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.
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NEW ENGLAND BUSINESS SERVICE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 23, 1998
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 23, 1998 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 ratify the selection of Deloitte & Touche LLP as independent auditors
of the Company for the fiscal year ending June 26, 1999; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on August 28, 1998 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 27, 1998, 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
Craig Barrows
Secretary
September 11, 1998
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 23, 1998
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 23, 1998 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 11, 1998
to each stockholder entitled to vote at the Meeting. The Company's Annual
Report to Stockholders for the fiscal year ended June 27, 1998 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 28, 1998 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 28, 1998, there were 14,337,819 shares of Common Stock issued and
outstanding. The following table sets forth certain information regarding the
Common Stock owned as of that date (except as noted below) by each person (or
group of affiliated persons) known by the Company to own beneficially more
than 5% of the Company's outstanding shares of Common Stock. Except as
otherwise indicated in the footnotes to this table, the Company believes that
each of the persons or entities named in this table has sole voting and
investing power with respect to all the shares of Common Stock indicated.
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT
------------------- ----------------------- -------
Jay R. Rhoads, Jr. ............................ 1,568,200(1) 10.93
New England Business Service, Inc.
500 Main Street
Groton, MA 01471
David L. Babson & Company Inc.................. 1,276,100(2) 8.90
1 Memorial Drive
Cambridge, MA 02142
Royce & Associates, Inc. ...................... 1,183,800(3) 8.26
1414 Avenue of the Americas
New York, NY 10019
Palisade Capital Management, L.L.C. ........... 1,042,600(4) 7.27
One Bridge Plaza
Fort Lee, NJ 07024
FMR Corp. ..................................... 730,100(5) 5.09
82 Devonshire Street
Boston, MA 02109
- --------
(1) Includes 5,000 shares which may be acquired within 60 days of August 28,
1998 through the exercise of stock options. Also includes 85,768 shares
owned by Mr. Rhoads's wife, as to all of which Mr. Rhoads disclaims
beneficial ownership.
1
(2) As reported in, and based solely upon, an Amendment No. 2 to Schedule 13G
dated January 15, 1998, filed with the Securities and Exchange Commission
by David L. Babson & Company Inc.
(3) As reported in, and based solely upon, an Amendment No. 1 to Schedule 13G
dated February 4, 1998, filed with the Securities and Exchange Commission
by Royce & Associates, Inc. (the "Royce Schedule 13G"). According to the
Royce Schedule 13G, of the 1,183,800 shares of Common Stock owned
collectively by Royce & Associates, Inc. and its affiliates (the "Royce
Shares"), (i) Royce & Associates, Inc. beneficially owns 1,120,000 of the
Royce Shares, (ii) Royce Management Company beneficially owns 63,800 of
the Royce Shares, and (iii) Charles M. Royce beneficially owns 1,183,800
of the Royce Shares.
(4) As reported in, and based solely upon, an Amendment No. 1 to Schedule 13G
dated January 30, 1998, filed with the Securities and Exchange Commission
by Palisade Capital Management, L.L.C.
(5) As reported in, and based solely upon, an Amendment No. 7 to Schedule 13G
dated December 31, 1997, filed with the Securities and Exchange Commission
by FMR Corp.
On August 28, 1998, the directors, the Chief Executive Officer and the other
individuals named in the Summary Compensation Table (the "Named Executive
Officers") beneficially owned the number of shares of Common Stock shown
below:
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP(1)(2)(3) PERCENT(1)
- ------------------- ------------------ ----------
Peter A. Brooke.................................. 26,497(4) *
Robert L. Gable.................................. 8,000 *
Benjamin H. Lacy................................. 18,892 *
Herbert W. Moller................................ 7,100(5) *
Robert J. Murray................................. 287,544(6) 1.97
Jay R. Rhoads, Jr................................ 1,568,200(7) 10.93
Richard H. Rhoads................................ 68,178(8) *
Brian E. Stern................................... 4,000(9) *
M. Anne Szostak.................................. 1,000(10) *
Edward M. Bolesky................................ 72,172 *
Robert S. Brown, Jr.............................. 78,694 *
John F. Fairbanks................................ 26,286 *
Theodore Pasquarello............................. 378,218(11) 2.64
All Directors and Executive Officers as a Group
(17 persons).................................... 2,642,135(12) 17.74
- --------
*Less than one percent
(1) The number and percent of the outstanding shares of Common Stock with
respect to each named beneficial owner treat as outstanding all shares
which may be acquired by such person within 60 days of August 28, 1998.
