-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FjelgaAn4tpL7O+vQhtSa/DI2zG3V4E5NCGyv8UzsdVGotVhH3ND3dYdTGHv2QXL qkofy/AnQEv5bIaPz609GA== 0000205700-03-000052.txt : 20030512 0000205700-03-000052.hdr.sgml : 20030512 20030512105004 ACCESSION NUMBER: 0000205700-03-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030329 FILED AS OF DATE: 20030512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND BUSINESS SERVICE INC CENTRAL INDEX KEY: 0000205700 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 042942374 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11427 FILM NUMBER: 03691806 BUSINESS ADDRESS: STREET 1: 500 MAIN ST CITY: GROTON STATE: MA ZIP: 01471 BUSINESS PHONE: 9784486111 10-Q 1 form10qq3_03.txt NEW ENGLAND BUSINESS SERVICE, INC. FORM 10Q UNITED STATES 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 March 29, 2003. OR [ ] 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 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 --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No --- --- The number of common shares of the Registrant outstanding on May 12, 2003 was 12,984,153. PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements - ---------------------------- NEW ENGLAND BUSINESS SERVICE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
Mar. 29, June 29, 2003 2002 -------- -------- ASSETS Current Assets Cash and cash equivalents $ 5,728 $ 6,112 Accounts receivable, net 52,795 55,738 Inventories, net 35,036 34,095 Direct mail advertising materials, net and prepaid expenses 13,107 13,374 Deferred income tax benefit 11,474 13,240 -------- -------- Total current assets 118,140 122,559 Property and Equipment, net 70,478 73,602 Net Property Held for Sale 328 328 Deferred Income Tax Benefit 19,368 18,934 Goodwill, net 68,066 67,964 Other Intangible Assets, net 47,233 51,884 Long-Term Investment - 30,521 Other Assets 2,909 3,130 -------- -------- TOTAL ASSETS $326,522 $368,922 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 12,779 $ 16,858 Accrued expenses 44,207 48,126 Obligations under capital lease-current portion 514 1,102 -------- -------- Total current liabilities 57,500 66,086 Long-Term Debt 96,177 148,358 Deferred Income Taxes 18,008 17,758 STOCKHOLDERS' EQUITY Common stock 15,888 15,829 Additional paid-in capital 59,214 57,885 Unamortized value of restricted stock awards (633) (62) Accumulated other comprehensive loss (3,845) (7,411) Retained earnings 143,875 125,905 -------- -------- Total 214,499 192,146 Less Treasury stock, at cost (59,662) (55,426) -------- -------- Stockholders' Equity 154,837 136,720 -------- -------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $326,522 $368,922 ======== ========
See Notes to Condensed Consolidated Financial Statements NEW ENGLAND BUSINESS SERVICE, INC. STATEMENTS OF CONSOLIDATED INCOME (In thousands, except per share data)
Three Months Ended Nine Months Ended Mar. 29, Mar. 30, Mar. 29, Mar. 30, 2003 2002 2003 2002 -------- -------- -------- -------- NET SALES $127,267 $132,879 $408,717 $423,926 COST OF SALES 54,765 58,554 172,182 184,310 -------- -------- -------- -------- GROSS PROFIT 72,502 74,325 236,535 239,616 OPERATING EXPENSES: Selling and advertising 44,519 46,147 140,117 145,639 General and administrative 17,393 17,313 55,908 53,655 -------- -------- -------- -------- Total operating expenses 61,912 63,460 196,025 199,294 INCOME FROM OPERATIONS 10,590 10,865 40,510 40,322 OTHER (EXPENSE)/INCOME: Interest income 35 37 110 135 Interest expense (1,622) (3,361) (6,677) (10,196) Loss on settlement of interest rate swaps - - (3,277) - Gain on sale of long-term investment 1,027 - 11,424 - -------- -------- -------- -------- Total other(expense)/income (560) (3,324) 1,580 (10,061) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 10,030 7,541 42,090 30,261 PROVISION FOR INCOME TAXES 4,144 2,895 16,309 11,620 -------- -------- -------- -------- INCOME BEFORE THE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 5,886 4,646 25,781 18,641 -------- -------- -------- -------- EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE - - - (2,792) -------- -------- -------- -------- NET INCOME $ 5,886 $ 4,646 $ 25,781 $ 15,849 ======== ======== ======== ======== PER SHARE AMOUNTS: Basic Earnings Per Share Before the Effect of a Change in Accounting Principle $ .46 $ .36 $ 1.98 $ 1.47 ======== ======== ======== ======== Effect of a Change in Accounting Principle $ .00 $ .00 $ .00 $ (.22) -------- -------- ------- -------- Basic Earnings Per Share $ .46 $ .36 $ 1.98 $ 1.25 ======== ======== ======== ======== Diluted Earnings Per Share Before the Effect of a Change in Accounting Principle $ .44 $ .35 $ 1.93 $ 1.45 ======== ======== ======== ======= Effect of a Change in Accounting Principle $ .00 $ .00 $ .00 $ (.22) -------- -------- -------- -------- Diluted Earnings Per Share $ .44 $ .35 $ 1.93 $ 1.23 ======== ======== ======== ======== Dividends $ .20 $ .20 $ .60 $ .60 ======== ======== ======== ======== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 12,932 12,763 12,991 12,648 Plus incremental shares from assumed conversion of stock options and contingently returnable shares 342 326 333 197 -------- -------- -------- -------- DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 13,274 13,089 13,324 12,845 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements NEW ENGLAND BUSINESS SERVICE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
Nine Months Ended Mar. 29, Mar. 30, 2003 2002 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 25,781 $ 15,849 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 14,774 13,945 Amortization 5,342 6,692 Deferred income taxes (79) - Loss on disposal of equipment 52 57 Gain on sale of long-term investment (11,424) - Change in accounting principle - 2,792 Provision for losses on accounts receivable 4,267 3,767 Deferred grants (6) - Employee benefit charges 694 3,849 Changes in assets and liabilities: Accounts receivable (1,124) (426) Inventories and prepaid expenses (17) 8,143 Accounts payable (4,123) (5,460) Income taxes payable 1,725 2,434 Other accrued expenses (1,418) (607) -------- -------- Net cash provided by operating activities 34,444 51,035 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (11,501) (11,368) Purchase of long-term investment (5,421) (17,652) Proceeds from sale of long-term investment 47,366 - Proceeds from sale of equipment 11 24 -------- -------- Net cash provided by/(used in) investing activities 30,455 (28,996) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (90,769) (98,140) Proceeds from borrowings - net of issuance costs 37,309 84,181 Proceeds from issuance of common stock 619 2,813 Acquisition of treasury stock (4,894) - Dividends paid (7,811) (7,585) -------- -------- Net cash used in financing activities (65,546) (18,731) EFFECT OF EXCHANGE RATE CHANGES ON CASH 263 (127) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS (384) 3,181 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,112 7,154 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,728 $ 10,335 ======== ========
See Notes to Condensed Consolidated Financial Statements NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share data) 1. Basis of Presentation/Accounting Policies - -------------------------------------------- The condensed consolidated financial statements contained in this report are unaudited but reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of the interim periods reflected. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to applicable rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated 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 29, 2002. 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 29, 2002. The Company has consistently followed those policies in preparing this report. The results from operations for the interim periods reported herein are not necessarily indicative of results to be expected for the full year. Certain reclassifications have been made to the comparative periods so as to be in conformity with the current quarter presentations. 2. Restructuring and Impairment of Assets - ---------------------------------------- During fiscal year 2001, the Company undertook two distinct restructuring actions. The first resulted in a restructuring charge of $3,500 in fiscal year 2001 and an additional charge of $1,023 in fiscal year 2002 to provide for costs primarily associated with the Company's decision to more closely align its direct marketing and direct sales activities. As part of the restructuring program, the McBee US headquarters was relocated from Parsippany, New Jersey to the RapidForms facility in Thorofare, New Jersey. In addition, the McBee manufacturing plant in Damascus, Virginia was closed and a portion of leased warehousing space occupied by Chiswick in Sudbury, Massachusetts was vacated. In Canada, the McBee sales and marketing organizations were combined with NEBS Direct Marketing and began operating under the NEBS name. Approximately 140 employees were affected by the restructuring either through elimination of their positions or relocation. The second restructuring action resulted in the Company recording an additional charge in fiscal year 2001 of $3,645 to provide for costs associated with the Company's decision to eliminate excess capacity by closing a manufacturing facility in Ogden, Utah and a leased distribution facility in Sudbury, Massachusetts, along with other actions to reduce the workforce in various locations. Approximately 175 employees were affected by this restructuring, either through elimination of their positions or relocation. The closed manufacturing facility in Ogden, Utah is classified on the balance sheet as property held for sale. The property is carried at net book value which approximates fair value less the cost to sell. The following is a table of the charges incurred and the cash paid in fiscal 2003 pursuant to these actions:
First Restructuring Second Restructuring Employee Facility termination Facility closure costs benefit costs closure costs Total Three Months Ended ------------- ------------- ------------- --------- Mar. 29, 2003 Balance Dec. 28, 2002 $ 850 $ 116 $ 0 $ 966 Payments for the period (124) (34) 0 (158) ------- -------- ------ ------- Balance Mar. 29, 2003 $ 726 $ 82 $ 0 $ 808 ======= ======== ====== ======= First Restructuring Second Restructuring Employee Facility termination Facility closure costs benefit costs closure costs Total Nine Months Ended ------------- ------------- ------------- --------- Mar. 29, 2003 Balance June 29, 2002 $1,038 $ 166 $ 451 $ 1,655 Payments for the period (312) (84) (451) (847) ------- -------- ------ ------- Balance Mar. 29, 2003 $ 726 $ 82 $ 0 $ 808 ====== ======== ====== ======== The activities related to all restructuring actions identified above are anticipated to be completed by the Company during fiscal year 2003 with the exception of lease payments, which may extend beyond this time frame.
3. Inventories - -------------- Inventories are carried at the lower of first-in, first-out cost or market. Inventories at March 29, 2003 and June 29, 2002 consisted of:
Mar.29, June 29, 2003 2002 ------- ------- Raw Material $ 1,566 $ 1,709 Work in Process - 124 Finished Goods 33,470 32,262 ------ ------- Total $35,036 $34,095 ======= =======
4. Long-Term Investment - ----------------------- In July 2002, the Company invested, through the exercise of warrants, an additional $5,421 in the common stock of Advantage Payroll Services, Inc. ("Advantage"). In September 2002, Advantage merged with Paychex, Inc. At closing, the Company received the first payment of proceeds from the merger transaction of $42,264 and the Company recognized a $6,322 gain on the sale of its long-term investment. In the second quarter, the Company received the second payment of proceeds and recognized a gain of $4,075. In the third quarter, Company received the third and final payment of proceeds and recognized a gain of $1,027. The Company recognized a total gain of $11,424 for the nine months ended March 29, 2003. The Company used the proceeds from the sale of the Advantage investment to pay down floating rate debt and to terminate three interest rate swap agreements with a notional amount of $75,000 with two commercial banks. These interest rate swaps were no longer needed to hedge the reduced level of the Company's floating rate debt. The Company was required to make termination payments equivalent to the fair value of the swaps totaling $3,277. This amount, which was reclassified from other comprehensive income to other expense, represents a loss on settlement of interest rate swaps to terminate the agreements. 5. Goodwill and Other Intangible Assets - ------------------------------------------ In the first quarter of fiscal 2002 SFAS No. 142 "Goodwill and Other Intangible Assets" was adopted. SFAS No. 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and addresses the impairment testing and recognition for goodwill and intangible assets. In applying SFAS No. 142, the Company completed the transitional intangible asset impairment test by determining the carrying amount of its various reporting units and comparing that with their fair value, determined by using a multiple of earnings before interest, taxes, depreciation and amortization. In fiscal year 2002, the Company recognized an impairment charge to write off goodwill in the amount of $2,792 relating to its European business within its International business segment. The impairment loss is recognized in the condensed consolidated statements of income under the caption "Effect of a Change in Accounting Principle". Intangible assets consist of the following:
June 29, Mar. 29, 2002 2003 ---------- --------- Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization ------------- ------------ -------------- ------------ Intangible assets with defined lives: Customer lists $46,327 $36,562 $46,327 $40,894 Covenant not to compete 1,183 1,183 1,183 1,183 Debt issue costs 2,729 1,209 3,420 1,693 Long-term contracts 5,300 663 5,300 913 Bank referral agreements 7,400 1,511 7,400 1,787 Intangible assets with indefinite lives: Tradenames 32,800 2,727 32,800 2,727 -------- -------- -------- -------- Total intangible assets $95,739 $43,855 $96,430 $49,197 ======== ======== ======== ========
Changes in the carrying amount of goodwill (net) for the nine months ended March 29, 2003, by segment are as follows: June 29, Mar. 29, 2002 Adjustments 2003 -------- ------------ ---------- Direct Marketing-US $24,237 - $24,237 Direct Sales-US 7,501 - 7,501 Apparel 9,624 - 9,624 Packaging and Display Products 23,246 - 23,246 International 3,356 $ 102 3,458 -------- -------- -------- Total $67,964 $ 102 $68,066 ======== ======== ======== The adjustment of $102 in the International segment is the effect of the change in foreign currency translation rates. Amortization of intangible assets for the nine months ended March 29, 2003 was $5,342. Estimated amortization of intangible assets for fiscal years 2003, 2004, 2005, 2006 and 2007, without consideration of any other increases or decreases in the balance of the assets, is $7,098, $5,325, $1,259, $1,085 and $749, respectively.
6. Stock Options - ------------------ The Company accounts for stock-based compensation to employees using the intrinsic value method. Accordingly, no compensation cost has been recognized for fixed stock option grants since the options granted to date have exercise prices per share of not less than the fair value of the Company's common stock at the date of the grant. If compensation cost for stock option grants had been determined based on the fair value of the grant for the three and nine months ended March 29, 2003 the Company's net income and net income per share would have been reduced to the pro forma amounts shown below:
Three Months Ended Nine Months Ended Mar. 29, Mar. 30, Mar. 29, Mar. 30, 2003 2002 2003 2002 -------- ------- -------- -------- Net income: As reported $ 5,886 $ 4,646 $25,781 $15,849 Pro forma 5,514 4,279 24,831 14,907 Net income per diluted share: As reported $ .44 $ .35 $ 1.93 $ 1.23 Pro forma .42 .33 1.86 1.16
The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model. The weighted-average grant date fair value of options granted during the nine months ended March 29, 2003 was $5.72. No options were granted during the three months ended March 29, 2003. 7. Other Comprehensive Income - ----------------------------- Other Comprehensive Income consists of foreign currency translation adjustments, pension adjustments, unrealized gains and losses on investments and changes in the fair market value of cash flow hedges. The Company's comprehensive income is set forth below:
Three Months Ended Nine Months Ended Mar. 29, Mar. 30, Mar. 29, Mar. 30, 2003 2002 2003 2002 -------- ------- -------- -------- Net Income $ 5,886 $ 4,646 $ 25,781 $ 15,849 Changes in: Unrealized (losses)/gains on investments, net of tax (102) (20) 109 (65) Foreign currency translation adjustments, net 1,091 (60) 746 (698) Unrealized gains/(losses) on derivatives held for hedging purposes, net of tax 284 1,102 2,711 (331) -------- ------- -------- -------- Comprehensive income $ 7,159 $ 5,668 $ 29,347 $ 14,755 ======== ======= ======== ========
The Company's accumulated other comprehensive loss is set forth below: Balance Balance Mar. 29, June 29, 2003 2002 --------- ---------- Unrealized losses on investments, net of tax $ (183) $ (292) Foreign currency translation adjustments, net (2,872) (3,618) Pension adjustments, net of tax (305) (305) Unrealized losses on derivatives held for hedging purposes, net of tax (485) (3,196) -------- ------- Total $(3,845) $(7,411) ======== =======
8. Financial Information by Business Segment - -------------------------------------------- The Company has identified five reportable segments. The first segment is "Direct Marketing-US" and represents those business operations that sell primarily printed products such as checks and business forms to small businesses through direct marketing in the United States. The second segment, "Direct Sales-US", also sells primarily checks and business forms to small businesses; however, they sell through a direct sales force to the customer in the United States and, to a lesser extent, through distributors. The third segment, "Apparel", utilizes independent sales representatives to market its specialty apparel products and to solicit orders from customers in the promotional products/advertising specialty industry. "Packaging and Display Products", the fourth segment, primarily resells packaging and shipping supplies and retail signage marketed through a combination of direct marketing and direct selling efforts. The fifth segment, "International", sells primarily printed products such as checks and business forms to small businesses in Europe and Canada through direct marketing, distributors or by directly selling to the customer. The Company evaluates segment performance and allocates resources based on a profit from operations measure. This measure is similar to income from operations as reported on the statements of consolidated income in that it excludes interest and other income and expense. This measure, however, also excludes certain items that are reported within income from operations. These include management incentive compensation, amortization, integration charges, restructuring charges, impairment charges and corporate expenses. The chief operating decision-maker, in assessing segment results, does not consider these items. In order to reconcile the segment numbers to the Company's income before income taxes, adjustments representing the items listed above totaling $4,994 and $8,646 for the three months and $14,975 and $26,438 for the nine months ended March 29, 2003 and March 30, 2002, respectively, need to be made to the reported segment results. Net sales and profit from operations for each of the Company's business segments are set forth below:
Packaging Direct Direct and Display Marketing-US Sales-US Apparel Products International Total ----------- ----------- ----------- ----------- ------------- ------ Three months ended Mar. 29, 2003 Net sales $62,626 $27,439 $ 9,319 $18,577 $ 9,306 $127,267 Profit (loss) from operations 13,126 2,815 (1,347) 278 152 15,024 Less adjustments listed above 4,994 Income before income taxes $ 10,030
Three months ended Mar. 30, 2002 Net sales $66,466 $27,066 $11,960 $18,342 $9,045 $132,879 Profit (loss) from operations 13,691 2,620 (992) 411 457 16,187 Less adjustments listed above 8,646 Income before income taxes $ 7,541
Packaging Direct Direct and Display Marketing-US Sales-US Apparel Products International Total ----------- ----------- ----------- ----------- ------------- ------ Nine months ended Mar. 29, 2003 Net sales $207,406 $82,350 $28,924 $60,891 $29,146 $408,717 Profit (loss) from operations 47,060 8,824 (2,440) 1,863 1,758 57,065 Less adjustments listed above 14,975 Income before income taxes $ 42,090
Nine months ended Mar. 30, 2002 Net sales $217,674 $79,958 $36,951 $59,877 $29,466 $423,926 Profit (loss) from operations 47,851 6,769 (1,348) 1,369 2,058 56,699 Less adjustments listed above 26,438 Income before income taxes $ 30,261
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------- Overview - -------- New England Business Service, Inc. (the "Company") was founded in 1952, incorporated in Massachusetts in 1955 and reincorporated in Delaware in 1986. The Company 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 and promotional apparel and other business products through direct mail, direct sales, telesales, dealers and the Internet to small businesses throughout the United States, Canada, the United Kingdom and France. The Company also markets and sells payroll services provided by a payroll services company on a private label basis to small businesses in the United States as well as designs, embroiders and sells specialty apparel products through distributors and independent sales representatives to the promotional/advertising specialty industry and golf pro shops, primarily in the United States. The Company has identified five reportable segments. The first segment is "Direct Marketing-US" and represents those business operations that sell primarily printed products such as checks and business forms to small businesses through direct marketing in the United States. The second segment, "Direct Sales-US," also sells primarily checks and business forms to small businesses; however, they sell through a direct sales force to the customer in the United States and, to a lesser extent, through distributors. The third segment, "Apparel", utilizes independent sales representatives to market its specialty apparel products and to solicit orders from customers in the promotional products/advertising specialty and golf industries. "Packaging and Display Products", the fourth segment, primarily resells packaging and shipping supplies and retail signage marketed through a combination of direct marketing and direct selling efforts. The fifth segment, "International", sells primarily printed products such as checks and business forms to small businesses in Europe and Canada through direct marketing, distributors or by directly selling to the customer. 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 "Certain Factors That May Affect Future Results." Results of Operations - --------------------- Net sales decreased $5.6 million or 4.2% to $127.3 million in the third quarter of fiscal year 2003 from $132.9 million in last year's third quarter. The sales change included decreases of approximately $3.8 million in the Direct Marketing-US segment and $2.6 million in the Apparel segment and are primarily attributable to weakness in the economy and, with respect to the Apparel segment, reduced discretionary business spending by corporate customers. These decreases were partially offset by an increase of $.4 million in sales of the Company's Direct Sales-US segment which is benefiting from the implementation of direct marketing strategies and $.2 million in sales in the Packaging and Display Segments which is benefiting from improved order rates from larger customers in the manufacturing market. Net sales in the International segment increased $.2 primarily as a result of foreign currencies strengthening against the U.S. dollar. Net sales decreased $15.2 million or 3.6% to $408.7 million for the first nine months of fiscal year 2003 from $423.9 million in last year's comparable period. The sales change included decreases of approximately $10.3 million in the Direct Marketing-US segment, $8.0 million in the Apparel segment and are primarily attributable to weakness in the economy and, with respect to the Apparel segment, reduced discretionary business spending by corporate customers. A decrease of $.3 million in the International segment was principally due to the timing of shipments in the first quarter offset by foreign currencies strengthening against the U.S. dollar for the first nine months. These decreases were partially offset by increases of $2.4 million in sales of the Company's Direct Sales-US segment which is benefiting from the implementation of direct marketing strategies and $1.0 million in the Packaging and Display segment which is benefiting from improved order rates from larger customers in the manufacturing market. For the third quarter of fiscal year 2003, cost of sales improved to 43.0% of sales from 44.1% in last year's comparable period. For the first nine months of fiscal year 2003, cost of sales improved to 42.1% from 43.5% in last year's comparable period. This is the result of a shift in channel and product mix, which resulted in a lower percentage of total sales coming from the Apparel segment. The Apparel segment has higher cost of sales as a percentage of sales than the other segments. In addition, gross margin in the Apparel segment improved due to a shift in their sales mix tied to lower sales to wholesalers. The Company also benefited from improvements in material costs as a result of favorable vendor negotiations. Cost of sales as a percent of sales is expected to increase slightly for the remainder of the fiscal year.* Selling and advertising expense increased to 35.0% of sales in the third quarter of fiscal year 2003 as compared to 34.7% of sales in last year's comparable quarter as a result of the effect of call center fixed costs and the sales decrease as well as an increase in the channel mix percent of the Direct Sales-US segment which has a higher selling and advertising percent of sales relative to the other segments. These increases were partially offset by lower amortization expense. For the first nine months of fiscal year 2003, selling and advertising expense decreased to 34.3% as compared to 34.4% of sales in last year's comparable period the result of cost management and lower amortization expense. Selling and advertising expense as a percentage of sales is expected to decrease slightly for the remainder of the fiscal year.* General and administrative expense increased to 13.7% of sales in the third quarter of fiscal year 2003 from 13.0% of sales in last year's comparable quarter. The increase is due to higher legal expense and the effect of the sales decrease offset by lower incentive compensation. For the first nine months of fiscal year 2003, general and administrative expense increased to 13.7% of sales from 12.7% in last year's comparable period. The increase is due to higher incentive compensation, legal costs and realized losses on deferred compensation investments in the first nine months in fiscal year 2003 as compared to last year's comparable period. General and administrative expense as a percent of sales is expected to increase slightly for the remainder of the fiscal year.* During fiscal year 2001, the Company undertook two separate restructuring actions. The first resulted in a restructuring charge of $3.5 million in fiscal year 2001 and an additional charge of $1.0 million in fiscal year 2002 to provide for costs primarily associated with the Company's decision to more closely align its direct marketing and direct sales activities. As part of the restructuring program, the McBee US headquarters was relocated from Parsippany, New Jersey to the RapidForms facility in Thorofare, New Jersey. In addition, the McBee manufacturing plant in Damascus, Virginia was closed and a portion of leased warehousing space occupied by Chiswick in Sudbury, Massachusetts was vacated. In Canada, the McBee sales and marketing organizations were combined with NEBS Direct Marketing and began operating under the NEBS name. Approximately 140 employees were affected by the restructuring either through elimination of their positions or relocation. The second restructuring action resulted in the Company recording an additional charge in fiscal year 2001 of $3.6 million to provide for costs associated with the Company's decision to eliminate excess capacity by closing a manufacturing facility in Ogden, Utah and a leased distribution facility in Sudbury, Massachusetts, along with other actions to reduce the workforce in various locations. Approximately 175 employees were affected by the restructuring, either through elimination of their positions or relocation. The closed manufacturing facility in Ogden, Utah is classified on the balance sheet as property held for sale. The property is carried at net book value which approximates fair value less the cost to sell. The following is a table of the charges incurred and the cash paid in fiscal 2003 pursuant to these actions (in thousands of dollars):
First Restructuring Second Restructuring Employee Facility termination Facility closure costs benefit costs closure costs Total Three Months Ended ------------- ------------- ------------- --------- Mar. 29, 2003 Balance Dec. 28, 2002 $ 850 $ 116 $ 0 $ 966 Payments for the period (124) (34) 0 (158) ------- ------- ------- ------- Balance Mar. 29, 2003 $ 726 $ 82 $ 0 $ 808 ======= ======= ======= ======= First Restructuring Second Restructuring Employee Facility termination Facility closure costs benefit costs closure costs Total Nine Months Ended ------------- ------------- ------------- --------- Mar. 29, 2003 Balance June 29, 2002 $1,038 $ 166 $ 451 $1,655 Payments for the period (312) (84) (451) (847) ------- ------- ------- ------- Balance Mar. 29, 2003 $ 726 $ 82 $ 0 $ 808 ======= ======= ======= ======= The activities related to all restructuring actions identified above are anticipated to be completed by the Company during fiscal year 2003 with the exception of lease payments, which may extend beyond this time frame.
