SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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NEW ENGLAND BUSINESS SERVICE, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NEW ENGLAND BUSINESS SERVICE, INC.
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(Name of Person(s) Filing Proxy Statement)
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LOGO
PROXY
Statement
Nineteen
Ninety-Seven
NEW ENGLAND BUSINESS SERVICE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD OCTOBER 24, 1997
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 offices of the Company, 500 Main Street, Groton, Massachusetts,
on Friday, October 24, 1997 at 10:00 a.m., Eastern Daylight Savings 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 approve the NEBS 1997 Key Employee and Eligible Director Stock Option
and Stock Appreciation Rights Plan;
3. To ratify the selection of Deloitte & Touche LLP as independent auditors
of the Company for the fiscal year ending June 27, 1998; and
4. 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 29, 1997 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 28, 1997, which contains financial statements and other information
of interest to stockholders, accompanies this Notice and the accompanying
Proxy Statement.
The business matters enumerated 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. To avoid unnecessary expense, please mail
your Proxy promptly in the enclosed return envelope, which requires no postage
if mailed in the United States.
By order of the Board of Directors
Timothy D. Althof
Secretary
September 12, 1997
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 24, 1997
The Proxy accompanying this Proxy Statement is solicited by the Board of
Directors of New England Business Service, Inc. (the "Company") to be voted at
the Annual Meeting of Stockholders to be held on Friday, October 24, 1997 and
at any adjournment thereof (the "Meeting").
It is expected that copies of the Notice of Meeting, this Proxy Statement
and the enclosed form of Proxy will be mailed on or about September 12, 1997
to each stockholder entitled to vote at the Meeting. The Company's Annual
Report to Stockholders for the fiscal year ended June 28, 1997 accompanies
this Proxy Statement.
VOTING SECURITIES
Only the record holders of shares of common stock, $1.00 par value, of the
Company ("Common Stock") at the close of business on August 29, 1997 may vote
at the Meeting. Each share of Common Stock is entitled to one vote on the
matters to be voted upon at the Meeting.
On August 29, 1997, there were 13,670,470 shares of Common Stock issued and
outstanding. On that date, the following persons were known by the Company to
own beneficially more than 5% of the Company's outstanding shares of Common
Stock:
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT
------------------- ----------------------- -------
Jay R. Rhoads, Jr. ............................. 1,599,200(1) 11.69
New England Business Service, Inc.
500 Main Street
Groton, MA 01471
David L. Babson & Company....................... 1,286,200(2) 9.41
1 Memorial Drive
Cambridge, MA 02142
Royce & Associates, Inc. ....................... 1,134,600(3) 8.30
1414 Avenue of The Americas
New York, NY 10019
Palisade Capital Management, L.L.C. ............ 983,000(4) 7.19
One Bridge Plaza
Fort Lee, NJ 07024
Fidelity Management and Research Corporation.... 719,600(5) 5.26
82 Devonshire Street
Boston, MA 02110
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(1) Sole voting and investment power with respect to 1,513,432 shares; shared
voting and investment power with respect to 85,768 shares. Includes 4,000
shares issuable within 60 days upon exercise of options.
(2) Sole investment power with respect to 1,286,200 shares and sole voting
power with respect to 595,100 shares.
(3) Sole investment and voting power with respect to 1,134,600 shares.
(4) Sole investment and voting power with respect 983,000 shares.
(5) Sole voting power with respect to 81,300 shares and sole investment power
with respect to 719,600 shares.
On August 29, 1997, the directors, the Chief Executive Officer and the other
four Named Executive Officers of the Company beneficially owned the number of
shares of Common Stock shown below:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
NAME OF DIRECTOR SOLE VOTING AND SHARED VOTING
OR EXECUTIVE OFFICER INVESTMENT POWER AND INVESTMENT POWER TOTAL PERCENT
-------------------- ---------------- -------------------- --------- -------
Jay R. Rhoads, Jr. ..... 1,513,432(1) 85,768(2) 1,599,200 11.69
Robert J. Murray........ 148,393(1) 42,112(3)(4) 190,505 1.38
Richard H. Rhoads....... 65,337(1) 1,841(5) 67,178 *
Peter A. Brooke......... 18,858(1) 21,018(6) 39,876 *
Benjamin H. Lacy........ 18,825(1) 18,825 *
Robert L. Gable......... 5,000 5,000 *
Herbert W. Moller....... 3,100(7) 3,100 *
Brian E. Stern.......... 3,000(1) 3,000 *
George P. Allman........ 10,425(1) 6,492(4)(8) 16,917 *
Edward M. Bolesky....... 61,289(1) 4,468(4) 65,757 *
Robert S. Brown, Jr. ... 68,877(1) 4,462(4) 73,339 *
Robert D. Warren........ 10,854(1) 3,174(4)(9) 14,028 *
All Directors and
Executive Officers as a
Group (15 persons)..... 2,499,374(10) 17.78
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* Less than one percent
(1) Includes shares which may be acquired within 60 days through the exercise
of stock options. The persons who have such options and the number of
shares which may be so acquired are as follows: Jay R. Rhoads, Jr., 4,000
shares; Mr. Murray, 148,386 shares; Richard H. Rhoads, 43,000 shares; Mr.
Brooke, 4,000 shares; Mr. Lacy, 4,000 shares; Mr. Stern, 3,000 shares;
Mr. Allman, 10,425 shares; Mr. Bolesky, 57,629 shares; Mr. Brown, 66,427
shares and Mr. Warren, 10,425 shares.
(2) Shares owned by Mr. Rhoads' wife, as to all of which Mr. Rhoads disclaims
beneficial ownership.
(3) Includes 41,393 shares owned jointly by Mr. Murray and Mr. Murray's wife.
(4) Includes shares owned by the following persons and held in an account by
the trustee of The 401(k) Plan for Employees of New England Business
Service, Inc.: Mr. Murray, 719 shares; Mr. Allman, 269 shares; Mr.
Bolesky, 4,468 shares; Mr. Brown, 4,462 shares and Mr. Warren 174 shares.
(5) Includes 1,000 shares owned by Mr. Rhoads' wife individually and 841
shares owned by his wife and a co-trustee of a trust for the benefit of
Mr. Rhoads' children, as to all of which shares Mr. Rhoads disclaims
beneficial ownership.
(6) Includes 12,468 shares owned by Mr. Brooke's wife and 8,550 shares owned
by Mr. Brooke's children, as to all of which shares Mr. Brooke disclaims
beneficial ownership.
(7) Shares owned jointly by Mr. Moller and Mr. Moller's wife.
(8) Includes 6,223 shares owned jointly by Mr. Allman and Mr. Allman's wife.
(9) Includes 3,000 shares owned jointly by Mr. Warren and Mr. Warren's wife.
(10) Including 108,627 shares owned by trusts or custodians for the benefit of
children of officers and directors, by spouses or dependent children of
officers and directors, as to all of which shares the officers and
directors disclaim beneficial ownership, 384,754 shares which directors
and officers owning currently-exercisable options may acquire pursuant to
Company stock option and stock appreciation rights plans, 53,716 shares
jointly owned by officers or directors and their spouses and 11,170
shares held for the accounts of Named Executive Officers by the trustee
of The 401(k) Plan for Employees of New England Business Service, Inc.
