-----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, DYMGihXtpyDJ3dyAy2RYh6RGgZwo9x1aAHF39tFjCiZ9yK+XBEKCRgdDAV0VRcKe lqdrwCcIyvUPAYvgRBbOsA== 0000205700-98-000010.txt : 19981111 0000205700-98-000010.hdr.sgml : 19981111 ACCESSION NUMBER: 0000205700-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980926 FILED AS OF DATE: 19981110 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: 0627 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11427 FILM NUMBER: 98741680 BUSINESS ADDRESS: STREET 1: 500 MAIN ST CITY: GROTON STATE: MA ZIP: 01471 BUSINESS PHONE: 5084486111 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 26, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 1-11427 NEW ENGLAND BUSINESS SERVICE, INC. ---------------------------------- (Exact name of the registrant as specified in its charter) Delaware 04-2942374 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 Main Street Groton, Massachusetts, 01471 ---------------------------- (Address of principal executive offices) (Zip Code) (978) 448-6111 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of common shares of the Registrant outstanding on October 29, 1998 was 14,374,994. PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements - ---------------------------- NEW ENGLAND BUSINESS SERVICE, INC. CONDENSED CONSOLIDATED BALANCE SHEET (In Thousands)

See Notes to Unaudited Consolidated Financial Statements NEW ENGLAND BUSINESS SERVICE, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited)

See Notes to Unaudited Consolidated Financial Statements NEW ENGLAND BUSINESS SERVICE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (unaudited) Three Months Ended Sept. 26, Sept. 27, 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 5,478 $ 5,961 Adjustments to reconcile net income to cash: Depreciation 3,412 2,616 Amortization 3,050 837 Loss on disposal of asset 31 - Deferred income taxes 38 (284) Gain on pension settlement - 556 Exit costs (740) - Other non-cash items 2,218 326 Changes in assets and liabilities: Accounts receivable (3,152) (3,592) Inventories and prepaid expenses (5,479) (4,632) Accounts payable 2,461 (123) Accrued expenses (296) 3,623 --------- --------- Net cash provided by operating activities 7,021 5,288 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (6,383) (2,658) Acquisition of business lines - net of cash acquired (164) - Other assets (32) 418 --------- --------- Net cash used in investing activities (6,579) (2,240) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of debt (17,000) (5,000) Proceeds from credit line 10,500 2,000 Proceeds from issuing common stock 257 844 Purchase of treasury stock (58) - Dividends paid (2,864) (2,728) --------- --------- Net cash used in financing activities (9,165) (4,884) EFFECT OF EXCHANGE RATE ON CASH (27) (35) NET DECREASE IN CASH AND CASH EQUIVALENTS (8,750) (1,871) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,823 7,365 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,073 $ 5,494 ========= ========= See Notes to Unaudited Consolidated Financial Statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation/Accounting Policies - -------------------------------------------- The consolidated financial statements contained in this report are unaudited (except for June 27, 1998 amounts) but reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods reflected. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to applicable rules and regulations of the Securities and Exchange Commission. The consolidated financial statements included herein should be read in conjunction with the financial statements and notes thereto, and the Independent Auditors' Report in the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 1998. Reference is made to the accounting policies of the Company described in the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 1998. The Company has consistently followed those policies in preparing this report. The results of operations for the interim period reported herein are not necessarily indicative of results to be expected for the full year. 2. Acquisitions - ---------------- On December 23, 1997, the Company acquired all of the outstanding common stock of Rapidforms, Inc. ("Rapidforms") for consideration of approximately $82,136,000 in cash (net of cash acquired). As part of the purchase accounting for the Rapidforms acquisition and included in the allocation of the acquisition cost, a liability of $4,000,000 was recorded to cover the anticipated costs related to a plan to close redundant Rapidforms' manufacturing and warehouse facilities and to reduce manufacturing personnel. Approximately $3,700,000 of the liability is allocated for employee termination benefits and approximately $300,000 for termination of certain contractual obligations. The liability associated with the Rapidforms integration plan remaining as of September 26, 1998 was $2,836,000. On June 3, 1998, the Company acquired all of the outstanding common stock of McBee Systems, Inc. and all of the assets of McBee Systems of Canada, Inc. (collectively "McBee") for consideration of approximately $48,529,000 in cash (net of cash acquired), and 382,352 shares of Company common stock valued at approximately $12,600,000, for an aggregate purchase price of $61,129,000. Purchase price allocations and useful lives are still subject to final valuations. The Company does not believe these initial allocations will change materially. As part of the purchase accounting for the McBee acquisition and included in the allocation of the acquisition costs, a liability of $2,642,000 was recorded to cover anticipated costs (primarily employee termination benefits) related to a plan to close redundant McBee manufacturing and warehouse facilities and to reduce manufacturing personnel. As of September 26, 1998, the remaining McBee integration liability was $2,594,000. 3. Inventories - -------------- Inventories are carried at the lower of first-in, first-out cost or market. Inventories at September 26, 1998 and September 27, 1997 consisted of:
(unaudited) Sept. 26, June 28, 1998 1998 ----------- ----------- Raw paper $ 1,969,000 $ 1,622,000 Business forms, related office products and shipping, warehouse and packaging supplies 19,984,000 19,348,000 ---------- ----------- Total $21,953,000 $20,970,000 =========== ===========
4.Financial Instruments - ------------------------------- In order to effectively fix the interest rate on a portion of the debt outstanding under the revolving line of credit, the Company has entered into interest rate swap agreements with several of the banks party to the credit agreement. These swap agreements contain notional principal amounts and other terms determined with respect to the Company's forecasts of future cash flows and borrowing requirements. At September 26, 1998, the notional principal amount outstanding of the interest rate swap agreements totaled $115 million with a fair value of $(1,651,000). In order to minimize the Company's exposure to foreign currency fluctuations with respect to intercompany loans to foreign subsidiaries and affiliates, the Company has entered into short-term forward exchange rate contracts with a major commercial bank in currency amounts directly corresponding to the short- term intercompany loan amounts. At September 26, 1998, the Company had outstanding forward exchange rate contracts for $1.9 million worth of Pounds Sterling and $91,000 worth of French Francs. The fair value of these contracts is nominal, and approximated the carrying value. As of September 26, 1998 and June 27, 1998, the carrying value of all other financial instruments approximates fair value. 5.New Accounting Pronouncements - ------------------------------- In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The Company has adopted this Statement in the current fiscal year. In the current period approximately $350,000 in costs which previously would have been expensed have been capitalized under the caption "Property and equipment, net." The Company also implemented the disclosure standard SFAS No. 130 "Reporting Comprehensive Income" in the first quarter of fiscal 1999. The AICPA has also issued Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities." The policies promulgated by this statement had previously been followed by the Company and thus its implementation will not impact the financial statements. In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits." In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The former two statements are considered to be "disclosure only" standards and are not anticipated to have a material impact on the consolidated financial statements (these will be implemented in fiscal 1999). The latter standard does have a direct impact on the consolidated financial statements and will be adopted by the Company in fiscal year 1999. Yet, in the Company's situation, such impact is not considered likely to be material in nature. Item 2. Management's Discussion and Analysis of Financial Condition - ------------------------------------------------------------------- and Results of Operations - --------------------------------- Overview - -------- New England Business Service, Inc. (the "Company"), a Delaware corporation founded in 1952, incorporated in Massachusetts in 1956 and reincorporated in Delaware in 1986, designs, produces and distributes business forms, checks, envelopes, labels, greeting cards, signs, stationery and related printed products and distributes packaging, shipping and warehouse supplies, software, work clothing and other business products through mail order, direct sales, telesales, dealers and the internet to small businesses throughout the United States, Canada, the United Kingdom and France. Any sentence followed by an asterisk (*) in this section constitutes a forward-looking statement which reflects the Company's current expectations. There can be no assurance the Company's actual performance will not differ materially from those projected in such forward-looking statements due to the important factors described in the section to this Management's Discussion and Analysis of Financial Condition and Results of Operations titled "Forward- Looking Information and Risk Factors to Future Performance." Results of Operations - --------------------- Net sales increased $37.1 million or 49% to $112.7 million in the first quarter of fiscal 1999 from $75.6 million in last year's first quarter. The sales increase was composed of approximately a $35.0 million or 46.2% increase associated with the acquisition of Rapidforms, Inc. ("Rapidforms"), McBee Systems, Inc. and all of the assets of McBee Systems of Canada, Inc. (collectively "McBee") during fiscal year 1998, and a $2.1 million or 2.8% increase in sales of the Company's other business units. McBee and Rapidforms were acquired subsequent to the end of last year's first quarter. For the first quarter of fiscal 1999, cost of sales decreased to 37.2% of sales from 38.4% in last year's comparable period. This decrease was due primarily to a non-recurring increase in freight costs in the previous year's quarter as a result of the UPS strike, an increase in revenue generated by higher margin products associated with the recent acquisition of McBee and increased efficiencies in the Company's U.S and Canadian operating units primarily selling business forms and related printed products. Cost of sales as a percent of sales is anticipated to decline slightly during the year due to anticipated efficiency improvements resulting from manufacturing integration activities with recently acquired companies.* Forward-Looking Information and Risk Factors to Future Performance - ------------------------------------------------------------------ From time to time, the Company or its representatives have made or may make forward-looking statements that reflect the Company's current expectations, orally or in writing, in this Management's Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this Quarterly Report on Form 10-Q, in other reports filed under the Securities Act of 1934, as amended, in press releases or in statements made with the approval of an authorized executive officer. The words or phrases "is expected," "will continue," "anticipates," "estimates," or similar expressions in any of these communications are intended to identify "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as enacted by the Private Securities Litigation Reform Act of 1995. There can be no assurance the Company's actual performance will not differ materially from that projected in such forward-looking statements due to important factors including but not limited to those described below. These factors include increasing competition, economic cycles, technological change, paper and postal costs, customer preferences, response rates, prospect lists, governmental regulations, inherent risks in acquisitions, disruptions to the Company's operating systems, Year 2000 risks to computer systems and reliance on vendors, all of which are described in further detail below. Increasing Competition; Pressure on Price and Margins The Company operates in a highly competitive marketplace, in which it competes with a variety of mail order marketers, retailers, dealers, distributors and local printers in the marketing of business forms, checks, stationery and business supplies to small businesses. Over the course of the past decade, providers of business forms, checks, and stationery have experienced growth in excess manufacturing capacity. In addition, the Company has faced increasing competition from low-price, high-volume office supply chain stores. Improvements in the cost and quality of printing technology have increasingly allowed dealers, distributors and local printers to gain access to products of complex design and functionality at competitive prices. The Company currently anticipates that these trends will continue. No assurance can be given that competition will not have an adverse effect on the Company's business. In addition, if any of the Company's competitors were to seek to gain or retain market share by reducing prices or increasing promotional discounting, the Company could be compelled to reduce its prices or match the discounts and thereby reduce its gross margin and profitability. Economic Cycles; Variability of Performance. The Company's standardized forms and check business accounts for a majority of its sales and profitability. The forms and check industry is highly competitive and generally characterized by mature products designed within well-established industry standards. The Company relies, in part, on net small business formations for growth in demand for its standardized form and check products. As a result, the Company's growth rate is closely correlated to the strength of its target small business market. The Company's revenue trends and operating profitability have been materially adversely affected by recession- related contractions in the small business economy in the past. The Company will continue to experience quarterly and annual variations in net sales and net income as a result of changes in the levels of small business formations and failures or from other economic events having an impact on small businesses generally. Technological Change; Product Obsolescence and Risks to Competitive Advantage. The Company's standardized business forms and related products are designed to provide small businesses with the financial and business records required to manage a business. Steady technological improvements have provided small businesses in several market segments with alternative means to enact and record business transactions. PC-based, point-of-sale, electronic form and electronic transaction systems have been designed to automate several of the functions performed by the Company's products. The price and performance characteristics of personal laser and ink-jet printing equipment have improved markedly in the recent past, thereby allowing small businesses a cost- competitive means to print low-quality versions of Company forms on plain paper. In addition, the Internet has the potential to eliminate the Company's advantage of scale in direct marketing by providing all competitors with equal access to customers who purchase products over the Internet. In response, the Company has focused resources on the acquisition, development and procurement of new products less susceptible to technological obsolescence and has aggressively moved to develop a comprehensive electronic catalog of products to be utilized in retail-based kiosks, PC-based software and over the Internet. It should be noted that the Company's small business customers have to-date proven to be relatively slow adopters of new technology which has minimized the adverse impact of these technological trends. However, the Company can give no assurance that continued technological change will not have a material adverse impact on the long-term prospects for the Company's business. Paper Costs and Postal Rates; Risks to Margins. The cost of paper used to produce the Company's products, catalogs and advertising materials constitutes, directly or indirectly, approximately 30% of consolidated revenues. In addition, the Company is reliant on the U.S. Postal Service for delivery of most of the Company's promotional materials. Coated paper costs for promotional materials and postal rates for third class mail have increased significantly over the past decade. In addition, certain segments of the paper market have demonstrated considerable price volatility over the past five years. The Company has been able to counteract the impact of postal and paper cost