<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1996
------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1984
For the transition period from ______________________ to ______________________
Commission file number 1-5492-1
--------
NASHUA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 02-0170100
- ---------------------------------- ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
44 Franklin Street
P.O. Box 2002
Nashua, New Hampshire 03061-2002
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 880-2323
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1996
- ------------------------------ -----------------------------------------
Common Stock, par value $1.00 6,628,360 shares (excluding 23,895 shares
held in treasury)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands)
<CAPTION>
June 28, 1996 December 31,
ASSETS: (Unaudited) 1995
- ------- ------------- -----------
<S> <C> <C>
Cash and cash equivalents $ 22,978 $ 8,390
Accounts receivable 25,231 29,579
Inventories
Materials and supplies 5,786 10,318
Work in process 2,037 2,835
Finished goods 6,090 8,870
-------- --------
13,913 22,023
Other current assets 22,472 31,785
Net current assets of discontinued operations - 7,415
-------- --------
Total current assets 84,594 99,192
-------- --------
Plant and equipment 122,767 127,658
Accumulated depreciation (61,344) (57,601)
-------- --------
61,423 70,057
Intangible assets 37,513 45,705
Accumulated amortization (9,678) (8,814)
-------- --------
27,835 36,891
Other assets 23,290 18,590
Net non-current assets of discontinued operations - 6,642
-------- --------
Total assets $197,142 $231,372
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Current maturities of long-term debt $ 2,004 $ 500
Accounts payable 28,339 26,858
Accrued expenses 30,979 33,385
Income taxes payable 12,616 6,662
-------- --------
Total current liabilities 73,938 67,405
Long-term debt 4,739 68,350
Other long-term liabilities 20,099 20,742
Common stock and additional capital 18,693 18,681
Retained earnings 85,682 61,563
Cumulative translation adjustment (5,254) (4,618)
Treasury stock, at cost (755) (751)
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $197,142 $231,372
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 3
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
---------------------------------------------------------------------
(UNAUDITED)
-----------
(In thousands, except per share data)
<CAPTION>
For three months ended For six months ended
------------------------- ----------------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net sales $103,601 $122,173 $205,098 $231,743
Cost of products sold 72,964 88,909 148,261 171,634
Research, selling, distribution and
administrative expenses 29,992 29,426 58,756 54,890
Unusual charge 7,000 - 7,000 -
Equity in net income of Cerion Technologies (385) - (385) -
Gain on disposition of Cerion Technologies stock (31,962) - (31,962) -
Gain on Cerion Technologies public stock offering (7,353) - (7,353) -
Interest expense 970 1,453 2,509 2,904
Interest income (109) (175) (231) (396)
-------- -------- -------- --------
Income from continuing operations before income taxes 32,484 2,560 28,503 2,711
Income taxes 13,826 1,064 12,085 1,124
-------- -------- -------- --------
Income from continuing operations 18,658 1,496 16,418 1,587
Income from discontinued operation, net of taxes 318 367 524 346
Gain on disposal of discontinued operation, net of taxes 8,434 - 8,434 -
-------- -------- -------- --------
Income before extraordinary loss 27,410 1,863 25,376 1,933
Extraordinary loss on extinguishment of debt, net of tax benefit (1,257) - (1,257) -
-------- -------- -------- --------
Net income 26,153 1,863 24,119 1,933
Retained earnings, beginning of period 59,529 78,662 61,563 79,744
Dividends - (1,151) - (2,303)
-------- -------- -------- --------
Retained earnings, end of period $ 85,682 $ 79,374 $ 85,682 $ 79,374
======== ======== ======== ========
Earnings per common and common equivalent share:
Income from continuing operations $ 2.91 $ .23 $ 2.57 $ .25
-------- -------- -------- --------
Income from discontinued operation:
Income from discontinued operation .05 .06 .08 .05
Gain on disposal of discontinued operation 1.32 - 1.32 -
-------- -------- -------- --------
1.37 .06 1.40 .05
-------- -------- -------- --------
Income before extraordinary loss 4.28 .29 3.97 .30
Extraordinary loss on extinguishment of debt (.20) - (.20) -
-------- -------- -------- --------
Net income $ 4.08 $ .29 $ 3.77 $ .30
======== ======== ======== ========
Dividends per common share $ - $ .18 $ - $ .36
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 4
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