2
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of Directors of not fewer than
three nor more than nine directors. The persons named as proxies in the
accompanying form of Proxy intend (unless authority to vote therefor is
specifically withheld) to vote to fix the number of directors for the ensuing
year at eight and to vote for the election of the eight persons named below,
being the nominees of the present Board, as directors to hold office until the
next Annual Meeting and until their respective successors are elected and
qualified. All of the nominees were re-elected to their position at the 1996
Annual Meeting. If any of the nominees becomes unavailable to serve as a
director, the persons named as proxies have discretionary authority to vote
for a substitute. The Board of Directors has no reason to believe that any of
the nominees will be unavailable to serve if elected.
NOMINEES FOR ELECTION AS DIRECTORS
Information regarding each nominee is presented below.
Robert J. Murray, age 56, was elected Chief Executive Officer and Chairman
of the Board in December 1995. Mr. Murray has been a director of the Company
since 1991. Mr. Murray retired from The Gillette Company in 1995 having been
with that company for more than 34 years. From January 1, 1991 until his
retirement in 1995, Mr. Murray was Executive Vice President, North Atlantic
Group of The Gillette Company. During 1990, he served as Vice President,
Chairman's Office, of Gillette and from 1985 to 1989 as Chairman of the Board
of Management of Braun AG, one of Gillette's German subsidiaries. Mr. Murray
is a director of Fleet National Bank, LoJack Corporation, North American
Mortgage, Hannaford Bros. Co. and Allmerica Financial Corporation.
Peter A. Brooke, age 68, has been a director of the Company since 1989. He
also served in that capacity from 1970 to 1983. His principal occupation for
more than five years prior to December 31, 1995, was as Chairman and Chief
Executive Officer of Advent International Corporation. In January 1996, Mr.
Brooke retired as Chief Executive Officer of Advent International but remains
as Chairman of its Board of Directors. Advent International Corporation is an
international venture capital management firm. Mr. Brooke is also a director
of Unitrode Corporation.
Robert L. Gable, age 66, has been a director of the Company since July 1996.
Mr. Gable has been Chairman and Chief Executive Officer of Unitrode
Corporation since 1990. From 1988 to 1990, Mr. Gable was a management
consultant. From 1985 until 1988, Mr. Gable was President and Chief Executive
Officer of Computervision Corporation.
Benjamin H. Lacy, age 71, has been a director of the Company since 1970. His
principal occupation is as President of the Clipper Ship Foundation, Inc., a
grant-making charitable foundation. Prior to his retirement in May, 1995, Mr.
Lacy was of counsel to the law firm of Hill & Barlow, a Professional
Corporation, which has served as general counsel to the Company since 1973.
Herbert W. Moller, age 55, has been a director of the Company since July
1996. Mr. Moller has held several positions at The Gillette Company since
1966. Mr. Moller has been the Vice President, Finance and Strategic Planning,
Gillette North Atlantic Group, since 1992. From 1989 through 1992, Mr. Moller
was Vice President of Management Information Systems at The Gillette Company.
Jay R. Rhoads, Jr., age 72, has been a director of the Company since its
incorporation in 1955. He served as President from 1965 to 1971, as Chief
Executive Officer from 1965 to 1975 and as Chairman of the Board from 1971 to
1987. Mr. Rhoads is the brother of Richard H. Rhoads.
Richard H. Rhoads, age 67, joined the Company in 1965 and has been a
director since 1970. From 1975 to 1991, he was Chief Executive Officer. His
principal occupation since 1988 was his position as Chairman of the
3
Board, a position from which he retired in 1995. Since 1980, Mr. Rhoads has
served as a member of the Executive Committee of the Board. Mr. Rhoads is the
brother of Jay R. Rhoads, Jr.
Brian E. Stern, age 49, has been a director of the Company since April 1995.
Mr. Stern has been President of the Office Document Products Group and
Corporate Senior Vice President of Xerox Corporation since 1994. From 1993 to
1994, Mr. Stern was President of the Personal Document Products Division of
Xerox. From 1992 to 1993, Mr. Stern was Vice President of Corporate Business
Strategy of Xerox and from 1990 to 1992, Vice President, Finance, Development
and Manufacturing of Xerox.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing executive, audit, organization and compensation,
stock option, and nominating committees of the Board of Directors.
The Audit Committee was composed of Messrs. Brooke (Chairman), Lacy and
Stern at the beginning of fiscal year 1997. Mr. Moller was appointed as an
additional member of the Committee at a Board of Directors Meeting on August
19, 1996. At the Annual Meeting of the Board of Directors on October 25, 1996,
Mr. Brooke resigned from the Committee. Messrs. Moller (Chairman), Lacy and
Stern composed the Committee thereafter. The Committee met twice during the
last fiscal year. The Committee reviewed the matters raised in the management
letter which was submitted to the Committee by the Company's independent
public accounting firm, Deloitte & Touche LLP, and discussed the letter and
other matters with representatives of Deloitte & Touche LLP. The Committee
also recommended to the Board of Directors the selection of Deloitte & Touche
LLP to serve as the Company's auditors for the fiscal year ending June 27,
1998.
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. The Committee was composed
of Messrs. Lacy (Chairman), Brooke and Richard H. Rhoads at the beginning of
fiscal year 1997. At the Annual Meeting of the Board of Directors on October
25, 1996, Mr. Rhoads resigned from the Committee and Mr. Gable was appointed
to succeed him. Messrs. Lacy (Chairman), Brooke and Gable composed the
Committee thereafter. The Committee met twice and acted once by unanimous
written consent without a meeting in fiscal year 1997.
The Stock Option Committee, which administers and awards options under the
NEBS 1990 Key Employee Stock Option and Stock Appreciation Rights Plan and
NEBS 1994 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plan, was composed of Messrs. Richard H. Rhoads (Chairman)
and Brooke at the beginning of fiscal year 1997. Mr. Lacy was appointed an
additional member of the Committee at a Board of Directors' Meeting on July
26, 1996. At the Annual Meeting of the Board of Directors on October 25, 1996,
Mr. Rhoads resigned from the Committee and Mr. Gable was appointed to succeed
him. Messrs. Lacy (Chairman), Brooke and Gable composed the Committee
thereafter. The Committee met or acted by unanimous written consent five times
in fiscal year 1997.
The Nominating Committee was composed of Messrs. Frank L. Randall, Jr.
(Chairman) and Jay R. Rhoads, Jr. until Mr. Randall's retirement from the
Board of Directors on October 25, 1996. At the Annual Meeting of the Board of
Directors on October 25, 1996, Messrs. Brooke and Stern were appointed to the
Committee. The Committee was composed of Messrs. Brooke (Chairman), Jay R.
Rhoads, Jr. and Stern thereafter. The function of the Nominating Committee is
to recommend 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. The Nominating Committee recommended to
the Board of Directors the persons nominated for election as directors by the
Stockholders at the Annual Meeting to be held October 24, 1997.
The Executive Committee, composed of Messrs. Richard H. Rhoads (Chairman),
Murray and Lacy prior to October 25, 1996 and Messrs. Murray (Chairman), Lacy,
Moller and Richard H. Rhoads thereafter, met or acted by unanimous written
consent nine times in fiscal year 1997.
4
The Board of Directors met nine times during fiscal year 1997. 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities (collectively, "Reporting
Persons") to file reports of ownership and changes in ownership on Forms 3, 4
and 5 (the "Forms") with the Securities and Exchange Commission (the "SEC")
and the New York Stock Exchange (the "NYSE"). Reporting Persons are required
by SEC regulation to furnish the Company with copies of all Forms filed with
the SEC and the NYSE.
