EXHIBIT 2.2
PAYMENT AND ESCROW AGREEMENT
dated as of June 2, 2003
among
NEW ENGLAND BUSINESS SERVICE, INC.,
THE REPRESENTATIVE
and
SUNTRUST BANK
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TABLE OF CONTENTS
ARTICLE I PAYMENT AND ESCROW FUNDS
1.1 Establishment of Payment and Escrow Funds............1
ARTICLE II INDEBTEDNESS PAYMENT FUND
2.1 Payment Procedures for Indebtedness..................2
ARTICLE III EQUITY PAYMENT FUND
3.1 Surrender and Payment Procedures for Company Common
Stock................................................2
3.2 Surrender and Payment Procedures for Company
Options..............................................4
3.3 Special Equity Payment Fund Instructions Relating
to USDA..............................................5
3.4 Reports..............................................5
3.5 Termination of Equity Payment Fund...................5
ARTICLE IV EQUITY ESCROW FUND
4.1 Final Aggregate Merger Consideration Deposit to or
Distribution from Escrow Fund........................6
4.2 Claims Against Equity Escrow Fund....................6
4.3 Resolution of Claims.................................7
4.4 Payment of Claims....................................7
4.5 Distribution of Equity Escrow Fund...................7
4.6 Special Equity Escrow Fund Instructions Relating to
USDA.................................................8
ARTICLE V REPRESENTATIVE FUND
5.1 Representative Fund..................................9
5.2 Special Representative Fund Instructions Relating
to USDA.............................................10
ARTICLE VI GENERAL PROVISIONS
6.1 Term of Agreement...................................10
6.2 Taxes...............................................10
6.3 Investment of Cash..................................11
6.4 The Agent...........................................11
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6.5 Notices.............................................14
6.6 Assignment..........................................15
6.7 Governing Law.......................................15
6.8 Counterparts........................................15
Exhibit A Merger Agreement
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PAYMENT AND ESCROW AGREEMENT
PAYMENT AND ESCROW AGREEMENT, dated as of
June 2, 2003 (this "Agreement"), by and among New England
Business Service, Inc., a Delaware corporation (the "Buyer"),
Joann McNiff, as the representative (the "Representative") of
the former stockholders and optionholders of Safeguard Business
Systems, Inc., a Delaware corporation (the "Company"), and
SunTrust Bank, a Georgia banking corporation, as Payment and
Escrow Agent (the "Agent").
This Agreement is being entered into pursuant to
Section 2.3(a) of the Merger Agreement, dated as of April
23, 2003 (the "Merger Agreement"), by and among the Buyer,
Centurion Sub, Inc. and the Company, a copy of which is
attached as Exhibit A hereto. Capitalized terms used but
not defined herein shall have the meanings given to them in
the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing
and of the respective representations, warranties, covenants
and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
ARTICLE I
PAYMENT AND ESCROW FUNDS
1.1 Establishment of Payment and Escrow Funds.
Simultaneously with the execution and delivery
of this Agreement and in accordance with Section 2.3(a) of
the Merger Agreement, the Buyer is depositing with the Agent
(a) cash in the amount of the Indebtedness of the Company
and its Subsidiaries to be paid off in connection with the
Closing of $17,232,196.22 (the "Indebtedness Payment
Fund") and (b) cash in the amount of $54,536,395.78, (i)
$7,900,000 of which, together with any additional amount
deposited pursuant to Section 4.1, shall be the "Equity
Escrow Fund", (ii) $500,000 of which shall be the
"Representative Fund" and (iii) the $46,136,395.78 (1)
balance of which shall be the "Equity Payment Fund," and the
Agent shall hold and pay or distribute the Indebtedness
Payment Fund, the Equity Escrow Fund, the Representative
Fund and the Equity Payment Fund in accordance with this
Agreement.
(1) Initial Aggregate Merger Consideration minus the Equity
Escrow Fund and the Representative Fund.
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ARTICLE II
INDEBTEDNESS PAYMENT FUND
2.1 Payment Procedures for Indebtedness.
Exhibit 1 hereto lists (i) the names of all
holders of Indebtedness of the Company and its Subsidiaries
to be paid off in connection with the Closing, (ii) the
amount of Indebtedness owed to each such holder to be so
paid and (iii) the bank account of each such holder to which
such payment is to be made (together with wire payment
instructions for such bank account). As soon as practicable
after the deposit by the Buyer of the Indebtedness Payment
Fund and not later than before the close of business on the
date hereof, the Agent shall pay the Indebtedness Payment
Fund to such holders, in such amounts and to such accounts
as set forth on Exhibit 1 hereto by wire transfer of
immediately available funds. No payments shall be made
under Article III hereof until such time as all payments
required by this Section 2.1 have been made.
ARTICLE III
EQUITY PAYMENT FUND
3.1 Surrender and Payment Procedures for Company Common
Stock.