(In thousands)
<CAPTION>
Six Months Ended
-----------------------
June 28, June 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net income $ 24,119 $ 1,933
Adjustments to reconcile net income to cash
provided by (used in) continuing operating activities:
Depreciation and amortization 9,130 8,241
Income from discontinued operations (524) (346)
Extraordinary loss on extinguishment of debt 1,257 -
Gain on disposal of discontinued operations (8,434) -
Equity in net income of Cerion Technologies (222) -
Gain on disposition of Cerion Technologies stock (18,410) -
Gain on Cerion Technologies public stock offering (4,235) -
Unusual charge 4,032 -
Net change in working capital and other assets 4,875 1,367
-------- --------
Cash provided by continuing operating activities 11,588 11,195
-------- --------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (6,723) (5,930)
Acquisition of business - (25,861)
Proceeds from repayment of Cerion Technologies note 11,142 -
Proceeds from sale of Cerion Technologies stock, net 33,080 -
-------- --------
Cash used in investing activities of continuing operations 37,499 (31,791)
-------- --------
Cash flows from financing activities of continuing operations:
Proceeds from borrowings 877 32,800
Repayment of borrowings (62,984) (6,266)
Dividends paid - (2,294)
Proceeds and tax benefits from shares
issued under stock option plans 12 5
Purchase and reissuance of treasury stock (4) 36
Extinguishment of debt (952) -
-------- --------
Cash provided by (applied to)financing activities of continuing operations (63,051) 24,281
-------- --------
Proceeds from the sale of discontinued operation 28,000 -
Cash provided by (applied to) activities of discontinued operations 554 (3,492)
Effect of exchange rate changes on cash (2) 80
-------- --------
Increase in cash and cash equivalents 14,588 273
Cash and cash equivalents at beginning of period 8,390 10,219
-------- --------
Cash and cash equivalents at end of period $ 22,978 $ 10,492
======== ========
Interest paid $ 2,405 $ 4,517
======== ========
Income taxes paid $ 85 $ 6,551
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Indebtedness
- ------------
According to the provisions of the Company's debt agreements, a portion of the
proceeds from the Tape Products Division sale, the Cerion Technologies Inc.
(Cerion) stock sale and the notes receivable from Cerion were to be used to
repay a portion of the Company's debt. As a result, during the second quarter,
the Company repaid $63 million of debt. The revised senior notes require
prepayment penalties if any debt is prepaid before the scheduled repayment
dates. Therefore, the Company incurred a $.9 million prepayment penalty during
the second quarter. The prepayment penalty, along with other expenses related
to the debt extinguishment, were charged to operations as an extraordinary loss
item during the second quarter. The prepayment penalty is scheduled to be paid
on December 31, 1997 and bears interest at a rate of 11.85 percent.
Earnings Per Common and Common Equivalent Share
- -----------------------------------------------
<TABLE>
Earnings per common and common equivalent share is computed based on the total
of the weighted average number of common shares and, as applicable, the weighted
average number of common equivalent shares outstanding during the period.
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ----------------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common shares outstanding 6,606,218 6,373,815 6,605,528 6,373,631
Common share equivalents 35,997 4 22,223 250
</TABLE>
The increase in the common shares outstanding represents the restricted stock
issued under the 1993 and 1996 Stock Incentive Plans.
Stock Options
- -------------
At June 28, 1996, options for 515,074 shares of common stock were outstanding.
Stock options for an additional 605,815 shares may be awarded under the
Company's 1996 Stock Incentive Plan.
Unusual Charge
- --------------
In the second quarter the Company recorded a $7 million pretax charge associated
with the writedown of goodwill in its Mainland European photofinishing operation
which was acquired in 1995. Increased competition in the market since the
acquisition has resulted in performance below original expectations,
necessitating a reduction in the carrying value of the business. The Company is
currently evaluating alternatives to enhance performance of the operation which
could result in additional charges of up to $3 million in the second half of
1996.
Dispositions
- ------------
On May 20, 1996 the Company completed the sale of its Tape Products Division.
The Company received $28 million for the net assets of the business resulting in
an aftertax gain of $8.4 million.
