<PAGE>
Page 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1999
----------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
------------ -------------
Commission file number 0-19056
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Northstar Computer Forms, Inc.
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0882640
- ----------------------------- -------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Numbers)
7130 Northland Circle North Brooklyn Park, Minnesota 55428
- ------------------------------------------------------ ---------
(Address or Principal Executive Offices) Zip Code
Registrant's telephone number, including area code (612) 531-7340
--------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at March 5, 1999
----- ----------------------------
<S> <C>
Common Stock, $ .05 par value 2,728,586 Shares
</TABLE>
<PAGE>
Page 2
Part 1. Financial Information
Item 1. Financial Statements
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
January 31, October 31,
1999 (Unaudited) 1998
---------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,053,772 $ 4,162,845
Accounts receivable, less
allowance for doubtful accounts
of $149,000 at January 31, 1999 and $138,000 at October 31, 1998 5,646,989 4,936,112
Inventories 2,207,624 2,245,338
Other current assets 907,917 687,769
Deferred income taxes 253,156 255,656
------------ ------------
Total current assets 13,069,458 12,287,720
------------ ------------
Property, plant and equipment 30,975,417 30,433,014
Less accumulated depreciation and
amortization (16,874,808) (16,279,745)
------------ ------------
Net property, plant and equipment 14,100,609 14,153,269
------------ ------------
Notes receivable, less current portion 155,426 161,573
Goodwill, net 1,505,916 1,556,293
Other assets, net 1,277,197 1,292,817
------------ ------------
Total assets $ 30,108,606 $ 29,451,672
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
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Page 3
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET, CONTINUED
<TABLE>
<CAPTION>
January 31, October 31,
1999 (Unaudited) 1998
---------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,385,000 $ 1,385,000
Accounts payable 2,203,814 1,316,878
Accrued liabilities 1,346,852 1,927,671
------------ ------------
Total current liabilities 4,935,666 4,629,549
Deferred compensation 731,660 738,845
Deferred income taxes 1,612,133 1,526,633
Long-term debt, less current portion 3,683,050 3,945,550
Commitments
Stockholders' equity:
Common stock, $ .05 par value
authorized, 5,000,000 shares; issued
and outstanding, 2,728,585 at January 31, 1999
and 2,714,436 at October 31, 1998 136,429 135,722
Additional paid-in capital 2,734,289 2,671,492
Retained earnings 16,275,379 15,803,881
------------ ------------
Total stockholders' equity 19,146,097 18,611,095
------------ ------------
Total liabilities and stockholders' equity $ 30,108,606 $ 29,451,672
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
<PAGE>
Page 4
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31
1999 1998
---- ----
<S> <C> <C>
Net sales $ 10,643,618 $ 10,608,027
Cost of goods sold 7,916,249 7,747,106
------------ ------------
Gross profit 2,727,369 2,860,921
Selling, general and
administrative expenses 1,945,720 1,936,854
------------ ------------
Operating income 781,649 924,067
Other income (expense):
Interest expense (92,020) (209,577)
Other, net, principally
interest income 70,869 77,085
------------ ------------
(21,151) (132,492)
------------ ------------
Earnings Before income taxes 760,498 791,575
Provision for income taxes 289,000 297,000
------------ ------------
Net earnings $ 471,498 $ 494,575
------------ ------------
Net earnings per common share:
Basic $ 0.17 $ 0.19
------------ ------------
Diluted $ 0.17 $ 0.18
------------ ------------
Dividends declared per
common share $ - $ -
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
<PAGE>
Page 5
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
for the three months ended January 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 471,498 $ 494,575
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 646,577 644,139
Amortization 95,597 71,151
Provision for losses on receivables 13,800 13,800
Gain on sale of equipment (7,900) (10,662)
Changes in certain operating assets and liabilities (359,762) (1,003,772)
----------- ------------
Net cash provided by operating activities 859,810 209,231
----------- ------------
Cash flows from investing activities:
Capital expenditures and equipment deposits (599,617) (762,487)
Capitalized computer software costs - (229,261)
Proceeds from sale of equipment 13,600 13,000
Notes receivable repayments 6,147 540,619
----------- ------------
Net cash used in investing activities (579,870) (438,129)
----------- ------------
Cash flows from financing activities:
Dividends paid (190,017) (176,147)
Principal payments on long-term debt (262,500) (1,187,500)
Stock options exercised 63,504 20,554
----------- ------------
Net cash used in financing activities (389,013) (1,343,093)
----------- ------------
Net decrease in cash and cash equivalents (109,073) (1,571,991)
Cash and cash equivalents at beginning of period 4,162,845 5,317,881
----------- ------------
Cash and cash equivalents at end of period $ 4,053,772 $ 3,745,890
----------- ------------
----------- ------------
Supplemental disclosure of cash flow:
Cash paid during the period for:
Income taxes $ 56,000 $ 1,103,250
Interest 71,300 209,577
</TABLE>
See accompanying notes to unaudited Condensed
Consolidated Financial Statements
<PAGE>
Page 6
NORTHSTAR COMPUTER FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999
1. Basis of Presentation
The interim condensed consolidated financial statements included in this
Form 10-Q have been prepared by Northstar Computer Forms, Inc. (the
Company), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to these rules and regulations. The
year-end balance sheet was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. These unaudited condensed consolidated financial statements
should be read in conjunction with the financial statements and related
notes included in the Company's 1998 Annual Report on Form 10-K as filed
with the Securities and Exchange Commission.
The unaudited condensed consolidated financial statements presented herein
as of January 31, 1999, and for the three months ended January 31, 1999 and
1998 reflect, in the opinion of management, all adjustments (which include
only normal, recurring adjustments) necessary for a fair presentation of
the financial position, results of operations and cash flows as of and for
the periods presented. The results of operations for any interim period
are not necessarily indicative of results for the full year.
2. Earnings per share
Net earnings per share (EPS) for all periods presented have been computed
by dividing net earnings by the weighted average number of common shares
outstanding (basic EPS) and by the weighted average number of common and
common equivalent shares outstanding (diluted EPS). The Company's common
equivalent shares consist of stock options when their effect is not
antidilutive.
At January 31, 1999 and 1998, 39,000 and 9,000 outstanding options were
excluded from the computation of diluted earnings per share for the
respective quarter because the option's exercise price was greater than the
average market price of the Company's common shares.
For all periods presented, the weighted average common and common
equivalent shares outstanding are as follows:
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Page 7
<TABLE>
<CAPTION>
For the three months ended January 31,
(Unaudited)
1999 1998
---- ----
<S> <C> <C>
Weighted average common
shares outstanding 2,719,103 2,642,819
Common equivalent shares
outstanding:
Option equivalents 99,325 239,024
--------- ---------
Weighted average common
and common equivalent shares
outstanding 2,818,428 2,881,843
--------- ---------
--------- ---------
</TABLE>
3. At January 31, 1999 and 1998, inventories consisted of the following:
<TABLE>
<CAPTION>
January 31
1999 1998
---- ----
<S> <C> <C>
Raw materials $1,396,597 $1,394,156
Work in process 477,183 598,846
Finished goods 333,844 252,336
---------- ----------
$2,207,624 $2,245,338
---------- ----------
---------- ----------
</TABLE>
4. New Accounting Pronouncements
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income," a
new standard requiring the reporting and display of "Comprehensive Income"
(defined as the change in equity of a business enterprise during a period
from sources other than those resulting from investment by owners and
distributions to owners) and its components in a full-set of
general-purpose financial statements. In the fiscal years 1999 and 1998,
the Company did not have any changes in equity from nonowner sources.
In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information," a new standard for reporting
information about operating or business segments in financial statements.
The new standard will be effective for the Company's annual financial
statements in fiscal year 1999. The Company has not evaluated what impact,
if any, this new standard will have on the Company's future reporting of
operating and business segments.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." This SOP provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. The Company is reviewing the requirements of
the SOP and does not expect it to significantly change its current
accounting for software costs. SOP-98-1 is required to be adopted by the
Company for its fiscal year 2000.
<PAGE>
Page 8
4. Subsequent Event
On February 5, 1999, the Company's Board of Directors (Board) approved
an amendment to the Outside Directors Stock Option Plan to permit the
granting of additional options to directors and to add an additional
100,000 shares to the plan. This amendment is subject to shareholders'
approval at the April 8, 1999 annual meeting. Contingent upon approval
of the amendment, the Compensation Committee of the Board granted options
for 10,000 shares each to the four outside directors.
On February 5, 1999 the Board also granted 100,700 options under the
Company's Incentive Stock Option Plan. Key employees were granted
options for 56,000 shares and all other employees were granted an option
for 100 shares each.
<PAGE>
Page 9
NORTHSTAR COMPUTER FORMS, INC.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations of
Interim Financial Data (Unaudited)
Results of Operations
The following discussion and analysis provides information that the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions readers that statements
contained herein, other than historical data, may be forward-looking and
subject to risks and uncertainties. The following important factors could
cause the Company's actual results to differ materially from those projected
in forward-looking statements made by, or on behalf of, the Company. This
list is not intended to present an all-inclusive list of such factors.