equipment, capitalized software and intangible and other assets are evaluated utilizing various factors, including the expected period the asset will be utilized, forecasted cash flows, the cost of capital and customer demand. Investments are evaluated for impairment based upon market conditions and the viability of the investment. Changes in judgments on any of these factors could impact the value of the asset. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each jurisdiction in which we operate that imposes a tax on income. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance, we must include an expense within the tax provision in the consolidated statements of income. In the event that actual results differ from these estimates, our provision for income taxes could be materially impacted. New Accounting Pronouncements - ----------------------------- In July 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supercedes SFAS No. 121 on the same topic and the accounting and certain reporting provisions of APB Opinion 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business (as defined in that Opinion). This Statement also amends Accounting Research Bulletin ("ARB") 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The Company adopted this Statement in the first quarter of fiscal 2003. The implementation of this Statement did not impact the Company's consolidated financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS 146 addresses the financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Consensus No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". Adoption of this Statement is required for exit activities initiated after December 31, 2003 In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock- Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, the statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used in reported results. The Company adopted this Statement in the third quarter of fiscal year 2003. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities for the nine months ended March 29, 2003 was $34.4 million and represented a decrease of $16.6 million from the $51.0 million provided in the comparable period last year. This decrease in cash provided by operating activities was due to the impact of the after tax cost of terminating interest rate swaps and income taxes related to the gain on the sale of equity interests in Advantage Payroll Services, Inc., as well as the benefit from an inventory reduction in last year's comparable period versus an increase in the current year. Working capital at March 29, 2003 totaled $60.6 million, including $5.7 million of cash and short-term investments. At June 29, 2002, working capital was $56.5 million, including cash and short term investments of $6.1 million. The increase in working capital is primarily the result of terminating interest rate swaps and timing of accounts payable partially offset by a decrease in accounts receivable due to a reduction in days sales outstanding. Capital expenditures for the nine months ended March 29, 2003 were $11.5 million as compared to $11.4 million during last year's comparable period. Capital expenditures in the first nine months of fiscal year 2003 included improvements in our information systems' infrastructure and investments to enhance manufacturing capability. The Company anticipates that total capital outlays will approximate $16.0 million in fiscal year 2003, which will include additional planned improvements in our information systems' capabilities and investments to enhance manufacturing capability.* In July 2002, the Company invested, through the exercise of warrants, an additional $5.4 million in the common stock of Advantage Payroll Services, Inc. ("Advantage"). In September 2002, Advantage merged with Paychex, Inc. At closing, the Company received the first payment of proceeds from the merger transaction of $42.3 million and the Company recognized a $6.3 million gain on the sale of its long-term investment. In the second quarter, the Company received the second payment of proceeds and recognized a gain of $4.1 million. In the third quarter, the Company received the third and final payment of proceeds and recognized a gain of $1.0 million. The Company recognized a total gain of $11.4 million for the nine months ended March 29, 2003. The Company used the proceeds from the sale of the Advantage investment to pay down floating rate debt and to terminate three interest rate swap agreements with a notional amount of $75.0 million with two commercial banks. These interest rate swaps were no longer needed to hedge the reduced level of the Company's floating rate debt. The Company was required to make termination payments equivalent to the fair value of the swaps totaling $3.3 million. This amount, which was reclassified from other comprehensive income to other expense, represents a loss on settlement of interest rate swaps to terminate the agreements. During the nine months ended March 29, 2003, $4.9 million was spent to repurchase 221 thousand shares of the Company's common stock. There were no repurchases of the Company's common stock during fiscal year 2002. In addition to its present cash and short-term investment balances, the Company has historically generated sufficient cash internally to fund its needs for working capital, dividends and capital expenditures. The Company currently has a committed, unsecured, revolving credit agreement for $200 million. 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 in compliance with these covenants. At March 29, 2003, the Company had $46.0 million outstanding under this arrangement. In November 2001, the Company entered into a $50 million Note Purchase Agreement with The Prudential Insurance Company of America. Under this agreement, the Company borrowed at the Eurodollar rate plus a spread for one year, after which the interest rate was fixed at a rate of 7.23%. This 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 in compliance with these covenants. At March 29, 2003, the Company had $50.0 million outstanding under this arrangement. In order to effectively fix the interest rate on a portion of the debt outstanding under the revolving credit agreement, the Company as of March 29, 2003 had one interest rate swap agreement with one of the banks party to the credit agreement. This swap agreement contains a notional principal amount and other terms (including rate of interest paid and received and maturity date) determined with respect to the Company's forecasts of future cash flows and borrowing requirements. At March 29, 2003 the notional principal amount outstanding under the interest rate swap agreement totaled $20.0 million. In the first nine months of fiscal year 2003, a credit of approximately $16 thousand was transferred from other comprehensive income to earnings related to the ineffective portion of the Company's swaps. A credit of approximately $25 thousand was transferred during the comparable period in the prior year. During the first nine months of fiscal year 2003, the Company terminated three other interest rate swaps at a pretax cost of $3.3 million. The Company anticipates that its current cash on hand, cash flow from operations and additional availability under the revolving credit agreement will be sufficient to meet the Company's liquidity requirements for its operations and capital expenditures during fiscal year 2003.* However, the Company may pursue additional acquisitions from time to time, which would likely be funded through the use of available cash, issuance of stock, obtaining of additional credit, or any combination thereof.* Certain Factors That May Affect Future Results - ------------------------------------------------------------------ References in this section to "we", "us" and "our" refer to New England Business Service, Inc. We may make forward-looking statements in this report and in other documents filed with the SEC, in press releases, and in discussions with analysts, investors and others. These statements include: - - descriptions of our operational and strategic plans, - - expectations about our future sales and profits, - - views of conditions and trends in our markets, and - - other statements that include words like "expects", "estimates", "anticipates", "believes" and "intends", and which describe opinions about future events. You should not rely on these forward-looking statements as though they were guarantees. These statements are based on our expectations at the time the statements are made, and we are not required to revise or update these statements based on future developments. Known and unknown risks may cause our actual results, performance or achievements to be materially different from those expressed or implied by these statements. A majority of our sales and profits come from selling standardized business forms, checks and related products by mail order, telesales and direct sales to a target market consisting mainly of small businesses. We believe that the critical success factors to compete in this market include competitive pricing, breadth of product offering, product quality and the ability to attract and retain a large number of individual customers. These critical success factors are also applicable to the success of our packaging, shipping and warehouse supplies markets as well. Known material risks that may affect those critical success factors are described below. A majority of the sales in our apparel business come from selling knit and woven sport shirts under labels licensed from third parties to the promotional products/advertising specialty and golf industries. We believe that the critical success factors to compete in this market include product quality, timely fulfillment of customer orders and brand awareness. Known material risks that may affect those success factors are also described below. Our printed product lines face increased competition from various sources such as office supply superstores. Increased competition may require us to reduce prices or offer other incentives in order to attract new customers and retain existing customers, which could reduce our profits. Low-price, high-volume office supply chain stores offer standardized business forms, checks and related products to small businesses. Because of their size, these superstores have the buying power to offer many of these products at competitive prices. These superstores also offer the convenience of "one-stop shopping" for a broad array of office supplies that we do not offer. In addition, national superstore competitors have greater financial strength to reduce prices or increase promotional discounts in order to seek or retain market share. If any of these new competitors seek to gain or retain market share through price reductions or increased discounting, we may be forced to reduce our prices or match the discounts in order to stay competitive, which could reduce our profits. Technological improvements may reduce our competitive advantage over our smaller competitors, which could reduce our profits. Historically, our relatively greater financial strength and size have enabled us to offer a broader array of products, particularly those having a complex construction, at lower prices than the small local and regional dealers, distributors and printers who constitute our primary competition. Improvements in the cost and quality of printing technology are enabling these smaller competitors to gain access to products of complex design and functionality at competitive costs. Increased competition from local and regional competitors could force us to reduce our prices in order to attract and retain customers, which could reduce our profits. Because our sales growth is dependent on our ability to continually attract new customers in our target small business market, economic events that adversely affect the small business economy may reduce our sales and profits. Average annual sales per customer of our core products have remained relatively stable over time. As a result, we rely, in part, on continually attracting new customers for these products. Our sales and profits have been adversely affected by economic-related contractions in the small business economy. We expect that our sales and profits will continue to be affected by changes in the levels of small business formations and failures and from other economic events that affect the small business economy generally. Because our sales growth is dependent on our ability to continually attract new customers in our target small business market, changes in the direct marketing industry that reduce our competitive advantage in contacting prospective customers may reduce our sales and profits. Growth in the total number of our direct mail customers depends on continued access to high-quality lists of newly-formed small businesses. In the past, our ability to compile proprietary prospect lists was a distinct competitive advantage. However, the external list compilation industry has become more sophisticated and comprehensive lists of new small business formations are now commercially available to our competitors. In addition, the Internet has the potential to eliminate our advantage of scale in direct marketing by providing all competitors, regardless of current size, with access to prospective customers. We currently rely on the speed of our delivery of promotional materials to prospective customers to gain advantage over competitors. We are also expanding our Internet product offerings and capabilities and seeking to increase our visibility on the Internet. Notwithstanding these efforts, a deterioration in our competitive advantage in contacting prospective customers could reduce our sales and profits. In addition, the enactment of privacy laws could constrain our ability to obtain prospect lists or to telemarket to prospective customers. Declining response rates to the Company's catalogs and other direct mail promotional materials could reduce our sales and profits. Our direct mail-based businesses have recently experienced declines in the response rates to our catalogs and other direct mail promotional materials from both existing customers and prospects. We believe that these declines are attributable to a number of factors, including current economic conditions, the overall increase in direct mail solicitations received by our target customers generally, and the gradual obsolescence of our standardized forms products. To the extent that we cannot compensate for reduced response rates through increases in average order value or improve response rates through new product introductions and improved direct mail contact strategies, our sales and profits may be adversely affected. Increases in the cost of paper and in postal rates adversely impact our costs, which we may be unable to offset by reducing costs in other areas or by raising prices. The cost of paper to produce our products, catalogs and advertising materials makes up a significant portion of our total costs. Also, we rely on the U.S. Postal Service to deliver most of our promotional materials. Prices for the various types of paper that we use have been volatile, and we expect them to continue to be so. Third class postal rates have generally increased over the past ten years, at times significantly. We are not sure that we will always be able to reduce costs in other areas or to increase prices for our products sufficiently to offset increases in paper costs and postal rates. If we are unable to offset these cost and expense increases, our profits will be adversely affected. Disruption in the services provided by certain of our critical vendors may adversely affect our operating performance and profits. We use a limited number of vendors to provide key services to our business. Examples of this are as follows: - - we use MCI and Qwest Communications International to provide a majority of the toll-free telephone lines for our direct marketing business, - - we use United Parcel Service to deliver most of the products that we ship to customers, - - we rely on the postal services of the countries in which we do business to deliver our catalogs and other advertising material to customers. In the past, we have been adversely affected by disruption of some of these services due to labor actions, system failures, adverse weather conditions and other natural disasters. If there are future interruptions in service from one or more of these vendors, we believe that there could be a significant disruption to our business due to our inability to readily find alternative service providers at comparable rates. Sales of our standardized forms products face technological obsolescence and changing customer preferences, which could reduce our sales and profits. Our standardized business forms, checks and related products provide our customers with financial and business records to manage their businesses. Continual technological improvements have provided our target customers in several market segments with alternative means to enact and record business transactions. For example, the price and performance capabilities of personal computers and related printers now provide a cost-competitive means to print low-quality versions of our business forms on plain paper. In addition, electronic transaction systems and off-the-shelf business software applications have been designed to automate several of the functions performed by our business form products. In response to the gradual obsolescence of our standardized forms business, we continue to develop our capability to provide custom and full- color products. However, we have less of a cost advantage with these products than with standardized forms, due to improvements in the cost and quality of printing technology available to our smaller local and regional competitors. We are also seeking to introduce new products and services that are less susceptible to technological obsolescence. We may develop new products internally, procure them from third party vendors, or obtain them through the acquisition of a new business. We generally realize lower gross margins on outsourced products than on products that we manufacture ourselves. The risks associated with the acquisition of new businesses are described below. If new printing capabilities and new product introductions do not continue to offset the obsolescence of our standardized business forms products, there is a risk that the number of new customers we attract and existing customers we retain may diminish, which could reduce our sales and profits. Decreases in sales of our historically high margin standardized business forms products due to obsolescence could also reduce our gross margins. This reduction could in turn adversely impact our profits unless we are able to offset the reduction through the introduction of new high margin products and services or realize cost savings in other areas. We source our apparel products from offshore third party manufacturers. Difficulty in securing reliable sources for these products could adversely affect our ability to maintain inventory levels that are adequate to satisfy customer demand. We purchase a majority of our apparel products from "full package" manufacturers outside the United States. In most cases, these same manufacturers supply other apparel companies, many of which are significantly larger than our apparel business and are able, when necessary, to secure preferential treatment from the manufacturers. The availability of product from these manufacturers can also be adversely affected by social, political and economic conditions in their respective regions. Any significant disruption in our relationships with our current manufacturers could adversely affect our apparel business to the extent we cannot readily find alternative sources of supply at comparable levels of price and quality. Inaccurate forecasting of the demand for specific apparel styles and sizes could reduce our sales and profits. We believe that success in our apparel business depends in part on our ability to immediately ship ordered products, either directly or through our distributors. Given the relatively long lead time in procuring inventory, we must estimate demand for specific styles and sizes well in advance of receiving firm orders from customers in order to ensure the timely availability of these products. Inaccurate forecasting of demand for specific styles and sizes can result in either lost sales due to product unavailability, or reduced margins from liquidating overstocked items. Failure of our apparel licensors to adequately promote our licensed brands and protect those brands from infringement could reduce our sales and profits. We believe that brand awareness is an important factor to the end-user of our apparel products, and in that regard we market and sell a majority of our apparel products under nationally-recognized brands licensed from third parties. In each case, the licensor is primarily responsible for promoting its brand and protecting its brand from infringement. The failure of one or more of our licensors to adequately promote or defend their brands could diminish the perceived value of those brands to our customers, which could lead to reduced sales and profits. Reductions in the number of apparel lines carried by wholesalers in the promotional products/advertising specialty industry may adversely impact our sales and profits. Until recently, a significant portion of the sales in our apparel business has been to a relatively small number of wholesalers serving the promotional products/advertising specialty market. Sales to these wholesalers has been recently decreasing, and has been partially offset by increases in direct sales to advertising specialty dealers and golf pro shops. We believe that the wholesale apparel business serving this market is undergoing fundamental change, with wholesalers increasingly carrying only private label lines and branded lines on an exclusive basis. We believe that these changes, together with current economic conditions, are likely to result in an accelerated decrease in our sales to wholesalers. To the extent that increases in our direct sales to advertising specialty dealers, together with increases in our apparel sales to other markets, cannot keep pace with the erosion in our sales to wholesalers, sales and profits could be adversely impacted. Our growth strategy depends, in part, on the acquisition of complementary businesses that address our target small business market. The acquisition of complementary businesses that address our target small business market has been important to our growth strategy. We intend to continue this acquisition activity in the future. The success of this activity depends on the following: - - our ability to identify suitable businesses and to negotiate agreements on acceptable terms, - - our ability to obtain financing through additional borrowings, by issuing additional shares of common stock, or through internally generated cash flow, and - - our ability to achieve anticipated savings and growth and avoid disruption to our existing businesses and the customers of acquired businesses. In evaluating a potential acquisition, we conduct a business, financial and legal review of the target. This review is intended to support our assumptions with respect to the projected future performance of the target and to identify the benefits and risks associated with those assumptions. We cannot be certain that our review will identify all potential risks associated with the purchase, integration or operation of acquired businesses. Unanticipated risks and/or performance inconsistent with our pre- acquisition expectations may adversely affect the benefits that we expect to obtain from any given acquisition and could result in an impairment of intangible assets, which would reduce our reported earnings for the period the impairment occurs. 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 (which carries a variable interest rate) creates an exposure to changes in interest rates. The effect, however, 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 the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended June 29, 2002. The Company does not hold or issue financial instruments for trading, profit or speculative purposes. In order to effectively convert the interest rate on 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. During the first nine months of fiscal year 2003 as part of paying down floating rate debt, the Company terminated three interest rate swap agreements with a notional amount of $75.0 million with two commercial banks. These interest rate swaps were no longer needed to hedge the reduced level of the Company's floating rate debt. The Company was required to make termination payments equivalent to the fair value of the swaps totaling $3.3 million. This amount, which was reclassified from other comprehensive income to other expense, represents a loss on settlement of interest rate swaps to terminate the agreements. 