increases with cost reduction programs and selected product price increases. Due to increased competition in the small business forms, checks, stationery and supplies marketplace, no assurance can be given that the Company will be able to increase product pricing to compensate for future paper or postal cost increases. The inability to raise prices in response to paper or postal cost increases could reduce the Company's operating profitability and net income. Governmental Regulations; Sales Risk. Future governmental legislation or regulation including, but not limited to, the following potential regulatory actions have the potential to have a material adverse impact on the Company's business prospects: 1) enactment of privacy laws could constrain the Company's ability to mail promotional materials or to telemarket to small businesses; 2) modification to U.S. Postal Service regulations with the effect of increasing postal rates or reducing postal delivery efficiency could have an adverse impact on the Company's marketing efforts; and 3) institution of a "general sales tax", "value added tax" or similar national tax could reduce demand for the Company's products. Although the Company has no current knowledge or belief that such adverse regulation, of a material nature, or similar governmental regulation is pending or imminent, it can make no assurance that adverse governmental regulation will not have a material adverse impact on the Company's business in the future. Acquisitions; Inherent Risk. From time to time the Company has acquired, or may acquire in the future, a majority ownership position in a company or substantially all of the assets related to a specific line of business. Such acquisitions are undertaken to enhance the Company's competitive position in the marketplace or to gain access to new markets, products, competencies or technologies. The Company has performed in the past and will perform in the future a business, financial and legal due diligence review in advance of an acquisition to corroborate the assumptions critical to projected future performance of an acquired entity and to identify the risks inherent to such projections. However, the Company can make no assurances that its due diligence review will identify all potential risks associated with the purchase, integration or operation of any acquired enterprise. If any of such potential risks materialize, the Company's future net sales and net income could be materially adversely affected. Operating Systems; Disasters and Disruptions. The Company has become increasingly dependent upon its manufacturing, administrative and computer processing infrastructure and operations to process its high volume of small dollar value orders on an efficient, cost competitive and profitable basis. The Company has implemented commercially reasonable safeguards to reduce the likelihood of property loss or service disruptions and has secured property and business interruption insurance to minimize the adverse financial consequences arising from a select group of risks. However, the Company can make no assurances that its infrastructure and operations are not susceptible to loss or disruption, whether caused by (i) intentional or unintentional acts of Company personnel or third party service providers, or (ii) natural disasters including, but not limited to, earthquakes, fire or severe storms. In addition, the Company can make no assurance that its insurance coverage will adequately respond to all potential causes of property loss or service disruption. In the event that any such acts or disasters lead to property loss or operating system disruption for which property and business interruption insurance coverage is unavailable or insufficient, the Company's financial performance and long-term prospects could be materially adversely affected. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ The Company is exposed to a number of market risks, primarily the effects of changes in foreign currency exchange rates and interest rates. Investments in and loans and advances to foreign subsidiaries and branches, and their resultant operations, denominated in foreign currencies, create exposures to changes in exchange rates. The Company's utilization of its revolving line of credit creates an exposure to changes in interest rates. The effect of changes in exchange rates and interest rates on the Company's earnings generally has been small relative to other factors that also affect earnings, such as business unit sales and operating margins. For more information on these market risks and financial exposures, see Note 1 and Note 5 of the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended June 27, 1998. The Company does not hold or issue financial instruments for trading, profit or speculative purposes. In order to minimize the Company's exposure to foreign currency fluctuations with respect to the short-term intercompany loans created to fund the operating cash requirements of the Company's European operations (see Note 2 in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended June 27, 1998), the Company has entered into forward exchange rate contracts for the amount of the loans and associated interest. The currencies hedged are the British pound and the French franc. While there is no specified repayment date for the loans, the forward exchange rate contracts are of limited duration and are replaced periodically as they mature. In order to effectively convert the interest rate of a portion of the Company's debt from a Eurodollar based floating rate to a fixed rate, the company has entered into interest rate swap agreements with major commercial banks. Although the Company is exposed to credit and market risk in the event of future nonperformance by any of the banks, management has no reason to believe that such an event will occur. Upon reviewing its derivatives and other foreign currency and interest rate instruments, based on historical foreign currency rate movements and the fair value of market-rate sensitive instruments at year-end, the Company does not believe that near term changes in foreign currency or interest rates will have a material impact on its future earnings, fair values or cash flows. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NEW ENGLAND BUSINESS SERVICE, INC. ---------------------------------- (Registrant) November 10, 1998 /s/Daniel M. Junius - ----------------- -------------------- Date Daniel M. Junius Senior Vice President-Chief Financial Officer (Principal Financial and Accounting Officer) EX-11 2 EARNINGS PER SHARE Exhibit 11 ---------- New England Business Service, Inc. Statement Re Computation of Per Share Earnings (In Thousands Except Per Share Data) (unaudited)
Three Months Ended Sept. 26, Sept. 27, 1998 1997 -------- -------- Net Income (a) $5,478 $5,961 BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (b) 14,327 13,646 Plus incremental shares from assumed conversion of stock options 480 305 -------- -------- DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING(c) 14,807 13,951 ======== ======== PER SHARE AMOUNTS: Basic Earnings Per Share (a)/(b) $ .38 $ .44 ======== ======== Diluted Earnings Per Share (a)/(c) $ .37 $ .43 ======== ========
EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF NEW ENGLAND BUSINESS SERVICE, INC. AND ITS SUBSIDIARIES AS OF SEPTEMBER 26, 1998 AND THE RELATED STATEMENTS OF CONSOLIDATED INCOME AND CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-26-1999 JUN-28-1998 SEP-26-1998 2,073 0 57,854 4,021 21,953 99,995 137,615 82,349 307,917 53,616 0 0 0 15,201 103,209 307,917 112,686 112,686 41,912 41,912 0 919 2,179 9,127 3,649 5,478 0 0 0 5,478 .38 .37

EX-3.2 4 AMENDED AND RESTATED (Through October 23, 1998) BY-LAWS OF NEW ENGLAND BUSINESS SERVICE, INC. ARTICLE ONE Stockholders Section 1. Annual Meeting. The annual meeting of the stockholders shall be held on the fourth Friday of October in each year (or if that be a legal holiday in the place where the meeting is to be held, on the next succeeding full business day), or on such later date to which the Directors or the Chairman of the Board or the President shall postpone such meeting, at the hour fixed by the Directors or the Chairman of the Board or the President and stated in the notice of the meeting. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, by the Certificate of Incorporation or by these By-laws, may be specified by the Directors or the Chairman of the Board or the President. If no annual meeting is held in accordance with the foregoing provisions, the Directors shall cause the meeting to be held as soon thereafter as convenient. Section 2. Special Meetings. Special meetings of the stockholder may be called by the Chairman of the Board, the President or the Directors. No call of a special meeting of the stockholders shall be required if such notice of the meeting shall have been waived in writing (including a telegram) by every stockholder entitled to notice thereof, or by his attorney thereunto authorized. Section 3. Place of Meetings. All meetings of stockholders shall be held at the principal office of the corporation unless a different place (within the United States) is fixed by the Directors or the Chairman of the Board or the President and stated in the notice of the meeting. Section 4. Notices. Except as otherwise provided by law, notice of all meetings of stockholders shall be given as follows, to wit: A written notice, stating the place, day and hour thereof, shall be given by the Secretary (or person or persons calling the meeting), not less than 10 nor more than sixty days before the meeting, to each stockholder entitled to vote thereat and to each stockholder who, by law, the Certificate of Incorporation, or these By-laws, is entitled to such notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it postage prepaid, and addressed to such stockholder at his address as it appears upon the books of the corporation. Notices of all meetings of stockholders shall state the purposes for which the meetings are called. No notice need be given to any stockholder if a written waiver of notice, executed before or after the meeting by the stockholder or his attorney thereunto authorized, is filed with the records of the meeting. Section 5. Quorum. At any meeting of stockholders a quorum for the transaction of business shall consist of one or more individuals appearing in person and/or as proxies and owning and/or representing a majority of the shares of the corporation then outstanding and entitled to vote, provided that in the absence of a quorum, the stockholders may, by majority vote, adjourn the meeting from time to time until a quorum shall be present. Section 6. Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote, and a proportionate vote for any fractional share entitled to vote, held by him of record according to the records of the corporation, unless otherwise provided by the Certificate of Incorporation or by resolution or resolutions of the Board of Directors establishing rights of Preferred Stock as provided for in the Certificate of Incorporation. Stockholders may vote either in person or by written proxy dated not more than three years before the meeting named therein, unless the proxy provides for a longer period. Proxies shall be filed with the Secretary before being voted at any meeting or any adjournment thereof. Every proxy must be signed by the stockholder or by his attorney-in-fact. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise. Section 7. Action at Meeting. When a quorum is present, the action of the stockholders on any matter properly brought before such meeting shall be decided by the holders of a majority of the stock present or represented and entitled to vote and voting on such matter, except where a different vote is required by law, the Certificate of Incorporation or these By-laws. Any election by stockholders shall be determined by a majority of the votes cast by the stockholders entitled to vote at the election. No ballot shall be required for such election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. Section 8. Special Action. Any action to be taken by the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action by a writing filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. Section 9. Record Date. The Directors may fix in advance a time which shall be not more than sixty days prior to (a) the date of any meeting of stockholders and not less than ten days prior to such meeting, (b) the date for the payment of any dividend or the making of any distribution to stockholders, or (c) the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof, the right to receive such dividend or distribution, or the right to give consent or dissent. The Board of Directors may fix a new record date, or confirm an existing record date, for the purpose of determining the stockholders entitled to vote at any adjourned or postponed meeting. In each such case only stockholders of 2 record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Section 10. Stockholder List. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this Section or the books of the corporation, or to vote at any meeting of stockholders. ARTICLE TWO Directors Section 1. Powers. The Board of Directors, subject to any action at any time taken by such stockholders as then have the right to vote, shall have the entire charge, control and management of the corporation, its property and business and may exercise all or any of its power. Section 2. Election. A Board of Directors of such number, not less than 3, nor more than 9, as shall be fixed by the stockholders, shall be elected by the stockholders at the annual meeting. Section 3. Vacancies. Any vacancy at any time existing in the Board may be filled by the Board at any meeting. The stockholders having voting power may, at a special meeting called at least in part for the purpose, choose a successor to a Director whose office is vacant, and the person so chosen shall displace any successor chosen by the Directors. Section 4. Enlargement of the Board. The number of the Board of Directors may be increased and one or more additional Directors elected at any special meeting of the stockholders, called at least in part for the purpose, or by the Directors by vote of a majority of the Directors then in office. Section 5. Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, Directors shall hold office until the next annual meeting of stockholders and thereafter until their successors are chosen and qualified. Any Director may resign by delivering his written resignation to the corporation at its 3 principal office or to the Chairman of the Board, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Section 6. Removal. A Director may be removed from office with or without cause by vote of a majority of the stockholders entitled to vote in the election of Directors. Section 7. Annual Meetings. Immediately after each annual meeting of stockholders and at the place thereof, if a quorum of the Directors elected at such meeting is present, there shall be a meeting of the Directors without notice; but if such a quorum of the Directors elected thereat is not present at such meeting, or if present does not proceed immediately thereafter to hold a meeting of the Directors, the annual meeting of the Directors shall be called in the manner hereinafter provided with respect to the call of special meetings of Directors. Section 8. Regular Meetings. Regular meetings of the Directors may be held at such times and places as shall from time to time be fixed by resolution of the Board and no notice need be given of regular meetings held at times and places so fixed, provided however, that any resolution relating to the holding of regular meetings shall remain in force only until the next annual meeting of stockholders, and that if at any meeting of Directors at which a resolution is adopted fixing the times or place or places for any regular meetings any Director is absent, no meeting shall be held pursuant to such resolution until either each such absent Director has in writing or by telegram approved the resolution or seven days have elapsed after a copy of the resolution certified by the Secretary has been mailed postage prepaid, addressed to each such absent Director at his last known home or business address. Section 9. Special Meetings. Special meetings of the Directors may be called by the Chairman of the Board, the President, the Treasurer or any two Directors and shall be held at the place designated in the call thereof. Section 10. Notices. Notices of any special meeting of the Directors shall be given by the Secretary to each Director, by mailing to him, postage prepaid, and addressed to him at his address as registered on the books of the corporation, or if not so registered at his last known home or business address, a written notice of such meeting at least four days before the meeting or by delivering such notice to him at least forty-eight hours before the meeting or by sending to him at least forty-eight hours before the meeting, by prepaid telegram addressed to him at such address, notice of such meeting. If the Secretary refuses or neglects for more than twenty- four hours after receipt of the call to give notice of such special meeting, or if the office of the Secretary is vacant or the Secretary is incapacitated, such notice may be given by the officer or one of the Directors calling the meeting. Notice need not be given to any Director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto 4 or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors' meeting need not specify the purpose of the meeting. Section 11. Quorum. At any meeting of the Directors a majority of the number of Directors required to constitute a full Board, as fixed in or determined pursuant to these By-laws as then in effect, shall constitute a quorum for the transaction of business; provided always that any number of Directors (whether one or more and whether or not constituting a quorum) present at any meeting or at any adjourned meeting may make any reasonable adjournment thereof. Section 12. Action at Meeting. At any meeting of the Directors at which a quorum is present, the action of the Directors on any matter brought before the meeting shall be decided by the vote of a majority of those present and voting, unless a different vote is required by law, the Certificate of Incorporation, or these By-laws. Section 13. Special Action. Any action by the Directors may be taken without a meeting if a written consent thereto is signed by all the Directors and filed with the records of the Directors' meetings. Such consent shall be treated as a vote of the Directors for all purposes. Section 14. Committees. The Directors may, by vote of a majority of the number of Directors required to constitute a full Board as fixed in or determined pursuant to these By-laws as then in effect, elect from their number an executive or other committees and may by like vote delegate thereto some or all of their powers except those which by law, the Certificate of Incorporation or these By-laws they are prohibited from delegating. Except as the Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these By- laws for the Directors. ARTICLE THREE Officers Section 1. Enumeration. The officers of the corporation shall be a President, a Treasurer, a Secretary, and such Vice Presidents, Assistant Treasurers, Assistant Secretaries, and other officers as may from time to time be determined by the Directors. Section 2. Election. The President, Treasurer and Secretary shall be elected annually by the Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen by the Directors at such meeting or at any other meeting. Section 3. Qualification. The President may, but need not be, a Director. No officer need be a stockholder. Any two or more offices may be held by the same person, provided that the President and the Secretary shall not be the same person. Any officer 5 may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. Section 4. Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, the President, Treasurer and Secretary shall hold office until the first meeting of the Directors following the annual meeting of stockholders, and thereafter until his successor is chosen and qualified. Other officers shall hold office until the first meeting of the Directors following the annual meeting of stockholders unless a shorter term is specified in the vote choosing or appointing them. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the Chairman of the Board, the President or the Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Section 5. Removal. The Directors may remove any officer with or without cause by a vote of a majority of the entire number of Directors then in office, provided, that an officer may be removed for cause only after reasonable notice and opportunity to be heard by the Board of Directors prior to action thereon. Section 6. Chairman of the Board. If the Directors shall appoint a Chairman of the Board, he shall preside at all meetings of the Board and of the stockholders at which he shall be present. In the absence or disability of the President, the powers and duties of the President shall be exercised and performed by the Chairman of the Board. He shall, subject to the Board of Directors, be responsible for the long-range planning of the corporation. He shall perform such duties and have such powers additional to the foregoing as the Board shall from time to time designate. Section 7. President. In the absence or disability of the Chairman of the Board, the President shall, when present, preside at all meetings of the stockholders and of the Directors. Except as otherwise expressly provided by these By-laws or by action of the Board, it shall be the duty of the President, and he shall have the power, to see that all orders and resolutions of the Directors are carried into effect. The President, as soon as reasonably possible after the close of each fiscal year, shall submit to the Directors a report of the operations of the corporation for such year and a statement of its affairs and shall from time to time report to the Directors all matters within his knowledge which the interests of the corporation may require to be brought to its notice. The President shall perform such duties and have such powers additional to the foregoing as the Directors shall designate. Section 8. Vice Presidents. Each Vice President shall have such powers and perform such duties as the Directors shall from time to time designate. Section 9. Treasurer. The Treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositaries as shall be designated by the Directors or in the absence of such 6 designation in such depositaries as he shall from time to time deem proper. He shall disburse the funds of the corporation as shall be ordered by the Directors, taking proper vouchers for such disbursements. He shall promptly render to the President and to the Directors such statements of his transactions and accounts as the President and Directors respectively may from time to time require. The Treasurer shall perform such duties and have such powers additional to the foregoing as the Directors may designate. Section 10. Assistant Treasurer. In the absence or disability of the Treasurer, his powers and duties shall be performed by the Assistant Treasurer, if only one, or if more than one, by the one designated for the purpose by the Directors. Each Assistant Treasurer shall have such other powers and perform such other duties as the Directors shall from time to time designate. Section 11. Secretary and Assistant Secretary. The Secretary or an Assistant Secretary, if one be elected, shall record all proceedings of the stockholders in a book to be kept therefor and, if there be no Secretary or Assistant Secretary of the Board of Directors, shall also record all proceedings of the Directors in a book to be kept therefor. If there be more than one Assistant Secretary, then the one designated to so record such proceedings by the Directors shall do so, otherwise a Temporary Secretary designated by the person presiding at a meeting, shall perform the duties of the Secretary. Unless the Directors shall appoint a transfer agent and/or registrar or other officer or officers for the purpose, the Secretary shall be charged with the duties of keeping or causing to be kept, accurate records of all stock outstanding, stock certificates issued and stock transfers; and, subject to such other duties or different rules as shall be adopted from time to time by the Directors, such records may be kept solely in the stock certificate books. The Secretary and each Assistant Secretary shall have such other powers and perform such other duties additional to the foregoing as the Directors may from time to time designate. ARTICLE FOUR Provisions Relating to Capital Stock Section 1. Certificates of Stock. The shares of the corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the corporation by, the Chairman or Vice- Chairman of the Board of Directors, or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Upon the face or back of each stock certificate issued to represent any partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, shall be set forth the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof 7 and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 2. Transfer of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificate shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation. Section 3. Equitable Interests Not Recognized. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person except as may be otherwise expressly provided by law. Section 4. Lost or Destroyed Certificates. The Directors of the corporation may, subject to any contrary provision of law, determine the conditions upon which a new certificate of stock may be issued in place of any certificate alleged to have been lost, stolen, destroyed, or mutilated. 8 ARTICLE FIVE Stock in Other Corporations Except as the Directors may otherwise designate, the Chairman of the Board, President or Treasurer may waive notice of, and appoint any person or persons to act as proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization the securities of which may be held by the corporation. ARTICLE SIX Inspection of Records Books, accounts, documents and records of the corporation shall be open to inspection by any Director at all times during the usual hours of business. The original, or attested copies, of the Certificate of Incorporation, By- laws and records of all meeting of the incorporators and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the corporation, or at an office of its transfer agent or of the Secretary. Said copies and records need not be all kept in the same office. They shall be available at all reasonable times to the inspection of any stockholder for any proper purpose but not to secure a list of stockholders for the purpose of selling said list or copies thereof or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. ARTICLE SEVEN Checks, Notes, Drafts and Other Instruments Checks, notes, drafts and other instruments for the payment of money drawn or endorsed in the name of the corporation may be signed by any officer or officers or person or person authorized by the Directors to sign the same. No officer or person shall sign any such instrument as aforesaid unless authorized by the Directors to do so. ARTICLE EIGHT Seal The seal of the corporation shall be circular in form, bearing its name, the word "Delaware," and the year of its incorporation. The Treasurer shall have custody of the seal and may affix it (as may any other officer authorized by the Directors) to any instrument requiring the corporate seal. 9 ARTICLE NINE Fiscal Year The fiscal year of the Corporation shall be the year ending with the last Saturday of June in each year. ARTICLE TEN Amendments These By-laws may at any time be amended by vote of the stockholders, provided that notice of the substance of the proposed amendment is stated in the notice of the meeting. If authorized by the Certificate of Incorporation, the Directors may also make, amend, or repeal these By-laws in whole or in part, except with respect to any provisions thereof which by law, the Certificate of Incorporation, or these By-laws requires action by the stockholders. Not later than the time of giving notice of the meeting of stockholders next following the making, amending or repealing by the Directors of any By-law, notice thereof stating the substance of such change shall be given to all stockholders entitled to vote on amending the By-laws. Any By-law adopted by the Directors may be amended or repealed by the stockholders. ARTICLE ELEVEN Indemnification Section 1. Right to Indemnification. Each person who was or is made a party to or is otherwise involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such person is or was a Director or officer of the corporation or that, being or having been such a Director or officer of the Corporation, such person is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to any employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as such a Director or officer or in any other capacity while serving as such a Director or officer, shall be indemnified and held harmless by the corporation to the full extent permitted by the Delaware General Corporation Law (the "DGCL"), as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director or officer and shall inure to the benefit of the indemnitee's 10 heirs, executors and administrators; provided, however, that except as provided in Section 2 of this ARTICLE ELEVEN with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by any such indemnitee only if such proceeding (or part thereof) was authorized or ratified by the Board of Directors. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending (or otherwise appearing in) any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that an advancement of expenses shall be made only upon delivery to the corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise. Section 2. Right of Indemnitee to Bring Suit. If a claim under Section 1 of this ARTICLE ELEVEN is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. The indemnitee shall be presumed to be entitled to indemnification under this ARTICLE ELEVEN upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking has been tendered to the corporation), and thereafter the corporation shall have the burden of proof that the indemnitee is not so entitled. Neither the failure of the corporation (including the Board of Directors, independent legal counsel or the stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances nor an actual determination by the corporation (including the Board of Directors, independent legal counsel or the stockholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled. Section 3. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred by this ARTICLE ELEVEN shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, agreement, vote of stockholders or disinterested Directors, provisions of the Certificate of Incorporation or By-laws of the corporation or otherwise. Notwithstanding any amendment to or repeal of this ARTICLE ELEVEN, any indemnitee shall be entitled to indemnification in accordance with the provisions hereof with respect to any acts or omissions of such indemnitee occurring prior to such amendment or repeal. 11 Section 4. Insurance. The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. ARTICLE TWELVE Principal and Registered Offices Section 1. Principal Office. The corporation's principal office shall be 500 Main Street, Groton, Massachusetts or such other place as the Board of Directors may designate. Section 2. Registered Office. The corporation's registered office shall be 229 South State Street, City of Dover, County of Kent, Delaware, or such other place as the Board of Directors may designate. 12 12 12 EX-10.1 5 NEW ENGLAND BUSINESS SERVICE, INC. NEBS 1997 KEY EMPLOYEE AND ELIGIBLE DIRECTOR STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN (Including Amendment and Restatement of the NEBS 1990 Key Employee Stock Option and Stock Appreciation Rights Plan and the NEBS 1994 Key Employee and Eligible Director Stock Option and Stock Appreciation Rights Plan) Amended Through October 23, 1998 The NEBS 1997 Key Employee and Eligible Director Stock Option and Stock Appreciation Rights Plan (the "Plan") amends and restates: (a) the NEBS 1990 Key Employee Stock Option and Stock Appreciation Rights Plan (the "1990 Plan"), and (b) the NEBS 1994 Key Employee and Eligible Director Stock Option and Stock Appreciation Rights Plan (the "1994 Plan"). All shares reserved but not allocated for options under the 1990 Plan and the 1994 Plan are available for issuance under the Plan. Any option granted under the 1990 Plan or the 1994 Plan may be amended by the Committee (as defined below) in accordance with the terms of the Plan. 1. Purpose and General Matters --------------------------- (a) Purpose. The purpose of the Plan is to provide a means whereby New ------- England Business Service, Inc. (the "Company"), by granting options to purchase stock in the Company and stock appreciation rights in connection with certain of such options, can attract and retain persons of ability as key employees of the Company or any subsidiary (as defined below) of the Company and as non-employee directors of the Company. It is also the purpose of the Plan to provide a performance incentive to option holders and to encourage stock ownership in the Company by such key employees and non-employee directors. (b) General Matters. It is intended that options granted under the --------------- Plan shall constitute either "incentive stock options," within the meaning of Section 422 of the Internal Revenue Code of 1986, as from time to time amended (the "Code"), or "non-incentive stock options," as determined by the Committee appointed pursuant to Section 2 of the Plan in its sole discretion and indicated on each form of option agreement (the "Option Agreement"), and the terms of the Plan and Option Agreements shall be construed accordingly; provided, however, that non-employee directors shall be granted non-incentive stock options only. Except as otherwise provided herein, the words parent and subsidiary shall be interpreted in accordance with Section 422 and Section 424 of the Code. 2. Administration -------------- The Plan shall be administered and interpreted by a committee (the "Committee") appointed by (and serving at the pleasure of) the Company's Board of Directors (the "Board"). The Committee shall consist of not less than two members of the Board, each of whom while serving as such shall be a person who in the opinion of counsel to the Company is (i) a "Non-Employee Director," as such term is used in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), and (ii) an "Outside Director," as such term is used in regulation 1.162-27(e)(3) under Section 162(m) of the Code. The acts of a majority of the Committee members present at any meeting at which a quorum -2- is present, and any acts approved in writing by all members without a meeting, shall constitute acts of the Committee. Subject to the provisions of the Plan, the Committee shall determine with respect to options granted to employees of the Company or any subsidiary: (a) the employees to whom options shall be granted; (b) the number of shares to be optioned to each employee; (c) whether any option granted hereunder to an employee shall be an incentive stock option or a non-incentive stock option; (d) whether or not any option granted hereunder to an employee shall contain stock appreciation rights (as provided in Section 6 below); and (e) the terms and conditions of each agreement between the Company and the employee to whom the Company has granted any option under the Plan. Consistent with the foregoing, the Committee shall have full authority to administer the Plan, including authority to interpret and construe any provisions of the Plan and to adopt rules and regulations for administering the Plan, as it may deem necessary. Decisions of the Committee shall be final and binding on all persons who have an interest in the Plan. No members of the Committee or of the Board shall be held liable for any action or determination made in good faith with respect to the Plan or any option or stock appreciation right granted hereunder. 