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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission File Number 1-5492-1
NASHUA CORPORATION
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(Exact name of registrant as specified in its Charter)
Delaware 02-0170100
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(State of incorporation) (I.R.S. Employer Identification Number)
44 Franklin Street
P.O. Box 2002
Nashua, New Hampshire 03061-2002
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (603) 880-2323
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $1.00 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.(X)
Continued
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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
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The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 15, 1996 was approximately $68,464,003. The number of
shares outstanding of the registrant's Common Stock as of March 15, 1996 was
6,598,940 (excluding 23,630 shares held in treasury).
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Nashua Corporation conducts business in three segments: Commercial
Products, Photofinishing and Cerion Technologies (formerly Precision
Technologies). The consolidated sales for 1995 were $452.2 million. Foreign
sales and export sales from the United States totaled $138.8 million and
represented 30.7 percent of the Company's total sales in fiscal 1995.
Nashua was incorporated in Massachusetts in 1904 and changed its state
of incorporation to Delaware in 1957. The Company has its principal executive
offices at 44 Franklin Street, P.O. Box 2002, Nashua, New Hampshire 03061-2002
(Telephone: (603) 880-2323). References to the "Company" or to "Nashua" refer to
Nashua Corporation and its consolidated subsidiaries, unless the context
otherwise requires.
On January 13, 1995, the Company acquired certain photofinishing
operations from Nexus Photo Ltd. The acquisition includes mail-order
photofinishing operations in France, Belgium, the Netherlands and Spain, and a
wholesale film-processing business in Northern Ireland. The total purchase price
was approximately $27.6 million. Approximately $20.7 million of the purchase
price was provided under the $75 million revolving credit agreement dated
January 5, 1995.
The Company recorded restructuring and other unusual charges of $16.2
million in 1995, which included $14.3 million related to the Commercial Products
Group, primarily for business unit and functional realignments, product and
channel rationalizations, inventory write-downs related to the remanufactured
cartridge operation, and cost reduction initiatives. The remainder of the 1995
charges resulted primarily from changes in the Company's executive management
during the year, including severance and other personnel related costs. The 1995
restructuring and other unusual charges include charges of $8.2 million and $8
million in the third and fourth quarters, respectively.
On March 21, 1996, Cerion Technologies filed a registration
statement on Form S-1 with the Securities and Exchange Commission for a
proposed initial public offering of 3,840,000 shares of common stock. Of the
total, 1,615,000 shares are being offered by Cerion and 2,225,000 shares are
being offered by Nashua as the selling stockholder. Cerion Technologies, based
in Champaign, Illinois, is an independent supplier of aluminum substrates for
the computer disk drive industry. All or most of the proceeds anticipated to be
generated from the sale of shares offered by Nashua will be used to prepay a
portion of the Company's debt.
The Company's revolving credit facility and senior note agreement
require maintenance of certain restrictive financial covenants related to
interest and fixed charge coverage, tangible net worth, leverage and additional
debt. Since September 29, 1995, the Company has not been in compliance with the
interest and fixed charge coverage portions of these agreements. Since the
initial date of technical default, the lenders have provided the Company with a
forbearance during which time the parties have been negotiating amendments to
the lending agreements in order to allow the Company to remain in compliance. As
part of the interim agreement with its lenders, interest payable on amounts
outstanding under the Revolving Credit Agreement were adjusted to the agent
bank's prime rate (Reference Rate) plus .5 percent.
On March 27, 1996, the Company reached agreement with its lenders on
the terms of amendments to existing lending agreements which will supersede the
terms and conditions of the existing $75 million revolving credit facility and
the Company's senior note agreement. Under the provisions agreed to with
lenders, the revolving credit facility will be replaced with a bank facility
(the "Bank Facility"). Advances under the Bank Facility will be made pursuant to
both a term loan arrangement and a revolving credit facility with an initial
aggregate credit availability of up to $66 million.
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Of the total revolving credit balance outstanding on the facility
closing date, $48 million will initially be designated as outstanding under the
term loan portion of the Bank Facility with the remainder designated as
outstanding under the revolving credit facility.
The revolving credit portion of the Bank Facility will provide for
initial credit availability equal to the lesser of $18 million or a defined
percentage of eligible accounts receivable and inventory. The agreement also
will provide for up to $5 million of the revolving credit facility to be
available for the issuance of letters of credit. The revolving credit portion of
the Bank Facility will expire on December 31, 1997.
The terms of the Bank Facility and revised senior note will require
certain mandatory prepayments and, with respect to the Bank Facility, contain
provisions for certain facility commitment reductions, tied to the sale or
issuance by the Company of equity securities or the sale or disposition of
assets. According to the provisions of the term loan and senior note
agreements, one-half of the amount outstanding on October 1, 1996 and December
31, 1996, respectively, will become due and payable in four equal quarterly
installments commencing in January 1997. All remaining amounts outstanding are
due on December 31, 1997. Prepayments will also be required beginning in
January 1997, based on Excess Cash Flows, as defined in the agreement.
During December 1995, the Company announced its intention to sell its
Tape Products Division, due to the continuing realignment of its Commercial
Products Group. The Tape Products Division manufactures a variety of masking and
duct tapes, and has substantially different customers, markets, distribution
channels and cost structure than the remaining Commercial Products businesses.
The proceeds to be generated from the sale will be used to prepay a portion of
the Company's debt.
The Note entitled "Information About Operations" to the Company's
Consolidated Financial Statements, which appears on page 38 of this Form 10-K,
contains financial information concerning Nashua's business segments.
COMMERCIAL PRODUCTS GROUP
In the fourth quarter of 1995, the Company announced the realignment of
the Commercial Products Group into three distinct divisions: Imaging Supplies,
Specialty Coated Products and Label Products. The realignment was designed to
better focus Nashua's businesses around traditional core markets and become more
responsive to the needs of its customers. The Commercial Products Group
manufactures and sells office and industrial imaging supplies.
IMAGING SUPPLIES The Imaging Supplies Division manufactures and sells a
variety of consumable products used in the process of reproducing and
transferring readable images. Nashua's imaging supplies are comprised of toners,
developers, remanufactured laser printer cartridges, facsimile paper and copy
paper. The Imaging Supplies Division sales were approximately $137 million for
1995, $143 million for 1994 and $153 million for 1993.
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The Division markets its toners, developers, facsimile paper, copy
paper and remanufactured laser printer cartridges to its national and
government accounts through a network of approximately 150 dealers located
throughout the United States. These dealers also purchase Nashua's imaging
supplies for resale directly to end-users. The Company also sells certain of
these products through its own sales force to office supply distributors, and
to original equipment manufacturers and private label distributors.
The Division's competitors for toners and developers include Xerox
Corporation, Canon, Inc., Ricoh Corporation and Eastman Kodak Company, which
sell supplies for use in machines manufactured by them. The Company also
competes with other smaller independent manufacturers of toner and developer
products. This market segment is competitive, with more sophisticated toner
formulas and shorter copier machine life cycles requiring timely product
development and marketing.
The Division's primary competitor for its remanufactured laser printer
cartridges is Canon, Inc. which manufactures both new and remanufactured laser
printer cartridges principally for sale to large original equipment
manufacturers, including Hewlett Packard Company, for resale under their brand
names. In addition, there are several thousand small laser printer cartridge
rechargers who provide low volumes to small customers. In 1995, in order to
reduce manufacturing costs and maintain competitive pricing, the Company
relocated its remanufactured laser printer cartridge production from Exeter,
New Hampshire to Nogales, Mexico.
SPECIALTY COATED PRODUCTS The Specialty Coated Products Division
manufactures and sells thermal and non-thermal, thermosensitive label,
Davac[RegisteredTrademark] dry-gummed label and carbonless papers. Specialty
Coated Products Division sales were approximately $54 million for 1995, $62
million for 1994 and $60 million for 1993.
Thermal papers develop an image upon contact with either a heated
stylus or a thermal print head. A major application for these papers is for use
in thermal facsimile machines. This application is expected to be adversely
affected in the future by the increased use of plain paper facsimile machines.
Thermal papers are also used in point of sale printers, airline and package
identification systems, gaming and ticketing systems, medical and industrial
recording charts and for conversion to labels. The Division's competitors
include major integrated companies such as Appleton Papers, Inc., Kanzaki Paper
Mfg. Co., Ltd., Jujo Paper Co., Ltd. and Ricoh Corporation, as well as several
other manufacturers in Japan and Europe.
The Division's thermosensitive label papers are coated with an adhesive
that is activated when heat is applied. These products are usually sold through
fine paper merchants who, in turn, resell these products to printers who convert
the papers into labels for use primarily in the pharmaceutical industry. The
Division's thermosensitive label papers are also used in the bakery industry and
the meat packaging industry.
Davac[RegisteredTrademark] dry-gummed label paper is a paper which is
coated with a moisture-activated adhesive. Davac[RegisteredTrademark]
dry-gummed label paper is sold primarily to fine paper merchants and business
forms manufacturers. It is ultimately converted into various types of labels
and stamps.
Competitors in the thermosensitive and dry-gummed label industries
include Brown-Bridge Company (a division of Spinnaker Industries, Inc.) and
Ivex Corporation.
Carbonless paper is a coated paper used in the production of multi-part
business forms which produce multiple copies without carbon paper. The product
is sold in sheet form through fine paper merchants and
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in roll form directly to the printing industry, where it is converted into
multi-part business forms. Within the carbonless paper market, Nashua generally
competes with large integrated manufacturers including Appleton Papers, Inc.,
The Mead Corporation and 3M.
LABEL PRODUCTS The Label Division sells pressure sensitive labels
through distributors and directly to end-users. Significant uses of labels
include grocery scale marking, inventory control and address labels. The Label
Division is a major supplier of labels to the supermarket industry and labels
for use in the distribution and manufacture of products. The label industry is
price sensitive and competitive, and includes competitors such as Moore,
Rittenhouse, Hobart, Avery Dennison Corporation and Uarco, Inc. plus numerous
small regional converters. A majority of the pressure-sensitive, thermal and
non-thermal roll stock used by the Label Division is manufactured by Nashua's
Specialty Coated Products Division. Label Division sales were approximately $54
million for 1995, $54 million for 1994 and $52 million for 1993.
DEVELOPMENT OF NEW PRODUCTS Success of the Commercial Products Group
depends in part on its continued ability to develop and market new products.
There can be no assurance that the Company will be able to develop and introduce
new products in a timely manner or that such products, if developed, will
achieve market acceptance. In addition, the Group's growth is dependent on its
ability to penetrate new markets and sell through alternative channels of
distribution. There can be no assurance that the markets being served by the
Commercial Products Group will continue to grow; that existing and new products
will meet the requirements of such markets; that the Group's products will
achieve customer acceptance in such markets; that competitors will not force
prices to an unacceptably low level or take market share from the Commercial
Products Group; or that the Group can achieve or maintain profits in these
markets.
SUPPLIES AND MATERIALS The Commercial Products Group depends on outside
suppliers for most of the raw materials used to produce toners and developers,
labels and label papers, carbonless papers and thermal papers, including paper
to be converted and chemicals to be used in producing the various coatings
Nashua applies. The Group purchases these materials from several suppliers and
believes that adequate supplies are available. Products purchased in finished
form (including certain toners, developers and papers) are readily available
from a variety of sources. There are no assurances that the Group's operating
results will not be adversely affected, however, by future increases in cost of
raw materials or sourced products.
MANUFACTURING OPERATIONS The Commercial Products Group operates
manufacturing facilities in Nashua, New Hampshire; Merrimack, New Hampshire;
Omaha, Nebraska; and Nogales, Mexico. All of these sites are union-based, except
for the Nogales, Mexico plant. There can be no assurance that future operating
results will not be adversely affected by labor, political and regulatory risks
in Mexico, or changes in labor wage rates or productivity.
PHOTOFINISHING
Nashua traditionally has provided mail-order photofinishing services to
amateur photographers under the tradenames York Photo Labs in the United States,
Truprint and York Photo Labs in the United Kingdom and Scot Foto and York Photo
in Canada. Nashua develops and prints films received by mail at its processing
facilities in the United States, the United Kingdom and Canada, and also sells
film, cameras and associated products to its base of customers. Nashua is the
market leader in the mail-order photofinishing business in all three countries.
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The January 1995 acquisition of certain Continental European and
Northern Ireland photofinishing operations has allowed the Company to leverage
its existing marketing, processing and system capabilities to expand into the
mail-order photofinishing markets in France, Belgium, the Netherlands and Spain,
and the wholesale market in Northern Ireland and the Irish Republic. Nashua
continues to operate the businesses under the tradenames Maxicolor and Trifica
in France, Belgium and the Netherlands, Labopost in Spain and Belmont in
Northern Ireland and the Irish Republic.
In both the mail-order and wholesale businesses, demand is generally
strongest during the third quarter due to increased picture taking by amateur
photographers during the summer months.
COMPETITORS The Company's major mail-order photofinishing competitors
include District Photo, Inc., Mystic Color Labs Inc. and Seattle Film Works,
Inc. in the United States, Grunwick Processing Laboratories Limited in the
United Kingdom, Chas. Abel Photo Services, Ltd. in Canada, Spector Photo Group
N.V. and Fotolabo S.A. in France and Colorado in the Netherlands, as well as
numerous other national, regional and local processors in countries in which
the Company operates. The proliferation of mini-labs, discount stores and mass
merchandisers offering reduced price processing could adversely impact the
mail-order segment of the photofinishing market, as well as increasing
competitiveness within the mail-order segment which has typically relied on its
lower prices as a competitive advantage over retail services.
REGULATION The Company's direct mail operations are subject to
regulation by the national and local government agencies with jurisdiction over
the areas in which they operate. In general, these regulations govern the manner
in which orders may be solicited, the form and content of advertisements,
information which must be provided to prospective customers, the time within
which orders must be filled, obligations to customers if orders are not shipped
within a specified period of time and the time within which refunds must be paid
if the ordered merchandise is unavailable or if it is returned. From time to
time the Photofinishing businesses have modified their methods of doing business
and marketing operations in response to inquiries and requests from regulatory
authorities. To date, such changes have not had an adverse effect on the
businesses. However, there can be no assurance that future regulatory
requirements or actions will not have an adverse effect on the Photofinishing
businesses' marketing programs or operations.
TECHNOLOGICAL ADVANCEMENT Although the Photofinishing businesses are
continually developing new marketing programs and developing new production
techniques, there can be no assurance that the businesses will be able to
anticipate technological advances within the photography industry. For example,
the newly announced Advanced Photo System and digital imaging systems are
currently being developed within the industry. To the extent the industry was
to move toward these new technologies and the Photofinishing business was unable
to adapt to these changes, the Photofinishing businesses' results of operations
and financial condition could be materially adversely affected.
MATERIALS AND SUPPLIERS The principal supplies and materials used by
Nashua's Photofinishing business include color print paper, photo developing
chemicals and color print films, all of which are available from several
manufacturers. Sales of the Photofinishing businesses' products and services on
a direct-to-consumer mail-order basis are largely dependent on national postal
services for receipt of orders and delivery of processed film or other products.
Any significant changes in the operations or rates of these postal services or
extended interruptions in postal deliveries could have an adverse effect on the
Photofinishing operations.
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CERION TECHNOLOGIES (FORMERLY PRECISION TECHNOLOGIES)
Cerion Technologies, based in Champaign, Illinois, manufactures and
markets precision-machined aluminum disk substrates that are used in the
production of magnetic thin-film disks for hard disk drives of portable and
desktop computers. Cerion Technologies depends on a small number of customers.
Cerion Technologies' 1995 aluminum disk substrate sales were to four customers
of which two represented approximately 47 percent and 42 percent of its sales.
Cerion does not have any long-term purchase commitments from those customers.
Cerion Technologies also produces organic photoconductor drum substrates for
laser printer cartridges and photocopiers.
On March 21, 1996, Cerion Technologies filed a registration
statement on Form S-1 with the Securities and Exchange Commission for a proposed
initial public offering of 3,840,000 shares of common stock. Of the total,
1,615,000 shares are being offered by Cerion and 2,225,000 shares are being
offered by Nashua as the selling stockholder. All or most of the proceeds
anticipate to be generated from the sale of shares offered by Nashua will be
used to repay a portion of the Company's debt.
COMPETITION Cerion's primary competitor is Kobe Precision, Inc., a
division of Kobe Steel, Ltd. Also, several of the hard disk drive manufacturers
currently produce aluminum disk substrates internally for their own use, and
Cerion believes that a majority of its market currently is supplied by such
vertically integrated manufacturers. Moreover, these companies could make their
products available for distribution into the market as direct competitors of
Cerion. Any of these changes would reduce the already small number of current
and potential customers for Cerion's products and increase competition for the
remaining market. There can be no assurance that Cerion will be able to continue
to compete successfully with existing or new competitors.
SUPPLIERS Cerion relies on Alcoa Memory Products, Inc., a subsidiary of
Aluminum Company of America, Incorporated ("Alcoa"), as its sole supplier of the
aluminum blanks used by it for producing aluminum disk substrates. It also
relies on a sole supplier for the aluminum drum blanks used for its OPC drum
substrates, and on a limited number of suppliers for certain materials used in
its aluminum disk and OPC drum substrate manufacturing processes, including
etching chemicals and coolants. Cerion does not have any long-term supply
contracts with Alcoa or any of its other major suppliers. Changing suppliers for
certain materials would be expensive and require long lead times. For certain
materials, a change in supplier could result in Cerion being required to
re-qualify its products with certain of its customers. Any significant
limitations on the supply of raw materials could disrupt, limit or halt Cerion's
production of aluminum disk substrates or OPC drum substrates and could have a
material adverse effect on Cerion's business, operating results and financial
condition.