(2) Includes shares which may be acquired within 60 days of August 28, 1998
through the exercise of stock options as follows: Mr. Brooke, 5,000
shares; Mr. Gable, 3,000 shares; Mr. Lacy, 4,225 shares; Mr. Moller,
3,000 shares; Mr. Murray, 233,497 shares; Jay R. Rhoads, Jr., 5,000
shares; Richard H. Rhoads, 44,000 shares; Mr. Stern, 1,000 shares; Mr.
Bolesky, 65,639 shares; Mr. Brown, 70,869 shares; Mr. Fairbanks, 23,825
shares; Mr. Pasquarello, 12,500 shares; and all directors and executive
officers as a group, 554,807 shares.
(3) 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, 1,608 shares; Mr. Bolesky, 5,047 shares; Mr.
Brown, 5,032 shares; Mr. Fairbanks, 1,433 shares; and Mr. Pasquarello,
338 shares.
(4) Includes 12,468 shares owned by Mr. Brooke's wife, as to all of which
shares Mr. Brooke disclaims beneficial ownership.
(5) Includes 4,100 shares owned jointly by Mr. Moller and Mr. Moller's wife.
(6) Includes 52,439 shares owned jointly by Mr. Murray and Mr. Murray's wife.
2
(7) Includes 85,768 shares owned by Mr. Rhoads's wife, as to all of which Mr.
Rhoads disclaims beneficial ownership.
(8) Includes 1,000 shares owned by Mr. Rhoads's wife individually and 841
shares owned by his wife and a co-trustee of a trust for the benefit of
Mr. Rhoads's children, as to all of which shares Mr. Rhoads disclaims
beneficial ownership.
(9) Includes 1,000 shares owned by Mr. Stern's wife, as to all of which
shares Mr. Stern disclaims beneficial ownership.
(10) Shares owned jointly by Ms. Szostak and Ms. Szostak's husband.
(11) Includes 365,217 shares owned by Cambria Corporation, of which Mr.
Pasquarello is the president, sole director and sole stockholder.
(12) Including 101,077 shares owned by trusts or custodians for the benefit of
dependent children of directors and executive officers, or by spouses or
dependent children of directors and executive officers, as to all of
which shares the directors and executive officers disclaim beneficial
ownership; 66,922 shares jointly owned by executive officers or directors
and their spouses; and 15,027 shares held for the accounts of executive
officers by the trustee of The 401(k) Plan for Employees of New England
Business Service, Inc.
3
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 Company's Board of Directors currently
consists of nine members. Peter A. Brooke and Jay R. Rhoads, Jr., directors
since 1989 and 1955, respectively, have decided not to stand for re-election.
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 seven and to vote for the election of the
seven 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 1997 Annual Meeting, except that M. Anne
Szostak was elected to her position by the other directors on January 23,
1998. 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 57, 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 Gillette. 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, Hannaford Bros. Co. and
Allmerica Financial Corporation.
Robert L. Gable, age 67, has been a director of the Company since July 1996.
Mr. Gable has been Chairman of Unitrode Corporation since 1990, and was Chief
Executive Officer of Unitrode from 1990 to November 1997. 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. Mr. Gable
is a director of Unitrode Corporation and Ibis Technology Corporation.
Benjamin H. Lacy, age 72, 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 served as general counsel to the Company from 1973 to 1998.
Herbert W. Moller, age 56, has been a director of the Company since July
1996. Mr. Moller retired from The Gillette Company in January 1998 having been
with that company for 32 years. From 1992 until his retirement in 1998, Mr.
Moller was Vice President, Finance and Strategic Planning, Gillette North
Atlantic Group. From 1989 through 1992, Mr. Moller was Vice President of
Management Information Systems of Gillette.
Richard H. Rhoads, age 68, 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 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 50, 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. Mr. Stern is a director of HON Industries, Inc.
4
M. Anne Szostak, age 48, has been a director of the Company since January
1998. Ms. Szostak has been Executive Vice President and Corporate Director of
Human Resources of Fleet Financial Group, Inc. since March 1998. From 1994 to
March 1998, Ms. Szostak was Senior Vice President and Corporate Director of
Human Resources for Fleet Financial Group, Inc. From 1991 to 1994, Ms. Szostak
was Chairman, President and Chief Executive Officer of Fleet Bank of Maine.
Ms. Szostak is a director of Providence Energy Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing audit, organization and compensation, stock option,
nominating and executive committees of the Board of Directors.
