0000927016-01-502885.txt : 20011008
0000927016-01-502885.hdr.sgml : 20011008
ACCESSION NUMBER: 0000927016-01-502885
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011026
FILED AS OF DATE: 20010919
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: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-11427
FILM NUMBER: 1740154
BUSINESS ADDRESS:
STREET 1: 500 MAIN ST
CITY: GROTON
STATE: MA
ZIP: 01471
BUSINESS PHONE: 5084486111
DEF 14A
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ddef14a.txt
NOTICE & PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
New England Business Service, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
NEW ENGLAND BUSINESS SERVICE, INC.
Notice of Annual Meeting of Stockholders
To Be Held October 26, 2001
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of New
England Business Service, Inc., a Delaware corporation (the "Company"), will be
held at the principal executive offices of the Company, 500 Main Street,
Groton, Massachusetts, on Friday, October 26, 2001 at 10:00 a.m., local time,
for the purpose of considering and voting upon the following matters:
1. To fix the number of directors and elect a Board of Directors to serve
until the next annual meeting of stockholders and until their successors
are elected and qualified;
2. To ratify the selection of Deloitte & Touche LLP as independent auditors
of the Company for the fiscal year ending June 29, 2002; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on August 31, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at this meeting. Accordingly, only stockholders of record at the close
of business on that date are entitled to vote at the meeting or at any
adjournment thereof.
A copy of the Company's annual report to stockholders for the fiscal year
ended June 30, 2001, which contains financial statements and other information
of interest to stockholders, accompanies this notice and the accompanying proxy
statement.
The business matters listed above are discussed more fully in the
accompanying proxy statement. Whether or not you plan to attend the meeting,
you are urged to study the proxy statement carefully and then to fill out, sign
and date the enclosed proxy card. Record holders may also vote by telephone or
through the Internet by following the instructions printed on the enclosed
proxy card.
By order of the Board of Directors
Craig Barrows
Secretary
September 21, 2001
Whether or not you plan to attend the meeting, you are requested to sign and
mail promptly the enclosed proxy which is being solicited on behalf of the
Board of Directors. A return envelope which requires no postage if mailed in
the United States is enclosed for that purpose.
NEW ENGLAND BUSINESS SERVICE, INC.
500 Main Street
Groton, Massachusetts 01471
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 26, 2001
We are mailing this proxy statement, with the accompanying proxy card, to
you on September 21, 2001 in connection with the solicitation of proxies by the
Board of Directors of New England Business Service, Inc. for the 2001 annual
meeting of stockholders and any adjournment of that meeting. The meeting will
be held on Friday, October 26, 2001, beginning at 10:00 a.m., local time, at
the principal executive offices of the Company, 500 Main Street, Groton,
Massachusetts.
INFORMATION ABOUT VOTING
Who can attend and vote at the meeting?
Stockholders of record at the close of business on August 31, 2001 are
entitled to attend and vote at the meeting. Each share of the Company's common
stock is entitled to one vote on all matters to be voted on at the meeting, and
can be voted only if the record owner is present to vote or is represented by
proxy. The proxy card provided with this proxy statement indicates the number
of shares of the Company's common stock that you own and are entitled to vote
at the meeting.
What constitutes a quorum at the meeting?
The presence at the meeting, in person or represented by proxy, of the
holders of a majority of the common stock outstanding on August 31, 2001, the
record date, will constitute a quorum for purposes of the meeting. On the
record date, 12,578,093 shares of common stock were outstanding. For purposes
of determining whether a quorum exists, proxies received but marked "withhold"
or "abstain" and so-called "broker non-votes" (described below) will be counted
as present.
How do I vote by proxy?
If you properly fill in your proxy card and our transfer agent receives it
in time to vote at the meeting, your "proxy" (one of the individuals named on
your proxy card) will vote your shares as you have directed. No postage is
required if your proxy card is mailed in the United States in the return
envelope that has been enclosed with this proxy statement.
If you sign, date and return the proxy card but do not specify how your
shares are to be voted, then your proxy will vote your shares as follows:
. To fix the number of directors at nine and to elect the persons named
below under "Election of Directors".
. To ratify the selection of Deloitte & Touche LLP as independent auditors
for fiscal year 2002.
. In their discretion as to any other business which may properly come
before the meeting.
1
Can I vote by telephone or through the Internet?
If you hold your shares in your own name, you may vote by telephone or
through the Internet by following the instructions printed on your proxy card.
How do I vote if my shares are held by my broker?
If your shares are held by your broker in "street name", you will need to
instruct your broker concerning how to vote your shares in the manner provided
by your broker.
What discretion does my broker have to vote my shares held in "street name"?
A broker holding your shares in "street name" must vote those shares
according to any specific instructions it receives from you. If specific
instructions are not received, your broker generally may vote your shares in
its discretion, depending on the type of proposal involved. Under NYSE rules,
there are certain matters on which brokers may not vote without specific
instructions from you. If such a matter comes to a vote at the meeting, your
shares will not be voted on that matter, giving rise to what is called a
"broker non-vote". Shares represented by broker non-votes will be counted for
purposes of determining the existence of a quorum.
Can I change my vote after I return my proxy card?
Yes. You may change your vote at any time before your proxy is exercised. To
change your vote, you may:
. Deliver to our corporate secretary a written notice revoking your
earlier vote; or
. Deliver to our transfer agent a properly completed and signed proxy card
with a later date; or
. Vote again by telephone or through the Internet; or
. Vote in person at the meeting.
Your attendance at the meeting will not be deemed to revoke a previously-
delivered proxy unless you clearly indicate at the meeting that you intend to
revoke your proxy and vote in person.
How do I vote my 401(k) shares?
If you participate in the Company's 401(k) plan, you will receive a proxy
card that covers Company shares allocated to your account. Properly completed
and signed proxy cards will serve to instruct the plan trustee on how to vote
any shares allocated to your account. The plan trustee will vote all shares as
to which no instructions have been received from plan participants as directed
by the Company's retirement committee in their best judgment.
How are votes counted?
. Election of directors. Assuming that the number of directors is fixed
at nine, the nine nominees who receive the most votes of those shares
present in person or represented by proxy at the meeting will be
elected. If you do not vote for a particular nominee, or you withhold
authority for one or all nominees, your vote will have no effect on the
outcome of the election.
. Other business. The ratification of selection of independent auditors
and approval of all other business which may properly come before the
meeting require the favorable vote of a majority of the shares present
in person or represented by proxy at the meeting and actually voting on
the matter. Abstentions and broker non-votes, which are described above,
will have no effect on the outcome of voting on these matters.
2
How is the Company soliciting proxies?
We bear the cost of preparing, assembling and mailing the proxy material
relating to the solicitation of proxies by the Board of Directors for the
meeting. In addition to the use of the mails, certain of our officers and
regular employees may, without additional compensation, solicit proxies in
person, by telephone or other means of communication. We will also request
brokerage houses, custodians, nominees and fiduciaries to forward copies of the
proxy material to those persons for whom they hold shares, and will reimburse
those record holders for their reasonable expenses in transmitting this
material.
VOTING SECURITIES
Who owns more than 5% of the Company's stock?
On August 31, 2001, there were 12,578,093 shares of common stock
outstanding. On that date, to our knowledge there were six stockholders who own
beneficially more than 5% of the common stock. The table below contains
information, as of that date (except as noted below), regarding the beneficial
ownership of these persons or entities. Unless otherwise indicated, we believe
that each of the persons or entities listed below has sole voting and investing
power with respect to all the shares of common stock indicated.
Number of
Shares
Beneficially
Name and Address of Beneficial Owner Owned Percent
------------------------------------ ------------ -------
T. Rowe Price Associates, Inc............................ 1,497,000(1) 11.09
100 E. Pratt Street
Baltimore, MD 21202
FMR Corp................................................. 1,097,400(2) 8.72
82 Devonshire Street
Boston, MA 02109
Fenimore Asset Management, Inc........................... 1,091,069(3) 8.67
118 North Grand Street
Cobleskill, NY 12043
David L. Babson & Company Inc............................ 1,044,400(4) 8.30
1 Memorial Drive
Cambridge, MA 02142
Royce & Associates, Inc.................................. 925,400(5) 7.36
1414 Avenue of the Americas
New York, NY 10019
Robert J. Murray......................................... 766,693(6) 5.87
c/o New England Business Service, Inc.