TECHNOLOGICAL ADVANCEMENT Although Cerion is continually developing new
products and production techniques, there can be no assurance that Cerion will
be able to anticipate technological advances or shifts and compete effectively
against competitors' new products. For example, certain glass and ceramic
substrates currently are being sold in the 65mm thin-film disk market. If these
materials were to become more prevalent, and Cerion were unable to produce glass
and ceramic substrates, Cerion's business, results of operations and financial
condition could be materially adversely affected.
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RESEARCH AND DEVELOPMENT
Nashua's research and development efforts have been instrumental in the
development of many of the products it markets. Nashua's research and
development expenditures were $9.2 million in 1995, $9.1 million in 1994 and
$7.0 million in 1993.
ENVIRONMENTAL MATTERS
The Company (and its competitors) are subject to various environmental
laws and regulations. These include the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act ("CERCLA"), the Resource Conservation and Recovery Act
("RCRA"), the Clean Water Act and other state and local counterparts of these
statutes. The Company believes that its operations have been and continue to be
operating in compliance in all material respects with the applicable
environmental laws and regulations. (Violation of these laws and regulations
could result in substantial fines and penalties.) Nevertheless, in the past and
potentially in the future, the Company has and could receive notices of alleged
environmental violations. The Company has endeavored to promptly remedy any such
violations upon notification.
For the past three years, the Company has spent approximately $1
million per year for compliance with pertinent environmental laws and
regulations. In addition, for those sites which the Company has received
notification of the need to remediate, the Company has assessed its liability
and has established a reserve for estimated costs associated therewith. At
December 31, 1995 the reserve for potential environmental liabilities was $1.5
million. Liability of "potentially responsible parties" (PRP) under CERCLA and
RCRA, however, is joint and several, and actual remediation expenses at sites
where the Company is a PRP may exceed current estimates. The Company believes
that based on the facts currently known, and the environmental reserve
recorded, its remediation expense with respect to those sites and on-going
costs of compliance are not likely to have a material adverse effect on its
liquidity, consolidated financial position or results of operations.
EMPLOYEES
Nashua and its subsidiaries had approximately 3,234 full-time employees
at March 1, 1996. Approximately 550 employees of Nashua's Commercial Products
segment are members of one of several unions, principally the United
Paperworkers International Union. There are two agreements with the United
Paperworkers International Union covering a majority of the Commercial Products
hourly employees. These agreements generally have a duration of two years and
expiration dates in the first quarter of the year.
FOREIGN OPERATIONS
During 1995, Nashua had Photofinishing subsidiaries in Canada, the
United Kingdom, Ireland, France and the Netherlands. Nashua had export sales of
approximately $36.4 million in 1995, $33.1 million in 1994 and $38.6 million in
1993.
Nashua includes revenues and other financial data from its foreign
operations in its business segment reporting according to the nature of the
product sold. The Note to the Company's Consolidated Financial Statements
entitled "Information About Operations," which appears on page 38 of this Form
10-K, contains
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additional information regarding Nashua's foreign operations during the last
three years, including identifiable assets, net sales and income (loss) from
continuing operations by geographic area.
Nashua's international sales are subject to risks that generally do not
affect businesses operating wholly within a single country. These include
political risks associated with doing business in foreign countries, exchange
control and import limitations which may impede the free movement of goods and
funds from one country to another and currency exchange rate risks. Nashua's
foreign businesses generally are adversely affected as the United States dollar
strengthens against the foreign currencies of the countries in which it does
business. From time-to-time Nashua enters into various foreign exchange
contracts to mitigate the risk of foreign currency fluctuations with respect to
foreign currency denominated transactions.
ITEM 2. PROPERTIES
Nashua's manufacturing facilities are located in the United States,
Canada, the United Kingdom, Northern Ireland and Mexico. Nashua considers its
properties to be in good operating condition and suitable for the production of
its products.
The principal manufacturing facilities of the Company are listed by
industry segment, location and principal products produced. Except as otherwise
noted, each of these facilities is owned by the Company.
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<TABLE>
PRINCIPAL PROPERTIES
<CAPTION>
SQUARE PRINCIPAL
LOCATION FOOTAGE PRODUCTS PRODUCED
- -------- ------- -----------------
<S> <C> <C>
COMMERCIAL PRODUCTS
Merrimack, New Hampshire 435,000 carbonless paper, facsimile paper,
thermosensitive and dry-gummed label
papers, chemicals
Omaha, Nebraska 170,000 pressure-sensitive labels and laminate
paper
Watervliet, New York 422,000 (3) pressure-sensitive tapes
Nashua, New Hampshire 198,000 dry toners and developers, chemicals
Chelmsford, Massachusetts 35,000 (1) liquid toners
Nogales, Mexico 55,000 (1) laser printer cartridges
PHOTOFINISHING
Parkersburg, West Virginia 81,000 (1) photofinishing
Newton Abbot, United Kingdom 46,000 (1) photofinishing
Telford, United Kingdom 38,000 (1) photofinishing
Saskatoon, Saskatchewan, Canada 15,000 photofinishing
Deal, United Kingdom 12,000 (1) (2) photofinishing
Belfast, Northern Ireland 24,000 (1) (2) photofinishing
CERION TECHNOLOGIES
Champaign, Illinois 32,000 (4) aluminum substrates for computer disks and
photoconductor drums
<FN>
(1) Leased facilities.
(2) Acquired by the Company on January 13, 1995.
(3) The Company has announced its intention to sell the Tape Products
Division and its Watervliet, New York facility.
(4) The Company has filed a Form S-1 indicating its intention to sell a
portion of its shares of Cerion Technologies.
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh")
filed a Complaint with the United States District Court, District of New
Hampshire, alleging Nashua's infringement of U.S. patents 4,611,730 and
4,878,603 relating to certain toner cartridges for Ricoh copiers. The Complaint
seeks damages and injunctive relief. The products involved constitute an
insignificant amount of Nashua's sales. The Company believes it has substantial
defenses and intends to defend the action vigorously.
During 1994, the Internal Revenue Service (IRS) completed an
examination of the Company's corporate income tax returns for the years 1988
through 1991. As a result of the IRS' findings, the Company agreed to and paid
additional taxes and interest of $7.8 million in January 1995 in connection
with adjustments related mainly to the tax treatment of certain items
associated with the 1990 sale of the International Office Systems business. On
January 13, 1995, the IRS issued a Notice of Deficiency in the amount of $8.7
million in connection with the tax years 1990 and 1991. The tax deficiency
relates to the tax treatment of income recognized in connection with the 1990
sale of the International Office Systems business. The major issues relate to
foreign tax credits, foreign earnings and profits computation, and the
treatment of the disposition of preferred stock of a foreign subsidiary. The
Company disagrees with the position taken by the IRS and filed a formal protest
of the deficiency on February 9, 1995. In management's opinion, the ultimate
disposition of this matter will not have a material adverse effect on the
financial position, results of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Reference is made to the Note entitled "Quarterly Operating Results and
Common Stock Information (Unaudited)" to the Company's Consolidated Financial
Statements, which appears on page 40 of this Form 10-K.
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ITEM 6. SELECTED FINANCIAL DATA
Nashua Corporation and Subsidiaries
<TABLE>
F I V E Y E A R F I N A N C I A L R E V I E W
(In thousands, except per share data, price
range, number of employees and percentages)
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $ 452,196 $ 418,903 $ 427,601 $ 439,540 $ 426,227
Gross margin percentage 25.7% 24.9% 25.6% 26.6% 26.6%
Selling, distribution and administrative
expenses as a percentage of sales 23.4% 20.7% 20.6% 21.3% 20.6%
Income (loss) before interest expense and
taxes as a percentage of sales* (3.2)% 1.5% 0.6% 4.1% 5.1%
Income (loss) before taxes as a percentage of sales* (4.5)% 1.0% 0.1% 3.5% 4.7%
Income (loss) as a percentage of sales* (3.4)% 0.5% 0.1% 2.0% 2.7%
Effective tax rate (23.2)% 45.2% 56.0% 42.7% 42.3%
Income (loss) before income taxes* $ (20,149) $ 4,031 $ 565 $ 15,275 $ 19,940
Income (loss) after taxes * (15,470) 2,210 250 8,745 11,510
Income (loss) from discontinued operations 739 (63) (19,419) (3,437) (10,958)
Cumulative effect of accounting
principle changes -- -- -- (10,131) --
Net income (loss) $ (14,731) $ 2,147 $ (19,169) $ (4,823) $ 552
Earnings (loss) per share:
Continuing operations* $ (2.43) $ .35 $ .04 $ 1.38 $ 1.82
Discontinued operations .12 (.01) (3.06) (.54) (1.73)
Cumulative effect of accounting
principle changes -- -- -- (1.60) --
Net income (loss) (2.31) .34 (3.02) (.76) .09
FINANCIAL POSITION
Working capital $ 31,787 $ 46,789 $ 23,728 $ 40,630 $ 35,974
Total assets 231,372 227,825 219,065 236,699 243,200
Long-term debt 68,350 49,166 20,342 27,865 25,386
Total debt 68,850 49,816 25,742 31,065 30,386
Total capital employed 143,725 142,512 118,865 148,217 160,098
Total debt as a percentage of capital employed 47.9% 35.0% 21.7% 21.0% 19.0%
Shareholders' equity $ 74,875 $ 92,696 $ 93,123 $ 117,152 $ 129,712
Shareholders' equity per common share 11.75 14.55 14.74 18.57 20.64
OTHER SELECTED DATA
Investment in plant and equipment $ 13,163 $ 15,937 $ 14,489 $ 11,936 $ 9,967
Depreciation and amortization 17,400 14,146 14,061 12,793 12,437
Dividends per common share .54 .72 .72 .72 .72
Return on average shareholders' equity (17.6)% 2.3% (18.2)% (3.9)% 0.4%
Common stock price range:
High $ 21 $30-3/4 $31-3/4 $31-1/4 $ 37
Low 12-1/4 19-3/4 25-1/4 21 18-1/8
Year-end closing price 13-5/8 20-1/2 27-1/2 28-3/8 23-1/8
Number of employees 3,447 3,054 4,011 4,145 3,869
Average common and common
equivalent shares 6,374 6,360 6,343 6,325 6,332
<FN>
See Business Changes, Income Taxes and Postretirement Benefits Notes to
Consolidated Financial Statements for a description of certain matters relevant
to this data.
*Income is from continuing operations and before the cumulative effect of
accounting principle changes and includes restructuring and other unusual
pretax charges of $16.2 million for 1995 (3.6% of sales), $2.6 million for
1994 (.6% of sales) and $11.8 million for 1993 (2.8% of sales).
</TABLE>
-12-
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS - 1995 COMPARED TO 1994
Net sales of $452.2 million increased 8 percent from 1994, primarily the result
of the Company's acquisition of photofinishing businesses in Europe and Ireland
in the first quarter of 1995 and increased volume in Cerion Technologies,
partially offset by a decline in sales in the Commercial Products Group. The
Company recorded a net loss from continuing operations of $15.5 million,
including restructuring and other unusual pretax charges of $16.2 million and a
valuation allowance of $3.3 million against tax assets due to the probability
that such assets will not be realized. This compared to net income from
continuing operations of $2.2 million in 1994, including pretax restructuring
and other unusual charges of $2.6 million. The Company's pretax results before
restructuring and other unusual charges decreased from income of $6.6 million in
1994 to a loss of $3.9 million in 1995 due to lower operating income in the
Photofinishing Group, increased operating losses in the Commercial Products
Group, increased spending in Microsharp, and increased interest expense,
partially offset by an increase in operating income in Cerion Technologies.
During December 1995, the Company announced its intention to sell the Tape
Products Division due to the continuing realignment of the Company's Commercial
Products Group. The Tape Products Division manufactures a variety of masking and
duct tapes, and has substantially different customers, markets, distribution
channels and cost structure than the remaining Commercial Products businesses.
The results of the Tape Products Division are reported as discontinued
operations.
<TABLE>
The total restructuring and other unusual charges of $16.2 million in 1995
included $14.3 million related to the Commercial Products Group, primarily for
business unit and functional realignments, product and channel rationalizations,
inventory write-downs related to the remanufactured cartridge operation, and
cost reduction initiatives. The remainder of the 1995 charges resulted primarily
from changes in the Company's executive management during the year, including
severance and other personnel related costs. The 1995 restructuring and other
unusual charges include charges of $8.2 million and $8 million in the third and
fourth quarters, respectively. Details of the charges related to continuing
operations and the activity recorded during 1995 are as follows:
<CAPTION>
Balance Balance
Dec. 31, Current Year Current Year Dec. 31,
(In thousands) 1994 Provision Charges 1995
-------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Provisions for severance related
to workforce reductions $1,550 $ 3,000 $ 1,950 $2,600
Provisions related to other
personnel costs 150 850 850 150
Provisions for assets to be sold
or discarded 1,250 8,800 10,050 --
Other -- 3,550 1,500 2,050
------ ------- ------- ------
Total $2,950 $16,200 $14,350 $4,800
====== ======= ======= ======
</TABLE>
The current year provision for workforce reductions includes amounts for salary
and benefit continuation for approximately 110 employees as part of the
Commercial Products reorganization and product rationalization. The current year
provision for assets to be sold or discarded includes approximately $5.6 million
related to cartridge inventory write-downs, as well as other asset write-downs
resulting from product and channel
-13-
<PAGE> 15
rationalization within Commercial Products. The cartridge inventory charges
relate primarily to excess empty cartridges received in 1995 under rebate
programs and contractual obligations, most of which have been terminated. At
December 31, 1995, approximately 30 employee terminations provided for had
occurred, with the remaining separations scheduled to be completed in 1996. All
charges, excluding asset write-downs, are principally cash in nature and are
expected to be funded from operations. All restructuring activities provided for
in the balance at December 31, 1994 were completed in 1995. Amounts incurred did
not change materially from the reserve balance of $3 million. Management
anticipates all 1995 actions will be completed by the end of 1996 and estimates
annualized savings in personnel and operating costs of approximately $5 million.
Net sales for the Commercial Products Group decreased $14 million, or 5 percent,
driven by lower volumes across several product lines, somewhat offset by higher
selling prices. Volume declines were experienced in facsimile, carbonless and
copy papers, label rollstock, toner, diskettes and office catalog supplies.
Volumes increased in remanufactured laser printer cartridges and converted label
products. Selling price increases across most of the paper-based product lines
reduced the unfavorable impact of volume declines. The operating loss before
restructuring and other unusual charges increased $4.7 million compared to 1994,
primarily due to the lower volumes, partially offset by lower selling and
administrative expenses. Selling price increases were offset by higher raw
material costs.
During the last half of 1995, the Company initiated a number of actions to
reverse the sales and operating income declines experienced in the Commercial
Products Group in 1995, including changes in executive management, establishing
market-oriented business units and streamlining the workforce. Management
intends to continue to focus on the tasks of implementing these actions in 1996.
Net sales in the Photofinishing Group increased $33.8 million, or 23 percent,
from the prior year due to the acquisition of European and Irish photofinishing
operations in the first quarter of 1995. To a lesser extent, sales increased
from higher selling prices in the U.S. and U.K. as well as from the impact of a
weaker U.S. dollar. These favorable impacts were offset by lower volumes in the
U.S., U.K. and Canada resulting from continued competitive pressure. Operating
income declined $9.2 million from the prior year, resulting from lower volume in
the U.S. and Canada, as well as higher marketing costs in the U.S. and U.K.
Higher marketing costs in the U.S. resulted from increased postal rates, higher
mailer costs and increased circulation volumes. U.K. marketing costs increased
due to investments in new and redesigned brand launches as well as an increase
in the cost of mailers.
Sales for Cerion Technologies increased $13.5 million to $27.5 million in
1995, and operating income increased to $6 million in 1995 from a loss of $.2
million in 1994. The improvements are due to continued strong demand for
aluminum substrates, improved product mix and manufacturing efficiencies
associated with the increases in volume.
Administrative expenses increased 23 percent as the result of the photofinishing
businesses acquired in 1995, partially offset by efficiencies resulting from the
restructuring actions taken in 1994. Selling and distribution expenses as a
percent of sales increased 13 percent due to the 1995 photofinishing
acquisition. Research and development expenses were substantially unchanged year
to year.
The effective tax rate for continuing operations was a benefit of 23.2 percent
in 1995 compared to a charge of 45.2 percent in 1994. The tax benefit was less
than the U.S. statutory rate primarily due to the establishment of a valuation
allowance against long-term tax assets and the unfavorable impact of
non-deductible goodwill amortization.
-14-
<PAGE> 16
On March 21, 1996, Cerion Technologies filed a registration statement on Form
S-1 with the Securities and Exchange Commission for a proposed initial public
offering of 3,840,000 shares of common stock. Of the total, 1,615,000 shares
are being offered by Cerion and 2,225,000 shares are being offered by Nashua
as the selling stockholder. Cerion Technologies, based in Champaign, Illinois,
is an independent supplier of aluminum substrates for the computer disk drive
industry. All or most of the proceeds anticipated to be generated from the sale
of shares offered by Nashua will be used to prepay a portion of the Company's
debt.
RESULTS OF CONTINUING OPERATIONS - 1994 COMPARED TO 1993
Net sales of $418.9 million declined slightly from 1993. The Company generated
after-tax income from continuing operations of $2.2 million which included
pretax restructuring and other unusual charges of $2.6 million. This compared to
after-tax income from continuing operations of $.3 million in 1993 which
included pretax restructuring and other unusual charges of $11.8 million. Net
sales for the year decreased in the Commercial Products Group and in the
Photofinishing Group, and were substantially unchanged for Cerion Technologies.