The Audit Committee is composed of Messrs. Moller (Chairman), Lacy and
Stern. The Committee met three times 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 26, 1999.
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 is composed
of Messrs. Lacy (Chairman), Brooke and Gable. The Committee met one time
during the last fiscal year.
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 and 1997 Key Employee and Eligible Director Stock Option and Stock
Appreciation Rights Plans, is composed of Messrs. Lacy (Chairman), Brooke and
Gable. The Committee met three times during the last fiscal year.
The Nominating Committee is composed of Messrs. Brooke (Chairman), Jay R.
Rhoads, Jr. and Stern. 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 Ms. Szostak for election as a director in January 1998
and the persons nominated for election as directors by the Stockholders at the
Annual Meeting to be held October 23, 1998.
The Executive Committee, composed of Messrs. Murray (Chairman), Lacy, Moller
and Richard H. Rhoads, met or acted by unanimous written consent nine times
during the last fiscal year.
The Board of Directors met eight times during the last fiscal year. All of
the directors attended at least 75% of the meetings of the Board of Directors
and committees of the Board on which they served.
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 1998, 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 1997 Annual Meeting of
Stockholders and not actively employed by the Company were granted stock
options pursuant to The NEBS 1997 Key Employee and Eligible Director Stock
Option and Stock Appreciation Rights Plan with an exercise price determined by
the market value
5
of the Company's Common Stock on the tenth day following such Annual Meeting.
Mr. Brooke, Mr. Gable, Mr. Lacy, Mr. Moller, Jay R. Rhoads, Jr., Richard H.
Rhoads and Mr. Stern each received an option grant for the purchase of 1,000
shares of the Company's Common Stock following their election at the 1997
Annual Meeting of Stockholders. Each eligible director will be granted an
option to acquire 1,000 shares upon each subsequent election at an Annual
Meeting of Stockholders of the Company, under similar terms, except that any
newly elected director, or continuing director who was first elected
subsequent to the previous Annual Meeting or 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.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company to the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company in all capacities for the fiscal years ended
June 27, 1998, June 28, 1997 and June 29, 1996.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
------------------------------ ------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION(2)
------------------ ---- -------- -------- ------------ ------------ ---------------
Robert J. Murray........ 1998 $393,800 $161,079 $37,492(3) 35,000 $18,360
Chairman, President and
CEO 1997 393,800 263,988 44,499(3) 88,165 5,490
1996 212,046 0 0 301,000 495
Edward M. Bolesky....... 1998 180,000 81,538 0 13,100 15,613
Vice President--Direct
Marketing 1997 173,000 80,185 0 40,124 8,480
Telesales & Service 1996 164,800 0 0 7,148 3,125
Robert S. Brown, Jr. ... 1998 170,000 64,258 0 9,600 15,273
Vice President--Circu-
lation and 1997 170,000 60,945 0 22,737 5,423
International 1996 170,000 0 0 7,373 5,773
John F. Fairbanks(4).... 1998 175,000 62,041 0 12,700 11,068
Vice President--Chief
Financial 1997 141,667 74,250 0 40,000 4,811
Officer, Treasurer 1996 -- -- -- -- --
Theodore Pasquarello(5). 1998 200,000 30,580 0 14,500 10,696
Executive Vice Presi-
dent, 1997 57,969 0 0 50,000 247
President of Chiswick
Division 1996 -- -- -- -- --
- --------
(1) The Company has not issued stock appreciation rights or granted restricted
stock awards. In addition, the Company does not maintain a "long-term
incentive plan," as that term is defined by applicable rules. Securities
underlying options are shares of Common Stock.
6
(2) The amounts reported represent (i) 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. and (ii) the dollar value of premiums paid by the Company on
group term life insurance for the benefit of the Named Executive Officers.
(3) The amounts reported are the value of the Company's reimbursement to Mr.
Murray for his tax liability arising from the Company's payment of lease
and expense obligations on an apartment for Mr. Murray's sole use.
(4) Mr. Fairbanks was elected an executive officer of the Company effective
October 31, 1996.
(5) Mr. Pasquarello was elected an executive officer of the Company effective
March 31, 1997.