- Loss of one or more major customers due to bank consolidations or
other reasons,
- Rise in paper prices which outpaces the Company's ability to pass the
increase onto its customers,
- Inability to extend existing contracts or successfully negotiate new
contracts,
- Technological obsolescence of the Company's products or manufacturing
equipment,
- Contracting market for traditional business forms products,
- Competition from large national manufacturers of internal bank forms
and custom business forms.
<TABLE>
<CAPTION>
Three Months Ended January 31
Percentage of Net Sales Increase (Decrease)
----------------------- -------------------
1999 1998 1999 vs. 1998
---- ---- -------------
<S> <C> <C> <C>
Net Sales................................. 100.0 % 100.0 % .3 %
Cost of Goods Sold........................ 74.4 73.0 2.2
------- ------- ------
Gross Profit ............................. 25.6 27.0 (4.7)
------- ------- ------
Selling, General and
Administrative Expenses................. 18.3 18.3 .5
------- ------- ------
Operating Income.......................... 7.3 8.7 (15.4)
Net Earnings.............................. 4.4 4.7 (4.7)
------- ------- ------
</TABLE>
The following table sets forth unaudited net sales information for the periods
indicated for internal bank forms, custom business forms and consolidated net
sales of the Company.
<TABLE>
<CAPTION>
INTERNAL CUSTOM CONSOLIDATED
BANK FORMS % BUSINESS FORMS % SALES
---------- - -------------- - --------
<S> <C> <C> <C> <C> <C>
Current Quarter
1999 $ 7,225,903 68 $3,417,715 32 $10,643,618
1998 7,455,284 70 3,152,743 30 10,608,027
Change (229,381) 264,972 35,591
Percentage Change ( 3.1%) 8.4% 0.3%
</TABLE>
<PAGE>
Page 10
RESULTS OF OPERATIONS
NET SALES. Net sales for the first quarter of 1999 remained relatively flat
compared to the first quarter of 1998. However, as the sales mix shows,
internal bank forms decreased $229,381 or 3.1%. The sales decrease occurred
within the Northstar Financial Forms division which had several sales contracts
which expired in the second and third quarter of 1998 and were not renewed. The
other internal bank forms operations had a sales increase of approximately 9%
for the quarter with no significant change in product mix, sales prices or
customer base. The custom business forms sales increase is due to a new
negotiable document product line for an existing customer. Sales fluctuations
were driven primarily by volume and mix changes as sales prices remained
relatively constant.
GROSS PROFIT. Gross profit was $2,727,369 for the first quarter of 1999
compared to $2,860,921 for the first quarter of 1998, a decrease of $133,552.
As a percent of sales, gross profit was 25.6% in the first quarter of 1999
compared to 27.0% in the first quarter of 1998. The Company was able to
maintain material costs, indirect labor and benefits, variable costs and fixed
costs at the same percentage of sales. However direct labor costs increased
approximately 10% as new employees were added to train for the anticipated
increased business as discussed in the "Outlook" section.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased minimally, and remained constant at 18.3% of
net sales.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest expense which decreased $117,557 in 1999 due to debt repayments.
PROVISION FOR IN INCOME TAXES. The provision for income taxes remained constant
at 38% for 1999 consistent with the first quarter of 1998.
EARNINGS. Earnings before income taxes were $760,498 or 7.1 percent of net
sales in 1999 compared with $791,575 or 7.5 percent of net sales in the first
quarter of 1998. Net earnings were $471,498 ($0.17 per diluted share)in 1999
compared to $494,575 ($0.18 per diluted share) in 1998.
FINANCIAL CONDITION AND LIQUIDITY
LONG-TERM DEBT. The Company's long-term debt consists of a term loan and
Industrial Development Revenue Bonds. The term loan principal is payable in
quarterly installments and from annual excess cash flow as defined in the Loan
Agreement with any remaining principal balance due on July 31, 2003. The bonds
require annual principal payments and interest at a variable rate based upon
comparable tax-exempt issues. Both the term loan and the bonds specify limits
on capital expenditures and dividends as well as specify working capital, net
worth and certain financial ratios that the Company must maintain.
LIQUIDITY. Cash provided by operations was $859,810 for the first quarter of
1999, compared to $209,231 in the first quarter of 1998. Working capital was
$8.1 million on January 31, 1999 compared to $7.7 million on October 31, 1998.
During the quarter ended January 31, 1999, the Company continued to expand its
manufacturing capacity by the acquisition of $599,617 in equipment compared to
capital expenditures of $991,748 for equipment and computer software for the
first quarter of 1998. The Company anticipates that total equipment and
computer software expenditures for 1999 will approximate $2,100,000.
<PAGE>
Page 11
If necessary to finance operations, the Company has a $1.5 million line of
credit at an interest rate equal to the bank's reference rate. The Company did
not have to utilize this line of credit during 1999 or 1998. The Company
believes its existing financial resources are adequate to fund its 1999
operations, including capital expenditures and dividend payments, and foresees
no events or uncertainties that are likely to have a material impact on its
liquidity.
OUTLOOK. Merger and acquisition activity in the banking industry remains
extremely strong at this time. Banks generally consolidate their purchasing of
internal bank forms with one supplier. Therefore, the Company could obtain or
lose a significant customer or numerous smaller customers as this consolidation
activity continues. The Company continues to work to stabilize and increase
its customer base. During the third quarter of 1998, the Company was able to
obtain three new large-volume internal bank form customers which are expected to
positively impact sales in 1999. In addition, to increase and improve market
penetration in the internal bank forms market, the Company has developed
additional distribution channels by forming two new strategic alliances with
other companies in the financial forms industry. Sales with one of these
partners began slowly but are now increasing monthly. Sales with the second
alliance depends on the partner's ability to sell internal bank forms as
ancillary products used in the equipment it sells to the banking industry. In
January 1999, the Company signed a new contract to manufacture negotiable
documents for its largest customer. The new contract is for a four-year term
with additional sales from a new product line estimated at $3.5 million
annually. The Company also has a proposal pending for one other new negotiable
document contract and has begun producing a new line of custom business forms
for a current customer.
Paper price changes, sales volume changes and sales mix changes are three
factors with a significant effect on the Company's gross profit. The Company
expects the paper industry to increase prices in 1999, but at this time expects
to be able to pass these paper price increases onto its customers. During the
remainder of 1999, sales volumes are expected to increase in both custom
business forms and internal bank forms. Based upon these expectations, the
Company expects the gross profit for the balance of 1999 to exceed the 1998
gross profit in total and as a percentage of sales.
The Company does not anticipate significant change in selling, general and
administrative costs for 1999. Based on the projected increase in sales volume,
these costs are expected to decrease as a percentage of sales in 1999.
The outlook for the Company has been positively affected by the internal bank
forms computer system which the Company developed and installed in the first
location in the last quarter of 1997. This system has been continually enhanced
and is now installed in all of the Company's internal bank forms production
facilities. The last installation was completed in February 1999. The
integrated computer system is already increasing operating efficiencies within
the internal bank forms plants by streamlining order processing, enhancing
equipment utilization and improving billing and reporting capabilities.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, the FASB issued SFAS 130,
"Reporting Comprehensive Income," a new standard requiring the reporting and
display of "Comprehensive Income" (defined as the change in equity of a
business enterprise during a period from sources other than those resulting
from investment by owners and distributions to owners) and its components in
a full-set of general-purpose financial statements. In the three month
period ended January 31, 1999, and in fiscal year 1998, the Company did not
have any changes in equity from nonowner sources.
<PAGE>
Page 12
In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information," a new standard for reporting information
about operating or business segments in financial statements. The new standard
will be effective for the Company's annual financial statements in fiscal year
1999. The Company has not determined what impact, if any, this new standard
will have on its reporting of segment information.
In March 1998, the Accounting Standards Executive Committee issued Statement of
Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." This SOP provides guidance on accounting for the
costs of computer software developed or obtained for internal use. The Company
is reviewing the requirements of the SOP and does not expect it to significantly
change its current accounting for software costs. SOP 98-1 is required to be
adopted by the Company for its fiscal year 2000.
READINESS FOR YEAR 2000.
STATE OF READINESS. The Company's Y2K Plan is focused on assessing and ensuring
compliance of its hardware, operating systems, software applications and custom
applications. Additionally, the Company is reviewing the Year 2000 compliance
status of its customers, vendors and other service providers.
HARDWARE, OPERATING SYSTEMS AND SOFTWARE APPLICATIONS. The Company is in the
process of completing its assessment of its hardware, operating systems and
software applications. The Company estimates that 80% of its hardware,
operating systems and software applications have been upgraded for Y2K
compliance or have been certified internally or through the appropriate vendor
to be compliant. The Company expects any remaining upgrades required to be
completed by August 31, 1999. Projected expenditures are included in the 1999
proposed capital expenditure budget.