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 changes in foreign currency or interest rates will have a material impact on its near-term earnings, fair values or cash flows. Item 4. Controls and Procedures - -------------------------------- Within the 90-day period prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a- 14(c)promulgated under the Securities Exchange Act of 1934). Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date that the Company carried out its evaluation referenced in the preceding paragraph. PART II - OTHER INFORMATION - --------------------------- Item 1. LEGAL PROCEEDINGS - -------------------------- On June 30, 2000, a lawsuit entitled "Perry Ellis International, Inc. v. PremiumWear, Inc.", was filed in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida. The case has been removed to federal court and is currently pending in the United States District Court for the Southern District of Florida. On April 11, 2001, the court granted the plaintiff's motion to amend its complaint to add the Company as a co- defendant. The amended complaint relates to a Right of First Refusal Agreement dated as of May 22, 1996 (the "RFR Agreement") between the plaintiff and PremiumWear, Inc., and to the Company's acquisition of all the outstanding shares of PremiumWear in July 2000. In the amended complaint, the plaintiff alleges breach of the RFR Agreement and breach of an implied covenant of good faith and fair dealing against PremiumWear as a result of PremiumWear's alleged failure to notify the plaintiff of certain discussions between PremiumWear and the Company preceding the Company's agreement to purchase all of the outstanding shares of PremiumWear. The amended complaint also alleges that the Company tortiously interfered with the plaintiff's rights under the RFR Agreement by allegedly inducing PremiumWear to breach its obligations to the plaintiff under the RFR Agreement. The plaintiff is seeking damages in an unspecified amount, attorneys' fees, interest and costs. The Company believes the allegations in the amended complaint are without merit and intends to defend the lawsuit vigorously. On July 24, 2002, a class action lawsuit entitled "OLDAPG, Inc. v. New England Business Service, Inc." was filed in the Court of Common Pleas of the Ninth Judicial Circuit in and for Charleston County, South Carolina. The named plaintiff in the lawsuit seeks to represent a class consisting of all persons who allegedly received facsimiles containing unsolicited advertising from the Company in violation of the Telephone Consumer Protection Act of 1991 (the "TCPA"). The plaintiff is seeking statutory damages in the amount of $500.00 per individual violation, which amount can be trebled to $1,500.00 for each violation found to have been "willful and knowing". The plaintiff is also seeking injunctive relief with respect to further violations of the TCPA and attorneys' fees and costs. The Company believes that it has valid defenses to the claims asserted in the complaint and intends to defend the lawsuit vigorously. From time to time the Company is involved in other disputes and/or litigation encountered in the ordinary course of its business. The Company does not believe that the ultimate impact of the resolution of such other outstanding matters will have a material effect on the Company's business, operating results or financial condition. 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 VOTE OF SECURITY HOLDERS - ---------------------------------------------------------- Not applicable. Item 5. OTHER INFORMATION - -------------------------- Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- a. Exhibits Exhibit No. Description ---------- ----------- 10.1 Third Amendment to Second Amended and Restated Revolving Credit Agreement dated as of March 13, 2003, by and between the Company, Fleet National Bank, and certain other financial institutions. 10.2 Fourth Amendment to Second Amended and Restated Revolving Credit Agreement dated as of April 18, 2003, by and between the Company, Fleet National Bank, and certain other financial institutions. 10.3* New England Business Service, Inc. Deferred Compensation Plan Trust Agreement dated August 29, 2002. 10.4* New England Business Service, Inc. Supplemental Executive Retirement Plan, effective January 4, 1999, as amended and restated effective April 25, 2003. 10.5* First Amendment to Change in Control and Severance Agreement dated May 5, 2003 between the Company and Robert J. Murray. 10.6* Form of First Amendment to Change in Control Severance Agreement dated May 5, 2003 between the Company and certain executive officers of the Company listed in Exhibit 10.18.2 to the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2002. 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Chief Executive Officer) 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Chief Financial Officer). * Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of the Company participates. b. Reports on Form 8-K. None 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) May 12, 2003 - ----------------- /s/Daniel M. Junius -------------------- Date Daniel M. Junius Executive Vice President-Chief Financial Officer (Principal Financial Officer) Certifications I, Robert J. Murray, certify that: 1. I have reviewed this quarterly report on Form 10-Q of New England Business Service, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report it being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. May 12, 2003 /s/Robert J. Murray - ----------------- -------------------- Robert J. Murray Chairman and Chief Executive Officer (Principal Executive Officer) I, Daniel M. Junius, certify that: 1. I have reviewed this quarterly report on Form 10-Q of New England Business Service, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report it being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. May 12, 2003 /s/Daniel M. Junius - ----------------- -------------------- Date Daniel M. Junius Executive Vice President-Chief Financial Officer (Principal Financial Officer) EX-10 3 exh10_1.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 10.1 Exhibit 10.1 THIRD AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS NEW ENGLAND BUSINESS SERVICE, INC. THIRD AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS dated as of March 13, 2003 (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"), FLEET NATIONAL BANK, formerly known as BankBoston, N.A., a national banking association ("Fleet"), and the other lending institutions listed on Schedule 1 to the Credit Agreement referred to below (together with Fleet, the "Banks"), FLEET NATIONAL BANK, formerly known as BankBoston, N.A., as agent for itself and such other lending institutions (the "Agent"), and CITIZENS BANK OF MASSACHUSETTS, as syndication agent. WHEREAS, the Borrower, the Banks and the Agent are parties to a Second Amended and Restated Revolving Credit Agreement dated as of July 13, 2001 (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 to extend the Revolving Credit Loan Maturity Date to February 28, 2006 and to make certain other revisions; WHEREAS, subject to the terms and conditions hereof, the Agent and the Banks are willing to permit such extension and such other revisions; WHEREAS, subject to the terms and conditions set forth herein, the Borrower, the Banks, and the Agent have agreed to amend the Credit Agreement and certain other Loan Documents, including the Addendum to Guaranty and the Intercompany Subordination Agreements 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 hereto hereby agree to amend the Credit Agreement, the Addendum to Guaranty and the Subordination Agreements as follows: 1. Amendments to Definitions. Section 1.1 of the Credit Agreement is hereby amended by: (a) deleting the definition of "Applicable Eurodollar Rate Margin" in its entirety and substituting in lieu thereof the following new definition: "Applicable Eurodollar Rate Margin. For any fiscal quarter or portion thereof within any Interest Period with respect to any Eurodollar Rate Loan, 1.25% per annum; provided, however, that in the event that the ratio of Consolidated Funded Debt (calculated as of the last day of such fiscal quarter or portion thereof) to EBITDA (calculated for the four (4) consecutive fiscal quarters ending on the last day of such fiscal quarter or portion thereof) meets the requirements set forth in the chart below, the Applicable Eurodollar Rate Margin shall, commencing initially with the Third Amendment Effective Date and thereafter commencing with the date on which the Borrower delivers to the Banks the financial statements referred to in 6.4(a) or, as the case may be, 6.4(b) and ending on the date of the next change to be effected pursuant to this paragraph, be the percentage set forth opposite the applicable ratio of Consolidated Funded Debt to EBITDA in the table below: Ratio of Consolidated Funded Applicable Eurodollar Debt to EBITDA Rate Margin Less than or equal to 0.55% 1.0:1.0 Greater than 1.0:1.0 and 0.625% less than or equal to 1.5:1.0 Greater than 1.5:1.0 and 0.875% less than or equal to 2.0:1.0 Greater than 2.0:1.0 and 0.925% less than or equal to 2.25:1.0 Greater than 2.25:1 1.25% If any financial statements referred to above are not delivered within the time periods specified in 6.4(a) or, as the case may be, 6.4(b), then, until such financial statements are delivered, the Applicable Eurodollar Rate Margin as at the end of the fiscal period that would have been covered thereby shall, for the purposes of this definition, be deemed to be 1.25%. In addition, at all times while a Default or an Event of Default shall have occurred and be continuing, the Applicable Eurodollar Rate Margin shall, for the purposes of this definition, be deemed to be 1.25%." (b) deleting the definition of "Consolidated Funded Debt" in its entirety and substituting in lieu thereof 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, Synthetic 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, Synthetic Leases and including commitment fee, agency fee, facility fee, utilization fee, balance deficiency fee and similar fee expenses in connection with the borrowing of money plus (iii) Indebtedness consisting of any Earnout Payment Obligations from and after such time as such Earnout Payment Obligations are properly classified as liabilities for purposes of generally accepted accounting principles." (c) deleting the definition of "Consolidated Net Income" in its entirety and substituting in lieu thereof the following new definition: "Consolidated Net Income. The consolidated net income (or deficit) of the Borrower and its Subsidiaries, after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles." (d) deleting the definition of "Consolidated Total Interest Expense" in its entirety and substituting in lieu thereof the following new definition: "Consolidated Total Interest Expense. For any period, the aggregate amount of interest required to be expensed by the Borrower and its Subsidiaries in accordance with generally accepted accounting principles during such period on all Indebtedness of the Borrower and its Subsidiaries outstanding during all or any part of such period, including expense consisting of interest in respect of Capitalized Leases and Synthetic Leases, and excluding commitment fee, agency fee, facility fee, utilization fee, balance deficiency fee and similar fee expenses in connection with the borrowing of money." (e) deleting the definition of "EBITDA" in its entirety and substituting in lieu thereof the following new definition: "EBITDA. The consolidated earnings (or loss) from the operations of the Borrower and its Subsidiaries for any period, after all expenses and other proper charges but before payment or provision for any income taxes, interest expense, depreciation or amortization for such period, and excluding the Restructuring Charges (to the extent taken), charges in respect of the impairment of goodwill or other intangible assets of the Borrower and any of its Subsidiaries in an amount not to exceed $20,000,000 in the aggregate and any nonrecurring, noncash gains, in each case determined in accordance with generally accepted accounting principles. For purposes hereof, EBITDA shall include, on a pro forma basis, EBITDA (calculated for any applicable period, commencing with the four consecutive fiscal quarters of the Borrower ending in the quarter in which such Permitted Acquisition is made) of any Subsidiary acquired by means of a Permitted Acquisition (including historical earnings and cash flows associated with such Subsidiary and any incurrence or reduction of Indebtedness associated with such Permitted Acquisition, but excluding any projected synergies or similar benefits expected to be realized as a result of such event)." (f) deleting the definition of "Intercompany Subordination Agreement" in its entirety and substituting in lieu thereof the following new definition in the order required by alphabetical order: "R&M Trust Intercompany Subordination Agreement. The Intercompany Subordination Agreement, dated as of October 8, 1998, among the Agent, the Borrower and R&M Trust." (g) deleting the definition of "Loan Documents" in its entirety and substituting in lieu thereof the following new definition: "Loan Documents. This Credit Agreement, the Notes, the Agent's Fee Letter, the Chiswick Trust Intercompany Subordination Agreement, the R&M Trust Intercompany Subordination Agreement and any other subordination agreements entered into pursuant to 7.1(j) or (o), the Guaranty and all documents evidencing or relating to any interest rate protection arrangements entered into between the Borrower and any Bank." (h) deleting the definition of "Notes" in its entirety and substituting in lieu thereof the following new definition: "Notes. The Competitive Bid Notes, the Syndicated Notes and any replacements for such Notes issued in connection with the Third Amendment or under 17.4 of the Credit Agreement." (i) deleting the definition of "Permitted Acquisition" in its entirety and substituting in lieu thereof the following new definition: "Permitted Acquisition. Any acquisition of any Person, business, division or specified group of assets by the Borrower or any of the Guarantors (other than Russell & Miller, R&M Trust and Chiswick Trust), provided that, with respect to any such other acquisition, (1) the Agent and the Majority Banks approve, in their sole discretion, such acquisition in writing in advance or (2) each of the following conditions is met: (a) immediately prior to and after, and after giving effect to, such acquisition, no Default or Event of Default shall then exist; (b)(i) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with any single such acquisition (including consideration in the form of cash, Earnout Payment Obligations, or the assumption of Indebtedness for borrowed money, debt or other similar monetary obligations by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust, or Chiswick Trust) (including such Indebtedness in existence prior to the date of such acquisition which was not incurred in connection with or contemplation thereof) but excluding stock or other equity interest consideration) shall not exceed $35,000,000 and (ii) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with any such acquisition, including consideration of the types described in clause (b)(i) of this definition and stock or other equity interest consideration (as valued for the purpose of such acquisitions) shall not exceed $40,000,000; (c)(i) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with all such acquisitions (including consideration in the form of cash, Earnout Payment Obligations, or the assumption of Indebtedness for borrowed money, debt or other similar monetary obligations by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) (including such Indebtedness in existence prior to the date of any such acquisition which was not incurred in connection with or contemplation thereof) but excluding stock or other equity interest consideration) shall not exceed $60,000,000 and (ii) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with all such acquisitions, including consideration of the types described in clause (c)(i) of this definition and stock or other equity interest consideration (as valued for the purpose of such acquisitions) shall not exceed $80,000,000; (d) such acquisition shall have been approved by the board of directors and shareholders, if required, or other applicable management of such Person, and to the extent applicable, approval by final order of any relevant bankruptcy court; (e) either (i) such acquisition is the acquisition of assets only (for use in substantially the same line of business as the line of business of the Borrower or any of its Subsidiaries) or (ii) such acquisition involves the purchase of the capital stock or other equity interests of a Person and each of the following conditions is met: (A) such acquisition is the acquisition of one hundred percent (100%) of the capital stock or other equity interests of such Person. (B) such Person is in substantially the same line of business as the Borrower or any of its Subsidiaries, (C) the Borrower or a Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) is the survivor of any merger or consolidation with such Person; (D) not less than ten (10) Business Days prior to such acquisition, the Borrower shall notify the Banks thereof, and (E) contemporaneously with the occurrence of any such acquisition, the Borrower shall (I) cause such Person, if such Person shall be engaged in business of any kind or nature (other than having qualified to do business in a foreign jurisdiction) or shall have a net worth or assets of more than a de minimis value, to guaranty all of the Obligations hereunder pursuant to the Guaranty, and (II) cause such Person to deliver to the Banks and the Agent (aa) evidence of proper corporate or other entity authorization, and (bb) legal opinions with respect to each of the matters and documents set forth in this clause (E), in each case, in form and substance satisfactory to the Agent and the Banks; and (f) the Agent shall have received each of the following, each in form and substance satisfactory to the Agent: (i) a compliance certificate evidencing pro forma compliance with the requirements of 8 hereof following the consummation of any such acquisition, (ii) due diligence summaries evidencing the Borrower's or such Guarantor's (other than Russell & Miller, R&M Trust or Chiswick Trust), as the case may be, due diligence with respect to the Person or assets being acquired and (iii) such other information, including financial statements, as the Agent or the Majority Banks may request. (j) deleting the definition of "Permitted Joint Venture" in its entirety and substituting in lieu thereof the following new definition: "Permitted Joint Venture. Investment by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in any Person, provided that, with respect to any such Investment, (1) the Agent and the Majority Banks approve, in their sole discretion, such Investment in writing in advance or (2) each of the following conditions is met: (a) immediately prior to and after, and after giving effect to, such Investment, no Default or Event of Default shall then exist; (b) subject to the limitations set forth in subsection (d) of this definition, (i) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with all such Investments (including consideration in the form of cash, Earnout Payment Obligations, or the assumption of Indebtedness for borrowed money, debt or other similar monetary obligations by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) (including any such Indebtedness in existence prior to the date of such Investment which was not incurred in connection with or in contemplation thereof) but excluding stock or other equity interest consideration) shall not exceed $10,000,000, and (ii) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with all such Investments, including consideration of the type described in and included in clause (b)(i) of this definition and stock or other equity interest consideration (as valued for the purpose of any such Investment) shall not exceed $20,000,000; (c) such Investment shall have been approved by the board of directors and shareholders, if required, or other applicable management of such Person; (d) (i) such Person is in substantially the same line of business as the Borrower or any of its Subsidiaries or (ii) in a different line of business from that of the Borrower or any of its Subsidiaries so long as, and notwithstanding the limitations set forth in subsection (b) of this definition, (A) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust, or Chiswick Trust) in connection with such Investment under this subsection (d)(ii) (including consideration in the form of cash, Earnout Payment Obligations, or the assumption of Indebtedness for borrowed money, debt or other similar monetary obligations by the Borrower or such Guarantor (other than Russell & Miller, R&M Trust, or Chiswick Trust) (including any such Indebtedness in existence prior to the date of such Investment which was not incurred in connection with or in contemplation thereof) but excluding stock or other equity interest consideration) shall not exceed $1,000,000, and (B) the aggregate consideration paid or to be paid by the Borrower or any Guarantor (other than Russell & Miller, R&M Trust or Chiswick Trust) in connection with such Investment under this subsection (d)(ii), including consideration of the type described in and included in clause (d)(ii)(A) of this definition and stock or other equity interest consideration (as valued for the purpose of any such Investment) shall not exceed $5,000,000; (e) following the making of such Investment, neither the Borrower nor any of its Subsidiaries shall own a majority or more of the capital stock or other equity interests of such Person; (f) not less than ten (10) Business Days prior to the making of such Investment, the Borrower shall notify the Banks thereof; and (g) the Agent shall have received each of the following, each in form and substance satisfactory to the Agent: (i) a compliance certificate evidencing pro forma compliance with the requirements of 8 hereof following the making of any such Investment, (ii) due diligence summaries evidencing the Borrower's or such Guarantor's (other than Russell & Miller, R&M Trust or Chiswick Trust), as the case may be, due diligence with respect to the Person, and (iii) such other information, including financial statements, as the Agent or the Majority Banks may request." (k) deleting the definition of "Revolving Credit Loan Maturity Date" in its entirety and substituting in lieu thereof the following new definition: "Revolving Credit Loan Maturity Date. February 28, 2006." (l) deleting the definition of "Unsecured Subordinated Promissory Note" in its entirety. (m) inserting, in alphabetical order, the following new definitions: "Chiswick Trust Unsecured Subordinated Promissory Note. The promissory note evidencing the Indebtedness permitted by 7.1(o)(ii) in form and substance (including any modifications thereof) satisfactory to the Agent." "Earnout Payment Obligations. In connection with any acquisition, earnout or deferred purchase price obligations, such as payments required to be made in the future based on performance or other standards." "Intercompany Subordination Agreements. Collectively, the Chiswick Trust Intercompany Subordination Agreement and the R&M Trust Intercompany Subordination Agreement." "R&M Trust Unsecured Subordinated Promissory Note. The promissory note evidencing the Indebtedness permitted by 7.1(o)(i) in form and substance (including any modifications thereof) satisfactory to the Agent." "Third Amendment. The Third Amendment to Second Amended and Restated Revolving Credit Agreement dated as of March 13, 2003 among the Borrower, the Guarantors of the Borrower listed on the signature pages thereto, the Agent, and the Banks." "Third Amendment Effective Date. The "Effective Date", as defined in the Third Amendment." 2. Amendment of 2.7 of the Credit Agreement. Section 2.7(e) of the Credit Agreement is hereby deleted in its entirety. 3. Amendment of 2.9 of the Credit Agreement. Section 2.9 of the Credit Agreement is hereby deleted in its entirety. 4. Amendment of 4.2 of the Credit Agreement. Section 4.2 of the Credit Agreement is hereby amended by deleting in subsection (b), after the text "provided, further, that if the Total Commitment is increased or decreased during any calendar quarter", the text "pursuant to 2.9 hereof or otherwise". 5. Amendment of 6.13 of the Credit Agreement. Section 6.13 of the Credit Agreement is hereby restated in its entirety as follows: "6.13. Certain Intercompany Payments. The Borrower will (a) promptly upon R&M Trust's receipt thereof, cause R&M Trust to lend to the Borrower pursuant to the R&M Trust Unsecured Subordinated Promissory Note all amounts (net of reasonable, ordinary course operating expenses) received by it from time to time from Russell & Miller or otherwise, and (b) promptly upon Chiswick Trust's receipt thereof, cause Chiswick Trust to lend to the Borrower pursuant to the Chiswick Trust Unsecured Subordinated Promissory Note all amounts (net of reasonable, ordinary course operating expenses) received by it from time to time from Chiswick or otherwise." 