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(1) IN FISCAL YEAR SHARE DATE 5% 10%
---- ---------- -------------- --------- ---------- ------------- ---------------
Robert J. Murray........ 35,000 7.4% $30.00 10/30/07 $ 660,339 $ 1,673,430
Edward M. Bolesky....... 13,100 2.8% 30.00 10/30/07 247,156 626,341
Robert S. Brown, Jr. ... 9,600 2.0% 30.00 10/30/07 181,122 458,998
John F. Fairbanks....... 12,700 2.7% 30.00 10/30/07 239,609 607,216
Theodore Pasquarello.... 14,500 3.1% 30.00 10/30/07 273,569 693,278
- --------
(1) The stock options awarded vest annually in four equal installments
beginning on October 30, 1998 and ending on October 30, 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........ 10,568 $158,832 224,109 192,488 $2,670,662 $1,714,016
Edward M. Bolesky....... 4,650 86,213 60,478 44,138 755,353 229,918
Robert S. Brown, Jr. ... 3,730 33,168 66,446 27,854 890,126 154,183
John F. Fairbanks....... 2,800 41,377 20,955 42,841 196,337 212,655
Theodore Pasquarello.... 0 0 12,500 52,000 62,500 198,375
- --------
(1) In-the-money options are options where the market value of the underlying
securities at June 27, 1998 exceeds the exercise price.
7
PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
During fiscal year 1997, the Company amended its defined benefit pension
plan (the "Pension Plan") to freeze plan participation at December 31, 1996
and to eliminate further benefit accruals after June 28, 1997. The Company
terminated the Pension Plan during the first quarter of fiscal year 1998 and
provided for optional lump sum distributions of benefits in lieu of an annuity
contract, determined in accordance with a formula set forth in the amended
plan. The distributions were paid out of Pension Plan funds without additional
employer contributions.
For the persons named in the Summary Compensation Table, the lump sum
distribution payments from the Pension Plan were: Mr. Bolesky, $134,285; Mr.
Brown, $136,876; and Mr. Fairbanks, $6,819. In each case, these amounts were
rolled over into the executive's account in The 401(k) Plan for Employees of
New England Business Service, Inc. Mr. Murray and Mr. Pasquarello did not
participate in the Pension Plan.
Certain of the Named Executive Officers have also participated in the
Company's Supplemental Executive Retirement Plan (the "Supplemental Plan").
The Supplemental Plan provided 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 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.
In connection with the curtailment and termination of the Pension Plan, the
Company amended the Supplemental Plan to freeze participation in and the
accrual of benefits under the plan effective June 28, 1997. For the persons
named in the Summary Compensation Table, the amounts accrued under the
Supplemental Plan as of June 27, 1998 were: Mr. Bolesky, $6,716; and Mr.
Brown, $16,056. Mr. Murray, Mr. Fairbanks and Mr. Pasquarello did not
participate in the Supplemental Plan.
DEFERRED COMPENSATION PLAN
The Company has established the New England Business Service, Inc. Deferred
Compensation Plan pursuant to which Named Executive Officers of the Company
may elect to defer, until 60 days following the termination of employment with
the Company, a portion of all compensation payable by the Company for personal
services rendered to the Company 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.
The Company has established a trust for the benefit of participants in the
Deferred Compensation Plan. Pursuant to the terms of the trust, as soon as
possible after any Deferral Amounts have been withheld from a participant in
the plan, the Company will contribute such Deferral Amounts to the trust to be
held for the benefit of the participant in accordance with the terms of the
plan and the trust. However, the assets in the trust will become available to
the Company's creditors if the Company becomes insolvent or bankrupt. If the
funds in the trust are insufficient to pay amounts due under the plan to a
participant, the Company remains obligated to pay any deficiency.
STOCK COMPENSATION PLAN
The Company has established the New England Business Service, Inc. Stock
Compensation Plan pursuant to which officers (including the Named Executive
Officers) and other key employees of the Company may be issued shares of
Common Stock in lieu of cash in payment of all or part of their regular, bonus
or other special compensation, as determined by the Organization and
Compensation Committee. For fiscal year 1998, the
8
Organization and Compensation Committee determined that each of the Named
Executive Officers would be issued shares of Common Stock having a fair market
value equal to 25% of the after-tax amounts of the annual bonuses shown in the
Summary Compensation Table in lieu of payment of such amounts in cash. Fair
market value of the shares issued was determined based on the closing price of
the Common Stock as reported on the New York Stock Exchange-Composite
Transactions Reporting System prior to the date on which the bonuses were
paid. The foregoing awards under the Stock Compensation Plan did not apply to
any portion of a bonus that was deferred by a Named Executive Officer under
the terms of the Deferred Compensation Plan.
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into agreements 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
During fiscal year 1998, the members of the Organization and Compensation
Committee and the Stock Option Committee were Mr. Brooke, Mr. Gable and Mr.