THIRD PARTY RELATIONSHIPS. The Company is communicating with vendors, customers
and other business partners to determine their Y2K compliance. The Company
anticipates that this will be complete by July 1999.
COST AND CONTINGENCY PLANS. Although the ultimate cost of attaining Year 2000
compliance is not fully known at this time, management's best estimate is that
the external costs will not be material. These costs will be funded from
operations. In the event the Company needs to devote more resources to the
process, additional costs may be incurred. Such a situation could have a
materially adverse effect on the Company's financial condition and results of
operations. To date, the Company has not developed any detailed contingency
plans. To the extent that the Company identifies Year 2000 compliance issues
that cannot be addressed on a timely basis, it will seek to develop appropriate
contingency plans in order to mitigate its risk.
<PAGE>
Page 13
NORTHSTAR COMPUTER FORMS, INC.
PART II. - OTHER INFORMATION
Item 6. A. Exhibits
10.30 Northstar Computer Forms Inc, Amended and Restated
Outside Directors Stock Option Plan.
10.31 MICR Forms Agreement between Travelers Express Company,
Inc. and Northstar Computer Forms, Inc.
B. Reports on Form 8K - None.
None of the other items contained in Part II of Form 10-Q is applicable to the
Company for the quarter ended January 31, 1999.
<PAGE>
Page 14
Signatures
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 thereunto duly authorized.
Northstar Computer Forms, Inc.
(Registrant)
Date: March 10, 1999 By: Mary Ann Morin
----------------------- ----------------------------
Mary Ann Morin
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
NORTHSTAR COMPUTER FORMS, INC.
AMENDED AND RESTATED
OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT AND PURPOSE. Northstar Computer Forms, Inc. (the
"Company") established in 1995 a plan providing for the grant of stock options
to certain non-employee members of its Board of Directors who are serving or
will serve on the Board of the Company. This plan is known as the Northstar
Computer Forms, Inc. Outside Directors Stock Option Plan and is hereby amended
and restated effective February 5, 1999 (the "Plan"). The purpose of the Plan
is to advance the interests of the Company and its shareholders by enhancing the
Company's ability to attract and retain qualified persons to serve on its Board
of Directors.
2. DEFINITIONS. The following terms have the meanings set forth below,
unless the context otherwise requires:
2.1 "BOARD" means the Board of Directors of the Company.
2.2 "CODE" means the Internal Revenue Code of 1986, as amended.
2.3 "COMMON STOCK" means the common stock of the Company, par value $.05
per share, or the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with Section 4.3 of the
Plan.
2.4 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2.5 "FAIR MARKET VALUE" means, with respect to the Common Stock, the
following:
(a) If the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the Nasdaq
National Market, the last sale price of the Common Stock on such exchange
or reported by the Nasdaq National Market as of such date (or, if no shares
were traded on such day, as of the next preceding day on which there was
such a trade.).
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the Nasdaq National Market, and bid and
asked prices therefor in the over-the-counter market are reported by The
Nasdaq SmallCap Market-Registered Trademark- or the National Quotation
Bureau, Inc. (or any comparable reporting service), the mean of the closing
bid and asked prices as of such date, as so reported by the Nasdaq System,
or, if not so reported thereon, as reported by the National Quotation
Bureau, Inc. (or such comparable reporting service).
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the Nasdaq National Market, and such bid
and asked prices are
<PAGE>
not so reported, such price as the Board determines in good faith in the
exercise of its reasonable discretion.
2.6 "NASD" means the National Association of Securities Dealers, Inc.
2.7 "OPTION" means a right to purchase Common Stock granted to an Outside
Director under this Plan that does not qualify as an incentive stock option
under Section 422 of the Code. Options may be either Formula Options or
Discretionary Options.
2.8 "OUTSIDE DIRECTOR" means a member of the Board who is not an employee
of the Company or any Subsidiary.
2.9 "PERSON" means any individual, corporation, partnership, group,
association or other "person" (as such term is used in Section 14(d) of the
Exchange Act), other than the Company, a wholly owned subsidiary of the Company
or any employee benefit plan sponsored by the Company or a wholly owned
subsidiary of the Company.
2.10 "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that are
already owned by the Participant and shares of Common Stock that could be
acquired by the Participant pursuant to the exercise of an Option.
2.11 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.12 "DISCRETIONARY OPTION" means an Option granted pursuant to Section 5A
of the Plan, which is granted at the discretion of the Administrator.
2.13 "FORMULA OPTION" means an Option granted pursuant to Section 5 of the
Plan, as amended.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Company's Compensation Committee (the "Administrator"), who shall be responsible
for overseeing that the terms and conditions of the Plan are complied with and
that grants are made to Outside Directors at the proper times and in the proper
amounts as are required hereunder with respect to Formula Options and properly
implemented with respect to Discretionary Options. The Administrator shall have
the power and authority to make grants of Discretionary Options to Outside
Directors from time to time pursuant to the terms of the Plan, including the
power to determine the number of shares to be covered by each such award granted
hereunder and the terms and conditions, not inconsistent with the terms of the
Plan, of any award granted hereunder (including, but not limited to, any vesting
schedule or restriction on any Option and/or the shares of Common Stock relating
thereto). The Administrator shall have no discretion with respect to Formula
Options.
The Administrator shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the
2
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Plan. The Administrator may delegate its authority to officers of the
Company for the purpose of implementing any aspect of the Plan.
4. COMMON STOCK SUBJECT TO THE PLAN.
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
below, the maximum number of shares of Common Stock that shall be authorized and
reserved for issuance under the Plan shall be 150,000 shares of Common Stock.
The maximum number of shares authorized may also be increased from time to time
by approval of the Board and, if required pursuant to Rule 16b-3 under the
Exchange Act or the applicable rules of any securities exchange or the NASD, the
shareholders of the Company.
4.2 SHARES AVAILABLE FOR USE. Shares of Common Stock that may be issued
upon exercise of Options shall be applied to reduce the maximum number of shares
of Common Stock remaining available for use under the Plan. Any shares of
Common Stock that are subject to an Option (or any portion thereof) that lapses,
expires or for any reason is terminated unexercised shall automatically again
become available for use under the Plan.
4.3 ADJUSTMENTS TO SHARES. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in the corporate
structure or shares of the Company, appropriate adjustment shall be made as to
the number and kind of securities subject to outstanding Options. Without
limiting the generality of the foregoing, in the event that any of such
transactions are effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets, including cash, with respect to
or in exchange for such Common Stock, any Outside Director holding outstanding
Options shall upon the exercise of such Option receive, in lieu of any shares of
Common Stock he or she may be entitled to receive, such stock, securities or
assets, including cash, as have been issued to such Outside Directors if their
Options had been exercised and such Outside Directors had received Common Stock
prior to such transaction.
5. TERMS AND CONDITIONS OF FORMULA OPTIONS
5.1 GRANT. Subject to the terms and conditions of the Plan, the
Administrator shall grant Formula Options to each Outside Director who is not,
on the date such Option would be granted, the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of more than 5% of the outstanding Common
Stock, on the terms and conditions set forth in this Section 5. During the term
of the Plan and provided that sufficient shares of Common Stock are available
pursuant to Section 4:
(a) OUTSIDE DIRECTORS ELECTED PRIOR TO 1993. No Outside directors
elected to the Board prior to 1993 shall be eligible to participate in, or
receive Formula Options under, the Plan.
(b) OUTSIDE DIRECTORS ELECTED DURING OR AFTER 1993. Any Outside
Director elected during or after 1993 shall receive a Formula Option to
purchase 10,000 shares of
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Common Stock, which Option shall be issued effective on the date the
Outside Director is elected to the Board (the "Grant Date").
5.2 EXERCISE PRICE. The exercise price for the Formula Options granted
hereunder shall be equal to the Fair Market Value of the Common Stock on the
Grant Date.
5.3 VESTING OF OPTIONS. Subject to the provisions of Section 5.4 hereof,
Formula Options granted hereunder shall vest over a five year period at the rate
of 20% per year, commencing one year from the Grant Date.
5.4 DURATION. Each Formula Option granted to an Outside Director pursuant
to this Plan and all rights to purchase Common Stock thereunder shall terminate
on the earliest of:
(a) Ten years after the date such Option is granted; or
(b) The expiration of the period specified in Section 6, whichever is
applicable, after an Outside Director ceases to be a member of the
Board.
In no event shall a Formula Option be exercisable at any time after its original
expiration date.
