advice with respect to the matters set forth in
Section 8 hereof or (b) your seeking to obtain or enforce any right or
benefit provided by this Agreement, in each case, regardless of whether or
not your claim is upheld by a court of competent jurisdiction; provided,
however, you shall be required to repay any such amounts to the Company to
the extent that a court issues a final and non-appealable order setting
forth the determination that the position taken by you was frivolous or
advanced by you
<PAGE> 9
in bad faith.
(ii) You shall not be required to mitigate the amount of any payment
the Company becomes obligated to make to you in connection with this
Agreement, by seeking other employment or otherwise.
8. Taxes.
(i) All payments to be made to you under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any
other payments which you have the right to receive from the Company or any
corporation which is a member of an "affiliated group" (as defined in
Section 1504 (a) of the Internal Revenue Code of 1986 (the "Code") without
regard to Section 1504(b) of the Code) of which the Company is a member,
would constitute a "parachute payment" (as defined in Section 28OG (b) (2)
of the Code) , the payments pursuant to this Agreement shall be reduced
(reducing first the payments under Section 5 (iii) (B) ) to the largest
amount as will result in no portion of such payments being subject to the
excise tax imposed by Section 4999 of the Code; provided, however, that
the determination as to whether any reduction in the payments under this
Agreement pursuant to this proviso is necessary shall be made by you in
good faith, and such determination shall be conclusive and binding on the
Company with respect to its treatment of the payment for tax reporting
purposes.
9. Survival.
The respective obligations of, and benefits afforded to, the Company and
you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this Agreement
shall survive termination of this Agreement.
10. Notice.
For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid and addressed, in the case
of the Company, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address set
forth below his signature, provided that all notices to the Company shall
be directed to the attention of the Chairman of the Board of the Company,
with a copy to Terrence W. Mahoney, Hill & Barlow, One International
Place, Boston, MA 02110, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
11. Miscellaneous.
No provision of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in a writing
signed by you and the Chairman of the Board or President of the Company.
No waiver by either party hereto at any time of any breach by the other
party hereto of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be
<PAGE> 10
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
laws of the State of Massachusetts.
12. Validity.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
13. Arbitration.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts by three arbitrators in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered
on the arbitrators' award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
The Company shall bear all costs and expenses arising in connection with
any arbitration proceeding pursuant to this Section 13.
14. Employee's Commitment.
You agree that subsequent to your period of employment with the Company,
you will not at any time communicate or disclose to any unauthorized
person, without the written consent of the Company, any proprietary
processes of the Company or any subsidiary or other confidential
information concerning their business, affairs, products, suppliers or
customers which, if disclosed, would have a material adverse effect upon
the business or operations of the Company and its subsidiaries, taken as a
whole; it being understood, however, that the obligations of this Section
14 shall not apply to the extent that the aforesaid matters (a) are
disclosed in circumstances where you are legally required to do so or (b)
become generally known to and available for use by the public otherwise
than by your wrongful act or omission.
15. Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
<PAGE> 11
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
NEW ENGLAND BUSINESS SERVICE, INC.
By/s/ Robert J. Murray
--------------------
Robert J. Murray
For NEBS, Inc. Board of Directors
Agreed to this 18th day
Of November, 1998
/s/ Daniel M. Junius
- ------------------------------
Mr. Daniel M. Junius
12 Crestwood Court
Amherst, NH 03031
<PAGE> 12
SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
NEW ENGLAND BUSINESS SERVICE, INC.
SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT dated as of January 8, 1999 (this "Amendment"), by and among
NEW ENGLAND BUSINESS SERVICE, INC. (the "Borrower"), a Delaware
corporation having its principal place of business at 500 Main Street,
Groton, Massachusetts 01471, and the Subsidiaries of the Borrower
listed on the signature pages hereto (the "Guarantors"), BANKBOSTON,
N.A., a national banking association ("BKB"), and the other lending
institutions listed on Schedule 1 to the Credit Agreement referred to
below (together with BKB, the "Banks"), BANKBOSTON, N.A., as agent for
itself and such other lending institutions (the "Agent"), and FLEET
NATIONAL BANK, as documentation agent for itself and such other
lending institutions (the "Documentation Agent").