6. Amendment of 6.17 of the Credit Agreement. Section 6.17 of the Credit Agreement is hereby amended by inserting, immediately following 6.16 thereof and immediately before 7 thereof, the following new 6.17: "6.17. Termination of Financing Statement and Lease. The Borrower shall (a) within sixty (60) days following the Third Amendment Effective Date, cause the termination of the financing statement (file number 972-004466 filed with the Tennessee Secretary of State's office) filed by FBS Business Finance Corporation against all inventory and proceeds thereof of PremiumWear, with the Borrower hereby acknowledging that there is no outstanding security interest evidenced by such financing statement and no Indebtedness outstanding with respect thereto and (b) prior to March 30, 2003, exercise its buy-out option to discontinue the commercial lease between the Borrower and Cummings Properties, LLC with respect to the real property located at 400 West Cummings Park, Suites 1825 - 1925, Woburn, Massachusetts, and within sixty (60) days following the termination of such lease on September 30, 2003, cause the termination of the financing statement (file number 200209466700 filed with the Massachusetts Secretary of Commonwealth's office) filed by Cummings Properties, LLC to secure obligations under such lease." 7. Amendment of 7.1 of the Credit Agreement. Section 7.1 of the Credit Agreement is hereby amended by: (a) deleting subsection (o) thereof in its entirety and substituting in lieu thereof the following new subsection (o): "(o) Indebtedness of the Borrower to (i) R&M Trust under and pursuant to the R&M Trust Unsecured Subordinated Promissory Note from the Borrower to R&M Trust, which such Indebtedness is subordinated to the Obligations on terms and conditions satisfactory to the Agent, which shall include the R&M Trust Intercompany Subordination Agreement, and (ii) Chiswick Trust under and pursuant to the Chiswick Trust Unsecured Subordinated Promissory Note from the Borrower to Chiswick Trust, which such Indebtedness is subordinated to the Obligations on terms and conditions satisfactory to the Agent, which shall include the Chiswick Trust Intercompany Subordination Agreement;" (b) deleting subsection (r) thereof in its entirety and substituting in lieu thereof the following new subsection (r): "(r) (i) Indebtedness of the Borrower not to exceed $50,000,000 in aggregate principal amount under the Note Purchase Agreement dated as of November 9, 2001 (the "Note Purchase Agreement"), by and among the Borrower and each of the purchasers listed in Schedule A attached thereto, so long as such Indebtedness is subject to the Intercreditor Agreement (as defined in the Note Purchase Agreement); and (ii) so long as no Default or Event of Default shall have occurred and be continuing or would occur as a result of the incurrence of any thereof and with the prior written consent of the Agent, unsecured Indebtedness of the Borrower to Persons which are not its Subsidiaries consisting of: (A) Indebtedness which is expressly subordinated and made junior to the payment and performance in full of the Obligations; and (B) Indebtedness which may rank pari passu with the Obligations; provided, however, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (i) and (ii) shall not at any time exceed $125,000,000; the sum of the Total Commitment plus the aggregate principal amount of any Indebtedness otherwise permitted by this 7.1(r) shall not at any time exceed $325,000,000; and with respect to clause (ii) only, (1) the aggregate principal amount of Indebtedness incurred pursuant to 7.1(r)(ii) shall not at any time exceed $75,000,000; (2) the terms of any Indebtedness permitted pursuant to 7.1(r)(ii) shall include such terms and conditions as the Agent may require, with the Agent being satisfied with the form and substance of the documentation evidencing such Indebtedness and hereby being authorized to enter into such intercreditor or other agreements with the holders of any Indebtedness permitted by 7.1(r)(ii) as the Agent shall deem necessary or appropriate; and (3) prior to the incurrence of any Indebtedness pursuant to 7.1(ii), the Borrower shall provide to the Agent and each of the Banks pro forma financial statements and compliance certificates in the form of Exhibit G indicating that for the period from the date of the incurrence of such Indebtedness until the Revolving Credit Loan Maturity Date, no Default or Event of Default would result from the incurrence of such Indebtedness;" (c) deleting subsection (t) thereof in its entirety and substituting in lieu thereof the following new subsection (t): "(t) Indebtedness consisting of the guaranty by any Subsidiary of the Borrower of any Indebtedness permitted by 7.1(r);" (d) adding the following new subsections (u) and (v): "(u) in connection with any Permitted Acquisition, if any, Indebtedness consisting of any Earnout Payment Obligations; (v) Indebtedness of the Borrower or any of its Subsidiaries (other than Russell & Miller, Chiswick Trust or R&M Trust) not otherwise expressly permitted under subsections (a) - (u) of this 7.1, in an aggregate amount not to exceed $5,000,000 at any one time." 8. Amendment of 7.3 of the Credit Agreement. Section 7.3 of the Credit Agreement is hereby amended by: (a) deleting the text of subsection (f) in its entirety, and inserting in lieu thereof the following text: "(f) Investments consisting of (i) the Guaranty and (ii) any guaranty from any Subsidiary or Subsidiaries of the Borrower guarantying Indebtedness permitted by 7.1(r);" (b) deleting subsection (t) thereof in its entirety and substituting in lieu thereof the following new subsection (t): "(t) Investments by the Borrower or any of its Subsidiaries (other than Russell & Miller, Chiswick Trust and R&M Trust) in mutual funds, annuities or insurance policies directly relating to or in connection with the Indebtedness permitted by Section 7.1(q) in an aggregate amount not to exceed such Permitted Indebtedness; and" (c) adding the following new subsection (u): "(u) Investments not otherwise expressly permitted under subsections (a) - (t) of this 7.3, in an aggregate amount not to exceed $5,000,000." 9. Amendment of 7.5 of the Credit Agreement. Section 7.5 of the Credit Agreement is hereby amended by deleting in Section 7.5.2(e) thereof, the text "Permitted Investments", and substituting in lieu thereof the text "Investments permitted under 7.3 hereof". 10. Amendment of 7.11 and 7.12 of the Credit Agreement. Sections 7.11 and 7.12.2 of the Credit Agreement are hereby amended by: (a) deleting subsection (c) in Section 7.11 and the sentence immediately following such subsection in their entirety, and inserting in lieu thereof the following text: "(c) contemporaneously with the formation of a domestic Subsidiary, the Borrower shall (i) cause such domestic Subsidiary, if such domestic Subsidiary shall engage in business of any kind or nature (other than qualifying to do business in a foreign jurisdiction), shall have a net worth or assets of more than a de minimis value or shall issue any capital stock to any person other than the Borrower or a Subsidiary of the Borrower, to guaranty all of the Obligations hereunder pursuant to the Guaranty, and (ii) cause such domestic Subsidiary to deliver to the Banks and the Agent satisfactory evidence of proper corporate or other authorization and legal opinions with respect to such Guaranty. Upon the notice to the Agent required by subsection (b) of the immediately preceding sentence, and in the case of a domestic Subsidiary, the delivery to the Agent of the items required by subsections (c)(i) and (ii) of the immediately preceding sentence, Schedule 5.19 shall be, and shall be deemed to be, automatically amended to include such new Subsidiary." (b) deleting in Section 7.12.2, the text "an Unsecured Subordinated Promissory Note" following the text "other than the lending to the Borrower pursuant to" and substituting in lieu thereof the following text "the R&M Trust Unsecured Subordinated Promissory Note or the Chiswick Trust Unsecured Subordinated Promissory Note (as applicable)" (c) inserting in Section 7.12.2, the text "R&M Trust" following the text "the Chiswick Trust Intercompany Subordination Agreement, the R&M Contribution Agreement or the". 11. Amendment of 7.14 and 7.15 of the Credit Agreement. Sections 7.14 and 7.15 of the Credit Agreement are hereby amended by: (a) deleting Section 7.14 in its entirety and inserting the following new 7.14 in lieu thereof: "7.14. Subordinated or Pari Passu Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, (a) amend, supplement or otherwise modify the terms of (i) any subordinated Indebtedness permitted by 7.1(r)(ii)(A) (other than any extension of the date of payment therefor or any reductions in the rate at which interest or other fees are payable to the holders thereof in connection therewith) or (ii) any pari passu Indebtedness permitted by 7.1(r)(i) or 7.1(r)(ii)(B) in any manner which could reasonably be expected to result in the occurrence of a Default or an Event of Default; provided, however, that the Borrower will not, and will not permit any of its Subsidiaries to, enter into any such amendments, supplements or modifications described in this subsection (a) without providing to the Agent and the Banks copies thereof within five (5) days following the effectiveness thereof; or (b) prepay, redeem or repurchase any of the subordinated or pari passu Indebtedness permitted by 7.1(r); provided, however, that the Borrower may prepay, redeem or repurchase any pari passu Indebtedness permitted by 7.1(r)(i) or 7.1(r)(ii)(B) so long as (x) no Default or Event of Default has occurred and is continuing or would occur as a result thereof, and (y) immediately after each such prepayment, redemption or repurchase of pari passu Indebtedness permitted by 7.1(r)(i) and 7.1(r)(ii)(B), (i) the aggregate amount of the Banks' Unfunded Commitments (after giving effect to all Syndicated Loans and Competitive Bid Loans requested) shall equal or exceed $10,000,000; and (ii) Consolidated Funded Debt, as of the date of such prepayment, redemption or repurchase (and after giving effect thereto), shall not exceed (A)(1) EBITDA for the four fiscal quarters of the Borrower ending at the end of the fiscal quarter of the Borrower ending immediately prior to such prepayment, redemption or repurchase multiplied by (2) 2.5 minus (B) $10,000,000." (b) inserting immediately following 7.14 thereof and immediately before 8 thereof, the following new 7.15: "7.15. Additional Lease Obligations. The Borrower will not, and will not permit any of its Subsidiaries to, incur any additional lease obligations (other than those permitted by 6.17) to Cummings Properties, LLC which are secured by any assets of the Borrower or any of its Subsidiaries." 12. Amendment of 8.2 of the Credit Agreement. Section 8.2 of the Credit Agreement is hereby restated in its entirety as follows: "8.2 Minimum Fixed Charge Coverage Ratio. The Borrower will not, as at the end of any four (4) consecutive fiscal quarters of the Borrower ending on any quarter end, permit the ratio of (a) EBITDA for such period minus Capital Expenditures for such period to (b) Consolidated Total Interest Expense for such period plus any scheduled amortization payments on Indebtedness for borrowed money or in respect of any Capitalized Leases permitted by 7.1, to be less than (a) 4.00:1.00 for any such period ending on or before September 30, 2004 and (b) 3.25:1.00 for any such period ending thereafter." 13. Amendment of 8.3 of the Credit Agreement. Section 8.3 of the Credit Agreement is hereby restated in its entirety as follows: "8.3. Consolidated Net Worth. The Borrower will not permit Consolidated Net Worth at any time to be less than the sum of (a) $130,000,000, plus (b) on a cumulative basis, fifty percent (50%) of positive Consolidated Net Income for each fiscal quarter beginning with the fiscal quarter ended March 29, 2003, plus (c) one hundred percent (100%) of the proceeds of any sale by the Borrower or any Subsidiary of (i) equity securities issued by the Borrower or such Subsidiary, or (ii) warrants or subscription rights for equity securities issued by the Borrower or such Subsidiary." 14. Amendment of 11.1 of the Credit Agreement. Section 11.1 of the Credit Agreement is hereby amended by deleting subsection (q) thereof, and substituting in lieu thereof the following new subsection (q): "(q) the holders of any Indebtedness permitted pursuant to 7.1(r) shall accelerate the maturity of all or any part of such Indebtedness, or, except in each case as permitted by 7.14 hereof, (i) the terms of such Indebtedness shall be amended, supplemented or otherwise modified without the prior written consent of the Agent and the Majority Banks, (ii) such Indebtedness shall be prepaid, redeemed or repurchased in whole or in part or (iii) an offer to prepay, redeem or repurchase such Indebtedness in whole or in part shall have been made;" 15. Amendment of 15 of the Credit Agreement. Section 15 of the Credit Agreement is hereby amended by inserting after the text "or the transactions contemplated hereby" and before the text "including, without limitation,", the text "(except to the extent resulting solely from the gross negligence or willful misconduct of the indemnified party)". 16. Replacement of Schedules 1, 5.18, 5.19, 7.1, 7.2 and 7.3 to the Credit Agreement. Schedules 1, 5.18, 5.19, 7.1, 7.2 and 7.3 to the Credit Agreement are hereby deleted in their entirety, and Schedules 1, 5.18, 5.19, 7.1, 7.2 and 7.3 attached hereto are hereby substituted in lieu thereof. 17. Transitional Arrangements; Allocations. Effective as of the Effective Date, each Bank shall make such dispositions and arrangements with each other Bank with respect to the then outstanding Loans (the "Adjustment") as shall result in the amount of Loans owed to each Bank being equal to the product of such Bank's Commitment Percentage multiplied by the aggregate Loans outstanding on the Effective Date (the "Adjusted Amount"). Each of the Borrower and the Guarantors hereby agrees that each Bank's Adjusted Amount shall be Loans owed by the Borrower to such Bank as if such Bank had initially made Loans to the Borrower in the amount of the Adjusted Amount. Each Bank hereby waives any breakage costs arising in connection with the Adjustment to which it might have otherwise been entitled under 4.10 of the Credit Agreement (as if the Adjustment resulted in prepayments of the Loans reallocated pursuant to the Adjustment). Upon the occurrence of the Adjustment, (a) the Agent shall appropriately adjust its records to reflect each Bank's Adjusted Amount and (b) the Borrower shall promptly issue to each of the Banks whose Commitment has changed an Amended and Restated Syndicated Note in the form of Exhibit A hereto in connection with this Amendment and the contemplated reallocation of the Total Commitment. Immediately thereafter each of the Banks receiving an Amended and Restated Syndicated Note shall promptly return to the Agent its existing Amended and Restated Syndicated Note. The Banks shall make any appropriate adjustments in payments received in respect of the Obligations which are allocable to periods prior to the Effective Date directly among themselves as shall be necessary to effect the proper allocation of such payments among the Banks, reflecting their respective portions of the applicable Obligations held by them from time to time. 18. Amendment of Annex 1 to Form of Guaranty. The Addendum to Guaranty is hereby amended by inserting immediately following Section 2 thereof the following new sections: "3. The Additional Guarantor is a wholly-owned direct or indirect Subsidiary of the Borrower. 4. No provision of the Additional Guarantor's charter, other incorporation or formation papers, by-laws, or stock or certificate provisions prohibits the undersigned from making distributions to the Borrower. 5. The Additional Guarantor hereby affirms that each of the representations and warranties set forth in 5 of the Credit Agreement is true and correct in all material respects with respect to the Additional Guarantor as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date)." 19. Amendment of Subordination Agreements. (a) the R&M Trust Subordination Agreement is hereby amended by the addition of the following new section: "16. Each of the Borrower, R&M Trust and the Agent hereby acknowledges and confirms that this Agreement continues in full force and effect, and all references to the Credit Agreement herein shall refer to the Second Amended and Restated Revolving Credit Agreement, dated as of July 13, 2001 by and among New England Business Service, Inc., as Borrower, Fleet National Bank, as Agent and the Banks listed on Schedule 1 thereto, as amended, restated, modified or supplemented from time to time." (b) the Chiswick Trust Subordination Agreement is hereby amended by the addition of the following new section: "16. Each of the Borrower, Chiswick Trust and the Agent hereby acknowledges and confirms that this Agreement continues in full force and effect, and all references to the Credit Agreement herein shall refer to the Second Amended and Restated Revolving Credit Agreement, dated as of July 13, 2001 by and among New England Business Service, Inc., as Borrower, Fleet National Bank, as Agent and the Banks listed on Schedule 1 thereto, as amended, restated, modified or supplemented from time to time." 20. 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 21 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, including without limitation the Replacement Notes (as defined in 21(b) hereto), 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, 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 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, also are correct at and as of the date hereof. (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 11.1(e) of the Credit Agreement, a breach of which shall constitute an Event of Default. 21. Effectiveness. This Amendment shall become effective as of the date first written above (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) This Amendment shall have been duly executed and delivered by each of the parties thereto and shall be in full force and effect; (b) The Borrower shall have executed and delivered to the Agent an Amended and Restated Syndicated Note in favor of each Bank which agrees to modify its Commitment in existence immediately prior to the Effective Date, in a principal amount equal to such Bank's Commitment (as allocated by the Agent hereunder and set forth in Schedule 1 attached hereto), such Note substantially in the form of Exhibit A hereto (the "Replacement Notes"); (c) The Agent shall have received from the Secretary of the Borrower and each of the Guarantors a copy, certified by such Secretary to be true and complete as of the date hereof, of each of (i) its charter or other organizational documents as in effect on such date of certification, (ii) its by-laws as in effect on such date, and (iii) the resolutions of its Board of Directors or other management authorizing, to the extent it is a party thereto, the execution, delivery and performance of this Amendment, the Replacement Notes and any other Amendment Documents; provided, however, that in lieu of providing the items required by subsections (i) and (ii) of this subsection (c), such Secretary may certify, to the extent true and correct, that charter documents and by-laws previously provided to the Agent are true and correct as of the date hereof, in full force and effect and have not been amended, rescinded or revoked; (d) The Agent shall have received from each of the Borrower and the Guarantors an incumbency certificate, dated as of the date hereof, signed by a duly authorized officer of the Borrower or such Guarantor, as the case may be, and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of the Borrower or such Guarantor, as the case may be, the Amendment Documents; (e) The Agent shall have received from the Borrower good standing certificates for each of the Borrower and the Guarantors, issued by the Secretary of State of each such entity's jurisdiction of incorporation or organization; (f) The Agent shall have received favorable legal opinions addressed to the Agent and the Banks, dated as of the date hereof, in form and substance satisfactory to the Agent, from LeBoeuf, Lamb, Greene and MacRae LLP counsel to the Borrower, with respect to the Borrower and each Guarantor (with respect to its Guaranty); (g) The Agent shall have received in cash, for the account of each Bank party to this Amendment, an amendment fee in an amount agreed to by the Agent, the Borrower and such Bank; (h) The Agent shall have received, for the account of Fleet Securities, Inc., an arrangement fee in an amount equal to that agreed to by Fleet Securities, Inc., the Agent and the Borrower as of the date hereof; and (i) Such other items, documents, agreements, items or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. 22. 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 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. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as a sealed instrument as of the date first set forth above. BORROWER: NEW ENGLAND BUSINESS SERVICE, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Executive Vice President, Chief Financial Officer and Treasurer BANKS: FLEET NATIONAL BANK formerly known as BankBoston, N.A., individually and as Agent By: /s/ Irene Bertozzi Bartenstein Name: Irene Bertozzi Bartenstein Title: Vice President KEY BANK N.A. By:/s/ Lisa Hudson Name: Lisa Hudson Title: Vice President CITIZENS BANK OF MASSACHUSETTS, as successor to USTrust By:/s/ Daniel Bernard Name: Daniel Bernard Title: Vice President SUNTRUST BANK By:/s/ Todd Sheets Name: Todd Sheets Title: Assistant Vice President NATIONAL CITY BANK By:/s/ Tara M. Handforth Name: Tara M. Handforth Title: Vice President THE BANK OF NOVA SCOTIA By:/s/ Todd S. Meller Name: Todd S. Meller Title: Managing Director BANKNORTH, N.A. By:/s/ Jon R. Sundstrom Name: Jon R. Sundstrom Title: Senior Vice President WEBSTER BANK By:/s/ Peter F. Samson Name: Peter F. Samson Title: Vice President Signature page to the Third Amendment Each of the undersigned hereby acknowledges the foregoing Third Amendment as of the Effective Date, agrees to the provisions of 18 and, to the extent applicable, 19 and further agrees that its obligations under the Guaranty will extend to the Credit Agreement, as so amended, and the other Loan Documents, as so amended. MCBEE SYSTEMS, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer CHISWICK, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer PREMIUMWEAR, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer RAPIDFORMS, 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 R&M TRUST Daniel M. Junius 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/ Daniel M. Junius Daniel M. Junius, 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 CHISWICK TRUST Daniel M. Junius and Craig Barrows, as Trustees under Declaration of Trust of Chiswick Trust dated September 15, 1999 and filed with the Secretary of the Commonwealth of Massachusetts on September 17, 1999, and not individually By: /s/ Daniel M. Junius Daniel M. Junius, 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 VERIPACK.COM, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer PWI HOLDINGS, 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 EX-10 4 exh10_2.