-----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, KKBQS81NCA3gN8lYLH1b42U13hiuCDkRAxMC3l0hegQdaaBraKTzxKBCCXdD7m9X fQ8qfatt61iTo9CvbPK2eQ== 0000205700-99-000001.txt : 19990209 0000205700-99-000001.hdr.sgml : 19990209 ACCESSION NUMBER: 0000205700-99-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981226 FILED AS OF DATE: 19990208 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: 99523401 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 December 26, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 1-11427 NEW ENGLAND BUSINESS SERVICE, INC. ---------------------------------- (Exact name of the registrant as specified in its charter) Delaware 04-2942374 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 Main Street Groton, Massachusetts, 01471 ---------------------------- (Address of principal executive offices) (Zip Code) (978) 448-6111 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of common shares of the Registrant outstanding on January 29, 1999 was 14,488,579. 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)

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 December 26, 1998 was $2,321,000. On June 3, 1998, the Company acquired all of the outstanding common stock of McBee Systems, Inc. and all of the assets of McBee Systems of Canada, Inc. (collectively "McBee") for consideration of approximately $48,518,000 in cash (net of cash acquired), and 382,352 shares of Company common stock valued at approximately $12,600,000, for an aggregate purchase price of $61,118,000. Purchase price allocations and useful lives are still subject to final valuations. The Company does not believe these initial allocations will change materially. As part of the purchase accounting for the McBee acquisition and included in the allocation of the acquisition costs, a liability of $2,642,000 was recorded to cover anticipated costs (primarily employee termination benefits) related to a plan to close redundant McBee manufacturing and warehouse facilities and to reduce manufacturing personnel. The liability associated with the McBee integration plan remaining as of December 26, 1998 was $1,983,000. Should the integration liabilities for McBee and Rapidforms be settled at amounts less than their original estimates, the excess will reduce the amount of recorded goodwill. 3. Inventories - -------------- Inventories are carried at the lower of first-in, first-out cost or market. Inventories at December 26, 1998 and June 27, 1998 consisted of:

4. New Accounting Pronouncements - ------------------------------- In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The Company has adopted this Statement in the current fiscal year. In the current year-to-date period approximately $751,000 in costs which previously would have been expensed have been capitalized under the caption "Property and equipment, net." The Company also implemented the disclosure standard SFAS No. 130 "Reporting Comprehensive Income" in the first quarter of fiscal year 1999. The AICPA has also issued Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities." The policies promulgated by this statement had previously been followed by the Company and thus its implementation will not impact the financial statements. In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits." In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The former two statements are considered to be "disclosure only" standards and are not anticipated to have a material impact on the consolidated financial statements (these will be implemented in fiscal year 1999). The latter standard does have a direct impact on the consolidated financial statements and will be adopted by the Company in fiscal year 1999. Yet, in the Company's situation, such impact is not considered likely to be material in nature. Item 2. Management's Discussion and Analysis of Financial Condition - ------------------------------------------------------------------- and Results of Operations - --------------------------------- Overview - -------- New England Business Service, Inc. (the "Company"), a Delaware corporation founded in 1952, incorporated in Massachusetts in 1955 and reincorporated in Delaware in 1986, designs, produces and distributes business forms, checks, envelopes, labels, greeting cards, signs, stationery and related printed products and distributes packaging, shipping and warehouse supplies, software, work clothing and other business products through mail order, direct sales, telesales, dealers and the internet to small businesses throughout the United States, Canada, the United Kingdom and France. Any sentence followed by an asterisk (*) in this section constitutes a forward-looking statement which reflects the Company's current expectations. There can be no assurance the Company's actual performance will not differ materially from those projected in such forward-looking statements due to the important factors described in the section to this Management's Discussion and Analysis of Financial Condition and Results of Operations titled "Forward- Looking Information and Risk Factors to Future Performance." Results of Operations - --------------------- Net sales increased $45.6 million or 55.9% to $127.3 million in the second quarter of fiscal year 1999 from $81.7 million in last year's second quarter. The sales increase was composed of approximately a $41.3 million, or 50.6%, increase associated with the acquisition of Rapidforms, Inc. ("Rapidforms"), McBee Systems, Inc. and all of the assets of McBee Systems of Canada, Inc. (collectively "McBee") during fiscal year 1998, and a $4.3 million, or 5.3%, increase in sales of the Company's other business units. Sales in fiscal year 1999 were aided by favorable customer response to the recently launched Company Colors(tm) line of work wear. The second quarter of the fiscal year also is the primary time period for seasonal sales of holiday cards for both Rapidforms and the Company's other business units. McBee and Rapidforms were acquired subsequent to the end of last year's first quarter. Net sales increased $82.7 million or 52.6% to $240.0 million for the first six months of fiscal year 1999 from $157.3 million in last year's first six months. The sales increase was composed of approximately a $76.3 million, or 48.5%, increase associated with the acquisition of Rapidforms and McBee during fiscal year 1998, and a $6.4 million, or 4.1%, increase in sales of the Company's other business units. 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 have increased steadily over the past few years until recently. In addition, certain segments of the paper market have demonstrated considerable price volatility in that same time period. Postal rates for third class mail have also increased sporadically and at times significantly in the past decade. The Company has been able to counteract the impact of postal and paper cost increases with cost reduction programs and selected product price increases. Due to increased competition in the small business forms, checks, stationery and supplies marketplace, no assurance can be given that the Company will be able to increase product pricing to compensate for future paper or postal cost increases. The inability to raise prices in response to paper or postal cost increases could reduce the Company's operating profitability and net income. 