WHEREAS, the Borrower wishes to enter into certain corporate
restructuring transactions pursuant to which (a) McBee Systems, Inc.,
a Colorado corporation ("McBee"), will become a wholly owned
Subsidiary of Rapidforms, Inc., a New Jersey corporation
("Rapidforms"), and (b) Russell & Miller, Inc., a Delaware corporation
("Russell & Miller") will become a wholly-owned subsidiary of McBee
(the transactions described in clauses (a) and (b) are hereinafter
together referred to as the "Restructuring Transactions");
WHEREAS, the Borrower, Rapidforms and McBee wish to contribute
certain of their intellectual property rights to Russell & Miller;
WHEREAS, each of the Borrower, Rapidforms and McBee will in turn
license such intellectual property rights from Russell & Miller;
WHEREAS, Russell & Miller will contribute, on an ongoing basis,
all royalty payments received by it under the License Agreement to R&M
Trust, a voluntary association with transferable shares organized
under and by virtue of the laws of the Commonwealth of Massachusetts
(commonly referred to as a Massachusetts business trust) ("R&M
Trust");
WHEREAS, R&M Trust intends to loan substantially all of its cash
assets to the Borrower, which loans shall be evidenced by an Unsecured
Subordinated Promissory Note dated as of October 8, 1998;
<PAGE>
-2-
WHEREAS, the Borrower, the Banks, the Agent and the Documentation
Agent are parties to an Amended and Restated Revolving Credit
Agreement dated as of December 18, 1997 (as amended and in effect from
time to time, the "Credit Agreement," capitalized terms defined
therein having the same meanings herein as therein), pursuant to which
the Banks have extended credit to the Borrower on the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower has requested that the Agent and the Banks
amend the Credit Agreement so as to permit, to the extent required,
the Restructuring Transactions and the other transactions described in
the foregoing recitals;
WHEREAS, subject to the terms and conditions set forth herein,
the Borrower, the Banks, the Agent and the Documentation Agent have
agreed to amend the Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree to amend the Credit
Agreement as follows:
1. Amendments to Definitions. Section 1.1 of the Credit
Agreement is hereby amended by:
(a) adding the following new definitions to section 1.1
of the Credit Agreement in the proper alphabetical order:
"Intercompany Subordination Agreement. The Intercompany
Subordination Agreement dated as of October 8, 1998 among the Agent,
the Borrower and R&M Trust."
"R&M Contribution Agreement. The agreement pursuant to which
each of Rapidforms, McBee and Russell & Miller will contribute cash
generated from its respective operations to R&M Trust (including, in
the case of Russell & Miller, royalty payments made to it under any of
the Trademark License Agreements), in form and substance (including
any modifications thereof) satisfactory to the Agent."
"R&M Trust. R&M Trust, a voluntary association with transferable
shares organized under and by virtue of the laws of the Commonwealth
of Massachusetts (commonly referred to as a Massachusetts business
trust)."
"Restructuring Transactions. The contribution by the Borrower to
Rapidforms of one hundred percent (100%) of the issued and outstanding
capital stock of McBee; and the contribution by Rapidforms to McBee of
one hundred percent (100%) of the issued and outstanding capital stock
of Russell & Miller."
"Russell & Miller. Russell & Miller, Inc., a Delaware
corporation."
"Trademark Assets. The trademark related intellectual property
rights and related intangible assets to be contributed by the
Borrowers, Rapidforms or McBee to Russell & Miller pursuant to, and as
described in, the Trademark Contribution Agreement."
<PAGE>
-3-
"Trademark Contribution Agreement. The Agreement pursuant to
which each of the Borrower, Rapidforms and McBee will contribute the
Trademark Assets to Russell & Miller, in form and substance (including
any modifications thereto) satisfactory to the Agent."
"Trademark License Agreements. The separate agreements pursuant
to which each of the Borrower or one or more of its Subsidiaries will
license from Russell & Miller (i) all United States and foreign
trademarks, service marks, common law marks, trade names and trade
dress owned by Russell & Miller, and (ii) all United States and
foreign trademarks, service marks, common law marks, trade names and
trade dress licensed by Russell & Miller that Russell & Miller is
legally and/or contractually able to sublicense to the Borrower and
its Subsidiaries, in form and substance (including any modifications
thereto) satisfactory to the Agent."
"Unsecured Subordinated Promissory Note. The promissory note
evidencing the Indebtedness permitted by section 7.1(p), in form and
substance (including any modifications thereof) satisfactory to the
Agent."