Based on the Company's review of the copies of the Forms it has received and
written representations from Reporting Persons, the Company believes that the
following Forms were filed late: a Form 4 reflecting the purchase of shares in
the open market by George P. Allman in November 1996, two Forms 4 reflecting
the purchase of shares by Herbert W. Moller in the open market in January and
April 1997, and a Form 4 reflecting the exercise of a stock option and sale of
the shares received upon exercise by Steven G. Schlerf in May 1997. The
Company believes that all other Reporting Persons complied with all filing
requirements applicable to them with respect to transactions during fiscal
year 1997.
CERTAIN TRANSACTIONS
On March 31, 1997, the Company acquired all of the assets and assumed
certain liabilities of Chiswick Trading, Inc. ("Chiswick") for consideration
of approximately $34,600,000 in cash and approximately $8,400,000 in shares of
the Company's common stock, for an aggregate purchase price of $43,000,000. In
negotiating the amount of consideration to be paid for the assets of Chiswick,
the Company considered, among other things, the following factors with respect
to Chiswick: historical and projected financial results, the quality and
performance of management, the market values of comparable public companies,
and the projected financial performance of Chiswick and the Company on a
combined basis. The final acquisition price was approved by the Company's
Board of Directors. There was no material relationship between the Company and
Chiswick or any of their respective officers, directors or stockholders, until
after the closing of the Chiswick transaction. After the closing, Theodore
Pasquarello, previously the president and sole stockholder of Chiswick, became
an executive officer of the Company.
In connection with the Chiswick acquisition, the Company entered into lease
agreements (i) with Theodore Pasquarello and Eileen Pasquarello, as Trustees
of the Paris Trust, for 49,700 square feet of space in a building at 31 Union
Avenue, Sudbury, Massachusetts, and for 33,00 square feet of space in a
building at 25 Union Avenue, Sudbury, Massachusetts, and (ii) with Theodore
Pasquarello, as Trustee of E.B. Realty Trust, for 117,000 square feet of space
in a building at 33 Union Avenue, Sudbury, Massachusetts. The Company's
Chiswick Division is located in these spaces. Each lease agreement has a term
of ten years. The combined annual rent payable by the Company under the three
lease agreements is approximately $998,500 during the period April 1, 1997
through March 31, 2000, $1,058,400 during the period April 1, 2000 through
March 31, 2003, and $1,121,900 during the period April 1, 2003 through March
31, 2007 (in each case excluding the Company's share of operating expenses and
real estate taxes). Mr. Pasquarello is a beneficiary of both the Paris Trust
and the E.B. Realty Trust. Management believes that the terms of each lease
agreement are no less favorable to the Company than could be obtained in a
transaction with an unrelated third party.
5
COMPENSATION OF OFFICERS AND DIRECTORS
The following table sets forth all compensation paid by the Company through
August 29, 1997 to the Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company (the "Named Executive
Officers") in all capacities for the fiscal years ended June 28, 1997, June
29, 1996 and June 30, 1995.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------
NAME AND OTHER ANNUAL NUMBER OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- -------- -------- ------------ ------------ ------------
Robert J. Murray........ 1997 $393,800 $263,988 $44,499(1) 88,165 $ 4,500(2)
Chairman, President and
CEO 1996 212,046 0 0 301,000 0
1995 0 0 0 0 0
Edward M. Bolesky....... 1997 173,000 80,185 0 40,124 7,795(2)
Vice President--Direct
Marketing 1996 164,800 0 0 7,148 2,472(2)
Telesales & Service 1995 154,000 66,300 0 12,833 4,620(2)
Robert S. Brown, Jr. ... 1997 170,000 60,945 0 22,737 4,750(2)
Vice President--
Circulation and 1996 170,000 0 0 7,373 5,100(2)
International 1995 170,000 64,000 0 11,805 4,351(2)
George P. Allman........ 1997 153,750 71,113 0 33,778 1,969(2)
Vice President--
Diversified 1996 75,000 0 0 15,000 0
Operations 1995 0 0 0 0 0
Robert D. Warren........ 1997 152,500 79,200 0 33,778 1,200(2)
Vice President--
Business 1996 37,500 0 0 15,000 0
Management and
Development 1995 0 0 0 0 0
Russell V. Corsini,
Jr. .................... 1997 67,567 33,108 0 11,862 231,148(3)
Vice President--Chief
Financial 1996 202,700 0 0 8,792 2,931(2)
Officer (Resigned
October 31, 1996) 1995 193,000 63,000 0 19,300 4,620(2)
- --------
(1) The amount reported is the value of the Company's reimbursement to Mr.
Murray for his tax liability arising from the Company's payment of lease
and expense obligations on an apartment for Mr. Murray's sole use.
(2) The amounts reported are the dollar value of Company contributions to the
account of each Named Executive Officer pursuant to the terms of The
401(k) Plan for Employees of New England Business Service, Inc.
(3) The amount reported for Mr. Corsini in fiscal year 1997 contains
compensation paid to Mr. Corsini following his resignation under the terms
of his separation agreement and the dollar value of Company contributions
to his account pursuant to the terms of The 401(k) Plan for Employees of
New England Business Service, Inc.
6
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
NUMBER GRANTED EXERCISE APPRECIATION FOR OPTION TERM
OF SHARES TO EMPLOYEES PRICE PER EXPIRATION ----------------------------
NAME GRANTED IN FISCAL YEAR SHARE DATE 5% 10%
---- --------- -------------- --------- ---------- ------------- --------------
Robert J. Murray........ 28,165(1) 3.9% $15.375 9/5/06 $ 272,335 $ 690,149
60,000(2) 8.3% 26.375 5/1/07 995,226 2,522,097
Edward M. Bolesky....... 10,124(1) 1.4% 15.375 9/5/06 97,892 248,076
30,000(2) 4.2% 26.375 5/1/07 497,693 1,261,049
Robert S. Brown, Jr..... 7,737(1) 1.1% 15.375 9/5/06 74,811 189,586
15,000(2) 2.1% 26.375 5/1/07 248,806 630,524
George P. Allman........ 8,778(1) 1.2% 15.375 9/5/06 84.877 215,094
25,000(2) 3.5% 26.375 5/1/07 414,677 1,050,874
Robert D. Warren........ 8,778(1) 1.2% 15.375 9/5/06 84,877 215,094
25,000(2) 3.5% 26.375 5/1/07 414,677 1,050,874
All Executive Officers
as a Group............. 341,774 N/A N/A N/A 5,090,802 12,901,093
All Non-Executive
Directors as a Group... 11,000 N/A N/A N/A 123,656 313,370
All Employees other than
Executive Officers as a
Group.................. 367,658 N/A N/A N/A 4,644,106 11,769,078
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(1) The stock options awarded vest annually in three equal installments
beginning on September 5, 1997 and ending on September 5, 1999, except
that all of such options will vest immediately in case of a change in
control of the Company.
(2) The stock options awarded vest annually in four equal installments
beginning on May 1, 1998 and ending on May 1, 2001, except that all of
such options will vest immediately in case of a change in control of the
Company.
This presentation is intended to disclose the potential value which would
accrue to the option holder if the option were exercised the day before it
would expire and if the per share value had appreciated at the compounded
annual rate indicated above each column. The application of an absolute
mathematical formula results in a higher potential realizable value for
options granted at a time when the market value is relatively high. The
assumed rates of appreciation of 5% and 10% are prescribed by Securities and
Exchange Commission rules on disclosure of executive compensation. The Company
does not advocate or necessarily agree that these rates are indicative of
future growth in the market price of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
VALUE OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED VALUE ------------------------------ -------------------------
NAME AT EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- -------------- ----------- -------------
Robert J. Murray........ 0 $ 0 139,000 253,165 $1,047,813 $1,541,785
Edward M. Bolesky....... 0 0 49,259 46,907 443,069 148,833
Robert S. Brown, Jr. ... 0 0 59,054 29,376 518,145 122,483
George P. Allman........ 0 0 7,500 41,278 55,781 147,402
Robert D. Warren........ 0 0 7,500 41,278 53,906 145,527
- --------
(1) In-the-money options are options where the current market value exceeds
the exercise price.