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 are no specified repayment dates for the loans, the forward exchange rate contracts are of limited duration and are replaced periodically as they mature. In order to effectively convert the interest rate of a portion of the Company's debt from a Eurodollar based floating rate to a fixed rate, the company has entered into interest rate swap agreements with major commercial banks. Although the Company is exposed to credit and market risk in the event of future nonperformance by any of the banks, management has no reason to believe that such an event will occur. Upon reviewing its derivatives and other foreign currency and interest rate instruments, based on historical foreign currency rate movements and the fair value of market-rate sensitive instruments at year-end, the Company does not believe that near term changes in foreign currency or interest rates will have a material impact on its future earnings, fair values or cash flows. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NEW ENGLAND BUSINESS SERVICE, INC. ---------------------------------- (Registrant) February 9, 1999 /s/Daniel M. Junius - ----------------- -------------------- Date Daniel M. Junius Senior Vice President-Chief Financial Officer (Principal Financial and Accounting Officer) 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)

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 DECEMBER 26, 1998 AND THE RELATED STATEMENTS OF CONSOLIDATED INCOME AND CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-26-1999 JUN-28-1998 DEC-26-1998 4,709 0 62,401 4,797 23,323 101,743 139,388 85,213 307,024 47,658 0 0 0 15,268 110,190 307,024 239,983 239,983 88,499 88,499 0 2,074 4,480 21,864 8,474 13,390 0 0 0 13,390 .93 .91

EX-10.1 4 October 23, 1998 Mr. Daniel M. Junius 12 Crestwood Court Amherst, NH 03031 Dear Dan: New England Business Service, Inc., a Delaware corporation (the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a change in control of the Company. In particular, the Board believes it important, should the Company or its shareholders receive a proposal for transfer of control of the Company, that you be able to assess and advise the Board whether such proposal would be in the best interests of the Company and its shareholders and to take such other action regarding such proposal as the Board might determine to be appropriate, without being influenced by the uncertainties of your own situation. In order to induce you to remain in the employ of the Company, this letter agreement, which has been approved by the Board, sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a "change in control" of the Company under the circumstances described below. 1. Agreement to Provide Services; Right to Terminate. (i) Except as otherwise provided in paragraph (ii) below, the Company or you may terminate your employment at any time, subject to the Company's providing the benefits hereinafter specified in accordance with the terms hereof. 1 (ii) In the event a tender offer or exchange offer is made by a Person (as hereinafter defined) for more than 25% of the combined voting power of the Company's outstanding securities ordinarily having the right to vote at elections of directors ("Outstanding Company Voting Securities"), including shares of common stock ($1.00 par value) of the Company (the "Stock"), you agree that you will not leave the employ of the Company (other than as a result of Disability or upon Retirement, as such terms are hereinafter defined) and will render the services contemplated in the recitals to this Agreement until such tender offer or exchange offer has been abandoned or terminated or a change in control of the Company, as defined in Section 3 hereof, has occurred. For purposes of this Agreement, the term "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is defined in Section 3(a)(9) and as used in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, a wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored by the Company or a subsidiary of the Company. 2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until July 1, 2001; provided, however, that this Agreement shall continue in effect for a period of twenty-four (24) months after a change in control of the Company, as defined in Section 3 hereof, if such change in control shall have occurred during the term of this Agreement. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company terminate your employment prior to a change in control of the Company as provided in Section 1 (i) above. 3. Change in Control. For the purpose of this Agreement a "Change in Control" shall mean: (a) The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of the Stock or (ii) the combined voting power of the Outstanding Company Voting Securities; provided, however, that the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege); (B) any acquisition by the Company or by any corporation controlled by the Company; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (D) any acquisition by any corporation pursuant to a consolidation or merger, if, following such consolidation or merger, the conditions describe in clauses (i), (ii) and (iii) of subsection (c) of this paragraph are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") ceasing for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director (other than a director designated by a Person who has entered into an agreement within the Company to effect a transaction described in clauses (a) or (c) of this Section) subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote or resolution of at least a majority of the directors then comprising the Incumbent 2 Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Adoption by the Board of a resolution approving an agreement of consolidation of the Company with or merger of the Company into another corporation or business entity in each case, unless, following such consolidation or merger, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger and/or the combined voting power of the then outstanding voting securities of such corporation or business entity entitled to vote generally in the election of directors (or other persons having the general power to direct the affairs of such entity) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Company Voting Securities immediately prior to such consolidation or merger in substantially the same proportions as their ownership, immediately prior to such consolidation or merger, of the Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation or other business entity resulting from such consolidation or merger and any Person beneficially owning, immediately prior to such consolidation or merger, directly or indirectly, 35% or more of the Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger and/or the combined voting power of the then outstanding voting securities of such corporation or business entity entitled to vote generally in the election of its directors (or other persons having the general power to direct the affairs of such entity) and (iii) at least a majority of the members of the board of directors (or other group of persons having the general power to direct the affairs of the corporation or other business