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 10.2 Exhibit 10.2 FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT NEW ENGLAND BUSINESS SERVICE, INC. FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of April 18, 2003 (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 (hereafter including Centurion Sub referred to herein) listed on the signature pages hereto (the "Guarantors"), FLEET NATIONAL BANK, formerly known as BankBoston, N.A., a national banking association ("Fleet"), and the other lending institutions listed on Schedule 1 to the Credit Agreement referred to below (together with Fleet, the "Banks"), FLEET NATIONAL BANK, formerly known as BankBoston, N.A., as agent for itself and such other lending institutions (the "Agent"), and CITIZENS BANK OF MASSACHUSETTS, as syndication agent. WHEREAS, the Borrower, the Banks and the Agent are parties to a Second Amended and Restated Revolving Credit Agreement dated as of July 13, 2001 (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 to permit the indirect acquisition (the "Safeguard Acquisition") by the Borrower of one hundred percent (100%) of the capital stock of Safeguard Business Systems, Inc., a Delaware corporation ("Safeguard"), upon the terms and conditions set forth herein, and to make certain other revisions; WHEREAS, subject to the terms and conditions hereof, the Agent and the Banks are willing to permit such acquisition and such other revisions; WHEREAS, subject to the terms and conditions set forth herein, the Borrower, the Banks, and the Agent have agreed to amend the Credit Agreement and certain other Loan Documents 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 hereto hereby agree to amend the Credit Agreement as follows: 1. Amendments to Definitions. Section 1.1 of the Credit Agreement is hereby amended by: (a) inserting, in the place required by alphabetical order, the following new definition: "Centurion Sub. Centurion Sub, Inc., a Delaware corporation and a wholly-owned Subsidiary of Rapidforms." (b) inserting, at the end of the last paragraph of the definition of "Applicable Eurodollar Rate Margin" after the text "for purposes of this definition, be deemed to be 1.25%.", the following text: "Notwithstanding the foregoing, the Applicable Margin for the period from the Safeguard Acquisition Effective Date until the date six months after the Safeguard Acquisition Effective Date, shall not fall below 0.875%, regardless of whether the ratio of Consolidated Funded Debt to EBITDA, calculated in accordance with the first paragraph of this definition, falls below 1.5 : 1.0." (c) inserting, at the end of the last paragraph of the definition of "Applicable Facility Fee Percentage" after the text "for purposes of this definition, be deemed to be 0.375%.", the following text: "Notwithstanding the foregoing, the Applicable Facility Fee Percentage for the period from the Safeguard Acquisition Effective Date until the date six months after the Safeguard Acquisition Effective Date, shall not fall below 0.250%, regardless of whether the ratio of Consolidated Funded Debt to EBITDA, calculated in accordance with the first paragraph of this definition, falls below 1.5 : 1.0." (d) deleting the definition of "Consolidated Funded Debt" in its entirety and substituting in lieu thereof 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, Synthetic 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, Synthetic Leases and including commitment fee, agency fee, facility fee, utilization fee, balance deficiency fee and similar fee expenses in connection with the borrowing of money plus (iii) Indebtedness consisting of any Earnout Payment Obligations from and after such time as such Earnout Payment Obligations are properly classified as liabilities for purposes of generally accepted accounting principles plus (iv) deferred payment obligations of Safeguard to its independent distributors related to the termination or assignment to Safeguard of the distributors' rights under their distributor agreements with Safeguard at all times when such obligations are properly classified as a liability for purposes of generally accepted accounting principles." (e) deleting at the beginning of the first paragraph of the definition of "Permitted Acquisition" the text "Permitted Acquisition. Any" and substituting in lieu thereof, the text "Permitted Acquisition. The Safeguard Acquisition and any other ". (f) inserting, in alphabetical order, the following new definitions: "Fourth Amendment. The Fourth Amendment to Second Amended and Restated Revolving Credit Agreement dated as of April 18, 2003 among the Borrower, the Guarantors of the Borrower listed on the signature pages thereto, the Agent, and the Banks." "Fourth Amendment Effective Date. The "Effective Date", as defined in the Fourth Amendment." "Safeguard Acquisition. The acquisition by Rapidforms of one hundred percent (100%) of the capital stock of Safeguard on the terms and conditions set forth below: (a) the closing of the Safeguard Acquisition shall occur no later than July 3, 2003; (b) immediately prior to and after, and after giving effect to, the Safeguard Acquisition, no Default or Event of Default shall then exist; (c) the terms and conditions of the Safeguard Acquisition shall be substantially those set forth in the Safeguard Merger Agreement. Without limiting the generality of the foregoing, (i) the total consideration (including consideration in the form of any Earnout Payment Obligations paid to stockholders for shares of the capital stock of Safeguard and amounts paid to cause the retirement of any Indebtedness of Safeguard and its Subsidiaries to Foothill Income Trust, L.P. and Foothill Capital Corporation) shall not exceed $77,500,000, (ii) neither Safeguard nor any of its Subsidiaries shall have, nor shall the Borrower or any of its Subsidiaries have assumed, any Indebtedness for borrowed money, debt or other similar monetary obligations, including guaranties of the obligations of others, except for Indebtedness permitted by 7.1, and (iii) upon the consummation of the Safeguard Acquisition, Rapidforms shall have acquired one hundred percent (100%) of the capital stock of Safeguard and its Subsidiaries; (d) there shall be no material misstatements in or omissions from the material furnished to the Agent and the Banks for their review in connection with the Safeguard Acquisition; (e) upon consummation of the Safeguard Acquisition, the stock and assets of Safeguard and its Subsidiaries shall be free and clear of any and all liens and encumbrances, other than Permitted Liens; and (f) all conditions precedent set forth in the Safeguard Merger Agreement shall have been satisfied, and none of such conditions shall have been amended, supplemented or waived except with the prior written consent of the Agent." "Safeguard Acquisition Effective Date. The date on which the Safeguard Acquisition is consummated and becomes effective. " "Safeguard. Safeguard Business Systems, Inc., a Delaware corporation." "Safeguard Merger Agreement. The merger agreement among the Borrower, Centurion Sub, and Safeguard pertaining to the merger of Centurion Sub with and into Safeguard, on terms and conditions satisfactory to the Agent." 2. Amendment of 4.2 of the Credit Agreement. Section 4.2 of the Credit Agreement is hereby amended by inserting in subsection (b), after the text "provided, however, that" and before the text "no such fee shall be payable for any calendar quarter", the text "following the date six months after the Safeguard Acquisition Effective Date,". 3. Amendment of 5.24 and 5.25 of the Credit Agreement. Sections 5.24 and 5.25 of the Credit Agreement are hereby amended by: (a) inserting, immediately following 5.23 thereof, the following new 5.24: "5.24. Safeguard Acquisition. Each of the representations and warranties made by the Borrower, Centurion Sub and, to the best of the Borrower's knowledge, Safeguard under the Safeguard Merger Agreement shall have been true and correct in all material respects when made and shall continue to be true and correct in all material respects on the date of the consummation of the Safeguard Acquisition."; (b) inserting, immediately following 5.24 thereof, and immediately before 6 thereof, the following new 5.25: "5.25. Safeguard Equipment Lease Obligation. From and after the Safeguard Acquisition Effective Date, and for so long as the financing statement (file number 2035543-2 filed with the Delaware Secretary of State's office) filed by Bankers Direct Leasing, a division of EAB Leasing Corp., against Safeguard (or any other security agreement or financing statement purporting to grant to, or perfect a security interest in favor of, Bankers Direct Leasing, a division of EAB Leasing Corp., in collateral other than leased equipment of the Borrower or any of its Subsidiaries (including Safeguard)) exists or remains on record, neither the Borrower nor any of its Subsidiaries (including Safeguard) has or shall have any Indebtedness or equipment lease or other similar obligation to Bankers Direct Leasing, a division of EAB Leasing Corp., other than the obligations under and pursuant to the equipment lease dated February 12, 1999 between Safeguard and Bankers Direct Leasing, a division of EAB Leasing Corp., the maximum aggregate amount of which obligations shall not at any time exceed $813,000." 4. Amendment of 6.17 and 6.18 of the Credit Agreement. Sections 6.17 and 6.18 of the Credit Agreement are hereby amended by: (a) deleting in Section 6.17 the text "(a) within sixty (60) days following the Third Amendment Effective Date, cause the termination of the financing statement (file number 972-004466 filed with the Tennessee Secretary of State's office) filed by FBS Business Finance Corporation against all inventory and proceeds thereof of PremiumWear, with the Borrower hereby acknowledging that there is no outstanding security interest evidenced by such financing statement and no Indebtedness outstanding with respect thereto and (b)" and substituting in lieu thereof the text ","; (b) inserting, immediately following 6.17 thereof, the following new 6.18: "6.18. Safeguard Acquisition. Promptly following the Safeguard Acquisition Effective Date, the Borrower shall deliver to the Agent (a) satisfactory evidence of the payment and satisfaction of all outstanding Indebtedness of Safeguard and its Subsidiaries to Foothill Income Trust, L.P. and Foothill Capital Corporation, in the form of fully executed pay off letters in form and substance satisfactory to the Agent as to the repayment of such Indebtedness and the release of any and all existing liens and granted security interests of Safeguard and its Subsidiaries; (b) a completed and fully executed certificate of the locations of Safeguard and its Subsidiaries, in form and substance satisfactory to the Agent, together with the results of UCC searches of Safeguard and its Subsidiaries indicating no liens other than Permitted Liens; (c) a compliance certificate evidencing the Borrower's pro forma compliance with the requirements of 8 of this Credit Agreement immediately prior to and following the consummation of the Safeguard Acquisition, in the form of Exhibit G to this Credit Agreement, and duly certified by the principal financial or accounting officer of the Borrower; and (d) to the extent necessary or appropriate to reflect the Safeguard Acquisition, revisions to the disclosure schedules attached to this Credit Agreement and the other Loan Documents, in each case reflecting solely the materials disclosed by the Safeguard Agreement, together with a duly executed certificate of the Borrower representing that none of the revisions to the disclosure schedules reflect any items which, individually or collectively, might materially adversely affect the properties, assets, financial condition or business of the Borrower or its Subsidiaries, which certificate shall constitute a representation of the Borrower for purposes of 11.1(e) of the Credit Agreement. Without limiting the foregoing, the Borrower agrees that it shall not seek to revise (A) Schedule 5.18 to the Credit Agreement except as set forth on Schedule A to the Fourth Amendment, (B) Schedules 7.1 or 7.3 to the Credit Agreement or (C) Schedule 7.2 to the Credit Agreement (other than to reflect the changes set forth on Schedule B to the Fourth Amendment). Promptly following the consummation of the Safeguard Acquisition, the Borrower shall (x) cause Safeguard and each of its domestic Subsidiaries (in accordance with 7.11 hereto) to execute and deliver to the Agent a Guaranty or Addendum to Guaranty, in the form of Exhibit A hereto, of the Obligations under this Credit Agreement and the other Loan Documents, together with such evidence of corporate authorization, other corporate documentation and legal opinions as the Agent may reasonably request and (y) deliver to the Agent evidence satisfactory to the Agent, of the satisfaction and release of all Indebtedness (other than Indebtedness permitted by 7.1) of, and all liens and security interests (other than Permitted Liens) granted by, Safeguard and its Subsidiaries." 5. Amendment of 7.1 of the Credit Agreement. Section 7.1 of the Credit Agreement is hereby amended by: (a) deleting subsection (m) thereof in its entirety and substituting in lieu thereof the following new subsection (m): "Indebtedness for borrowed money, debt or similar monetary obligations assumed in respect of Permitted Acquisitions (other than the Safeguard Acquisition), to the extent permitted by paragraph 2(b) and (c) of the definition thereof, and other Indebtedness assumed in respect of Permitted Acquisitions (other than the Safeguard Acquisition) and existing prior to the date of any Permitted Acquisition (other than the Safeguard Acquisition) and not created in contemplation thereof;" (b) deleting subsection (q) thereof in its entirety and substituting in lieu thereof the following new subsection (q): "(q) (i) Indebtedness owed by the Borrower or any of its Subsidiaries (other than Russell & Miller, Chiswick Trust and R&M Trust) to any of their respective officers, directors or employees in connection with any deferred compensation plan, post-retirement medical or life insurance benefit plan, supplemental executive retirement plan or post-retirement medical benefit plan in an aggregate amount not to exceed $15,000,000; and (ii) Indebtedness owed by the Borrower or any of its Subsidiaries (other than Russell & Miller, Chiswick Trust and R&M Trust) consisting of supplemental retirement and death benefits payable to Safeguard executives terminated prior to the Safeguard Acquisition Effective Date in an aggregate amount not to exceed $8,500,000"; (c) deleting subsection (v) thereof in its entirety and substituting in lieu thereof the following new subsection (v): "(v) deferred payment obligations of Safeguard to its independent distributors related to the termination, or assignment to Safeguard, of the distributors' rights under their distributor agreements with Safeguard to the extent permitted by Section 7.5.1(f); and" (d) adding the following new subsection (w): "(w) Indebtedness of Safeguard and its Subsidiaries to Foothill Income Trust, L.P. and Foothill Capital Corporation until promptly after the consummation of the Safeguard Acquisition in accordance with the terms and conditions of the Safeguard Merger Agreement (which shall require the prompt payment of such Indebtedness following the Safeguard Acquisition Effective Date);" (e) adding the following new subsection (x): "(x) Indebtedness of the Borrower or any of its Subsidiaries (other than Russell & Miller, Chiswick Trust or R&M Trust) not otherwise expressly permitted under subsections (a) - (w) of this 7.1, in an aggregate amount not to exceed $5,000,000 at any one time." 6. Amendment of 7.2 of the Credit Agreement. Section 7.2 of the Credit Agreement is hereby amended by: (a) inserting in subsection (i) thereof, after the text "pursuant to Permitted Acquisitions" and before the text "and securing Indebtedness", the text "(other than the Safeguard Acquisition)" and inserting in subsection (i) thereof, after the text "the definition of Permitted Acquisitions", the text "(other than the Safeguard Acquisition);" (b) deleting in subsection (j) thereof, after the text, "constitutes Margin Stock" the text "." and replacing in lieu thereof the text "; and"; (c) adding the following new subsection (k): "(k) in the event that the Safeguard Acquisition is consummated in accordance with the terms and conditions of the Safeguard Merger Agreement, liens on assets of Safeguard and its Subsidiaries securing the Indebtedness permitted by 7.1(w) for so long as such Indebtedness is permitted to exist by the terms of this Credit Agreement." 7. Amendment of 7.3 of the Credit Agreement. Section 7.3 of the Credit Agreement is hereby amended by deleting subsection (k) thereof in its entirety and substituting in lieu thereof the following new subsection (k): "(k) Investments in respect of (i) Permitted Acquisitions (other than the Safeguard Acquisition) to the extent permitted by the definition thereof; and (ii) the Safeguard Acquisition to the extent permitted by the definition thereof and 7.1(w);". 8. Amendment of 7.5 of the Credit Agreement. Section 7.5 of the Credit Agreement is hereby amended by: (a) deleting in Section 7.5.1(d) thereof, the text "or" following the text "does not exceed $18,000,000" and substituting in lieu thereof the text ",". (b) inserting in Section 7.5.1 thereof, the following new subsections (f), (g) and (h) following the text "(e) Permitted Joint Ventures": "(f) the termination or assignment to Safeguard of the distributors' rights under Safeguard's agreements with its independent distributors so long as the aggregate payments to the independent distributors in connection therewith (including deferred payment obligations) from and after the Safeguard Acquisition Effective Date do not exceed $15,000,000 in aggregate amount, (g) the transfer of intellectual property rights to Russell & Miller by Safeguard through one or more intermediate Subsidiaries after the Safeguard Acquisition Effective Date or (h) the acquisition by NEBS Business Products Limited of the capital stock of Safeguard Business Systems Limited from Safeguard." (c) deleting in Section 7.5.2(f) thereof, the text "and" following the text "(determined as of the date or dates of such dispositions)," (d) inserting in Section 7.5.2 thereof, the following new subsection (h), following the text "(g) the disposition for fair market value of the common stock and/or other equity interests of Advantage held by the Borrower": "and (h) the transfer of the capital stock of Safeguard Business Systems Limited by Safeguard to NEBS Business Products Limited." (e) deleting the last paragraph thereof in its entirety and substituting in lieu thereof the following new paragraph: "Notwithstanding the restrictions contained above in 7.5.1 and 7.5.2, the Borrower or any Guarantor (other than Russell & Miller, R&M Trust and Chiswick Trust), may transfer assets owned by it to the Borrower or any other Guarantor (other than R&M Trust, Chiswick Trust and except to the extent permitted in 7.5.1(g), Russell & Miller)." 9. Amendment of 7.16 of the Credit Agreement. Section 7.16 of the Credit Agreement is hereby amended by inserting, immediately following 7.15 thereof and immediately before 8 thereof, the following new 7.16: "7.16. Additional Safeguard Obligations. Notwithstanding any limitation contained in 7.1 hereof, from and after the Safeguard Acquisition Effective Date, and for so long as the financing statement (file number 2035543-2 filed with the Delaware Secretary of State's office) filed by Bankers Direct Leasing, a division of EAB Leasing Corp., against Safeguard (or any other security agreement or financing statement purporting to grant to, or perfect a security interest in favor of, Bankers Direct Leasing, a division of EAB Leasing Corp., in collateral other than leased equipment of the Borrower or any of its Subsidiaries (including Safeguard)) exists or remains on record, neither the Borrower nor any of its Subsidiaries (including Safeguard) shall incur or permit to exist any Indebtedness or equipment lease or other similar obligation to Bankers Direct Leasing, a division of EAB Leasing Corp., other than the obligations under and pursuant to the equipment lease dated February 12, 1999 between Safeguard and Bankers Direct Leasing, a division of EAB Leasing Corp., the maximum aggregate amount of which obligations shall not at any time exceed $813,000." 10. Replacement of Schedule 5.19 to the Credit Agreement and Addition of Schedules A and B to the Fourth Amendment. 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. Schedule A is hereby added to this Amendment to reflect additions to Schedule 5.18 to the Credit Agreement upon consummation, if any, of the Safeguard Acquisition. Schedule B is hereby added to this Amendment to reflect additions to be made to Schedule 7.2 to the Credit Agreement upon the consummation, if any, of the Safeguard Acquisition. 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 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, 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 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, also are correct at and as of the date hereof and will be true and correct as of the date of the closing of the Safeguard Acquisition. (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 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 the date first written above (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) Substantially contemporaneously with the satisfaction of each of the other conditions set forth in this 12, the Borrower shall have delivered fully executed copies of the Safeguard Merger Agreement and related documents to the Agent which shall be in full force and effect and shall have satisfied each of the conditions to effectiveness of the Safeguard Merger Agreement (other than the effectiveness of this Amendment); (b) This Amendment shall have been duly executed and delivered by each of the Agent, the Majority Banks, the Borrower and the Guarantors and shall be in full force and effect; (c) Centurion Sub shall have executed and delivered to the Agent an Addendum to Guaranty in the form of the Addendum to Exhibit A to the Credit Agreement; (d) The Agent shall have received from the Secretary of Centurion Sub a copy, certified by such Secretary to be true and complete as of the date hereof, of each of (i) its charter or other organizational documents as in effect on such date of certification, (ii) its by-laws as in effect on such date, and (iii) the resolutions of its Board of Directors or other management authorizing, to the extent it is a party thereto, the execution, delivery and performance of this Amendment, and any other Amendment Documents; (e) The Agent shall have received from Centurion Sub an incumbency certificate, dated as of the date hereof, signed by a duly authorized officer of Centurion Sub and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of Centurion Sub, the Amendment Documents; (f) The Agent shall have received from the Borrower copies of the most recent consolidated financial statements of Safeguard, the December 31, 2002 audited consolidated financial statements of Safeguard, and a copy of the form of Safeguard Merger Agreement, in form and substance satisfactory to the Agent (or if modified, with such modifications as the Agent may, in its sole discretion approve); (g) The Agent shall have received good standing certificates for Centurion Sub, issued by the Secretary of State of such entity's jurisdiction of incorporation or organization; (h) The Agent shall have received a favorable legal opinion addressed to the Agent and the Banks, dated as of the date hereof, in form and substance satisfactory to the Agent, with respect to the Guaranty by Centurion Sub; (i) 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 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. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as a sealed instrument as of the date first set forth above. BORROWER: NEW ENGLAND BUSINESS SERVICE, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Executive Vice President, Chief Financial Officer and Treasurer BANKS: FLEET NATIONAL BANK formerly known as BankBoston, N.A., individually and as Agent By: /s/ Irene Bertozzi Bartenstein Name: Irene Bertozzi Bartenstein Title: Vice President KEY BANK N.A. By: /s/ Lisa Hudson Name: Lisa Hudson Title: Vice President CITIZENS BANK OF MASSACHUSETTS, as successor to USTrust By: /s/ Daniel Bernard Name: Daniel Bernard Title: Vice President SUNTRUST BANK By: /s/ Todd Sheets Name: Todd Sheets Title: Assistant Vice President NATIONAL CITY BANK By: /s/ Tara M. Handforth Name: Tara M. Handforth Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ Todd S. Meller Name: Todd S. Meller Title: Managing Director BANKNORTH, N.A. By: /s/ Jon R. Sundstrom Name: Jon R. Sundstrom Title: Senior Vice President WEBSTER BANK By: /s/ Peter F. Samson Name: Peter F. Samson Title: Vice President Signature page to the Fourth Amendment Each of the undersigned hereby acknowledges the foregoing Fourth Amendment as of the Effective Date, and further agrees that its obligations under the Guaranty will extend to the Credit Agreement, as so amended, and the other Loan Documents, as so amended. MCBEE SYSTEMS, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer CHISWICK, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer PREMIUMWEAR, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer RAPIDFORMS, 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 R&M TRUST Daniel M. Junius 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/ Daniel M. Junius Daniel M. Junius, 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 CHISWICK TRUST Daniel M. Junius and Craig Barrows, as Trustees under Declaration of Trust of Chiswick Trust dated September 15, 1999 and filed with the Secretary of the Commonwealth of Massachusetts on September 17, 1999, and not individually By: /s/ Daniel M. Junius Daniel M. Junius, 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 VERIPACK.COM, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer PWI HOLDINGS, 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 CENTURION SUB, INC. By: /s/ Daniel M. Junius Name: Daniel M. Junius Title: Treasurer EX-10 5 exh10_3.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 10.3 Exhibit 10.3 DEFERRED COMPENSATION PLAN TRUST AGREEMENT TABLE OF CONTENTS ARTICLE PAGE ARTICLE 1 Establishment of Trust ................. 1 ARTICLE II Payments to Plan Participants and their Beneficiaries ......................... 2 ARTICLE III Trustee Responsibility Regarding Payments to Trust Beneficiary when Company is Insolvent ............................ 3 ARTICLE IV Duties and Powers of the Trustee........ 