Pretax income from continuing operations, excluding restructuring charges, was
$6.6 million compared to $12.4 million in 1993, primarily due to the decline in
operating income in the Commercial Products Group and expenses related to the
development of the new Microsharp business.
In 1994, the Company created the Commercial Products Group by combining the
former Office Supplies and Coated Products Groups. The objective of this
reorganization was to improve service levels, leverage selling capabilities and
reduce costs by offering the full breadth of Nashua products to all customers.
In connection with these changes, the Company's office supplies catalog business
was merged with existing sales and marketing operations of the new Commercial
Products Group. In addition, the Company spent approximately $1 million in 1994
on professional fees associated with the development of customer interface
systems.
Net sales for the Commercial Products Group decreased $5.3 million, or 2
percent, to $259.5 million, due to reduced diskette and remanufactured laser
printer cartridge volume partially offset by volume gains for thermal labels,
heat seal and copy paper. Operating income before restructuring and other
unusual charges compared unfavorably to 1993 by $3.3 million, primarily due to
extremely competitive toner pricing, a shift to lower margin toners, lower
remanufactured laser printer cartridge volume, and significantly higher raw
material prices across many product lines. Selling price increases only
partially offset the impact of higher raw material costs.
Net sales in the Photofinishing Group decreased $3.3 million, approximately 2
percent, to $145.4 million. Continued competitive pressure resulted in lower
volume in the U.S. compared to the prior year, partially offset by higher volume
in the U.K. operation. In addition, U.S. sales in 1994 were depressed by lower
prices in the first quarter compared to the comparable period of the prior year,
partially offset by improvements in price throughout the year, especially the
fourth quarter. While volume and pricing pressures adversely impacted gross
margin, operating income, excluding restructuring charges, was substantially
unchanged year over year due to lower administrative costs.
Cerion Technologies transitioned in 1994 from a captive supplier of
substrates to an independent supplier. Net sales were substantially unchanged
year to year at $14 million. Operating income declined $.8 million to a loss of
$.2 million, primarily due to manufacturing changeover costs and market
introduction costs associated with new products being offered to an expanded
customer base.
Administrative expenses decreased approximately 8 percent, primarily as a result
of efficiencies resulting from the restructuring actions taken in 1994. Selling
and distribution expenses as a percentage of sales were essentially unchanged.
Research and development expenses increased $2.1 million to $9.1 million as a
result of the Company's investment in Microsharp display technology and new
product development for the Commercial Products Group.
-15-
<PAGE> 17
In the fourth quarter of 1993, the Company recorded restructuring and other
unusual charges totaling $48.5 million. Approximately $36.7 million of this
amount related to management's decision to sell or otherwise liquidate the
thin-film disk, oxide disk and diskette manufacturing operations of the Computer
Products Group. The 1993 charge also included approximately $11.8 million
related to the integration and streamlining of the operations of the Commercial
Products Group, including workforce reductions, as well as consolidation of
facilities and the write-down of certain assets. As part of the restructuring
plan, the Company offered certain of its employees an early retirement program
and recorded an additional pretax charge in the first quarter of 1994 of $5.7
million, of which $2.6 million related to the Company's continuing operations
and $3.1 million related to discontinued operations.
During the second quarter of 1994, the Company sold substantially all of its
Computer Products businesses for total cash proceeds of $11.1 million,
subordinated notes of $4.9 million and future royalty payments based on sales of
the oxide disk and head-disk-assembly operations. In addition, the Company
received cash proceeds of approximately $2 million based on the 1994 operating
results of the thin-film disk operation. The amounts received were not
materially different from the estimates included in the 1993 charge. As a result
of the sale of these businesses, the related results of operations were
reclassified as discontinued operations.
<TABLE>
The details of the Company's 1993 restructuring and other unusual charges
related to continuing operations and the activity recorded during 1994 are as
follows:
<CAPTION>
Balance Balance
Dec. 31, 1994 1994 Dec. 31,
(In thousands) 1993 Provision Charges 1994
-------- --------- ------- --------
<S> <C> <C> <C> <C>
Provisions related to workforce reductions:
Severance costs $ 3,850 $ 700 $ 3,000 $1,550
Pension and OPEB costs 900 2,600 3,500 --
Provisions related to other personnel costs 1,100 -- 950 150
Provisions for assets to be sold or discarded 5,100 (1,100) 2,750 1,250
Other 850 400 1,250 --
------- ------- ------- ------
Total $11,800 $ 2,600 $11,450 $2,950
======= ======= ======= ======
</TABLE>
The 1993 restructuring and other unusual charges included provisions for salary
and benefit continuation costs for approximately 170 employees. The 1994
provision represented a revision in the Company's original estimate of severance
costs primarily as a result of approximately 20 additional employee terminations
from the Company's Commercial Products Group rather than from discontinued
operations. As of December 31, 1994, substantially all planned employee
reductions had taken place, and the remaining accrual represented payments made
to these former employees in the first half of 1995. Pension and OPEB costs
recorded in 1993 relate to curtailment charges recognized in connection with the
planned workforce reductions. The provision recognized in 1994 was recorded in
connection with the Company's early retirement program based upon the actual
number of employee acceptances. Provisions for other personnel costs relate
primarily to relocation costs.
The provisions for assets to be sold or discarded included a charge of
approximately $1.8 million to write-down certain corporate and manufacturing
facilities to their estimated net realizable value, as well as the costs
associated with holding certain vacated portions of these facilities during the
period until the property can be sold or otherwise disposed. During 1994, the
Company commissioned an appraisal of its corporate and manufacturing facilities,
and as a result of the appraisal, revised upward its estimate of proceeds to be
realized upon disposal. Other than as described above, there were no material
changes during the year to the Company's original estimate of the costs
associated with the restructuring actions.
-16-
<PAGE> 18
The effective tax rate for continuing operations was 45.2 percent compared to 56
percent in 1993. The effective tax rate is higher than the U.S. statutory rate
in 1994 primarily due to the impact of non-deductible goodwill.
EFFECT OF INFLATION AND CHANGING PRICES
The Company believes that results of operations as reported in its historical
cost financial statements reasonably match current costs, except for
depreciation, with revenues generated in the period. Depreciation expense based
on the current costs of plant and equipment would be significantly higher than
depreciation expense reported in the historical financial statements; however,
such expense would not affect cash provided by operating activities.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Working capital decreased approximately $15 million in 1995, primarily due to
increases in accrued restructuring and other unusual charges, decreased
inventories and receivables in the Commercial Products Group and tax payments
related to discontinued operations, offset by increased receivables in Cerion
Technologies. At year-end, the ratio of total debt to equity increased to 92
percent from 54 percent at December 31, 1994. The Company suspended its
quarterly dividend in the fourth quarter and intends to review the decision when
the Company's financial performance would make such reconsideration appropriate.
The Company relies primarily on cash provided by operating activities to fund
its normal additions to plant and equipment. Investments in plant and equipment
in 1995 were approximately $13 million.
In January 1995, the Company replaced its existing $40 million revolving credit
facility with a similar $75 million facility. This new agreement provided $20.7
million of the $27.6 million purchase price for the photofinishing businesses
acquired on January 13, 1995. Borrowings of $53 million were outstanding under
this facility at December 31, 1995, compared with $33 million outstanding under
the previous facility at December 31, 1994. In addition, the Company has $15
million outstanding at December 31, 1995 under a senior note agreement with an
insurance company.
The Company's revolving credit facility and senior note agreement require
maintenance of certain restrictive financial covenants related to interest and
fixed charge coverage, tangible net worth, leverage and additional debt. Since
September 29, 1995, the Company has not been in compliance with the interest and
fixed charge coverage portions of these agreements. Since the initial date of
technical default, the lenders have provided the Company with a forbearance
during which time the parties have been negotiating amendments to the lending
agreements in order to allow the Company to remain in compliance. As part of the
interim agreement with its lenders, interest payable on amounts outstanding
under the revolving credit facility were adjusted to the agent bank's prime rate
(Reference Rate) plus .5 percent. The weighted average rate in effect at
December 31, 1995 for borrowings under the revolving credit facility was 8
percent per annum. See additional discussion in the Subsequent Events note.
On March 27, 1996, the Company reached agreement with its lenders on the terms
of amendments to existing lending agreements which will supersede the terms and
conditions of the $75 million revolving credit facility and the Company's senior
note agreement. Under the provisions agreed to with the lenders, the revolving
credit facility will be replaced with a bank facility (the "Bank Facility").
Advances under the Bank Facility will be made pursuant to both a term loan
arrangement and a revolving credit facility with an initial aggregate credit
availability of up to $66 million. Interest on amounts outstanding under both
the term loan and
-17-
<PAGE> 19
revolving credit portion of the agreement will be payable at the Reference Rate
plus .5 percent. The revised senior note will be at a rate of 11.85 percent per
annum.
Of the total revolving credit balance outstanding on the facility closing date,
$48 million initially will be designated as outstanding under the term loan
portion of the Bank Facility with the remainder designated as outstanding under
the revolving credit facility.
The revolving credit portion of the Bank Facility will provide for initial
credit availability equal to the lesser of $18 million or a defined percentage
of eligible accounts receivable and inventory. The agreement will also provide
for up to $5 million of the revolving credit facility to be available for the
issuance of letters of credit. The revolving credit portion of the Bank Facility
will expire on December 31, 1997.
The terms of the Bank Facility and revised senior note will require certain
mandatory prepayments and, with respect to the Bank Facility, contain
provisions for certain facility commitment reductions, tied to the sale or
issuance by the Company of equity securities or the sale or disposition of
assets. According to the provisions of the term loan and the senior note,
one-half of the amounts outstanding on October 1, 1996 and December 31, 1996,
respectively, will become due and payable in four equal quarterly installments
commencing in January 1997. All remaining amounts outstanding will be due on
December 31, 1997. Prepayments also will be required beginning in January 1997,
based on Excess Cash Flows, as defined in the agreement.
All or most of the proceeds to be generated from the sale of the Company's Tape
Products Division and the sale of certain equity shares in Cerion Technologies
will be used to prepay a portion of the Company's debt.
The Bank Facility will require a commitment fee of .5 percent per annum on
unused amounts, as well as a 2 percent per annum fee on letters of credit
issued under the facility. In addition, the Bank Facility and revised senior
note agreement will provide for contingent fees to be paid if the actual level
of prepayments made in 1996 are below certain specified levels.
Borrowings under the Bank Facility and revised senior note will be
collateralized by a security interest in the Company's receivables and
inventory, assets of the domestic and certain foreign subsidiaries and the
stock of certain foreign subsidiaries. Subject to shareholder approval and
certain circumstances, additional collateral may be required. The agreements
will contain certain financial covenants with respect to tangible net worth,
capital expenditures, cash flows and the ratio of cash flows to fixed charges.
In addition, the agreements will not allow the payment of dividends and will
restrict, among other things, the incurrence of additional debt, guarantees,
lease arrangements or sale of certain assets.
The Company had $36.5 million of deferred tax assets, net of a valuation
allowance of $3.3 million, and $5.3 million of deferred tax liabilities at
December 31, 1995. The deferred tax assets include $21.5 million of loss and tax
credit carryforward benefits which expire as follows: $2.8 million in 1996; $.2
million in 1997; $.1 million in 1998; $.5 million in 1999; $3 million in 2000;
and $14.9 million thereafter. These carryforwards relate primarily to the U.S.
and will require a minimum of approximately $60 million in cumulative U.S.
taxable income prior to the carryforwards' expiration in order to be fully
utilized. The remainder of the deferred tax assets pertain to net deductible
temporary differences between financial and taxable bases of assets and
liabilities such as accruals not yet paid or reserves not yet deductible for tax
purposes. In the past, taxable income has generally been higher than income for
financial reporting purposes. The Company expects this relationship to continue
in the future. The Company had $4.2 million of tax receivables at December 31,
1995, generated primarily from the carryback of the 1994 tax loss of
approximately $29.5 million.
-18-
<PAGE> 20
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh")
filed a Complaint with the United States District Court, District of New
Hampshire, alleging Nashua's infringement of U.S. patents 4,611,730 and
4,878,603 relating to certain toner cartridges for Ricoh copiers. The Complaint
seeks damages and injunctive relief. The products involved constitute an
insignificant amount of Nashua's sales. The Company believes it has substantial
defenses and intends to defend the action vigorously.
During 1994, the Internal Revenue Service (IRS) completed an examination of the
Company's corporate income tax returns for the years 1988 through 1991. As a
result of the IRS' findings, the Company agreed to and paid additional taxes and
interest of $7.8 million in January 1995 in connection with adjustments related
mainly to the tax treatment of certain items associated with the 1990 sale of
the International Office Systems business. On January 13, 1995, the IRS issued a
Notice of Deficiency in the amount of $8.7 million in connection with the tax
years 1990 and 1991. The tax deficiency relates to the tax treatment of income
recognized in connection with the 1990 sale of the International Office Systems
business. The major issues relate to foreign tax credits, foreign earnings and
profits computation, and the treatment of the disposition of preferred stock of
a foreign subsidiary. The Company disagrees with the position taken by the IRS
and filed a formal protest of the deficiency on February 9, 1995. In
management's opinion, the ultimate disposition of this matter will not have a
material adverse effect on the financial position or results of operations of
the Company.
The Company (and its competitors) are subject to various environmental laws and
regulations. These include the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (CERCLA), the Resource Conservation and Recovery Act (RCRA),
the Clean Water Act and other state and local counterparts of these statutes.
The Company believes that its operations have been and continue to be operating
in compliance in all material respects with the applicable environmental laws
and regulations. (Violation of these laws and regulations could result in
substantial fines and penalties.) Nevertheless, in the past and potentially in
the future, the Company has received and could receive notices of alleged
environmental violations. The Company has endeavored to promptly remedy any such
violations upon notification.
For the past three years, the Company has spent approximately $1 million per
year in order to keep its operations in compliance with pertinent environmental
laws and regulations. In addition, for those sites which the Company has
received notification of the need to remediate, the Company has assessed its
liability and accrued what it considers to be the most likely amount within the
estimated range of remediation costs. At December 31, 1995, the accrual for
potential environmental liability was $1.5 million. Liability of "potentially
responsible parties" (PRP) under CERCLA and RCRA, however, is joint and several,
and actual remediation expenses at sites where the Company is a PRP may exceed
current estimates. The Company believes that, based on the facts currently known
and the environmental accrual recorded, its remediation expense with respect to
those sites and on-going costs of compliance are not likely to have a material
adverse effect on its liquidity, consolidated financial position or results of
operations.
Based upon projected future cash flows from operating activities, the sale of
certain assets, as well as credit availability under the revised lending
agreements, the Company believes that it has the liquidity and capital resources
needed to meet its future financial commitments.
-19-
<PAGE> 21
<TABLE>
ITEM 8. CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<CAPTION>
Year Ended December 31,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
(In thousands, except per share data)
Net sales $ 452,196 $ 418,903 $ 427,601
--------- --------- ---------
Cost of products sold 336,037 314,559 318,278
Selling, distribution and administrative expenses 105,977 86,719 88,101
Research and development expense 9,238 9,128 6,992
Restructuring and other unusual charges 16,247 2,600 11,800
Interest expense 5,532 2,451 2,179
Interest income (686) (585) (314)
--------- --------- ---------
Total costs and expenses 472,345 414,872 427,036
Income (loss) from continuing operations before
income taxes (20,149) 4,031 565
Income taxes (benefit) (4,679) 1,821 315
--------- --------- ---------
Income (loss) from continuing operations (15,470) 2,210 250
--------- --------- ---------
Income (loss) from discontinued operations, net of tax 739 (63) (19,419)
--------- --------- ---------
Net income (loss) (14,731) 2,147 (19,169)
--------- --------- ---------
Retained earnings, beginning of year 79,744 82,166 105,880
Dividends (3,450) (4,569) (4,545)
--------- --------- ---------
Retained earnings, end of year $ 61,563 $ 79,744 $ 82,166
========= ========= =========
Earnings (loss) per common and common equivalent share:
Income (loss) from continuing operations $ (2.43) $ .35 $ .04
Income (loss) from discontinued operations .12 (.01) (3.06)
--------- --------- ---------
Net income (loss) $ (2.31) $ .34 $ (3.02)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-20-
<PAGE> 22
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31,
(In thousands, except share data) 1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 8,390 $ 10,219
Accounts receivable 29,579 40,811
Inventories
Materials and supplies 10,318 15,713
Work in process 2,835 4,942
Finished goods 8,870 13,506
--------- ---------
22,023 34,161
Other current assets 31,785 22,971
Net current assets of discontinued operations 7,415 --
--------- ---------
99,192 108,162
Plant and Equipment
Land 1,377 1,441
Buildings and improvements 37,739 36,638
Machinery and equipment 85,305 84,827
Construction in progress 3,237 6,684
--------- ---------
127,658 129,590
Accumulated depreciation (57,601) (58,733)
--------- ---------
70,057 70,857
Other Assets 55,481 48,806
Net Non-Current Assets of Discontinued Operations 6,642 --
--------- ---------
Total Assets $ 231,372 $ 227,825
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes and loans payable $ -- $ 200
Current maturities of long-term debt 500 450
Accounts payable 26,858 27,374
Accrued expenses 33,385 22,107
Income taxes payable 6,662 11,242
--------- ---------
67,405 61,373
Long-Term Debt
Borrowings under revolving credit agreement 53,000 33,000
Senior notes 15,000 15,000
Other long-term debt 350 1,166
--------- ---------
68,350 49,166
Other Long-Term Liabilities 20,742 24,590
--------- ---------
Shareholders' Equity
Preferred stock, par value $1.00: 2,000,000 shares authorized and unissued -- --
Common stock, par value $1.00: Authorized 40,000,000 shares
Issued 6,502,570 shares in 1995 and 6,396,570 shares in 1994 6,503 6,397
Additional capital 12,178 12,270
Retained earnings 61,563 79,744
Cumulative translation adjustment (4,618) (4,928)
Treasury stock, at cost (751) (787)
--------- ---------
74,875 92,696
Commitments and Contingencies
Total Liabilities and Shareholders' Equity $ 231,372 $ 227,825
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-21-
<PAGE> 23
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Net income (loss) $(14,731) $ 2,147 $(19,169)
Adjustments to reconcile net income (loss) to cash provided by (used in)
continuing operating activities:
Depreciation and amortization 17,400 14,146 14,061
Deferred income taxes (6,387) (1,497) (3,790)
Write-down of fixed assets to net realizable value 1,629 -- 2,000
(Income) loss from discontinued operations (739) 63 19,419
Change in operating assets and liabilities, net of effects from acquisition
and disposal of businesses:
Accounts receivable 9,345 (5,957) 3,769
Inventories 9,602 (5,760) 869
Other assets 5,900 (3,957) 6,192
Accounts payable (3,257) 59 (1,345)
Accrued expenses 7,856 (13,446) 11,020
Other long-term liabilities (3,848) 2,144 (1,289)
Income taxes payable 1,738 9,029 (149)
-------- -------- --------
Cash provided by (used in) operating activities 24,508 (3,029) 31,588
CASH FLOWS FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Investment in plant and equipment (13,163) (15,937) (14,489)
Acquisition of business (27,596) -- (4,286)
-------- -------- --------
Cash used in investing activities (40,759) (15,937) (18,775)
CASH FLOWS FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from borrowings 32,800 52,900 9,900
Repayment of borrowings (13,766) (28,826) (15,223)
Dividends paid (3,450) (4,569) (4,545)
Proceeds and tax benefits from shares issued under stock option plans 14 1,081 122
Purchase and reissuance of treasury stock 36 (2) 14
-------- -------- --------
Cash provided by (used in) financing activities 15,634 20,584 (9,732)
Proceeds from sale of discontinued operations 6,950 11,115 --
Cash applied to activities of discontinued operations (8,173) (8,612) (9,345)
Effect of exchange rate changes on cash 11 215 (65)
-------- -------- --------
Increase (decrease) in cash and cash equivalents (1,829) 4,336 (6,329)
Cash and cash equivalents at beginning of year 10,219 5,883 12,212
-------- -------- --------
Cash and cash equivalents at end of year $ 8,390 $ 10,219 $ 5,883
======== ======== ========
Interest paid $ 7,565 $ 2,457 $ 2,051
======== ======== ========
Income taxes paid $ 9,054 $ 1,171 $ 5,355
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-22-
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
BASIS OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of Nashua Corporation and its subsidiaries (the Company),
all of which are wholly-owned.