3. Stock ----- (a) Shares Reserved under the Plan. Subject to the provisions of ------------------------------ clause (c) below, the stock which shall be the subject of the options and appreciation -3- rights granted under the Plan shall be shares of the Company's Common Stock, par value $1 per share (the "Stock"), and the total number of shares of Stock as to which options may be granted under the Plan shall not exceed 1,474,559. (b) Status of Shares in Terminated or Surrendered Options. If any ----------------------------------------------------- outstanding option under the Plan (including any options issued under the 1990 Plan or the 1994 Plan) expires or is terminated for any reason, or is surrendered pursuant to Section 6 below, then the shares of Stock allocable to the unexercised or surrendered portion of such option, less any shares distributed in payment of stock appreciation rights upon such surrender, shall be added to the remaining number of shares as to which future options may be granted under the Plan. (c) Adjustment of Shares Reserved under the Plan. If the Company shall -------------------------------------------- combine or split the Stock or shall declare thereon any dividend payable in shares of Stock, or shall reclassify or take any other action of a similar nature affecting the Stock, then the number and class of shares of Stock which may thereafter be optioned (in the aggregate and to any participant) shall be adjusted accordingly, and, in the case of each option outstanding at the time of any such action, the number and class of shares which may thereafter be purchased pursuant to such option and the option price per share (and any stock appreciation right related thereto) shall be adjusted to such extent as may be determined by the Board, upon recommendation of the Committee, to be necessary to maintain unimpaired and unenlarged the rights of the holder of such option, and any such determination shall be conclusive and binding upon -4- such holder. After any such adjustment, the term "Stock" shall be deemed to mean the Stock as so adjusted. 4. Eligibility ----------- (a) Employees. All employees of the Company or of any subsidiary --------- ("Employees") shall be eligible to participate in the Plan and to receive grants of stock options ("Employee Options") hereunder, except that no Employee shall be granted an incentive stock option if, at the time the option is granted, such Employee owns stock of the Company which, taking into account the attribution rules of Section 424(d) of the Code, possesses more than ten per cent (10%) of the total combined voting power of all classes of the Company's stock then outstanding. Officers and directors of the Company or of any subsidiary who are full-time Employees and who otherwise meet the foregoing terms of eligibility shall be eligible to participate in the Plan and to receive grants of Employee Options hereunder. (b) Eligible Directors. "Eligible Directors" shall mean directors of ------------------ the Company who are directors on the date of grant and who are not Employees. All options granted under the Plan to Eligible Directors shall be non-incentive stock options within the meaning of Section 422 of the Code. Each Eligible Director who is such on the 10th day following the date on which each Annual Meeting of the Stockholders of the Company (the "Annual Meeting") is held during the term of the Plan shall on such 10th day be granted a stock option (a "Director Option") to purchase 1,000 shares of Stock; provided -5- that the first such grant to each Eligible Director shall be of an option to purchase 3,000 shares of Stock. The date of grant of a Director Option under the Plan to an Eligible Director shall be the applicable day referred to immediately above. 5. Terms and Conditions of Options ------------------------------- (a) Number of Shares and Maximum Fair Market Value. Each Option ---------------------------------------------- Agreement shall state the total number of shares to which it pertains. The maximum number of shares of Stock with respect to which Employee Options may be granted under the Plan to any Employee during any single calendar year shall be 100,000 shares. The aggregate fair market value (determined at the time the option is granted) of the Stock with respect to which incentive stock options become exercisable for the first time by an individual during any calendar year (under all the plans of his or her employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. (b) Option Price. Each Option Agreement shall state a single option ------------ price applicable to all of the shares to which it pertains. The option price per share shall be the fair market value (the "Fair Market Value") of a share of Stock on the day the option is granted. For purposes of determining the option price (and for all other valuation purposes under the Plan) the Fair Market Value of a share of Stock shall be the last sales price per share of the Stock as reported on the New York Stock Exchange prior to the date on which such option is granted (or on or prior to the date as to which such other valuation is made), or, if the Stock is not then listed on the New York Stock Exchange or if no price has been -6- so reported within one week prior to the date of such issuance (or within one week prior to such other valuation date), such market value shall be as determined by a principal market maker for the Stock designated by the Committee. (c) Expiration of Options. Each Option Agreement shall state the date --------------------- on which it shall expire, which (i) shall be ten (10) years from the date of grant in the case of Director Options; (ii) shall not be more than ten (10) years from the date of grant for Employee Options; and (iii) shall otherwise be as determined by the Committee. (d) Exercise. Any option may be exercised by the holder thereof (or -------- his personal representative if exercised pursuant to clause (iii) of subsection (f) below) or any transferee permitted by clause (g) below by giving notice in writing of such exercise to the Chief Financial Officer of the Company during the period that it is exercisable. The option price for the number of shares for which the option is exercised shall be due and payable at the time of such exercise. It shall be payable in United States dollars and may be paid in cash or by certified check, bank cashier's check, the surrendering of shares of the Company's Stock (which shall be valued at its Fair Market Value on the date of surrender in accordance with Section 5(b) of the Plan) or any other means approved by the Chief Financial Officer. The time of exercise of any option shall be the time at which such notice of exercise and payment are received by the Chief Financial Officer. (e) Waiting Period. Each Director Option shall not be exercisable in -------------- whole or in part until one (1) year after its date of grant. The Committee may, in -7- its discretion, provide that an Employee Option may not be exercised in whole or in part for any period or periods of time specified by the Committee. Except as so provided, any option may be exercised in whole at any time or in part from time to time during its term, provided that no option may be exercised for less than ten (10) shares unless the issue of a lesser number is sufficient to exhaust the option. Notwithstanding anything to the contrary in the Plan or in any Option Agreement (but subject to the provisions of Section 11 below), the right to purchase all of the remaining shares under each option granted under the Plan that is outstanding on the date of occurrence of a Change in Control (as defined in Section 11 below) of the Company shall vest and become exercisable immediately upon the occurrence of such Change in Control. (f) Termination of Employment or Eligible Director Status. ----------------------------------------------------- (i) Except after a Change in Control, each Employee Option held by an Employee whose employment terminates other than by reason of retirement or death shall expire upon such cessation of employment unless the Board determines, in its sole discretion and upon such terms as it deems appropriate, that such Employee Option shall continue to be exercisable for a period after such cessation of employment (but in no event for a period beyond the remainder of the term thereof). Each Employee Option held by an Employee whose employment terminates upon or following a Change in Control shall remain exercisable for a period of time as provided in clause (v) below. (ii) Subject to clause (iii) of this sub-section (f) and Section 8 below, if an Employee retires holding an unexpired incentive stock option, such option shall be exercisable by him or her during the remainder of the term thereof or during the three (3) months following retirement, whichever period is shorter, and only as to not more than the number of shares as to which it was exercisable -8- immediately prior to retirement. If an Employee retires holding an unexpired non-incentive stock option, such option shall be exercisable by him or her during the remainder of the term thereof or for two (2) years following retirement, whichever period is shorter, and only as to not more than the number of shares as to which it was exercisable immediately prior to retirement. (iii) Subject to Section 8 below, if an optionee dies holding an unexpired Employee or Director Option, such option shall be exercisable by his or her personal representative as to not more than the number of shares as to which it was exercisable immediately prior to such optionee's death, during, and only during, the period beginning with such death and ending with the earlier of the first anniversary of such death or the expiration date of the option. (iv) Subject to clause (iii) of this sub-section (f) and Section 8 below, if an Eligible Director ceases to serve as a director of the Company for any reason other than death while holding an unexpired Director Option, such option shall be exercisable by him or her during the remainder of the term thereof or for two (2) years following the date that he or she ceases to serve as a director of the Company, whichever period is shorter, and only as to not more than the number of shares as to which it was exercisable immediately prior to such date of cessation of service as a director. (v) Subject to clause (iii) of this sub-section (f) and Section 8 below, if an Employee's employment terminates upon or within six months following a Change in Control, any unexpired Employee Option held by such Employee at the time of his or her termination shall remain exercisable for the remainder of the -9- term thereof, or for three months following such termination, whichever period is shorter. (g) Assignability of Options and Stock Appreciation Rights. No ------------------------------------------------------ incentive stock option (or stock appreciation right related thereto) shall be assignable or transferable except by will or by the laws of descent and distribution as provided in clause (iii) of sub-section (f) above. During the lifetime of an optionee, any incentive stock option (and stock appreciation rights related thereto) granted to him or her shall be exercisable only by the optionee; provided that such option (and related stock appreciation rights) shall be exercisable on behalf of the optionee by his or her legal representative if the optionee is mentally incompetent. Notwithstanding the foregoing, Director Options shall be transferable (subject to any terms and conditions imposed by the Committee) by the optionee, either directly or in trust, to one or more members of the optionee's immediate family, or to a family partnership or other entity for the exclusive benefit of one or more members of the optionee's immediate family. The Committee may grant employees non-incentive stock options and related stock appreciation rights transferable (subject to any terms and conditions imposed by the Committee) by the optionee, either directly or in trust, to one or more members of the optionee's immediate family, or to a family partnership or other entity for the exclusive benefit of one or more members of the optionee's immediate family. Following any transfer permitted pursuant to this paragraph, of which the optionee has notified the Committee in writing, such option or stock appreciation right may be -10- exercised by the transferee(s), subject to all terms and conditions of the Option Agreement. For these purposes, the members of the optionee's immediate family include only the optionee's: (i) spouse and lineal descendants of spouse; (ii) lineal descendants and spouses of lineal descendants; (iii) lineal ancestors and spouses of lineal ancestors; and (iv) siblings, and spouses and children of such siblings. (h) Stockholder Rights. No person shall have any rights as a ------------------ stockholder with respect to the shares of Stock subject to any option granted under the Plan until he or she shall have been issued a stock certificate for such shares. (i) Securities Law Compliance and Other Conditions. The Committee may ---------------------------------------------- include in each Option Agreement such requirements as it may deem necessary or advisable to assure compliance with all applicable state and federal securities laws and regulations. Any Option Agreement may contain such other provisions (not inconsistent with the express provisions of the Plan) as the Committee shall deem advisable. (j) Non-Incentive Stock Options. Notwithstanding any other provisions --------------------------- of this Plan, the Committee may grant options which in one or more respects do not meet the requirements for incentive stock options established by Section 422 of the Code. The Committee shall indicate in each Option Agreement whether an incentive stock option within the meaning of Section 422 of the Code or a non- incentive stock option is thereby granted. Except as to Director Options and as otherwise provided in this Plan, the Committee, in its sole discretion, shall -11- establish the terms and conditions for each non-incentive stock option which it grants. Such terms and conditions may, but need not, include some or all of the provisions of this Plan with respect to incentive stock options. If the Committee grants an option which in all respects meets the requirements for incentive stock options it may nonetheless designate such option a non-incentive stock option in the Option Agreement. No shares of Stock or other compensation shall be delivered pursuant to the exercise of a non-incentive stock option (whether by the optionee or a transferee) unless arrangements satisfactory to the Company's Chief Financial Officer have been made for any required federal, state or local income tax or other withholdings. 6. Stock Appreciation Rights ------------------------- (a) In General. A stock appreciation right is a right granted to the ---------- holder of an Employee Option granted under this Plan to receive, pursuant to the terms of the right, an amount payable in shares of Stock, or, at the election of the Committee, cash or a combination of cash and shares of Stock, in each case equal to the increase in the value of the shares covered by the option to which the stock appreciation right is related, all as more particularly set forth below in this Section 6. (b) Committee's Power to Include Appreciation Rights in Option Grant. ---------------------------------------------------------------- Any Employee Option Agreement may provide that the option holder is entitled to receive, with respect to all or a stated percentage of the shares of Stock purchasable thereunder from time to time (or any portion thereof) and subject to the surrender of the option to purchase such shares, an appreciation distribution -12- by the Company in an amount equal to the difference between the Fair Market Value, on the date of such surrender, of the shares of Stock as to which such option is surrendered and the aggregate option price for such shares. Such surrender shall be deemed to have occurred as of the date the Chief Financial Officer of the Company receives written notice of such surrender. (c) Form of Appreciation Distributions. If the option is so ---------------------------------- surrendered, in whole or in part, the appreciation distribution to which the option holder is entitled shall be made in the form of shares of Stock, provided that the Committee shall be entitled, in its sole discretion, to discharge the Company's obligation by the payment of cash, or partly by the payment of cash and partly by the delivery of shares of Stock, so long as the total value of such payment is equal to the aggregate value of the shares of Stock which the surrendering optionee is entitled to receive. (d) Tax Withholding Required. No shares of Stock shall be delivered or ------------------------ cash payment made in discharge of a stock appreciation right unless arrangements satisfactory to the Company's Chief Financial Officer have been made for any required federal, state or local income tax or other withholdings. (e) Committee's Power to Limit Annual Amount of Appreciation Distributions. ---------------------------------------------------------------------- Notwithstanding any other provision of the Plan, the Committee may, from time to time, determine the maximum amount of cash or Stock which may be delivered upon exercise of stock appreciation rights in any year. The Committee may further determine that, if the amount to be received by an option holder exercising any such rights is reduced in any year by reason of this -13- limitation, all or a portion of the amount not delivered may be delivered in a later year or years. 