-5-
<PAGE> 6
On May 24, 1996, the Company and Cerion completed the initial public offering of
common stock of Cerion at a price of $13.00 per share. A total of 4,416,000
shares were sold, of which 1,615,000 were sold by Cerion and 2,801,000 were sold
by the Company. The Company received net proceeds of $33.9 million and recorded
a $32 million pretax gain on its sale of Cerion shares and a $7.3 million pretax
gain from the Company's interest in the shares sold by Cerion. As a result of
the sale, the Company's ownership of Cerion was reduced to 37.1 percent, and
accordingly, the Company now uses the equity method of accounting for its
investment in Cerion common stock.
Other
- -----
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K, as amended, for the year ended December
31, 1995.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
adjustments and the classification of the Tape Products Division as a
discontinued operation) necessary to present fairly the financial position of
the Company as of June 28, 1996, the results of operations for the three and six
month periods ended June 28, 1996 and June 30, 1995, and cash flows for the six
month periods ended June 28, 1996 and June 30, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Net sales of $103.6 million for the second quarter of 1996 and $205.1 million
for the first six months of 1996 were down 15.2 percent and 11.5 percent,
respectively from the same periods in 1995. The sales decreases were caused by
lower revenues in the Commercial Products and Photofinishing Groups, partially
offset by sales increases in Cerion. The Company recorded income from
continuing operations in the second quarter of 1996 of $18.7 million compared
with $1.5 million in the second quarter of 1995 and $16.4 million for the first
six months of 1996 compared to $1.6 million for the same period in 1995. The
second quarter and first six months of 1996 income from continuing operations
included a $32 million pretax gain on the disposition of the Company's stock in
Cerion, which was completed in May, a $7.3 million pretax gain from the
interest in the shares sold by Cerion and a $7 million pretax charge in the
Company's Mainland European photofinishing operation. The Company also recorded
an $8.4 million aftertax gain in the second quarter on the sale of its Tape
Products Division which was reported as a discontinued operation, and an
extraordinary aftertax charge of $1.3 million associated with extinguishment of
debt.
The Commercial Products Group's second quarter sales decreased 22.5 percent to
$53.1 million compared to the second quarter of 1995 and decreased 22.7 percent
to $105.8 million for the first six months of 1996 compared to the same period
in 1995. The decreases were primarily in the Imaging Supplies and Specialty
Coated divisions. The Imaging Supplies Division's sales decreased due to lower
toner and copier paper volumes. The toner volume decrease was caused primarily
by lower order rates from larger distributors. The decrease in paper sales was
the result of an increase in the supply of paper in the marketplace. The
Specialty Coated sales decreases were across several product
-6-
<PAGE> 7
lines due to lower volumes which were attributed to increased competition and
declining demand for certain product lines. The Commercial Products Group's
operating profit decreased from $1.4 million for the second quarter of 1995 to
an operating loss of $.1 million for the second quarter of 1996 and decreased
from an operating profit of $2.5 million for the first six months of 1995 to an
operating loss of $2.8 million for the first six months of 1996, primarily due
to the lower volumes.
The Photofinishing Group's sales for the second quarter of 1996 decreased 10.4
percent to $43 million compared to the 1995 second quarter sales of $48 million.
Sales for the first six months of 1996 were $80 million, down 5.2 percent
compared to the same period in 1995. The sales for the first six months of 1995
do not include a full six months of sales for the Northern Ireland and Mainland
European operations, as they were acquired by the Company on January 13, 1995.
The sales decreases were due primarily to lower volumes in the UK, Mainland
European and US operations partially offset by an increase in the US operation's
average selling price. The Photofinishing Group recorded an operating loss of
$6.4 million for the second quarter of 1996 versus an operating profit of $2.7
million for the second quarter of 1995 and a $7.5 million operating loss for the
first six months of 1996, compared to an operating profit of $3.4 million for
the same period in 1995. The 1996 operating loss includes a $7 million charge
for the writedown of goodwill in the Mainland European operation. Excluding the
goodwill writedown, the Photofinishing Group's 1996 second quarter and first six
months operating income declined $2.1 million and $3.9 million, respectively,
from the same periods in 1995. The declines were due primarily to the lower
volumes in the UK and Mainland European operations. The US operation's increase
in average selling price was offset by an increase in expenses related to the
increased use of business reply mail for customer orders.
As previously discussed, the Company's interest in Cerion was reduced from 100
percent to 37.1 percent as a result of the sale of Cerion shares to the public
on May 24, 1996. Accordingly, the Company no longer consolidates the results of
Cerion and has accounted for its equity interest since that date. The Company
recorded gains of $32 million on its disposition of Cerion stock and $7.3
million from its interest in the shares sold by Cerion in the second quarter of
1996.