entity) resulting from such consolidation or merger were members of the Incumbent Board at the time of the execution of the initial agreement providing for such consolidation or merger; provided, that any right to receive compensation pursuant to Section 5 below which shall vest by reason of the action of the Board pursuant to this subsection (c) shall be divested upon (A) the rejection of such agreement of consolidation or merger by the stockholders of the Company or (B) its abandonment by either party thereto in accordance with its terms; or (d) Adoption by the requisite majority of the whole Board, or by the holders of such majority of stock of the Company as is required by law or by the Certificate of Incorporation or By-Laws of the Company as then in effect, of a resolution or consent authorizing (i) the dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation or other business entity with respect to which, following the such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the outstanding voting securities of such 3 corporation or other entity to vote generally in the election of its directors (or other persons having the general power to direct its affairs) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Stock and/or Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation or other business entity and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 35% or more of the Stock and/or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the then outstanding voting securities of such corporation or other business entity entitled to vote generally in the election of directors (or other persons having the general power to direct its affairs), and (C) at least a majority of the members of the board of directors or group of persons having the general power to direct the affairs of such corporation or other entity were members of the Incumbent Board at the time of the execution of the initial agreement of action of the Board providing for such sale or other disposition of assets of the Company; provided, that any right to receive compensation pursuant to Section 5 below which shall vest by reason of the action of the Board or the stockholders pursuant to this subsection shall be divested upon the abandonment by the Company of such dissolution, or such sale of or other disposition of assets, as the case may be. Notwithstanding anything in the foregoing to the contrary, no change in control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in you, or a group of Persons which includes you, acquiring, directly or indirectly, 35% or more of the combined voting power of the Company's Outstanding Voting Securities. 4. Termination Following Change in Control. If any of the events described in Section 3 hereof constituting a change in control of the Company shall have occurred, you shall be entitled to the benefits provided in section 5 hereof upon the termination of your employment with the Company within twenty-four (24) months after such event, unless such termination is (a) because of your death, (b) by the Company for Cause, Disability or Retirement or (c) by you other than for Good Reason (as all such capitalized terms are hereinafter defined). (i) Disability. Termination by the company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for one hundred twenty (120) consecutive days as a result of your incapacity due to physical or mental illness, unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence you shall have returned to the full time performance of your duties. (ii) Retirement. Termination by you or by the Company of your employment based 4 on "Retirement" shall mean termination on or after your normal retirement date as defined in the Company's Pension Plan (or any successor or substitute plan or plans of the Company put into effect prior to a change in control) (the "Pension Plan"). (iii) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a demand for substantial performance is delivered to you by the Chairman of the Board or President of the Company which specifically identifies the manner in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of this paragraph (iii), no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for Cause so long as the Board has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in (a) or (b) of this paragraph (iii) and specifying the particulars thereof in detail. (iv) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on: (A) a determination by you, in your reasonable judgment, that there has been an adverse change in your status or position(s) as an officer of the Company as in effect immediately prior to the change in control, including, without limitation, any adverse change in your status or position as a result of a diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of you from or any failure to reappoint or reelect you to such position(s) (except in connection with the termination of your employment for Cause, Disability or Retirement or as a result of your death or by you other than for Good Reason); (B) a reduction by the Company in your base salary as in effect immediately prior to the change in control; 5 (C) the failure by the Company to continue in effect any Plan (as hereinafter defined, excluding any stock option plan) in which you are participating at the time of the change in control of the Company (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the change in control, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case on the date of the change in control or which would materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you at the time of the change in control; (D) the failure by the Company to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with the Company's normal vacation policy as in effect immediately prior to the change in control; (E) the Company's requiring you to be based at an office that is greater than 50 miles from where your office is located immediately prior to the change in control except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the change in control; (F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 6 hereof; (G) any purported termination by the Company of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (v) below (and, if applicable, paragraph (iii) above); and for purposes of this Agreement, no such purported termination shall be effective; or (H) any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which, prior to the change in control, you were permitted by the Board to attend to or engage in. For purposes of this Agreement, "Plan" shall mean any compensation plan such as an incentive, stock option or restricted stock plan or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees. 6 (v) Notice of Termination. Any purported termination by the Company or by you following a change in control shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. (vi) Date of Termination. "Date of Termination" following a change in control shall mean (a) if your employment is to be terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (b) if your employment is to be terminated by the Company for Cause or by you pursuant to Sections 4 (iv) (F) and 6 hereof or for any other Good Reason, the date specified in the Notice of Termination, or (c) if your employment is to be terminated