7. Replacement Options ------------------- The Committee may permit the voluntary surrender of all or a portion of any Employee Option granted under this Plan conditioned upon the granting to the option holder of a new Employee Option issued under the Plan for the same or a different number of shares. The new option (which may contain stock appreciation rights) shall be exercisable at such price, during such period and in accordance with such other terms and conditions as the Committee may determine, consistent with the provisions of this Plan, without regard to the price, period of exercise, or other terms or conditions of the option surrendered. 8. Reorganization -------------- In case of any one or more reclassifications, changes, or exchanges of outstanding shares of the Company's Stock (other than as provided in sub-section (c) of Section 3), or consolidations of the Company with, or mergers of the Company into, other corporations, or other recapitalizations or reorganizations (other than consolidations with a subsidiary in which the Company is the continuing corporation and which do not result in any reclassifications, change or exchange of outstanding shares of the Company's Stock), or in case of any one or more sales or conveyances to another corporation of the property of the Company as an entirety, or substantially as an entirety (any and all of which are hereinafter in this section called -14- "Reorganizations"), the holder of each option then or thereafter outstanding shall have the right, upon any subsequent exercise thereof, to acquire the same kind and amount of securities and property which such holder would then hold if such holder had exercised such option immediately before the first of such Reorganizations and continued to hold all securities and property which came to such holder as a result of that and subsequent Reorganizations, less all securities and property surrendered or canceled pursuant to any of same (the rights provided by Section 3(c) and this Section 8 being continuing and cumulative) except that, notwithstanding any provision of clause (ii), (iii), (iv) or (v) of subsection (f) of Section 5 to the contrary, the Board shall have the right, upon no less than thirty (30) days' notice to the holder of each outstanding option, to terminate the period in which all outstanding options may be exercised at the time of such Reorganization. Such notice shall be effective when mailed to such option holder by certified or registered mail addressed to him or her at the holder's address of record or when delivered in hand to such option holder. In such event all outstanding options, other than options as to which one of the events referred to in Sections 5(f)(ii), (iii) or (iv) has occurred, may be exercised, in whole or in part, and all outstanding options as to which one of the events referred to in Sections 5(f)(ii), (iii) or (iv) has occurred may be exercised, but only to the extent therein permitted, and only at any time prior to such Reorganization. A liquidation shall be deemed a Reorganization for the foregoing purposes. -15- 9. Amendment --------- The Board may alter, amend, suspend or terminate the Plan at any time and from time to time and may alter and amend all Option Agreements granted hereunder, except that any such action requiring shareholder approval under Rule 16b-3 of the Securities and Exchange Act of 1934, the Code or any regulation thereunder, or the rules of the New York Stock Exchange or any stock exchange on which the Stock is traded will be subject to shareholder approval or ratification. No amendment of the Plan or of any Option Agreement may, without the consent of the holder of an outstanding option granted under the Plan, adversely affect the rights of such holder under such option. -16- 10. Effective Date and Term of Plan ------------------------------- (a) Effective Date. The Plan shall become effective on the date of its -------------- approval by the Board (the "Effective Date"), but before any options granted under the Plan shall become exercisable, the Plan must be approved by the holders of at least a majority of the Company's outstanding voting stock represented and voting at a duly held meeting at which a quorum is present, provided the shares voting for approval also constitute at least a majority of the required quorum.1 If such stockholder approval is not obtained, then any options previously granted under the Plan shall terminate and no further options shall be granted. Subject to such limitation, the Committee may grant Employee Options under the Plan at any time after the Effective Date and before the date fixed herein for termination of the Plan and Director Options shall be granted as provided under the Plan. (b) Term of Plan. The Plan shall terminate on the 10th anniversary of ------------ the Effective Date. Any options outstanding under the Plan at the time of its termination shall continue to have force and effect in accordance with the provisions set forth in the Option Agreements evidencing such options. 11. Change in Control ----------------- For the purpose of this Plan a "Change in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 35% - ----------------- 1 The Plan was approved by the Board at a meeting held on July 25, 1997, and by the requisite vote of stockholders at the Annual Meeting of Stockholders held on October 24, 1997. -17- or more of either (i) the then outstanding shares of the Stock or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege); (B) any acquisition by the Company or by any corporation controlled by the Company; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (D) any acquisition by any corporation pursuant to a consolidation or merger, if, following such consolidation or merger, the conditions described in clauses (i), (ii), and (iii) of subsection (c) of this Section are satisfied; or (b) Individuals who, as of the effective date of the Plan determined pursuant to Section 10(a) above, constitute the Board (the "Incumbent Board") ceasing for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such effective date whose election, or nomination for election by the Company's shareholders, was approved by a vote or resolution of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened -18- solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Adoption by the Board of a resolution approving an agreement of consolidation of the Company with or merger of the Company into another corporation or business entity in each case, unless, following such consolidation or merger, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger and/or the combined voting power of the then outstanding voting securities of such corporation or business entity entitled to vote generally in the election of directors (or other persons having the general power to direct the affairs of such entity) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Company Voting Securities immediately prior to such consolidation or -19- merger in substantially the same proportions as their ownership, immediately prior to such consolidation or merger, of the Stock and/or Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation or other business entity resulting from such consolidation or merger and any Person beneficially owning, immediately prior to such consolidation or merger, directly or indirectly, 35% or more of the Stock and/or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger or the combined voting power of the then outstanding voting securities of such corporation or business entity entitled to vote generally in the election of its directors (or other persons having the general power to direct the affairs of such entity) and (iii) at least a majority of the members of the board of directors (or other group of persons having the general power to direct the affairs of the corporation or other business entity) resulting from such consolidation or merger were members of the Incumbent Board at the time of the execution of the initial agreement providing for such consolidation or merger; provided that any right to purchase shares of Stock which shall vest by reason of the action of the Board pursuant to this subsection (c) shall be divested, with respect to any shares not already purchased by the optionee or his or her personal representative or transferee, upon (A) the rejection of such agreement of consolidation or merger by the stockholders of the Company or (B) its abandonment by either party thereto in accordance with its terms; or (d) Adoption by the requisite majority of the whole Board, or by the holders of such majority of stock of the Company as is required by law or by the Certificate of Incorporation or By-Laws of the Company as then in effect, of a resolution or consent authorizing (i) the dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation or other business entity with respect to which, following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the outstanding voting securities of such corporation -20- or other entity entitled to vote generally in the election of its directors (or other persons having the general power to direct its affairs) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Stock and/or Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation or other business entity and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 35% or more of the Stock and/or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the then outstanding voting securities of such corporation or other business entity entitled to vote generally in the election of directors (or other persons having the general power to direct its affairs) and (C) at least a majority of the members of the board of directors (or other group of persons having the general power to direct the affairs of such corporation or other entity) were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company; provided that any right to purchase shares of Stock which shall vest by reason of the action of the Board or the stockholders pursuant to this -21- subsection (d) shall be divested, with respect to any shares not already purchased by the optionee or his or her personal representative or transferee, upon the abandonment by the Company of such dissolution, or such sale or other disposition of assets, as the case may be. -22- EX-10.2 6 NEW ENGLAND BUSINESS SERVICE, INC. STOCK COMPENSATION PLAN (Amended and Restated through October 23, 1998) Section 1. Purpose. The purpose of this Stock Compensation Plan (the "Plan") of New England Business Service, Inc. (the "Company") is to provide for the mandatory or voluntary receipt of shares of the Company's Common Stock, valued at full market value as of the date of grant, in lieu of an equivalent amount of cash, in payment (in whole or in part) of certain types of regular, bonus or other special compensation payable to directors of the Company and officers and other key employees of the Company and its subsidiaries, thereby creating, encouraging and facilitating increased ownership of Common Stock by such directors and key employees and, through such ownership, enhancing the identity of interest between them and the Company's shareholders. Section 2. Definitions. In addition to the terms defined elsewhere in the Plan, the following shall be defined terms under the Plan: 2.01. "Award" means any award of Stock granted to a Participant under the Plan. 2.02. "Board" means the Board of Directors of the Company. 2.03. "Code" means the Internal Revenue Code of 1986, as amended from time to time. Reference to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder. 2.04. "Committee" means the Organization and Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan, provided, however, that the Committee shall always consist of two or more directors, each of whom while serving as such shall be a person who in the opinion of counsel to the Company is (i) a "Non-Employee Director," as such term is used in Rule 16b-3 promulgated under the Exchange Act, and (ii) an "Outside Director," as such term is used in Regulation 1.162-27(e)(3) under Section 162(m) of the Code or a successor regulation. A majority of the Committee members present at any meeting at which a quorum is present, and any acts approved in writing by all members without a meeting, shall constitute acts of the Committee. 2.05. "Company" is defined in Section 1. 2.06. "Covered Employee" has the same meaning as set forth in section 162(m) of the Code, and successor provisions. 2.07. "Employee" means any salaried employee, including officer- employees, of the Company or any Subsidiary. 2.08. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder. 2.09. "Participant" means a person who, as a director of the Company or an Employee has been granted an Award under the Plan. 2.10. "Plan" is defined in Section 1. 2.11. "Rule 16b-3" means Rule 16b-3, as from time to time amended and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. 2.12. "Stock" means the Common Stock, $1.00 par value, of the Company and such other securities of the Company as may be substituted for Stock pursuant to Section 4 below. 2.13. "Subsidiary" means any corporation with respect to which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock. In addition, any other related entity may be designated by the Board as a Subsidiary, provided such entity's financial statements would be consolidated with those of the Company under generally accepted accounting principles. 2.14. "Year" means a fiscal year of the Company. Section 3. Administration. 3.01. Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan: i. to select and designate Employees as Participants; ii. to designate Subsidiaries; iii. to determine the Awards to be granted to each Employee- Participant; iv. to determine whether, to what extent, and under what circumstances an Award will be deferred either automatically, at the election of the Committee, or at the election of the Participant; v. to prescribe the form of any Award agreements which need not be identical for each Participant; vi. to adopt, amend, suspend, waive, and rescind such rules and regulations not inconsistent with the specific terms of the Plan, and appoint such agents, as the Committee may deem necessary or advisable to administer the Plan; 2 vii. to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder; and viii. to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. 3.02 Manner of Exercise of Committee Authority. Unless authority is otherwise reserved under the terms of the Plan, or applicable law, the Committee shall have full and sole discretion in exercising its authority under the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Company, Subsidiaries, Participants and any person claiming any rights under the Plan from or through any Participant. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. A consent signed by all members of the Committee shall constitute the act of the Committee without the necessity, in such event, of holding a meeting. 3.03 Limitation of Liability. Each member of the Committee shall be entitled, in good faith, to rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any Subsidiary, the Company's independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any activity, determination, or interpretation taken or made in good faith with respect to the Plan and all members of the Committee and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation. Section 4. Shares Subject to the Plan. The total number of shares of Stock reserved and available for Awards under the Plan shall be 300,000. If the Company shall combine or split the Stock or shall declare thereon any dividend payable in shares of Stock, or shall reclassify or take any other action of a similar nature affecting the Stock, then the number and class of shares of Stock which shall thereafter be reserved and available for Awards under the Plan shall be adjusted accordingly. Section 5. Eligibility. Awards may be granted only to individuals who are directors of the Company or Employees. Section 6. Awards. 6.01. General. All shares of Stock issued pursuant to Awards shall be issued in lieu of cash compensation equal in value to the Fair Market Value of such shares on the date of the Award. The Fair Market Value of a share of Stock on the date of an Award 3 shall be the last sales price per share of the Stock as reported on the New York Stock Exchange prior to the date of the Award or, if the Stock is not then listed on the New York Stock Exchange or if no price has been so reported within one week prior to the date of such Award, such market value shall be determined by a principal market maker for the Stock designed by the Committee. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award to an Employee, at the date of grant, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine. 6.02. Performance Awards. The Committee is authorized to grant Performance Awards to Employees on the following terms and conditions: i. Award and Conditions. Performance Awards to Covered Employees are intended to be "qualified performance-based compensation" within the meaning of section 162(m) of the Code and shall be paid solely on account of the attainment of one or more pre-established performance goals (within the meaning of section 162(m) (4)(C) and any regulations relating thereto) determined by the Committee. ii. The payout of any such Award to a Covered Employee may be reduced, but not increased, based on the degree of attainment of other performance criteria or otherwise at the discretion of the Committee. iii. Other Terms. Subject to Section 6.05 below, a Performance Award shall be denominated and payable in shares of Stock, and have such other terms as shall be determined by the Committee. iv. The satisfaction of the performance goals on account of which a Performance Award is to be made, shall be certified by the Committee before such Award is made. 6.03. Awards of Stock in Payment of Directors' Compensation. 6.03.1 Elective Awards. The Committee is authorized to make awards of Stock to non-employee Directors who elect to receive such Stock in lieu of all or part of their retainers or fees on the following terms and conditions: Such elections shall be made by a written notice of election signed by the electing Director and delivered or mailed to the Chief Financial Officer, Treasurer or Secretary of the Company and shall specify either (a) the annual retainer or retainers or meeting attendance fee or fees which shall be paid in whole or in part in Stock, and the percentage of each such retainer or fee which shall be paid in Stock; or (b) that all or certain specified payments to be received within each twelve-month period commencing on the first day of a specified calendar month (or a specified portion of such payments) shall continue to be paid in Stock until such election is amended or revoked by another notice given in the same manner. 6.03.2 Mandatory Awards. Notwithstanding the provisions of Section 6.03.1, from and after October 23, 1998 fifty percent (50%) of each non-employee Director's annual retainer will be paid by an award of Stock hereunder in lieu of payment in cash. 4 Awards pursuant to this Section shall automatically be made each year on the tenth day following the date on which the non-employee Director is elected to the Board by the stockholders or by the other directors. 6.04. Other Awards. The Committee is authorized to grant to Employees such other Awards as are deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, Stock issued to Employees in lieu of cash bonuses or portions of bonuses. 6.05. Stand-Alone, Tandem, and Substitute Awards. Awards to Employees granted under the Plan may, in the discretion of the Committee, be granted either alone or, as a part of or in tandem with, or in substitution for, any award granted under any other plan of the Company, or any Subsidiary, or any other right of a Participant to receive payment from the Company or any Subsidiary. If an Award is granted in substitution for another award, the Committee shall require the surrender of such other award in consideration for the grant of the new Award hereunder. Awards granted in addition to or as a part of or in tandem with other awards may be granted either as of the same time as or a different time from the grant of such other awards. Section 7. General Restrictions Applicable to Awards. 7.01. Restrictions Under Rule 16b-3. 7.01.1. Six-Month Holding Period. Unless a Participant could otherwise transfer Stock without incurring liability under Section 16(b) of the Exchange Act, shares of Stock issued under the Plan shall be held for at least six months from the date of acquisition. 7.01.2. Compliance with Rule 16b-3. It is the intent of the Company that this Plan comply in all respects with Rule 16b-3 in connection with any Award granted to a person who is subject to Section 16 of the Exchange Act. Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such person, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements with respect to such person. 7.02. Registration and Listing Compliance. The Company shall not be obligated to distribute any Shares with respect to any Award in a transaction subject to regulatory approval, registration, or any other applicable requirement of federal or state law, or subject to a listing requirement under any listing or similar agreement between the Company and any national securities exchange, until such laws, regulations, and contractual obligations of the Company have been complied with in full, although the Company shall be obligated to use its best efforts to obtain any such approval and comply with such requirements as promptly as practicable. 5 7.03. Stock Certificates. All shares of Stock delivered under the Plan pursuant to any Award shall be subject to such stop-transfer order and other restrictions as the Committee may deem advisable under applicable federal or state laws, or rules and regulations thereunder, and the rules of NASDAQ or any national securities exchange on which the Stock is listed. The Committee may cause a legend or legends to be placed on any certificates representing shares of Stock to make appropriate reference to such restrictions or any other restrictions that may be applicable to such shares. In addition, during any period in which shares of Stock are subject to restrictions under the terms of the Plan or any Award Agreement the Committee may require the Participant to enter into an agreement providing that certificates representing any shares of Stock issuable or issued pursuant to an Award shall remain in the physical custody of the Company or such other person as the Committee may designate. Section 8. Amendments. The Board may amend, alter, suspend, discontinue or terminate the Plan without the consent of stockholders or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the Company's stockholders within one year after such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of New York Stock Exchange or any other stock exchange on which the Stock may be listed, or if the Board in its discretion determines that obtaining such stockholder approval is for any reason advisable. Section 9. General Provisions. 9.01. No Stockholder Rights. No Award shall confer on any Participant any of the rights of a stockholder of the Company unless and until shares of Stock are duly issued or transferred to the participant in accordance with the terms of the Award. 9.02. Tax Withholding. The Company or any Subsidiary is authorized to withhold from any Award granted, or any payroll or other payment to a Participant, amounts of withholding and other taxes due with respect thereto, and to take such other action as the Committee may deem necessary or advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax liabilities relating to any Award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of Participant's tax obligations. 9.03. No Right to Employment. Nothing contained in the Plan or any Award Agreement shall confer, and no grant of an Award shall be construed as conferring, upon any employee any right to continue in the employ of the Company or any Subsidiary or to interfere in any way with the right of the Company or any Subsidiary to terminate his employment at any time or increase or decrease his compensation from the rate in existence at the time of granting of an Award. 9.04. Other Compensatory Arrangements. The Company or any Subsidiary shall be permitted to adopt other or additional compensation arrangements (which may 6 include arrangements which relate to Awards), and such arrangements may be either generally applicable or applicable only in specific cases. 9.05. Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash or other property shall be issued or paid in lieu of fractional shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. 9.06. Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law. Section 10. Effective Date and Duration. The Plan shall become effective as of June 25, 1994, provided, however, that within one year after such date, the Plan shall have been approved by the affirmative vote of the holders of a majority of the shares of Stock present or represented and entitled to vote (and the affirmative vote of a majority of the shares of Stock voting) at a meeting of the Company's stockholders, or any adjournment thereof. 1 If so approved the Plan shall continue in force until June 24, 2004. ___________________________ 1 The Plan was approved by the requisite vote of stockholders at the Annual Meeting of Stockholders held on October 28, 1994 7 7 7 EX-10.3 7 _________________________________________________________________ New England Business Service, Inc. Supplemental Executive Retirement Plan _________________________________________________________________ Effective January 4, 1999 TABLE OF CONTENTS (continued) _____________________________________________________________ ARTICLE IX - DEATH BENEFITS 9.1 Death Prior to Benefit Commencement 20 9.2 Death After Benefit Commencement 20 ARTICLE X - ADMINISTRATION 10.1 Plan Administration 21 10.2 Indemnification 21 10.3 Ownership of Assets 22 10.4 Expenses 22 ARTICLE XI - TRUST AGREEMENT; LIQUIDITY FUND 11.1 Trust Fund 23 11.2 Liquidity Fund 23 ARTICLE XII - AMENDMENT OF THE PLAN 12.1 Amendment 24 12.2 Effect of Amendment on Vesting 24 ARTICLE XIII - TERMINATION OF THE PLAN 13.1 Termination 25 13.2 Benefits after Plan Termination 25 ARTICLE XIV - MISCELLANEOUS 14.1 Limitations of Rights; Employment Relationship 26 14.2 Determination of Benefits, Claims Procedure, and Administration 26 14.3 Arbitration 27 14.4 Non-Assignability of Benefits 28 14.5 Facility of Payments 28 14.6 Obligations to Withhold and Pay Taxes 29 14.7 Representations 29 14.8 Severability 29 14.9 Applicable Law 29 14.10 Successor Employers 30 APPENDIX - DESIGNATION OF PARTICIPANTS 31 ARTICLE I ESTABLISHMENT OF THE PLAN _________________________________________________________________ 1.1 Name of Plan The Plan shall be known as the New England Business Service, Inc. Supplemental Executive Retirement Plan. 1.2 Effective Date The Effective Date of the Plan is January 4, 1999. 1.3 Purpose The Company intends this Plan to provide certain retirement income benefits (as described herein) to certain Executives (as identified from time to time in the Appendix hereto) of the Company. Such benefits are intended to supplement the retirement income benefits provided to a Participant by the Company through its other broad-based retirement programs and Social Security benefits. 1.4 Restricted Coverage Participation in this Plan shall be limited to Executives, so that for purposes of Title I of ERISA the Plan shall at all times cover only employees who make up a select group of management or highly compensated employees whose positions with the Company allow them to have a significant effect on the Company's results of operations by the performance of services of major importance in the management, operation, and development of the Company's business. 1.5 Plan Unfunded This Plan is intended to be unfunded for purposes of (a) Title I of ERISA and (b) taxation of vested accrued benefits pursuant to the Code. 1 ARTICLE II DEFINITIONS ______________________________________________________________________ The following terms shall have the meanings specified below unless the context otherwise requires: 2.1 "Accrued Benefit" shall mean the portion of a Participant's normal retirement benefit that has accrued as of any date pursuant to Section 6.2. 2.2 "Average Final Compensation" shall mean the sum of (a) the Participant's annual base salary at the time of his Separation from Service and (b) the average of a Participant's bonuses for the three Plan Years in which the Participant's greatest bonus is received during his final five Plan Years of Service. 2.3 "Benefit Commencement Date" shall mean the date as of which benefits hereunder first become payable, in accordance with the provisions of Article VII, to or with respect to a Participant. 2.4 "Board" shall mean the Board of Directors of the Company. 2.5 "Change in Control" shall mean: (a) The acquisition by any individual, entity, or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 35% or more of either (i) the then outstanding shares of the Company's common stock (the "Common Stock"), or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege); 2 (B) any acquisition by the Company or by any corporation controlled by the Company; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (D) any acquisition by any corporation pursuant to a consolidation or merger, if, following such consolidation or merger, the conditions described in clauses (i), (ii), and (iii) of subsection (c) of this Section are satisfied; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote or resolution of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or a threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Adoption by the Board of a resolution approving an agreement of consolidation of the Company with or merger of the Company into another corporation or business entity in each case, unless, following such consolidation or merger, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger and/or the combined voting power of the then outstanding voting securities of such cor poration or business entity entitled to vote generally in the election of directors (or other persons having the general power to direct the affairs of such entity) is then beneficially owned, directly or indirectly, by all or sub stantially all of the individuals and entities who were the beneficial owners, respectively, of the Common Stock and Outstanding Company Voting Securities immediately prior to such consolidation or merger in substantially the same proportions as their ownership immediately prior to such consolidation or merger of the Common Stock and/or Outstanding Company Voting Securities, as the case may be; (ii) no Person, excluding (A) the Company; (B) any employee benefit plan (or related trust) of the Company; (C) such corporation or other business entity resulting from such consoli dation or merger, and (D) any Person beneficially owning, immediately prior to such consoli dation or merger, directly or indirectly, 35% or more of the Common Stock and/or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 35% or more of the then outstanding shares of common stock of the corporation resulting from such consolidation or merger, or the combined voting power of the then out standing voting securities of such corporation or business entity entitled to vote generally in the election of its directors (or other persons having the general power to direct the affairs of such entity), and (iii)at least a majority of the members of the board of directors (or other group of persons having the general power to direct the affairs of the corporation or other business entity) resulting from such consolidation or merger were members of the Incumbent Board at the time of the execution of the initial agreement providing for such consolidation or merger, provided that any right which shall vest by reason of the action of the Board pursuant to this paragraph (c) shall be divested, with respect to any such right not already exercised, upon (A) the rejection of such agreement of consolidation or merger by the stockholders of the Company, or (B) its abandonment by either party thereto in accordance with its terms. (d) Adoption by the requisite majority of the whole Board, or by the holders of such majority of stock of the Company as is required by law or by the Certificate of Incorporation or By-Laws of the Company as then in effect, of a resolution or consent authorizing 4 (i) the dissolution of the Company, or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation or other business entity with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the outstanding voting securities of such corporation or other business entity entitled to vote generally in the election of directors (or other persons having the general power to direct the affairs of such entity) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportions as their ownership immediately prior to such sale or other disposition of the Stock and/or Outstanding Company Voting securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation or other business entity, and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 35% or more of, the Common Stock and/or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35% or more of the then outstanding shares of common stock of such corporation and/or the combined voting power of the then outstanding voting securities of such corporation or other business entity entitled to vote generally in the election of directors (or other persons having the general power to direct the affairs of such entity); and (C) at least a majority of the members of the board of directors (or other group of persons having the general power to direct the affairs of such corporation or other entity) were members of the Incumbent Board at the time of the execution of the initial agreement or action 5 of the Board providing for such sale or other disposition of assets of the Company; provided that any right which shall vest by reason of the action of the Board or the stockholders pursuant to this paragraph (d) shall be divested, with respect to any such right not already exercised, upon the abandonment of the Company of such dissolution, or such sale or other disposition of assets, as the case may be. A Change in Control shall not occur upon the mere re-incorporation of the Company in another state. 