4 ARTICLE V Disposition of Income .................. 6 ARTICLE VI Limitation of the Trustee's Liability .. 6 ARTICLE VII Expenses and compensation ............... 7 ARTICLE VIII Substitution and Succession of the Trustee ................................ 8 ARTICLE IX Accounting Provisions ..................... 8 ARTICLE X Amendment and Termination ................ 9 ARTICLE XI Successor Company ........................ 9 ARTICLE XII Construction and Payment .................10 ARTICLE XIII Miscellaneous ............................ 10 TRUST AGREEMENT This Agreement is made by and between New England Business Service, Inc. (hereinafter the "Company"), and the undersigned banking institution, as Trustee (hereinafter referred to as the "Trustee"). W I T N E S S E T H : WHEREAS, the Company has established the New England Business Service, Inc. Deferred Compensation Plan (the "Plan") for certain of its employees; and WHEREAS, the Company wishes to establish a trust ("Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company's creditors in the event of the Company's insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded Plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title 1 of the Employee Retirement Income Security Act of 1974; and WHEREAS, the Trustee has consented to act as trustee of the trust fund and to hold and distribute the assets transferred to the trustee and accumulated in respect of the Plan on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter set forth, the Company and the Trustee hereby agree as set forth below. ARTICLE I ESTABLISHMENT 1.1 The Trust Fund shall consist of such sums of money or other property, in a form acceptable to the Trustee, as shall from time to time be paid or delivered to the Trustee pursuant to the Plan which, together with all earnings, profits, increments and accruals thereon, without distinction between principal and income, shall constitute the Trust Fund hereby created and established. The Trust Fund shall be held, administered and disposed of by the Trustee as provided in the Trust Agreement. The Trust hereby established shall be irrevocable. 1.2 The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part 1, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. 1.3 The Trust Fund shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event of insolvency, as defined in Section 3(a) herein. ARTICLE II PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES 2.1 The Company shall designate an Administrative Committee ("Committee") in accordance with the Plan and the Committee shall deliver to the Trustee a schedule ("the Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. The Company shall provide the Trustee with all information necessary to make such tax withholding provisions and the Trustee shall be entitled to rely on such information. The Company shall be responsible for the remittance to the appropriate tax authorities of its share of any applicable employment taxes, as distinguished from those employment taxes required to be withheld from the benefits due Plan participants and their beneficiaries. 2.2 The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by the Committee and any claim for such benefits shall be considered and reviewed by the Committee under the procedures set out in the Plan. 2.3 The Company may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, the Company shall make the balance of each such payment as it falls due. Trustee shall notify the Company where principal and earnings are not sufficient to cover payments required by the Payment Schedule under paragraph 2.1 hereof. ARTICLE III TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT 3.1 The Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code or under state court receivership law. 3.2 At all times during the continuance of the Trust as provided in paragraph 1.3 hereof, the principal and income of the Trust shall be subject to claims of general creditors of the company under federal and state law as set forth below: 3.2.1 The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries. 3.2.2 Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee by the Company and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. The Trustee may hire accountants at the expense of the Trust Fund to assist it in making such a determination concerning the Company's solvency. 3.2.3 If at any time the Trustee has determined that the company is Insolvent, the Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold assets of the Trust for the benefit of the Company's general creditors. While so holding such assets, the Trustee shall make payments to such creditors if the Company shall so direct or, if the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy code or state receivership law, as a court of competent jurisdiction shall direct. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Plan or otherwise. 3.2.4 The Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Article II of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). 3.3 Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to paragraph 3.2. hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by the Company in lieu of the payment provided for hereunder during any such period of discontinuance. ARTICLE IV DUTIES AND POWERS OF THE TRUSTEE 4.1 The Trustee shall act with the care, skill, prudence and diligence under the circumstance then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company or the Committee which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by the Company or the Committee. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. 4.2 The Trustee shall follow the written directions of the Committee with respect to investing and reinvesting the Trust Fund. The Company shall be responsible to ensure that such written directions of the Committee are made in accordance with the Plan and are not contrary to law. The Trustee shall have no responsibility to monitor investments of the Trust Fund and shall not be liable for any investment losses or other consequences resulting from any action or inaction of the Company or the Committee with respect to the investments of the Trust Fund. Subject to said directions, the Trustee shall have the power: 4.2.1 To purchase or subscribe for and invest in any securities, but not including any securities of the Trustee or any affiliate of the Trustee, and to retain any such securities in the Trust Fund. Without in any way intending to limit the generality of the foregoing, the said term "securities" shall be deemed to include common and preferred stocks, mortgages, debentures, bonds, notes or other evidences of indebtedness, and other forms of securities. All rights associated with assets of the Trust shall be exercised by the Trustee, or by the person designated by the Trustee, and shall in no event be exercisable by or rest with Plan participants. The Company shall have the right at any time, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by the Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. Upon the written direction of the committee, the Trustee shall invest and reinvest all or a portion of the Trust Fund in shares of any open-ended investment fund or company, including those managed by an affiliate of the Trustee. 4.2.2 To deal with all or any part of the Trust Fund; to acquire any property by purchase, subscription, lease, or other means; to sell for cash or on credit, convey, lease for long or short terms, or convert, redeem, or exchange all or any part of the Trust Fund; to hold part of the Trust Fund uninvested or in savings accounts or certificates of deposit offered by the Trustee, or in money market funds managed by the Trustee or an affiliate of the Trustee. 4.2.3 To vote, or give proxies to vote, any stock or other security, and to waive notice of meetings, to oppose, participate in, and consent to the reorganization, merger, consolidation, or readjustment of the finances of any enterprise, to pay assessments and expenses in connection therewith and to deposit securities under deposit agreements. 4.2.4 To register any investment held in the Trust in its own name or in the name of its nominee, or to hold any investment in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust. 4.2.5 To make, execute, acknowledge and deliver any and all documents, deeds and conveyance, and any and all other instruments necessary or appropriate to carry out the powers herein granted. 4.2.6 To enforce by suit or otherwise, or to waive, it right on behalf of the Trust Fund, and to defend claims asserted against it or the Trust Fund; to compromise, adjust and settle any and all claims against or in favor of it or the Trust Fund. 4.2.7 To renew, extend, or foreclose any mortgage or other security; to bid on property in foreclosure; to take deeds in lieu of foreclosure, with or without paying a consideration therefor. 4.2.8 To employ agents necessary for the operation of the Trust and to request the advice and assistance of counsel, including counsel for the Company, or other counsel designated by the Committee or by the Trustee. 4.2.9 In the event that the Company authorized the transfer of all or a portion of the assets of the Trust to an insurance company, to enter into and execute on behalf of the Trust all such documents and instruments necessary or appropriate to carry out such transfer. 4.2.10 To do all such other acts, execute all such other instruments and take such other proceedings and exercise all such other privileges and rights with relation to any asset constituting a part of the Trust as are necessary to carry out the purpose of the Trust, and no person dealing with the Trustee shall be bound to see to the application of any money or property paid or delivered to the Trustee or to inquire into the validity or propriety of any such transaction. 4.3 No persons dealing with the Trustee shall be under any obligation to see to the proper application of any money paid or property delivered to the Trustee or to inquire into the Trustee's authority as to any transaction. 4.4 The Trustee may make any distribution required hereunder by mailing its check for the specified amount, or delivering the specified property, to the person to whom such distribution or payment is to be made, at such address as may have been last furnished to the Trustee, or if no such address shall have been furnished, to such person in care of the Company, or to the Committee or (if so directed by the Committee) by crediting the account of such person or by transferring the funds to such person's account by bank or wire transfer. ARTICLE V DISPOSITION OF INCOME During the term of this Trust, all income received, net of expenses and taxes, shall be accumulated and reinvested. ARTICLE VI LIMITATION OF TRUSTEE'S LIABILITY 6.1 The Trustee shall be accountable only for funds actually received by it hereunder and shall have no duty or liability to determine that the amount of the funds received by it comply with the provisions of the Plan. If the Company has established a contract with an insurance company to carry out the purposes of the Plan, the Trustee shall not be liable for the acts or omissions of such insurance company, or be under an obligation to invest or otherwise manage the portion of the Trust Fund which is subject to the management of such insurance company. 6.2 Whenever the Trustee is required or authorized to take any action hereunder pursuant to any written direction or notice of the Committee or the Company, the Trustee, acting in accordance with such direction or notice, shall not be responsible for the administration of such Plan or Trust, for the correctness of any payments or disbursements from the Trust, or for any other action taken by the Trustee in accordance with such written direction or notice. Such direction or notice shall be sufficient protection to the Trustee if contained in writing signed by the Committee or such other person authorized to execute documents on behalf of the Committee, in the case of direction or notice required to be given by the Committee; or by any officer of the Company, in the case of direction or notice required to be given by the Company. 6.3 The Company shall indemnify and hold harmless the Trustee from and against any losses, costs, damages or expenses, including reasonable attorneys' fees, which the Trustee may incur or pay out by reason of (i) the Trustee's acting in accordance with the directions of the Company or the Committee or failing to act in the absence of such directions; (ii) the Trustee's exercise and performance of its powers and duties hereunder, unless the same are determined to be due to the Trustee's negligence, bad faith or willful misconduct; (iii) any (alleged or actual) action or inaction on the part of the Company or the Committee, unless such losses, costs, damages, or expenses arise out of the Trustee's negligence, bad faith, or willful misconduct; or (iv) the Plan at any time fails to be exempt from the requirements of Parts 2, 3 and 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended. In addition, in the event that the Trustee undertakes or defends any litigation (including but not limited to any audit, proceeding or any other administrative action of any state, local or federal taxing authority) arising in connection with the Trust Fund, the Company agrees to indemnify the Trustee against the Trustee's reasonable costs, expenses, and liabilities (including, without limitation, reasonable attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the company does not pay such costs, expenses, and liabilities described in this paragraph in a reasonably timely manner, the Trustee may obtain payment from the Trust Fund. ARTICLE VII EXPENSES AND COMPENSATION The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon by the Trustee and the Company. All administrative expenses, charges, taxes and assessments of the Trust Fund and Trustee's fees shall be paid from the Trust Fund, and if the Trust Fund is insufficient to cover all such costs, the balance thereof shall be paid by the Company. ARTICLE VIII SUBSTITUTION AND SUCCESSION OF TRUSTEE 8.1 The Trustee may resign at any time by giving written notice to the Committee. Such resignation shall become effective ninety (90) days thereafter or upon the appointment of a successor Trustee, whichever occurs first. In the event a successor Trustee is not appointed within ninety (90) days, the Trustee may turn over the assets of the Trust to the Committee as successor Trustee. The Committee may remove the Trustee by giving ninety (90) days written notice to the Trustee of such intent to remove, and by then giving written notice of the appointment of a successor Trustee. The removal shall become effective upon acknowledgment of the receipt of the assets of the Trust by the successor Trustee. Each successor Trustee under this Trust shall be appointed in writing by the Committee and shall accept the Trust in writing. Such successor Trustee shall become vested with any estate, property, right, power and duty of the predecessor Trustee hereunder with like effect, as if originally named Trustee. No successor Trustee shall be liable for any act or failure of any predecessor Trustee, and with the approval of the Committee, a successor Trustee may accept the account rendered and the property delivered to it by the predecessor Trustee without in so doing incurring any liability or responsibility with respect to acts of default, if any, of the predecessor Trustee. 8.2 Any corporation into which the Trustee may merge or with which it may consolidate, or any corporation resulting from any merger or consolidation to which the Trustee may be party, shall be the successor of the Trustee hereunder, without the execution or filing of any additional instrument of the performance of any further act. ARTICLE IX ACCOUNTING PROVISIONS 9.1 The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made in the administration of the Trust Fund. 9.2 Within a reasonable time after the close of each fiscal year, or of any termination of the duties of the Trustee hereunder, the Trustee shall prepare and deliver to the Committee an account of its acts and transactions as Trustee during such fiscal year or during such period from the close of the last fiscal year to the termination of the Trustee's duties, respectively, including a statement of the then current value of the Trust Fund. Any such account shall be deemed accepted and approved by the Committee, and the Trustee shall be relieved and discharged, as if such account had been settled and allowed by a judgment or decree of a court of competent jurisdiction, unless protested by written notice to the Trustee within sixty (60) days of receipt thereof by the Committee. 9.3 The Trustee or the Committee shall have the right to apply at any time to a court of competent jurisdiction for judicial settlement of any account of the Trustee not previously settled as herein provided or for the determination of any question of construction or for instructions. In any such action or proceeding it shall be necessary to join as parties only the Trustee and the Committee (although the Trustee may also join such other parties as it may deem appropriate), and any judgment or decree entered therein shall be conclusive. ARTICLE X AMENDMENT AND TERMINATION 10.1 This Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable. 10.2 The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan. Upon termination of the Trust, any assets remaining in the Trust shall be returned to the Company. ARTICLE XI SUCCESSOR COMPANY Unless this Trust be sooner terminated, a successor to the business of the Company, by whatever form or manner resulting, which succeeds said Company under the Plan as therein provided shall, upon notice in writing from the Committee that all action required by the Plan to effect such succession has been taken, also succeed to all the right, powers and duties of such Company hereunder. ARTICLE XII CONSTRUCTION AND PAYMENT 12.1 The Trust shall be construed and administered according to the laws of the jurisdiction in which the principal office of the Trustee is located. In any question of interpretation or other matter of doubt, the Trustee may rely upon the opinion of counsel for the Company or Committee or any other attorney at law designated by the Company with approval of the Trustee. 12.2 No person having any present or future interest in the Trust shall have any right to assign, transfer, encumber, commute or anticipate his payment under this Trust and such payment shall not in any way be subject to any legal process or levy of execution upon, or attachment or garnishment proceeding against, the same for the payment of any claim against any person having an interest hereunder, nor shall such payment be subject to the jurisdiction of any bankruptcy court or insolvency proceedings. ARTICLE XIII MISCELLANEOUS 13.1 The titles to the Articles in this Trust Agreement are included for convenience of reference only and are not to be used in interpreting this Trust Agreement. 13.2 Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. 13.3 This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one Trust Agreement. 13.4 Communications to the Trustee shall be sent to the Trustee's principal office or to such other address as the Trustee may specify in writing. No communication shall be binding upon the Trustee until it is received by the Trustee. Communications to the Committee or the Company shall be sent to the Company's principal office or to such other address as the Company may specify in writing. 13.5 The effective date of this Trust Agreement shall be September 1, 2002. IN WITNESS WHEREOF, the Company and the Trustee have caused this instrument to be executed this 29th day of August, 2002. Company: New England Business Service, Inc. By:___/s/ Daniel M. Junius_______ Signature of Officer Trustee: Investors Bank and Trust Company By:___[Illegible Signature]_________ Signature of Officer STATE OF MASSACHUSETTS COUNTY OF MIDDLESEX In Groton, MA on the 29th day of August, 2002, before me personally appeared Daniel M. Junius, to me known and known by me to be the Executive Vice President of and the person who executed the foregoing instrument for and on behalf of New England Business Service, Inc. and he acknowledged said instrument by him executed to be the free act and deed of Daniel M. Junius and his own free and voluntary act and deed in his capacity as Executive Vice President of said Company. __/s/ Michelle R.Palermo-Murphy Notary Public EX-10 6 exh10_4.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 10.4 Exhibit 10.4 ____________________________________________________________ New England Business Service, Inc. Supplemental Executive Retirement Plan ____________________________________________________________ Effective January 4, 1999 As amended and restated effective April 25, 2003 NEW ENGLAND BUSINESS SERVICE, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS ____________________________________________________________ ARTICLE I ESTABLISHMENT OF THE PLAN 1.1 Name of Plan ...................................... 2 1.2 Effective Date...................................... 2 1.3 Purpose ........................................... 2 1.4 Restricted Coverage ................................ 2 1.5 Plan Unfunded ...................................... 2 ARTICLE II DEFINITIONS 2.1 "Accrued Benefit" ................................. 2 2.2 "Affiliate" ...................................... 3 2.3 "Average Final Compensation" ...................... 3 2.4 "Beneficial Owner" ................................ 3 2.5 "Benefit Commencement Date" ........................ 3 2.6 "Board" ........................................... 3 2.7 "Change in Control" ................................ 3 2.8 "Code" .......................................... 4 2.9 "Committee" ...................................... 4 2.10 "Company" .......................................... 4 2.11 "Disability (and "Disabled")........................ 4 2.12 "Early Retirement Date" ............................ 4 2.13 "Effective Date" ................................ 5 2.14 "Entry Date" ..................................... 5 2.15 "ERISA" .......................................... 5 2.16 "Exchange Act" ..................................... 6 2.17 "Executive" ....................................... 5 2.18 "Good Cause" ....................................... 5 2.19 "Normal Retirement Date" ........................... 6 2.20 "Participant" ..................................... 7 TABLE OF CONTENTS (continued) ____________________________________________________________ 2.21 "Person" .......................................... 6 2.22 "Plan" ........................................... 6 2.23 "Plan Administrator" ............................. 6 2.24 "Plan Year" ...................................... 6 2.25 "Separation from Service" .......................... 6 2.26 "Service" .......................................... 6 2.27 "Surviving Spouse" ................................ 6 2.28 "Trust" .......................................... 6 2.29 "Vested Benefit" ................................. 6 2.30 "Vesting Percentage" ............................... 6 2.31 "Year of Benefit Service" .......................... 7 ARTICLE III PARTICIPATION 3.1 Eligibility Requirements............................ 7 3.2 Entry and Re-Entry Into the Plan ................... 7 ARTICLE IV RETIREMENT BENEFITS 4.1 Amount, Timing and Form of Benefits ............... 7 ARTICLE V VESTING AND FORFEITURES 5.1 Vesting Percentage ................................. 8 5.2 Vested Benefits .................................. 8 5.3 Forfeitures ..................................... 8 5.4 Amendment of Vesting Provisions .................... 8 5.5 Forfeiture of Vested Benefit ....................... 9 ARTICLE VI RETIREMENT BENEFIT 6.1 Normal Retirement Benefit ..........................10 6.2 Determination of Accrued Benefit ...................12 6.3 Adjustment for Early Retirement ....................10 6.4 Adjustment for Late Retirement ....................12 6.5 Disability Retirement ...........................13 ARTICLE VII PAYMENT OF BENEFIT 7.1 Eligibility for Payment ...........................13 7.2 Benefit Commencement Date ......................14 Table of Contents (continued) ARTICLE VIII BENEFIT FORMS AVAILABLE 8.1 Forms of Benefits for Participants .................15 8.2 Life Annuity Benefit Election ......................15 ARTICLE IX DEATH BENEFITS 9.1 Death Prior to Benefit Commencement ................15 9.2 Death After Benefit Commencement .................16 ARTICLE X CHANGE IN CONTROL ELECTIONS 10.1 One Time Opportunity to Elect to Receive Lump Sum Benefit Payment ....................................16 10.2 Calculation of Lump Sum Benefit Payment.............17 ARTICLE XI ADMINISTRATION 11.1 Plan Administration ................................17 11.2 Indemnification ................................18 11.3 Ownership of Assets ................................16 11.4 Expenses ..........................................16 ARTICLE XII TRUST AGREEMENT; LIQUIDITY FUND 12.1 Trust Fund .....................................17 12.2 Liquidity Fund .....................................17 ARTICLE XIII AMENDMENT OF THE PLAN 13.1 Amendment ..........................................17 13.2 Effect of Amendments on Vesting ...................17 ARTICLE XIV TERMINATION OF THE PLAN 14.1 Termination .....................................18 14.2 Benefits After Plan Termination .................18 ARTICLE XV MISCELLANEOUS 15.1 Limitations of Rights; Employment Relationship .....18 15.2 Determination of Benefits, Claims Procedure, and Administration .....................................18 15.3 Arbitration ........................................20 15.4 NonAssignability of Benefits ......................20 15.5 Facility of Payments ............................21 15.6 Obligations to Withhold and Pay Taxes...............21 15.7 Representations ................................ 