by the Company for any reason other than Cause, the date specified in the Notice of Termination, which in no event shall be a date earlier than ninety (90) days after the date on which a Notice of Termination is given, unless an earlier date has been expressly agreed to by you in writing either in advance of, or after, receiving such Notice of Termination. In the case of termination by the Company of your employment for Cause, if you have not previously expressly agreed in writing to the termination, then within thirty (30) days after receipt by you of the Notice of Termination with respect thereto, you may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination shall be the date set either by mutual written agreement of the parties or by the arbitrators in a proceeding as provided in Section 13 hereof. During the pendency of any such dispute, the Company will continue to pay you your full compensation in effect just prior to the time the Notice of Termination is given (or, if higher, as in effect immediately prior to the change in control) and until the dispute is resolved in accordance with Section 13. 5. Compensation Upon Termination or During Disability; other Agreements. (i) During any period following a change in control of the Company that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall continue to receive your salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such Plans, until your employment is terminated pursuant to and in accordance with paragraphs 4(i) and 4 (vi) hereof. Thereafter, your benefits shall be determined in accordance with the Plans then in effect. (ii) If your employment shall be terminated for Cause following a change in control of the Company, the Company shall pay you your salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you. Thereupon the Company shall have no further obligations to you under this Agreement. (iii) Subject to Section 8 hereof, if, within twenty-four (24) months after a change in control of 7 the Company, as defined in Section 3 above, shall have occurred, your employment by the Company shall be terminated (a) by the Company other than for Cause, ' Disability or Retirement or (b) by you for Good Reason, then the Company shall pay to you, no later than the fifth day following the Date of Termination, without regard to any contrary provisions of any Plan, the following: (A) (x) your salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given (or, if higher, as in effect immediately prior to the change in control) and (y) any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you; and (B) you shall receive an amount equal to 1.5 times the average of your calendar year earnings from the Company, consisting for the purposes of this Agreement of base salary and any bonus paid pursuant to the Executive Bonus Plan, the Management Incentive Plan, Profit Sharing Plan or similar bonus plan, during the period consisting of the 5 most recent consecutive calendar years (or fewer than 5, if applicable) ending on or before the date of the change of control. For purposes of computing payment under this Agreement, compensation for any partial calendar year, including the year during which a change of control occurs, shall be annualized. (iv) If, within twenty-four (24) months after a change in control of the Company, as defined in Section 3 above, shall have occurred, your employment by the Company shall be terminated (a) by the Company other than for Cause, Disability or Retirement or (b) by you for Good Reason, then the Company shall maintain in full force and effect, for the continued benefit of you and your dependents for a period terminating on the earliest of (a) thirty months after the Date of Termination, (b) the commencement date of equivalent benefits from a new employer or (c) your normal retirement date under the terms of the Retirement Plan, all insured and self-insured employee welfare benefit Plans in which you were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such Plans (and any applicable funding media) and you continue to pay an amount equal to your regular contribution under such plans for such participation. In the event that your participation in any such Plan is barred, the Company, at its sole cost and expense, shall arrange to have issued for the benefit of you and your dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which you otherwise would have been entitled to receive under such Plans pursuant to this paragraph (iv) or, if such insurance is not available at a reasonable cost to the Company, the Company shall otherwise provide you and your dependents with equivalent benefits (on an after-tax basis). You shall not be required to pay any premiums or other charges in an amount greater than that which you would have paid in order to participate in such Plans. If, at the end of three years after the Termination Date, you have not reached your normal retirement date, you are participating in any of such Plans and you have not previously received or are not then receiving equivalent benefits from a new employer, the Company shall arrange, at its sole cost and expense, to enable you to convert your and your dependents' coverage under such Plans to individual policies or programs 8 upon the same terms as employees of the Company may apply for such conversions. (v) Except as specifically provided in paragraph (iv) above, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 6. Successors; Binding Agreement. (i) The Company will seek, by written request at least five business days prior to the time a Person becomes a Successor (as hereinafter defined), to have such Person assent to the fulfillment of the Company's obligations under this Agreement. Failure of such Person to furnish such assent by the later of (A) three business days prior to the time such Person becomes a Successor or (B) two business days after such Person receives a written request to so assent shall constitute Good Reason for termination by you of your employment if a change in control of the Company occurs or has occurred. For purposes of this Agreement, "Successor" shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's voting securities or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate. (iii) For purposes of this Agreement, the "Company" shall include any corporation or other entity which is the surviving or continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist. 7. Fees and Expenses; Mitigation. (i) The Company shall reimburse you, on a current basis, for all reasonable legal fees and related expenses incurred by you in connection with the Agreement following a change in control of the Company, including, without limitation, (a) all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or incurred by you in seeking advice with respect to the matters set forth in Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit provided by this Agreement, in each case, regardless of whether or not your claim is upheld by a court of competent jurisdiction; provided, however, you shall be required to repay any such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination that the position taken by you was frivolous or advanced by you 9 in bad faith. (ii) You shall not be required to mitigate the amount of any payment the Company becomes obligated to make to you in connection with this Agreement, by seeking other employment or otherwise. 