REVENUE RECOGNITION: Sales are recognized at the time the goods are shipped or
when title passes.
USE OF ESTIMATES: The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
these financial statements and accompanying notes. The more significant areas
requiring the use of management estimates relate to allowances for obsolete
inventory and uncollectible receivables, environmental obligations,
post-employment, post-retirement and other employee benefits, valuation
allowances for deferred tax assets, future cash flows associated with assets,
and useful lives for depreciation and amortization. Actual results could differ
from those estimates.
CASH EQUIVALENTS: The Company considers all highly liquid investment instruments
purchased with a maturity of three months or less to be cash equivalents. At
December 31, 1995 and 1994, the Company held $4.3 million and $5.9 million,
respectively, of various money market instruments carried at cost, which
approximated market.
ACCOUNTS RECEIVABLE: The consolidated balance is net of allowance for doubtful
accounts of $2.4 million at December 31, 1995 and $2.6 million at December 31,
1994, respectively.
INVENTORIES: Inventories are carried at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method for approximately 77 percent
and 80 percent of the inventories at December 31, 1995 and 1994, respectively,
and by the last-in, first-out (LIFO) method for the balance. Had the FIFO method
been used to cost all inventories, the inventory balances would have been
approximately $3.4 million and $2.7 million higher at December 31, 1995 and
1994, respectively.
ADVERTISING COSTS: The Company defers certain costs related to direct-response
advertising of its products. Such costs are amortized over periods that
correspond to the estimated revenue stream of the individual advertising program
which is generally less than one year. Total deferred costs at December 31, 1995
and 1994 were $6.4 million and $4.9 million, respectively. The total amounts
charged to expense for 1995, 1994 and 1993 were $41.3 million, $25 million and
$25.9 million, respectively.
RESEARCH AND DEVELOPMENT: Research and development costs are expensed as
incurred.
PLANT AND EQUIPMENT: Plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to operations as incurred, while additions,
renewals and betterments of plant and equipment are capitalized. Items which are
fully depreciated, sold, retired, or otherwise disposed of, together with the
related accumulated depreciation, are removed from the accounts and, where
applicable, the related gain or loss is recognized.
<TABLE>
For financial reporting purposes, depreciation is computed using the
straight-line method over the following estimated useful lives of the assets:
<S> <C>
Buildings and improvements 5-40 years
Machinery and equipment 3-20 years
</TABLE>
-23-
<PAGE> 25
During 1993, the Company recorded charges of $21.2 million related to the
write-down of fixed assets in connection with discontinued operations. See the
Business Changes note.
GOODWILL: Included in "Other Assets" is the excess of cost over the fair value
of identifiable net assets acquired (goodwill), which is being amortized on a
straight-line basis over periods ranging from 5 to 20 years. Goodwill amounted
to $32.6 million and $14.5 million at December 31, 1995 and 1994, respectively,
which is net of accumulated amortization of $7.9 million and $5.2 million,
respectively. See the Business Changes note.
The Company periodically reviews the value of its goodwill to determine if an
impairment has occurred. The Company measures the potential impairment of
recorded goodwill by comparing the undiscounted value of expected future
operating cash flows to the related net capital investment. Based on its review,
the Company does not believe that an impairment of its goodwill has occurred.
INCOME TAXES: Prepaid or deferred income taxes result principally from the use
of different methods of depreciation and amortization for income tax and
financial reporting purposes, the recognition of expenses for financial
reporting purposes in years different from those in which the expenses are
deductible for income tax purposes and the recognition of the tax benefit of net
operating losses.
FOREIGN CURRENCY TRANSLATION: The functional currency of the Company's foreign
subsidiaries is the local currency. Accordingly, assets and liabilities of these
subsidiaries have been translated using exchange rates prevailing at the
appropriate balance sheet date, and income statement items have been translated
using average monthly exchange rates.
FINANCIAL INSTRUMENTS: The Company enters into foreign exchange contracts as
hedges against exposure to fluctuations in exchange rates associated with
certain transactions denominated in foreign currencies. Market value gains or
losses on these contracts are included in the results of operations and
generally offset gains or losses on the related transactions. The Company also
utilizes forward sales contracts to hedge market price exposure on anticipated
sales of silver alloy, a by-product of its photofinishing process. The terms of
the Company's forward contracts are generally less than one year. Gains and
losses on these contracts are deferred and recognized as adjustments of carrying
amounts when the hedged transaction occurs. Deferred gains or losses at December
31, 1995 are not significant.
The Company may selectively enter into interest rate swap agreements to reduce
the impact of interest rate changes on its floating rate debt. The notional
amounts of such agreements are used to measure carrying value (interest to be
paid or received) and do not represent the amount of exposure to loss.
In 1995, the Company entered into a three-year $10 million interest rate swap
whereby the Company pays interest at a fixed rate of 5.68 percent and receives
interest at the three-month LIBOR rate which was 5.94 percent at December 31,
1995. Net interest payable or receivable is determined on a quarterly basis, and
the net interest amounts during 1995 were insignificant. The fair value of the
interest rate swap agreement, which was not significant, approximated its
carrying value at December 31, 1995.
The Company does not hold or issue derivative financial instruments for trading
purposes.
CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments, trade receivables and financial instruments
used in hedging activities.
-24-
<PAGE> 26
The Company places its temporary cash investments with high credit quality
financial institutions and, by policy, limits the amount of credit exposure with
any one financial institution. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of geographically diverse
customers make up the Company's customer base, thus spreading the trade credit
risk. The Company performs on-going credit evaluations of its customers'
financial condition and maintains allowances for potential credit losses. The
Company generally does not require collateral or other security to support
customer receivables.
The counterparties to the agreements relating to the Company's foreign exchange
and interest rate instruments consist of a number of high credit quality
financial institutions. The Company does not believe that there is significant
risk of nonperformance by these counterparties.
ENVIRONMENTAL EXPENDITURES: Environmental expenditures relating to on-going
operations are expensed when incurred unless the expenditures extend the life,
increase the capacity or improve the safety or efficiency of the property;
mitigate or prevent environmental contamination that has yet to occur and
improve the property compared with its original condition; or are incurred for
property held for sale.
Expenditures relating to site assessment, remediation and monitoring are accrued
and expensed when the costs are both probable and the amount can be reasonably
estimated. Estimates are based on in-house or third-party studies considering
current technologies, remediation alternatives and current environmental
standards. In addition, if there are other participants and the liability is
joint and several, the financial stability of the other participants is
considered in determining the Company's accrual. Insurance and other recoveries
relating to these expenditures are recorded separately once recovery is
probable.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Earnings per common and common
equivalent share are computed based on the total of the weighted average number
of common shares and, when applicable, the weighted average number of common
equivalent shares outstanding during the period presented.
OTHER RECENT PRONOUNCEMENTS: In March 1995, the Financial Accounting Standards
Board ("FASB") issued SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." In October 1995, the FASB
issued SFAS 123, "Accounting for Stock-Based Compensation." SFAS 121 and 123 are
effective for fiscal years beginning after December 15, 1995. The Company will
implement these statements as required. The future adoption of SFAS 121 is not
expected to have a material effect on the Company's consolidated financial
position or results of operations. The Company anticipates adopting SFAS 123
using the pro forma disclosure method described in the pronouncement.
BUSINESS CHANGES
Acquisitions
On January 13, 1995, the Company acquired certain photofinishing operations from
Nexus Photo Ltd. The acquisition included mail-order photofinishing operations
in France, Belgium, the Netherlands and Spain, and a wholesale film-processing
business in Northern Ireland. The total purchase price was $27.6 million. The
acquisition was accounted for as a purchase business combination and resulted in
the recording of approximately $22 million of related intangible assets. The
operating results of this business subsequent to the date of acquisition are
included in the Company's Consolidated Statement of Operations.
-25-
<PAGE> 27
<TABLE>
The unaudited combined condensed pro forma results listed below reflect purchase
price accounting adjustments assuming the acquisition occurred at the beginning
of 1994.
<CAPTION>
Year Ended
Dec. 31,
(In thousands, except per share data) 1994
--------
<S> <C>
Net sales $462,101
========
Income from continuing operations $ 3,090
========
Earnings per common and common equivalent share $ .49
========
</TABLE>
DISCONTINUED OPERATIONS
During December 1995, the Company announced its intention to sell the Tape
Products Division due to the continuing realignment of the Company's Commercial
Products Group. The Tape Products Division manufactures a variety of masking and
duct tapes, and has substantially different customers, markets, distribution
channels and cost structure than the remaining Commercial Products businesses.
The results of the Tape Products Division are reported as discontinued
operations in the accompanying Consolidated Statements of Operations. The
Company does not expect to incur a loss on the disposal of this division.
In the fourth quarter of 1993, the Company recorded restructuring and other
unusual charges totaling $48.5 million. Approximately $36.7 million of this
amount related to management's decision to sell or otherwise liquidate the
thin-film, oxide and diskette manufacturing operations of the Computer Products
Group.
During the second quarter of 1994, the Company sold substantially all of its
Computer Products businesses for total cash proceeds of $11.1 million,
subordinated notes of $4.9 million and future royalty payments based on sales of
the oxide disk and head-disk-assembly operations. In addition, the Company
received cash proceeds of $2 million based on the 1994 operating results of the
thin-film disk operation. The amounts received were not materially different
from the estimates included in the 1993 charge. As a result of the sale of these
businesses, the related results of operations are reported as discontinued
operations in the accompanying Consolidated Statements of Operations.
During the first quarter of 1994, the Company offered its employees an early
retirement program, and recorded an additional pretax charge of $3.1 million to
discontinued operations related to the program in the accompanying Consolidated
Statements of Operations.
<TABLE>
The results of operations of the thin-film disk, oxide disk and
head-disk-assembly operations, as well as the Tape Products Division are
summarized as follows:
<CAPTION>
Year Ended
---------------------------------------
Dec. 31, Dec. 31, Dec. 31,
(In thousands) 1995 1994 1993
------- -------- ---------
<S> <C> <C> <C>
Net sales $58,444 $ 78,911 $ 140,941
Income (loss) before income taxes 1,239 157 (31,966)
Income tax expense (benefit) 500 220 (10,035)
------- -------- ---------
Income (loss) from discontinued operations $ 739 $ (63) $ (21,931)
======= ======== =========
</TABLE>
-26-
<PAGE> 28
In April 1990, the Company sold the international portion of its Office Systems
and Supplies Group to Gestetner Holdings PLC (Gestetner). Under the terms of the
Purchase Agreement, Gestetner raised certain objections to the purchase price
totaling $15.3 million, excluding interest, which were submitted to arbitration.
In January 1994, the arbitrator issued a final ruling which resulted in a total
payment by Nashua of $1.8 million, including interest, to Gestetner. Resolution
of the purchase price allowed the Company to recognize an after-tax gain from
discontinued operations of $2.5 million in 1993.
RESTRUCTURING AND OTHER UNUSUAL CHARGES
<TABLE>
The total restructuring and other unusual charges of $16.2 million in 1995
included $14.3 million related to the Commercial Products Group, primarily for
business unit and functional realignments, product and channel rationalizations,
inventory write-downs related to the remanufactured cartridge operation, and
cost reduction initiatives. The remainder of the 1995 charges resulted primarily
from changes in the Company's executive management during the year, including
severance and other personnel related costs. The 1995 restructuring and other
unusual charges include charges of $8.2 million and $8 million in the third and
fourth quarters, respectively. Details of the charges related to continuing
operations and the activity recorded during 1995 are as follows:
<CAPTION>
Balance Balance
Dec. 31, Current Year Current Year Dec. 31,
(In thousands) 1994 Provision Charges 1995
-------- ------------ ------------ --------
<S> <C> <C> <C> <C>
1995 Activity
Provisions for severance related
to workforce reductions $1,550 $ 3,000 $ 1,950 $2,600
Provisions related to other
personnel costs 150 850 850 150
Provisions for assets to be sold
or discarded 1,250 8,800 10,050 --
Other -- 3,550 1,500 2,050
------ ------- ------- ------
Total $2,950 $16,200 $14,350 $4,800
====== ======= ======= ======
</TABLE>
The provision for workforce reductions includes amounts for salary and benefit
continuation for approximately 110 employees as part of the Commercial Products
reorganization and product rationalization. The provision for assets to be sold
or discarded includes approximately $5.6 million related to cartridge inventory
write-downs, as well as other asset write-downs resulting from product and
channel rationalization within Commercial Products. The cartridge inventory
charges relate primarily to excess empty cartridges received in 1995 under
rebate programs and contractual obligations, most of which have been terminated.
At December 31, 1995, approximately 30 employee terminations provided for had
occurred, with the remaining separations scheduled to be completed in 1996. All
charges, excluding asset write-downs, are principally cash in nature and are
expected to be funded from operations. All restructuring activities provided for
in the balance at December 31, 1994 were completed in 1995. Amounts incurred did
not change materially from the reserve balance of $3 million. Management
anticipates all 1995 actions will be completed by the end of 1996 and result in
annualized savings in personnel and operating costs of approximately $5 million.
-27-
<PAGE> 29
<TABLE>
During the fourth quarter of 1993, the Company recorded a charge of
approximately $11.8 million related to the integration and streamlining of the
operations of the Commercial Products Group, including workforce reductions,
consolidation of facilities and the write-down of certain assets. The details of
the Company's charge related to continuing operations and the activity recorded
in 1994 are as follows:
<CAPTION>
Balance Balance
Dec. 31, Current Year Current Year Dec. 31,
(In thousands) 1993 Provision Charges 1994
------- ------------ ------------ --------
<S> <C> <C> <C> <C>
1994 Activity
Provisions related to workforce
reductions:
Severance $ 3,850 $ 700 $ 3,000 $1,550
Pension and OPEB costs 900 2,600 3,500 --
Provisions related to other
personnel costs 1,100 -- 950 150
Provisions for assets to be sold
or discarded 5,100 (1,100) 2,750 1,250
Other 850 400 1,250 --
------- ------- ------- ------
Total $11,800 $ 2,600 $11,450 $2,950
======= ======= ======= ======
</TABLE>
The 1993 restructuring and other unusual charges included provisions for salary
and benefit continuation costs for approximately 170 employees. The 1994
provision represented a revision in the Company's original estimate of severance
costs primarily as a result of approximately 20 additional terminations from the
Company's Commercial Products Group rather than from discontinued operations. As
of December 31, 1995, all employee reductions related to these actions had been
completed. Pension and OPEB reserves at December 31, 1993 relate to curtailment
charges recognized in connection with the planned workforce reductions. The
provision recognized in 1994 was recorded in connection with the Company's early
retirement program based upon the actual number of employee acceptances.
Provisions for other personnel costs relate primarily to relocation costs.
The provision for assets to be sold or discarded included a charge of $1.8
million to write-down certain corporate and manufacturing facilities to their
estimated net realizable value, as well as the costs associated with holding
certain vacated portions of these facilities during the period until the
property can be sold, or otherwise disposed. During 1994, the Company
commissioned an appraisal of its corporate and manufacturing facilities, and as
a result of the appraisal revised upward its estimate of proceeds to be realized
upon disposal. Other than as described above, there were no material changes to
the Company's original estimate of the costs associated with the restructuring
actions.