(b) deleting the definition of "Consolidated Funded Debt" in
its entirety and replacing it with the following new definition:
"Consolidated Funded Debt. At any time of determination, the
sum of (i) the amount of the Loans outstanding (after giving account
to any amounts requested) plus accrued but unpaid interest thereon;
plus (ii) the outstanding amount of any other Indebtedness for
borrowed money (other than intercompany Indebtedness owed by the
Borrower and its Subsidiaries to each other and permitted by the terms
hereof), in respect of Capitalized Leases or which is otherwise
subject to the payment of interest plus accrued but unpaid interest on
such Indebtedness, including expenses consisting of interest in
respect of Capitalized Leases and including commitment fee, agency
fee, facility fee, balance deficiency fee and similar fee expenses in
connection with the borrowing of money."
(c) amending the definition of "Loan Documents" by inserting
the text "the Intercompany Subordination Agreement and any other
subordination arrangements entered into pursuant to section 7.1(j) or
(p)" immediately after the text "the Fee Letters" and immediately
before the text "any Guaranty".
2. Amendment of section 5.1.1 of the Credit Agreement.
Section 5.1.1 of the Credit Agreement is hereby deleted in its
entirety, and the following new section 5.1.1 is hereby substituted in
lieu thereof:
"5.1.1. Organization; Good Standing. Each of the Borrower
and its Subsidiaries (i) is a corporation or, in the case of R&M
Trust, a Massachusetts business trust, duly organized, validly
existing and, except in the case of R&M Trust (with respect to which
no such concept is applicable), in good standing under the laws of its
jurisdiction of organization, (ii) has all requisite power to own its
property and conduct its business as now conducted and as presently
contemplated and (iii) is in good standing
<PAGE>
-4-
as a foreign corporation or other entity and is duly authorized to do
business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of the
Borrower or such Subsidiary."
3. Amendment of section 5.1.2 of the Credit Agreement.
Section 5.1.2 of the Credit Agreement is hereby amended by:
(a) deleting clause (i) thereof in its entirety and
substituting in lieu thereof the following text: "(i) are within the
corporate or other authority of such Person,";
(b) inserting in clause (ii) thereof the text "or other"
immediately after the word "corporate" and immediately before the text
"proceedings"; and
(c) inserting in clause (iv) thereof the text "or other
organizational documents thereof, immediately after the text
"corporate charter or bylaws" and immediately before the text "of, or
any agreement".
4. Amendment of section 6.6 of the Credit Agreement. Section
6.6 of the Credit Agreement is hereby amended by:
(a) deleting the title thereof in its entirety and
substituting in lieu thereof the title "Corporate or Other Existence;
Maintenance of Properties."; and
(b) inserting in the first sentence thereof, immediately
after the text "and those of its Subsidiaries" and immediately before
the text "and will not, and will not cause or permit", the text "(and,
in the case of R&M Trust, its existence, rights and franchises as a
Massachusetts business trust)".
5. Amendment of section 6.14 of the Credit Agreement and
Addition of new section 6.15 to the Credit Agreement. Section 6.14 of
the Credit Agreement is hereby deleted in its entirety, and the
following new section section 6.14 and 6.15 are hereby substituted in
lieu thereof:
"6.14. Certain Intercompany Payments. The Borrower will,
and will, as applicable, cause each of Russell & Miller and R&M Trust
to, (a) promptly upon Russell & Miller's receipt thereof, cause all
royalty payments received by Russell & Miller pursuant to any of the
Trademark License Agreements (net of reasonable expenses incurred by
Russell & Miller in connection with the maintenance, protection and
enforcement of its related trademark intellectual property rights and
the performance of its obligations under the Trademark License
Agreements) to be paid to R&M Trust as capital contributions, and (b)
promptly upon R&M Trust's receipt thereof, cause R&M Trust to lend to
the Borrower pursuant to the Unsecured Subordinated Promissory Note
all amounts (net of reasonable, ordinary course operating expenses)
received by it pursuant to clause (a) of this section 6.14 or
otherwise.
6.15. Further Assurances. The Borrower will, and will
cause each of its Subsidiaries to, cooperate with the Banks and the
Agent and execute such further
<PAGE
-5-
instruments and documents as the Banks or the Agent shall reasonably
request to carry out to the satisfaction of the Agent and the Banks
the transactions contemplated by this Credit Agreement and the other
Loan Documents."