2.6 "Code" shall mean the Internal Revenue Code of 1986 as amended, and including all regulations thereunder. 2.7 "Committee" shall mean the Organization and Compensation Committee of the Board of Directors of the Company. 2.8 "Company" shall mean New England Business Service, Inc. and, in the event of a Change in Control, each successor to and assign of New England Business Service, Inc. 2.9 "Compensation" shall mean those elements of a Participant's total remuneration from the Company which are pensionable under this Plan. (a) Compensation shall include only base salary and bonuses earned by a Participant for personal services rendered to the Company for any Plan Year, regardless of when such remuneration is actually paid (or would be paid if not deferred pursuant to any deferred compensation plan). Compensation shall include: (i) amounts deferred under any deferred compensation plan, and (ii) amounts contributed from the Participant's remuneration under any plan maintained by the Company pursuant to Code Sections 125, 132, or 401(k). (b) Compensation shall not include: (i) employer contributions to any employee benefit plan (including without limitation this Plan) and all benefits provided under any such plan, and 6 (ii) the value of or any income from any types of equity-based compensation programs (including without limitation stock options, stock appreciation rights, and restricted stock) except for the portion of any bonus paid in the medium of Company Stock. 2.10 "Disability" (and "Disabled") shall mean a Participant's inability, on account of a physical or mental impairment or condition, substantially to perform the material duties of his position as an Executive despite reasonable accommodations made or proposed by the Company, provided that (a) such inability and impairment or condition are established to the satisfaction of the Board, and (b) the Participant is receiving benefits under a Company Disability Plan. 2.11 "Early Retirement Date" shall mean the first day of any month following the later of (a) the Participant's 55th birthday and (b) either (i) the completion of his fifth Year of Benefit Service, or (ii) his separation from service either (A) upon or following the occurrence of a Change in Control or (B) as the result of either a Disability or an involuntary termination without Good Cause. 2.12 "Effective Date" shall mean the date specified as such in Section 1.2 above. 2.13 "Entry Date" shall mean the date on which an Executive becomes a Participant in the Plan as provided in Article III. 2.14 "ERISA" shall mean Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended, and including all regulations thereunder. 2.15 "Executive" shall mean any employee of the Company who is a member of a select group of management or highly compensated employees of the Company, and who is recommended for participation in the Plan by the Chief Executive Officer of the Company and approved by the Committee. 2.16 "Good Cause" shall mean a Participant's: (a) Willful and continuing failure substantially to perform duties assigned in good faith from time to time by the Company, provided that such failure is not solely the result of 7 (i) a Disability; (ii) a leave of absence either granted in writing by the Company or guaranteed by applicable law; or (iii) some other reason agreed to in advance by the Board. (b) Willful conduct which is demonstrably and materially injurious to the Company. (c) Conviction of a felony or a misdemeanor involving the theft, misappropriation, or embezzlement of property of the Company. For purposes of this Section 2.16, the term "Board" shall include the board of directors (or body with a similar function) of the Company's successor following a Change in Control. 2.17 "Incumbent Board" shall mean the Board, as defined in Section 2.5, which is in place as of the Effective Date of this Plan. 2.18 "Normal Retirement Date" shall mean the first day of the month coincident with or next following a Participant's 65th birthday. 2.19 "Participant" shall mean any Executive who is covered by this Plan in accordance with the provisions of Article III. 2.20 "Plan" shall mean the New England Business Service, Inc. Supplemental Executive Retirement Plan, as stated herein and as amended or supplemented from time to time. 2.21 "Plan Administrator" shall mean the committee appointed to administer the Plan pursuant to Section 10.1 of this Plan. 2.22 "Plan Year" shall mean the Company's fiscal year, ending on the last Friday of each June following the Effective Date while this Plan remains in effect, provided that for purposes of the definitions of "Average Final Compensation" and "Year of Benefit Service", "Plan Year" shall include all such periods before or after the Effective Date of the Plan. 8 2.23 "Separation from Service" shall mean the termination of a Participant's Service for any reason, including the death of the Participant. 2.24 "Service" shall mean a Participant's period of employment with the Company. 2.25 "Surviving Spouse" shall mean the spouse of a Participant as of the earlier of (a) the Participant's Benefit Commencement Date or (b) his date of death, entitled to received benefits under the Plan as provided in Sections 8.1 and 9.1 of the Plan. 2.26 "Trust" shall mean, in the event of a Change in Control, the trust created under the New England Business Service, Inc. Supplemental Executive Retirement Plan Trust Agreement. 2.27 "Vested Benefit" shall mean the portion of a Participant's Accrued Benefit calculated in accordance with Article V of this Plan. 2.28 "Vesting Percentage" shall mean the percentage determined in accordance with Section 5.1 of this Plan. 2.29 "Year of Benefit Service" shall mean, except as otherwise specified in the Appendix hereto, each Plan Year subsequent to June 29, 1992 in which the Participant has any Service. In all instances throughout this document, the masculine pronoun shall include the feminine pronoun, and the singular shall include the plural. 9 ARTICLE III PARTICIPATION _______________________________________________________________________ 3.1 Eligibility Requirements Only Executives shall be eligible to become and remain Participants in the Plan. An Executive shall become a Participant only upon designation as a Participant in the Appendix hereto by the Committee after recommendation by the Chief Executive Officer. A Participant shall continue as a Participant for the purpose of accruing additional benefits under the Plan only as long as he remains in Service as an Executive of the Company. A Disabled Participant remains a Participant as long as he is continuing to accrue Benefit Service while Disabled under the provisions of Section 6.5. 3.2 Entry and Re-Entry Into the Plan An Executive shall become a Participant on the effective date of his designation as a Participant in the Appendix hereto. If a Participant's Service is subsequently broken and he is later re-employed as an Executive, he shall resume his participation in the Plan only if he is again designated as a Participant by the Committee on an amended Appendix hereto and only on the effective date of such new designation. 10 ARTICLE IV RETIREMENT BENEFITS _______________________________________________________________________ 4.1 Amount, Timing, and Form of Benefits A Participant who has a Separation from Service after his Entry Date shall be entitled to receive his Vested Benefit, as determined in accordance with Articles V and VI, commencing on the Participant's Benefit Commencement Date as determined in accordance with Article VII, and payable in the form provided in Article VIII. 11 ARTICLE V VESTING AND FORFEITURES ________________________________________________________________________ 5.1 Vesting Percentage Subject to Section 5.5, a Participant's Vesting Percentage as of any date shall be 0% until the date on which the first of the following events occurs and thereafter it shall be 100%: (a) A Change in Control occurs, unless such Change in Control was approved by a resolution adopted by at least a majority of the members of the Incumbent Board (as defined in Section 2.5). (b) The Participant incurs a Separation from Service, either involuntarily without Good Cause or on account of Disability or death. (c) The participant attains his Early Retirement Date. 5.2 Vested Benefit Subject to Section 5.5, a Participant's Vested Benefit under this Plan shall be the product of his Accrued Benefit multiplied by his Vesting Percentage. 5.3 Forfeitures Any portion of a Participant's Accrued Benefit that is not included in his Vested Benefit at the time of his Separation from Service shall be immediately forfeited. If a Participant's Vested Benefit is reduced to zero pursuant to Section 5.5, his Accrued Benefit shall be forfeited immediately. Any amounts forfeited by a Participant shall remain the sole and exclusive property of the Company and shall not increase the benefits of any other Participant. 5.4 Amendment of Vesting Provisions No amendment to the Plan shall reduce a Participant's Vested Benefit under the Plan. An amendment may, however, increase the Service required or impose or change any 12 other requirements or conditions that a Participant must meet in order to become vested or further vested in any Accrued Benefit to the extent not already vested as of the date that the amendment is adopted. 5.5 Forfeiture of Vested Benefit Notwithstanding anything to the contrary in this Plan, the Vesting Percentage and the Vested Benefit of any Participant shall be reduced to zero if, during the period ending on the earlier of the fifth anniversary of his Separation from Service and the effective date of a Change in Control, the Participant either provides Services to or obtains an Interest in any Entity which at the time of the Participant's Separation from Service directly Competed with any member of the Company Group. For purposes of this Section 5.5, the following terms shall have the following meanings: (a) "Compete" shall mean the offer or sale of the same products and/or services as are offered or sold by any member of the Company Group or the offer or sale of any products and/or services that reasonably may be used in substitution of any products and/or services offered or sold by any member of the Company Group. (b) "Company Group" shall mean the Company and all of its direct and indirect "parent corporations" and "subsidiary corporations" within the meaning of Code Sections 424(e) and 424(f) respectively. (c) "Entity" shall refer to every possible type of entity, whether organized as a proprietorship, partnership, limited liability company, corporation or otherwise. (d) "Interest" shall refer to every type of ownership interest of a Participant in an Entity, whether as a proprietor, partner, member, shareholder or otherwise. (e) "Services" shall mean the provision of any type of services to an Entity by a Participant, whether acting as a director, officer, employee, proprietor, partner, member, independent contractor, or otherwise. 13 Notwithstanding anything to the contrary in this Section 5.5 with respect to any Participant the five-year forfeiture period referred to above in this section shall be reduced to the maximum lesser period that an arbitrator or a court of competent jurisdiction determines (in a final award or judgment all appeals for which have either been exhausted or waived) to be enforceable with respect to such Participant. No other rights or obligations under this Plan of the Company or of the prevailing Participant and no rights or obligations under this Plan of any other Participant shall be affected by operation of this paragraph with respect to a Participant. 14 ARTICLE VI RETIREMENT BENEFITS 6.1 Normal Retirement Benefit A Participant who retires on or after his Normal Retirement Date shall be entitled to an annual retirement income, paid monthly and continuing for the Participant's lifetime, equal to the sum of (a) 2.75% of his Average Final Compensation for each of his first ten Years of Benefit Service, and (b) 2.00% of his Average Final Compensation for each of his next five Years of Benefit Service. 6.2 Determination of Accrued Benefit A Participant's Accrued Benefit as of any date shall be that benefit, commencing on his Normal Retirement Date, determined as follows, based on his Average Final Compensation as of the date of determination: (a) If the Participant is eligible for Early Retirement The benefit shall be calculated as provided in Section 6.1, but based on his Years of Benefit Service as of the date of determination. (b) If the Participant is not eligible for Early Retirement The benefit shall be calculated as provided in Section 6.1, but based on the Years of Benefit Service he is projected to have earned as of his earliest Early Retirement Date (assuming he remains in full time employment until that date), multiplied by a fraction (not to exceed 1.0) whose numerator is his Years of Benefit Service as of the date of determination, and whose denominator is his projected Years of Benefit Service as of his earliest Early Retirement Date. Notwithstanding the above, following a Change in Control the Accrued Benefit of all Participants in the Plan on the date of the Change in Control shall he determined under the provisions of Section 6.2(a) only. 15 6.3 Adjustment for Early Retirement If a Participant retires on an Early Retirement Date, his benefit from this Plan shall be his Accrued Benefit. If the Participant elects to receive his retirement benefit prior to his 62nd Birthday, it shall be reduced one-half of one percent for each month by which his Benefit Commencement Date precedes his 62nd Birthday. 6.4 Adjustment for Late Retirement If a Participant retires after his Normal Retirement Date, he shall receive a benefit calculated in accordance with the provisions of Section 6.1, but based upon his Benefit Service and his Average Final Compensation as of his Late Retirement Date. 6.5 Disability Retirement A Participant who is Disabled as provided in Section 2.10 shall be considered to be a retired employee on a Disability Retirement. (a) As long as the Participant is receiving benefits under the Company's Long Term Disability Plan, he shall receive no benefit payments from this Plan but shall continue to earn credit for Years of Benefit Service. (b) Upon reaching his Normal Retirement Date (or upon the cessation of Long Term Disability Benefits, if later), he shall cease earning credit for Years of Benefit Service and shall commence receiving his Normal Retirement Benefit. Such benefit shall be based upon his Average Final Compensation as of his date of Disability, and Years of Benefit Service accumulated through his Benefit Commencement Date. (c) A Participant on Disability Retirement who is continuing to earn credit for Years of Benefit Service under paragraph (a) above may, upon attainment of his Early Retirement Date, elect to retire early. He shall thereafter cease receiving credit for additional Service under paragraph (a), and shall instead commence receiving an Early Retirement benefit as determined under Section 6.3, based on his Average Final Compensation as of his date of Disability, and his Years of Benefit Service accumulated through his date of Early Retirement. 16 ARTICLE VII PAYMENT OF BENEFIT ________________________________________________________________________ 7.1 Eligibility for Payment A Participant's benefits shall be paid from the Plan only after both of the following conditions are met: (a) The occurrence of a Participant's Separation from Service. (b) The Participant's attainment of his Early Retirement Date. 7.2 Benefit Commencement Date (a) Time of Commencement Unless a Participant or Surviving Spouse (as the case may be) has made a timely election to defer payment with the approval of the Committee pursuant to the provisions of paragraph (b) of this Section 7.2, the Participant's Vested Benefit under this Plan shall be paid beginning 60 days after the date on which the conditions of Section 7.1 are first met. Notwithstanding the foregoing, at any time after a Participant's Separation from Service and prior to the earlier of (i) payment or commencement of the Participant's benefit pursuant to this Section 7.2, or (ii) the date on which a Change in Control occurs, the Company may elect unilaterally to defer payment or commencement of all or any portion of the Participant's Benefit until the next July following the Participant's Separation from Service date if the Participant was a "covered employee" within the meaning of Code Section 162(m) at the time of his Separation from Service. Any such election by the Company may be made by the Board, the Committee, or the Company's chief executive officer, and shall be evidenced in writing and sent to the Participant at his last known address. 17 (b) Benefit Commencement Election Subject to the approval of the Committee (as defined in Section 10.1), a Participant or Surviving Spouse may make a one-time irrevocable election to defer payment of benefits to a postponed Benefit Commencement Date on any determinable date beyond the Participant's initial Benefit Commencement Date determined pursuant to paragraph (a) of this Section 7.2, provided that such election is made on the form prescribed by the Committee and is received by the Committee not later than 30 days before such initial Benefit Commencement Date. The Committee shall have absolute discretion to approve, disapprove, or modify before approving any such election to defer benefits. 