Net sales recorded by the Company in the second quarter of 1996 (through May
23, 1996) related to Cerion were $7.5 million versus $5.7 million for the
second quarter of 1995. Net sales recorded by the Company in the six months
ended June 28, 1996 (through May 23, 1996) related to Cerion were $19.3 million
compared to $10.5 million for the six months ended June 30, 1995. Cerion's
results of operations of $2.4 million and $5.6 million through May 23, 1996 are
included in income from continuing operations for the second quarter and first
six months of 1996, respectively. Cerion's increased sales and operating income
in both 1996 periods as compared to 1995 were the result of higher disk volumes
due to market demands and increased capacity partially offset by higher
administrative expenses in anticipation of becoming a stand-alone public
company.
Research, selling, distribution and administrative expenses for the second
quarter of 1996 increased 2 percent, or $.6 million compared to the same period
in 1995. An increase in administrative expenses of $1.7 million was partially
offset by a $1.1 million decrease in selling and distribution expenses. The
administrative expense increase was primarily the result of higher costs for
Cerion in anticipation of becoming a stand-alone public company, non-recurring
legal expenses recorded in the second quarter of 1996 and an increase in
performance incentives. The selling and distribution expense decrease was due
to the lower sales volumes and the restructuring actions taken during the
second half of 1995 and the first quarter of 1996. Research expense for the
second quarter 1996 was unchanged when compared to the second quarter of 1995.
-7-
<PAGE> 8
<TABLE>
Restructuring and other unusual charges of $16.2 million were recorded in the
third and fourth quarters of 1995 related to the Commercial Products Group's
business unit and functional realignments, product and channel rationalizations,
inventory write-downs related to the remanufactured cartridge operation, cost
reduction initiatives and changes in the Company's executive management during
the year, including severance and other personnel related costs. Details of the
charges related to continuing operations and the activity recorded during the
second quarter of 1996 are as follows:
<CAPTION>
Balance Current Current Balance
Mar. 29, Period Period June 28,
(In thousands) 1996 Provision Charges 1996
------- --------- ------- -------
<S> <C> <C> <C> <C>
Provisions for severance related to
workforce reductions $2,050 $ - $ 630 $1,420
Provisions related to other personnel costs 125 - 125 -
Other 1,850 - 250 1,600
------ --------- ------ -------
Total $4,025 $ - $1,005 $3,020
====== ========= ====== ======
</TABLE>
The provision for workforce reductions recorded in 1995 included amounts for
salary and benefit continuation for approximately 110 employees as part of the
Commercial Products reorganization and product rationalization. At June 28,
1996, approximately 86 of the employee terminations provided for had occurred,
with the remaining separations scheduled to be completed in 1996. All charges
are principally cash in nature and are expected to be funded from operations.
Management anticipates that all actions will be completed by the end of 1996 and
estimates annualized savings in personnel and operating costs of approximately
$5 million.
The estimated annual effective income tax rate of 42.4 percent for the first six
months of 1996 is higher than the U.S. statutory rate primarily due to the
unfavorable impact of non-deductible goodwill and state income taxes.
Working capital decreased $21.1 million from December 31, 1995 primarily due to
the Tape Products Division sale, the deconsolidation of Cerion due to the
public stock offering, a $7.8 million reduction in inventory, a $9.3 million
reduction in other assets and a $6.0 million increase in income taxes payable,
partially offset by a $14.6 million increase in cash. The decrease in other
current assets was due to a reduction in tax assets used to offset income tax
liabilities. The inventory reductions were the result of management control
initiatives implemented during the year. A majority of the working capital
generated from the sale of the Tape Products Division and Cerion stock, and the
proceeds from the Cerion notes was used to repay debt.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Reference is made to the Company's patent litigation with Ricoh Company, Ltd.
and Ricoh Corporation ("Ricoh") reported in the Company's Annual Report on Form
10-K as amended for the year ended December 31, 1995. The case was tried in the
United States District Court, District of New Hampshire in the second quarter of
1996. Ricoh is seeking injunctive relief and damages. The Company believes it
has substantial defenses but it cannot predict the outcome. Ricoh alleged that
its damages, if Ricoh were successful on the merits, would be approximately $10
million as of the date of the trial, and Nashua alleged that even if Ricoh were
to prevail that such damages should be in the range of $120,000 to $400,000.