500 Main Street
Groton, MA 01471
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(1) Information is based on Form 13F dated August 9, 2001, filed with the SEC
by T. Rowe Price Associates, Inc. for the period ended June 30, 2001.
(2) Information is based on a Form 13F dated August 14, 2001, filed with the
SEC by FMR Corp. for the period ended June 30, 2001.
3
(3) Information is based on a Form 13F dated July 26, 2001, filed with the SEC
by Fenimore Asset Management, Inc. for the period ended June 30, 2001.
(4) Information is based on a Form 13F dated August 15, 2001, filed with the
SEC by David L. Babson & Company Inc. for the period ended June 30, 2001.
(5) Information is based on a Form 13F dated August 9, 2001, filed with the SEC
by Royce & Associates, Inc. for the period ended June 30, 2001.
(6) Includes (a) 277,270 shares owned jointly by Mr. Murray and his wife; (b)
481,028 shares which may be acquired within 60 days of August 31, 2001
through the exercise of stock options; (c) 3,603 restricted shares awarded
under the Company's stock compensation plan (as to which he has sole voting
power, but no investment power); and (d) 4,792 equivalent shares allocated
to his account in the Company's 401(k) plan.
How much stock do the Company's directors and executive officers own?
On August 31, 2001, the directors and nominees, the executive officers of
the Company named in the summary compensation table below, and all of the
directors and executive officers of the Company as a group beneficially owned
the number of shares of common stock shown below:
Number of Shares
Name of Beneficial Owner Beneficially Owned(1) Percent(1)
------------------------ --------------------- ----------
William T. End(2)............................ 5,664
Neil S. Fox(3)............................... 5,174 *
Robert L. Gable(4)........................... 23,300 *
Benjamin H. Lacy(5).......................... 22,000 *
Thomas J. May(6)............................. 7,010 *
Herbert W. Moller(7)......................... 12,400 *
Robert J. Murray(8).......................... 766,693 5.87
Joseph R. Ramrath............................ 2,000 *
Brian E. Stern(9)............................ 9,433 *
M. Anne Szostak(10).......................... 8,010 *
George P. Allman(11)......................... 115,869 *
David E. Berg(12)............................ 55,000 *
Edward M. Bolesky(13)........................ 139,688 1.10
Richard T. Riley(14)......................... 55,747 *
All directors and executive officers as a
group (17 persons)(15)...................... 1,426,752 10.52
--------
* Less than one percent
(1) The number and percent of the shares of common stock with respect to each
named beneficial owner are calculated by assuming that all shares which may
be acquired by such person within 60 days of August 31, 2001 are
outstanding.
(2) Includes (a) 2,664 shares owned by Mr. End individually; and (b) 3,000
shares which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options.
(3) Includes (a) 1,174 shares owned jointly by Mr. Fox and his wife; and (b)
4,000 shares which may be acquired within 60 days of August 31, 2001
through the exercise of stock options.
(4) Includes (a) 13,300 shares owned by Mr. Gable individually; (b) 7,000
shares which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options; and (c) 3,000 shares owned by Mr. Gable's wife
individually, as to which Mr. Gable disclaims beneficial ownership.
4
(5) Includes (a) 17,000 shares owned by Mr. Lacy individually; and (b) 5,000
shares which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options.
(6) Includes (a) 3,010 shares owned by Mr. May individually; and (b) 4,000
shares which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options.
(7) Includes (a) 1,664 shares owned by Mr. Moller individually; (b) 3,736
shares owned jointly by Mr. Moller and his wife; and (c) 7,000 shares which
may be acquired within 60 days of August 31, 2001 through the exercise of
stock options.
(8) Includes (a) 277,270 shares owned jointly by Mr. Murray and his wife; (b)
481,028 shares which may be acquired within 60 days of August 31, 2001
through the exercise of stock options; (c) 3,603 restricted shares awarded
under the Company's stock compensation plan (as to which he has sole voting
power, but no investment power); and (d) 4,792 equivalent shares allocated
to his account in the Company's 401(k) plan.
(9) Includes (a) 1,300 shares owned by Mr. Stern individually; (b) 5,000 shares
which may be exercised within 60 days of August 31, 2001 through the
exercise of stock options; and (c) 3,133 shares owned by Mr. Stern's wife
individually, as to which Mr. Stern disclaims beneficial ownership.
(10) Includes (a) 1,500 shares owned by Ms. Szostak individually; (b) 1,510
shares owned jointly by Ms. Szostak and her husband; and (c) 5,000 shares
which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options.
(11) Includes (a) 3,480 shares owned by Mr. Allman individually; (b) 16,777
shares owned by a family trust of which Mr. Allman is a co-trustee (as to
which he shares voting and investment power); (c) 91,528 shares which may
be acquired within 60 days of August 31, 2001 through the exercise of
stock options; (d) 1,666 restricted shares awarded under the Company's
stock compensation plan (as to which he has sole voting power, but no
investment power); and (e) 2,418 equivalent shares allocated to his
account in the Company's 401(k) plan.
(12) Includes (a) 40,000 shares owned jointly by Mr. Berg and his wife; and (b)
15,000 shares which may be acquired within 60 days of August 31, 2001
through the exercise of stock options.
(13) Includes (a) 1,648 shares owned by Mr. Bolesky individually; (b) 128,196
shares which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options; (c) 1,240 restricted shares awarded under the
Company's stock compensation plan (as to which he has sole voting power,
but no investment power); (d) 7,604 equivalent shares allocated to his
account in the Company's 401(k) plan; and (e) 1,000 shares owned by Mr.
Bolesky's daughter individually, as to which Mr. Bolesky disclaims
beneficial ownership.
(14) Includes (a) 8,000 shares owned by Mr. Riley individually; (b) 46,250
shares which may be acquired within 60 days of August 31, 2001 through the
exercise of stock options; (c) 1,409 restricted shares awarded under the
Company's stock compensation plan (as to which he has sole voting power,
but no investment power); and (d) 88 equivalent shares allocated to his
account in the Company's 401(k) plan.
(15) Includes (a) 62,971 shares owned by directors and executive officers
individually; (b) 346,467 shares owned jointly by directors and executive
officers and their respective spouses (including family trusts); (c)
982,656 shares which may be acquired within 60 days of August 31, 2001
through the exercise of stock options; (d) 10,784 restricted shares
awarded to the executive officers under the Company's stock compensation
plan (as to which each has sole voting power, but no investment power);
(e) 17,741 equivalent shares allocated to the accounts of the executive
officers under the Company's 401(k) plan; and (f) 6,133 shares owned
individually by spouses or children of directors and executive officers,
as to which the directors and executive officers disclaim beneficial
ownership.
5
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, the directors and executive officers of
the Company, and certain persons who own more than 10% of the common stock, are
required to report their ownership of the common stock and changes in that
ownership to the SEC and the NYSE. Specific due dates for these reports have
been established, and we are required to report in this proxy statement any
failure to file by these dates during the Company's fiscal year 2001.
Based solely on our review of copies of the reports we have received, or
written representations from certain reporting persons, we believe that, during
the Company's fiscal year 2001, all of these reporting requirements were timely
satisfied by our directors, executive officers and 10% holders.
6
PROPOSAL ONE
ELECTION OF DIRECTORS
Who sits on the Company's Board of Directors?
The Company's by-laws provide for a Board of Directors of not fewer than
three nor more than nine directors. The Board of Directors currently consists
of nine members.