INDEBTEDNESS
On January 5, 1995, the Company replaced its existing $40 million revolving
credit facility with a similar $75 million revolving credit facility. The
facility is scheduled to expire on December 31, 1997, unless otherwise extended.
Interest on amounts outstanding is payable at either LIBOR plus .75 percent to
1.125 percent, based on amounts outstanding, or at the Reference Rate at the
Company's election, or, if amounts outstanding are borrowed under competitive
bid, interest is payable at the quoted rate. The agreement requires the Company
to pay an annual commitment fee of .3125 percent on the unused portion of the
facility and .25 percent on any loans advanced under competitive bids.
Borrowings of $53 million were outstanding under this facility at December 31,
1995, compared with $33 million outstanding under the previous facility at
December 31, 1994.
-28-
<PAGE> 30
On September 13, 1991, the Company entered into a senior note agreement, as
amended, with an insurance company under which the Company borrowed $20 million
at a fixed rate of 9.17 percent. In connection with the Company's renegotiation
of its revolving credit facility, the interest rate applicable to the senior
notes was increased to 9.67 percent as of January 1, 1995. Mandatory payments of
$2.5 million were made in 1993 and 1994. The remaining balance of the notes will
become due beginning in 1997 with the final payment due in 2001.
The Company's revolving credit facility and senior note agreement require
maintenance of certain restrictive financial covenants related to interest and
fixed charge coverage, tangible net worth, leverage and additional debt. Since
September 29, 1995, the Company has not been in compliance with the interest and
fixed charge coverage portions of these agreements. Since the initial date of
technical default, the lenders have provided the Company with a forbearance
during which time the parties have been negotiating amendments to the lending
agreements in order to allow the Company to remain in compliance. As part of the
interim agreement with its lenders, interest payable on amounts outstanding were
adjusted to the Reference Rate plus .5 percent. The weighted average rate in
effect at December 31, 1995 for borrowings under the revolving credit facility
was 8 percent per annum. See additional discussion in the Subsequent Events
note.
The fair value of the Company's total debt approximated its recorded amount at
December 31, 1995 and 1994, respectively. The fair value is based on
management's estimate of current rates available to the Company for similar debt
with the same remaining maturity.
The combined aggregate amount of minimum principal payments due subsequent to
December 31, 1995 for all long-term indebtedness is $.5 million in 1996 and
$68.4 million in 1997. These minimum principal payments have been adjusted to
reflect the terms of the Company's revised lending agreements. See the
Subsequent Events note.
INCOME TAXES
<TABLE>
The domestic and foreign components of income (loss) from continuing operations
before income taxes and cumulative effect of accounting principle changes are as
follows:
<CAPTION>
(In thousands) 1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Domestic $(22,766) $(1,775) $(6,015)
Foreign 2,617 5,806 6,580
-------- ------- -------
Consolidated $(20,149) $ 4,031 $ 565
======== ======= =======
</TABLE>
<TABLE>
Income tax expense (benefit) charged to continuing operations consists of the
following:
<CAPTION>
(In thousands) 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Current:
United States $ -- $ -- $ 1,608
Foreign 1,708 3,303 2,640
State and local -- 15 82
------- ------- -------
Total current 1,708 3,318 4,330
Deferred:
United States (6,703) (612) (3,873)
Foreign 316 (885) 83
------- ------- -------
Total deferred (6,387) (1,497) (3,790)
------- ------- -------
Changes in statutory rates -- -- (225)
Income tax expense $(4,679) $ 1,821 $ 315
======= ======= =======
</TABLE>
-29-
<PAGE> 31
<TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<CAPTION>
December 31,
(In thousands) 1995 1994
-------- --------
<S> <C> <C>
Depreciation $ 3,859 $ 4,393
Other 1,478 --
-------- --------
Gross deferred tax liabilities 5,337 4,393
-------- --------
Restructuring (1,886) (1,033)
Pension and postretirement benefits (9,386) (11,505)
Loss and credit carryforwards (21,478) (10,675)
Workers compensation accrual (1,343) (1,372)
Inventory reserve (2,673) (875)
Bad debt reserve (1,086) (1,261)
Other (1,997) (1,460)
-------- --------
Gross deferred tax assets (39,849) (28,181)
Deferred tax assets valuation allowance 3,300 --
-------- --------
$(31,212) $(23,788)
======== ========
</TABLE>
<TABLE>
Reconciliations between income taxes from continuing operations computed using
the United States statutory income tax rate and the Company's effective tax rate
are as follows:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
United States statutory rate (benefit) (35.0)% 35.0% 35.0%
Goodwill 1.5 8.2 88.2
Dividend income -- -- 41.2
State and local income taxes, net of
federal tax benefit (5.6) .2 (41.4)
Tax asset valuation reserve 16.4 -- --
Foreign tax credits (1.6) -- --
Rate revaluation -- -- (52.4)
Rate difference-foreign subsidiaries (.3) (3.1) (20.7)
Other, net 1.4 4.9 6.1
----- ----- -----
Effective tax rate (benefit) (23.2)% 45.2% 56.0%
===== ===== =====
</TABLE>
At December 31, 1995, $19.3 million and $11.9 million of net tax assets were
included in "Other Current Assets" and "Other Assets," respectively. At December
31, 1994, $6.3 million and $17.5 million of tax assets were included in "Other
Current Assets" and "Other Assets," respectively.
At December 31, 1995, the Company had $14.8 million and $6.7 million of net
operating loss carryforward benefits and tax credit carryforwards, respectively,
which are primarily limited to offset certain future domestic taxable earnings.
The net operating loss carryforward benefits expire as follows: $.5 million in
1999; $2.6 million in 2000; and $11.7 million thereafter. The tax credit
carryforwards expire as follows: $2.8 million in 1996; $.2 million in 1997; $.1
million in 1998; $.4 million in 2000; and $3.2 million thereafter. These amounts
are reflected gross of a tax asset valuation reserve in the amount of $3.3
million due to the probability that certain of these assets will not be
realized.
-30-
<PAGE> 32
During 1994, the Internal Revenue Service (IRS) completed an examination of the
Company's corporate income tax returns for the years 1988 through 1991. As a
result of the IRS' findings, the Company agreed to and paid additional taxes and
interest of $7.8 million in January 1995 in connection with adjustments related
mainly to the tax treatment of certain items associated with the 1990 sale of
the International Office Systems business. On January 13, 1995, the IRS issued a
Notice of Deficiency in the amount of $8.7 million in connection with the tax
years 1990 and 1991. The tax deficiency relates to the tax treatment of income
recognized in connection with the 1990 sale of the International Office Systems
business. The major issues relate to foreign tax credits, foreign earnings and
profits computation, and the treatment of the disposition of preferred stock of
a foreign subsidiary. The Company disagrees with the position taken by the IRS
and filed a formal protest of the deficiency on February 9, 1995. In
management's opinion, the ultimate disposition of this matter will not have a
material adverse effect on the financial position or results of operations of
the Company.
It is management's intention to reinvest undistributed earnings of foreign
subsidiaries which aggregate approximately $25 million, based on exchange rates
at December 31, 1995. These earnings could become subject to additional tax if
they were remitted as dividends, if foreign earnings were lent to the Company or
if the Company should sell its stock in the subsidiaries. It is not practicable
to estimate the amount of additional tax that might be payable on undistributed
foreign earnings.
SHAREHOLDERS' EQUITY
The Company is authorized to issue up to 200,000 shares of Series A
Participating Preferred Stock in connection with its Rights Agreement under
which holders of the Company's common stock received a dividend of one preferred
stock purchase right for each outstanding share of common stock. Each Right
entitles the registered holder to purchase from the Company one one-hundredth
share of the Company's Series A Participating Preferred Stock, at a price of
$90.00. The Rights do not detach or become exercisable until the tenth business
day following the public announcement that a person has acquired, or obtained
the right to acquire, 10 percent or more of the outstanding common stock of the
Company, or the commencement of a tender or exchange offer which would result in
the acquisition of beneficial ownership of 10 percent or more of the Company's
common stock. The Rights Agreement provides that if any person or group were to
acquire 10 percent or more of the Company's common stock, then shareholders
other than the acquiring person would be entitled to purchase, at the Rights'
then-current exercise price, a number of additional Company shares having a
market value of twice the Rights' exercise price, unless the acquiring person
purchases at least 85 percent of Nashua's common stock in a cash tender offer
for all shares. The Company's Board of Directors may, at their option, exchange
one Company share of common stock for each Right (other than the Rights held by
the acquiring person) if the acquiring person has acquired more than 10 percent
but less than 50 percent of the Company's common stock. The Rights Agreement
further provides that, upon the occurrence of certain events including
transactions in which the Company is acquired and certain self-dealing
transactions with the Company by an acquirer, each Right entitles the holder
thereof (other than the acquirer) to purchase shares of capital stock of either
the Company or of the acquirer having a value equal to twice the then-current
exercise price of the Rights. At any time prior to a person's acquiring
beneficial ownership of 10 percent or more of the Company's common stock, the
Continuing Directors, by a two-thirds vote, may authorize the Company to redeem
the Rights at any time at a redemption price of five cents per Right. The Rights
will expire on September 2, 1996, unless earlier redeemed by the Company. In
addition to the Rights attaching to the common stock outstanding, Rights will be
issued with each common share that is issued prior to the time the Rights become
exercisable or expire.
-31-
<PAGE> 33
In 1989, the Board of Directors authorized the Company to repurchase up to
1,000,000 shares of its common stock. As of December 31, 1995, the Company had
purchased approximately 435,000 shares under this program.
<TABLE>
The following summarizes the changes in selected shareholders' equity accounts
for each of the three years in the period ended December 31, 1995:
<CAPTION>
Common Stock Cumulative
Par Additional Translation Treasury Stock
Shares Value Capital Adjustment Shares Cost
--------- ------ ---------- ----------- ------ ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 6,333,690 $6,334 $ 11,130 $(5,393) (25,000) $(799)
Stock options exercised and
related tax benefit 6,740 6 116 -- -- --
Translation adjustments and
gains and losses from certain
inter-company balances -- -- -- (451) -- --
Purchase of treasury shares -- -- -- -- (120) (3)
Reissuance of treasury shares -- -- -- -- 530 17
--------- ------ -------- ------- ------- -----
BALANCE, DECEMBER 31, 1993 6,340,430 6,340 11,246 (5,844) (24,590) (785)
Stock options exercised and
related tax benefit 56,140 57 1,024 -- -- --
Translation adjustments and
gains and losses from certain
inter-company balances -- -- -- 916 -- --
Purchase of treasury shares -- -- -- -- (60) (2)
--------- ------ -------- ------- ------- -----
BALANCE, DECEMBER 31, 1994 6,396,570 6,397 12,270 (4,928) (24,650) (787)
Stock options exercised and
related tax benefit 1,000 1 13 -- -- --
Translation adjustments and
gains and losses from certain
inter-company balances -- -- -- (310) -- --
Restricted stock issuances 105,000 105 1,299 -- -- --
Deferred compensation -- -- (1,404) -- -- --
Reissuance of treasury shares -- -- -- -- 240 36
--------- ------ -------- ------- ------- -----
BALANCE, DECEMBER 31, 1995 6,502,570 $6,503 $ 12,178 $(4,618) (24,410) $(751)
========= ====== ======== ======= ======= =====
</TABLE>
STOCK OPTION AND STOCK AWARD PLANS
The Company has three stock compensation plans at December 31, 1995: the 1980
Stock Award Plan (1980 plan), the 1987 Stock Option Plan (1987 plan) and the
1993 Stock Incentive Plan (1993 plan). Awards can no longer be granted under the
1980 plan. Awards under the 1987 plan and the 1993 plan are made at the
discretion of the Executive Salary Committee of the Board of Directors. Stock
options awarded under the 1980 plan which are outstanding at December 31, 1995,
are currently exercisable and expire on the tenth anniversary of the date of
grant.
-32-
<PAGE> 34
Under the 1987 plan, nonqualified stock options and incentive stock options may
be awarded. Stock options under the 1987 plan become exercisable either (a) 50
percent on the first anniversary of grant, and the remainder on the second
anniversary of grant, (b) 100 percent at six months from the date of grant, (c)
100 percent at one year from the date of grant, or (d) otherwise as determined
by the Executive Salary Committee of the Board of Directors. Nonqualified stock
options expire 10 years and one day from the date of grant, and incentive stock
options expire 10 years from the date of grant.
Under the 1993 plan, non-statutory stock options, incentive stock options and
shares of restricted stock may be awarded. Stock options under the 1993 plan
become exercisable either (a) 50 percent on the first anniversary of grant and
the remainder on the second anniversary of grant, (b) 100 percent at one year
from the date of grant, or (c) otherwise as determined by the Executive Salary
Committee of the Board of Directors. Non-statutory stock options expire 10 years
and one day from the date of grant, and incentive stock options expire 10 years
from the date of grant. Restricted stock awards under the 1993 plan are granted
to certain key executives and are earned only if the closing price of the
Company's common stock meets specific target prices for certain defined periods
of time. During 1995, the Company granted 105,000 shares of restricted stock.
Restrictions on such shares lapse in equal amounts when the average closing
price of Nashua's common stock reaches $20, $25 and $30, respectively, for a
consecutive 30 trading day period. Shares issued under the plan are initially
recorded at their fair market value on the date of grant with a corresponding
charge to additional paid in capital representing the unearned portion of the
award. Shares of restricted stock are forfeited if the specified average closing
prices of the Company's common stock are not met within five years of grant.
In the event of a change of control, as defined in the 1987 plan and the 1993
plan, the option holder may, with respect to stock option agreements which so
provide, have a limited right with respect to options under the plans to elect
to surrender the options and receive cash or shares equal in value to the
difference between the option price and the larger of either the highest
reported price per share on the New York Stock Exchange during the sixty-day
period before the change in control or, if the change in control is the result
of certain defined transactions, the highest price per share paid in such
defined transactions.
Because the exercise price of all stock options awarded under these plans has
been equal to the quoted market price of the Company's common stock at date of
grant, or because the conditions upon which restrictions on stock awards would
lapse have not been met, no compensation expense has been recorded.
-33-
<PAGE> 35
<TABLE>
A summary of the status of the Company's stock options, under incentive plans
follows:
<CAPTION>
Outstanding Option Price Exercisable
Options Per Share Options
----------- ------------ -----------
<S> <C> <C> <C>
December 31, 1992 395,390 $11.81-38.38 357,990
Options granted 113,800 25.75-30.25 --
Options that became exercisable -- 25.50-34.63 25,350
Options exercised (6,740) 11.81-25.50 (6,740)
Options lapsed and cancelled (6,380) 25.75-34.63 (2,900)
-------- ------------- --------
December 31, 1993 496,070 $11.81-38.38 373,700
Options granted 103,950 22.63-29.50 --
Options that became exercisable -- 25.75-28.13 62,406
Options exercised (56,140) 11.81-28.13 (56,140)
Options lapsed and cancelled (158,046) 25.75-38.38 (151,981)
-------- ------------- --------
December 31, 1994 385,834 $13.75-34.63 227,985
Options granted 298,500 12.75-19.75 --
Options that became exercisable -- 22.63-30.25 101,124
Options exercised (1,000) 13.75 (1,000)
Options lapsed and cancelled (177,425) 12.75-34.63 (88,650)
-------- ------------- --------
December 31, 1995 505,909 $12.75-34.63 239,459
======== ============= ========
</TABLE>
COMMITMENTS AND CONTINGENCIES
Rent expense for office equipment, facilities and vehicles was $2.5 million,
$2.1 million and $1.8 million for 1995, 1994 and 1993, respectively. At December
31, 1995, the Company was committed, under non-cancelable operating leases, to
minimum annual rentals as follows: 1996 - $2.1 million; 1997 - $1.8 million;
1998 - $1.1 million; 1999 - $1.1 million; 2000 - $1.0 million; thereafter - $8.5
million.
At December 31, 1995, the Company was obligated under approximately $5.6 million
in standby letters of credit.
In April 1994, Ricoh Company, Ltd. and Ricoh Corporation ("Ricoh")
filed a Complaint with the United States District Court, District of New
Hampshire, alleging Nashua's infringement of U.S. patents 4,611,730 and
4,878,603 relating to certain toner cartridges for Ricoh copiers. The Complaint
seeks damages and injunctive relief. The products involved constitute an
insignificant amount of Nashua's sales. The Company believes it has substantial
defenses and intends to defend the action vigorously.
The Company is involved in certain environmental matters and has been designated
by the Environmental Protection Agency (EPA) as a "potentially responsible
party" (PRP) for certain hazardous waste sites. In addition, the Company has
been notified by certain state environmental agencies that some of the Company
sites not addressed by the EPA require remedial action. These sites are in
various stages of investigation and remediation. Due to the unique physical
characteristics of each site, the technology employed, the extended timeframes
of each remediation, the interpretation of applicable laws and regulations and
the financial viability of other potential participants, the ultimate cost to
the Company of remediation for each site is difficult to determine. At December
31, 1995, based on the facts currently known and the Company's prior experience
with these matters, the Company has concluded that there is at least a
reasonable possibility that site assessment, remediation and monitoring costs
will be incurred by the Company with respect to those sites which can be
reasonably estimated in the aggregate range of $1.5 million to $1.7 million.