5.5 MANNER OF EXERCISE. A Formula Option may be exercised by an Outside
Director in whole or in part from time to time, subject to the conditions
contained herein, by delivery, in person or through certified or registered
mail, of written notice of exercise to the Company at its principal executive
office (Attention: Chief Financial Officer), and by paying in full the total
Option exercise price for the shares of Common Stock purchased. Such notice
shall be in a form satisfactory to the Administrator and shall specify the
particular Option (or portion thereof) that is being exercised and the number of
shares with respect to which the Option is being exercised. The exercise of the
Option shall be deemed effective upon receipt of such notice and payment
complying with the terms of the Plan. As soon as practicable after the
effective exercise of the Option, the Outside Director shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased, and
the Company shall deliver to the Outside Director one or more duly issued stock
certificates evidencing such ownership. If an Outside Director exercises any
Formula Option with respect to some, but not all, of the shares of Common Stock
subject to such Option, the right to exercise such Option with respect to the
remaining shares shall continue until it expires or terminates in accordance
with its terms. A Formula Option shall only be exercisable with respect to
whole shares.
5.6 PAYMENT OF EXERCISE PRICE. The total purchase price of the shares to
be purchased upon exercise of a Formula Option may be paid entirely in cash
(including check, bank draft or money order) or in whole or in part, by transfer
from the Outside Director to the Company of Previously Acquired Shares. In the
event the Outside Director pays the purchase price of a Formula Option in whole
or in part with Previously Acquired Shares, the value of such shares shall be
equal to their Fair Market Value on the date of exercise of the Option.
5.7 RIGHTS AS A SHAREHOLDER. No Outside Directors shall have any rights
as a shareholder with respect to any shares of Common Stock covered by a Formula
Option until the
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Outside Director shall have become the holder of record of such shares, and
no adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date the Outside
Director becomes the holder of record of such shares.
5A. TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS
5A.1 GRANT. Subject to the terms and conditions of the Plan, the
Administrator shall have the discretion and authority to grant Discretionary
Options to each Outside Director who is not, on the date such Option would be
granted, the beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
of more than 5% of the outstanding Common Stock, on the terms and conditions set
forth in this Section 5A. The terms and conditions of the Discretionary Options
shall be as specified in a resolution approved by the Administrator or a stock
option grant agreement entered into between an authorized representative of the
Administrator and an Outside Director and may contain or vary any of the
provisions specified in this Section 5A (except for Section 5A.2).
5A.2 EXERCISE PRICE. The exercise price for all Discretionary Options
granted hereunder shall be equal to the Fair Market Value of the Common Stock on
the Grant Date.
5A.3 VESTING OF OPTIONS. Unless otherwise specified by the Administrator,
and subject to the provisions of Section 5A.4 hereof, Discretionary Options
granted hereunder shall vest over a five year period at the rate of 20% per
year, commencing one year from the Grant Date.
5A.4 DURATION. Unless otherwise specified by the Administrator, each
Discretionary Option granted to an Outside Director pursuant to this Plan and
all rights to purchase Common Stock thereunder shall terminate on the earliest
of:
(a) Ten years after the date such Option is granted; or
(b) The expiration of the period specified in Section 6, whichever is
applicable, after an Outside Director ceases to be a member of the Board.
In no event shall a Discretionary Option be exercisable at any time after its
original expiration date.
5A.5 MANNER OF EXERCISE. Unless otherwise specified by the Administrator, a
Discretionary Option may be exercised by an Outside Director in whole or in part
from time to time, subject to the conditions contained herein, by delivery, in
person or through certified or registered mail, of written notice of exercise to
the Company at its principal executive office (Attention: Chief Financial
Officer), and by paying in full the total Option exercise price for the shares
of Common Stock purchased. Such notice shall be in a form satisfactory to the
Administrator and shall specify the particular Option (or portion thereof) that
is being exercised and the number of shares with respect to which the Option is
being exercised. The exercise of the Option shall be deemed effective upon
receipt of such notice and payment complying with the terms of the Plan. As
soon as practicable after the effective exercise of the Option, the Outside
Director shall be recorded on the stock transfer books of the Company as the
owner of the shares purchased, and the Company shall deliver to the Outside
Director one or more duly issued stock certificates evidencing such ownership.
If an Outside Director exercises any Discretionary Option with respect
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to some, but not all, of the shares of Common Stock subject to such Option,
the right to exercise such Option with respect to the remaining shares shall
continue until it expires or terminates in accordance with its terms. A
Discretionary Option shall only be exercisable with respect to whole shares.
5A.6 PAYMENT OF EXERCISE PRICE. The total purchase price of the shares to
be purchased upon exercise of a Discretionary Option may be paid entirely in
cash (including check, bank draft or money order) or in whole or in part, by
transfer from the Outside Director to the Company of Previously Acquired Shares.
In the event the Outside Director pays the purchase price of a Discretionary
Option in whole or in part with Previously Acquired Shares, the value of such
shares shall be equal to their Fair Market Value on the date of exercise of the
Option.
5A.7 RIGHTS AS A SHAREHOLDER. No Outside Directors shall have any rights
as a shareholder with respect to any shares of Common Stock covered by a
Discretionary Option until the Outside Director shall have become the holder of
record of such shares, and no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the
date the Outside Director becomes the holder of record of such shares.
6. TERMINATION OF SERVICE ON THE BOARD. An Option granted to an Outside
Director shall continue to be exercisable for a period of one year after the
date such Outside Director ceases to be a member of the Board, for any reason,
but only to the extent that the Option was exercisable immediately prior to said
Outside Director's ceasing to be a member of the Board (and in no event beyond
the date set forth in Section 5.4(a) or Section 5A.4(a), as the case may be).
7. CHANGE IN CONTROL. In the event of any Change in Control of the
Company, as defined herein, all Options held by Outside Directors pursuant to
this Plan shall immediately vest and become exercisable. For purposes of
this Section 7, a "Change in Control" of the Company shall mean (a) the sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company (in one transaction or in a series of related transactions) to
a corporation that is not controlled by the Company, (b) the approval by the
shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company, or (c) a change in control of the Company of a
nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of the Current Report on
Form 8-K, as in effect on the effective date of the Plan, pursuant to Section
13 or 15(d) of the Exchange Act, whether or not the Company is then subject
to such reporting requirement; provided, however, that, without limitation,
such a Change in Control shall be deemed to have occurred at such time as (i)
any Person becomes after the effective date of the Plan the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 20% or more of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors, or (ii) individuals who constitute the Board on the effective date
of the Plan cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the effective date
of the Plan whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
comprising or deemed pursuant hereto to comprise the Board on the effective
date of the Plan (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director) shall be, for purposes of this clause (ii) and the following
sentence, considered as
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though such person were a member of the Board on the effective date of the
Plan. Notwithstanding anything in the foregoing to the contrary, no Change
in Control shall be deemed to have occurred for purposes of this Section 7 by
virtue of any transaction which shall have been approved by the affirmative
vote of at least a majority of the members of the Board on the effective date
of the Plan.
8. RESTRICTIONS ON TRANSFER. Other than pursuant to a qualified domestic
relations order (as defined by the Code), no right or interest of any Outside
Director in an Option prior to the exercise of such Options shall be assignable
or transferable, or subjected to any lien, during the lifetime of the Outside
Director, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, pledge, divorce or bankruptcy. In the event of an Outside
Director's death, such person's rights and interest in Options shall be
transferable by testamentary will or the laws of descent and distribution, and
payment of any amounts due under the Plan shall be made to, and exercise of any
Options (to the extent permitted pursuant to Section 6 of the Plan) may be made
by, the Outside Director's legal representatives, heirs or legatees.
9. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to amend, modify or rescind any previously approved compensation plans
or programs entered into by the Company. The Plan will be construed to be in
addition to any and all such other plans or programs. Neither the adoption of
the Plan nor the submission of the Plan to the shareholders of the Company for
approval will be construed as creating any limitations on the power or authority
of the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.
10. SECURITIES RESTRICTIONS. Shares of Common Stock issued pursuant to
Options granted under the Plan may not be sold, assigned, transferred, pledged,
encumbered or otherwise disposed of, whether voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise, except pursuant to
registration under the Securities Act and applicable state securities laws or
pursuant to exemptions from such registration. The Company may condition the
sale, assignment, transfer, pledge, encumbrance or other disposition of such
shares not issued pursuant to an effective and current registration statement
under the Securities Act and all applicable state securities laws on the receipt
from the party to whom the shares of Common Stock are to be so transferred of
any representations or agreement requested by the Company in order to permit
such transfer to be made pursuant to exemptions from registration under the
Securities Act and applicable state securities laws.
11. PLAN AMENDMENT, MODIFICATION AND TERMINATION. The Board may suspend
or terminate the Plan or any portion thereof at any time, and may amend the Plan
from time to time in such respects as the Board may deem advisable in order that
Options under the Plan shall conform to any change in applicable laws or
regulations or in any other respect the Board may deem to be in the best
interests of the Company; provided, however, that no such amendment shall be
effective, without approval of the shareholders of the Company, if shareholder
approval of the amendment is then required pursuant to Rule 16b-3 under the
Exchange Act or any successor rule or under the applicable rules or regulations
of any securities exchange or the NASD; and provided further that this Plan
shall not be amended more than once in any six month period, except to comply
with applicable rules and regulations of the Code, the Exchange Act, any
securities exchange or the
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NASD. No termination, suspension or amendment of the Plan shall alter or
impair any outstanding Option without the consent of the Outside Director
affected thereby.
12. GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the laws of the State of Minnesota.
13. EFFECTIVE DATE. This Plan shall become effective on the date it is
adopted by the Shareholders of the Company.
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AGREEMENT NUMBER 010199
MICR FORMS AGREEMENT
BETWEEN
TRAVELERS EXPRESS COMPANY, INC.
AND
NORTHSTAR COMPUTER FORMS, INC.
This Agreement is entered into as of the 1ST day of JANUARY 1999, by and
between Travelers Express Company, Inc. (Buyer or TECI) and Northstar Computer
Forms, Inc. (Seller OR NORTHSTAR).
The parties agree to the following terms for the purchase by Buyer of items
listed in attached EXHIBIT A from Seller:
I. SCOPE
In consideration of Buyer's first purchase order under this Agreement,
Seller agrees to sell to Buyer, and hereby extends to Buyer, a Purchase
Agreement to purchase MICR forms as listed in EXHIBIT A at the stated
prices; and (ii) to accept purchase orders as may be released by Buyer
which comply with this Agreement. MICR forms are: money orders, gift
certificates, official checks, process control documents, LASER CUT SHEETS,
AND OTHER CUSTOM MICR DOCUMENTS. It is further understood and agreed that
Seller will accept such complying purchase orders from Buyer at the
specified prices for the period commencing with the date first above
written and ending DECEMBER 31, 2002, (Agreement period) provided, however,
that orders placed within this period may call for delivery through APRIL
30, 2003 (DELIVERY PERIOD).
II. PRICING
2.1 All prices stated in EXHIBIT A are F.O.B. manufacturing plant.
Title of the documents passes to Buyer upon the earlier event of
shipment or passage to Seller's warehouse for inventory purposes.
2.2 In addition to the invoice terms and conditions, Seller agrees that:
(1) No material will be invoiced against this Agreement number as it
is intended for use by Buyer as a control number only; (2) all
charges with respect to purchase orders issued hereunder shall be
invoiced weekly in summary billing format; and (3) payment terms
shall be 2% ten days, net thirty (30) days (2/10N30) after receipt
of invoice. Any amount owed under this Agreement by one party to
the other which is not paid on or before the 15th day after the due
date of the invoice will require the invoicing party to provide
copies of the original invoice to the owing party for payment. All
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amounts due after 90 days of the original due date, unless and
except there is a bona fide dispute or a mutually agreed extension,
shall bear interest until paid at the rate of 18% per annum (1.5%
per month), but in no event exceed the maximum lawful rate of
interest permitted by applicable law.
2.3 All unbilled balances on existing orders which are not subject to
other purchase agreements as of the date first written above shall
receive the benefit of the pricing as set forth in EXHIBIT A.
2.4. If at any time during the Agreement period Seller shall:
(i) Offer for sale any of the items to be purchased hereunder at
a lower price for similar or lesser quantities; or
(ii) if seller shall offer for sale at a lower price for similar
or lesser quantities items designed to basically the same
specifications, but with a price differential which is
greater than that which would reasonably be warranted by the
difference in cost of manufacture (based upon the difference
in specifications);
then, commencing with the effective date of the price referenced in
(i) or (ii) above, this Agreement and its stated prices shall be
considered amended to reflect such lower prices for similar or
lesser quantities (or the excess over said warranted price
differential). The amended price shall not apply to units required
by Buyer's purchase orders to be delivered prior to its effective
date. Seller shall promptly notify buyer of any such price
reduction which would serve to reduce the price payable by Buyer
under this Agreement. Section 2.4 will be specifically covered
twice each year (Section 7.4) during the term of this Agreement.
2.5 Pricing will remain firm in the absence of materials cost
fluctuations. If material costs increase, Seller may increase prices
by the amount of the materials cost increase, but no more than six
percent (6%) of the cost per year per 1000 documents before the
increase. If material costs decrease, the reduction will be passed
through to Buyer upon Seller receiving said price reduction. Prices
will be reviewed at the business review meetings provided for in
SECTION 7.4. Buyer requires suitable justification (ie. Mill
invoices, PPI indexes, etc.) and 30 day prior written notice of
change in bid price.
2.6 In exchange for Buyer's promise to purchase ninety percent (90%) of
its MICR forms requirements of the types listed in EXHIBIT A from
Seller, Seller agrees to pay cash rebates (see EXHIBIT E) to Buyer
based on
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billing levels for all forms (money orders and other forms) as
provided in EXHIBIT A. Estimated annual Money Order volumes for
1999 are 284,000,000 items. Estimated annual Official Check volumes
for 1999 are 36, 000,000 items. Rebates will be effective on
purchases beginning January 1, 1999.
2.7 Seller shall provide ongoing consultation to Buyer regarding how to
reduce costs. This consultation shall include, but is not limited
to, product mix, and composition, applicable "best practices" used
with other customers, continuous process and production efficiency
improvements, etc. This consultation is intended to help Buyer
reduce Official Check per unit costs to less than $.08 per item, and
shall be formally documented at each semi-annual review (section
7.4).
III. QUANTITIES
3.1 Buyer agrees to purchase ninety percent (90%) of its MICR forms
annual dollar requirements from Seller pursuant to this Agreement.
Nothing in this Agreement shall preclude Buyer from procuring like
or comparable items from other sources.
IV. LEAD TIMES
4.1 ALL PROOFS: Buyer will receive a first proof ON NEW ORDERS within
48 hours of the time the completed purchase order is received by
Seller. Buyer will receive any subsequent proof within 24 hours
after receipt by Seller. All appropriate logo's, artwork, drawing,
disks, and specifications will be provided with orders. Proof under
SECTION 4.1 refers to standard base items (e.g. common formats and
sizes). Complex design, process colors, backgrounds, and intricate
logos may take an additional 24 hours.
4.2 MONEY ORDER FORMS: All custom logo standard size manual money order
forms of exact repeat or returned proof approval received by the 1st
of each month will be printed on the 15th of each month or received
by the 15th of each month will be printed on the 30th of each month.
All generic standard size manual money order forms will be scheduled
with a minimum of twenty to thirty days prior to agreed upon
inventory replenishment dates.
All generic or custom logo automated money order forms will be
scheduled with a minimum of twenty to thirty days prior to agreed
upon inventory replenishment dates.
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Delivery requirements less than stated above must have pre-authorized
approval and will be subject to print upcharges. Buyer reserves the
right to prioritize the sequence of the Buyer's orders for print
production.
4.3 OFFICIAL CHECKS: Seller is required to transmit proofs
electronically. All orders printed four color or less on standard
white official check stock with quantities up to 20,000 to ship with
10 working days after proof approval or electronic entry of exact
repeats. Buyer reserves the right to prioritize the sequence of
Buyer's orders.
All orders printed for four color or less on standard white official
check stock with quantities over 20,000 but less than 50,000 will
ship within 15 working days after proof approval or electronic entry
of exact repeats. Buyer reserves the right to prioritize the
sequence of Buyer's orders for print production.
All orders printed for four colors or less on standard white
official check stock with quantities over 50,000 and/or extra wide
forms in OC-7 classification may require additional lead times not
exceed longer than 20 working days.
All orders printed process color, more than four color, or non
standard papers may require additional lead times, not to exceed
longer than 20 working days.
Delivery requirements of less than 10 working days must have
pre-authorization approval and will be subject to print upcharges.
Both new and repeat orders will be transmitted to Seller via an
electronic order entry system supplied by Buyer's automated systems.
V. QUALIFICATION TESTING
5.1. Without in any way limiting its warranty or incoming inspection
testing rights under this Agreement, Buyer, from time to time,
intends to subject samples of the purchased items to qualification
tests. The tests will be sufficient to assure that the items meet
all the specification requirements described in EXHIBIT C if any, as
well as applicable drawings, samples and other descriptions. Buyer
shall notify Seller of any deficiencies indicated by the testing.
Seller shall at its own expense replace, alter, or modify the
remaining to-be-delivered items so that they will pass subsequent
qualification tests, unless Buyer elects, in writing, to waive a
deficiency.
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5.2. Should Seller fail to satisfactorily correct, at its own expense,
any and all deficiencies discovered in Buyer's qualification testing
within a reasonable time period after receiving Buyer's notice, then
Buyer, at its sole option, shall have the right (i) to cancel all or
any portion of the outstanding item orders without charge, and
receive full credit at Seller's risk and expense all items which
Seller previously delivered to Buyer.
5.4. Seller agrees that with respect to present or future items subject
to this Agreement, it will make available to Buyer at no charge,
results of Seller's internal qualification tests, whether or not
dealing with testing against Buyer's specifications.
VI. SPECIFICATIONS AND PRODUCTION PROCESS CHANGES
6.1 Seller agrees that all items to be delivered under this Agreement
shall meet the specifications described in EXHIBIT C, if any, as
well as applicable drawings, Buyer approved samples, and other
documented descriptions. Seller further agrees that in addition to
and not limiting the foregoing requirement, it will not make any
change in a item to be delivered hereunder which would effect the
item's form, fit, function, appearance or performance without first
having received Buyer's prior written consent.