You are being asked to fix the number of directors for the next year at nine
and to vote for all nine directors at the meeting. Benjamin H. Lacy, a director
since 1970, has decided to retire from the Board and will not be standing for
re-election. The Board is nominating all eight remaining current directors for
re-election, and is nominating Mr. Joseph R. Ramrath, who is not currently a
director, for election at the meeting. Persons elected as directors at the
meeting will hold office until the next annual meeting of stockholders and
until their respective successors are elected and qualified, subject to their
prior death, resignation or removal.
All of the nominees other than Mr. Ramrath were elected as directors at the
2000 annual meeting of stockholders. We have no reason to believe that any of
the nominees will be unavailable to serve if elected. However, if any one of
them becomes unavailable, the persons named as proxies in the accompanying
proxy card have discretionary authority to vote for a substitute chosen by the
Board. Any vacancies not filled at the meeting may be filled by the Board.
Information About the Nominees
William T. End, age 53, has been a director of the Company since 2000. Mr.
End has been Executive Chairman of the Board of Cornerstone Brands, Inc., a
catalog retailer, since 2001. Prior to that he was Chairman, Chief Executive
Officer and a director of Cornerstone Brands, Inc. from 1995 to 2001. Prior to
that he was President and Chief Executive Officer of Lands' End, Inc., a
catalog retailer, from 1991 to 1995. Mr. End is a director of IDEXX
Laboratories, Inc.
Neil S. Fox, age 61, has been a director of the Company since 1999. Mr. Fox
has been Chairman and Chief Executive Officer of Neil Fox Consultancy, which
provides consulting services in the field of database and direct response
marketing, since February 2000. Prior to that he was Chairman and Chief
Executive Officer of Lowe Fox Pavlika, a marketing consulting firm affiliated
with the Interpublic Group of Companies, from 1998 to February 2000. Prior to
that he was Chairman of Fox Pavlika & Partners for more than five years.
Robert L. Gable, age 70, has been a director of the Company since 1996. Mr.
Gable was Chairman of Unitrode Corporation, a supplier of electronic components
and sub-systems, from 1990 until his retirement in 1998, and was Chief
Executive Officer of Unitrode from 1990 to 1997. Mr. Gable is a director of
Evercel, Inc. and Ibis Technology Corporation.
Thomas J. May, age 54, has been a director of the Company since 1999. Mr.
May has been Chairman and Chief Executive Officer of NSTAR, an energy utility
holding company formed in connection with the combination of BEC Energy and
Commonwealth Energy Systems, and its principal operating subsidiaries since
1999. Prior to that he was Chairman and Chief Executive Officer of BEC Energy,
an energy utility holding company, and its principal operating subsidiaries
from 1998 to 1999. He has been Chairman and Chief Executive Officer of Boston
Edison Company, a regulated public utility company, since 1994, and was
7
President of Boston Edison from 1994 to 1999. Mr. May is a trustee of NSTAR and
a director of FleetBoston Financial Corporation, Liberty Financial Companies,
Inc. and RCN Corporation.
Herbert W. Moller, age 60, has been a director of the Company since 1996.
Mr. Moller retired from The Gillette Company, a diversified consumer products
company, in 1998, having been with Gillette for 32 years. From 1992 until his
retirement in 1998, Mr. Moller was Vice President, Finance and Strategic
Planning, Gillette North Atlantic Group.
Robert J. Murray, age 60, has been a director of the Company since 1991. Mr.
Murray has been Chairman of the Board, President and Chief Executive Officer of
the Company since 1995. Mr. Murray retired from The Gillette Company in 1995,
having been with Gillette for more than 34 years. From 1991 until his
retirement in 1995, Mr. Murray was Executive Vice President, North Atlantic
Group of Gillette. Mr. Murray is a director of LoJack Corporation, Allmerica
Financial Corporation and the Delhaize Group.
Joseph R. Ramrath, age 44, has been Executive Vice President and Chief Legal
Officer of the United Asset Management division of Old Mutual plc, an
international financial services firm headquartered in London, England, since
2000. Prior to that he was Senior Vice President, General Counsel and Secretary
of United Asset Management Corporation from 1996 until its acquisition by Old
Mutual in 2000. Prior to that he was a partner and member of the management
committee of the law firm of Hill & Barlow, a professional corporation.
Brian E. Stern, age 53, has been a director of the Company since 1995. Mr.
Stern has been Senior Vice President of Xerox Corporation, a provider of
document processing products and services, and President of Xerox Technology
Enterprises since 1999. From 1994 to 1999, he was Senior Vice President and
President of the Office Document Products Group of Xerox. Mr. Stern is a
director of HON Industries, Inc. and Esselte AB.
M. Anne Szostak, age 51, has been a director of the Company since 1998. Ms.
Szostak has been Executive Vice President and Corporate Director of Human
Resources of FleetBoston Financial Corporation, a diversified financial
services company, since 1998. From 1994 to 1998, Ms. Szostak was Senior Vice
President and Corporate Director of Human Resources of Fleet. Ms. Szostak is a
director of Tupperware Corporation.
What committees has the Board established?
The Board of Directors has standing Audit, Organization and Compensation,
Nominating, and Executive Committees.
The Audit Committee recommends the selection of the Company's outside
auditors, and acts as a direct channel between the independent auditors and the
Board. In addition, the Committee reviews the Company's audited financial
statements with the outside auditors, and reports to the Board its assessment
of the quality and performance of the Company's internal auditors and
independent accountants, and the adequacy of the Company's financial controls.
During fiscal year 2001, members of the Committee were Messrs. End, Gable, May
and Moller (chairman). At the annual meeting of the Board held on October 20,
2000, Mr. End was appointed to the Committee in place of Mr. Gable. The
Committee met five times during the last fiscal year.
The Organization and Compensation Committee reviews and makes
recommendations to the Board of Directors concerning the election of officers
and the compensation of the officers and directors. In addition, the Committee
administers and grants awards under the Company's stock compensation plan and
stock option
8
plans. During fiscal year 2001, members of the Committee were Messrs. End,
Gable, Lacy and May. At the annual meeting of the Board held on October 20,
2000, Mr. End was appointed to the Committee in place of Mr. Lacy (who had been
chairman), and Mr. Gable was appointed chairman. The Committee met or acted by
unanimous written consent six times during the last fiscal year.
The Nominating Committee recommends to the Board of Directors persons to be
nominated for election as directors by the stockholders at the annual meeting
of stockholders or by the Board of Directors to fill vacancies. During fiscal
year 2001, members of the Committee were Messrs. Fox and Stern and Ms. Szostak
(chairman). The Committee recommended the persons nominated for election as
directors by the stockholders at the 2001 annual meeting of stockholders.
The Executive Committee may exercise all of the authority of the Board,
except those powers that are expressly reserved to the Board by law, the
Company's charter or by-laws or resolution of the Board. During fiscal year
2001, members of the Committee were Messrs. Gable, Lacy, Moller and Murray
(chairman) and Ms. Szostak and, prior to October 20, 2000, former director
Richard H. Rhoads, who retired from the Board at the 2000 annual meeting of
stockholders. At the annual meeting of the Board held on that date, Mr. Gable
was appointed to the Committee in the place of Mr. Rhoads. The Committee met or
acted by unanimous written consent six times during the last fiscal year.
How often did the Board meet in fiscal year 2001?
The Board of Directors met or acted by unanimous written consent nine times
during the last fiscal year. All of the directors attended at least 75% of the
meetings of the Board of Directors and committees of the Board on which they
served.
How are the directors compensated?
Directors who are also employees of the Company receive no additional
compensation for serving on the Board or its committees.
Non-employee directors receive as compensation for all services as directors
an annual retainer of $22,000, plus $1,000 for each Board meeting and each
committee meeting (not held on the same day as a Board meeting) which they
attend. The annual retainer is paid 50% in cash and 50% in shares of common
stock in accordance with the Company's stock compensation plan. Each chairman
of a committee (other than Mr. Murray) receives an additional annual fee of
$3,000.