(a) Exhibit 2 hereto lists (i) the names and addresses of
all of the holders (individually a "Stockholder" and
collectively, the "Stockholders") of shares of common stock,
par value $.01 per share, of the Company ("Company Common
Stock") that were issued and outstanding immediately prior
to the time of the filing of the Certificate of Merger
pursuant to the Merger Agreement on the date hereof (the
"Effective Time"), as such names and addresses appear on the
stock transfer books of the Company, (ii) the number of such
issued and outstanding shares of Company Common Stock that
were held by each such Stockholder, (iii) the certificate
numbers of the stock certificate or certificates
(individually a "Certificate" and collectively the
"Certificates") which immediately prior to the Effective
Time represented such issued and outstanding shares of
Company Common Stock so held by each such Stockholder, (iv)
any stop transfer order issued against the shares
represented by such Certificates and the Certificate number
to which such stop transfer order relates, (v) the amount of
the partial payment to be paid to such Stockholder pursuant
to Section 3.1(d) (the "Stockholder Partial Payment") and
(vi) each such Stockholder's Ownership Percentage Interest.
(b) As soon as practicable after the date hereof,
the Agent shall mail, by first class mail, postage prepaid, to the
Stockholders listed on Exhibit 2 hereto, at the respective
addresses set forth on Exhibit 2 hereto, (i) a stockholder
agreement in the form attached as Exhibit 3 hereto
(individually a "Stockholder Agreement" and collectively the
"Stockholder Agreements"), (ii) a copy of the letter of
transmittal, in the form attached as Exhibit 4 hereto
(individually a "Stockholder Letter of Transmittal" and
collectively the "Stockholder Letters of Transmittal"), and
(iii) an envelope addressed to the Agent for use by the
Stockholders in delivering their respective Stockholder
Agreements to the Agent and surrendering their respective
Certificate or Certificates to the Agent for payment in
accordance with the Merger Agreement and this Agreement.
The Agent shall furnish additional copies of the Stockholder
Agreement, the Stockholder Letter of Transmittal and the
return envelope as requested and shall accept and respond to
telephone requests for information relative to the
procedures for the delivery of Stockholder Agreements and
the surrender of Certificates.
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(c) From time to time after the date hereof,
the Stockholders will deliver to the Agent their respective
Stockholder Agreements and surrender to the Agent their respective
Certificate or Certificates, accompanied by a Stockholder
Letter of Transmittal, all in accordance with the instruc
tions contained in the Stockholder Letter of Transmittal.
Upon receipt of any Stockholder Agreement, Certificate and
the accompanying Stockholder Letter of Transmittal,
the Agent shall examine them to confirm that they have been
executed and delivered or surrendered in accordance with the
instructions in the Stockholder Letter of Transmittal,
including verifying that no stop order has been issued
against the shares represented by such Certificate by reason
of loss, theft, destruction or other invalidity and
attempting to reconcile any discrepancies between the
Stockholder surrendering such Certificate, the certificate
number of such Certificate and the number of shares of
Company Common Stock represented by such Certificate, on the
one hand, and the information set forth on Exhibit 2 hereto,
on the other hand. If the Agent determines that any such
delivery or surrender does not comply with the foregoing,
the Agent shall contact the applicable Stockholder by what
ever means of communication the Agent deems most expedient
in order to resolve the deficiency. Should the Agent be
unable to resolve the deficiency, the Agent shall request
further instructions from the General Counsel and Secretary
of the Buyer. The Buyer reserves the right, in its absolute
discretion, to determine all questions regarding the
delivery of Stockholder Agreements and the surrender of
Certificates and Stockholder Letters of Transmittal,
including the propriety of the execution thereof and any
other question as to the eligibility for acceptance of any
delivery or surrender, and to waive any deficiency with
respect thereto. Upon receipt of any Certificates
representing Dissenting Shares held by Stockholders listed
on Exhibit 5 hereto, the Agent shall so notify the General
Counsel and Secretary of the Buyer and shall not exchange
any such Certificates without receiving the prior written
approval of the Buyer. The Agent shall cancel all Cer
tificates accepted for payment and retain such Certificates
pending further instructions from the Buyer.
(d) Except as otherwise provided in
Section 3.3(a), promptly after receiving and processing a
Stockholder Agreement, Certificate and accompanying
Stockholder Letter of Transmittal in accordance with
Section 3.1(c), and subject to the prior payout of the
Indebtedness Payment Fund pursuant to Section 2.1, the
Agent shall make the Stockholder Partial Payment to which
the Stockholder delivering such Stockholder Agreement and
surrendering such Certificate and accompanying Stockholder
Letter of Transmittal is entitled by mailing, by first class mail,
postage prepaid, a check in the amount of the Stockholder
Partial Payment set forth opposite such Stockholder's name
on Exhibit 2, in accordance with the payment instructions
given by such Stockholder in the accompanying Stockholder
Letter of Transmittal, which such Stockholder Partial
Payment was determined by the parties to the Merger
Agreement pursuant to clause (A) of the third sentence
of Section 2.3(c) thereof.
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3.2 Surrender and Payment Procedures for Company Options.
(a) Exhibit 6 hereto lists (i) the names and
addresses of all of the holders (individually an "Optionholder"
and collectively, the "Optionholders") of options (each a
"Company Option" and collectively the "Company Options") to
purchase shares of Company Common Stock that were
outstanding immediately prior to the Effective Time, as such
names and addresses appear on the books of the Company, (ii)
the number of shares of Company Common Stock subject to, and
the exercise price of, each Company Option held by each such
Optionholder, (iii) the amount of the partial payment to be
paid to such Optionholder pursuant to Section 3.2(d) (the
"Optionholder Partial Payment") and (iv) each such
Optionholder's Ownership Percentage Interest.