7
PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Along with other employees of the Company, the Named Executive Officers have
participated in the Company's Pension Plan and Trust which is a defined
benefit plan that meets regulatory requirements (the "Pension Plan"). The
Named Executive Officers have also participated in the Company's Supplemental
Executive Retirement Plan (the "Supplemental Plan"). Benefits under the
Pension Plan, payable upon normal retirement at age 65 as a life annuity or an
actuarial equivalent thereof, are based upon age, length of service (up to 25
years) and an average of the participant's five highest consecutive years of
compensation (subject to a maximum dollar limitation) out of the ten years
immediately preceding the normal retirement date or other date of termination
of employment. The Supplemental Plan provides for making payments concurrently
with payments made under the Pension Plan in amounts equal to the difference
between the amount received by an executive (or his contingent beneficiary)
under the Pension Plan and the amount which would be receivable in accordance
with the Pension Plan's formula (as illustrated by the following Retirement
Benefit Table) if the length of service and annual earnings taken into account
in determining the amount payable to any Participant as a pension under the
Pension Plan were not subject to the maximum service and dollar limitations
under the Pension Plan and if the Pension Plan benefit were not subject to an
overall annual dollar limitation imposed by law.
RETIREMENT BENEFIT TABLE
YEARS OF SERVICE
AVERAGE --------------------------
ANNUAL EARNINGS 15 20 25
--------------- -------- -------- --------
$ 25,000....................................... $ 5,000 $ 7,000 $ 8,000
50,000....................................... 10,000 14,000 17,000
100,000....................................... 25,000 34,000 42,000
150,000....................................... 40,000 54,000 67,000
200,000....................................... 55,000 74,000 92,000
250,000....................................... 70,000 94,000 117,000
300,000....................................... 85,000 114,000 142,000
400,000....................................... 115,000 154,000 192,000
500,000 and over.............................. 145,000 194,000 242,000
For the persons named in the Summary Compensation Table, the years of
credited service and 1997 compensation covered by the pension plans as of June
28, 1997 are: Mr. Bolesky, 16.2 years, $173,000, and Mr. Brown, 25.8 years,
$170,000. Messrs. Murray, Allman and Warren did not participate in the plan.
During fiscal year 1997, the Company amended the Pension Plan to freeze plan
participation at December 31, 1996 and to eliminate further benefit accruals
after June 28, 1997. The Company expects to terminate the plan during the
first quarter of fiscal year 1998. During fiscal year 1998, the Company
intends to freeze participation in and accrual of benefits under the
Supplemental Plan effective June 28, 1997.
The Company also amended the Pension Plan, for the remainder of its
operation, as follows: to provide for optional lump sum distributions of
benefits in lieu of an annuity contract, based on an applicable interest rate
and mortality assumptions; to provide for an increase in benefits (a "boost
benefit") as described below for Pension Plan participants who have not yet
accrued a full benefit under the plan but who have either (a) completed at
least 20 years of service or (b) attained at least age 45 and completed at
least 10 years of service, provided such increase (i) is determined by the
Retirement Committee to be fair and equitable on an actuarially determined
basis, (ii) meets all applicable non-discrimination tests and benefit
limitations, and (iii) can be adequately funded from the Pension Plan without
additional employer contributions; to provide for the equitable allocation as
described below of any Pension Plan assets remaining, after making provision
for the satisfaction of all then-outstanding Pension Plan liabilities
(including the above benefit increases), on a fair and equitable basis (the
"surplus benefit") among such participants in the Pension Plan who are either
(a) active employees eligible to accrue a benefit under the Pension Plan at
the time such allocation is made or (b) retirees (other than
8
terminated vested participants); and to vest former participants who do not
have at least a one-year break in service as of the Pension Plan termination
date, or as is otherwise required by the Internal Revenue Service.
The boost benefit referred to above is the estimated amount required to
compensate for any shortfall between (a) the benefit that an eligible Pension
Plan participant would have accrued under the Pension Plan if the Pension Plan
had not been terminated and if the participant had remained at the Company
until normal retirement at age 65 and (b) the benefit attributable to Company
contributions projected (based on reasonable actuarial assumptions) to be
available to the participant under the Company's 401(k) Plan for Employees of
New England Business Service, Inc. (the "401(k) Plan"), assuming that the
participant will remain at the Company until age 65 and will make sufficient
contributions to the 401(k) Plan to receive the maximum Company contributions
(currently 9% of annual compensation) provided for under the 401(k) Plan.
The surplus benefit referred to above is the amount that can be provided to
each eligible person after dividing any remaining Pension Plan assets between
the two eligible groups of Pension Plan participants (active employees and
retirees) on the basis of the aggregate benefit obligation to each group and
allocating the respective surplus amounts (a) among the active employee group
based on each eligible participant's years of service relative to the
aggregate service of all active-employee participants and (b) among the
retiree group so as to provide an approximately uniform percentage increase in
benefits to each person in such group.
For the persons named in the Summary Compensation Table, the lump sum
distribution value of both regular and boost benefits under the Pension Plan
are: Mr. Bolesky, $133,705; and Mr. Brown, $135,970. The surplus benefit
allocations to Messrs. Bolesky and Brown cannot be estimated at this time.
These amounts are expected to be distributed during fiscal year 1998. Mr.
Murray, Mr. Allman and Mr. Warren did not participate in the plan.
DEFERRED COMPENSATION PLAN
The Company has established the New England Business Service, Inc. Deferred
Compensation Plan (the "Plan") pursuant to which Named Executive Officers of
the Company may elect to defer, until 60 days following the termination of his
or her employment with the Company, a portion of all compensation payable by
the Company for his or her personal services rendered to the Company during
each Plan year (the "Deferral Amounts"). Each participating officer may
request that the Deferral Amounts be allocated among several available
investment options established and offered by the Company. The benefit payable
under the Plan at any time to a participant following termination of
employment is equal to the sum of the applicable Deferral Amounts and any
earnings or losses attributable to the investment of such Deferral Amounts.
COMPENSATION OF DIRECTORS
Directors of the Company generally receive as compensation for all services
as directors $12,000 per year plus $1,000 for each board meeting and each
meeting (not held on the same day as a board meeting) of any committee of the
board which they attend. In fiscal year 1997, Benjamin H. Lacy received an
additional $20,000 as compensation for his services as Chairman of the
Organization and Compensation Committee, Chairman of the Stock Option
Committee and as recording secretary to the board. Robert J. Murray received
no compensation for his services as director.