Lacy.
9
REPORT OF ORGANIZATION AND COMPENSATION
COMMITTEE AND STOCK OPTION COMMITTEE
POLICIES
In providing for the compensation of the Named Executive Officers, it is 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 non-durable goods
manufacturers and direct marketing companies of comparable size, as determined
by a nationally recognized compensation and benefits consultant. In addition,
annual bonuses are provided for, the payment and amount of which depend upon
the Company's degree of attainment of pre-established sales and earnings
targets and, in some instances and to varying extents, upon the attainment of
pre-established individual objectives. Long-range 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 prices equal to 100%
of current market value, in amounts reflecting the level of responsibility of
the grantees for the Company's long term success.
In determining its executive compensation policies from year to year, the
Company expects to take appropriate measures to prevent the employee
remuneration paid by it from being rendered non-deductible by operation of the
terms of Section 162(m) of the Internal Revenue Code of 1986, as amended. Such
measures may include (i) limiting the amount of non-performance-based
compensation paid to any employee, and (ii) complying with the statutory
requirements for exempting performance-based compensation from
non-deductibility by obtaining stockholder approval of qualified performance-
based plans. In October 1994 and October 1997, such approval was obtained for
The New England Business Service Inc. Stock Compensation Plan and the NEBS
1997 Key Employee and Eligible Director Stock Option and Stock Appreciation
Rights Plan, respectively.
IMPLEMENTATION
1. Salaries. The individual salaries of the Named Executive Officers for
fiscal year 1998 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 salary recommendations were made by the Committee after review
of individual performance appraisals by the Chief Executive Officer and
discussion with him of the performance of the Company during fiscal year 1998
and of the individual performances of the Named Executive Officers (other than
himself) during that year. Upon the recommendation of the Chief Executive
Officer, the Committee proposed, and the Board of Directors approved, no
increase in the Chief Executive Officer's salary for fiscal year 1998.
2. Annual Bonuses. At the beginning of fiscal year 1998, all of the Named
Executive Officers were designated as participants in the Company's Annual
Executive Bonus Plan and target bonuses of 70% of base salary for the Chief
Executive Officer and 50% of base salary for the other Named Executive
Officers were established. Financial performance targets equal to the
Company's budgeted net sales and net earnings for fiscal year 1998 were
established as the goals for the achievement of 100% of the target bonus for
the Chief Executive Officer. A combination of financial performance targets
equal to the Company's budgeted net sales and net earnings and business
segment net sales for fiscal year 1998 were established as the goals for the
achievement of 70% of the target bonuses of each of the other Named Executive
Officers having revenue responsibility for particular business segments of the
Company. Personal objectives were established for each of the Named Executive
Officers, other than the Chief Executive Officer, the attainment of which, in
whole or in part, would determine the extent of such officer's right to
receive the other 30% of the target bonus.
Based on these criteria, the Chief Executive Officer received a bonus of
40.9% of his base salary and the other Named Executive Officers received
bonuses ranging from 15.3% to 45.3% of their respective salaries.
3. Stock Options. In October 1997, the Stock Option Committee authorized the
granting of a stock option to the Chief Executive Officer to purchase shares
with a value on the date of grant equal to 110% of his fiscal year 1998 base
salary. At the same meeting, options were granted to the other Named Executive
Officers for
10
shares with a value ranging from 70% to 90% of their respective fiscal year
1998 base salaries. These grants were on the same basis as that adopted by the
Stock Option Committee in fiscal year 1997, whereby a modified Black-Scholes
methodology was employed 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 1998 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 arrived at is as stated above and 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 as Chairman, President and Chief Executive Officer on December 13,
1995. At his request, and with the approval of the Board of Directors, there
has been no subsequent adjustment. Because Mr. Murray's principal residence is
located more than 75 miles from the Company's headquarters, the Company
furnishes Mr. Murray with an apartment within a shorter commuting distance and
reimburses Mr. Murray for his tax liability arising from this arrangement.
Otherwise, Mr. Murray was not provided any fringe benefits other than those
available to all officers of the Company.
ORGANIZATION AND COMPENSATION
COMMITTEE AND STOCK OPTION COMMITTEE
Peter A. Brooke
Robert L. Gable
Benjamin H. Lacy (Chairman)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1997, the Company acquired substantially all of the assets and assumed
certain liabilities of Chiswick Trading, Inc. 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 33,000 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,
who became an executive officer of the Company as a result of the Chiswick
acquisition, 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.