(b) As soon as practicable after the date hereof,
the Agent shall mail, by first class mail, postage prepaid, to the
Optionholders listed on Exhibit 6 hereto, at the respective
addresses set forth on Exhibit 6 hereto, (i) a copy of the
letter of transmittal, in the form attached as Exhibit 7
hereto (individually an "Optionholder Letter of Transmittal"
and collectively the "Optionholder Letters of Transmittal"),
and (ii) an envelope addressed to the Agent for use by the
Optionholders in surrendering their respective Company
Option or Company Options for payment in accordance with the
Merger Agreement and this Agreement. The Agent shall
furnish additional copies of the Optionholder Letter of
Transmittal and the return envelope as requested and shall
accept and respond to telephone requests for information
relative to the procedures for surrender of Company Options.
(c) From time to time after the date hereof,
the Optionholders will surrender to the Agent their respective
Company Option or Company Options, accompanied by an Optionholder
Letter of Transmittal, all in accordance with the instruc
tions contained in the Optionholder Letter of Transmittal.
Upon receipt of any Company Option and the accompanying
Optionholder Letter of Transmittal, the Agent shall examine
them to confirm that they have been executed and surrendered
in accordance with the instructions in the Optionholder
Letter of Transmittal, including attempting to reconcile any
discrepancies between the Optionholder surrendering such
Company Option and the number of shares of Company Common
Stock subject to, and the exercise price of, such Company
Option, on the one hand, and the information set forth on
Exhibit 6 hereto, on the other hand. If the Agent
determines that any such surrender does not comply with the
foregoing, the Agent shall contact the applicable
Optionholder by whatever means of communication the Agent
deems most expedient in order to resolve the deficiency.
Should the Agent be unable to resolve the deficiency, the
Agent shall request further instructions from the General
Counsel and Secretary of the Buyer. The Buyer reserves the
right, in its absolute discretion, to determine all
questions regarding the surrender of Company Options and
Optionholder Letters of Transmittal, including the propriety
of the execution thereof and any other question as to the
eligibility for acceptance of any surrender, and to waive
any deficiency with respect thereto. The Agent shall retain
all Company Options accepted for payment pending further
instructions from the Buyer.
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(d) Except as otherwise provided in Section
3.3(b), promptly after receiving and processing a Company Option
and accompanying Optionholder Letter of Transmittal in
accordance with Section 3.2(c), and subject to the prior
payout of the Indebtedness Payment Fund pursuant to Section
2.1, the Agent shall make the Optionholder Partial Payment
to which the Optionholder surrendering such Company Option
and accompanying Optionholder Letter of Transmittal is
entitled by mailing, by first class mail, postage prepaid, a
check in the amount of the Optionholder Partial Payment set
forth opposite such Optionholder's name on Exhibit 6, in
accordance with the payment instructions given by such
Optionholder in the accompanying Optionholder Letter of
Transmittal, which such Optionholder Partial Payment was
determined by the parties to the Merger Agreement pursuant
to clause (A) of the third sentence of Section 2.3(d)
thereof.
3.3 Special Equity Payment Fund Instructions Relating to
USDA.
(a) Upon receipt of one or more executed
Stockholder Agreements, Certificates and Stockholder Letters of
Transmittal in the name of the United Safeguard Distributor
Association (the "USDA"), together with a letter of
direction executed on behalf of the USDA relating to the
Certificate(s) surrendered by the USDA (the "USDA
Stockholder Letter of Direction"), the Agent shall
immediately notify the Buyer and, upon written authorization
by the Buyer, shall, in lieu of making a Stockholder Partial
Payment to the USDA, make Stockholder Partial Payments to
the individuals identified in the USDA Stockholder Letter of
Direction and in the amounts set forth in the USDA
Stockholder Letter of Direction (the total of which such
amounts shall not exceed the amount of the Stockholder
Partial Payment set forth opposite the USDA's name on
Exhibit 2).
(b) Upon receipt of one or more executed
Optionholder Letters of Transmittal in the name of the USDA,
together with a letter of direction executed on behalf of the
USDA relating to the Company Option(s) surrendered by the USDA
(the "USDA Optionholder Letter of Direction"), the Agent
shall immediately notify the Buyer and, upon written
authorization by the Buyer, shall, in lieu of making an
Optionholder Partial Payment to the USDA, make Optionholder
Partial Payments to the individuals identified in the USDA
Optionholder Letter of Direction and in the amounts set
forth in the USDA Optionholder Letter of Direction (the
total of which such amounts shall not exceed the amount of
the Optionholder Partial Payment set forth opposite the
USDA's name on Exhibit 6).
3.4 Reports.
The Agent shall furnish to the General Counsel
and Secretary of the Buyer, weekly until [July 2], 2003 and
monthly thereafter, when there is activity, reports showing
cumulative surrender and payment activity pursuant to this
Article III.
3.5 Termination of Equity Payment Fund.
On December 2, 2003, the Agent shall (a)
distribute to the Buyer all amounts remaining in the Equity
Payment Fund and (b) deliver to the Buyer (i) final reports
showing the cumulative surrender and payment activity
pursuant to this Article III and (ii) all Stockholder
Agreements, Certificates, Stockholder Letters of
Transmittal, Company Options and Optionholder Letters of
Transmittal accepted for payment through such date not
previously delivered to the Buyer. Any Stockholder or
Optionholder who has not theretofore surrendered its
Certificate or Company Option to the Agent in accordance
herewith shall, subject to applicable law, look as a general
creditor only to the Buyer for payment for its Company
Common Stock or Company Option.