This range is based, in part, on an allocation of certain sites' costs which,
due to the joint and several nature of the liability, could increase if the
other PRP's are unable to bear their allocated share. At December 31, 1995, the
Company has accrued $1.5 million which represents, in management's view, the
most likely amount within the range stated above. Based on information currently
available to the Company, management believes that it is probable that the major
responsible parties will fully pay the costs apportioned to them. Management
believes that, based on its financial position and the estimated environmental
accrual recorded, its remediation expense with respect to those sites is not
likely to have a material adverse effect on its consolidated financial position
or results of operations.
-34-
<PAGE> 36
POSTRETIREMENT BENEFITS
Pension Plans: The Company and its subsidiaries have several pension plans which
cover substantially all of its regular full-time employees. Benefits under these
plans are generally based on years of service and the levels of compensation
during those years. The Company's policy is to fund amounts deductible for
income tax purposes. Assets of the plans are invested in interest-bearing cash
equivalent instruments, fixed-income securities and common stocks.
<TABLE>
Net periodic pension cost from continuing operations for the plans, exclusive of
enhanced early retirement and curtailment pension costs, includes the following
components:
<CAPTION>
(In thousands) 1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 2,490 $ 2,771 $ 2,884
Interest cost on projected benefit obligation 8,581 7,916 7,196
Actual return on plan assets (23,622) 1,826 (17,554)
Net amortization and deferral 15,281 (9,491) 10,839
-------- ------- --------
Net periodic pension cost $ 2,730 $ 3,022 $ 3,365
======== ======= ========
</TABLE>
In February 1994, the Company offered certain of its United States employee
groups an enhanced early retirement pension benefit. The cost of the enhanced
pension benefit was $4.2 million, $2.2 million of which was attributable to
discontinued operations. In 1993, the Company recognized a curtailment expense
of $1.2 million, approximately $.6 million of which related to discontinued
operations.
<TABLE>
The following sets forth the funded status of the plans and the amounts
recognized in the Company's consolidated balance sheet at December 31, 1995:
<CAPTION>
Accumulated
Benefit Obligation
----------------------
Less Than Exceeds
(In thousands) Assets Assets
--------- --------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 49,661 $ 68,399
-------- --------
Accumulated benefit obligation $ 49,855 $ 68,557
-------- --------
Projected benefit obligation $ 50,284 $ 70,696
-------- --------
Market value of plan assets $ 54,511 $ 62,583
-------- --------
Plan assets in excess of (less than) projected benefit obligation $ 4,227 $ (8,113)
Unrecognized transition (asset) obligation (1,929) 2,025
Unrecognized prior service costs 1,322 4,297
Unrecognized net gain (2,140) (7,368)
Additional liability -- (617)
-------- --------
Prepaid (accrued) pension cost $ 1,480 $ (9,776)
======== ========
</TABLE>
-35-
<PAGE> 37
<TABLE>
The following sets forth the funded status of the plans and the amounts
recognized in the Company's consolidated balance sheet at December 31, 1994:
<CAPTION>
Accumulated
Benefit Obligation
(In thousands) Less Than Exceeds
Assets Assets
--------- --------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $41,052 $58,035
------- -------
Accumulated benefit obligation $41,863 $58,158
------- -------
Projected benefit obligation $42,189 $62,046
------- -------
Market value of plan assets $47,117 $53,137
------- -------
Plan assets in excess of (less than) projected benefit obligation $ 4,928 $(8,909)
Unrecognized transition (asset) obligation (2,196) 2,363
Unrecognized prior service costs 1,452 5,568
Unrecognized net gain (1,390) (7,731)
Additional liability -- (143)
------- -------
Prepaid (accrued) pension cost $ 2,794 $(8,852)
======= =======
</TABLE>
During 1994, the Company updated the definition of average annual compensation,
the effect of which increased the unrecognized prior service liability by $1.8
million. Approximately $4.2 million and $7.5 million of the accrued pension cost
for 1995 and 1994, respectively, are included in "Other Long-Term Liabilities"
in the accompanying consolidated balance sheet.
<TABLE>
The significant actuarial assumptions used for the plans' valuations were:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Weighted-average discount rate 7.4% 8.2%
Expected long-term rate of return on plan assets 9.7% 9.7%
Rate of increase in future compensation levels 5.1% 5.0%
</TABLE>
RETIREE HEALTH CARE AND OTHER BENEFITS: The Company provides certain health care
and other benefits to eligible retired employees and spouses. Salaried
participants generally become eligible for retiree health care benefits after
reaching age 60 with ten years of service. Benefits, eligibility and
cost-sharing provisions for hourly employees vary by location or bargaining
unit. Generally, the medical plans pay a stated percentage of most medical
expenses, reduced for any deductibles and payments made by government programs
and other group coverage. In 1993, the postretirement benefit plan was changed
to share the cost of benefits with all retirees, resulting in an unrecognized
benefit which is being amortized over the future service period of the active
employees.
-36-
<PAGE> 38
<TABLE>
The following table sets forth the funded status of the plans, reconciled to the
accrued postretirement benefit cost recognized in the Company's balance sheet:
<CAPTION>
(In thousands) 1995 1994
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 7,143 $ 7,264
Fully eligible active plan participants 1,483 1,668
Other active participants 1,815 2,453
-------- --------
Market value of plan assets -- --
Accumulated postretirement benefit obligation
in excess of plan assets (10,441) (11,385)
Unrecognized prior service benefit (4,589) (5,221)
Unrecognized net (gain) loss (2,208) (1,232)
-------- --------
Accrued postretirement benefit cost $(17,238) $(17,838)
======== ========
</TABLE>
Approximately $16.5 million and $17.1 million of accrued postretirement benefits
for 1995 and 1994, respectively, are included in "Other Long-Term Liabilities"
in the accompanying consolidated balance sheet.
<TABLE>
Net periodic postretirement benefit cost of continuing operations, exclusive of
enhanced early retirement and curtailment costs, included the following
components:
<CAPTION>
(In thousands) 1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Service cost of benefits earned $ 85 $ 133 $ 162
Interest cost on accumulated postretirement
benefit obligation 768 942 791
Amortization of prior service benefit (724) (554) (554)
----- ----- -----
Net periodic postretirement benefit cost $ 129 $ 521 $ 399
===== ===== =====
</TABLE>
As part of the 1994 early retirement program, the Company offered certain of its
United States employee groups an enhanced early retirement health care benefit.
The cost of the enhanced health care benefit was $1.5 million, $.9 million of
which was attributable to discontinued operations. At December 31, 1994, the
postretirement benefit plans were amended to transfer the cost of health
supplemental benefit payments to the Company's pension plan. In 1993, the
Company recognized a curtailment expense of $.8 million, approximately half of
which related to discontinued operations, in connection with its decision to
dispose of certain operations and reduce personnel in the remaining businesses.
For measurement purposes, a 6 percent annual rate of increase in the per capita
claims cost of medical benefits was assumed for the various plans in 1995. This
rate was assumed to decrease gradually to 5 percent in 1999 and remain at that
level thereafter. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.25 percent.
If the future health care cost trend rate were increased 1 percent, the
accumulated postretirement benefit obligation as of December 31, 1995 would have
increased by 2 percent. The effect of this assumed change on the aggregate of
service and interest cost for 1995 would have been an increase of 3 percent.
-37-
<PAGE> 39
INFORMATION ABOUT OPERATIONS
<TABLE>
The Company conducts business in three segments: Commercial Products,
Photofinishing and Cerion Technologies. In 1994, the Company combined its
Coated Products and Office Supplies business segments to form Commercial
Products. Commercial Products produces and sells facsimile and thermal papers,
pressure-sensitive labels, specialty papers, and copier and laser printer
supplies primarily to domestic resellers, original equipment manufacturers and
private label distributors. Photofinishing provides photofinishing services to
amateur photographers through mail-order in North America and Western Europe, as
well as through retail establishments in Ireland. Cerion Technologies
manufactures precision metallic parts primarily for the domestic computer
industry. Net sales, operating income and identifiable assets of the Company's
three business segments and the geographic areas in which they operate are set
forth below:
<CAPTION>
Net Sales From Income (loss) From
Continuing Operations Continuing Operations Identifiable Assets
(In millions) 1995 1994 1993 1995(a) 1994(b) 1993(c) 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BY BUSINESS
Commercial Products $245.5 $259.5 $264.8 $(20.4) $ (4.0) $ (1.6) $ 84.3 $105.2 $ 91.3
Photofinishing 179.2 145.4 148.7 7.2 16.4 15.9 83.5 58.1 47.6
Cerion Technologies 27.5 14.0 14.1 6.0 (.2) .6 12.4 7.4 4.3
Corporate expenses,
including interest and assets -- -- -- (12.9) (8.2) (14.3) 37.1 40.8 33.4
Discontinued Operations -- -- -- -- -- -- 14.1 16.3 42.5
------ ------ ------ ------ ------ ------ ------ ------ ------
Consolidated $452.2 $418.9 $427.6 $(20.1) $ 4.0 $ .6 $231.4 $227.8 $219.1
====== ====== ====== ====== ====== ====== ====== ====== ======
BY GEOGRAPHIC AREA
United States $349.8 $357.5 $366.3 $(11.2) $ 6.3 $ 4.4 $112.6 $133.8 $110.5
Europe 95.5 53.6 52.3 3.0 5.0 8.6 62.5 33.3 26.7
Other 6.9 7.8 9.0 1.0 .9 1.9 5.1 3.6 6.0
Eliminations, corporate
expenses, including interest
and assets -- -- -- (12.9) (8.2) (14.3) 37.1 40.8 33.4
Discontinued Operations -- -- -- -- -- -- 14.1 16.3 42.5
------ ------ ------ ------ ------ ------ ------ ------ ------
Consolidated $452.2 $418.9 $427.6 $(20.1) $ 4.0 $ .6 $231.4 $227.8 $219.1
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Sales between business segments are insignificant. Intrasegment sales between
geographic areas are generally priced at the lowest price offered to
unaffiliated customers.
(a) Includes restructuring and other unusual charges of $14.3 million and $1.9
million for Commercial Products and Corporate, respectively.
(b) Includes restructuring and other unusual charges of $2.6 million for
Commercial Products Group.
(c) Includes restructuring and other unusual charges of $3.5 million, $.8
million and $7.5 million for Commercial Products, Photofinishing and
Corporate, respectively.
<TABLE>
Capital expenditures and depreciation and amortization by business segment are
set forth below:
<CAPTION>
Depreciation and
Capital Expenditures Amortization
1995 1994 1993 1995 1994 1993
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Commercial Products $ 8.6 $11.1 $ 9.8 $ 8.3 $ 7.9 $ 7.5
Photofinishing 2.5 3.8 2.9 8.3 5.4 5.9
Cerion Technologies 2.1 1.0 1.8 .8 .8 .7
----- ----- ----- ----- ----- -----
Consolidated $13.2 $15.9 $14.5 $17.4 $14.1 $14.1
===== ===== ===== ===== ===== =====
</TABLE>
-38-
<PAGE> 40
SUBSEQUENT EVENTS
On March 21, 1996, Cerion Technologies filed a registration statement on Form
S-1 with the Securities and Exchange Commission for a proposed initial public
offering of 3,840,000 shares of common stock. Of the total, 1,615,000 shares
are being offered by Cerion and 2,225,000 shares are being offered by Nashua as
the selling stockholder. Cerion Technologies, based in Champaign, Illinois, is
an independent supplier of aluminum substrates for the computer disk drive
industry. All or most of the proceeds anticipated to be generated from the sale
of shares offered by Nashua will be used to prepay a portion of the Company's
debt.
On March 27, 1996, the Company reached agreement with its lenders on the terms
of amendments to existing lending agreements which will supersede the terms and
conditions of the $75 million revolving credit facility and the Company's senior
note agreement. Under the provisions agreed to with the lenders, the revolving
credit facility will be replaced with a bank facility (the "Bank Facility").
Advances under the Bank Facility will be made pursuant to both a term loan
arrangement and a revolving credit facility with an initial aggregate credit
availability of up to $66 million. Interest on amounts outstanding under both
the term loan and revolving credit portion of the agreement will be payable at
the prime rate plus .5 percent. The revised senior note will be at a rate of
11.85 percent per annum.
Of the total revolving credit balance outstanding on the facility closing date,
$48 million initially will be designated as outstanding under the term loan
portion of the Bank Facility with the remainder designated as outstanding under
the revolving credit facility.
The revolving credit portion of the Bank Facility will provide for initial
credit availability equal to the lesser of $18 million or a defined percentage
of eligible accounts receivable and inventory. The agreement also will provide
for up to $5 million of the revolving credit facility to be available for the
issuance of letters of credit. The revolving credit portion of the Bank Facility
will expire on December 31, 1997.
The terms of the Bank Facility and revised senior note will require certain
mandatory prepayments and, with respect to the Bank Facility, contain
provisions for certain facility commitment reductions, tied to the sale or
issuance by the Company of equity securities or the sale or disposition of
assets. According to the provisions of the term loan and the senior note,
one-half of the amount outstanding on October 1, 1996 and December 31, 1996,
respectively, will become due and payable in four equal quarterly installments
commencing in January 1997. All remaining amounts outstanding will be due on
December 31, 1997. Prepayments also will be required beginning in January 1997,
based on Excess Cash Flows, as defined in the agreement.
The Bank Facility will require a commitment fee of .5 percent per annum on
unused amounts, as well as a 2 percent per annum fee on letters of credit
issued under the facility. In addition, the Bank Facility and revised senior
note agreement will provide for contingent fees to be paid if the actual level
of prepayments made in 1996 are below certain specified levels.
Borrowings under the Bank Facility and revised senior note will be
collateralized by a security interest in the Company's receivables and
inventory, assets of the domestic and certain foreign subsidiaries and the
stock of certain foreign subsidiaries. Subject to shareholder approval and
certain circumstances, additional collateral may be required. The agreements
will contain certain financial covenants with respect to tangible net worth,
capital expenditures, cash flows and the ratio of cash flows to fixed charges.
In addition, the agreements will not allow the payment of dividends and will
restrict, among other things, the incurrence of additional debt, guarantees,
lease arrangements or sale of certain assets.
-39-
<PAGE> 41
<TABLE>
QUARTERLY OPERATING RESULTS AND COMMON STOCK INFORMATION (UNAUDITED)
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
1995
Net sales $ 109.6 $ 122.2 $ 121.7 $ 98.7 $ 452.2
Gross profit 26.9 33.3 33.3 22.7 116.2
Income (loss) from continuing operations(1) .1 1.5 (7.3) (9.7) (15.4)
Income from discontinued operations -- .4 -- .3 .7
Net income (loss)(1) .1 1.9 (7.3) (9.4) (14.7)
Earnings (loss) per common and common
equivalent share:
Continuing operations(1) .01 .23 (1.14) (1.53) (2.43)
Discontinued operations -- .06 -- .06 .12
Net income (loss)(1) .01 .29 (1.14) (1.47) (2.31)
Dividends .18 .18 .18 -- .54
Market price:
High 21 20 19-1/4 16-7/8 21
Low 18-1/2 18-5/8 14-3/4 12-1/4 12-1/4
1994
Net sales $ 98.0 $ 107.0 $ 113.3 $ 100.6 $ 418.9
Gross profit 22.8 28.5 30.5 22.5 104.3
Income (loss) from continuing operations(2) (1.8) 2.1 1.9 -- 2.2
Income (loss) from discontinued operations (1.7) .8 .5 .3 (.1)
Net income (loss)(2) (3.5) 2.9 2.4 .3 2.1
Earnings (loss) per common and common
equivalent share:
Continuing operations(2) (.27) .34 .29 (.01) .35
Discontinued operations (.27) .12 .08 .06 (.01)
Net income (loss)(2) (.54) .46 .37 .05 .34
Dividends .18 .18 .18 .18 .72
Market price:
High 30 3/4 27 3/8 29 1/4 23 1/8 30 3/4
Low 26 1/4 24 3/8 22 7/8 19 3/4 19 3/4
<FN>
(1) The third quarter includes restructuring and other unusual charges of $8.2
million and a valuation allowance of $3.3 million against tax assets due to
the probability that such assets will not be realized. The fourth quarter
includes restructuring and other unusual charges of $8 million.
(2) The first quarter includes restructuring and other unusual charges of $2.6
million.
</TABLE>
The Company's stock is traded on the New York Stock Exchange. At December 31,
1995, there were 1,542 record holders of Nashua's common stock.
-40-
<PAGE> 42
Report of Independent Accountants
To the Board of Directors and Shareholders of Nashua Corporation
In our opinion, the accompanying financial statements listed in the index
appearing under Item 14 (a) (1) present fairly, in all material respects, the
financial position of Nashua Corporation and its subsidiaries at December 31,
1995 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 5, 1996, except as to the Subsequent Events note, which is as of March
27, 1996
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
DIRECTORS OF THE REGISTRANT The directors are elected annually by the
stockholders and hold office until successors are elected and qualified or until
death, resignation or removal. The business experience for each director of
Nashua for the last five years and the year he first became a director of Nashua
and their ages are as follows:
<CAPTION>
DIRECTOR
NAME AGE SINCE BUSINESS EXPERIENCE
---- --- ----- -------------------
<S> <C> <C> <C>
Joseph A. Baute 68 1984 Mr. Baute has been the Chairman of Nashua Corporation since April 28, 1995
and was President and Chief Executive Officer from November 10, 1995 to
January 2, 1996. He was Chairman and Chief Executive Officer of Markem
Corporation (information application systems) from prior to 1991 until his
retirement in 1993. He is also a Director of Houghton-Mifflin Company, State
Street Bank & Trust Company and Infosoft International.
Sheldon A. Buckler(a)(c) 64 1994 Dr. Buckler has been Chairman of the Board of Commonwealth Energy
System since May 1995. He was Vice Chairman of the Board of Polaroid
Corporation from prior to 1991 until his retirement in 1994. He is also a
Director of ASECO Corporation, PARLEX Corporation and Spectrum
Information Technologies, Inc.