Under the terms of the Company's 1997 key employee and eligible director
stock option and stock appreciation rights plan, each non-employee director is
annually granted on the tenth day following his or her election at the annual
meeting of stockholders an option to purchase 1,000 shares of common stock. In
the case of the first annual meeting of stockholders at which a director is
elected, the option grant to that director is for 3,000 shares. Each of these
option grants becomes exercisable one year after the date of grant, and expires
ten years after the date of grant.
Non-employee directors may defer receipt of their cash fees and retainers
pursuant to a deferral plan. Deferred amounts are generally paid to the
director beginning on the first day of the first fiscal year beginning after
the director's 70th birthday, and may be paid in a lump sum at that time or in
quarterly installments over a period not to exceed ten years. Interest is
credited to each participating director's account quarterly at the so-called
"prime rate" of interest of Fleet National Bank on the last preceding June 30th
and December 31st. None of the current directors has elected to defer payments
as described above.
9
EXECUTIVE COMPENSATION
How were the executive officers compensated for fiscal year 2001?
The following table sets forth all compensation paid by the Company to the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company, who are collectively referred to as the
"named executive officers", in all capacities for the last three fiscal years.
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards(1)
--------------------------------- ----------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus(2) Compensation(3) Awards(4) Options (#) Compensation(5)
------------------ ---- -------- -------- --------------- ---------- ----------- ---------------
Robert J. Murray........ 2001 $500,000 -- $24,995 -- 80,000 $18,655
Chairman, President 2000 500,000 $113,988 12,089 $37,993 25,000 10,590
and CEO 1999 500,000 129,151 37,871 43,048 50,000 10,590
George P. Allman........ 2001 210,000 -- -- -- 30,000 14,759
Senior Vice President, 2000 185,000 34,113 -- 11,350 10,000 10,333
President--Diversified 1999 175,000 84,060 -- 28,006 15,000 10,293
Operations
David E. Berg(6)........ 2001 224,500 67,500 -- -- 30,000 62,151
Senior Vice President, 2000 -- -- -- -- -- --
President-- 1999 -- -- -- -- -- --
PremiumWear
Edward M. Bolesky(7).... 2001 210,000 -- -- -- 30,000 11,560
Senior Vice President, 2000 200,000 34,368 -- 11,433 10,000 15,192
President--NEBS 1999 180,000 51,009 -- 16,978 15,000 15,113
Direct Marketing
Richard T. Riley........ 2001 210,000 -- -- -- 30,000 11,267
Senior Vice President, 2000 200,000 64,814 -- 21,601 10,000 11,300
President--Integrated 1999 200,000 24,249 -- 8,054 15,000 42,581
Marketing Services
--------
(1) The Company has not issued stock appreciation rights. In addition, the
Company does not maintain a "long-term incentive plan," as that term is
defined by applicable rules. Securities underlying options are shares of
common stock.
(2) For fiscal years 1999 and 2000, 25% of each named executive officer's
annual bonus was paid in the form of restricted shares in lieu of cash. The
dollar value of these restricted shares is excluded from the amounts
reported in this column, and is set forth under the column heading
"Restricted Stock Awards".
(3) The amounts reported are the value of the Company's reimbursement to Mr.
Murray for his tax liability arising from the Company's payment of certain
occupancy expenses associated with his residence in Boston, Massachusetts.
10
(4) The amounts reported are the value of restricted shares that were awarded
to each named executive officer under the Company's stock compensation plan
in lieu of cash as part of his annual bonus for fiscal years 1999 and 2000.
The awards vest on the third anniversary of the date of grant, except that
such awards will vest immediately in case of the holder's death, disability
or retirement, or a change in control of the Company. Dividends are payable
on unvested awards to the same extent as they are paid on the common stock
generally, except that such dividend payments are automatically reinvested
in shares of common stock, and the additional shares are subject to the
same restrictions that are applicable to the underlying restricted shares.
As of June 30, 2001, each of the named executive officers held the following
number of unvested shares of restricted stock having the corresponding
fiscal year-end values, based on the closing price ($19.20) of the common
stock on June 29, 2001, the last trading day of fiscal year 2001:
Value at Fiscal
Name Number of Shares Year End
---- ---------------- ---------------
Robert J. Murray........................... 3,570 $68,544
George P. Allman........................... 1,651 31,699
David E. Berg.............................. -- --
Edward M. Bolesky.......................... 1,229 23,597
Richard T. Riley........................... 1,396 26,803
--------
(5) The table below presents the components of this column for fiscal year
2001, which represent (a) the value of Company contributions to the account
of each named executive officer pursuant to the terms of the Company's
401(k) plan (in the case of Messrs. Berg and Riley, the PremiumWear and
Rapidforms 401(k) plans, respectively), (b) the value of premiums paid by
the Company on group term life insurance for the benefit of the named
executive officers, and (c) in the case of Mr. Berg, the pro-rated amount
of the bonus for which he was otherwise eligible under PremiumWear's 2000
bonus plan with respect to the period from January 2, 2000 through the date
on which PremiumWear became a wholly-owned subsidiary of the Company, which
amount was paid to Mr. Berg following the acquisition date.
401(k) Plan Group Term Life PremiumWear
Name Contribution Insurance Premium 2000 Bonus
---- ------------ ----------------- -----------
Robert J. Murray................. $17,750 $905 --
George P. Allman................. 14,012 747 --
David E. Berg.................... 8,063 288 $53,800
Edward M. Bolesky................ 10,800 760 --
Richard T. Riley................. 10,893 374 --
--------
(6) Mr. Berg became an executive officer of the Company in connection with the
acquisition of PremiumWear, Inc. by the Company in July 2000. Pursuant to
the terms of his employment agreement with PremiumWear, 50% of Mr. Berg's
bonus target under the Company's 2001 executive bonus plan was guaranteed.
(7) Mr. Bolesky ceased to be an executive officer of the Company on June 30,
2001.
11
Stock Option Plan
The following table provides details regarding stock options granted to the
named executive officers during the last fiscal year under the Company's 1997
key employee and eligible director stock option and stock appreciation rights
plan. The table also shows hypothetical values of the common stock obtainable
upon exercise of each option grant, net of the option's exercise price,
assuming that the market price of the common stock appreciates at compound
annual rates of 5% and 10% over the ten-year term of the option. The assumed
rates of appreciation are presented as examples pursuant to the SEC's rules on
disclosure of executive compensation. We do not advocate or necessarily agree
that these rates are indicative of future growth in the market price of the
common stock.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Shares Options Exercise Appreciation For
Underlying Granted Price Option Term
Options To Employees Per Expiration ---------------------
Name Granted(1) In Fiscal Year Share Date 5% 10%
---- ---------- -------------- -------- ---------- ---------- ----------
Robert J. Murray........ 80,000 7.65% $20.875 7/28/2010 $1,050,254 $2,661,550
George P. Allman........ 30,000 2.87% 20.875 7/28/2010 393,845 998,081
David E. Berg........... 25,000 2.39% 19.250 7/14/2010 302,656 766,989
5,000 .48% 20.875 7/28/2010 65,641 166,347
Edward M. Bolesky....... 30,000 2.87% 20.875 7/28/2010 393,845 998,081
Richard T. Riley........ 30,000 2.87% 20.875 7/28/2010 393,845 998,081
--------
(1) The stock options awarded vest as to 25% of the shares covered by each
award on the date of grant, and as to an additional 25% of the shares
covered by each award on each of the first three anniversaries of the date
of grant, except that all of such options will vest immediately in case of
a change in control of the Company.