21 Table of Contents (continued) 15.8 Severability .....................................21 15.9 Applicable Law .....................................21 15.10 Successor Employers ...............................21 ARTICLE I ESTABLISHMENT OF THE PLAN 1.1 Name of Plan The Plan shall be known as the New England Business Service, Inc. Supplemental Executive Retirement Plan. 1.2 Effective Date The Effective Date of the Plan is January 4, 1999 and the Plan was amended and restated effective April 25, 2003. 1.3 Purpose The Company intends this Plan to provide certain retirement income benefits (as described herein) to certain Executives (as identified from time to time in the Appendix hereto or who otherwise become Participants in accordance with the provisions of the Plan). Such benefits are intended to supplement the retirement income benefits provided to such Participants by the Company through its other broad- based retirement programs and Social Security benefits. 1.4 Restricted Coverage Participation in this Plan shall be limited to Executives, so that for purposes of Title I of ERISA the Plan shall at all times cover only employees who make up a select group of management or highly compensated employees whose positions with the Company allow them to have a significant effect on the Company's results of operations by the performance of services of major importance in the management, operation, and development of the Company's business. 1.5 Plan Unfunded This Plan is intended to be unfunded for purposes of (a) Title I of ERISA and (b) taxation of vested accrued benefits pursuant to the Code. ARTICLE II DEFINITIONS The following terms shall have the meanings specified below unless the context otherwise requires: 2.1 "Accrued Benefit"shall mean the portion of a Participant's normal retirement benefit that has accrued as of any date pursuant to Section 6.2. 2.2 "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. 2.3 "Average Final Compensation" shall mean the sum of (a) the Participant's highest base salary during his final five Plan Years of Service and (b) the average of a Participant's bonuses for the three Plan Years in which the Participant's greatest bonus is received during his final five Plan Years of Service. 2.4 "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. 2.5 "Benefit Commencement Date" shall mean the date as of which benefits hereunder first become payable, in accordance with the provisions of Article VII, to or with respect to a Participant. 2.6 "Board" shall mean the Board of Directors of the Company. 2.7 "Change in Control" shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall have occurred: (a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 35% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in Section 2.7(c)(i); (b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on April 25, 2003 constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then in office who either were directors on April 25, 2003 or whose appointment, election or nomination for election was previously so approved or recommended; (c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 35% or more of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. (e) Notwithstanding the foregoing definition, a Change in Control shall not be deemed to occur with respect to an Executive or Participant if the Change in Control results in the Executive or Participant, or a group of Persons which includes the Executive or Participant, acquiring, directly or indirectly, 35% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities. An Executive described in the preceding sentence who is not a Participant shall not automatically become a Participant pursuant to Section 3.1. 2.8 "Code" shall mean the Internal Revenue Code of 1986 as amended, and including all regulations thereunder. 2.9 "Committee" shall mean the Organization and Compensation Committee of the Board of Directors of the Company (or such other committee appointed by the Board to administer the Plan). 2.10 "Company" shall mean New England Business Service, Inc. and, in the event of a Change in Control (but not for purposes of the definition of Change in Control), each successor to and assign of New England Business Service, Inc. 2.11 "Disability (and "Disabled") shall mean a Participant's inability, on account of a physical or mental impairment or condition, substantially to perform the material duties of his position as an Executive despite reasonable accommodations made or proposed by the Company, provided that (a) such inability and impairment or condition are established to the satisfaction of the Board, and (b) the Participant is receiving benefits under a Company Disability Plan. 2.12 "Early Retirement Date" shall mean the first day of any month following the later of (a) the Participant's 55th birthday and (b) either (i) the completion of his fifth Year of Benefit Service, or (ii) his separation from service either (A) upon or following the occurrence of a Change in Control or (B) as the result of either a Disability or an involuntary termination without Good Cause. 2.13 "Effective Date" shall mean the date specified as such in Section 1.2 above. 2.14 "Entry Date" shall mean the date on which an Executive becomes a Participant in the Plan as provided in Article III. 2.15 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and including all regulations thereunder. 2.16 "Exchange Act"shall mean the Securities Exchange Act of 1934, as amended from time to time. 2.17 "Executive" shall mean any employee or corporate officer of the Company who is a member of a select group of management or highly compensated employees of the Company and who is, except under the circumstances set forth in the second sentence of Section 3.1, recommended for participation in the Plan by the Chief Executive Officer of the Company and approved by the Committee. 2.18 "Good Cause" shall mean a Participant's: (a) Willful and continuing failure substantially to perform duties assigned in good faith from time to time by the Company, provided that such failure is not solely the result of (i) A Disability; (ii) A leave of absence either granted in writing by the Company or guaranteed by applicable law; or (iii) Some other reason agreed to in advance by the Board. (b) Willful conduct which is demonstrably and materially injurious to the Company. (c) Conviction of a felony or a misdemeanor involving the theft, misappropriation, or embezzlement of property of the Company. For purposes of this Section 2.18, the term "Board" shall include the board of directors (or body with a similar function) of the Company's successor following a Change in Control. Notwithstanding the foregoing definition, if a Participant is a party to an effective written employment, change in control or similar agreement that defines "cause" (or words of similar meaning) and termination of employment "for cause" gives rise to the denial or forfeiture of any benefit under such agreement (or results in the Participant being ineligible for a benefit under such agreement), such termination shall be deemed to be a Separation from Service for Good Cause for purposes of the Plan with respect to such Participant. 2.19 "Normal Retirement Date" shall mean the first day of the month coincident with or next following a Participant's 65th birthday. 2.20 "Participant" shall mean any Executive who is covered by this Plan in accordance with the provisions of Article III. 2.21 "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities and (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 2.22 "Plan" shall mean the New England Business Service, Inc. Supplemental Executive Retirement Plan, as amended or supplemented from time to time. 2.23 "Plan Administrator" shall mean the Committee. 2.24 "Plan Year" shall mean the Company's fiscal year, ending on the last Friday of each June following the Effective Date while this Plan remains in effect, provided that for purposes of the definitions of "Average Final Compensation" and "Year of Benefit Service," "Plan Year" shall include all such periods before or after the Effective Date of the Plan. 2.25 "Separation from Service" shall mean the termination of a Participant's Service for any reason, including the death of the Participant. 2.26 "Service" shall mean a Participant's period of employment with the Company and its subsidiaries. 2.27 "Surviving Spouse" shall mean the spouse of a Participant as of the earlier of (a) the Participant's Benefit Commencement Date or (b) his date of death, entitled to received benefits under the Plan as provided in Sections 8.1 and 9.2 of the Plan. 2.28 "Trust" shall mean, in the event of a Change in Control, the trust created under the New England Business Service, Inc. Supplemental Executive Retirement Plan Trust Agreement. 2.29 "Vested Benefit" shall mean the portion of a Participant's Accrued Benefit calculated in accordance with Article V of this Plan. 2.30 "Vesting Percentage" shall mean the percentage determined in accordance with Section 5.1 of this Plan. 2.31 "Year of Benefit Service" shall mean, except as otherwise specified in the appendix hereto, each Plan Year subsequent to June 29, 1992 in which the Participant has any Service. In all instances throughout this document, the masculine pronoun shall include the feminine pronoun, and the singular shall include the plural. ARTICLE III PARTICIPATION 3.1 Eligibility Requirements Only Executives shall be eligible to become and remain Participants in the Plan. Except as provided in the next sentence, an Executive shall become a Participant only upon designation as a Participant in the Appendix hereto by the Committee after recommendation by the Chief Executive Officer. Notwithstanding the foregoing, upon the occurrence of a Change in Control, each Executive who is then a party to an effective written change in control severance agreement with the Company shall automatically become a Participant, without further action by the Committee. A Participant shall continue as a Participant for the purpose of accruing additional benefits under the Plan only as long as he remains in Service as an Executive of the Company; provided that the Committee may allow a Participant who is no longer an Executive of the Company to continue as a Participant as long as the Participant remains in Service. A Disabled Participant remains a Participant as long as he is continuing to accrue Benefit Service while Disabled under the provisions of Section 6.5. 3.2 Entry and Re-Entry Into the Plan An Executive shall become a Participant on the earlier of (i) the effective date of his designation as a Participant in the appendix hereto and (ii) the date of a Change in Control (if such participation is provided for on a Change in Control pursuant to Section 3.1). If a Participant's Service is subsequently broken and he is later re-employed as an Executive, he shall resume his participation in the Plan only if he is again designated as a Participant by the Committee on an amended Appendix hereto and only on the effective date of such new designation (or, if applicable, upon a Change in Control subsequent to such re-employment). ARTICLE IV RETIREMENT BENEFITS 4.1 Amount, Timing and Form of Benefits Except as set forth in Article X, a Participant who has a Separation from Service after his Entry Date shall be entitled to receive his Vested Benefit, as determined in accordance with Articles V and VI, commencing on the Participant's Benefit Commencement Date as determined in accordance with Article VII, and payable in the form provided in Article VIII. ARTICLE V VESTING AND FORFEITURES 5.1 Vesting Percentage Subject to Section 5.5, a Participant's Vesting Percentage as of any date shall be 0% until the date on which the first of the following events occurs and thereafter it shall be 100%. (a) A Change in Control occurs. (b) The Participant incurs a Separation from Service, either involuntarily without Good Cause or on account of Disability or death. (c) The Participant attains his Early Retirement Date. (d) This Plan is terminated or is amended to materially reduce the rate or amount of future benefit accruals available to the Participant under Article VI or any successor provision of the Plan; provided that in case of such an amendment, only the Participant's Accrued Benefit as of the effective date of the amendment shall become fully vested, and the Participant's Vesting Percentage in any subsequent benefit accruals shall not be affected. 5.2 Vested Benefits Subject to Section 5.5, a Participant's Vested Benefit under this Plan shall be the product of his Accrued Benefit multiplied by his Vesting Percentage. 5.3 Forfeitures Any portion of a Participant's Accrued Benefit that is not included in his Vested Benefit at the time of his Separation from Service shall be immediately forfeited. If a Participant's Vested Benefit is reduced to zero pursuant to Section 5.5, his Accrued Benefit shall be forfeited immediately. Any amounts forfeited by a Participant shall remain the sole and exclusive property of the Company and shall not increase the benefits of any other Participant. 5.4 Amendment of Vesting Provisions No amendment to the Plan shall reduce a Participant's Vested Benefit under the Plan. An amendment made prior to a Change in Control may, however, increase the Service required or impose or change any other requirements or conditions that a Participant must meet in order to become vested or further vested in any Accrued Benefit to the extent not already vested as of the date that the amendment is adopted. No such amendment shall be permitted following a Change in Control. 5.5 Forfeiture of Vested Benefit Notwithstanding anything to the contrary in this Plan, the Vesting Percentage and the Vested Benefit of any Participant shall be reduced to zero if, during the period ending on the fifth anniversary of his Separation from Service, the Participant either provides Services to or obtains an Interest in any Entity (other than a member of the Company Group) which at the time of the Participant's Separation from Service directly Competed with any member of the Company Group. For purposes of this Section 5.5, the following terms shall have the following meanings: (a) "Compete" shall mean the offer or sale of the same products and/or services as are offered or sold by any member of the Company Group or the offer or sale of any products and/or services that reasonably may be used in substitution of any products and/or services offered or sold by any member of the Company Group. (b) "Company Group" shall mean the Company and all of its direct and indirect "parent corporations" and "subsidiary corporations" within the meaning of Code Sections 424(e) and 424(f) respectively. (c) "Entity" shall refer to every possible type of entity, whether organized as a proprietorship, partnership, limited liability company, corporation or otherwise. (d) "Interest" shall refer to every type of ownership interest of a Participant in an Entity, whether as a proprietor, partner, member, shareholder or otherwise. (e) "Services" shall mean the provision of any type of services to an Entity by a Participant, whether acting as a director, officer, employee, proprietor, partner, member, independent contractor, or otherwise. Notwithstanding anything to the contrary in this Section 5.5 with respect to any Participant the five- year forfeiture period referred to above in this section shall be reduced to the maximum lesser period that an arbitrator or a court of competent jurisdiction determines (in a final award or judgment all appeals for which have either been exhausted or waived) to be enforceable with respect to such Participant. No other rights or obligations under this Plan of the Company or of the prevailing Participant and no rights or obligations under this Plan of any other Participant shall be affected by operation of this paragraph with respect to a Participant. Notwithstanding anything to the contrary in this Section 5.5, the provisions of this Section 5.5 shall not be effective with respect to a Participant whose Separation from Service occurs following a Change in Control in a manner which entitles the Participant to severance payments and benefits pursuant to an effective written change in control Severance Agreement with the Company. ARTICLE VI RETIREMENT BENEFIT 6.1 Normal Retirement Benefit A Participant who retires on or after his Normal Retirement Date shall be entitled to an annual retirement income, paid monthly and continuing for the Participant's lifetime, equal to the sum of (a) 2.75% of his Average Final Compensation for each of his first ten Years of Benefit Service, and (b) 2.00% of his Average Final Compensation for each of his next five Years of Benefit Service. 6.2 Determination of Accrued Benefit A Participant's Accrued Benefit as of any date shall be that benefit, commencing on his Normal Retirement Date, determined as follows, based on his Average Final Compensation as of the date of determination. (a) If the Participant is eligible for Early Retirement The benefit shall be calculated as provided in Section 6.1, but based on his Years of Benefit Service as of the date of determination, except as may be otherwise provided in a change in control severance agreement between the Company and a Participant. (b) If the Participant is not eligible for Early Retirement The benefit shall be calculated as provided in Section 6.1, but based on the Years of Benefit Service he is projected to have earned as of his earliest Early Retirement Date (assuming he remains in full time employment until that date), multiplied by a fraction (not to exceed 1.0) whose numerator is his Years of Benefit Service as of the date of determination, and whose denominator is his projected Years of Benefit Service as of his earliest Early Retirement Date. Notwithstanding the above, following a Change in Control, the Accrued Benefit of all Participants in the Plan on the date of the Change in Control (including those Executives who become Participants as a result of the Change in Control pursuant to the second sentence of Section 3.1) shall be determined under the provisions of Section 6.2(a) only. 6.3 Adjustment for Early Retirement If a Participant retires on an Early Retirement Date, his benefit from his Plan shall be his Accrued Benefit. If the Participant elects to receive his retirement benefit prior to his 62nd Birthday (other than pursuant to Article X hereof), it shall be reduced one-half of one percent for each month by which his Benefit Commencement Date precedes his 62nd Birthday. 6.4 Adjustment for Late Retirement If a Participant retires after his Normal Retirement Date (the date of such retirement, the "Late Retirement Date"), he shall receive a benefit calculated in accordance with the provisions of Section 6.1, but based upon his Benefit Service and his Average Final Compensation as of his Late Retirement Date. 6.5 Disability Retirement A Participant who is Disabled as provided in Section 2.11 shall be considered to be a retired employee on a Disability Retirement. (a) As long as the Participant is receiving benefits under the Company's Long Term Disability Plan, he shall receive no benefit payments from this Plan but shall continue to earn credit for Years of Benefit Service. (b) Upon reaching his Normal Retirement Date (or upon the cessation of Long Term Disability Benefits, if later), he shall cease earning credit for Years of Benefit Service and shall commence receiving his Normal Retirement Benefit. Such benefit shall be based upon his Average Final Compensation as of his date of Disability, and Years of Benefit Service accumulated through his Benefit Commencement Date. (c) A Participant on Disability Retirement who is continuing to earn credit for Years of Benefit Service under paragraph (a) above may, upon attainment of his Early Retirement Date, elect to retire early. He shall thereafter cease receiving credit for additional Service under paragraph (a), and shall instead commence receiving an Early Retirement benefit as determined under Section 6.3, based on his Average Final Compensation as of his date of Disability, and his Years of Benefit Service accumulated through his date of Early Retirement. ARTICLE VII PAYMENT OF BENEFIT 7.1 Eligibility for Payment Except as set forth in Article X hereof, a Participant's benefits shall be paid from the Plan only after both of the following conditions are met: (a) The occurrence of a Participant's Separation from Service. (b) The Participant's attainment of his Early Retirement Date. 7.2 Benefit Commencement Date (a) Time of Commencement Except as set forth in Article X hereof, unless a Participant or Surviving Spouse (as the case may be) has made a timely election to defer payment with the approval of the Committee pursuant to the provisions of paragraph (b) of this Section 7.2, the Participant's Vested Benefit under this plan shall be paid beginning 60 days after the date on which the conditions of Section 7.1 are first met. Notwithstanding the foregoing, at any time after a Participant's Separation from Service and prior to the earlier of (i) payment or commencement of the Participant's benefit pursuant to this Section 7.2, or (ii) the date on which a Change in Control occurs, the Company may elect unilaterally to defer payment or commencement of all or any portion of the Participant's Benefit until the next July following the Participant's Separation from Service date if the Participant was a "covered employee" within the meaning of Code Section 162(m) at the time of his Separation from Service. Any such election by the Company may be made by the Board, the Committee, or the Company's chief executive officer, and shall be evidenced in writing and sent to the Participant at his last known address. (b) Benefit Commencement Election Subject to the approval of the Committee, a Participant or Surviving Spouse may make a one-time irrevocable election to defer payment of benefits to a postponed Benefit Commencement Date on any determinable date beyond the Participant's initial Benefit Commencement Date determined pursuant to paragraph (a) of this Section 7.2, provided that such election is made on the form prescribed by the Committee and is received by the Committee not later than 30 days before such initial Benefit Commencement Date. The Committee shall have absolute discretion to approve, disapprove, or modify before approving any such election to defer benefits. ARTICLE VIII BENEFIT FORMS AVAILABLE 8.1 Forms of Benefits for Participants (a) If a Participant is Married on his Benefit Commencement Date Unless a Participant has made a timely election with the approval of the Committee pursuant to Section 8.2 below to waive the 50% joint and survivor benefit, the Participant's benefit shall be paid as a 50% joint and survivor benefit, under which the Participant shall receive an actuarially reduced benefit for his lifetime, with 50% of that reduced benefit continuing after his death to his Surviving Spouse for the remainder of the Surviving Spouse's life. (b) If the Participant is Not Married on his Benefit Commencement Date His benefit shall be paid as a life annuity, under which his benefit as described in Section 6 shall be paid to him as long as he shall survive, with no payments due after his death. 8.2 Life Annuity Benefit Election Subject to the Committee's approval, a married Participant may make a one-time irrevocable election to receive his retirement benefit from this Plan as a life annuity, as described in Section 8.1(b). Any such election shall be made on the form prescribed by the Committee and must be received by the Committee no later than 30 days before the benefit is to be paid pursuant to Section 7.2 of the Plan (after taking into account any election made by the Participant under paragraph (b) of Section 7.2). The Committee shall have absolute discretion to approve any such election by a married participant to receive his benefit in the life annuity form. ARTICLE IX DEATH BENEFITS 9.1 Death Prior to Benefit Commencement (a) Death On or After Eligibility for Early Retirement Upon the death of a Participant on or after his eligibility for an Early Retirement benefit, there shall be paid to his Surviving Spouse an immediate lifetime income equal to the benefit the spouse would have received had the Participant retired on the day before his death, receiving the 50% joint and survivor benefit described in Section 8.1 (a), and then died on his actual date of death. (b) Death Before Eligibility for Early Retirement If the Participant is not yet eligible for Early Retirement on his date of death, the benefit shall be the same as described in Section 9.1 (a), except that it shall be calculated as if the Participant were then the age at which he would first have become eligible for Early Retirement had he not died (but the amount of such benefit shall be determined by the Participant's actual number of Years of Benefit Service and his actual Average Final Compensation at the time of his death). The Surviving Spouse benefit under this Section 9.1(b) shall commence on the date the Participant would have attained Early Retirement eligibility had he survived. 