VII. REPORTING
7.1 MONEY ORDERS: Seller will supply Buyer with monthly statements
itemizing quantities ordered by Buyer during the term of this
Agreement. This report shall be in an Buyer defined PC format and
shall include, but not be limited to, (1) monthly volume by Money
Orders type, (2) monthly invoice by Money Orders type and for
non-standard Money Orders as a whole, (3) average turn around time,
and (4) total dollars committed to date.
7.2 OFFICIAL CHECKS: Seller will provide accurate and timely reporting.
Reports of the official check program are required to be in Buyer
defined PC format. Required reports include, but are not limited
to, the following:
- Monthly summary analysis
- Order analysis report
- Official check breakdown report
- Prices vs. quantity report
- Status reports on all orders to date and pricing
- Daily report of rush orders and their status
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- Historical reports by type, quantity and date produced
- Service level reports as requested by Buyer
7.3 OTHER PRODUCTS: Such reports as Buyer may request (e.g. Gift
Certificates)
7.4 Seller and Buyer will mutually agree to set a schedule for business
reviews in which at least two meetings will be scheduled at the
beginning of January and July of each contract year.
VIII. ADDITIONAL ITEMS
8.1 During the term of this Agreement, Buyer may have a need for items
being commercially produced by Seller, which although not then
listed in EXHIBIT A are in the same general product line as items
listed in Exhibit "A". In such a circumstance, Buyer shall have a
right, upon ten (10) days prior written notice to Seller, to have
the unlisted items added to this Agreement. These added items can
then be purchased under this Agreement, at Seller's then prevailing
prices for these items, at the same quantity levels at which the
items listed in EXHIBIT A are priced; however, the pricing shall at
all times reflect Seller's extending its "most favored customer"
status to Buyer for comparable specifications.
IX. RESCHEDULING AND CANCELLATION
9.1. Buyer may at its own election and convenience, before Seller
delivers the applicable units under one or more of its purchase
orders, (i) cancel this Agreement in whole as provided in ARTICLE
XII, or (ii) cancel particular purchase orders, or any portion
thereof, provided that:
(a) Buyer shall give notice to Seller of such cancellation
indicating its scope and extent.
(b) Such notice is received by Seller at least thirty (30) days
in advance in the case of SECTION (i) above or five (5)
days depending on "agreed to" lead time in SECTION (ii)
before the scheduled delivery date.
(c) Buyer is responsible for all costs incurred as it relates to
Buyer's orders in production including all material as it
relates to Buyer's orders in production.
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X. OTHER TERMS AND CONDITIONS
10.1 It is understood and agreed that the terms and conditions contained
in this Agreement in addition to the Standard Purchase Order Terms
and Conditions contained on the reverse side of Buyer's purchase
orders, a copy of which is hereto attached as EXHIBIT D, shall be
the sole terms and conditions governing this Agreement and each and
every order issued under it. Any conflicts which might exist
between this Agreement and said Standard Purchase Order Terms and
Conditions which are not specifically resolved in this Agreement
shall be resolved in favor of this Agreement.
10.2 If Seller, upon receipt per ARTICLE IV of this Agreement and Buyer's
purchase order, including but limited to the stated in-house
delivery date, cannot subsequently meet the mutually agreed to ship
date, will ship via overnight air freight F.O.B. origin, freight
prepaid. If delay is caused by Seller after missing the mutually
agreed ship date, enough product will be shipped next-day air to
prevent stock-outs and paid by Seller. The remainder of the order
will be shipped under normal terms.
10.3 Seller, upon receipt of Buyer's purchase order, will acknowledge
such purchase order as to correct quantity, in-house date, and
price, and return a copy to Buyer with the proper authorization.
10.4 Seller is to provide a cost reduction program/schedule each year by
JULY 15.
10.5 Money Orders: Seller and Buyer are to mutually agree on a test
procedure and in the event that Seller ships defective product and
such product is verified as defective at Buyer's test inspection,
Buyer will be entitled to a $.05/item credit from Seller for each
item found defective, as well as $250 per order charge. The credit
will only apply to defective items over 1000 (minimum) items and
limited to 30,000 (maximum) items per order. Defective product as
described above is defined as product which has failed criteria
found in ARTICLE V and in EXHIBIT C as described in the mutually
agreed test procedure.
Official Checks: Seller and Buyer are to mutually agree on a test
procedure and in the event that Seller ships defective product and
such product is verified as defective at Buyer's test inspection,
Buyer will be entitled to a $.05/item credit from Seller for each
item found defective, as well as $50 per order charge. The credit
will only apply to defective items
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over 3000 (minimum) items and limited to 20,000 (maximum) items per
order. In the event the Seller ships defective product, and in doing
so causes a TECI customer a break in service, Seller will have 3 days
from the date Seller receives notification to replace the defective
product. For any order delayed longer than the 3 day time period,
the Seller will credit the Buyer $250.00 per day for each day the
customer is delayed. Defective products described above is defined
as product which has failed criteria found in Section V and in
Exhibit "C" as described in the mutually agreed test procedure.
10.6 Seller agrees to employ a full time MICR Quality Assurance person
for each program (money orders and official checks). These people
will have had training in Statistical Process Control (SPC), Total
Quality Management (TQM) and forty hours or more in Total Quality
Improvement (TQI). These people will report directly to the Seller's
VP of Operations OR OPERATIONS MANAGER.
10.7 Seller will provide Buyer with an informed contact person for each
program (money orders and other MICR forms) at each plant and
warehouse who will be available via pager throughout the full
business day (7:00 AM to 5:00 PM). Seller will provide a list of
contact persons, locations and telephone numbers as EXHIBIT F to
this Agreement and will keep the list current.
10.8 NON-STANDARD MICR FORMS: Non-standard MICR forms will be priced
separately and subject to the same MICR forms specifications as
standard MICR forms, unless otherwise stated on the purchase order.
10.9 OUTSOURCED MICR FORMS: MICR forms that Seller elects to outsource
to another Seller will conform to the same specifications and price
constraints as in-house non-standard MICR forms. Pricing on
outsourced MICR forms will be quoted within 48 hours of receipt of
the purchase order, which at that time Buyer can proceed or cancel
said order. Notwithstanding any outsourcing, Seller remains
responsible to Buyer for the performance of this Agreement.
10.10 PURCHASE OF PAPER: Buyer reserves the right to purchase its own
paper to produce the MICR forms upon sixty (60) days written notice
to the Seller. Paper specifications and quality must meet Seller's
requirements based on Seller's past practices.
10.11 FREIGHT COSTS:
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Seller will deliver the Money Order forms directly to Buyer's
designated warehouse using the most economical transportation given
the delivery requirements. All discounts, or rebates, received by
Seller will be passed on to the Buyer. Buyer reserves the right to
select shipper for its products if discounts and/or rebates are more
advantageous to Buyer.
Seller will deliver the Official Check forms directly to the Buyer's
designated warehouse using the most economical transportation given
the delivery requirements. Seller and Buyer agree that the 1st year
of the Agreement Buyer shall receive a discount of 16% of freight
costs. After the first year, Buyer will receive a guaranteed
minimum rate of 16% discount. In the event the Seller's discounts
are less than 16%, Buyer will receive 100% of the freight discount.
Buyer reserves the right to select shipper for its products if
discounts are more advantageous to Buyer.
Rebate (discount) on freight does not include money orders/pick pack
products for which Norhtstar does not receive a discount.
Discounts will be discussed and adjusted at the annual reviews of
the program.
10.12 GOVERNING LAW: This Agreement is governed by and construed in
accordance with Minnesota law and it is the entire Agreement between
the parties. This Agreement may be amended or assigned only by the
written Agreement of both parties.
10.13 OWNERSHIP: All proofs, prints, negatives, separations,
enhancements, disks, electronic files, digital information, etc.,
that are provided by Buyer or developed or created by Seller in
connection with this Agreement, both the physical medium and the
intellectual property rights, are the exclusive property of Buyer
and must be returned to Buyer upon request or within ten (10) days
of the termination of this contract in a form used by Seller or
available to Seller without additional expense. Note that Seller
files digital information on an Amgraf Mecca System.
10.14 PRODUCT SPECIFICATIONS: Seller agrees to manufacture all products
in specification with ANSI standards in regards to size, MICR and
paper. EXHIBIT "C" lists automated MICR forms specifications. All
MICR forms should be created to these specifications unless the
Purchase Order specifically states otherwise. Exceptions will be
signed by both parties at authorized levels
10.15 CONFORMANCE REQUIREMENTS: Conformance requirements for MICR forms
is addressed in EXHIBIT C.