During fiscal year 1998, Herbert W. Moller, a director of the Company,
provided certain consulting services to the Company with respect to the
Company's information systems, for which services Mr. Moller was paid $20,000
and reimbursed for reasonable related expenses. Management believes that the
terms of Mr. Moller's engagement were no less favorable to the Company than
could have been obtained from a comparably qualified unrelated third party.
At the end of fiscal year 1998, the Company had outstanding borrowings of
approximately $23,500,000 from Fleet National Bank, one of several banks party
to an unsecured, revolving line of credit with the Company. Fleet National
Bank is a wholly owned subsidiary of Fleet Financial Group, Inc. M. Anne
Szostak, a director of the Company, is an executive officer of Fleet Financial
Group, Inc.
11
PERFORMANCE GRAPH
The following chart compares the value of $100 invested in the Company's
Common Stock from June 26, 1993 through June 27, 1998 with a similar
investment in the S&P 600 Small Cap Stock Index, and in a peer group
consisting of six/1/ publicly held companies selected on the basis of
similarity to the Company in the nature of products offered, marketing and
distribution channels utilized and customer markets served. The comparison
assumes that all dividends are reinvested.
PERFORMANCE GRAPH APPEARS HERE
NEBS S&P PEER GROUP
---- ----- ----------
FYE 1993 100.00 100.00 100.00
FYE 1994 122.49 101.87 95.03
FYE 1995 134.53 122.61 124.16
FYE 1996 138.37 154.50 165.93
FYE 1997 194.09 188.01 132.90
FYE 1998 243.96 224.60 141.45
PEER GROUP COMPANIES:
Deluxe Corporation Moore Corporation, Ltd. Viking Office Products, Inc.
The Reynolds & Reynolds Co. Global DirectMail Corp. Ennis Business Forms, Inc.
- --------
(1) CSS Industries, Inc. was previously included in the index of peer group
companies because of the similarity of that company's Rapidforms
subsidiary to the Company's business. In December 1997 the Company
acquired the Rapidforms business from CSS Industries, Inc., and as a
result, CSS Industries, Inc. has been removed from the index of peer group
companies.
12
PROPOSAL TWO
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 26, 1999, 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 1998, 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 1999 fiscal year.
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 all
Reporting Persons complied with all filing requirements applicable to them
with respect to transactions during fiscal year 1998, except that Richard T.
Riley's Form 3 was inadvertently filed more than ten days after his election
as an executive officer of the Company.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company, at its offices at 500
Main Street, Groton, Massachusetts 01471, no later than May 14, 1999, 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
13
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 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.
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.
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 stockholders' 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 SEVEN AND TO ELECT THE PERSONS NAMED UNDER
"ELECTION OF DIRECTORS," (2) TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP
AS AUDITORS FOR FISCAL YEAR 1999, AND (3) IN THE DISCRETION OF THE
PROXYHOLDERS AS TO ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING.
14
[X] Please mark
votes as in
this example.
The shares represented by this proxy will be voted as directed by the
undersigned. IF NO CONTRARY INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED IN FAVOR OF ALL PROPOSALS AS DESCRIBED IN DETAIL IN THE PROXY STATEMENT.
1. To fix the number of persons constituting the full Board of Directors at
seven and to elect the following nominees as directors: Robert L. Gable,
Benjamin H. Lacy, Herbert W. Moller, Robert J. Murray, Richard H. Rhoads,
Brian E. Stern and M. Anne Szostak.
FOR WITHHELD
[ ] [ ]
[ ]
--------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To ratify the selection of Deloitte & Touche LLP [ ] [ ] [ ]
as independent auditors of the Company for the
current fiscal year ending June 26, 1999.
3. And to vote and act upon any other business which
may properly come before the meeting or any
adjournment thereof.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name is printed opposite. When signing as
attorney-in-fact, executor, administrator, trustee or guardian, please give
title. If stock is held in joint names, all named stockholders should sign.
Signature: Date:
------------------------- -----------------
Signature: Date:
------------------------- -----------------
PROXY
NEW ENGLAND BUSINESS SERVICE, INC.
Meeting of Stockholders - October 23, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF NEW ENGLAND BUSINESS SERVICE, INC.
The undersigned stockholder in New England Business Service, Inc. (the
"Company") hereby appoints Robert J. Murray, Edward M. Bolesky and John F.
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 23,
1998 at 10:00 a.m., Eastern Daylight Savings Time, and any adjournments thereof.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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