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ARTICLE IV
EQUITY ESCROW FUND
4.1 Final Aggregate Merger Consideration Deposit to or
Distribution from Escrow Fund.
If the Initial Aggregate Merger Consideration
is increased pursuant to Section 2.1(d) of the Merger
Agreement, then not later than the fifth business day after
the date the Initial Aggregate Merger Consideration is
increased pursuant to Section 2.1(d) of the Merger
Agreement, the Buyer and the Representative shall so notify
the Agent in writing and the Buyer shall deposit in the
Equity Escrow Fund an amount in cash equal to such increase,
less the aggregate amount of such increase the Buyer or the
Surviving Corporation then knows it is required to deduct
and withhold with respect to the payments to be made
pursuant to Sections 3.1(d), 3.2(d) or 3.3 under the
Internal Revenue Code of 1986, as amended, or any other
provision of state, local or foreign tax law, (as set forth
in such notice). If the Initial Aggregate Merger
Consideration is decreased pursuant to Section 2.1(d) of the
Merger Agreement, then not later than the fifth business day
after the date the Initial Aggregate Merger Consideration is
decreased pursuant to Section 2.1(d) of the Merger
Agreement, the Buyer and the Representative shall so notify
the Agent in writing and the Agent shall distribute to the
Buyer from the Equity Escrow Fund an amount in cash equal to
such decrease (as set forth in such notice) by wire transfer
of immediately available funds to a bank account designated
by the Buyer. If after such deposit or distribution, as the
case may be, the amount in the Equity Escrow Fund exceeds
$5,900,000, then promptly thereafter the Agent shall mail to
each Stockholder and Optionholder who has previously
surrendered all of its, his or her Certificates or Company
Options, as the case may be, pursuant to Article III, by
first class mail, postage prepaid, a check in an amount
equal to the product of (i) the amount by which the amount
in the Equity Escrow Fund exceeds $5,900,000 and (ii) such
Stockholder's Ownership Percentage Interest as set forth on
Exhibit 2 hereto or such Optionholder's Ownership Percentage
Interest as set forth on Exhibit 6 hereto, as applicable.
The Buyer and the Representative shall notify the Agent in
writing as to the amounts to be paid pursuant to this
Section 4.1, if any.
4.2 Claims Against Equity Escrow Fund.
At any time prior to the eighteen month
anniversary of the Effective Time (the "Escrow Fund Release
Date"), the Buyer may give written notice (a "Claim Notice")
simultaneously to the Agent and the Representative of a
claim (a "Claim") for indemnification of it or any of its
affiliates or any of their respective officers, directors,
employees or agents under Section 8.2(a) of the Merger Agree
ment. The Claim Notice shall set forth in reasonable detail
the nature of the Loss or Taxes for which indemnification is
sought, the section or sections of the Merger Agreement to
which the Claim relates and the amount of the Loss or Taxes
involved (or if not then determinable by the Buyer, a rea
sonable good faith estimate of the amount of the Loss or
Taxes involved). Upon receipt of any Claim Notice, the
Agent shall establish a reserve in the amount of the Loss or
Taxes (or the estimate thereof) set forth therein (such
reserve together with all other amounts then so reserved
being hereinafter referred to as the "Reserve") until
such Claim is resolved in accordance with Section 4.3.
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4.3 Resolution of Claims.
(a) If the Buyer asserts a Claim pursuant to
Section 4.2 and the Representative does not give written notice
to the Agent and the Buyer objecting to such claim (an "Objection
Notice") within ten days after receipt by the Agent of the
Claim Notice relating thereto (the "Objection Period"), then
the Representative shall be deemed to have accepted the
Claim and the amount of the Loss or Taxes (or estimate there
of) set forth in the Claim Notice and such Claim shall
become a "Resolved Claim" at the time of such deemed accep
tance.
(b) If the Buyer asserts a Claim pursuant to
Section 4.2 and the Representative does give an Objection Notice
within the Objection Period, then (i) the Buyer (or other
Indemnified Party) shall be free to pursue such remedies as
may be available under applicable law to enforce its rights
to indemnification with respect to such Claim, (ii) such
Claim and the amount of the Loss or Taxes related thereto
shall be determined either by mutual agreement of the Buyer
(or other Indemnified Party) and the Representative or by an
arbitration pursuant to Section 11.10 of the Merger
Agreement, in either case, as evidenced by written notice to
the Agent signed by the Buyer and the Representative, and
(iii) such Claim shall become a "Resolved Claim" at the time
of such mutual agreement or determination by such
arbitrator.
4.4 Payment of Claims.
Whenever a Claim becomes a Resolved Claim
pursuant to Section 4.3, (a) the Buyer and the
Representative shall give the Agent written notice thereof
and (b) promptly thereafter, the Agent shall distribute to
the Buyer from the Equity Escrow Fund an amount equal to the
amount of the Loss or Taxes involved in such Resolved Claim
and set forth in such notice by wire transfer of immediately
available funds to a bank account designated by the Buyer.