All directors of the Company elected at the 1996 Annual Meeting of
Stockholders and not actively employed by the Company were granted stock
options pursuant to The NEBS 1994 Key Employee and Eligible Director Stock
Option and Stock Appreciation Rights Plan with an exercise price determined by
the market value of the Company's Common Stock on the tenth day following such
Annual Meeting. Mr. Brooke, Mr. Lacy, Richard H. Rhoads, Jay R. Rhoads, Jr.
and Mr. Stern each received an option grant for the purchase of 1,000 shares
of the Company's Common Stock and Mr. Gable and Mr. Moller each received an
option grant for the purchase of 3,000 shares following their election at the
1996 Annual Meeting of Stockholders. Each eligible director will be granted an
option to acquire 1,000 shares upon each subsequent election at an Annual
9
Meeting of Stockholders of the Company, under similar terms, except that any
newly elected director, or continuing director who retires from active
employment with the Company in the preceding year, will be granted an option
to acquire 3,000 shares following the first subsequent Annual Meeting and an
option to acquire 1,000 shares upon each re-election thereafter.
The Company has established The NEBS Deferred Compensation Plan for Outside
Directors, pursuant to which any director who is not an employee of the
Company may elect to defer until after his or her retirement as a director or
after his or her 70th birthday any or all of the compensation payable by the
Company for all services as a director. Each director may elect to be paid in
a lump sum on the first day of the first fiscal year beginning after such date
or in quarterly installments over a period not to exceed ten years. Interest
is credited to each director's account quarterly at the so-called "base rate"
of interest of BankBoston, N.A. on the last preceding June 30th and December
31st . No such elections are presently in effect.
CHANGE-IN-CONTROL ARRANGEMENTS
In December 1996, the Company entered into an agreement with each Named
Executive Officer 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 either (a) the Company's outstanding Common Stock
or (b) the combined voting power of the Company's outstanding voting
securities. If a tender offer or exchange offer is made for more than 25% of
the combined voting power of the Company's outstanding voting securities, the
Named Executive Officer agrees 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 Named
Executive Officer's employment is terminated (a) by the Company other than for
cause, as defined in the agreement, disability or retirement or (b) by the
Named Executive Officer for good reason, as defined in the agreement, the
Company shall pay the Named Executive Officer, in addition to salary, benefits
and awards accrued through the date of termination, an amount equal to 1.5
times the average of the Named Executive Officer's earnings, including base
salary and bonus, paid during the most recent five (or fewer, if applicable)
consecutive calendar years. The Company also agrees to provide the Named
Executive Officer 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 Named Executive
Officer unless such termination is for cause.
Each change in control agreement continues in effect until July 1, 2001;
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 Named Executive Officer may terminate the Named Executive Officer's
employment at any time. Each change in control agreement terminates if either
party terminates the Named Executive Officer's employment before a change in
control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
From June 30, 1996 until October 25, 1996, Richard H. Rhoads, former Chief
Executive Officer of the Company, was a member of the Organization and
Compensation Committee and Chairman of the Stock Option Committee.
10
REPORT OF ORGANIZATION AND COMPENSATION
COMMITTEE AND STOCK OPTION COMMITTEE
POLICIES
In providing for the compensation of the Named Executive Officers, it has
for many years been the policy of the Organization and Compensation Committee
(the "Committee") to recommend base salaries for each of them within salary
ranges, the mid-points of which are in general at about the 60th percentile of
the base salaries of officers in similar positions in a representative group
of companies of comparable size chosen by a nationally recognized compensation
and benefits consultant. In fiscal year 1997, this group included non-durable
goods manufacturers, software producers, business service providers, catalog
merchants and retail stores. For fiscal year 1998, this group has been more
focused, reflecting the Company's decision to reinvest in the direct marketing
of forms and related products to small businesses. Thus, software producers
have been eliminated from the group and representation of companies in the
catalog industry or in the business of supplying office products and printing
services has been increased.
Annual bonuses may be earned by these officers, the payment and amount of
which depend upon the degree of attainment of pre-established sales and
earnings targets and individual objectives. Pursuant to the Company's 1997
Executive Bonus Plan (the "Bonus Plan") and under the terms of the Company's
Stock Compensation Plan, twenty-five per cent (25%) of such bonuses are
payable in Company Common Stock, valued at 100% of market, which the
recipients are expected to retain.
Long term compensation is tied directly to the increase in value of the
Company's Common Stock, and hence takes the form of the award of stock
options, with option exercise prices equal to 100% of the then current market
value of the optioned stock, in amounts reflecting the level of responsibility
of each option recipient for the Company's long term success. At this meeting,
approval is being sought for the NEBS 1997 Key Employee and Eligible Director
Stock Option and Stock Appreciation Rights Plan, amending and increasing the
number of shares available under existing option plans. See Proposal Two of
this Proxy Statement for additional detail.
IMPLEMENTATION
1. Salaries. The individual salaries of the Named Executive Officers for
fiscal year 1997 were recommended by the Committee and approved by the Board
of Directors at the beginning of that year in accordance with the above-stated
policy. These salaries were recommended by the Committee after consideration
of individual performance reviews by the Chairman of the Board and discussion
with him of the performance of the Company during fiscal year 1996 and of the
individual performances of the Named Executive Officers (other than himself)
during that year. Upon the recommendation of the Chairman of the Board, the
Committee proposed, and the Board of Directors approved, no increase in the
Chairman of the Board's salary for fiscal year 1997.
2. Annual Bonuses. At the beginning of fiscal year 1997, all of the Named
Executive Officers were designated as participants in the Company's Bonus Plan
and target bonuses of 70% of base salary for the Chairman and 50% of base
salary for the other Named Executive Officers were established. Company
financial performance targets equal to the Company's budgeted net sales and
net earnings for fiscal year 1997 were established as the goals for the
achievement of one-half of the target bonuses of each of the Named Executive
Officers and personal objectives were established for each, the attainment of
which, in whole or in part, would determine the extent of each officer's right
to receive the other half of the target bonus. Based on these criteria, the
Chairman of the Board received a bonus of 51.8% of his base salary and the
other Named Executive Officers received bonuses ranging from 35.9% to 49.5% of
their respective salaries.
3. Stock Options. At its September 1996 meeting, the Stock Option Committee
authorized the granting of a stock option to the Chairman to purchase shares
with a market value on the date of grant equal to 110% of his fiscal year 1997
base salary. At the same meeting, options were granted to the other Named
Executive Officers for shares with a market value of 90% of their respective
fiscal year 1997 base salaries. These grants followed
11
the pattern of prior years. On May 1, 1997, at the recommendation of the Board
of Directors and the Company's compensation and benefits consultant, the Stock
Option Committee approved the grant of additional stock options to the Named
Executive Officers. These option grants were part of a program of special
option grants to 12 key executives intended to further align their interests
with those of shareholders, to reward them for their achievements during the
year, and to encourage them to remain with the Company. In implementing this
program, the Stock Option Committee adopted, for the first time, a modified
Black-Scholes methodology to value the granted options. In all cases, the per
share option exercise price for options granted by the Stock Option Committee
in fiscal year 1997 was set at 100% of the then current market value of a
share of the Company's Common Stock.
4. Mr. Murray's Compensation. The process by which the compensation of
Robert J. Murray, as Chairman, President and Chief Executive Officer of the
Company, was determined for fiscal year 1997 differed in no material way from
that employed with respect to the other Named Executive Officers. Mr. Murray's
base salary was not increased over that salary fixed at the time of his
employment in December of 1995, and his target bonus under the 1997 Executive
Bonus Plan remained at 70% of base salary. One-half of Mr. Murray's bonus was
based on attainment of the Company's financial performance targets as applied
to the other Named Executive Officers, and the other half on a more stringent
application of the same targets. Based on these criteria, Mr. Murray received
a bonus equal to 51.8% of base salary. Following the close of the year, the
Board of Directors, upon the recommendation of the Committee, awarded Mr.