Ricoh also is seeking treble damages and attorneys' fees for willful
infringement, but the Company believes an award for such damages is unlikely.
The Company is awaiting the Court's decision.
-8-
<PAGE> 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
For matters submitted to a vote of security holders, see the Company's proxy
statement dated May 15, 1996 issued in connection with the Annual Meeting of
Stockholders held on June 14, 1996, which is incorporated herein by reference.
At such Annual Meeting, the stockholders acted as follows:
Proposal 1:
----------
To elect a Board of Directors for the ensuing year.
Number of Votes
Nominees For Withheld
-------- --- --------
Sheldon A Buckler 5,312,006 322,961
Gerald G. Garbacz 5,336,983 297,984
Charles S. Hoppin 5,307,549 327,418
John M. Kucharski 5,307,878 327,089
David C. Miller, Jr. 5,354,549 280,418
James F. Orr III 5,307,542 327,425
The above-named individuals were elected Directors of the corporation.
Proposal 2:
----------
To authorize the Board of Directors to mortgage or pledge all or
substantially all of the corporation's assets upon such terms and
conditions as the Board of Directors deems expedient. The vote required
the affirmative vote of holders of two-thirds of the outstanding shares
of common stock.
Number of Votes
For Against Abstain No Vote
--- ------- ------- -------
3,861,093 976,953 206,508 590,413
The proposal was not approved because the requirement of the
affirmative vote of the holders of two-thirds of the outstanding shares
of common stock was not obtained.
Proposal 3:
----------
To approve the 1996 Stock Incentive Plan.
Number of Votes
For Against Abstain No Vote
--- ------- ------- -------
3,514,894 1,442,417 87,243 590,413
The proposal was adopted.
-9-
<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
10.13 Employment Agreement dated April 28, 1989 between the Company and
Paul Buffum. Exhibit to the Company's Form 10-Q for the period
ended June 28, 1996.
10.14 Employment Agreement dated May 3, 1996 between the Company and
Michael D. Jeans. Exhibit to the Company's Form 10-Q for the
period ended June 28, 1996.
(b) Reports on Form 8-K
On May 15, 1996, the Company filed a report on Form 8-KA regarding the sale
of the Tape Products Division and the initial public offering of Cerion
Technologies common stock.
On June 4, 1996, the Company filed a report on Form 8-K regarding the sale
of the Tape Products Division and the initial public offering of Cerion
Technologies common stock.
-10-
<PAGE> 11
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASHUA CORPORATION
---------------------------------
(Registrant)
Date: August 8, 1996 By: /s/ Daniel M. Junius
---------------------- ---------------------------------
Daniel M. Junius
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly authorized officer)
-11-
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and PAUL BUFFUM (the "Executive"), dated as of the 28th day of April,
1989.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first date
during the "Change of Control Period" (as defined in Section 1(b)) on which a
Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated or
the Executive ceases to be an officer of the Company prior to the date on which
a Change of Control occurs, and it is reasonably demonstrated that such
termination of employment (1) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (2) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period commencing on the date
hereof and ending on the third anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of l934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) (a
"Person") of 20% or more of either (i) the then
<PAGE> 2
-2-
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), PROVIDED, HOWEVER, that any
acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of
its subsidiaries or (y) any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, shall not constitute a Change of Control; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to the date
hereof whose election or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization, merger
or consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such Business Combination do not, following such
Business Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be; or
(d) (i) a complete liquidation or dissolution of the Company or of (ii)
sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, following such sale
or disposition, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities immediately prior
to such sale or disposition in substantially the same proportion as their
ownership of the Outstanding Company Common Stock and Company Voting Securities,
as
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the case may be, immediately prior to such sale or disposition.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Employment
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially consistent with
increases in base salary awarded in the ordinary course of business to other
peer executives of the Company and its affiliated companies. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" includes any company controlled by,
controlling or under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year beginning or ending during the Employment
Period, an annual bonus (the
<PAGE> 4
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"Annual Bonus") in cash at least equal to the average bonus paid or payable,
including by reason of deferral, to the Executive by the Company and its
affiliated companies in respect of the three fiscal years immediately preceding
the fiscal year in which the Effective Date occurs (annualized for any fiscal
year during the Employment Period consisting of less than twelve full months or
with respect to which the Executive has been employed by the Company for less
than twelve full months) (the "Recent Annual Bonus"). Each such Annual Bonus
shall be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Annual Base
Salary and Annual Bonus payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive, savings and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than (x) the most favorable of those provided by
the Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or (y) if more favorable to the
Executive, those provided at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent generally applicable
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than (x) the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or (y) if more favorable to the Executive, those provided at any
time after the Effective Date generally to other peer executives of the Company
and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive shall be
entitled to fringe benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company
<PAGE> 5
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and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
by the Company and its affiliated companies at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(viii) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer incentives of the Company and its
affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or Executive's legal representative (such agreement
as to acceptability not to be withheld unreasonably).