4.5 Distribution of Equity Escrow Fund.
(a) If on the ten month anniversary of the Effective Date,
the positive difference, if any, between the amount then in
the Equity Escrow Fund, on the one hand, and the Reserve as
of such date, on the other hand, exceeds $2,000,000 (the
amount, if any, by which such positive difference exceeds
$2,000,000 being hereinafter referred to as the "Ten Month
Excess"), then promptly thereafter, except as otherwise
provided in Section 4.6, the Agent shall mail to each
Stockholder and Optionholder who has previously surrendered
all of its, his or her Certificates or Company Options, as
the case may be, pursuant to Article III, by first class
mail, postage prepaid, a check in an amount equal to the
product of (i) the Ten Month Excess and (ii) such
Stockholder's Ownership Percentage Interest as set forth on
Exhibit 2 hereto or such Optionholder's Ownership Percentage
Interest as set forth on Exhibit 6 hereto, as applicable.
The Buyer and the Representative shall notify the Agent in
writing as to the amounts to be paid pursuant to this
Section 4.5(a), if any.
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(b) If on the Escrow Fund Release Date, the
amount then in the Equity Escrow Fund exceeds the Reserve as
of such date (the amount, if any, by which the amount then in
the Equity Escrow Fund exceeds the Reserve as of such date being
hereinafter referred to as the "Eighteen Month Excess"),
then promptly thereafter, except as otherwise provided in
Section 4.6, the Agent shall mail to each Stockholder and
Optionholder who has previously surrendered all of its, his
or her Certificates or Company Options, as the case may be,
pursuant to Article III, by first class mail, postage
prepaid, a check in an amount equal to the product of (i)
the Eighteen Month Excess and (ii) such Stockholder's
Ownership Percentage Interest as set forth on Exhibit 2
hereto or such Optionholder's Ownership Percentage Interest
as set forth on Exhibit 6 hereto, as applicable. The Buyer
and the Representative shall notify the Agent in writing as
to the amounts to be paid pursuant to this Section 4.5(b),
if any.
(c) If at the time any Claims outstanding as
of the Escrow Fund Release Date become Resolved Claims and all
distributions due the Buyer with respect thereto pursuant to
Section 4.4 have been distributed to the Buyer and any
amount remains in the Equity Escrow Fund, then promptly
thereafter, except as otherwise provided in Section 4.6, the
Agent shall (i) mail to each Stockholder and Optionholder
who has previously surrendered all of its, his or her
Certificates or Company Options, as the case may be,
pursuant to Article III, by first class mail, postage
prepaid, a check in an amount equal to the product of (A)
the amount then remaining in the Equity Escrow Fund and (B)
such Stockholder's Ownership Percentage Interest as set
forth on Exhibit 2 hereto or such Optionholder's Ownership
Percentage Interest as set forth on Exhibit 6 hereto, as
applicable and (ii) distribute the balance of the Equity
Escrow Fund to the Buyer by wire transfer of immediately
available funds to a bank account designated by the Buyer.
The Buyer and the Representative shall notify the Agent in
writing as to the amounts to be paid pursuant to this
Section 4.5(c), if any.
4.6 Special Equity Escrow Fund Instructions Relating to
USDA
(a) Upon receipt of a letter of direction executed on
behalf of the USDA relating to the distribution of amounts
payable under this Article IV to the USDA as a Stockholder
hereunder (the "USDA Stockholder Equity Escrow Letter of
Direction"), the Agent shall immediately notify the Buyer
and, upon authorization by the Buyer, shall, in lieu of
making any payment to the USDA under this Article IV, make
any payments due to the USDA under this Article IV to the
individuals identified in the USDA Stockholder Equity Escrow
Letter of Direction and in the amounts set forth in the USDA
Stockholder Equity Escrow Letter of Direction (the total of
which such amounts shall not exceed the amount which would
otherwise be payable under this Article IV to the USDA as a
Stockholder hereunder based on the USDA's Ownership
Percentage Interest set forth on Exhibit 2).
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(b) Upon receipt of a letter of direction
executed on behalf of the USDA relating to the distribution
of amounts payable under this Article IV to the USDA as an
Optionholder hereunder (the "USDA Optionholder Equity Escrow
Letter of Direction"), the Agent shall immediately notify the Buyer
and, upon authorization by the Buyer, shall, in lieu of
making any payment to the USDA under this Article IV, make
any payments due to the USDA under this Article IV to the
individuals identified in the USDA Optionholder Equity
Escrow Letter of Direction and in the amounts set forth in
the USDA Optionholder Equity Escrow Letter of Direction (the
total of which such amounts shall not exceed the amount
which would otherwise be payable under this Article IV to
the USDA as an Optionholder hereunder based on the USDA's
Ownership Percentage Interest set forth on Exhibit 6).
ARTICLE V
REPRESENTATIVE FUND
5.1 Representative Fund
(a) If, at any time prior to the eighteen month
anniversary of the Effective Time (the "Representative Fund
Release Date"), the Representative (a) on behalf of the
Stockholders and Optionholders in its capacity as
Representative, incurs out-of-pocket costs and expenses
("Out-of-Pocket Expenses") or (b) in connection with the
acceptance or administration of the Representative's duties
under this Agreement or the Merger Agreement incurs, without
gross negligence or bad faith on the part of the
Representative, any loss, liability or expense
("Indemnification Expenses"), the Representative may give
written notice (an "Expense Notice") to the Agent and the
Buyer setting forth in reasonable detail the nature and
amount of such Out-of-Pocket Expenses or Indemnification
Expenses. Upon receipt of any Expense Notice, the Agent
shall promptly distribute to the Representative from the
Representative Fund an amount equal to the Out-of-Pocket
Expenses or Indemnification Expenses set forth in the
Expense Notice by wire transfer of immediately available
funds to a bank account designated by the Representative.