Richard E. Carter(b) 67 1978 Private investor.
Thomas W. Eagar(d) 46 1993 Professor Eagar has been Professor of Materials Engineering at the
Massachusetts Institute of Technology (MIT) since prior to 1991 and POSCO
Professor of Materials Engineering since 1993. He has also been Head of the
Department of Materials Science and Engineering at MIT since January 1995.
Gerald G. Garbacz 59 1996 Mr. Garbacz has been President and Chief Executive Officer of Nashua
Corporation since January 2, 1996. He was a private investor from 1994
through 1995. He was Chairman and Chief Executive Officer of Baker &
Taylor Inc. (information distribution) from 1992 to 1994 and Executive Vice
President of W.R. Grace & Co. from prior to 1991 to 1992. He is also a
Director of Handy & Harman Inc.
Charles S. Hoppin(a)(c)(d) 64 l979 Mr. Hoppin has been a partner in the law firm of Davis Polk & Wardwell
since prior to l991.
John M. Kucharski(a)(b) 60 1988 Mr. Kucharski has been the Chairman, Chief Executive Officer and President
of EG&G, Inc. (technical and scientific products and services) since prior to
l991. He is also a Director of New England Electric System, Eagle Industry
Co., Ltd. and State Street Boston Corporation.
James F. Orr III (b)(d) 53 l989 Mr. Orr has been the Chairman, Chief Executive Officer and President of UNUM
Corporation (insurance) since prior to l991.
</TABLE>
-41-
<PAGE> 43
- -------------------
(a) Member of the Audit Committee of Nashua's Board of Directors.
(b) Member of the Executive Salary Committee of Nashua's Board of
Directors.
(c) Member of the Nominating Committee of Nashua's Board of Directors.
(d) Member of the Pension Plan Review Committee of Nashua's Board of
Directors.
EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the present executive
officers of the Company for Section 16 of the Securities and Exchange Act
purposes, their ages and their positions held with the Company:
-42-
<PAGE> 44
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Gerald G. Garbacz 59 President and Chief Executive Officer
Daniel M. Junius 43 Vice President-Finance, Chief Financial Officer and Treasurer
Robin J.T. Clabburn 59 Vice President and Chief Technical Officer
Bruce T. Wright 46 Vice President
Charles E. Turnbull 43 Vice President
John R. Mapley 64 Vice President
David A. Peterson 56 Vice President
</TABLE>
Mr. Garbacz has been President and Chief Executive Officer of Nashua
since January 1996. He was a Private Investor from 1994 through 1995. He was
Chairman and Chief Executive Officer of Baker & Taylor Inc. (information
distribution) from 1992 to 1994 and Executive Vice President of W.R. Grace &
Co. from prior to 1991 to 1992. He is also a Director of Handy & Harman Inc.
Mr. Junius has been Vice President-Finance, Chief Financial Officer and
Treasurer since November 1995. He was Vice President-Finance and Treasurer from
September 1995 to November 1995. Prior to September 1995 he was Treasurer.
Mr. Clabburn has been Vice President and Chief Technical Officer since
October 1995. He worked as a consultant for Nashua from March 1994 to October
1995. Prior to March 1994 he was Chief Executive Officer for several development
stage companies at Cookson Group PLC.
Mr. Wright has been Vice President since October 1994. Prior to October
1994 he was Vice President of Barry Controls.
Mr. Turnbull has been Vice President since August 1995. Prior to August
1995 he was President of Polyken Technologies.
Mr. Mapley has been Vice President since March 1996. From 1990 to March
1996 he was Chief Executive Officer of the Company's Photofinishing Group.
Mr. Peterson has been Vice President since November 1995. He was
General Manager of Cerion Technologies (Precision Technologies) from April 1992
to January 1996. Prior to April 1992 he held various operating positions within
the former Nashua Computer Products Division.
Executive officers are generally elected to their offices each year by
the Board of Directors shortly after the Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS Directors of Nashua, except employees and officers of
the Company, receive $15,000 annual cash compensation and $750 plus expenses for
each Board meeting and Board committee meeting attended and are each year
awarded options to purchase 1,000 shares of common stock having an exercise
price equal to the fair market value for such shares on the date of award under
the provisions of Nashua's l993 Stock Incentive Plan. Under the 1996 Stock
Incentive Plan, it is proposed that Nashua's non-employee Directors receive
shares of Nashua's common stock each year in the amount of and in lieu of annual
retainer cash compensation.
Mr. Joseph A. Baute, as the non-employee Chairman of Nashua for the
period April 28, 1995 through January 2, 1996 was paid approximately $75,000
plus expenses with the understanding that he would purchase $25,000 of Nashua
stock on the open market. The Company reimbursed Mr. Baute for brokerage
commissions on such stock purchase. This compensation was in lieu of all other
compensation including non-employee director stock options and compensation for
attending Board and Board Committee meetings.
-43-
<PAGE> 45
<TABLE>
COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth the annual and
long-term compensation paid to persons who served as Nashua's Chief Executive
Officer during 1995 and Nashua's six other highest paid executive officers in
1995:
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
----------------------------------------- --------------------------
Shares
Fiscal Other Annual Restricted Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Stock Awards Options/SARs Compensation(1)
- --------------------------- ---- ------ ----- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A. Baute 1995 $124,625 (2) $ 0 -- -- -- --
Chairman and Former
President and Chief
Executive Officer
Francis J. Lunger 1995 $276,694 (3) $ 0 -- -- 28,000 $7,229
Former President and Chief 1994 $212,308 $ 0 $214,053 (7) -- 23,000 $4,211
Executive Officer
William E. Mitchell 1995 $286,578 (4) $ 0 $248,344 (7) -- 15,000 $9,027
Former President and Chief 1994 $400,000 $ 0 $ 33,599 (8) -- 15,000 $5,033
Executive Officer 1993 $127,692 $ 0 $ 1,942 (9) -- 45,000 $3,528
Robin J. T. Clabburn 1995 $217,607 (5)(6) $ 0 $ 277 (10) $334,375 (12) 20,000 --
Vice President and
Chief Technical Officer
Robert A. Geiger 1995 $171,655 (6) $ 0 -- -- 13,500 $4,708
Vice President
Tape Products Division
John J. Ireland 1995 $168,997 (6) $ 0 $ 97,304 (7) -- 13,500 $9,447
Vice President
Specialty Coated Products
David A. Peterson 1995 $148,874 (6) $83,567 -- -- 11,500 $5,443
Vice President
Cerion Technologies
Daniel M. Junius 1995 $146,374 (6) $ 0 $ 561 (11) $334,375 (12) 11,500 $5,653
Vice President-Finance,
Chief Financial Officer
and Treasurer
Bruce T. Wright 1995 $134,240 (6) $ 0 -- $334,375 (12) 14,000 $5,440
Vice President
Human Resources
<FN>
- ---------------------
(1) Includes amounts set aside under the Company's Supplemental Compensation Plan, Company contributions
to the Employees' Savings Plan, life insurance income and premiums, financial consulting services,
imputed auto income and imputed income on an interest free loan. In 1995, these amounts were:
(i) as to the Employees' Savings Plan - Mr. Lunger, $2,229; Mr. Mitchell, $2,226; Mr. Geiger,
$2,600; Mr. Ireland, $2,229; Mr. Peterson, $2,228; Mr. Junius, $2,600; and Mr. Wright, $2,229;
(ii) as to life insurance income - Mr. Geiger, $2,108; Mr. Ireland, $560; Mr. Peterson, $2,057;
Mr. Junius, $553; and Mr. Wright, $711;
</TABLE>
-44-
<PAGE> 46
<TABLE>
<S> <C>
(iii) as to financial consulting services - Mr. Lunger, $5,000; Mr. Mitchell, $5,000; Mr. Ireland,
$6,000; Mr. Junius, $2,500; and Mr. Wright, $2,500;
(iv) as to imputed auto income - Mr. Mitchell, $1,801; and Mr. Peterson, $1,158; and
(v) as to imputed income on an interest free loan - Mr. Ireland, $658.
(2) Mr. Baute has served as Chairman since April 28, 1995. He has also served as President and Chief
Executive Officer from November 10, 1995 until January 2, 1996 when Mr. Garbacz became President
and Chief Executive Officer.
(3) Mr. Lunger left the Company in November 1995.
(4) Mr. Mitchell left the Company in September l995.
(5) Mr. Clabburn received an additional $31,674 for consulting services performed in 1995 prior to
becoming an employee of Nashua.
(6) Messrs. Clabburn, Geiger, Ireland, Peterson, Junius and Wright each first became executive
officers in 1995.
(7) Includes moving expense reimbursement and tax equalization payments.
(8) Includes tax equalization payments on moving expense reimbursement, executive life insurance
premiums and California state disability insurance payments.
(9) Includes tax equalization payments for executive life insurance and California state
disability insurance.
(10) Tax equalization payments.
(11) Includes tax equalization payments on executive medical reimbursement income and executive
life insurance premiums.
(12) Includes 25,000 shares of Restricted Stock (granted when the price of Nashua shares was
$13.375), 8,333 shares of which will vest when the average closing price over a 30 trading
day period of Nashua shares ("the average closing price") reaches $20.00; 8,333 shares of
which will vest when the average closing price of Nashua shares reaches $25.00; and
8,334 shares of which will vest when the average closing price of Nashua shares reaches
$30.00. However, any shares which have not vested upon the earlier of (i) by December
15, 2000 or (ii) termination of employment, will be forfeited. Dividends, if any, will
accumulate on such Restricted Stock and be paid to the recipient when and if the
underlying shares vest.
</TABLE>
-45-
<PAGE> 47
STOCK OPTIONS/STOCK APPRECIATION RIGHTS
<TABLE>
The following table sets forth certain information as to options/SARs
granted during fiscal l995 to the individuals listed in the Summary Compensation
Table. In accordance with SEC rules, also shown are the hypothetical gains or
"option spreads", on a pre-tax basis, that would exist for the respective
options/SARs. These gains are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the options/SARs were granted
over the full option term. To put this data into perspective, the resulting
Nashua stock prices for the grants expiring on February 24, 2005 would be $32.17
at a 5% rate of appreciation and $51.23 at a 10% rate of appreciation, for the
grant expiring on September 1, 2005, $29.12 at 5% and $46.38 at 10%, and for the
grants expiring on November 4, 2005, $20.77 at 5% and $33.07 at 10%.
<CAPTION>
OPTION/SAR GRANTS IN FISCAL 1995
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
% of Total Options/ Exercise or for Option/SAR Term
Options/SARs SARs Granted to Base Price Expiration ---------------------------
Name Granted (#) Employees in l995 ($/Share) Date 0% 5% 10%
- ---- ------------ ----------------- --------- ---------- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A. Baute . . . . . . 0 -- -- -- -- -- --
Francis J. Lunger . . . . . 8,000 2.7% $19.75 (1) -- -- --
20,000 6.9% $17.88 (1) -- -- --
William E. Mitchell . . . . 15,000 5.1% $19.75 (2) -- -- --
Robin J. T. Clabburn . . . 20,000 (3) 6.9% $12.75 11/4/2005 $0 $160,368 $406,404
Robert A. Geiger . . . . . 3,500 (4) 1.2% $19.75 2/24/2005 $0 $ 43,472 $110,167
10,000 (5) 3.4% $17.88 9/1/2005 $0 $112,446 $284,961
John J. Ireland . . . . . 3,500 (4) 1.2% $19.75 2/24/2005 $0 $ 43,472 $110,167
10,000 (5) 3.4% $17.88 9/1/2005 $0 $112,446 $284,961
David A. Peterson . . . . . 1,500 (4) 0.5% $19.75 2/24/2005 $0 $ 18,631 $ 47,215
10,000 (5) 3.4% $17.88 9/1/2005 $0 $112,446 $284,961
Daniel M. Junius . . . . . 1,500 (4) 0.5% $19.75 2/24/2005 $0 $ 18,631 $ 47,215
10,000 (5) 3.4% $17.88 9/1/2005 $0 $112,446 $284,961
Bruce T. Wright 4,000 (4) 1.4% $19.75 2/24/2005 $0 $ 49,683 $125,906
10,000 (5) 3.4% $17.88 9/1/2005 $0 $112,446 $284,961
<FN>
- -------------
(1) These options expired on November 10, 1995 due to the termination of Mr. Lunger's employment on that
date.
(2) These options expired on September 8, 1995 due to the termination of Mr. Mitchell's employment on that
date.
(3) These options will become exercisable on November 3, 1996.
(4) 50% of these options became exercisable on February 23, 1996; 50% will become
exercisable on February 23, 1997.
(5) 50% of these options will become exercisable on August 31, 1996 and 50% on August 31, 1997.
</TABLE>
-46-
<PAGE> 48
<TABLE>
The following table sets forth information as to options/SARs
exercised in 1995 and unexercisable options/SARs held at the end of fiscal
1995, by the individuals listed in the Summary Compensation Table:
<CAPTION>
OPTION EXERCISES IN FISCAL YEAR 1995 AND
VALUE OF OPTIONS/SARS AT END OF FISCAL 1995
Number of Unexercised Value of Unexercised,
Options/SARs Held at In-The-Money, Options/SARs
Fiscal Year End at Fiscal Year End (1)
Shares Acquired Value -------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Baute 0 $0 2,000 0 $0 $0
Francis J. Lunger 0 $0 23,000 0 $0 $0
William E. Mitchell 0 $0 30,000 0 $0 $0
Robin J. T. Clabburn 0 $0 0 20,000 $0 $17,600
Robert A. Geiger 0 $0 12,350 14,750 $0 $0
John J. Ireland 0 $0 2,500 16,000 $0 $0
David A. Peterson 0 $0 3,750 12,250 $0 $0
Daniel M. Junius 0 $0 12,250 12,250 $0 $0
Bruce T. Wright 0 $0 500 14,500 $0 $0
<FN>
- -------------------
(1) Represents the difference between the closing price on the New
York Stock Exchange of Nashua's common stock on December 29,
l995 ($13.63) and the exercise price of the options/SARs.
</TABLE>
PENSION PLAN
<TABLE>
The following table shows estimated annual benefits payable upon
retirement under the Nashua Corporation Retirement Plan for Salaried Employees,
which includes the individuals listed in the Summary Compensation table:
<CAPTION>
ESTIMATED PENSION BENEFITS
Average Annual Years of Service
Compensation from ------------------------------------------------------------------------
January 1, l990 25 or
to Retirement 5 years 10 years 15 years 20 years more years
- ---------------------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 13,750 $ 27,500 $ 41,250 $ 55,000 $ 68,750
250,000 27,500 55,000 82,500 110,000 137,500
375,000 41,250 82,500 123,750 165,000 206,250
500,000 55,000 110,000 165,000 220,000 275,000
625,000 68,750 137,500 206,250 275,000 343,750
750,000 82,500 165,000 247,500 330,000 412,500
875,000 96,250 192,500 288,750 385,000 481,250
1,000,000 110,000 220,000 330,000 440,000 550,000
</TABLE>
Compensation covered by this plan generally refers to total annual cash
compensation, including salary and bonus, but excluding certain items such as
the value of stock option awards and employer allocations to the Supplemental
Compensation Plan and Employees' Savings Plan. As of December 31, l995, the
individuals named in the Summary Compensation Table had the following years of
service credited under the plan: Messrs. Baute, Lunger, Mitchell and Clabburn
are not eligible; Mr. Geiger, 8 years; Mr. Ireland, 1.5 years; Mr. Peterson, 4.5
years; Mr. Junius, 11 years; and Mr. Wright, 1 year.
-47-
<PAGE> 49
The estimated annual benefits shown above are subject to an offset for
50% of a participant's primary Social Security benefit. Benefits as shown above,
minus the 50% offset for Social Security benefit, are available for participants
whose pensions start after reaching age 65. Participants who have five or more
years of service are eligible to receive pensions after reaching age 60 and
participants who have ten or more years of service are eligible to receive
pensions after reaching age 55, but payments are reduced 4.2% per year for each
year that they start receiving benefits earlier than at age 65. Payments are
further reduced for participants whose credited service began before age 40 and
terminate employment with Nashua prior to reaching age 55.
The Employee Retirement Income Security Act of l974 places limitations
on pensions which may be paid under plans qualified under the Internal Revenue
Code. Amounts exceeding such limitations may be paid outside of qualified plans.
Nashua has a Supplemental Unfunded Excess Retirement Benefit Plan providing for
such amounts for its employees including Messrs. Geiger, Ireland, Peterson,
Junius and Wright.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs.
Clabburn, Geiger, Ireland, Junius and Wright in order to ensure their continued
service to Nashua in the event of an attempt by a person or group of persons to
gain control of Nashua. Such employment agreements provide that upon termination
of employment under certain circumstances within three years of a "change in
control" as defined in these agreements, the employee would receive severance
pay equal to three times the sum of his annual salary and bonus for Messrs.
Junius and Wright and one times the sum of his annual salary and bonus for Mr.
Clabburn, Mr. Geiger and Mr. Ireland. In addition, if after one year following
the "change in control" Messrs. Junius or Wright elect to terminate employment,
he would receive the above described severance pay; Mr. Clabburn may make such
an election immediately following the change in control and receive his
severance pay. Additional payments are required with respect to Messrs. Junius
and Wright in amounts such that after the payment of all taxes, the executive
will be in the same after tax position as if no excise tax under Section 4999 of
the Internal Revenue Code had been imposed. In addition, the agreements provide
for the continuation for specified periods of certain other benefits.