6. Amendment of section 7.1 of the Credit Agreement. Section
7.1 of the Credit Agreement is hereby amended by:
(a) inserting, in subsection (b) thereof, immediately
after the text "of the Borrower" and immediately before the text
"incurred in the ordinary course", the text "and its Subsidiaries
(other than Russell & Miller and R&M Trust)";
(b) deleting subsection (f) thereof in its entirety and
substituting in lieu thereof the following new subsection (f):
"(f) obligations of the Borrower or any of its
Subsidiaries (other than Russell & Miller and R&M Trust) under
Capitalized Leases not exceeding $5,000,000 in the aggregate at any
time outstanding;"
(c) deleting subsection (g) thereof in its entirety and
substituting in lieu thereof the following new subsection (g):
"(g) Indebtedness incurred in connection with the
acquisition after the date hereof of any real or personal property by
the Borrower or any Subsidiary of the Borrower (other than Russell &
Miller and R&M Trust); provided that the aggregate principal amount of
such Indebtedness of the Borrower and its Subsidiaries (other than
Russell & Miller and R&M Trust) shall not exceed the aggregate amount
of $5,000,000 at any one time;".
(d) deleting subsection (j) thereof in its entirety and
substituting in lieu thereof the following new subsection (j):
"(j) Indebtedness of the Borrower to any and all
Subsidiaries of the Borrower (other than Russell & Miller and R&M
Trust), which Indebtedness is subordinated to the Obligations on terms
and conditions satisfactory to the Agent, in an aggregate amount not
to exceed $10,000,000;"
(e) deleting subsection (k) thereof in its entirety and
substituting in lieu thereof the following new subsection (k):
"(k) Indebtedness of the Borrower or any of its
Subsidiaries (other than Russell & Miller or R&M Trust) in respect of
(i) overseas lines of credit, (ii) letters of credit, (iii) the
granting of surety, appeal, bid, performance or other similar bonds or
(iv) guaranties or other contingent obligations in respect of
Indebtedness of any Person, all of which Indebtedness described in
clauses (i)-(iv) of this subparagraph (k), in the aggregate, shall not
exceed $10,000,000;".
<PAGE>
-6-
(f) inserting, immediately after subsection (n) and
before existing subsection (o) the following new subsections (o), (p)
and (q) with the following text:
"(o) obligations in respect of royalty payments owed by
any of the Borrower or any of its Subsidiaries to Russell & Miller
under and pursuant to any of the Trademark License Agreements;
(p) Indebtedness of the Borrower to R&M Trust under and
pursuant to the Unsecured Subordinated Promissory Note, which such
Indebtedness is subordinated to the Obligations on terms and
conditions satisfactory to the Agent, which shall include the
Intercompany Subordination Agreement; and"
(q) Indebtedness of Russell & Miller and R&M Trust not
expressly permitted under subsections (a) through (p) of this section
7.1, in an aggregate amount (owed by either or both such entities) not
to exceed $5,000,000 at any time; and"
(g) deleting existing subsection (o) and substituting in
lieu thereof the following new subsection (r):
"(r) Indebtedness of the Borrower or any of its
Subsidiaries (other than Russell & Miller or R&M Trust) not expressly
permitted under subsections (a) through (q) of this section 7.1 in an
aggregate amount not to exceed $5,000,000 at any time."
7. Amendment of section 7.3 of the Credit Agreement.
Section 7.3 of the Credit Agreement is hereby amended by:
(a) deleting clause (ii) from subsection (j) thereof in
its entirety and substituting in lieu thereof the following clause
(ii):
"(ii) made following the Closing Date in Subsidiaries
of the Borrower (other than R&M Trust) in an aggregate amount (other
than Investments permitted by section 7.3(n), section 7.3(o) or
section 7.3(p)) for all such Subsidiaries (other than R&M Trust) not
to exceed $7,500,000;".
(b) deleting the word "and" at the end of subsection (m)
thereof;
(c) inserting, immediately following subsection (m)
thereof and immediately before existing subsection (n) thereof, new
subsections (n), (o), (p) and (q) with the following text:
"(n) in connection with the Restructuring Transactions,
Investments consisting of the capital contribution by the Borrower to
Rapidforms of 100% of the issued and outstanding capital stock of
McBee and by Rapidforms to McBee of 100% of the issued and outstanding
capital stock of Russell & Miller;
(o) Investments consisting of the contribution by each
of the Borrower, Rapidforms and McBee of its Trademark Assets (whether
owned on the Second Amendment
<PAGE>
-7-
Effective Date or thereafter acquired) to Russell & Miller pursuant to
the Trademark Contribution Agreement;
(p) without limiting the Investments permitted by
section 7.3(j), Investments in R&M Trust by Rapidforms, McBee and
Russell & Miller pursuant to the R&M Contribution Agreement;
(q) Investments with respect to Indebtedness permitted
by section 7.1(p)."