The Representative shall not be entitled to any payment
hereunder for Out-of-Pocket Expenses or Indemnification
Expenses from the Stockholders, the Optionholders, the Buyer
or the Surviving Corporation after the Representative Fund
has been exhausted.
(b) If, on the Representative Fund Release Date,
any amount remains in the Representative Fund, then promptly
thereafter, except as otherwise provided in Section 5.2, the
Agent shall (i) mail to each Stockholder and Optionholder
who has previously surrendered all of its, his or her
Certificates or Company Options, as the case may be,
pursuant to Article III, by first class mail, postage
prepaid, a check in an amount equal to the product of (A)
the amount then remaining in the Representative Fund and (B)
such Stockholder's Ownership Percentage Interest as set
forth on Exhibit 2 hereto or such Optionholder's Ownership
Percentage Interest as set forth on Exhibit 6 hereto, as
applicable and (ii) distribute the balance of the
Representative Fund to the Buyer by wire transfer of
immediately available funds to a bank account designated by
the Buyer. The Buyer and the Representative shall notify
the Agent in writing as to the amounts to be paid pursuant
to this Section 5.1(b), if any.
5.2 Special Representative Fund Instructions Relating to
USDA.
(a) Upon receipt of a letter of direction executed on
behalf of the USDA relating to the distribution of amounts
payable under this Article V to the USDA as a Stockholder
hereunder (the "USDA Stockholder Representative Fund Letter
of Direction"), the Agent shall immediately notify the Buyer
and, upon authorization by the Buyer, shall, in lieu of
making any payment to the USDA under this Article V, make
any payments due to the USDA under this Article V to the
individuals identified in the USDA Stockholder
Representative Fund Letter of Direction and in the amounts
set forth in the USDA Stockholder Representative Fund Letter
of Direction (the total of which such amounts shall not
exceed the amount which would otherwise be payable under
this Article V to the USDA as a Stockholder hereunder based
on the USDA's Ownership Percentage Interest set forth on
Exhibit 2).
(b) Upon receipt of a letter of direction
executed on behalf of the USDA relating to the distribution
of amounts payable under this Article V to the USDA as an
Optionholder hereunder (the "USDA Optionholder Representative
Fund Letter of Direction"), the Agent shall immediately notify
the Buyer and, upon authorization by the Buyer, shall, in lieu of
making any payment to the USDA under this Article V, make
any payments due to the USDA under this Article V to the
individuals identified in the USDA Optionholder
Representative Fund Letter of Direction and in the amounts
set forth in the USDA Optionholder Representative Fund
Letter of Direction (the total of which such amounts shall
not exceed the amount which would otherwise be payable under
this Article V to the USDA as an Optionholder hereunder
based on the USDA's Ownership Percentage Interest set forth
on Exhibit 6).
ARTICLE VI
GENERAL PROVISIONS
6.1 Term of Agreement.
This Agreement shall be in effect until all
amounts in the Indebtedness Payment Fund, the Equity Payment
Fund, the Equity Escrow Fund and the Representative Fund
have been distributed or paid in accordance with this
Agreement.
6.2 Taxes.
The Buyer shall bear all federal, state and
local taxes based upon and measured by net or gross income
arising from the Indebtedness Payment Fund, the Equity
Payment Fund, the Equity Escrow Fund or the Representative
Fund. The Agent shall provide the Buyer with a copy of any
Form 1099-INT (or other applicable forms) received by the
Agent with respect to interest or other income earned on the
Equity Payment Fund, the Equity Escrow Fund or the
Representative Fund and paid to the Buyer in accordance with
Section 6.3. The Agent shall prepare and mail to each
Stockholder who receives funds hereunder a Form 1099-B
reporting such payments in accordance with applicable law.
The Agent shall prepare and mail to each Optionholder that
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holds non-compensatory Company Options (such Optionholders
to be identified in writing by the Buyer) and that receives
funds hereunder a Form 1099-B reporting such payments in
accordance with applicable law. The Buyer shall further
instruct the Agent in writing as to any reporting to be made
with respect to Optionholders that hold non-compensatory
Company Options and Stockholders, in each case, that have
not surrendered their Company Options or Certificates, as
applicable, in accordance with this Agreement prior to the
termination of the Equity Payment Fund pursuant to Section
3.5. To the extent required under applicable law, the Agent
shall deduct and withhold backup withholding tax at the
applicable rate from the amount payable to any Stockholder
hereunder, other than (i) a Stockholder who has timely
delivered to the Agent a properly executed Form W-9 (or
Substitute Form W-9) (Request for Taxpayer Identification
Number and Certification) indicating that such Stockholder
is not subject to backup withholding or (ii) a foreign
Stockholder who has timely delivered to the Agent a properly
executed Form W-8BEN (Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding).