As indicated in the following table, none of the named executive officers
exercised stock options during the last fiscal year. In addition, the table
includes the number of shares underlying both exercisable and unexercisable
stock options at the end of the last fiscal year. The table also shows the
value of "in-the-money" options, which represents the positive spread, if any,
between the exercise prices of stock options held by each named executive
officer and the closing price ($19.20) of the common stock on June 29, 2001,
the last trading day of fiscal year 2001.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Value of Unexercised
Number of Unexercised In-the-Money Options at
Number of Shares Options at Fiscal Year End Fiscal Year End
Acquired At Value ------------------------------ -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ---------------- -------- ------------- -------------- ----------- -------------
Robert J. Murray........ -- -- 433,528 132,500 $356,482 $19,000
George P. Allman........ -- -- 74,903 40,375 45,951 0
David E. Berg........... -- -- 7,500 22,500 0 0
Edward M. Bolesky....... -- -- 115,069 40,775 150,870 0
Richard T. Riley........ -- -- 32,500 42,500 0 0
12
Stock Compensation Plan
Under the Company's stock compensation plan, the Organization and
Compensation Committee may grant awards of common stock to officers and other
key employees in lieu of cash in payment of all or part of their regular,
bonus, or other special compensation. During fiscal year 2001, 50% of each non-
employee director's annual retainer was paid in common stock in accordance with
the terms of the stock compensation plan. In addition, dividend payments on
unvested awards of restricted stock were reinvested in additional shares of
common stock under the stock compensation plan, and the additional shares are
subject to the same restrictions that are applicable to the underlying
restricted shares.
Deferred Compensation Plan
Officers of the Company, including the named executive officers, may defer,
until 60 days following the termination of employment with the Company, a
portion of all compensation payable by the Company for personal services
rendered to the Company. Each participating officer may request that the
deferred amounts be allocated among several available investment options
established and offered by the Company, subject to approval by the Company's
retirement committee. The benefit payable under the plan at any time to a
participant following termination of employment is equal to the applicable
deferred amounts, plus or minus any earnings or losses attributable to the
investment of such deferred amounts. The amount of compensation in any given
fiscal year that is deferred by a named executive officer is included in the
summary compensation table under the column headings "salary" or "bonus", as
appropriate.
The Company has established a trust for the benefit of participants in the
deferred compensation plan. Pursuant to the terms of the trust, as soon as
possible after any deferred amounts have been withheld from a plan participant,
the Company will contribute such deferred amounts to the trust to be held for
the benefit of the participant in accordance with the terms of the plan and the
trust. However, the assets in the trust will become available to the Company's
creditors if the Company becomes insolvent or bankrupt. If the funds in the
trust are insufficient to pay amounts due under the plan to a participant, the
Company remains obligated to pay any deficiency.
13
Supplemental Executive Retirement Plan
The Company maintains a supplemental executive retirement plan, or SERP, for
key employees who are designated as participants by the Organization and
Compensation Committee. Benefits under the SERP are payable as a life annuity
upon normal retirement at age 65, or in a reduced amount in the event of
earlier retirement on or after age 55, and are based on age, length of service
(not less than 5 years), the participant's annual base salary at the time of
termination of employment, and an average of the participant's three highest
bonuses paid during the five years immediately preceding the termination of the
participant's employment. Benefits payable under the SERP are not subject to
any reduction for Social Security or other offset amounts. The following table
shows the annual benefit payable under the SERP to participants who retire at
or after the age 65.
Retirement Benefit Table
Annual Retirement Benefit
Average Final Compensation ---------------------------------------
Used as Basis for 5 Years of 10 Years of 15 or More
Computing Retirement Benefit Service Service Years of Service
---------------------------- ---------- ----------- ----------------
$200,000 $27,500 $ 55,000 $ 75,000
300,000 41,250 82,500 112,500
400,000 55,000 110,000 150,000
500,000 68,750 137,500 187,500
600,000 82,500 165,000 225,000
700,000 96,250 192,500 262,500
As of June 30, 2001, Messrs. Murray, Allman and Bolesky, who are the only
named executive officers who participate in the SERP, had 5, 5 and 8 years of
service, respectively, for purposes of the SERP.
Employment Agreements; Salary Continuation Arrangements; Change-in-Control
Arrangements
David E. Berg serves as President and Chief Executive Officer of PremiumWear
pursuant to an employment agreement dated May 26, 2000, which was entered into
in connection with the Company's acquisition of PremiumWear. The agreement is
effective through June 30, 2003, and provides for a base salary of $225,000 and
an option grant of 25,000 shares of common stock. The option vests as to 25% of
the shares covered by the award on the date of grant, and as to an additional
25% of the shares covered by the award on each of the first three anniversaries
of the date of grant. The agreement provides that Mr. Berg will participate in
the Company's annual executive bonus plan, with a target bonus equal to 60% of
his annual base salary, and 50% of his bonus target for fiscal year 2001 was
guaranteed. Mr. Berg is also eligible to receive a special incentive bonus of
up to 120% of his annual base salary for each of the Company's fiscal years
2001 through 2003, based upon PremiumWear's attainment of certain pre-
established sales and earnings targets. Following a change in control, 50% of
this special incentive bonus is guaranteed for the remaining term of the
agreement. If Mr. Berg's employment with PremiumWear is terminated during the
term of the agreement by PremiumWear without cause (as defined in the
agreement) or by Mr. Berg for good reason (as defined in the agreement), Mr.
Berg will continue to receive his base salary and benefits for the remaining
term of the agreement, offset by any compensation or benefits provided by
subsequent employment or self-employment. In addition, vesting of the option
grant described above will be accelerated if Mr. Berg's employment with
PremiumWear is terminated during the term of the agreement by PremiumWear
without cause or by Mr. Berg for good reason. If
14
termination under the foregoing circumstances occurs following a change in
control, Mr. Berg will also be entitled to receive 50% of the special incentive
bonus described above for the remaining term of the agreement.
Richard T. Riley assumed the position of Senior Vice President and
President--NEBS Direct Marketing on July 1, 2001, and in connection therewith
entered into a letter agreement with the Company dated June 29, 2001. The
agreement is effective through June 30, 2003, and provides that 50% of his
bonus target under the Company's 2002 executive bonus plan will be guaranteed.
If Mr. Riley's employment with the Company is terminated during the term of the
agreement by the Company without cause (as defined in the agreement) or by Mr.
Riley for good reason (as defined in the agreement), Mr. Riley will continue to
receive his base salary and benefits for the remaining term of the agreement.
The Company also provided an unsecured loan in the amount of $300,000 to Mr.
Riley in connection with his relocation to Massachusetts. The loan is interest-
free, and 20% of the principal amount will be forgiven annually so long as Mr.
Riley's employment with the Company has not been terminated voluntarily by Mr.
Riley or by the Company for cause. If the Company terminates Mr. Riley's
employment for cause, or if he otherwise voluntarily terminates his employment,
then the theretofore unforgiven principal amount will become immediately due
and payable, together with interest at the prime rate accruing from the date
the loan becomes due to the date of payment. Mr. Riley is solely responsible
for his income tax obligations, if any, based on the value of foregone interest
and forgiven principal.
Edward M. Bolesky ceased to be an executive officer of the Company on June
30, 2001. Mr. Bolesky has entered into a salary continuation agreement with the
Company, pursuant to which he has agreed to make himself available for special
projects as requested by the Chief Executive Officer during the period from
July 1 through December 31, 2001, and for which he will continue to be paid his
regular base salary of $17,500 per month and receive his normal employee
benefits. Thereafter, he will continue to receive his base salary (at the rate
of $8,750 per month) and benefits until the earlier of the date on which he
commences new employment or December 31, 2003. If he secures new employment
prior to December 31, 2002, he will be entitled to receive a lump sum payment
equal to $105,000, minus the aggregate gross payments received since January 1,
2002. All shares of restricted stock awarded to Mr. Bolesky will vest on
December 31, 2001.
The Company has entered into agreements with each named executive officer
(other than Mr. Berg) providing for certain benefits in the event of a change
in control of the Company. A change in control includes, among other events and
subject to certain exceptions, the acquisition by any person of beneficial
ownership of 35% or more of the outstanding common stock. If a tender offer or
exchange offer is made for more than 25% of the outstanding common stock, the
named executive officer has agreed not to leave the employ of the Company,
except in the case of disability or retirement, and to continue to render
services to the Company until such offer has been abandoned or terminated or a
change in control has occurred.