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10.16 SECURITY REQUIREMENTS: Seller agrees to install and maintain
security requirements found in EXHIBIT B for the duration of this
Agreement and any extensions. Buyer shall also have the right to
inspect the records, wherever maintained, upon reasonable notice,
during regular business hours.
XI. AMENDMENTS
11.1 This Agreement shall not be deemed or construed to have been
modified, amended, rescinded, canceled or waived in whole or in
part, except by written instruments signed by the parties hereto;
further, it is expressly agreed that matters affecting this
Agreement in general must be signed by both parties.
XII. RIGHT OF TERMINATION
12.1 If either Buyer or Seller fails to perform any of its covenants or
obligations under this Agreement (other than as expressly set forth
in SECTION 12.3), and such failure is, or in the aggregate such
failures are, material, then the party not in default under this
agreement may provide written notice of its intent to terminate this
Agreement and if such default is not cured within ten (10) business
days from the date of written notice to the defaulting party or, if
such default cannot reasonably be cured within such ten (10)
business day period, if cure is not commenced within such period and
thereafter diligently pursued, then the nondefaulting party may
terminate this Agreement immediately.
12.2. If the party not in default under this Agreement elects to terminate
this Agreement pursuant to SECTION 12.1., then, in addition to such
termination and subject to the terms of this Agreement, the party
not in default shall be entitled to any and all other remedies
provided by law or equity for the other party's failure to fulfill
its obligations under this Agreement.
12.3. If either Buyer or Seller becomes or is declared insolvent or
bankrupt, then this Agreement shall be immediately terminated,
without the requirement of any notice to the insolvent or bankrupt
party. A party shall be deemed insolvent or bankrupt for purposes
of this section in the event that:
(a) A receiver, liquidator or trustee of a party is appointed by
court order and such order remains in effect for more than
thirty (30) days; or a case is commenced or a petition is
filed against a party
10
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under any applicable liquidation, conservatorship,
bankruptcy, moratorium insolvency, reorganization or similar
laws for the relief of debtors from time to time in effect
and generally affecting the rights of creditors (a "Debtor
Relief Law"); or
(b) A party voluntarily seeks, consents to, or acquiesces in the
benefit or benefits of any provision of any Debtor Relief
Law; consents to the filing of any assignment for the
benefit of its creditors; admits in writing its inability to
pay its debts generally as they become due; or consents to
the appointment of a receiver, trustee, liquidator or
conservator for it or any part of its property.
12.4. If Seller fails to deliver to Buyer the CFO report as required by
SECTION 21.1, or if the report is not reasonably satisfactory to
Buyer because of declining financial condition, the Buyer shall have
the right to terminate this Agreement upon sixty (60) days prior
written notice to Seller.
12.5 CHANGE OF OWNERSHIP OR CONTROL: Seller agrees that a change in its
ownership or control during the term of this Agreement shall have no
effect on the Agreement with the exception that Buyer may terminate
the Agreement upon written notice to Seller. For purposes of this
Agreement, a change in ownership or control occurs when thirty
percent (30%) or more of Seller's shares or assets are transferred.
Seller will provide Buyer necessary information at the earliest
opportunity. Change of ownership does not include Seller's buyback
of its own stock.
12.6 Termination Transition: Buyer agrees to transition volume in six
month intervals at the conclusion of this agreement so as to effect
a smooth transition for both parties. Money Orders will form one
product group, official checks will form a second product group and
all other items will form the remaining product group.
12.7 Dispute Resolution Procedure:
a. Notice and Cure. Except as otherwise specified in this
Agreement, in the event of a breach of the Agreement the
nonbreaching party shall give the breaching party written notice
of the breach and thirty (30) days to cure it.
b. Negotiation. The parties agree to use their best efforts to
negotiate a resolution of the problem within the thirty (30) day
cure period.
c. Executive Representatives. If the parties are unable to resolve
the problem as provided above, they will each promptly designate
in writing one executive representative from each Party. The
executive
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representatives will use their best efforts to negotiate a
resolution of the problem within thirty (30) days.
d. Mediation. If the parties are unable to resolve the dispute as
provided above, they will submit the dispute to nonbinding
mediation with a neutral mediator in Minneapolis, Minnesota.
Each Party will pay its own expenses, and the parties will share
equally the fees and expenses of the mediator.
e. Arbitration. If mediation fails to resolve the dispute within
ninety (90) days from the date of submission, the parties shall
submit the dispute to binding arbitration in Minneapolis,
Minnesota.
f. Termination and Other Remedies. Nothing in this dispute
resolution procedure prevents a Party from terminating this
Agreement according to its provisions or instituting formal
proceedings at any time to avoid the expiration of any applicable
limitations period, or to preserve those rights regarding
confidentiality, or where a Party in good faith otherwise
determines that a breach of this Agreement by the other Party may
cause irreparable harm and relief in the form of a restraining
order, injunctive order or other equitable remedy is the only
adequate remedy.
XIII. INSURANCE COVERAGE
13.1. MINIMUM INSURANCE COVERAGE. Throughout the Term, Seller will
maintain insurance COVERAGE reasonably satisfactory to Buyer.
(a) Comprehensive General Liability, legal liability coverage,
covering the liability assumed under this Agreement, subject
to a minimum combined single limit of $2,000,000.00 for
bodily injury and property damage per any one occurrence.
The foregoing can be fulfilled by an umbrella insurance
policy.
(b) Comprehensive Automobile Liability Insurance, including
liability covering vehicles hired by the insured, and
vehicles owned by the insured's employees and agents and
used in the insured's business, as well as those owned by
the insured (sometimes known as owned, combined single limit
of $2,000,000.00 for bodily injury and property damage per
any one occurrence. The foregoing can be fulfilled by an
umbrella insurance policy.
(c) Workmen's Compensation Insurance to the full extent required
by applicable state law.
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(d) Crime and Premises Insurance, including, but not limited to,
coverage for employee dishonesty and agent dishonesty
covering for negotiable securities of others with a minimum
limit of $1,000,000.00
13.2. ADDITIONAL INSURED. Seller further agrees to name Buyer as an
additional insured, with respect to this Agreement as it relates to
Buyer's employees, agents, directors and affiliates on the
Comprehensive General Liability and Comprehensive Automobile
Liability policies referred to in the above SECTION 13.1. Seller
will provide Buyer with a copy of coverage's with Buyer named as an
additional insured on the comprehensive General Liability and
Comprehensive Automobile Liability policies within ten (10) days of
the date this Agreement is fully executed by the parties hereto.
13.3. CERTIFICATES OF INSURANCE. Before commencing Services hereunder,
Seller shall deliver to Buyer certificates of insurance evidencing
the foregoing coverage's issued by the acceptable insurance
carrier(s), providing that not less than thirty (30) days written
notice shall be given to Buyer prior to any change in the terms and
conditions of any such insurance coverage or the cancellation,
termination or expiration of any such insurance coverage.
XIV. INDEMNIFICATION BY THIRD PARTY CLAIMS AND LIMITATION OF LIABILITY.
14.1 Seller agrees to indemnify and hold harmless Buyer, its directors,
officers, agents and employees from and against all losses, damages,
claims, liabilities and causes of action of every kind, including
claims for the payment of negotiable instruments (as well as costs
and expenses incident thereto, including attorneys' fees) caused by
the fault or negligence of Seller or its employees arising out of
this Agreement or related to the inventory entrusted to Seller,
except any losses to the extent caused by the fault or negligence of
Buyer or its employees. Seller shall give the Buyer prompt and
reasonable notice of any such claims or actions, and Buyer shall
have the right to investigate, compromise and defend the same to the
extent of its own interests.
14.2 Buyer agrees to indemnify and hold harmless Seller, its directors,
officers, agents and employees from and against all losses, damages,
claims, liabilities and causes of action of every kind, including
claims for the payment of negotiable instruments (as well as costs
and expenses incident thereto, including attorneys' fees) caused by
the fault or negligence of Buyer or its employees arising out of
this Agreement,
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except any losses to the extent caused by the fault or negligence
of Seller or its employees. Buyer shall give Seller prompt and
reasonable notice of any such claims or actions, and Seller shall
have the right to investigate, compromise and defend the same to
the extent of its own interests.
14.3. REMEDIES CUMULATIVE; DAMAGES. All remedies are cumulative. Failure
to exercise a right or remedy is not a waiver. Except when due to a
claim or action pursuant to SECTION 14.1. (c), neither party is
liable to the other party for any indirect, special, incidental,
consequential or punitive damages.
14.4. SURVIVAL. This ARTICLE XIV shall survive the expiration or
termination of this Agreement.
XV. RELATIONSHIP OF PARTIES.
15.1 In connection with this Agreement, each party is an independent
contractor, and neither party has any authority to bind or commit
the other. Nothing herein shall be deemed or construed to create a
joint venture, partnership or agency relationship between the
parties for any purpose.