8. Taxes. (i) All payments to be made to you under this Agreement will be subject to required withholding of federal, state and local income and employment taxes. (ii) Notwithstanding anything in the foregoing to the contrary, if any of the payments provided for in this Agreement, together with any other payments which you have the right to receive from the Company or any corporation which is a member of an "affiliated group" (as defined in Section 1504 (a) of the Internal Revenue Code of 1986 (the "Code") without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a "parachute payment" (as defined in Section 28OG (b) (2) of the Code) , the payments pursuant to this Agreement shall be reduced (reducing first the payments under Section 5 (iii) (B) ) to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code; provided, however, that the determination as to whether any reduction in the payments under this Agreement pursuant to this proviso is necessary shall be made by you in good faith, and such determination shall be conclusive and binding on the Company with respect to its treatment of the payment for tax reporting purposes. 9. Survival. The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 5, 6 (ii), 7, 8, 13 and 14 of this Agreement shall survive termination of this Agreement. 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned employee, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board of the Company, with a copy to Terrence W. Mahoney, Hill & Barlow, One International Place, Boston, MA 02110, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chairman of the Board or President of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be 10 deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Massachusetts. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts by three arbitrators in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators' award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 13. 14. Employee's Commitment. You agree that subsequent to your period of employment with the Company, you will not at any time communicate or disclose to any unauthorized person, without the written consent of the Company, any proprietary processes of the Company or any subsidiary or other confidential information concerning their business, affairs, products, suppliers or customers which, if disclosed, would have a material adverse effect upon the business or operations of the Company and its subsidiaries, taken as a whole; it being understood, however, that the obligations of this Section 14 shall not apply to the extent that the aforesaid matters (a) are disclosed in circumstances where you are legally required to do so or (b) become generally known to and available for use by the public otherwise than by your wrongful act or omission. 15. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11 If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, NEW ENGLAND BUSINESS SERVICE, INC. By/s/ Robert J. Murray -------------------- Robert J. Murray For NEBS, Inc. Board of Directors Agreed to this 18th day Of November, 1998 /s/ Daniel M. Junius - ------------------------------ Mr. Daniel M. Junius 12 Crestwood Court Amherst, NH 03031 12 EX-10.2 5 SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT NEW ENGLAND BUSINESS SERVICE, INC. SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of January 8, 1999 (this "Amendment"), by and among NEW ENGLAND BUSINESS SERVICE, INC. (the "Borrower"), a Delaware corporation having its principal place of business at 500 Main Street, Groton, Massachusetts 01471, and the Subsidiaries of the Borrower listed on the signature pages hereto (the "Guarantors"), BANKBOSTON, N.A., a national banking association ("BKB"), and the other lending institutions listed on Schedule 1 to the Credit Agreement referred to below (together with BKB, the "Banks"), BANKBOSTON, N.A., as agent for itself and such other lending institutions (the "Agent"), and FLEET NATIONAL BANK, as documentation agent for itself and such other lending institutions (the "Documentation Agent"). WHEREAS, the Borrower wishes to enter into certain corporate restructuring transactions pursuant to which (a) McBee Systems, Inc., a Colorado corporation ("McBee"), will become a wholly owned Subsidiary of Rapidforms, Inc., a New Jersey corporation ("Rapidforms"), and (b) Russell & Miller, Inc., a Delaware corporation ("Russell & Miller") will become a wholly-owned subsidiary of McBee (the transactions described in clauses (a) and (b) are hereinafter together referred to as the "Restructuring Transactions"); WHEREAS, the Borrower, Rapidforms and McBee wish to contribute certain of their intellectual property rights to Russell & Miller; WHEREAS, each of the Borrower, Rapidforms and McBee will in turn license such intellectual property rights from Russell & Miller; WHEREAS, Russell & Miller will contribute, on an ongoing basis, all royalty payments received by it under the License Agreement to R&M Trust, a voluntary association with transferable shares organized under and by virtue of the laws of the Commonwealth of Massachusetts (commonly referred to as a Massachusetts business trust) ("R&M Trust"); WHEREAS, R&M Trust intends to loan substantially all of its cash assets to the Borrower, which loans shall be evidenced by an Unsecured Subordinated Promissory Note dated as of October 8, 1998; -2- WHEREAS, the Borrower, the Banks, the Agent and the Documentation Agent are parties to an Amended and Restated Revolving Credit Agreement dated as of December 18, 1997 (as amended and in effect from time to time, the "Credit Agreement," capitalized terms defined therein having the same meanings herein as therein), pursuant to which the Banks have extended credit to the Borrower on the terms and subject to the conditions set forth therein; WHEREAS, the Borrower has requested that the Agent and the Banks amend the Credit Agreement so as to permit, to the extent required, the Restructuring Transactions and the other transactions described in the foregoing recitals; WHEREAS, subject to the terms and conditions set forth herein, the Borrower, the Banks, the Agent and the Documentation Agent have agreed to amend the Credit Agreement as set forth herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Credit Agreement as follows: 1. Amendments to Definitions. Section 1.1 of the Credit Agreement is hereby amended by: (a) adding the following new definitions to section 1.1 of the Credit Agreement in the proper alphabetical order: "Intercompany Subordination Agreement. The Intercompany Subordination Agreement dated as of October 8, 1998 among the Agent, the Borrower and R&M Trust." "R&M Contribution Agreement. The agreement pursuant to which each of Rapidforms, McBee and Russell & Miller will contribute cash generated from its respective operations to R&M Trust (including, in the case of Russell & Miller, royalty payments made to it under any of the Trademark License Agreements), in form and substance (including any modifications thereof) satisfactory to the Agent." "R&M Trust. R&M Trust, a voluntary association with transferable shares organized under and by virtue of the laws of the Commonwealth of Massachusetts (commonly referred