If, within 24 months after a change in control of the Company, the
executive's employment is terminated (1) by the Company other than for cause or
disability (as those terms are defined in the agreement) or (2) by the named
executive officer for good reason (as defined in the agreement), the Company
has agreed to pay the executive, in addition to salary, benefits and awards
accrued through the date of termination, an amount equal to 2 times (in the
case of Mr. Murray, 2 1/2 times) the sum of the executive's then current
annualized base salary and bonus target under the Company's annual executive
bonus plan. The Company has also agreed to provide the executive with benefits
under all employee welfare benefit plans, or equivalent benefits, for up to 30
months following such termination. The Company must give 90 day advance notice
of termination to the executive unless such termination is for cause. If the
executive's employment with the Company or any of its subsidiaries is governed
by a separate written employment agreement that provides benefits upon a
termination
15
of employment, the aggregate of any payments or benefits under such employment
agreement will offset and reduce the aggregate of payments and benefits under
the change in control agreement.
Each change in control agreement provides that if any payments or benefits
to be made under the agreement, individually or together with any other
payments or benefits, are subject to excise tax pursuant to section 4999 of the
Internal Revenue Code of 1986, as amended, the Company will "gross up" the
payments to the executive as necessary (after taking into account all income
taxes payable by the executive officer as a result of the receipt of the "gross
up" payment) to place the executive in the same after-tax position the
executive would have been in had no such excise tax been paid or incurred with
respect to such payment or benefits.
Each change in control agreement continues in effect through June 30, 2004,
subject to automatic one-year extensions thereafter unless notice is given of
the Company's or the executive's intention not to extend the term of the
agreement; provided, however, that the agreement continues in effect for 24
months following a change in control that occurs during the term of the
agreement. Except as otherwise provided in the change in control agreement, the
Company and each executive may terminate the executive's employment at any
time. Each change in control agreement terminates if either party terminates
the executive's employment before a change in control.
Mr. Berg has entered into an agreement with PremiumWear, Inc. providing for
certain benefits in the event of a change in control of PremiumWear or the
Company. A change in control includes, among other things and subject to
certain exceptions, a divestiture of PremiumWear or its business by the
Company, or the acquisition of any person of beneficial ownership of 35% or
more of the Company's outstanding common stock. If, within 24 months after a
change in control, Mr. Berg's employment is terminated (1) by PremiumWear other
than for cause or disability (as those terms are defined in the agreement) or
(2) by Mr. Berg for good reason (as defined in the agreement), PremiumWear has
agreed to pay Mr. Berg, in addition to salary, benefits and awards accrued
through the date of termination, an amount equal to 2 times Mr. Berg's annual
compensation (as defined in the agreement). PremiumWear has also agreed to
provide Mr. Berg with benefits under all employee welfare benefit plans, or
equivalent benefits, for up 24 months following such termination. The payments
and benefits payable to Mr. Berg under his employment agreement with
PremiumWear will offset and reduce the aggregate of payments and benefits under
his change in control agreement.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Prior to October 20, 2000, the members of the Organization and Compensation
Committee were Messrs. Gable, Lacy and May. At the annual meeting of the Board
held on October 20, 2000, Mr. End was appointed to the Organization and
Compensation Committee in place of Mr. Lacy.
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
What is our executive compensation philosophy?
The Organization and Compensation Committee, in exercising responsibility
for setting base salary and total compensation levels, retains a nationally
recognized compensation and benefits consulting firm to assist in the annual
review of the direct compensation of the executive officers of the Company.
16
In providing for the compensation of the executive officers, a salary
structure has been developed with salary ranges for executive officers targeted
to reflect a midpoint which in general is about the 50th percentile of the base
salaries of officers in similar positions in a representative group of non-
durable goods manufacturers and direct marketing companies of comparable size.
In addition, annual bonuses are provided for, the payment and the amount of
which depend upon the degree of attainment of pre-established Company and
business unit sales and earnings targets and, in some instances and to varying
extents, upon the attainment of pre-established individual objectives. Long-
term compensation is tied directly to the increase in value of the common
stock, and hence takes the form of stock options, with option prices equal to
100% of current market value, in amounts reflecting the level of responsibility
of the grantees for the Company's long-range success. For one of the executive
officers, the level of total compensation for fiscal year 2001 was set pursuant
to the terms and conditions of an employment agreement entered into in
connection with a business acquisition.
In determining its executive compensation policies from year to year, the
Company expects to take appropriate measures to prevent the employee
remuneration paid by it from being rendered non-deductible by operation of the
terms of Section 162(m) of the Internal Revenue Code. Such measures may include
(1) limiting the amount of non-performance-based compensation paid to any
employee, and (2) complying with the statutory requirements for exempting
performance-based compensation from non-deductibility by obtaining stockholder
approval of qualified performance-based plans. In October 1997, such approval
was obtained for the Company's 1997 key employee and eligible director stock
option and stock appreciation rights plan.
How were executive base salaries determined for fiscal year 2001?
The individual salaries of the executive officers for fiscal year 2001 were
recommended by the Organization and Compensation Committee and approved by the
Board of Directors at the beginning of that year in accordance with the above-
stated policy. These salary recommendations were made after review of
individual performance evaluations by the Chief Executive Officer and
discussion with him of the performance of the Company during fiscal year 2000
and of the individual performances of the executive officers (other than
himself) during that year.
How were annual executive bonuses determined for fiscal year 2001?
At the beginning of fiscal year 2001, all of the executive officers were
designated as participants in the Company's annual executive bonus plan and
target bonuses of 70% of base salary for the Chief Executive Officer and 60% of
base salary for the other executive officers were established. A combination of
financial performance targets in a range from 70% to 100% and personal
objectives in a range from 0% to 30% of the target bonus were established as
the goals for the achievement of 100% of the target bonus for each of the
executive officers.
Based on these criteria, neither the Chief Executive Officer nor any of the
other executive officers earned bonuses for fiscal year 2001, except that
pursuant to his employment agreement, one executive officer received a
guaranteed bonus payment equal to 30% of his base salary.
Were stock options granted to executives in fiscal year 2001?
In July 2000, the Committee, employing the Black-Scholes methodology and
after consulting with the Board of Directors, authorized the granting of a
stock option to the Chief Executive Officer to purchase shares with a market
value on the date of grant approximating 110% of his fiscal year 2001 base
salary. At the same
17
meeting, options were granted to the other executive officers for shares with a
market value approximating 90% of their respective fiscal year 2001 base
salaries. In all cases, the per share option exercise price for options granted
by the Committee in fiscal year 2001 was set at 100% of the then current market
value of a share of the common stock. One executive officer received two stock
option grants for a total of 30,000 shares pursuant to the terms of his
employment agreement.
How was the Chief Executive Officer's compensation determined for fiscal year
2001?
The process by which the compensation of Robert J. Murray, as Chairman,
President and Chief Executive Officer, was arrived at is as stated above and
differed in no material way from that employed with respect to the other
executive officers. With Mr. Murray's base salary being in an appropriate range
as determined by the Committee's independent compensation consultant, there was
no adjustment made to Mr. Murray's base salary for fiscal year 2001.
Because Mr. Murray's principal residence is located more than 75 miles from
the Company's headquarters, the Company pays certain occupancy expenses
associated with a second residence within a shorter commuting distance and
reimburses Mr. Murray for his tax liability arising from this arrangement.
Otherwise, Mr. Murray was not provided any fringe benefits other than those
available to all officers of the Company.
Organization and Compensation Committee
William T. End
Robert L. Gable (Chairman)
Thomas J. May
18
REPORT OF THE AUDIT COMMITTEE
The Board of Directors has adopted a written charter under which the Audit
Committee operates (a copy of which is included as Appendix A to this proxy
statement), and has determined that all members of the Committee are
"independent" in accordance with the currently applicable rules of the NYSE.
In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the audited consolidated financial statements of the Company for the
fiscal year ended June 30, 2001 with the Company's management and Deloitte &
Touche LLP, our independent auditors.