Murray a special cash bonus of $60,000 in recognition of the dramatic
improvement in the Company's performance during the 1997 fiscal year. Because
Mr. Murray's principal residence is located more than 75 miles from the
Company's headquarters, the Company furnished Mr. Murray with an apartment
within a shorter commuting distance and reimbursed 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 AND STOCK OPTION COMMITTEE
Peter A. Brooke Robert L. Gable Benjamin H.
Lacy (Chairman)
12
PERFORMANCE GRAPH
The following chart compares the value of $100 invested in the Company's
Common Stock from June 27, 1992 through June 28, 1997 with a similar
investment in the S&P 600 Small Cap Stock Index, and in a peer group
consisting of seven 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. This fiscal year, the index of peer
group companies was modified to reflect the Company's focus on the direct
marketing of forms, checks, shipping and packaging supplies, and related
products to the small business marketplace. In accordance with Securities and
Exchange Commission rules, the return data for the former peer group companies
is provided below for comparative purposes, but will not be provided in future
years.
[PERFORMANCE GRAPH APPEARS HERE]
Former
-----------
NEBS S&P 600 Peer Group Peer Group
-------- -------- ----------- -----------
FYE 1992 100.00 100.00 100.00 100.00
FYE 1993 104.81 128.49 116.87 109.35
FYE 1994 128.39 130.88 131.16 103.68
FYE 1995 141.00 157.54 165.08 134.96
FYE 1996 145.03 198.52 211.72 180.28
FYE 1997 203.43 241.57 196.41 146.53
PEER GROUP COMPANIES:
CSS Industries, Inc. Moore Corporation, Ltd. Viking Office Products,
Deluxe Corporation Global DirectMail Corp. Inc.
Ennis Business Forms,
Inc.
The Reynolds & Reynolds
Co.
FORMER PEER GROUP COMPANIES:
American Business Moore Corporation Ltd. The Standard Register
Products, Inc. Paris Business Forms, Company
Ennis Business Forms, Inc. Wallace Computer
Inc. Services, Inc.
The Reynolds & Reynolds
Co.
13
PROPOSAL TWO
APPROVAL OF THE NEBS 1997 KEY EMPLOYEE AND ELIGIBLE
DIRECTOR STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
INTRODUCTION
On July 25, 1997, the Board of Directors voted to adopt, subject to
ratification by the stockholders, the NEBS 1997 Key Employee and Eligible
Director Stock Option and Stock Appreciation Rights Plan (the "1997 Plan")
which amends and restates the NEBS 1990 Key Employee Stock Option and Stock
Appreciation Rights Plan (the "1990 Plan") and the NEBS 1994 Key Employee and
Eligible Director Stock Option and Stock Appreciation Rights Plan (the "1994
Plan") and incorporates the two plans into the 1997 Plan. The 1997 Plan must
be ratified and approved by holders of a majority of the Company's outstanding
voting stock represented and voting at a meeting at which a quorum is present,
and no option granted under the 1997 Plan will become exercisable until the
1997 Plan is so approved.
The Company has in effect the 1990 Plan and the 1994 Plan. The number of
shares initially made available under the 1990 Plan was 1,000,000 shares, of
which 92,246 shares remained available for option grants prior to the adoption
of the 1997 Plan. The number of shares initially made available under the 1994
Plan was 1,200,000, of which 82,313 shares remained available for option
grants prior to the adoption of the 1997 Plan. The Company believes that
additional option shares must be made available to give the Company reasonable
flexibility in providing appropriate incentives to its employees. To simplify
administration of the Company's option program and to update the plans in
light of recent changes to the Section 16 rules under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Company has also determined
it to be advisable to amend the 1990 Plan and the 1994 Plan and to combine the
two plans into the 1997 Plan.
The significant amendments to the 1990 Plan and the 1994 Plan include:
1. The addition of 1,300,000 shares to the aggregate shares available for
grant under the Company's option plans. If the Plan is approved by the
stockholders, a total of 1,474,559 shares will be available for grant under
the Plan. This number includes a total of 174,559 shares that remained
available for grant under the 1990 Plan and the 1994 Plan prior to the
adoption of the 1997 Plan. If the Plan is approved by the stockholders, new
options granted by the Company will be granted under the 1997 Plan.
2. Providing for acceleration of vesting of stock options upon a change
in control of the Company, with respect to options granted under the 1990
Plan. Similar change in control provisions were included in the 1994 Plan.
If the 1997 Plan is approved by the stockholders, existing options granted
under the 1990 Plan may be amended to provide for acceleration of vesting
upon a change in control.
3. Certain changes to update provisions of the plans for conformity with
amended Section 16 rules under the Exchange Act. Such changes include (i)
permitting the transfer of non-incentive stock options, directly or in
trust, to immediate family members of optionees; (ii) eliminating certain
requirements with respect to the exercise of stock appreciation rights; and
(iii) the granting of broader discretion to the Board of Directors to amend
the Plan without stockholder approval or ratification.
SUMMARY OF THE 1997 PLAN
The purpose of the 1997 Plan is to provide a means whereby the Company, by
granting options to purchase shares of its common stock, par value $1.00 per
share (the "Common Stock") and stock appreciation rights ("SARs") in
connection with such options, can attract and retain persons of ability as key
employees of the Company and its subsidiaries and as directors of the Company.
It is also the purpose of the 1997 Plan to provide key employees with a
performance incentive and to encourage stock ownership in the Company by key
employees and directors.
The 1997 Plan is to be administered and interpreted by a committee (the
"Committee") appointed by the Board of Directors, whose members are all
independent, non-employee directors of the Company. Subject to the
14
express terms of the 1997 Plan, the Committee will determine the employees to
whom discretionary options will be granted, the number of shares as to which
options will be granted to each employee, whether or not any options will
contain SARs and the expiration date and other terms and conditions of each
option agreement. Directors who are not employees of the Company ("Eligible
Directors") will receive as part of their compensation for service as
directors non-discretionary option grants for 3,000 shares in their first year
of service as a director, and 1,000 shares in each year of service as a
director thereafter.
The total number of shares as to which options may be granted under the 1997
Plan shall not exceed 1,474,559; subject to adjustment to reflect stock splits
or combinations, stock dividends or reclassifications, or other actions of a
similar nature. Shares allocable to terminated or surrendered portions of
options may be reallocated to new options subsequently granted under the Plan.
The 1997 Plan provides for the granting of Incentive Stock Options ("ISOs"),
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and Non-Incentive Stock Options ("NISOs"), as determined
by the Committee in its sole discretion.
ELIGIBILITY
All employees and directors of the Company or a subsidiary of the Company
are eligible to participate in the 1997 Plan. Employees may be granted either
ISOs or NISOs, except that no employee will be granted an ISO if, immediately
after the grant, such employee would own stock, and/or hold outstanding
options to purchase stock, which represent ten percent (10%) or more of the
total of all shares of the Common Stock then outstanding plus all shares of
the stock which are then the subject of outstanding stock options, issued
under the 1997 Plan or otherwise. The aggregate fair market value of stock
with respect to which ISOs become exercisable for the first time by any
individual during any calendar year shall not exceed $100,000. The maximum
number of shares of stock with respect to which options may be granted to any
employee during any single calendar year is 100,000. Officers or directors of
the Company who are full-time employees of the Company and otherwise meet the
foregoing terms of eligibility and Eligible Directors will be eligible to
participate in the 1997 Plan. Options granted to Eligible Directors will be
NISO's only.