6.3 Investment of Cash.
Cash held in the Equity Payment Fund, the Equity
Escrow Fund or the Representative Fund shall be invested by
the Agent in short-term obligations of the U.S. government
or in certificates of deposit issued by a bank or trust
company having combined capital and surplus of at least
$500,000,000 or in such other manner as the parties hereto
may agree and direct the Agent in writing. The Agent shall
pay all interest or other income earned on the Equity
Payment Fund, the Equity Escrow Fund or the Representative
Fund over to the Buyer not later than the tenth business day
after the end of the month in which such interest or other
income is received by the Agent.
6.4 The Agent.
The obligations of the Agent under this Agree
ment are subject to the following terms and conditions:
(a) The Agent undertakes to perform only such
duties as are expressly set forth herein, and no additional
duties or obligations shall be implied hereunder. In performing
its duties under this Agreement, or upon the claimed failure to
perform any of its duties hereunder, the Agent shall not be
liable to anyone for any damages, losses or expenses which
may be incurred as a result of the Agent so acting or
failing to so act; provided, however, the Agent shall not be
relieved from liability for damages arising out of its gross
negligence or willful misconduct under this Agreement. The
Agent shall in no event incur any liability with respect to
(i) any action taken or omitted to be taken in good faith
upon advice of legal counsel, which may be counsel to any
party hereto, given with respect to any question relating to
the duties and responsibilities of the Agent hereunder or
(ii) any action taken or omitted to be taken in reliance
upon any instrument delivered to the Agent and believed by
it to be genuine and to have been signed or presented by the
proper party or parties. Except as otherwise expressly
provided in this Agreement, the Agent shall not have any
duties under or be bound in any way by any agreement or
contract (including but not limited to the Merger Agreement)
between the Buyer and the Representative, whether or not the
Agent has knowledge of any such agreement or contract; and
the parties hereto agree that the use of defined terms
incorporated by reference to the Merger Agreement and the
use of cross references to the Merger Agreement are solely
for the convenience of the parties and the Agent may rely on
the use of any such defined terms or cross references in any
communication received by it.
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(b) The Buyer and the Representative each warrant
to and agree with the Agent that there is no security interest in
the funds deposited hereunder; no financing statement under
the Uniform Commercial Code of any jurisdiction is on file
in any jurisdiction claiming a security interest in or
describing, whether specifically or generally, the funds
deposited hereunder; and the Agent shall have no
responsibility at any time to ascertain whether or not any
security interest exists in the funds deposited hereunder or
to file any financing statement under the Uniform Commercial
Code of any jurisdiction with respect thereto.
(c)(i) As an additional consideration for and as an
inducement for the Agent to act hereunder, it is understood
and agreed that, in the event of any disagreement between
the parties to this Agreement or among them or any other
person(s) resulting in adverse claims and demands being made
in connection with or for any money or other property
involved in or affected by this Agreement, the Agent shall
be entitled, at its option, to refuse to comply with the
demands of such parties, or any of such parties, so long as
such disagreement shall continue. In such event, the Agent
shall make no delivery or other disposition of any of the
funds deposited hereunder until such disagreement is
resolved. Anything herein to the contrary notwithstanding,
the Agent shall not be or become liable to such parties or
any of them for the failure of the Agent to comply with the
conflicting or adverse demands of such parties or any of
such parties.
(ii) The Agent shall be entitled to
continue to refrain and refuse to deliver or otherwise
dispose of the funds deposited hereunder or to otherwise act
hereunder, as stated above, unless and until:
(A) the rights of such parties have been
finally settled by binding arbitration as provided in the
Merger Agreement or duly adjudicated in a court located in
the State of Delaware having jurisdiction over the parties
and the funds deposited hereunder; or
(B) the parties have reached an agreement
resolving their differences and have notified the Agent in
writing of such agreement and have provided the Agent with
indemnity satisfactory to the Agent against any liability,
claims or damages resulting from compliance by the Agent
with such agreement.
In the event of a disagreement between such parties as
described above, the Agent shall have the right, in addition
to the rights described above and at its option, to tender
into the registry or custody of any court located in the
State of Delaware having jurisdiction, all funds deposited
hereunder and may take such other legal action as may be
appropriate or necessary, in the reasonable opinion of the
Agent after consultation with its legal counsel. Upon such
tender, the parties hereto agree that the Agent shall be
discharged from all further duties under this Agreement;
provided, however, that the filing of any such legal
proceedings shall not deprive the Agent of its compensation
hereunder earned prior to such filing and discharge of the
Agent of its duties hereunder.
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(d) The Buyer agrees to pay the Agent for
its ordinary services hereunder the fees determined in accordance
with and payable as specified in the Schedule of Fees set forth
in Exhibit 8 attached hereto and made a part hereof. In
addition, the Buyer agrees to pay to the Agent its expenses
incurred in connection with this Agreement, including but
not limited to reasonable attorneys' fees in the event the
Agent deems it necessary to retain counsel. Such expenses
shall be paid to the Agent within five business days
following receipt by the Buyer of a written statement
setting forth such expenses. The Buyer further agrees that,
in the event any controversy arises under or in connection
with this Agreement or the funds deposited hereunder or the
Agent is made a party to or intervenes in any litigation
pertaining to this Agreement or the funds deposited
hereunder to promptly reimburse the Agent for all costs and
expenses incurred by the Agent in connection with such
controversy or litigation.