(b) CAUSE. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" means (i)
an action taken by the Executive involving willful and wanton malfeasance
involving specifically a wholly wrongful and unlawful act, or (ii) the Executive
being convicted of a felony.
(c) GOOD REASON. The Executive's employment may be terminated during the
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith
<PAGE> 6
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and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than that described in Section 4(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Agreement, any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 12(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen days after the
giving of such notice). In the case of a termination of the Executive's
employment for Cause, a Notice of Termination shall include a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to the Executive and reasonable opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board prior to such vote), finding that in the good faith opinion of the Board
the Executive was guilty of conduct constituting Cause. No purported termination
of the Executive's employment for Cause shall be effective without a Notice of
Termination. The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be; provided, however,
<PAGE> 7
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that (i) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (ii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than the following obligations: (i) payment of the Executive's Annual Base
Salary through the Date of Termination to the extent not theretofore paid, (ii)
payment of the product of (x) the greater of (A) the Annual Bonus paid or
payable, including by reason of deferral, (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) for the most recently completed
fiscal year during the Employment Period, if any, and (B) the Recent Annual
Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus")
and (y) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of which is 365
and (iii) payment of any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company and
any accrued vacation pay not yet paid by the Company (the amounts described in
paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued
Obligations"). All Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. In addition, the Executive's estate or designated beneficiaries
shall be entitled to receive the Executive's Annual Base Salary for the balance
of the Employment Period; PROVIDED, HOWEVER, that such payments of Annual Base
Salary shall be reduced by any survivor benefits paid to the Executive's estate
or designated beneficiary under the Retirement Plan. Anything in this Agreement
to the contrary notwithstanding, the Executive's estate and family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided generally by the Company and any of its affiliated companies to the
estates and surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, as in effect generally with respect to other peer
executives and their estates and families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(b) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. In addition, the
Executive shall be entitled to receive the Executive's Annual Base Salary for
the balance of the Employment Period; PROVIDED, HOWEVER, that such payments of
Annual Base Salary shall be reduced by any benefits paid to the Executive under
the Retirement Plan by reason of Disability. Anything in this Agreement to the
contrary notwithstanding, the Executive shall be entitled after the Disability
Effective Date to receive disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to
<PAGE> 8
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disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid. If the Executive terminates employment
during the Employment Period other than for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or if the Executive shall terminate employment
under this Agreement for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following
amounts:
A. all Accrued Obligations; and
B. the product of (x) three and (y) the sum of (i) Annual Base
Salary and (ii) the Highest Annual Bonus; and
C. a lump-sum retirement benefit equal to the difference between (a)
the actuarial equivalent of the benefit under the Nashua
Corporation Retirement Plan for Salaried Employees (the
"Retirement Plan") and any supplemental and/or excess retirement
plan providing benefits for the Executive (the "SERP") which the
Executive would receive if the Executive's employment continued
at the compensation level provided for in Sections 4(b)(i) and
4(b)(ii) of this Agreement for the remainder of the Employment
Period, assuming for this purpose that all accrued benefits are
fully vested, and (b) the actuarial equivalent of the Executive's
actual benefit (paid or payable), if any, under the Retirement
Plan and the SERP; for purposes of determining the amount payable
pursuant to this Section 6(d)(i)C the accrual formulas and
actuarial assumptions utilized shall be no less favorable than
those in effect with respect to the Retirement Plan and the SERP
during the 90-day period immediately prior to the Effective Date;
and
(ii) for the remainder of the Employment Period, or such longer period as
any plan,
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program, practice or policy may provide, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies
applicable generally to other peer executives and their families
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies and their families. For purposes of
determining eligibility of the Executive for retiree benefits pursuant
to such plans, practices, programs and policies, the Executive shall
be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement. The Company agrees to
pay, to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to Section 9 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Internal Revenue Code of l986, as amended (the
"Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such
<PAGE> 10
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excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be used
in arriving at such determinations, shall be made by Price Waterhouse (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within fifteen business days of the Date of
Termination, if applicable, or such earlier time as is requested by the Company.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. The initial Gross-Up Payment, if any, as determined pursuant to this
Section 9(b), shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably
<PAGE> 11
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selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
<PAGE> 12
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10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
Paul Buffum
15 Myrtle Street
Milford, NH 03055
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If to the Company:
-----------------
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03061
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment for
Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver
of such provision or right or any other provision or right thereof.