Because participants in the Plan and the number of shares for which options
may be granted to employees are to be determined by the Committee, in its sole
discretion, it is impossible to state the names of the employees who are to
receive options or the number of shares as to which options may be granted to
any specific employee. The table on page 7 of this Proxy Statement sets forth
information with respect to the grant of Options under the 1990 Plan and the
1994 Plan to the Named Executive Officers, Eligible Directors and other
Company employees during the Company's last fiscal year.
The option price per share will be the fair market value of a share of the
Common Stock on the day the option is granted, as determined (a) by the
closing sales price per share of the Common Stock as last reported on the New
York Stock Exchange before the date on which such option is granted, or (b) in
certain circumstances by a principal market maker for the Common Stock
designated by the Committee. The last price of the Common Stock, as reported
on the New York Stock Exchange for August 29, 1997, was $30.50
Employees and Eligible Directors who exercise options to purchase securities
under the 1997 Plan will pay cash in the full amount of the option price at
the time of exercise and/or shall deliver other shares of Common Stock of a
fair market value equal to the exercise price of the optioned shares to be
purchased.
No portion of an option automatically granted under the 1997 Plan to an
Eligible Director will be exercisable until one year after the date of grant,
when such option will be exercisable in full. The Committee may, in its
discretion, prescribe waiting periods for employee options.
Any option agreement may provide, if the Committee so determines, that the
option holder shall have the right (a stock appreciation right, or "SAR"), at
any time while the option is exercisable, to surrender the option in whole or
in part, to the extent then exercisable, for an appreciation distribution by
the Company in an amount
15
equal to the difference between the fair market value, on the date of the
option surrender, of the shares of Common Stock subject to the surrendered
option (or the surrendered portion thereof) and the option price for such
shares. Any such appreciation distribution will be made in the form of shares
of Common Stock, unless the Committee, in its sole discretion, decides to
discharge the Company's obligation in whole or in part by the payment of cash.
No ISO or SAR related thereto will be assignable or transferable except by
will or by the laws of descent and distribution. Director options will be
transferable, directly or indirectly, to or for the benefit of members of the
optionee's immediate family. The Committee has the authority to grant NISOs to
employees that are transferable, directly or indirectly, to or for the benefit
of members of the optionee's immediate family. If an optionee ceases to be an
employee of the Company or subsidiary other than by reason of retirement or
death, any option held by such employee will expire upon the cessation of his
or her employment, or after three months if the employee is terminated
following a change in control (as defined below). If an employee retires, or
an Eligible Director ceases to serve as such, while holding an unexpired
option, such option will be exercisable during the remainder of the term
thereof or during the three months following such retirement or cessation of
service, whichever period is shorter, except that NISOs will be exercisable
for a period of two years, or the remainder of the term thereof, whichever
period is shorter, following such retirement or cessation of service.
Unexpired options may be exercised by the personal representative of a
deceased optionee during the remainder of the term thereof or during the 12
months following the date of such person's death, whichever period is shorter.
If the Company combines or splits the Common Stock or declares thereon any
dividend payable in shares of Common Stock, or reclassifies or takes any other
action of a similar nature affecting the Common Stock, then the number and
class of shares of Common Stock as to which options may thereafter be granted
(in the aggregate and to any participant) shall be adjusted accordingly, and,
in the case of each option outstanding at the time of any such action, the
number and class of shares which may thereafter by purchased pursuant to such
option and the option price per share (and any SARs related thereto) shall be
adjusted to such extent as may be determined by the Board, upon recommendation
of the Committee, to be necessary to maintain unenlarged and unimpaired the
rights of the holder of such option.
Upon a change in control of the Company, all outstanding unvested options
granted under the 1997 Plan will become immediately exercisable. Under the
1997 Plan, a "change in control" is deemed to occur upon (1) the acquisition,
directly or indirectly, of at least thirty-five percent (35%) of the
outstanding securities of the Company by a person other than the Company or an
employee benefit plan of the Company, (2) a more than fifty percent change in
the composition of the Board of Directors of the Company over a period of 24
months (if such change was not approved by a majority of the existing
directors), (3) certain mergers or consolidations involving the Company, (4) a
liquidation of the Company or (5) a sale of all or substantially all of the
Company's assets.
The Board of Directors may alter, amend, or suspend the 1997 Plan and may
alter and amend all option agreements granted thereunder, except that any such
action requiring shareholder approval under the Section 16 rules of the
Exchange Act, the Internal Revenue Code of 1986, as amended (the "Code") or
any regulation thereunder, or the rules of the New York Stock Exchange or any
exchange on which the Common Stock is traded will be subject to shareholder
approval or ratification. No amendment may adversely affect the rights of an
option holder without such option holder's consent.
The 1997 Plan will terminate on October 24, 2007. The expiration date of
each option agreement will be not later than ten (10) years from the date it
is granted.
FEDERAL INCOME TAX CONSIDERATIONS
It is intended that ISOs granted under the 1997 Plan shall be "incentive
stock options" within the meaning of Section 422 of the Code and terms of the
1997 Plan and the options granted thereunder are to be construed accordingly.
16
Persons receiving ISOs granted under the 1997 Plan generally will not
realize compensation income for regular federal income tax purposes on the
date the ISO is granted or on the date the option is exercised. Such persons
will, however, generally realize an item of tax preference income for purposes
of the federal alternative minimum tax to the extent that the fair market
value of the shares purchased upon exercise of the ISO exceeds the option
price for the shares (the "spread amount"). For purposes of the alternative
minimum tax only, the spread amount will be added to the option price in
determining basis in the stock and thus gain or loss on the sale of shares
acquired under such ISOs. A credit for any net alternative minimum tax paid by
an ISO holder on exercise may be available to offset such person's regular
income tax in subsequent years, including any tax on the capital gain
described in the following sentence. Generally, persons who exercise ISOs are
also expected to realize capital gain for federal income tax purposes on the
date they sell the shares acquired upon the exercise of ISOs in an amount
equal to the excess of the amount received from the sale of such shares over
the amount paid for such shares.
If an ISO holder disposes of shares acquired upon exercise of the ISO within
two years from the date of the ISO grant or within one year from the date of
exercise of the ISO, such disposition will disqualify the shares from
incentive stock option treatment under the Code (and is therefore referred to
as a "disqualifying disposition"). Such person would then have compensation
income for federal income tax purposes in the year of such disqualifying
disposition, generally in the amount (if any) by which the lesser of the fair
market value of the shares on the date of the ISO exercise or the price at
which the shares are disposed of exceeds the ISO exercise price, and capital
gain in the amount (if any) by which the sale price exceeds the fair market
value on the date of exercise.
Although the Company ordinarily is not entitled to a deduction upon the
grant or exercise of ISOs under the 1997 Plan or upon the sale of shares
thereby acquired, the Company is entitled to take a deduction in the Company's
tax year in which any disqualifying disposition occurs. The deduction is equal
to the compensation income realized by the person making such disposition.
Persons receiving NISO grants under the 1997 Plan generally will not realize
compensation income for regular federal income tax purposes on the date the
NISO is granted if the NISO has no readily ascertainable fair market value
when it is granted, but will realize such income on the date the NISO is
exercised. The amount of compensation income realized for federal income tax
purposes will be the amount (if any) by which the fair market value of the
shares on the date of the NISO exercise exceeds the option exercise price. The
Company will be allowed corresponding federal tax deductions in the amount of
the compensation income realized by the persons exercising the NISOs,
generally in the Company's tax year in which the NISOs are exercised. For
purposes of determining capital gain or loss upon the later sale of such
shares, persons exercising NISOs will obtain a basis in the shares purchased
equal to the fair market value of the shares at the time the NISO is
exercised. (That is, a person's basis will be equal to the sum of the option
exercise price plus the amount of compensation income realized by the person.)