to as a Massachusetts business trust)." "Restructuring Transactions. The contribution by the Borrower to Rapidforms of one hundred percent (100%) of the issued and outstanding capital stock of McBee; and the contribution by Rapidforms to McBee of one hundred percent (100%) of the issued and outstanding capital stock of Russell & Miller." "Russell & Miller. Russell & Miller, Inc., a Delaware corporation." "Trademark Assets. The trademark related intellectual property rights and related intangible assets to be contributed by the Borrowers, Rapidforms or McBee to Russell & Miller pursuant to, and as described in, the Trademark Contribution Agreement." -3- "Trademark Contribution Agreement. The Agreement pursuant to which each of the Borrower, Rapidforms and McBee will contribute the Trademark Assets to Russell & Miller, in form and substance (including any modifications thereto) satisfactory to the Agent." "Trademark License Agreements. The separate agreements pursuant to which each of the Borrower or one or more of its Subsidiaries will license from Russell & Miller (i) all United States and foreign trademarks, service marks, common law marks, trade names and trade dress owned by Russell & Miller, and (ii) all United States and foreign trademarks, service marks, common law marks, trade names and trade dress licensed by Russell & Miller that Russell & Miller is legally and/or contractually able to sublicense to the Borrower and its Subsidiaries, in form and substance (including any modifications thereto) satisfactory to the Agent." "Unsecured Subordinated Promissory Note. The promissory note evidencing the Indebtedness permitted by section 7.1(p), in form and substance (including any modifications thereof) satisfactory to the Agent." (b) deleting the definition of "Consolidated Funded Debt" in its entirety and replacing it with the following new definition: "Consolidated Funded Debt. At any time of determination, the sum of (i) the amount of the Loans outstanding (after giving account to any amounts requested) plus accrued but unpaid interest thereon; plus (ii) the outstanding amount of any other Indebtedness for borrowed money (other than intercompany Indebtedness owed by the Borrower and its Subsidiaries to each other and permitted by the terms hereof), in respect of Capitalized Leases or which is otherwise subject to the payment of interest plus accrued but unpaid interest on such Indebtedness, including expenses consisting of interest in respect of Capitalized Leases and including commitment fee, agency fee, facility fee, balance deficiency fee and similar fee expenses in connection with the borrowing of money." (c) amending the definition of "Loan Documents" by inserting the text "the Intercompany Subordination Agreement and any other subordination arrangements entered into pursuant to section 7.1(j) or (p)" immediately after the text "the Fee Letters" and immediately before the text "any Guaranty". 2. Amendment of section 5.1.1 of the Credit Agreement. Section 5.1.1 of the Credit Agreement is hereby deleted in its entirety, and the following new section 5.1.1 is hereby substituted in lieu thereof: "5.1.1. Organization; Good Standing. Each of the Borrower and its Subsidiaries (i) is a corporation or, in the case of R&M Trust, a Massachusetts business trust, duly organized, validly existing and, except in the case of R&M Trust (with respect to which no such concept is applicable), in good standing under the laws of its jurisdiction of organization, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing -4- as a foreign corporation or other entity and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of the Borrower or such Subsidiary." 3. Amendment of section 5.1.2 of the Credit Agreement. Section 5.1.2 of the Credit Agreement is hereby amended by: (a) deleting clause (i) thereof in its entirety and substituting in lieu thereof the following text: "(i) are within the corporate or other authority of such Person,"; (b) inserting in clause (ii) thereof the text "or other" immediately after the word "corporate" and immediately before the text "proceedings"; and (c) inserting in clause (iv) thereof the text "or other organizational documents thereof, immediately after the text "corporate charter or bylaws" and immediately before the text "of, or any agreement". 4. Amendment of section 6.6 of the Credit Agreement. Section 6.6 of the Credit Agreement is hereby amended by: (a) deleting the title thereof in its entirety and substituting in lieu thereof the title "Corporate or Other Existence; Maintenance of Properties."; and (b) inserting in the first sentence thereof, immediately after the text "and those of its Subsidiaries" and immediately before the text "and will not, and will not cause or permit", the text "(and, in the case of R&M Trust, its existence, rights and franchises as a Massachusetts business trust)". 5. Amendment of section 6.14 of the Credit Agreement and Addition of new section 6.15 to the Credit Agreement. Section 6.14 of the Credit Agreement is hereby deleted in its entirety, and the following new section section 6.14 and 6.15 are hereby substituted in lieu thereof: "6.14. Certain Intercompany Payments. The Borrower will, and will, as applicable, cause each of Russell & Miller and R&M Trust to, (a) promptly upon Russell & Miller's receipt thereof, cause all royalty payments received by Russell & Miller pursuant to any of the Trademark License Agreements (net of reasonable expenses incurred by Russell & Miller in connection with the maintenance, protection and enforcement of its related trademark intellectual property rights and the performance of its obligations under the Trademark License Agreements) to be paid to R&M Trust as capital contributions, and (b) promptly upon R&M Trust's receipt thereof, cause R&M Trust to lend to the Borrower pursuant to the Unsecured Subordinated Promissory Note all amounts (net of reasonable, ordinary course operating expenses) received by it pursuant to clause (a) of this section 6.14 or otherwise. 6.15. Further Assurances. The Borrower will, and will cause each of its Subsidiaries to, cooperate with the Banks and the Agent and execute such further -6- (f) inserting, immediately after subsection (n) and before existing subsection (o) the following new subsections (o), (p) and (q) with the following text: "(o) obligations in respect of royalty payments owed by any of the Borrower or any of its Subsidiaries to Russell & Miller under and pursuant to any of the Trademark License Agreements; (p) Indebtedness of the Borrower to R&M Trust under and pursuant to the Unsecured Subordinated Promissory Note, which such Indebtedness is subordinated to the Obligations on terms and conditions satisfactory to the Agent, which shall include the Intercompany Subordination Agreement; and" (q) Indebtedness of Russell & Miller and R&M Trust not expressly permitted under subsections (a) through (p) of this section 7.1, in an aggregate amount (owed by either or both such entities) not to exceed $5,000,000 at any time; and" (g) deleting existing subsection (o) and substituting in lieu thereof the following new subsection (r): "(r) Indebtedness of the Borrower or any of its Subsidiaries (other than Russell & Miller or R&M Trust) not expressly permitted under subsections (a) through (q) of this section 7.1 in an aggregate amount not to exceed $5,000,000 at any time." 7. Amendment of section 7.3 of the Credit Agreement. Section 7.3 of the Credit Agreement is hereby amended by: (a) deleting clause (ii) from subsection (j) thereof in its entirety and substituting in lieu thereof the following clause (ii): "(ii) made following the Closing Date in Subsidiaries of the Borrower (other than R&M Trust) in an aggregate amount (other than Investments permitted by section 7.3(n), section 7.3(o) or section 7.3(p)) for all such Subsidiaries (other than R&M Trust) not to exceed $7,500,000;". (b) deleting the word "and" at the end of subsection (m) thereof; (c) inserting, immediately following subsection (m) thereof and immediately before existing subsection (n) thereof, new subsections (n), (o), (p) and (q) with the following text: "(n) in connection with the Restructuring Transactions, Investments consisting of the capital contribution by the Borrower to Rapidforms of 100% of the issued and outstanding capital stock of McBee and by Rapidforms to McBee of 100% of the issued and outstanding capital stock of Russell & Miller; (o) Investments consisting of the contribution by each of the Borrower, Rapidforms and McBee of its Trademark Assets (whether owned on the Second Amendment -7- Effective Date or thereafter acquired) to Russell & Miller pursuant to the Trademark Contribution Agreement; (p) without limiting the Investments permitted by section 7.3(j), Investments in R&M Trust by Rapidforms, McBee and Russell & Miller pursuant to the R&M Contribution Agreement; (q) Investments with respect to Indebtedness permitted by section 7.1(p)." (d) deleting existing subsection (n) at the end thereof and substituting in lieu thereof the following new subsection (r): "(r) Investments not otherwise expressly permitted under subsections (a)-(q) of this section 7.3, in an aggregate amount not to exceed $5,000,000." 8. Amendment to section 7.5.2 of the Credit Agreement. Section 7.5.2 of the Credit Agreement is hereby amended by: (a) deleting the word "and" immediately before clause (e) thereof; (b) inserting, immediately before the period (".") at the end thereof the following new subsections (f) and (g): "(f) in connection with the Restructuring Transactions, transfer by the Borrower to Rapidforms of 100% of the issued and outstanding shares of the capital stock of McBee and the transfer by Rapidforms to McBee of 100% of the issued and outstanding capital stock of Russell & Miller; and (g) transfer by the Borrower, Rapidforms and McBee to Russell & Miller of all of their Trademark Assets pursuant to the Trademark Contribution Agreement; provided, however, that such Trademark Assets shall be licensed back to the Borrower, Rapidforms and McBee pursuant to and on the terms and conditions set forth in the applicable Trademark License Agreement." 9. Amendment to section 7.6 of the Credit Agreement. Section 7.6 of the Credit Agreement is hereby amended by deleting the period (".") at the end thereof and substituting in lieu thereof the following text: "; provided, however, that the Borrower, Rapidforms and McBee may transfer the Trademark Assets to Russell & Miller pursuant to the terms and conditions set forth in the Trademark Contribution Agreement, and Russell & Miller may license the Trademark Assets to the Borrower, and any of its Subsidiaries (other than R&M Trust) pursuant to the terms and conditions set forth in the Trademark License Agreements; and provided further that, to the extent otherwise limited by this section 7.6, the Borrower may sell approximately seventeen (17) acres of real property owned by it in Atlanta, Douglas County, Georgia, and may lease all or a portion of a building or buildings to be constructed thereon." 10. Amendment of section 7.12 of the Credit Agreement. Section 7.12 of the Credit Agreement is hereby amended by: -8- (a) deleting the heading thereof and substituting in lieu thereof the following heading: "Conduct of Business; Agreements Regarding Certain Subsidiaries". (b) inserting at the end thereof the following text: "R&M Trust shall not conduct any business or activities other than the lending to the Borrower pursuant to the Unsecured Subordinated Promissory Note of all amounts (net of reasonable, ordinary course operating expenses) received by it, whether by way of capital contributions pursuant to the R&M Contribution Agreement or otherwise, and shall have no assets other than cash (which shall be loaned to the Borrower in accordance with section 6.14) and Indebtedness owed by the Borrower to it as permitted by section 7.1(p). Without limiting the foregoing and notwithstanding any of the carve-outs contained in section 7.2 (other than section 7.2(a)), section 7.3 (other than section 7.3(b) (with respect to Investments by R&M Trust in a deposit account maintained with BKB until amounts held therein are loaned to the Borrower pursuant to section 6.14), section 7.3(f) and section 7.3(p)) or section 7.11, the Borrower shall not permit R&M Trust to encumber its assets in any manner described in section 7.2, to make or permit to exist or remain outstanding any Investments, or to create or acquire any Subsidiaries". 10. Replacement of Schedule 5.19 to the Credit Agreement. Schedule 5.19 to the Credit Agreement is hereby deleted in its entirety, and Schedule 5.19 attached hereto is hereby substituted in lieu thereof. 11. Representations and Warranties. The Borrower and each of the Guarantors hereby represents and warrants to the Agent and the Banks as of the date hereof, and as of any date on which the conditions set forth in section 12 below are met, as follows: (a) The execution and delivery by each of the Borrower and the Guarantors of this Amendment and all other instruments and agreements required to be executed and delivered by the Borrower or any of the Guarantors in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by each of the Borrower and the Guarantors of any of their obligations and agreements under the Amendment Documents and the Credit Agreement and the other Loan Documents, as amended hereby, are within the corporate or other authority of each of the Borrower and the Guarantors, have been authorized by all necessary corporate proceedings on behalf of each of the Borrower and the Guarantors, and do not and will not contravene any provision of law or the Borrower's charter or any of the Guarantors' charters, other incorporation or organizational papers, by-laws or any stock provision or any amendment thereof or of any indenture, agreement, instrument or undertaking binding upon the Borrower or any of the Guarantors. (b) Each of the Amendment Documents and the Credit Agreement and other Loan Documents, as amended hereby, to which the Borrower or any of the Guarantors is a party constitute legal, valid and binding obligations of such Person, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, -9- reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights. (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Borrower or any of the Guarantors of the Amendment Documents or the Credit Agreement or other Loan Documents, as amended hereby, or the consummation by the Borrower or any of the Guarantors of the transactions among the parties contemplated hereby and thereby