(f) This Agreement contains the entire understanding of the Company and the
Executive with respect to the subject matter hereof. The Executive and the
Company acknowledge that, except as may otherwise be provided under any other
written agreement between the Executive and the Company, the employment of the
Executive by the Company is "at will" and, prior to the Effective Date, both the
Executive's employment and this Agreement may be terminated by either the
Company or the Executive at any time. If the Executive's employment or this
Agreement is terminated prior to the Effective Date, the Executive shall have no
further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Paul Buffum
----------------------------------------
NAME: Paul Buffum
NASHUA CORPORATION
By /s/ Charles E. Clough
-------------------------------------
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and MICHAEL D. JEANS (the "Executive"), dated as of the 3rd day of
May, 1996.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first date
during the "Change of Control Period" (as defined in Section 1(b)) on which a
Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated or
the Executive ceases to be an officer of the Company prior to the date on which
a Change of Control occurs, and it is reasonably demonstrated that such
termination of employment (1) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (2) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period commencing on the date
hereof and ending on the third anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of l934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) (a
"Person") of 20% or more of either (i) the then
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outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), PROVIDED, HOWEVER, that any
acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of
its subsidiaries or (y) any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, shall not constitute a Change of Control; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to the date
hereof whose election or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization, merger
or consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such Business Combination do not, following such
Business Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be; or
(d) (i) a complete liquidation or dissolution of the Company or of (ii)
sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, following such sale
or disposition, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities immediately prior
to such sale or disposition in substantially the same proportion as their
ownership of the Outstanding Company Common Stock and Company Voting Securities,
as
<PAGE> 3
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the case may be, immediately prior to such sale or disposition.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Employment
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially consistent with
increases in base salary awarded in the ordinary course of business to other
peer executives of the Company and its affiliated companies. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" includes any company controlled by,
controlling or under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year beginning or ending during the Employment
Period, an annual bonus (the
<PAGE> 4
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"Annual Bonus") in cash at least equal to the average bonus paid or payable,
including by reason of deferral, to the Executive by the Company and its
affiliated companies in respect of the three fiscal years immediately preceding
the fiscal year in which the Effective Date occurs (annualized for any fiscal
year during the Employment Period consisting of less than twelve full months or
with respect to which the Executive has been employed by the Company for less
than twelve full months) (the "Recent Annual Bonus"). Each such Annual Bonus
shall be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Annual Base
Salary and Annual Bonus payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive, savings and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than (x) the most favorable of those provided by
the Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or (y) if more favorable to the
Executive, those provided at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent generally applicable
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than (x) the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or (y) if more favorable to the Executive, those provided at any
time after the Effective Date generally to other peer executives of the Company
and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive shall be
entitled to fringe benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company
<PAGE> 5
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and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(viii) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer incentives of the Company and its
affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 11(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or Executive's legal representative (such agreement
as to acceptability not to be withheld unreasonably).
(b) CAUSE. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" means (i)
an action taken by the Executive involving willful and wanton malfeasance
involving specifically a wholly wrongful and unlawful act, or (ii) the Executive
being convicted of a felony.
(c) GOOD REASON. The Executive's employment may be terminated during the
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith
<PAGE> 6
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and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than that described in Section 4(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 10(c) of
this Agreement.