XVI. SEVERABILITY
16.1 If any term or provision of this Agreement shall be found by a court
of competent jurisdiction to be invalid, illegal or otherwise
unenforceable, the same shall not affect the other terms or
provisions hereof or the whole of this Agreement, but such term or
provision shall be deemed modified to the extent necessary in the
court's opinion to render such term or provision enforceable, and
the rights and obligations of the parties shall be construed and
enforced accordingly, preserving to the fullest permissible extent
the intent and agreements of the parties herein set forth.
IX. NOTICE
17.1 Any notice provided for in, or permitted under, this Agreement shall
be made in writing and may be given or served by (a) delivering the
same in person or by prepaid messenger service to the party to be
notified, (b) depositing the same in the mail, postage prepaid,
registered or certified with return receipt requested, and addressed
to the party to be notified at the address herein specified, or (c)
telex, telegraph, facsimile, or other written telecommunication
medium. If notice is deposited in the United
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States mail pursuant to clause (b) of this SECTION 17.1, it will be
effective from and after three (3) days following the date that it is
so deposited. Notice given in any other manner shall be effective
only in and when received at the address of the party to be notified.
For the purpose of notice, the addresses and facsimile numbers are as
follows:
If to Seller:
Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, Minnesota 55428
ATTN: PRESIDENT
Facsimile: 612/535-5671
If to Buyer:
Travelers Express Company, Inc.
1550 Utica Avenue South
St. Louis Park, Minnesota 55416
Attn: Director of Corporate Services
Facsimile: 612/591-3121
With a copy to (except for communications required for the daily performance of
Services):
Travelers Express Company, Inc.
1550 Utica Avenue South
St. Louis Park, Minnesota 55416
Attn: Legal Department
Facsimile: 612/591-3859
XVIII. FORCE MAJEURE.
18.1 Neither party shall be liable for any delays or failures in
performance due to fire or to labor or material shortages, or to
strikes, walkouts, public enemy, Acts of God or to causes beyond the
party's control that are not due to its negligence, gross negligence
or willful misconduct. The party whose performance is to be excused
as provided in the previous
15
<PAGE>
sentence must advise the other party of such delay or failure in
performance as soon as such party has, or should have, knowledge
that an event has occurred which will cause same. Within five
days, the party must confirm the advice by written notice and
furnish as much detail as is reasonable available. If any
interruption of performance continues longer than thirty days, the
other party may terminate this Agreement by written notice to the
party whose performance is interrupted unless a course of
corrective action is approved by both parties.
XIX. ENVIRONMENTAL LIABILITY.
19.1 Seller and Buyer acknowledge to each other that each recognizes that
certain federal, state and local laws and regulations impose
liability upon multiple parties considered responsible for any
hazardous, toxic, radioactive, pollutant, or irritant condition
("Condition") under the doctrine of joint and several liability, or
strict liability. Buyer and Seller each acknowledge and agree that
it is not the purpose of this Agreement that either shall be
exposed to any liability arising out of any Condition at the other's
facilities, or the activities of the other. Accordingly, each party
hereto (an "Indemnifying Party") does waive any and all claims, and
agrees to indemnify, defend, and save harmless the other party, its
agents, employees, and subcontractors (individually and
collectively, an "Indemnified Party"), for, from and against any
suits, judgments or expenses, and reasonable attorneys fees, by
reason of any injury to persons, death, damage to property, or
violation of any law, or regulation arising in connection with any
Condition at the Indemnifying Party's facilities, or any Condition
arising in connection with the Indemnifying Party's activities in
the manufacturing, warehousing and deployment of the instruments and
other Buyer property. The obligation set forth herein shall continue
in full force and effect, whether or not this Agreement is
terminated for any reason whatsoever.
XX. RIGHT TO INSPECT AND MAINTENANCE OF BOOKS AND RECORDS.
20.1 Buyer, after giving reasonable notice to Seller, shall have the
right at reasonable intervals to have its employees, agents or
representatives inspect the Facilities during regular business hours
for the sole purpose of confirming adherence to the terms and
conditions of this Agreement. Such right of inspection shall not
interfere with the normal conduct of Seller's business or the
operations of its facilities.
20.2 All supplies and services provided hereunder by Seller shall be
subject to final inspection and approval by Buyer. It is expressly
understood and agreed that the mere fact that Buyer made payment for
same does not
16
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constitute final acceptance or a waiver of any rights.
20.3 Throughout the Term, Seller shall maintain reasonably full and
accurate accounts, records, books, journals, ledgers, and data
(collectively, "Records") regarding the Services rendered hereunder,
all in accordance with generally accepted accounting principles.
Upon two (2) days advance notice, Buyer, its employees, agents or
representatives shall have the right at reasonable intervals during
normal business hours to inspect the Records, and such other records
as may be reasonably necessary, for the sole purpose of verifying
performance by Seller of the Services and to confirm the Service
Fees. Seller shall maintain all Records related to invoices,
Services and backup documentation associated therewith for a
period of at least three (3) years after the termination or
expiration of this Agreement. Seller shall also make the Records
available to Buyer, its employees, agents or representatives within
the Minneapolis, Minnesota, metropolitan area within ten (10) days
after receipt of a reasonable request for such Records from Buyer.
Further, Buyer shall have the right to inspect the Records at
reasonable intervals wherever maintained, upon reasonable notice,
during regular business hours.
XXI. FINANCIAL STATEMENTS AND REPORTS.
21.1 During the Term, upon Buyer's request, Seller will furnish or cause
to be furnished to Buyer, as soon as the same are available, and in
any event within one hundred twenty (120) days of the end of each
fiscal year a copy of Seller's Chief Financial Officer's Report of
Key Financial Information ("CFO Report"). The CFO Report is an
annual audited compilation of Seller's income statement, balance
sheet and statement of cash flows. Buyer shall sign the
confidentiality agreement which shall accompany the CFO Report,
provided that such agreement contains language materially consistent
with the Buyer's Mutual Confidentiality Agreement.
XXII. PUBLICITY.
22.1 Without the prior written approval of Buyer, Seller is prohibited
from any media releases, public announcements and public disclosures
relating to this Agreement or the subject matter of this Agreement,
including, without limitation, promotional or marketing materials,
but not including any announcement intended solely for internal
distribution or any disclosure required by legal, accounting or
regulatory requirements.
XXIII. THIRD PARTY BENEFICIARIES.
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23.1 Buyer and Seller agree that this Agreement is for their benefit and
is not intended to confer any rights or benefits on any third
parties, including without limitation, any employees of Buyer or
Seller.
XXIV. CAPTIONS.
24.1 Captions appearing in this Agreement are for convenience only and
shall not be deemed to explain, limit or amplify the provisions
hereof.
XXV. ASSIGNMENT OR DELEGATION OF DUTIES.
25.1 Except as provided in SECTION 10.9 of this Agreement, Seller shall
not assign, subcontract, or otherwise convey or delegate its rights
or duties hereunder to any other party without the prior written
consent of Buyer, which shall not be unreasonably withheld or
delayed and which consent, if given, shall provide that it is
subject to all the terms and conditions of this Agreement.
XXVI. DISASTER RECOVERY. Seller agrees to maintain a disaster recovery
plan satisfactory to Buyer and to provide Buyer with a description
of the plan as EXHIBIT G to this Agreement. The description
provided as Exhibit G is a brief summary. The plan is available in
its entirety at Seller's corporate offices.
XXVII. YEAR 2000 READINESS. Seller warrants that in performing this
contract it will accurately process date/time data from, into, and
between the twentieth and twenty-first centuries, the years 1999 and
2000, and leap year calculations.
Buyer warrants that in performing this contract if will accurately
process date/time data from, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000, and leap year
calculations.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
Seller: Buyer:
Northstar Computer Forms, Inc., Travelers Express Company, Inc.,
a MINNESOTA corporation a Minnesota corporation
By: By:
--------------------------- -----------------------------
Name: Kenneth E. Overstreet Name: Paul Dykstra
------------------------- ---------------------------
Title: President Title: Sr. Vice President
------------------------- ---------------------------
Date: January 25, 1999 Date: February 16, 1999
------------------------- ---------------------------
19
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 4,053,772
<SECURITIES> 0
<RECEIVABLES> 5,497,989
<ALLOWANCES> 149,000
<INVENTORY> 2,207,624
<CURRENT-ASSETS> 13,069,458
<PP&E> 30,975,417
<DEPRECIATION> 16,874,808
<TOTAL-ASSETS> 30,108,606
<CURRENT-LIABILITIES> 4,935,666
<BONDS> 3,683,050
0
0
<COMMON> 136,429
<OTHER-SE> 19,009,668
<TOTAL-LIABILITY-AND-EQUITY> 30,108,606
<SALES> 10,643,618
<TOTAL-REVENUES> 10,643,618
<CGS> 7,916,249
<TOTAL-COSTS> 1,931,920
<OTHER-EXPENSES> (70,869)
<LOSS-PROVISION> 13,800
<INTEREST-EXPENSE> 92,020
<INCOME-PRETAX> 760,498
<INCOME-TAX> 289,000
<INCOME-CONTINUING> 471,498
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<NET-INCOME> 471,498
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