The Company must withhold federal and any applicable state and local income
taxes and other applicable employment taxes with respect to the compensation
income realized upon the exercise of NISOs by employees.
A person surrendering options for a SAR distribution will realize
compensation income in the full amount of such distribution. The Company will
be allowed a corresponding deduction of the amount of the distribution (the
excess of the fair market value of shares underlying such options over the
option price of such shares), generally in the Company's tax year in which
such surrender occurs. Such person will obtain a basis in any shares
distributed in satisfaction of SARs equal to the fair market value of such
shares at the time of such surrender (which is also the amount of compensation
income realized), for purposes of determining capital gain or loss upon the
later sale of such shares. The Company must withhold federal and applicable
state and local income taxes and other applicable employment taxes with
respect to an SAR distribution.
A person who transfers a NISO, pursuant to the 1997 Plan, to one or more
immediate family members or to a trust, partnership or other entity for the
benefit of one or more immediate family members generally will remain liable
for all income taxes (as described above) and employment taxes that result
from the exercise of such NISO. Such transfer of a NISO will also be subject
to the gift tax and estate tax provisions of the Code.
17
The persons named as proxies in the accompanying form of proxy intend
(unless specific contrary instructions are given) to vote to approve the 1997
Plan.
PROPOSAL THREE
RATIFICATION OF SELECTION OF AUDITORS
Upon the recommendation of its Audit Committee, the Board of Directors
selected the firm of Deloitte & Touche LLP as auditors of the Company for the
fiscal year ending June 27, 1998, subject to ratification by a vote of the
holders of a majority of the shares of Common Stock voting thereon at the
Annual Meeting. A representative of Deloitte & Touche LLP, which served as
auditors for fiscal year 1997, 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.
The persons named as proxies in the accompanying form of Proxy intend
(unless specific contrary instructions are given) to vote for ratification of
the selection of Deloitte & Touche LLP as auditors for the 1998 fiscal year.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company, at its offices at 500
Main Street, Groton, Massachusetts 01471, no later than May 15, 1998, in order
to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS AND VOTING PROCEDURES
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that shown above. However, if any
other proper business should come before the Meeting, it is the intention of
the persons named in the enclosed form of Proxy to vote the Proxies with
respect to any such business in accordance with their best judgment. Matters
with respect to which the enclosed form of Proxy confers such discretionary
authority are as follows: (i) matters which the Board of Directors does not
know of a reasonable time before the mailing of this Proxy Statement are to be
presented at the Annual Meeting; (ii) approval of the minutes of the prior
meeting of stockholders, such approval not constituting ratification of the
action taken at such meeting; (iii) election of any person as a director if
any of the nominees named herein are unable to serve or for good cause will
not serve; and (iv) matters incident to the conduct of the meeting.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from the owners. If
specific instructions are not received, however, brokers generally may vote
these shares in their discretion, depending on the type of proposal involved.
Rules of the New York Stock Exchange, however, preclude brokers from
exercising their voting discretion on certain proposals. Without specific
instructions from the beneficial owner in such case, the broker may not vote
on that proposal, giving rise to what is termed a "broker non-vote" on such a
proposal. In the event of a broker non-vote with respect to any issue coming
before the Meeting, the Proxy will nonetheless be counted as present for
purposes of determining the existence of a quorum. The effect of broker non-
votes on specific agenda items is described below, where applicable.
The vote required for election of directors is the affirmative vote of a
plurality of the shares present or represented at the Meeting and entitled to
vote thereon. Unless authority to vote for any director is withheld in the
Proxy, votes will be cast in favor of election of the nominees listed herein.
Votes withheld from election of directors will be excluded entirely from the
vote and will have no effect.
18
The vote required for approval of the NEBS 1997 Key Employee and Eligible
Director Stock Option and Stock Appreciation Rights Plan is the affirmative
vote of a majority of the shares of Common Stock present or represented at the
Meeting and voting thereon. Neither abstentions as to this proposal nor broker
non-votes will count as votes cast "for" or "against" this proposal and,
accordingly, will not be included in calculating the number of votes necessary
for approval of this proposal. Pursuant to New York Stock Exchange Rules,
brokers do not have discretionary authority to vote on this proposal without
instructions from beneficial owners.
The cost of preparing, assembling and mailing the proxy material will be
borne by the Company. In addition to the use of the mails, certain officers
and regular employees of the Company, without additional compensation, may use
their personal efforts, by telephone or otherwise, to obtain Proxies. The
Company 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 to request instruction for voting the Proxies. The
Company will reimburse such brokerage houses and other persons for their
reasonable expenses in connection therewith. In addition, the Company has
engaged the services of Georgeson & Company, Inc., to assist in the
solicitation of proxies for a fee of $7,500, plus reasonable out-of-pocket
expenses.
Any stockholder giving a Proxy in the accompanying form retains the power to
revoke it, by appropriate written notice to the Secretary of the Company or by
the giving of a later-dated Proxy, at any time prior to the exercise of the
powers conferred thereby. Attendance in person at the Meeting will not in
itself be deemed to revoke a Proxy unless the stockholder gives an affirmative
notice at the Meeting that the stockholder intends to revoke the Proxy and to
vote in person.
The Nominating Committee will accept shareholders' suggestions on candidates
to consider as potential Board members as part of the Committee's review of
the composition of the Board. Such recommendations may be sent to the
Nominating Committee through the Company Secretary at New England Business
Service, Inc., 500 Main Street, Groton, MA 01471.
The shares represented by a Proxy will be voted as directed by the
stockholder giving the Proxy.
IF NO CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED (1) TO FIX
THE NUMBER OF DIRECTORS AT EIGHT AND TO ELECT THE PERSONS NAMED UNDER
"ELECTION OF DIRECTORS," (2) TO APPROVE THE NEBS 1997 KEY EMPLOYEE AND
ELIGIBLE DIRECTOR STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN, (3) TO
RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS AUDITORS FOR FISCAL YEAR
1998, AND (4) IN THE DISCRETION OF THE PROXYHOLDERS AS TO ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING.
19
DETACH HERE
NEW ENGLAND BUSINESS SERVICE, INC.
P MEETING OF STOCKHOLDERS -- OCTOBER 24, 1997
R THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF NEW ENGLAND BUSINESS SERVICE, INC.
O
X The undersigned stockholder in New England Business Service, Inc. (the
"Company") hereby appoints Robert J. Murray, Edward M. Bolesky and John F.
Y Fairbanks 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 24, 1997 at 10:00 a.m.,
Eastern Daylight Savings Time, and any adjournments thereof.
---------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
---------------------
DETACH HERE
PLEASE MARK
[X] 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 2. To approve the NEBS 1997 FOR AGAINST ABSTAIN
Board of Directors at eight and to elect the following Key Employee and Eligible [_] [_] [_]
nominees as directors: Peter A. Brooke, Robert L. Gable, Director Stock Option
Benjamin H. Lacy, Herbert W. Moller, Robert J. Murray, and Stock Appreciation Rights
Jay R. Rhoads, Jr., Richard H. Rhoads, and Brian E. Stern. Plan.
FOR WITHHELD 3. To ratify the selection of [_] [_] [_]
[_] [_] Deloitte & Touche LLP as
independent auditors of the
[_] Company for the current fiscal
---------------------------------------- year ending June 27, 1998.
For all nominees except as noted above
4. 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:
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