9.2 Death After Benefit Commencement Upon the death of a Participant after his Benefit Commencement Date, there shall be no further benefits due except as may be paid to a Surviving Spouse under the 50% joint and survivor benefits pursuant to Section 8.l(a). ARTICLE X CHANGE IN CONTROL ELECTIONS 10.1 One Time Opportunity to Elect to Receive Lump Sum Benefit Payment Notwithstanding anything in the Plan to the contrary (including, without limitation, the provisions of Article VIII of the Plan), a Participant (other than a Participant who has had a Separation from Service or who has commenced to receive benefit payments hereunder) may elect to receive the Participant's Accrued Benefit in the form of a lump sum payment (the "Lump-Sum Benefit Payment") if the Participant's Separation from Service occurs following a Change in Control in a manner which entitles the Participant to severance payments and benefits pursuant to an effective written change in control severance agreement with the Company. Such Lump-Sum Benefit Payment shall be paid to the Participant within 30 days following such Participant's Separation from Service and shall be in lieu of any benefit to which the Participant would otherwise be entitled to pursuant to the Plan. Any election to receive a Lump-Sum Benefit Payment shall be made in writing and submitted by the Participant to the Company at any time prior to the Participant's Separation from Service and, unless otherwise provided by the Committee, shall become effective upon the one year anniversary of its submission, provided that the Participant has not experienced a Separation from Service prior to such effective date. 10.2 Calculation of Lump Sum Benefit Payment The Lump Sum Benefit Payment shall be calculated by the Company's independent actuary and shall equal the present value of the Participant's Accrued Benefit as of the date of the Participant's Separation from Service that would otherwise become payable on the Participant's Normal Retirement Date (or, if later, the date of the Participant's Separation from Service) using, for purposes of such calculation, the 1994 Group Annual Mortality Table and the annual interest rate on 30 year United States Treasury securities specified by the Internal Revenue Service for purposes of Section 417(e) of the Code for the month which is two months prior to the end of the Plan Year immediately preceding the Plan Year in which such termination occurs. ARTICLE XI ADMINISTRATION 11.1 Plan Administration The Committee shall be the Plan Administrator of this Plan. Each member shall serve at the pleasure of the Board. The Committee shall act by majority decision of its members. The Committee shall have the responsibility for the operation and administration of the Plan and shall have the power and authority to: (a) determine all matters relating to the eligibility of persons to become Participants in the Plan; (b) determine whether or not any Executive of the Company has become a Participant in the Plan; (c) determine whether and when the employment of any Participant has been terminated and, to the extent material to a determination of a benefit hereunder, the cause of such termination; (d) decide all questions which may arise from time to time with respect to the rights under the Plan of Executives of the Company, Participants, and any other persons who claim to be entitled to benefits under the plan. The Committee shall have exclusive discretionary authority to construe and interpret the Plan document; provided, however, that in exercising its powers and duties the Committee shall give the same consideration to Participants and beneficiaries in like circumstances. 11.2 Indemnification The Company agrees to indemnify and save harmless each member of the Committee or in any other fiduciary capacity from, against, for, and in respect of any and all damages, losses, obligations, liabilities, liens, deficiencies, attorneys' fees, costs and expenses incident to the performance of such person's duties unless resulting from the gross negligence, willful misconduct, or lack of good faith of such individual. Such indemnification shall apply to any such individual even though at the time liability is imposed the individual was no longer acting in a fiduciary capacity or as a member of the Committee. 11.3 Ownership of Assets All amounts accrued under this Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights shall remain (until made available to a Participant or Surviving Spouse) solely the property and rights of the Company (without being restricted to the provision of benefits under this Plan), and shall be subject to the claims of the general creditors of the Company. Except after a Change in Control, no trust is created under this Plan and it is not otherwise funded in any manner. No Participant or Surviving Spouse shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Company or any Accrued Benefit under the Plan prior to the time such assets are distributed as a Vested Benefit, and all rights created under the Plan shall be mere unsecured contractual rights. Notwithstanding the foregoing, nothing in this Plan shall be construed to prohibit any one or more Participants or Surviving Spouses from purchasing insurance to protect against loss on account of the provisions of this Section 11.3, and the Company shall reasonably cooperate in any effort to obtain such insurance, provided that any such insurance shall be obtained, owned, and paid for solely by the insured persons and not by the Company. 11.4 Expenses The Company shall pay: (a) its share of all fees and expenses incurred in administering the Plan; (b) all taxes imposed on the Company in connection with the Plan; and (c) all costs and expenses (including reasonable attorneys' fees) incurred by each Participant and Surviving Spouse to enforce the terms of the Plan against the Company or to collect a Vested Benefit under the Plan from the Company. ARTICLE XII TRUST AGREEMENT; LIQUIDITY FUND 12.1 Trust Fund Except after a Change in Control, no assets of the Company shall be held in trust for any purposes under the Plan. Upon the occurrence of a Change in Control, and from time to time (but at least once each Plan Year) thereafter, the Company shall contribute to the Trust assets sufficient actuarially to meet the Company's liability for all Vested Benefits under the Plan at each time that assets are contributed. 12.2 Liquidity Fund The Company at its sole option may from time to time maintain liquid assets representing all or any portion of the value of its Participants' Accrued Benefits. Any such liquidity fund shall be invested at the discretion of the Committee, shall not be held in trust for any Participant or Surviving Spouse (except as provided in Section 12.1) and shall in all respects remain subject to the provisions of Section 11.3. ARTICLE XIII AMENDMENT OF THE PLAN 13.1 Amendment The Company reserves the right to amend the Plan at any time and from time to time. Each amendment shall be approved by the Committee or by the Board of Directors of the Company. No amendment shall diminish or deprive a Participant of any benefit already vested. The Company may amend the Plan, and may do so retroactively if necessary, to conform the Plan to mandatory provisions of applicable laws or regulations or as permitted by the Internal Revenue Service or the Department of Labor. 13.2 Effect of Amendments on Vesting Notwithstanding the provisions of the preceding Section 13.1, no amendment to the Plan's vesting provisions shall reduce a Participant's Vested Benefit, determined as of the later of (a) the date of execution of such amendment, or (b) the effective date of such amendment. ARTICLE XIV TERMINATION OF THE PLAN 14.1 Termination The Company intends to continue the Plan indefinitely, but it does not assume a contractual obligation to do so, and the Company may terminate the Plan at any time, provided that no such action of the Company shall reduce any Participant's Vested Benefit. 14.2 Benefits After Plan Termination Each Participant shall have the right to receive payment of his Vested Benefits upon a complete termination of the Plan, subject to any deferral elections which the Participant may make pursuant to the terms of the Plan. In no event shall any person have recourse against the Company for any reason upon termination of the Plan other than for non-payment of Vested Benefits. ARTICLE XV MISCELLANEOUS 15.1 Limitations of Rights; Employment Relationship The establishment of this Plan or any modification thereof, or the accrual or vesting of any benefits, or the creation of any fund or account, or the payment of any benefits, shall not be construed as giving a Participant or any other person any legal or equitable right against the Company except as provided in this Plan. In no event shall the terms of employment of any employee be modified or in any way be affected by the Plan. 15.2 Determination of Benefits, Claims Procedure, and Administration (a) Claim A person who believes that he is being denied a benefit to which he is entitled under the Plan (hereinafter referred to as a "Claimant") may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the Committee in care of the Company at its then principal place of business. (b) Decision on Claim Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for a reasonable cause. If the claim is denied in whole or in part, the Committee shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (i) the specific reason or reasons for such denial; (ii) the specific reference to pertinent provisions of the Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his claim, and an explanation of why such material or such information is necessary; (iv) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (v) the time limits for requesting a review and for completing any such review. (c) Request for Review Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the chief executive officer of the Company (or his designee) review the determination of the Committee. Such request must be addressed to the chief executive officer of the Company at the Company's then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the chief executive officer or his designee. If the Claimant does not request a review of the Committee's determination by the chief executive officer of the Company within such 60 day period, he shall be barred and estopped from challenging the Committee's determination. (d) Review of Decisions Within 60 days after receipt of a request for review, the chief executive officer of the Company or his designee shall review the Committee's determination. After considering all materials presented by the Claimant, the chief executive officer or his designee shall render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth the specific reasons for a decision and containing specific references to the pertinent provisions of the Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the chief executive officer or his designee shall so notify the Claimant and shall render the decision as soon as possible, but not later than 120 days after receipt of the request for review. 15.3 Arbitration Any dispute between any person claiming benefits or any other rights under the Plan and the Company as to the interpretation or application of the provisions of the Plan and amounts payable hereunder that is not finally resolved under the claims procedure described in Section 15.2 of the Plan shall be determined exclusively by binding arbitration in Groton, Massachusetts in accordance with the Commercial Arbitration Rules (and not in accordance with the National Rules for the Resolution of Employment Disputes) of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court of competent jurisdiction. All fees of the arbitration shall be paid as directed by the arbitrator. The Company shall pay its own expenses of the arbitration, including reasonable attorney fees as directed by the arbitrator. The arbitrator shall be chosen by the parties, provided however that if the parties cannot agree on a choice within thirty (30) days after a demand for arbitration made by either party, the choice of an arbitrator shall be referred to the American Arbitration Association. Unless the parties otherwise agree, the arbitrator shall be a Massachusetts lawyer with at least fifteen years of experience as a specialist in employee benefits or employment law. The arbitrator shall determine the arbitrability of the dispute if it is in controversy. The arbitrator may consider and rule on any dispositive motions submitted by the parties. Discovery shall be limited to such pre-hearing exchange of information as is explicitly authorized by Chapter 251 of the Massachusetts General Laws. The arbitrator may further limit discovery to those items that in the judgment of the arbitrator are essential to the determination of the matters, in dispute. Except for any stenographer and the arbitrator, attendance at the arbitration shall be limited to the parties and their counsel and witnesses. Except as necessary for purposes of an action to enforce, modify, or vacate the arbitration award, all documents and other information submitted to the arbitrator, including any transcripts of the proceedings shall be confidential and shall not be disclosed to anyone other than the parties and their counsel and other appropriate advisors. 15.4 NonAssignability of Benefits Neither the Participant nor his Surviving Spouse shall have any power or right to transfer, assign, anticipate, hypothecate, or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be non-assignable and non- transferable. Any such attempted assignment or transfer shall be void. No amount payable under the Plan shall, prior to actual payment thereof, be subject to seizure by any creditor of any such person for the payment of any debt, judgment, or other obligation, by a proceeding at law or in equity, or be transferable by operation of law in the event of the bankruptcy, insolvency, divorce, or death of the Participant or his Surviving Spouse. 15.5 Facility of Payments In the event that the Committee shall determine that any person to whom a benefit is payable under the Plan is unable to care for his affairs because of illness or accident, or is otherwise mentally or physically incompetent or unable to give a valid receipt, the Committee may cause the payment becoming due to be paid to the person's spouse, child, grandchild, parent, brother or sister, or to any appropriate individual appointed by a court of competent jurisdiction, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment. 15.6 Obligations to Withhold and Pay Taxes Each Participant or other recipient of benefits under the Plan shall be liable for all tax obligations, if any, with respect to any sum received pursuant to the Plan and for accurately reporting and paying in full all such taxes to the appropriate federal, state, and local authorities. The Company shall have the right to deduct and withhold from any payment due under the Plan or from other amounts owed to or with respect to the Participant all withholding taxes and other amounts required by law or as necessary to set off amounts owed by the Participant to the Company. 15.7 Representations The Company hereby does not represent or guarantee that any particular federal, state or local income, payroll, personal property, or other tax consequence will result from participation in this Plan. A Participant should consult with professional tax advisors to determine the tax consequences of his participation. 15.8 Severability If a court of competent jurisdiction holds any provision of this Plan to be invalid or unenforceable, the remaining provisions of the Plan shall continue to be fully effective. 15.9 Applicable Law This Plan shall be governed by and construed in accordance with applicable federal law and, to the extent not preempted by such federal law, the laws of the Commonwealth of Massachusetts applicable to contracts that are made and to be wholly performed in such jurisdiction. 15.10 Successor Employers This Plan shall enure to the benefit of and be binding upon the Company and its successors. EX-10 7 exh10_5.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 10.5 Exhibit 10.5 FIRST AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT THIS FIRST AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "First Amendment"), dated May 5, 2003, is made and entered to by and between New England Business Service, Inc., a Delaware corporation with its principal offices at 500 Main Street, Groton, Massachusetts (the "Company"), and Robert J. Murray (the "Executive") residing in Cohasset, Massachusetts 02025. WHEREAS, the Company and the Executive are parties to a Change in Control Severance Agreement dated August 2, 2001 (the "Agreement"), pursuant to which the Executive is entitled to certain benefits in the event of a termination of the Executive's employment with the Company following a "Change in Control" (as defined in the Agreement"); and WHEREAS, the Board of Directors of the Company has determined that it is desirable to amend certain provisions of the Agreement in order to induce the Executive to remain in the employ of the Company; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Agreement; NOW, THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows: 1. Section 6 of the Agreement is hereby renamed "Severance Payments and Benefits". 2. Section 6.1(A) of the Agreement is hereby amended by inserting, before the period (".") at the end thereof, the following text: "(the "Bonus Amount")". 3. Section 6.1(C) of the Agreement is hereby deleted in its entirety and the following is substituted therefor: "(C) The Company shall pay the cost of providing the Executive with outplacement services up to a maximum of 20% of the sum of the Base Salary and the Bonus Amount, provided that such services are (i) utilized by the Executive within eighteen months following the Date of Termination and (ii) provided by an outplacement provider approved by the Company (which approval shall not be unreasonably withheld, delayed or conditioned). Such payment shall be made by the Company directly to the service provider promptly following the provision of such services and the presentation to the Company of documentation of the provision of such services. "(D) For purposes of calculating the Executive's benefits under the New England Business Service, Inc. Amended and Restated Supplemental Executive Retirement Plan (the "SERP"), the Executive shall be credited with an additional two and one-half (2-1/2) Years of Benefit Service (as such term is defined in the SERP) in addition to the number of Years of Service that the Executive would otherwise have been credited with as of the Date of Termination. "(E) Payments made, or benefits provided, to the Executive pursuant to Section 6.1(A), 6.1(B) or 6.1(C) shall be offset (but not below zero) by any severance payments or severance-related benefits provided to the Executive pursuant to any other plan, agreement or arrangement with the Company or a subsidiary providing for severance payments." 4. Except to the extent expressly amended hereby, the provisions of the Agreement shall remain in full force and effect. 5. The validity, interpretation, construction and performance of this First Amendment shall be governed by the laws of the Commonwealth of Massachusetts. 6. This First Amendment 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. [Signature Page Follows] IN WITNESS WHEREOF, the undersigned officer, on behalf of New England Business Service, Inc., and the Executive have hereunto set their hands as an agreement under seal, all as of the date first above written. NEW ENGLAND BUSINESS SERVICE, INC. By: /s/ Hedwig V. Whitney Name: Hedwig V. Whitney Title: Senior Vice President, Human Resources EXECUTIVE: /s/ Robert J. Murray Name: Robert J. Murray EX-10 8 exh10_6.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 10.6 Exhibit 10.6 FIRST AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT THIS FIRST AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT (this "First Amendment"), dated May 5, 2003, is made and entered to by and between New England Business Service, Inc., a Delaware corporation with its principal offices at 500 Main Street, Groton, Massachusetts (the "Company"), and [insert name] (the "Executive") residing in [city, state, zip]. WHEREAS, the Company and the Executive are parties to a Change in Control Severance Agreement dated [insert date] (the "Agreement"), pursuant to which the Executive is entitled to certain benefits in the event of a termination of the Executive's employment with the Company following a "Change in Control" (as defined in the Agreement"); and WHEREAS, the Board of Directors of the Company has determined that it is desirable to amend certain provisions of the Agreement in order to induce the Executive to remain in the employ of the Company; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Agreement; NOW, THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows: 1. Section 6 of the Agreement is hereby renamed "Severance Payments and Benefits". 2. Section 6.1(A) of the Agreement is hereby amended by inserting, before the period (".") at the end thereof, the following text: "(the "Bonus Amount")". 3. Section 6.1(C) of the Agreement is hereby deleted in its entirety and the following is substituted therefor: "(C) The Company shall pay the cost of providing the Executive with outplacement services up to a maximum of 20% of the sum of the Base Salary and the Bonus Amount, provided that such services are (i) utilized by the Executive within eighteen months following the Date of Termination and (ii) provided by an outplacement provider approved by the Company (which approval shall not be unreasonably withheld, delayed or conditioned). Such payment shall be made by the Company directly to the service provider promptly following the provision of such services and the presentation to the Company of documentation of the provision of such services. "(D) For purposes of calculating the Executive's benefits under the New England Business Service, Inc. Amended and Restated Supplemental Executive Retirement Plan (the "SERP"), the Executive shall be credited with an additional two (2) Years of Benefit Service (as such term is defined in the SERP) in addition to the number of Years of Service that the Executive would otherwise have been credited with as of the Date of Termination. "(E) Payments made, or benefits provided, to the Executive pursuant to Section 6.1(A), 6.1(B) or 6.1(C) shall be offset (but not below zero) by any severance payments or severance-related benefits provided to the Executive pursuant to any other plan, agreement or arrangement with the Company or a subsidiary providing for severance payments." 4. Except to the extent expressly amended hereby, the provisions of the Agreement shall remain in full force and effect. 5. The validity, interpretation, construction and performance of this First Amendment shall be governed by the laws of the Commonwealth of Massachusetts. 6. This First Amendment 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. [Signature Page Follows] IN WITNESS WHEREOF, the undersigned officer, on behalf of New England Business Service, Inc., and the Executive have hereunto set their hands as an agreement under seal, all as of the date first above written. NEW ENGLAND BUSINESS SERVICE, INC. By: Name: Robert J. Murray Title: Chairman and Chief Executive Officer EXECUTIVE: Name: EX-99 9 exh99_1.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 99.2 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of New England Business Service, Inc. (the "Company") for the period ended March 29, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Murray, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 12, 2003 /s/Robert J. Murray - --------------------------- Robert J. Murray Chairman and Chief Executive Officer EX-99 10 exh99_2.txt NEW ENGLAND BUSINESS SERVICE, INC. EXH 99.1 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of New England Business Service, Inc. (the "Company") for the period ended March 29, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel M. Junius, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 12, 2003 /s/ Daniel M. Junius - ---------------------------------------- Daniel M. Junius Executive Vice President, Chief Financial Officer and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----