(e) The Agent may resign at any time from
its obligations under this Agreement by providing written
notice to the parties hereto. Such resignation shall be
effective on the date set forth in such written notice which
shall be no earlier than 30 days after such written notice has been
given. In the event of such resignation, the Buyer shall
appoint a successor payment and escrow agent. In the event
no successor payment and escrow agent has been appointed on
or prior to the date such resignation is to become
effective, the Agent shall be entitled to tender into the
custody of a court of competent jurisdiction located in the
State of Delaware all funds then held by it hereunder and
shall thereupon be relieved of all further duties and
obligations under this Agreement. The Agent shall have no
responsibility for the appointment of a successor payment
and escrow agent hereunder.
(f) The Agent shall have no obligation to take
any legal action in connection with this Agreement or towards its
enforcement, or to appear in, prosecute or defend any action
or legal proceeding which would or might involve it in any
cost, expense, loss or liability unless security and
indemnity, as provided in this paragraph, shall be
furnished. The Buyer agrees to indemnify the Agent and its
officers, directors, employees and agents and save the Agent
and its officers, directors, employees and agents (each an
"Agent Indemnified Party") harmless from and against any and
all Agent Claims (as hereinafter defined) and Agent Losses
(as hereinafter defined) which may be incurred by the Agent
or any of such Agent Indemnified Parties as a result of
Agent Claims asserted against the Agent or any of such Agent
Indemnified Parties, directly or indirectly, as a result of
or in connection with the Agent's acting or failing to act
in its capacity as payment and escrow agent under this
Agreement by any person or entity. For the purposes hereof,
the term "Agent Claims" shall mean all claims, lawsuits,
causes of action or other legal actions and proceedings of
whatever nature brought against (whether by way of direct
action, counterclaim, cross action or impleader) the Agent
or any such Agent Indemnified Party, even if groundless,
false or fraudulent, so long as the claim, lawsuit, cause of
action or other legal action or proceeding is alleged or
determined, directly or indirectly, to arise out of, result
from, relate to or be based upon, in whole or in part: (i)
the acts or omissions of the Buyer or the Representative
under this Agreement, (ii) the appointment of the Agent as
payment and escrow agent under this Agreement or (iii) the
performance by the Agent of its powers and duties under this
Agreement; provided that, Agent Claims shall not include
claims that arise out of, result from, relate to or are
based upon an action or omission of the Agent which
constitutes gross negligence or willful misconduct. For the
purposes hereof, the term "Agent Losses" shall mean losses,
costs, damages, expenses, judgments and liabilities of
whatever nature (including but not limited to reasonable
attorneys', accountants' and other professionals' fees,
litigation and court costs and expenses and amounts paid in
settlement), directly or indirectly resulting from, arising
out of or relating to one or more Agent Claims. Upon the
written request of the Agent or any such Agent Indemnified
Party, the Buyer agrees to assume the investigation and
defense of any Agent Claim, including the employment of
counsel acceptable to the applicable Agent Indemnified Party
and the payment of all expenses related thereto and,
notwithstanding any such assumption, the Agent Indemnified
Party shall have the right, and the Buyer agrees to pay the
cost and expense thereof, to employ separate counsel with
respect to any such Agent Claim and participate in the
investigation and defense thereof in the event that such
Agent Indemnified Party shall have been advised by counsel
that there exists a conflict of interest between such Agent
Indemnified Party and the Buyer. The Buyer hereby agrees
that the indemnifications and protections afforded the Agent
in this section shall survive the termination of this
Agreement.
6.5 Notices.
All notices and other communications hereunder
shall be in writing and shall be delivered personally or by
next-day courier or sent by facsimile with confirmation of
receipt to the parties at the addresses specified below (or
at such other address for a party as shall be specified by
like notice). Any such notice or other communication shall
be effective upon receipt, if personally delivered or sent
by facsimile, or one day after delivery to a courier for
next-day delivery.
(a) if to the Buyer, to
New England Business Service, Inc.
500 Main Street
Groton, Massachusetts 01471
Attn: General Counsel and Secretary
Facsimile: (978) 449-3018
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: David T. Brewster
Facsimile: (617) 573-4822
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If to the Representative, to:
Ms. Joann McNiff
600 Fifth Avenue, 27th Floor
New York, New York 10020
Facsimile: (212) 218-4130
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: David G. Luther, Jr.
Facsimile: (214) 939-5849
If to the Agent, to:
SunTrust Bank
Corporate Trust Department
25 Park Place, 24th Floor
Atlanta, Georgia 30303
Attention: Sonia Henry
Facsimile: (404) 588-7335
6.6 Assignment.
This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the
prior written consent of the other parties, except by
operation of law and except that the Buyer may assign its
rights, but not its obligations, under this Agreement to any
Subsidiary of the Buyer (and shall notify the Agent in
writing of any such assignment).
6.7 Governing Law
. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware, without regard to the conflicts of law rules
thereof.
6.8 Counterparts
This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an origi
nal, but all of which together shall be deemed to be one and
the same instrument.
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IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
NEW ENGLAND BUSINESS SERVICE, INC.
By: _/s/ Daniel M. Junius_____
Name: Daniel M. Junius
Title: Treasurer
THE REPRESENTATIVE
___/s/ Joann McNiff____________
Joann McNiff, solely in her
capacity as the Representative
SUNTRUST BANK
By: __/s/ Sonia S. Henry_______
Name: Sonia S. Henry
Title: Assistant Vice President
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EXHIBIT A
[Copy of Merger Agreement]