The Committee has discussed with Deloitte & Touche the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees". In addition, the Committee has received the written
disclosures and the letter from Deloitte & Touche required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees" and has discussed with Deloitte & Touche its independence from the
Company and its management.
Based on the review and discussions referred to above, the Committee
recommended to the Board of Directors that the audited consolidated financial
statements of the Company be included in our annual report on Form 10-K for the
fiscal year ended June 30, 2001 for filing with the SEC.
Audit Committee
William T. End
Thomas J. May
Herbert W. Moller (Chairman)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the end of fiscal year 2001, the Company had outstanding borrowings of
approximately $53,550,000 from Fleet National Bank, one of several banks party
to an unsecured, revolving line of credit with the Company. Fleet National Bank
is a wholly owned subsidiary of FleetBoston Financial Corporation, of which M.
Anne Szostak is an executive officer. Ms. Szostak is a director of the Company.
During fiscal 2001, the Company paid $134,000 to iProspect.com, Inc. for
Internet marketing services. The Company expects to engage iProspect.com, Inc.
to provide additional services during fiscal 2002, for which it expects to pay
less than $60,000. The President of iProspect.com, Inc. is the son of Robert J.
Murray, who is the Chairman, President and Chief Executive Officer and a
director of the Company. Management believes that the terms of iProspect.com,
Inc.'s engagement are no less favorable to the Company than could have been
obtained from a comparably qualified unrelated third party.
19
PERFORMANCE GRAPH
The following chart compares the value of $100 invested in the Company's
common stock from June 28, 1996 through June 30, 2001 with a similar investment
in the S&P 600 small cap stock index, and in a peer group consisting of
seven(/1/) publicly held companies selected on the basis of similarity to the
Company in the nature of products offered, marketing and distribution channels
utilized and customer markets served. The comparison assumes that all dividends
are reinvested.
[GRAPH]
NEBS S&P 600 Peer Group Former Peer Group
1996 100 100 100 100
1997 137.79 120.00 97.98 90.93
1998 168.46 143.68 85.76 82.49
1999 152.29 137.35 83.99 86.32
2000 90.77 157.73 50.14 55.98
2001 110.76 177.41 76.6 79.42
Peer Group Companies:
Deluxe Corporation Moore Corporation, Ltd. Wallace Computer
Ennis Business Forms, Inc. The Standard Register Services, Inc.
John H. Harland Co. Co.
Systemax Inc.
--------
(1) The Reynolds & Reynolds Company was previously included in the index of
peer group companies because of the similarity of that company's printed
forms business to the Company's business. In August 2000, The Reynolds &
Reynolds Company sold its printed forms business, and as a result it has
been removed from the index of peer group companies. In accordance with
SEC rules, return data for the peer group, including The Reynolds &
Reynolds Company, is provided above as the "former peer group" for
comparative purposes, but will not be provided in future years.
20
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Upon the recommendation of its Audit Committee, the Board of Directors
selected the firm of Deloitte & Touche LLP as independent auditors of the
Company for the fiscal year ending June 29, 2002, subject to ratification by
the stockholders at the 2001 annual meeting of stockholders. A representative
of Deloitte & Touche, which served as independent auditors for fiscal year
2001, is expected to be present at the meeting, with the opportunity to make a
statement if he or she desires to do so, and to be available to respond to
appropriate questions.
INDEPENDENT AUDITOR FEES
The aggregate fees billed by Deloitte & Touche LLP for professional services
to the Company and its subsidiaries for fiscal year 2001 were as follows:
. Audit Fees: $285,000 for services rendered for the annual audit of the
Company's consolidated financial statements for fiscal year 2001 and the
quarterly reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q filed with the SEC.
. Financial Information Systems Design and Implementation: Deloitte &
Touche did not provide the Company with any professional services in
connection with financial information systems design and implementation
during fiscal 2001.
. All Other Fees: $233,407 for other non-audit activities, including
$77,000 for tax services; $72,722 for statutory and benefit plan audits;
$66,185 for acquisition-related services; and $17,500 for consulting
services on accounting matters.
The Audit Committee considered whether the provisions of the foregoing
services is compatible with maintaining Deloitte & Touche's independence.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2002 annual
meeting of stockholders must be received by the Company at its offices at 500
Main Street, Groton, Massachusetts 01471 no later than May 24, 2002, in order
to be considered for inclusion in the Company's proxy statement and proxy card
relating to that meeting in accordance with Rule 14a-8 under the Securities
Exchange Act of 1934.
Additionally, under the advance notice provisions in our by-laws, director
nominations or any other proposals to be presented outside of the processes of
Rule 14a-8 by a stockholder from the floor of the 2002 annual meeting of
stockholders must be submitted by the stockholder to our corporate secretary at
the above address no later than July 28, 2002 and no earlier than June 28,
2002. The notice must contain the information required by the by-laws. These
advance notice provisions are separate from the requirements which a
stockholder must meet in order to have a proposal included in the Company's
proxy statement under Rule 14a-8.
21
DIRECTOR NOMINATIONS
The Nominating Committee will consider your suggestions regarding potential
candidates for Board membership as part of the Committee's review of the
composition of the Board. Your recommendations may be sent to the Nominating
Committee through our corporate secretary at the above address.
ANNUAL REPORT ON FORM 10-K
You may obtain a copy of our annual report on Form 10-K for the fiscal year
ended June 30, 2001 (without exhibits) without charge by writing to: Investor
Relations, New England Business Service, Inc., 500 Main Street, Groton, MA
01471.
22
APPENDIX A
AUDIT COMMITTEE CHARTER
Composition:
The Audit Committee of the Board of Directors shall be composed of at least
three members, all of whom are non-employee directors and are free of any
relationship with the Company or its management that, in the opinion of the
Board, would interfere with their exercise of independent judgment as Committee
members. All members of the Committee shall be financially literate, and at
least one member shall have accounting or related financial management
expertise.
Determination of a director's independence, financial literacy, and
accounting and/or financial expertise for purposes of establishing his or her
qualifications for membership on the Committee shall be made by the Board in
its business judgment, subject to applicable criteria set forth from time to
time in the New York Stock Exchange's rules for listed companies. The Company
will sponsor education opportunities for Committee members in relevant areas.
The members of the Committee shall be elected annually by the Board at the
first meeting of the Board following the annual meeting of stockholders. Unless
a Chairman is designated by the full Board, the members of the Committee may
designate a Chairman by majority vote of the full Committee membership. The
Committee will designate a Secretary to prepare minutes of meetings from among
its members or such other persons as it deems appropriate.
Purpose:
The Audit Committee assists the Board in fulfilling its oversight
responsibilities by reviewing: the financial information that will be provided
by the Company to the stockholders and others; the systems of internal controls
regarding finance, accounting and legal compliance which management and the
Board have established; and the Company's auditing, accounting and financial
processes generally. The Committee also should provide a means of communication
among the Company's outside auditors, internal audit department, management and
the Board.
Meetings:
The Committee will hold four regular meetings annually. Regular meetings
should be scheduled so as to enable the Committee to review the Company's
quarterly financial results with management and the outside auditors prior to
the public release of the Company's earnings. Special meetings may be called by
the Chairman of the Committee or a majority of the members of the Committee as
circumstances dictate.
Responsibilities:
Oversight of Auditors
The Company's internal audit department and outside auditors report to
management for regular activities, but are ultimately accountable to the Board
of Directors and the Audit Committee. The Board, based on the recommendations
of the Committee, has the ultimate authority and responsibility to select the
outside auditors for each fiscal year, subject to ratification by the
stockholders, to evaluate the performance of the outside auditors and, where
appropriate, to replace the outside auditors.
A-1
In meeting these responsibilities, the Committee is expected to:
1. Recommend to the Board the selection of the outside auditors for each
fiscal year, subject to ratification by the stockholders. In connection
with this selection, the Committee should obtain, on an annual basis, a
formal written statement from the outside auditors delineating all
relationships between the Company and the auditors, and should actively
engage in a dialogue with the outside auditors with respect to any
disclosed relationships. In making its recommendation, the Committee should
take or recommend appropriate action in response to the outside auditors'
report to satisfy itself of the outside auditors' independence.