(d) deleting existing subsection (n) at the end thereof
and substituting in lieu thereof the following new subsection (r):
"(r) Investments not otherwise expressly permitted
under subsections (a)-(q) of this section 7.3, in an aggregate amount
not to exceed $5,000,000."
8. Amendment to section 7.5.2 of the Credit Agreement.
Section 7.5.2 of the Credit Agreement is hereby amended by:
(a) deleting the word "and" immediately before clause
(e) thereof;
(b) inserting, immediately before the period (".") at
the end thereof the following new subsections (f) and (g):
"(f) in connection with the Restructuring
Transactions, transfer by the Borrower to Rapidforms of 100% of the
issued and outstanding shares of the capital stock of McBee and the
transfer by Rapidforms to McBee of 100% of the issued and outstanding
capital stock of Russell & Miller; and
(g) transfer by the Borrower, Rapidforms and McBee
to Russell & Miller of all of their Trademark Assets pursuant to the
Trademark Contribution Agreement; provided, however, that such
Trademark Assets shall be licensed back to the Borrower, Rapidforms
and McBee pursuant to and on the terms and conditions set forth in the
applicable Trademark License Agreement."
9. Amendment to section 7.6 of the Credit
Agreement. Section 7.6 of the Credit Agreement is hereby amended by
deleting the period (".") at the end thereof and substituting in lieu
thereof the following text: "; provided, however, that the Borrower,
Rapidforms and McBee may transfer the Trademark Assets to Russell &
Miller pursuant to the terms and conditions set forth in the Trademark
Contribution Agreement, and Russell & Miller may license the Trademark
Assets to the Borrower, and any of its Subsidiaries (other than R&M
Trust) pursuant to the terms and conditions set forth in the Trademark
License Agreements; and provided further that, to the extent otherwise
limited by this section 7.6, the Borrower may sell approximately
seventeen (17) acres of real property owned by it in Atlanta, Douglas
County, Georgia, and may lease all or a portion of a building or
buildings to be constructed thereon."
10. Amendment of section 7.12 of the Credit Agreement.
Section 7.12 of the Credit Agreement is hereby amended by:
<PAGE>
-8-
(a) deleting the heading thereof and substituting in lieu
thereof the following heading: "Conduct of Business; Agreements
Regarding Certain Subsidiaries".
(b) inserting at the end thereof the following text:
"R&M Trust shall not conduct any business or activities other
than the lending to the Borrower pursuant to the Unsecured
Subordinated Promissory Note of all amounts (net of reasonable,
ordinary course operating expenses) received by it, whether by way of
capital contributions pursuant to the R&M Contribution Agreement or
otherwise, and shall have no assets other than cash (which shall be
loaned to the Borrower in accordance with section 6.14) and
Indebtedness owed by the Borrower to it as permitted by section
7.1(p). Without limiting the foregoing and notwithstanding any of the
carve-outs contained in section 7.2 (other than section 7.2(a)),
section 7.3 (other than section 7.3(b) (with respect to Investments by
R&M Trust in a deposit account maintained with BKB until amounts held
therein are loaned to the Borrower pursuant to section 6.14), section
7.3(f) and section 7.3(p)) or section 7.11, the Borrower shall not
permit R&M Trust to encumber its assets in any manner described in
section 7.2, to make or permit to exist or remain outstanding any
Investments, or to create or acquire any Subsidiaries".
10. Replacement of Schedule 5.19 to the Credit
Agreement. Schedule 5.19 to the Credit Agreement is hereby deleted in
its entirety, and Schedule 5.19 attached hereto is hereby substituted
in lieu thereof.