or referred to herein. (d) The representations and warranties contained in section 5 of the Credit Agreement and in the other Loan Documents were true and correct at and as of the date made. Except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents, changes occurring in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse) and to the extent that such representations and warranties relate expressly to an earlier date and after giving effect to the provisions hereof, such representations and warranties, after giving effect to this Amendment and the other Amendment Documents, also are correct at and as of the date hereof and will be correct as of the respective dates of the consummation of the Restructuring Transactions and of the effectiveness of the Trademark License Agreements, the Trademark Contribution Agreement, and the R&M Trust Contribution Agreement (as each such capitalized term is defined in the Credit Agreement, as amended hereby). (e) Each of the Borrower and the Guarantors has performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions of this Amendment and the other Amendment Documents, there exists no Event of Default or Default. (f) Each of the Borrower and the Guarantors acknowledges and agrees that the representations and warranties contained in this Amendment shall constitute representations and warranties referred to in section 11.1(e) of the Credit Agreement, a breach of which shall constitute an Event of Default. 12. Effectiveness. This Amendment shall become effective as of December 28, 1998 (the "Effective Date") upon the satisfaction of each of the following conditions, in each case in a manner satisfactory in form and substance to the Agent and the Banks: (a) Each of this Amendment and the Intercompany Subordination Agreement dated as of October 8, 1998 among the Borrower, R&M Trust and the Agent shall have been duly executed and delivered by each of the parties thereto and shall be in full force and effect; (b) The Borrower and the Guarantors shall have delivered to the Agent (i) copies of any amendments to their charter documents, other organizational papers and by-laws effective since the dates on which such charter documents, other organizational papers and by-laws were -10- last delivered to the Agent, with all such amendments being duly certified as true and correct by an officer of each such Person and without other amendment thereto, (ii) an incumbency certificate for each person authorized to sign this Amendment and (iii) authorizing resolutions authorizing this Amendment and the transactions contemplated hereby; and (c) Such other items, documents, agreements, items or actions as the Agent may reasonably request in order to effectuate the transactions contemplated hereby. 13. Miscellaneous Provisions. (a) Each of the Borrower and the Guarantors hereby ratifies and confirms all of its Obligations to the Agent and the Banks under the Credit Agreement, as amended hereby, and the other Loan Documents, including, without limitation, the Loans, and each of the Borrower and the Guarantors hereby affirms its absolute and unconditional promise to pay to the Banks and the Agent the Loans, reimbursement obligations and all other amounts due or to become due and payable to the Banks and the Agent under the Credit Agreement and the other Loan Documents, as amended hereby. Except as expressly amended hereby, each of the Credit Agreement and the other Loan Documents shall continue in full force and effect. This Amendment and the Credit Agreement shall hereafter be read and construed together as a single document, and all references in the Credit Agreement, any other Loan Document or any agreement or instrument related to the Credit Agreement shall hereafter refer to the Credit Agreement as amended by this Amendment. (b) Without limiting the expense reimbursement requirements set forth in section 14 of the Credit Agreement, the Borrower agrees to pay on demand all costs and expenses, including reasonable attorneys' fees, of the Agent incurred in connection with this Amendment. (c) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS. (d) This Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. [Signature Pages Follow] IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Amendment to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written. New England Business Service, Inc. By:/s/ Daniel M. Junius -------------------- Name: Daniel M. Junius Title: Treasurer BANKBOSTON, N.A., individually and as Agent By:/s/Harvey H Thayer ------------------ Name: Harvey H. Thayer Title: Managing Director FLEET NATIONAL BANK, individually and as Documentation Agent By:/s/Mary M. Barcus ----------------- Name: Mary M. Barcus Title: Senior Vice President FIRST UNION NATIONAL BANK, N.A., successor to CoreStates Bank, N.A. By:/s/John D. Brady ---------------- Name: John D. Brady Title: Vice President KEY BANK N.A. By:/s/ Noel B. Grayson ------------------------ Name: Noel B. Grayson Title: Vice President USTRUST By:/s/Brian C. Roche ------------------------ Name: Brain C. Roche Title: Vice President SUNTRUST BANK, ATLANTA By:/s/W. David Wisdom ------------------------- Name: W. David Wisdom Title: Group Vice President SUNTRUST BANK, ATLANTA By:/s/Karen C. Copeland -------------------------- Name: Karen C. Copeland Title: Assistant Vice President THE BANK OF NOVA SCOTIA By:/s/M. R. Bradley ---------------------------- Name: M. R. Bradley Title: Authorized Signatory WACHOVIA BANK, N.A. By:/s/Terence A. Snellings ----------------------------- Name: Terence A. Snellings Title: Senior Vice President KREDIETBANK N.V. By: ------------------------------ Name: Title: KREDIETBANK N.V. By: ------------------------------- Name: Title: SUMMIT BANK By: ------------------------------- Name: Title: Signature page to the Second Amendment The undersigned hereby acknowledges the foregoing Second Amendment as of the Effective Date and agrees that its obligations under the Guaranty will extend to the Credit Agreement, as so amended, and the other Loan Documents. RAPIDFORMS, INC. By:/s/ Daniel M. Junius --------------------------- Name: Daniel M. Junius Title: Treasurer MCBEE SYSTEMS, INC. By:/s/ Daniel M. Junius ------------------------------- Name: Daniel M. Junius Title: Treasurer RUSSELL & MILLER, INC. By:/s/ Daniel M. Junius ------------------------------ Name: Daniel M. Junius Title: Treasurer NEBS INTERACTIVE, INC. By:/s/ Daniel M. Junius ------------------------------- Name: Daniel M. Junius Title: Treasurer NEWSHIRE FORMS, INC. By:/s/ Daniel M. Junius ---------------------------- Name: Daniel M. Junius Title: Treasurer R & M TRUST By: Robert J. Murray, John F. Fairbanks and Craig Barrows, as Trustees under Declaration of Trust of R&M Trust dated July 20, 1998 and filed with the Secretary of the Commonwealth of Massachusetts on July 27, 1998, and not individually By: /s/ Robert J. Murray ---------------------------- Robert J. Murray, as Trustee under said Declaration of Trust and not individually By: /s/ John F. Fairbanks --------------------------- John F. Fairbanks, as Trustee under said Declaration of Trust and not individually By: /s/ Craig Barrows ---------------------------- Craig Barrows, as Trustee under said Declaration of Trust and not individually ~~-----END PRIVACY-ENHANCED MESSAGE-----~~