2. Review and approve the outside auditors' engagement letter and the
compensation of the outside auditors for audit-related services.
3. With respect to the provision of any non-audit related services by
the outside auditors, review such services with management and consider
whether, in the Committee's business judgment, the provision of such
services is compatible with maintaining the outside auditors' independence.
The Committee should take or recommend appropriate action to satisfy itself
that the outside auditors' provision of non-audit related services does not
impair the outside auditors' independence.
4. Review the performance of the outside auditors and make
recommendations to the Board regarding the discharge of the outside
auditors as circumstances warrant.
5. Review and approve the Company's internal audit charter, annual audit
plans and budget, including coordination with the outside auditors. In this
regard, the Committee should ensure that the internal audit department has
sufficient independence and authority from management to perform its
responsibilities, and should encourage the director of internal audit to
communicate regularly with the Committee.
6. Review and concur in the appointment, replacement, reassignment or
dismissal of the director of internal audit.
7. Confer with the outside auditors and the internal auditors concerning
the scope of their examinations of the books and records of the Company and
its subsidiaries; periodically throughout the year review the internal
audit department's progress against plan, including overall performance;
direct the attention of the auditors to specific matters or areas deemed by
the Committee to be of special significance; and authorize the auditors to
perform such supplemental reviews or audits as the Committee may deem
desirable.
Financial Reporting and Internal Controls
The Audit Committee serves as an independent and objective party to monitor
the Company's financial reporting process and internal control system. In
meeting these responsibilities, the Committee is expected to:
1. Review with the outside auditors, the director of internal audit, and
management their assessment of:
(a) the reliability and integrity of the Company's accounting
policies, financial reporting, and disclosure practices; and
(b) the adequacy and effectiveness of the Company's system of
internal control, including accounting and financial controls and
information system control and security.
2. Review with the outside auditors, the director of internal audit and
management any significant findings, risks or exposures with respect to the
foregoing policies and practices that are raised by the
A-2
outside auditors or internal audit, together with the recommendations made
by the respective auditors and management's responses thereto.
3. Review with the outside auditors, the director of internal audit and
management the extent to which changes or improvements in the foregoing
policies and practices have been implemented.
4. Prior to the public dissemination of the press release announcing the
Company's financial results for the year, review with the outside auditors
and management:
(a) the results of the outside auditors' audit of the Company's
financial statements and their report thereon, including discussion of
any significant changes in accounting principles and significant
proposed adjustments;
(b) any significant changes required in the outside auditors' audit
plan;
(c) any significant difficulties or disputes with management
encountered by the outside auditors during the course of the audit; and
(d) other matters related to the conduct of the audit which are to
be communicated to the Committee by the outside auditor under generally
accepted auditing standards.
5. With respect to the Company's annual report on Form 10-K, review the
audited financial statements for the year contained therein with management
and ensure that the outside auditors are satisfied with the proposed
disclosure and content of such financial statements. Based on the review
and discussions with management and the outside auditors described above,
the Committee shall recommend to the Board whether the audited financial
statements should be included in the Company's annual report on Form 10-K.
6. Review and approve the Audit Committee report prepared in accordance
with the rules of the Securities and Exchange Commission for inclusion in
the proxy statement relating to the Company's annual meeting of
stockholders, beginning with the 2001 annual meeting.
7. Prior to the public dissemination of the press release announcing the
Company's interim quarterly financial results, review with the outside
auditors and management the results of the outside auditors' interim
financial review conducted in accordance with Statement of Auditing
Standards No. 71.
8. With respect to the Company's quarterly reports on Form 10-Q, ensure
that the outside auditors are satisfied with the proposed disclosure and
content of the Company's financial statements for the quarter contained
therein.
9. Discuss with the outside auditors the professional competence of the
Company's financial, accounting and internal audit personnel.
Committee Processes
In meeting its general responsibilities described herein, the Audit
Committee is expected to:
1. Review and reassess the adequacy of this charter annually, or more
frequently as circumstances warrant, and report and make recommendations to
the Board on the responsibilities set forth herein.
2. Create an annual agenda for the ensuing year, and periodically modify
such agenda as circumstances warrant.
3. Prepare minutes of all meetings of the Committee. The Chairman of the
Committee should submit all such minutes to, or report on the matters
discussed at each Committee meeting with, the full Board.
A-3
4. Meet with the outside auditors, the director of internal audit, and
management in separate executive sessions to discuss any matter that the
Committee or these groups believe should be discussed privately with the
Committee.
5. Review at least annually with the Company's in-house counsel legal
compliance matters, including litigation, claims, assessments and
contingencies.
6. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities.
7. Consult with outside counsel, accountants, or other experts as the
Committee determines is advisable to assist it in the performance of its
responsibilities.
A-4
DETACH HERE
PROXY
NEW ENGLAND BUSINESS SERVICE, INC.
Meeting of Stockholders - October 26, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF NEW ENGLAND BUSINESS SERVICE, INC.
The undersigned stockholder in New England Business Service, Inc. (the
"Company") hereby appoints Robert J. Murray and Daniel M. Junius and each of
them, attorneys, agents and proxies, with power of substitution to each, to vote
all shares of Common Stock that the undersigned is entitled to vote, and, if
applicable, hereby directs the trustee of the 401(k) Plan for Employees of New
England Business Service, Inc. (the "Plan") to vote all shares of Common Stock
of the Company allocated to the account of the undersigned or otherwise which
the undersigned is entitled to vote pursuant to the Plan, at the Annual Meeting
of Stockholders of the Company to be held at the offices of the Company, 500
Main Street, Groton, Massachusetts on October 26, 2001 at 10:00 a.m., local
time, and any adjournments thereof.
------------ ------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
------------ ------------
-------------------
Vote by Telephone
-------------------
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
------------------------------------------------
Follow these four easy steps:
1. Read the accompanying Proxy Statement and
Proxy Card.
2. Call the toll-free number
1-877-PRX-VOTE (1-877-779-8683).
3. Enter your 14-digit Voter Control Number
located on your Proxy Card above your name.
4. Follow the recorded instructions.
------------------------------------------------
Your vote is important!
Call 1-877-PRX-VOTE anytime!
------------------
Vote by Internet
------------------
It's fast, convenient, and your vote is immediately
confirmed and posted.
------------------------------------------------
Follow these four easy steps:
1. Read the accompanying Proxy Statement and
Proxy Card.
2. Go to the Website
http://www.eproxyvote.com/neb
3. Enter your 14-digit Voter Control Number
located on your Proxy Card above your name.
4. Follow the instructions provided.
------------------------------------------------
Your vote is important!
Go to http://www.eproxyvote.com/neb anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
DETACH HERE
[x] Please mark votes as in this example. __
|
The shares represented by this proxy will be voted as directed by the
undersigned. IF NO CONTRARY INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED IN FAVOR OF ALL PROPOSALS AS DESCRIBED IN DETAIL IN THE PROXY STATEMENT.
1. To fix the number of persons constituting the full Board of
Directors at nine and to elect the following nominees as directors:
(01) William T. End, (02) Neil S. Fox, (03) Robert L. Gable,
(04) Thomas J. May, (05) Herbert W. Moller, (06) Robert J. Murray,
(07) Joseph R. Ramrath, (08) Brian E. Stern and (09) M. Anne Szostak
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] _______________________________________
For all nominees except as noted above.
FOR AGAINST ABSTAIN
2. To ratify the selection of Deloitte & [ ] [ ] [ ]
Touche LLP as independent auditors
of the Company for the current fiscal
year ending June 29, 2002.
3. And to vote and act upon any other business which may properly
come before the meeting or any adjournment thereof.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name is printed opposite. When signing
as attorney-in-fact, executor, administrator, trustee or guardian,
please give title. If stock is held in joint names, all named
stockholders should sign.
Signature:____________ Date:______ Signature:____________ Date:______