11. Representations and Warranties. The Borrower and each of
the Guarantors hereby represents and warrants to the Agent and the
Banks as of the date hereof, and as of any date on which the
conditions set forth in section 12 below are met, as follows:
(a) The execution and delivery by each of the Borrower and
the Guarantors of this Amendment and all other instruments and
agreements required to be executed and delivered by the Borrower or
any of the Guarantors in connection with the transactions contemplated
hereby or referred to herein (collectively, the "Amendment
Documents"), and the performance by each of the Borrower and the
Guarantors of any of their obligations and agreements under the
Amendment Documents and the Credit Agreement and the other Loan
Documents, as amended hereby, are within the corporate or other
authority of each of the Borrower and the Guarantors, have been
authorized by all necessary corporate proceedings on behalf of each of
the Borrower and the Guarantors, and do not and will not contravene
any provision of law or the Borrower's charter or any of the
Guarantors' charters, other incorporation or organizational papers,
by-laws or any stock provision or any amendment thereof or of any
indenture, agreement, instrument or undertaking binding upon the
Borrower or any of the Guarantors.
(b) Each of the Amendment Documents and the Credit
Agreement and other Loan Documents, as amended hereby, to which the
Borrower or any of the Guarantors is a party constitute legal, valid
and binding obligations of such Person, enforceable in accordance with
their terms, except as limited by bankruptcy, insolvency,
<PAGE>
-9-
reorganization, moratorium or similar laws relating to or affecting
generally the enforcement of creditors' rights.
(c) No approval or consent of, or filing with, any
governmental agency or authority is required to make valid and legally
binding the execution, delivery or performance by the Borrower or any
of the Guarantors of the Amendment Documents or the Credit Agreement
or other Loan Documents, as amended hereby, or the consummation by the
Borrower or any of the Guarantors of the transactions among the
parties contemplated hereby and thereby or referred to herein.
(d) The representations and warranties contained in section
5 of the Credit Agreement and in the other Loan Documents were true
and correct at and as of the date made. Except to the extent of
changes resulting from transactions contemplated or permitted by the
Credit Agreement and the other Loan Documents, changes occurring in
the ordinary course of business (which changes, either singly or in
the aggregate, have not been materially adverse) and to the extent
that such representations and warranties relate expressly to an
earlier date and after giving effect to the provisions hereof, such
representations and warranties, after giving effect to this Amendment
and the other Amendment Documents, also are correct at and as of the
date hereof and will be correct as of the respective dates of the
consummation of the Restructuring Transactions and of the
effectiveness of the Trademark License Agreements, the Trademark
Contribution Agreement, and the R&M Trust Contribution Agreement (as
each such capitalized term is defined in the Credit Agreement, as
amended hereby).
(e) Each of the Borrower and the Guarantors has performed
and complied in all material respects with all terms and conditions
herein required to be performed or complied with by it prior to or at
the time hereof, and as of the date hereof, after giving effect to the
provisions of this Amendment and the other Amendment Documents, there
exists no Event of Default or Default.
(f) Each of the Borrower and the Guarantors acknowledges
and agrees that the representations and warranties contained in this
Amendment shall constitute representations and warranties referred to
in section 11.1(e) of the Credit Agreement, a breach of which shall
constitute an Event of Default.
12. Effectiveness. This Amendment shall become effective as
of December 28, 1998 (the "Effective Date") upon the satisfaction of
each of the following conditions, in each case in a manner
satisfactory in form and substance to the Agent and the Banks:
(a) Each of this Amendment and the Intercompany Subordination
Agreement dated as of October 8, 1998 among the Borrower, R&M Trust
and the Agent shall have been duly executed and delivered by each of
the parties thereto and shall be in full force and effect;
(b) The Borrower and the Guarantors shall have delivered to
the Agent (i) copies of any amendments to their charter documents,
other organizational papers and by-laws effective since the dates on
which such charter documents, other organizational papers and by-laws
were
<PAGE>
-10-
last delivered to the Agent, with all such amendments being duly
certified as true and correct by an officer of each such Person and
without other amendment thereto, (ii) an incumbency certificate for
each person authorized to sign this Amendment and (iii) authorizing
resolutions authorizing this Amendment and the transactions
contemplated hereby; and
(c) Such other items, documents, agreements, items or actions
as the Agent may reasonably request in order to effectuate the
transactions contemplated hereby.
13. Miscellaneous Provisions.
(a) Each of the Borrower and the Guarantors hereby ratifies
and confirms all of its Obligations to the Agent and the Banks under
the Credit Agreement, as amended hereby, and the other Loan Documents,
including, without limitation, the Loans, and each of the Borrower and
the Guarantors hereby affirms its absolute and unconditional promise
to pay to the Banks and the Agent the Loans, reimbursement obligations
and all other amounts due or to become due and payable to the Banks
and the Agent under the Credit Agreement and the other Loan Documents,
as amended hereby. Except as expressly amended hereby, each of the
Credit Agreement and the other Loan Documents shall continue in full
force and effect. This Amendment and the Credit Agreement shall
hereafter be read and construed together as a single document, and all
references in the Credit Agreement, any other Loan Document or any
agreement or instrument related to the Credit Agreement shall
hereafter refer to the Credit Agreement as amended by this Amendment.