For purposes of this Agreement, any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 11(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen days after the
giving of such notice). In the case of a termination of the Executive's
employment for Cause, a Notice of Termination shall include a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to the Executive and reasonable opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board prior to such vote), finding that in the good faith opinion of the Board
the Executive was guilty of conduct constituting Cause. No purported termination
of the Executive's employment for Cause shall be effective without a Notice of
Termination. The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be; provided, however,
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that (i) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (ii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than the following obligations: (i) payment of the Executive's Annual Base
Salary through the Date of Termination to the extent not theretofore paid, (ii)
payment of the product of (x) the greater of (A) the Annual Bonus paid or
payable, including by reason of deferral, (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) for the most recently completed
fiscal year during the Employment Period, if any, and (B) the Recent Annual
Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus")
and (y) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of which is 365
and (iii) payment of any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company and
any accrued vacation pay not yet paid by the Company (the amounts described in
paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued
Obligations"). All Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. In addition, the Executive's estate or designated beneficiaries
shall be entitled to receive the Executive's Annual Base Salary for the balance
of the Employment Period; PROVIDED, HOWEVER, that such payments of Annual Base
Salary shall be reduced by any survivor benefits paid to the Executive's estate
or designated beneficiary under the Retirement Plan. Anything in this Agreement
to the contrary notwithstanding, the Executive's estate and family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided generally by the Company and any of its affiliated companies to the
estates and surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, as in effect generally with respect to other peer
executives and their estates and families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(b) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. In addition, the
Executive shall be entitled to receive the Executive's Annual Base Salary for
the balance of the Employment Period; PROVIDED, HOWEVER, that such payments of
Annual Base Salary shall be reduced by any benefits paid to the Executive under
the Retirement Plan by reason of Disability. Anything in this Agreement to the
contrary notwithstanding, the Executive shall be entitled after the Disability
Effective Date to receive disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to
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disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid. If the Executive terminates employment
during the Employment Period other than for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or if the Executive shall terminate employment
under this Agreement for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following
amounts:
A. all Accrued Obligations; and
B. the product of (x) three and (y) the sum of (i) Annual Base
Salary and (ii) the Highest Annual Bonus; and
C. a lump-sum retirement benefit equal to the difference between (a)
the actuarial equivalent of the benefit under the Nashua
Corporation Retirement Plan for Salaried Employees (the
"Retirement Plan") and any supplemental and/or excess retirement
plan providing benefits for the Executive (the "SERP") which the
Executive would receive if the Executive's employment continued
at the compensation level provided for in Sections 4(b)(i) and
4(b)(ii) of this Agreement for the remainder of the Employment
Period, assuming for this purpose that all accrued benefits are
fully vested, and (b) the actuarial equivalent of the Executive's
actual benefit (paid or payable), if any, under the Retirement
Plan and the SERP; for purposes of determining the amount payable
pursuant to this Section 6(d)(i)C the accrual formulas and
actuarial assumptions utilized shall be no less favorable than
those in effect with respect to the Retirement Plan and the SERP
during the 90-day period immediately prior to the Effective Date;
and
(ii) for the remainder of the Employment Period, or such longer period as
any plan,
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program, practice or policy may provide, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies
applicable generally to other peer executives and their families
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies and their families. For purposes of
determining eligibility of the Executive for retiree benefits pursuant
to such plans, practices, programs and policies, the Executive shall
be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period.
(iii) Notwithstanding the foregoing, if a Change of Control shall have
occurred before the Date of Termination, the aggregate amount payable
under this paragraph (d) shall not exceed one dollar less than three
times the Executive's "base amount", as defined in Section 280G of the
Internal Revenue Code of 1986, as amended from time to time.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement. The Company agrees to
pay, to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof, plus in each case interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code of
l986, as amended (the "Code").
<PAGE> 10
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9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
10. SUCCESSORS. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
Michael D. Jeans
44 Franklin Street
Nashua, NH 03060
<PAGE> 11
-11-
If to the Company:
-----------------
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03060
Attention: Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment for
Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver
of such provision or right or any other provision or right thereof.
(f) This Agreement contains the entire understanding of the Company and the
Executive with respect to the subject matter hereof. The Executive and the
Company acknowledge that, except as may otherwise be provided under any other
written agreement between the Executive and the Company, the employment of the
Executive by the Company is "at will" and, prior to the Effective Date, the
Executive's employment may be terminated by either the Company or the Executive
at any time. If the Executive's employment is terminated prior to the Effective
Date, the Executive shall have no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Michael D. Jeans
-------------------------------------
NAME: Michael D. Jeans
NASHUA CORPORATION
By /s/ Gerald G. Garbacz
-------------------------------------
President and Chief Executive Officer
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<PERIOD-START> JAN-01-1996
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0
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<SALES> 205,098
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