18 ARTICLE VIII BENEFIT FORMS AVAILABLE ________________________________________________________________________ 8.1 Forms of Benefits for Participants (a) If a Participant is Married on his Benefit Commencement Date Unless a Participant has made a timely election with the approval of the Committee pursuant to Section 8.2 below to waive the 50% joint and survivor benefit, the Participant's benefit shall be paid as a 50% joint and survivor benefit, under which the Participant shall receive an actuarially reduced benefit for his lifetime, with 50% of that reduced benefit continuing after his death to his Surviving Spouse for the remainder of the Surviving Spouse's life. (b) If the Participant is Not Married on his Benefit Commencement Date His benefit shall be paid as a life annuity, under which his benefit as described in Section 6 shall be paid to him as long as he shall survive, with no payments due after his death. 8.2 Life Annuity Benefit Election Subject to the Committee's approval, a married Participant may make a one-time irrevocable election to receive his retirement benefit from this Plan as a life annuity, as described in Section 8.1(b). Any such election shall be made on the form prescribed by the Committee and must be received by the Committee no later than 30 days before the benefit is to be paid pursuant to Section 7.2 of the Plan (after taking into account any election made by the Participant under paragraph (b) of Section 7.2). The Committee shall have absolute discretion to approve any such election by a married participant to receive his benefit in the life annuity form. 19 ARTICLE IX DEATH BENEFITS 9.1 Death Prior to Benefit Commencement (a) Death On or After Eligibility for Early Retirement Upon the death of a Participant on or after his eligibility for an Early Retirement benefit, there shall be paid to his Surviving Spouse an immediate lifetime income equal to the benefit the spouse would have received had the Participant retired on the day before his death, receiving the 50% joint and survivor benefit described in Section 8.1(a), and then died on his actual date of death. (b) Death Before Eligibility for Early Retirement If the Participant is not yet eligible for Early Retirement on his date of death, the benefit shall be the same as described in Section 9.1(a), except that it shall be cal- culated as if the Participant were then the age at which he would first have become eligible for Early Retirement had he not died (but the amount of such benefit shall be determined by the Participant's actual number of Years of Benefit Service and his actual Average Final Compensation at the time of his death). The Surviving Spouse benefit under this Section 9.1(b) shall commence on the date the Participant would have attained Early Retirement eligibility had he survived. 9.2 Death After Benefit Commencement Upon the death of a Participant after his Benefit Commencement Date, there shall be no further benefits due except as may be paid to a Surviving Spouse under the 50% joint and survivor benefits pursuant to Section 8.1(a). 20 ARTICLE X ADMINISTRATION _______________________________________________________________________ 10.1 Plan Administration The Committee shall be the Plan Administrator of this Plan. Each member shall serve at the pleasure of the Board. The Committee shall act by majority decision of its members. The Committee shall have the responsibility for the operation and administration of the Plan and shall have the power and authority to: (a) determine all matters relating to the eligibility of persons to become Participants in the Plan; (b) determine whether or not any Executive of the Company has become a Participant in the Plan; (c) determine whether and when the employment of any Participant has been terminated and, to the extent material to a determination of a benefit hereunder, the cause of such termination; (d) decide all questions which may arise from time to time with respect to the rights under the Plan of Executives of the Company, Participants, and any other persons who claim to be entitled to benefits under the plan. The Committee shall have exclusive discretionary authority to construe and interpret the Plan document; provided, however, that in exercising its powers and duties the Committee shall give the same consideration to Participants and beneficiaries in like circumstances. 10.2 Indemnification The Company agrees to indemnify and save harmless each member of the Committee or in any other fiduciary capacity from, against, for, and in respect of any and all damages, losses, obligations, liabilities, liens, deficiencies, attorneys' fees, costs and expenses incident to the performance of such person's duties unless resulting from the gross negligence, willful misconduct, or lack of good faith of such individual. Such indemnification shall apply to any such individual even though at the time liability is imposed the individual was no longer acting in a fiduciary capacity or as a member of the Committee. 21 10.3 Ownership of Assets All amounts accrued under this Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights shall remain (until made available to a Participant or Surviving Spouse) solely the property and rights of the Company (without being restricted to the provision of benefits under this Plan), and shall be subject to the claims of the general creditors of the Company. Except after a Change in Control, no trust is created under this Plan and it is not otherwise funded in any manner. No Participant or Surviving Spouse shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Company or any Accrued Benefit under the Plan prior to the time such assets are distributed as a Vested Benefit, and all rights created under the Plan shall be mere unsecured contractual rights. Notwithstanding the foregoing, nothing in this Plan shall be construed to prohibit any one or more Participants or Surviving Spouses from purchasing insurance to protect against loss on account of the provisions of this Section 10.3, and the Company shall reasonably cooperate in any effort to obtain such insurance, provided that any such insurance shall be obtained, owned, and paid for solely by the insured persons and not by the Company. 10.4 Expenses The Company shall pay: (a) its share of all fees and expenses incurred in administering the Plan; (b) all taxes imposed on the Company in connection with the Plan; and (c) all costs and expenses (including reasonable attorneys' fees) incurred by each Participant and Surviving Spouse to enforce the terms of the Plan against the Company or to collect a Vested Benefit under the Plan from the Company. 22 ARTICLE XI TRUST AGREEMENT; LIQUIDITY FUND ________________________________________________________________________ 11.1 Trust Fund Except after a Change in Control, no assets of the Company shall be held in trust for any purposes under the Plan. Upon the occurrence of a Change in Control, and from time to time (but at least once each Plan Year) thereafter, the Company shall contribute to the Trust assets sufficient actuarially to meet the Company's liability for all Vested Benefits under the Plan at each time that assets are contributed. 11.2 Liquidity Fund The Company at its sole option may from time to time maintain liquid assets representing all or any portion of the value of its Participants' Accrued Benefits. Any such liquidity fund shall be invested at the discretion of the Committee, shall not be held in trust for any Participant or Surviving Spouse, and shall in all respects remain subject to the provisions of Section 10.3. 23 ARTICLE XII AMENDMENT OF THE PLAN ______________________________________________________________________ 12.1 Amendment The Company reserves the right to amend the Plan at any time and from time to time. Each amendment shall be approved by the Board of Directors of the Company. No amendment shall diminish or deprive a Participant of any benefit already vested. The Company may amend the Plan, and may do so retroactively if necessary, to conform the Plan to mandatory provisions of applicable laws or regulations or as permitted by the Internal Revenue Service or the Department of Labor. 12.2 Effect of Amendments on Vesting Notwithstanding the provisions of the preceding Section 12.1, no amendment to the Plan's vesting provisions shall reduce a Participant's Vested Benefit, determined as of the later of (a) the date of execution of such amendment, or (b) the effective date of such amendment. 24 ARTICLE XIII TERMINATION OF THE PLAN ________________________________________________________________________ 13.1 Termination The Company intends to continue the Plan indefinitely, but it does not assume a contractual obligation to do so, and the Company may terminate the Plan at any time, provided that no such action of the Company shall reduce any Participant's Vested Benefit. 13.2 Benefits After Plan Termination In the event that the Company shall terminate the Plan in whole or in part, the rights of nonvested Participants to benefits accrued under the Plan as of the date of such termination shall remain unvested unless the Plan is specifically amended to provide for additional partial or full vesting. In no event shall any person have recourse against the Company for any reason upon termination of the Plan other than for non- payment of Vested Benefits. 25 ARTICLE XIV MISCELLANEOUS 14.1 Limitations of Rights; Employment Relationship The establishment of this Plan or any modification thereof, or the accrual or vesting of any benefits, or the creation of any fund or account, or the payment of any benefits, shall not be construed as giving a Participant or any other person any legal or equitable right against the Company except as provided in this Plan. In no event shall the terms of employment of any employee be modified or in any way be affected by the Plan. 14.2 Determination of Benefits, Claims Procedure, and Administration (a) Claim A person who believes that he is being denied a benefit to which he is entitled under the Plan (hereinafter referred to as a "Claimant") may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the Committee in care of the Company at its then principal place of business. (b) Decision on Claim Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for a reasonable cause. If the claim is denied in whole or in part, the Committee shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (i) the specific reason or reasons for such denial; (ii) the specific reference to pertinent provisions of the Plan on which such denial is based; 26 (iii) a description of any additional material or information necessary for the Claimant to perfect his claim, and an explanation of why such material or such information is necessary; (iv) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (v) the time limits for requesting a review and for completing any such review. (c) Request for Review Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the chief executive officer of the Company (or his designee) review the determination of the Committee. Such request must be addressed to the chief executive officer of the Company at the Company's then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the chief executive officer or his designee. If the Claimant does not request a review of the Committee's determination by the chief executive officer of the Company within such 60-day period, he shall be barred and estopped from challenging the Committee's determination. (d) Review of Decisions Within 60 days after receipt of a request for review, the chief executive officer of the Company or his designee shall review the Committee's determination. After considering all materials presented by the Claimant, the chief executive officer or his designee shall render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth the specific reasons for a decision and containing specific references to the pertinent provisions of the Plan on which the decision is based. If special circumstances require that the 60-day time period be extended, the chief executive officer or his designee shall so notify the Claimant and shall render the decision as soon as possible, but not later than 120 days after receipt of the request for review. 14.3 Arbitration 27 Any dispute between any person claiming benefits or any other rights under the Plan and the Company as to the interpretation or application of the provisions of the Plan and amounts payable hereunder that is not finally resolved under the claims procedure described in Section 14.2 of the Plan shall be determined exclusively by binding arbitration in Groton, Massachusetts in accordance with the Commercial Arbitration Rules (and not in accordance with the National Rules for the Resolution of Employment Disputes) of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court of competent jurisdiction. All fees and expenses of such arbitration shall be paid by the Company. The arbitrator shall be chosen by the parties, provided however that if the parties cannot agree on a choice within thirty (30) days after a demand for arbitration made by either party, the choice of an arbitrator shall be referred to the American Arbitration Association. Unless the parties otherwise agree, the arbitrator shall be a Massachusetts lawyer with at least fifteen years of experience as a specialist in employee benefits or employment law. The arbitrator shall determine the arbitrability of the dispute if it is in controversy. The arbitrator may consider and rule on any dispositive motions submitted by the parties. Discovery shall be limited to such pre-hearing exchange of information as is explicitly authorized by Chapter 251 of the Massachusetts General Laws. The arbitrator may further limit discovery to those items that in the judgment of the arbitrator are essential to the determination of the matters in dispute. Except for any stenographer and the arbitrator, attendance at the arbitration shall be limited to the parties and their counsel and witnesses. Except as necessary for purposes of an action to enforce, modify, or vacate the arbitration award, all documents and other information submitted to the arbitrator, including any transcripts of the proceedings shall be confidential and shall not be disclosed to anyone other than the parties and their counsel and other appropriate advisors. 14.4 Non-Assignability of Benefits Neither the Participant nor his Surviving Spouse shall have any power or right to transfer, assign, anticipate, hypothecate, or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be non-assignable and non-transferable. Any such attempted assignment or transfer shall be void. No amount payable under the Plan shall, prior to actual payment thereof, be subject to seizure by any creditor of any such person for the payment of any debt, judgment, or other obligation, by a proceeding at law or in equity, or be transferable by operation of law in the event of the bankruptcy, insolvency, divorce, or death of the Participant or his Surviving Spouse. 28 14.5 Facility of Payments In the event that the Committee shall determine that any person to whom a benefit is payable under the Plan is unable to care for his affairs because of illness or accident, or is otherwise mentally or physically incompetent or unable to give a valid receipt, the Committee may cause the payment becoming due to be paid to the person's spouse, child, grandchild, parent, brother or sister, or to any appropriate individual appointed by a court of competent jurisdiction, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment. 14.6 Obligations to Withhold and Pay Taxes Each Participant or other recipient of benefits under the Plan shall be liable for all tax obligations, if any, with respect to any sum received pursuant to the Plan and for accurately reporting and paying in full all such taxes to the appropriate federal, state, and local authorities. The Company shall have the right to deduct and withhold from any payment due under the Plan or from other amounts owed to or with respect to the Participant all withholding taxes and other amounts required by law or as necessary to set off amounts owed by the Participant to the Company. 14.7 Representations The Company hereby does not represent or guarantee that any particular federal, state or local income, payroll, personal property, or other tax consequence will result from participation in this Plan. A Participant should consult with professional tax advisors to determine the tax consequences of his participation. 14.8 Severability If a court of competent jurisdiction holds any provision of this Plan to be invalid or unenforceable, the remaining provisions of the Plan shall continue to be fully effective. 14.9 Applicable Law This Plan shall be governed by and construed in accordance with applicable federal law and, to the extent not preempted by such federal law, the laws of the Commonwealth of 29 Massachusetts applicable to contracts that are made and to be wholly performed in such jurisdiction. 30 14.10 Successor Employers This Plan shall enure to the benefit of and be binding upon the Company and its successors. IN WITNESS WHEREOF, the Company has caused this Plan to be executed under seal by its duly authorized representative this 2nd day of November, 1998. NEW ENGLAND BUSINESS SERVICE, INC. By: /s/ Robert J. Murray Title: Chairman, President and Chief Executive Officer (Seal) 31 31 ~~-----END PRIVACY-ENHANCED MESSAGE-----~~