(b) Without limiting the expense reimbursement requirements
set forth in section 14 of the Credit Agreement, the Borrower agrees
to pay on demand all costs and expenses, including reasonable
attorneys' fees, of the Agent incurred in connection with this
Amendment.
(c) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
(d) This Amendment may be executed in any number of
counterparts, and all such counterparts shall together constitute but
one instrument. In making proof of this Amendment it shall not be
necessary to produce or account for more than one counterpart signed
by each party hereto by and against which enforcement hereof is
sought.
[Signature Pages Follow]
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Amendment to be executed on its behalf by
its officer thereunto duly authorized, as of the date first above
written.
New England Business Service, Inc.
By:/s/ Daniel M. Junius
--------------------
Name: Daniel M. Junius
Title: Treasurer
BANKBOSTON, N.A.,
individually and as Agent
By:/s/Harvey H Thayer
------------------
Name: Harvey H. Thayer
Title: Managing Director
FLEET NATIONAL BANK,
individually and as Documentation Agent
By:/s/Mary M. Barcus
-----------------
Name: Mary M. Barcus
Title: Senior Vice President
FIRST UNION NATIONAL BANK,
N.A.,
successor to CoreStates Bank, N.A.
By:/s/John D. Brady
----------------
Name: John D. Brady
Title: Vice President
KEY BANK N.A.
By:/s/ Noel B. Grayson
------------------------
Name: Noel B. Grayson
Title: Vice President
USTRUST
By:/s/Brian C. Roche
------------------------
Name: Brain C. Roche
Title: Vice President
SUNTRUST BANK, ATLANTA
By:/s/W. David Wisdom
-------------------------
Name: W. David Wisdom
Title: Group Vice President
SUNTRUST BANK, ATLANTA
By:/s/Karen C. Copeland
--------------------------
Name: Karen C. Copeland
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By:/s/M. R. Bradley
----------------------------
Name: M. R. Bradley
Title: Authorized Signatory
WACHOVIA BANK, N.A.
By:/s/Terence A. Snellings
-----------------------------
Name: Terence A. Snellings
Title: Senior Vice President
KREDIETBANK N.V.
By:
------------------------------
Name:
Title:
KREDIETBANK N.V.
By:
-------------------------------
Name:
Title:
SUMMIT BANK
By:
-------------------------------
Name:
Title:
Signature page
to the Second Amendment
The undersigned hereby acknowledges the foregoing Second
Amendment as of the Effective Date and agrees that its obligations
under the Guaranty will extend to the Credit Agreement, as so amended,
and the other Loan Documents.
RAPIDFORMS, INC.
By:/s/ Daniel M. Junius
---------------------------
Name: Daniel M. Junius
Title: Treasurer
MCBEE SYSTEMS, INC.
By:/s/ Daniel M. Junius
-------------------------------
Name: Daniel M. Junius
Title: Treasurer
RUSSELL & MILLER, INC.
By:/s/ Daniel M. Junius
------------------------------
Name: Daniel M. Junius
Title: Treasurer
NEBS INTERACTIVE, INC.
By:/s/ Daniel M. Junius
-------------------------------
Name: Daniel M. Junius
Title: Treasurer
NEWSHIRE FORMS, INC.
By:/s/ Daniel M. Junius
----------------------------
Name: Daniel M. Junius
Title: Treasurer
R & M TRUST
By: Robert J. Murray,
John F. Fairbanks and
Craig Barrows, as Trustees
under Declaration of Trust of
R&M Trust dated July 20,
1998 and filed with the
Secretary of the
Commonwealth of
Massachusetts
on July 27, 1998, and not
individually
By: /s/ Robert J. Murray
----------------------------
Robert J. Murray, as Trustee under
said Declaration of Trust and not
individually
By: /s/ John F. Fairbanks
---------------------------
John F. Fairbanks, as Trustee
under said Declaration of Trust
and not individually
By: /s/ Craig Barrows
----------------------------
Craig Barrows, as Trustee under
said Declaration of Trust and not
individually