-48-
<PAGE> 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table shows the
number of shares and percentage of Nashua's common stock beneficially owned by
all persons known to Nashua to be the beneficial owners of more than 5% of its
common stock, as of March 15, l996:
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING
------------------------ ------------- -----------
<S> <C> <C>
GAMCO Investors, Inc./Gabelli Funds, Inc./Gabelli 633,400(b) 9.6%
Performance Partnership L.P./Gabelli International Limited/
Gabelli International II Limited(a)
One Corporate Center, Rye, NY 10580
GeoCapital Corporation(c) 454,700(d) 6.9%
767 Fifth Avenue, New York, NY 10153
Gouws Capital Management, Inc.(e) 396,065(f) 6.0%
511 Congress Street, Portland, ME 04101
The TCW Group, Inc./Robert Day(g) 393,800(h) 6.0%
865 South Figueroa Street
Los Angeles, CA 90017
President and Fellows of Harvard College/Harvard 357,900(j) 5.4%
Yenching Institute(i)
600 Atlantic Avenue, Boston, MA 02210
<FN>
- ---------------------
(a) Information is based on a joint Schedule 13D (Amendment No. 6) dated July 26, l995, furnished by such
beneficial owners, which are affiliated with one another.
(b) GAMCO Investors, Inc. owns 310,400 shares, for which it has sole dispositive power. It has sole voting power
with respect to 260,000 of these shares. Gabelli Funds, Inc. owns 292,000 shares for which it has sole
dispositive power and sole voting power. Gabelli Performance Partnership L.P. owns 15,000 shares for which it
has sole dispositive power and sole voting power. Gabelli International Limited owns 9,000 shares for which it
has sole voting and sole dispositive power. Gabelli International II Limited owns 7,000 shares for which it has
sole voting and sole dispositive power.
(c) Information is based on Schedule 13G, dated February 15, 1996, furnished by such beneficial owner.
(d) Sole dispositive power.
(e) Information is based on Schedule 13G, dated February 13, 1996, furnished by such beneficial owner.
(f) Sole voting power as to 53,160 shares and sole dispositive power as to 396,065 shares.
(g) Information is based on Schedule 13G, dated February 12, 1996, furnished by such beneficial owner.
</TABLE>
-49-
<PAGE> 51
<TABLE>
<S> <C>
(h) Sole voting and sole dispositive power.
(i) Information is based on Amendment No. 2 to Schedule 13G dated February 13, l996, furnished by such
beneficial owners, which are affiliated with one another.
(j) President and Fellows of Harvard College owns 351,300 shares, for which it has sole voting and sole dispositive
power. Harvard Yenching Institute owns 6,600 shares, for which it has sole voting and sole dispositive power.
</TABLE>
<TABLE>
SECURITY OWNERSHIP OF MANAGEMENT The following table shows the number of shares
and percentage of Nashua's common stock deemed to be beneficially owned by each
director, each executive officer named in the Summary Compensation Table above
and by all directors and officers of Nashua as a group, as of March 15, l996:
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF SHARES
NAME BENEFICIAL OWNERSHIP (A) OUTSTANDING
<S> <C> <C>
Joseph A. Baute.................................. 5,640 (a) *
Sheldon A. Buckler .............................. 4,000 (a) *
Richard E. Carter................................ 51,341 (a) *
Robin J. T. Clabburn ............................ 28,814 (b) *
Thomas W. Eagar.................................. 4,300 (a) *
Gerald G. Garbacz ............................... 127,500 (c) 1.9
Robert A. Geiger ................................ 15,923 (d)(k) *
Charles S. Hoppin................................ 5,000 (a) *
John J. Ireland ................................. 7,393 (e)(k) *
Daniel M. Junius ................................ 41,065 (b)(f)(k) *
John M. Kucharski................................ 5,500 (a) *
Francis J. Lunger ............................... 23,000 (g) *
William E. Mitchell ............................. 100 *
James F. Orr III................................. 7,000 (a) *
David A. Peterson ............................... 5,897 (h)(k) *
Bruce T. Wright ................................. 28,306 (b)(i) *
Directors and Officers as a group (20 persons)... 411,461 (j)(k)(l) 6.2
<FN>
- ---------------------
* Less than 1%
(a) Includes shares each non-employee Director has a right to acquire
through the exercise of stock options prior to May 31, l996 - Mr.
Baute, 2000 shares; Mr. Buckler, 1,000 shares; Mr. Carter, 3,000
shares; Mr. Eagar, 3,000 shares; Mr. Hoppin, 3,000 shares; Mr.
Kucharski, 3,000 shares; and Mr. Orr, 3,000 shares.
(b) Includes 25,000 shares of Restricted Stock, 8,333 shares of which
will vest when the average closing price over a 30 trading day period
of Nashua shares (the "average closing price") reaches $20.00; 8,333
shares of which will vest when the average closing price of Nashua
shares reaches $25.00; and 8,334 shares of which will vest when the
average closing price of Nashua shares reaches $30.00. However, any
shares which have not vested by December 15, 2000 or his termination
of employment will be forfeited.
(c) Includes 120,000 shares of Restricted Stock, 40,000 shares of which
will vest when the average closing price over a 30 trading day period
of Nashua shares (the "average closing price") reaches $20.00; 40,000
shares of which will vest when the average closing price of Nashua
shares reaches $25.00; and 40,000 shares of which will vest when the
average closing price of Nashua shares reaches $30.00. However, any
shares which have not vested by December 18, 2000 or his termination
of employment will be forfeited.
(d) Includes 15,350 shares Mr. Geiger has a right to acquire through the
exercise of stock options prior to May 31, 1996.
(e) Includes 6,750 shares Mr. Ireland has a right to acquire through the
exercise of stock options prior to May 31, 1996.
</TABLE>
-50-
<PAGE> 52
(f) Includes 12,250 shares Mr. Junius has a right to acquire through the
exercise of stock options prior to May 31, 1996.
(g) Shares Mr. Lunger has a right to acquire through the exercise of
stock options prior to May 10, 1996.
(h) Includes 5,250 shares Mr. Peterson has a right to acquire through the
exercise of stock options prior to May 31, 1996.
(i) Includes 2,500 shares Mr. Wright has a right to acquire through the
exercise of stock options prior to May 31, 1996.
(j) Includes 94,284 shares which the directors and officers of Nashua
have the right to acquire through exercises of stock options prior to
May 31, l996.
(k) Includes shares held in trust under the Employees' Savings Plan under
which the participating employee has voting power as to the shares in
his account. As of December 31, l995, 573 shares are held in trust
for Mr. Geiger's account, 643 shares are held in trust for Mr.
Ireland's account, 647 shares are held in trust for Mr. Peterson's
account, 3,578 shares are held in trust for Mr. Junius' account, and
10,035 shares are held in trust for the accounts of all directors and
officers as a group. No director other than Mr. Garbacz participates
in the Plan.
(l) Includes 225,000 shares of Restricted Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In conjunction with Mr. Mitchell's relocation from California to New
England, the Company granted to Mr. Mitchell an interest-free residential
bridge loan in the amount of $500,000 pending the sale of Mr. Mitchell's
California home. Mr. Mitchell has repaid the loan. The Company also guaranteed
repayment of a home mortgage loan acquired by Mr. Mitchell in the sum of $1.1
million. The guaranty has expired.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements
Consolidated Statement of Operations and Retained Earnings for
each of the three years in the period ended December 31, 1995 (See
page 20)
Consolidated Balance Sheet at December 31, 1995 and 1994 (See
page 21)
Consolidated Statement of Cash Flows for each of the three years
in the period ended December 31, 1995 (See page 22).
Notes to Consolidated Financial Statements (See pages 23 through
40)
Report of Independent Accountants (See page 41)
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule
(See page 56).
For the three years ended December 31, 1995:
Schedule II - Valuation and Qualifying Accounts.
The other schedule is omitted because it is not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.
-51-
<PAGE> 53
<TABLE>
<CAPTION>
(3) Exhibits:
---------
<S> <C>
2.01 Purchase and Sale Agreement, by and among Nashua
Corporation and subsidiaries and Nexus Photo Limited and
subsidiaries. Exhibit to the Company's Form 8-K dated
January 13, 1995, and incorporated herein by reference.
3.01 Composite Certificate of Incorporation of the Company, as
amended. Exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1989, and incorporated
herein by reference.
3.02 By-laws of the Company, as amended. Exhibit to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference.
4.01 Note Agreement dated as of September 13, 1991. Exhibit to
the Company's Form 10-K for the year ended December 31,
1991, and incorporated herein by reference.
4.02 Amendment No. 1 dated as of December 31, 1991 to the Note
Agreement dated September 13, 1991. Exhibit to the
Company's Form 10-K for the year ended December 31, 1993,
and incorporated herein by reference.
4.03 Amendment No. 2 dated as of January 27, 1994 to the Note
Agreement dated September 13, 1991. Exhibit to the
Company's Form 10-K for the year ended December 31, 1993,
and incorporated herein by reference.
4.04 Amendment No. 3 dated as of May 12, 1994 to the Note
Agreement dated September 13, 1991. Exhibit to the
Company's Form 10-K for the year ended December 31, 1994
and incorporated herein by reference.
4.05 Amendment No. 4 dated as of December 31, 1994 to the Note
Agreement dated September 13, 1991. Exhibit to the
Company's Form 10-K for the year ended December 31, 1994
and incorporated herein by reference.
4.06 Term Sheet dated March 27, 1996 regarding amendments to
Note Agreement dated September 13, 1991.
4.07 Allonge dated December 31, 1994 to the Note Agreement dated
September 13, 1991. Exhibit to the Company's Form 10-K
for the year ended December 31, 1994 and incorporated
herein by reference.
4.08 Credit Agreement dated as of January 5, 1995. Exhibit to
the Company's Form 10-K for the year ended December 31,
1994 and incorporated herein by reference.
4.09 Term Sheet dated March 27, 1996 amending and restating the
Credit Agreement dated January 5, 1995.
</TABLE>
-52-
<PAGE> 54
<TABLE>
<S> <C>
4.10 Rights Agreement dated as of August 22, 1986 between the
Company and The First National Bank of Boston. Exhibit to
the Company's Form 8-K dated August 22, 1986, and
incorporated herein by reference.
4.11 Amendment No. 1 dated April 22, 1988 to the Rights
Agreement dated as of August 22, 1986 between the Company
and The First National Bank of Boston. Exhibit to the
Company's Form 8-K dated May 3, 1988, and incorporated
herein by reference.
4.12 Amendment No. 2 dated May 17, 1989 to the Rights Agreement
dated as of August 22, 1986 between the Company and the
First National Bank of Boston. Exhibit to the Company's
Form 8-K dated May 17, 1989 and incorporated herein by
reference.
4.13 Amendment No. 3 dated October 27, 1989 to the Rights
Agreement dated as of August 22, 1986 between the Company
and the First National Bank of Boston. Exhibit to the
Company's Form 8-K dated October 31, 1989 and incorporated
herein by reference.
4.14 Amendment No. 4 dated March 22, 1993 to the Rights
Agreement dated as of August 22, 1986 between the Company
and the First National Bank of Boston. Exhibit to the
Company's Form 8-K dated March 22, 1993 and incorporated
herein by reference.
10.01 Management Incentive Compensation Program of the Company,
as amended 1993. Exhibit to the Company's Form 10-K for the
year ended December 31, 1992 and incorporated herein by
reference.(1)
10.02 1980 Stock Award Plan of the Company, as amended. Exhibit
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1981, and incorporated herein by
reference.(1)
10.03 1987 Stock Option Plan of the Company. Exhibit to the
Company's Proxy Statement dated March 24, 1987, and
incorporated herein by reference.(1)
10.04 Amendments to Nashua Corporation 1987 Stock Option Plan
effective as of April 28, 1989. Exhibit to the Company's
Form 10-Q for the quarterly period ended June 30, 1989, and
incorporated herein by reference.(1)
10.05 1993 Stock Option Plan of the Company. Exhibit to the
Company's Proxy Statement dated March 19, 1993, and
incorporated herein by reference.(1)
10.06 Employment Agreement dated December 18, 1995 between the
Company and Gerald G. Garbacz. Exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.(1)
10.07 Employment Agreement dated April 28, 1989 between the
Company and Daniel M. Junius. Exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.(1)
</TABLE>
-53-
<PAGE> 55
<TABLE>
<S> <C>
10.08 Employment Agreement dated November 3, 1995 between the
Company and Robin J.T. Clabburn. Exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.(1)
10.09 Employment Agreement dated February 24, 1995 between the
Company and Bruce T. Wright. Exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.(1)
10.10 Employment Agreement dated September 22, 1995 between the
Company and Charles E. Turnbull. Exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.(1)
10.11 Incentive Agreement dated July 5, 1989 between the Company
and John R. Mapley. Exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.(1)
10.12 Incentive Agreement dated March 21, 1996 between the
Company and David A. Peterson. Exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.(1)
11.01 Statement regarding Computation of Earnings Per Share and
Common Equivalent Share.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Independent Accountants.
24.01 Powers of Attorney.
</TABLE>
(1) Management contract or compensation plan identified
pursuant to Item 14(a)(3).
(b) Reports on Form 8-K:
On November 28, 1995, the Company filed a report on Form 8-K regarding
its non-compliance with certain financial covenants in its revolving
credit facility and senior note agreement.
On December 11, 1995, the Company filed a report on Form 8-K regarding
its non-compliance with certain financial covenants in its revolving
credit facility and senior note agreement.
On December 13, 1995, the Company filed a report on Form 8-K regarding
its intention to sell its Tape Products Division.
On December 27, 1995, the Company filed a report on Form 8-K regarding
the appointment of Gerald G. Garbacz as its President and Chief
Executive Officer.
-54-
<PAGE> 56
<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 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
Date: April 1, 1996 By /s/ Daniel M. Junius
---------------------------------
Daniel M. Junius
Vice President-Finance,
Chief Financial Officer and Treasurer
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Gerald G. Garbacz President and April 1, 1996
- ---------------------- Chief Executive Officer
Gerald G. Garbacz
/s/ Daniel M. Junius Vice President-Finance, April 1, 1996
- ---------------------- Chief Financial Officer
Daniel M. Junius and Treasurer
/s/ Joseph R. Matson Corporate Controller and April 1, 1996
- ---------------------- Chief Accounting Officer
Joseph R. Matson
Sheldon A. Buckler* Director
- ----------------------
Sheldon A. Buckler
Richard E. Carter* Director
- ----------------------
Richard E. Carter
Thomas W. Eagar* Director
- ----------------------
Thomas W. Eagar
John M. Kucharski* Director
- ----------------------
John M. Kucharski
James F. Orr III* Director
- ----------------------
James F. Orr III
*By /s/ Daniel M. Junius April 1, 1996
---------------------
Daniel M. Junius
Attorney-In-Fact
</TABLE>
-55-
<PAGE> 57
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS OF
NASHUA CORPORATION
Our audits of the consolidated financial statements referred to in our report
dated February 5, 1996, except as to the Subsequent Events note, which is as of
March 27, 1996, appearing on page 41 of this Annual Report on Form 10-K also
included an audit of the Financial Statement Schedules listed in Item 14(a) of
this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Boston, Massachusetts
February 5, 1996, except as to the Subsequent Events note, which is as of March
27, 1996
-56-
<PAGE> 58
SCHEDULE II
<TABLE>
NASHUA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Balance at
Previous Balance at
Description End of Year Additions Deductions End of Year
- ----------- ----------- --------- ---------- -----------
DECEMBER 31, 1995:
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $2,628 $1,717(a) $(1,948)(b)(c) $2,397
Valuation allowance on deferred tax asset -- 3,300(d) -- 3,300
DECEMBER 31, 1994:
Allowance for doubtful accounts 1,883 1,374(a) (629)(b) 2,628
DECEMBER 31, 1993:
Allowance for doubtful accounts 2,433 836(a) (1,386)(b) 1,883
<FN>
(a) Charged to costs and expenses.
(b) Accounts deemed uncollectible.
(c) Includes decrease of $270 due to restatement of discontinued operations.
(d) Charged to income tax expense.
</TABLE>
<PAGE> 1
EXHIBIT 4.06
NASHUA CORPORATION
SUMMARY OF TERMS AND CONDITIONS
MARCH 27, 1996
The following is a summary of the changes to the Note Agreement dated
September 13, 1991 (as amended, the "EXISTING NOTE AGREEMENT") between Nashua
Corporation (the "COMPANY") and The Prudential Insurance Company of America
("PRUDENTIAL"). This summary sets forth the agreement in principle of the
Company and Prudential in respect of the Existing Note Agreement subject to the
conditions precedent set forth herein. Except as specified herein, all other
terms shall remain as set forth in the Existing Note Agreement.
MATURITY: December 31, 1997.
AMORTIZATION: One half of the outstanding principal amount of the
Notes on October 1, 1996 shall be payable in four
quarterly principal payments on the first business day
of each calendar quarter ("MINIMUM PREPAYMENTS")
plus accrued interest and Yield-Maintenance Amount
commencing on January 2, 1997, with the balance due
and payable on the maturity date plus accrued interest
and Yield-Maintenance Amount (as the same may be
deferred and subordinated in accordance with the
terms set forth herein).
INTEREST RATE: 11.85% [increase to be commensurate with bank
facility] per annum payable quarterly.
YIELD-MAINTENANCE
AMOUNT: The Yield-Maintenance Amount shall be:
(a) calculated from the original maturity date of March
20, 2001 using the coupon rate of 9.67% and a
reinvestment yield of 50 basis points over U.S.
Treasury securities; and
<PAGE> 2
2
(b) computed as if prepayments were
applied to scheduled principal
prepayments required under the
Existing Note Agreement on a pro
rata basis.
Yield Maintenance Amount due in connection with any optional
or mandatory prepayment, including Minimum Prepayments, made
prior to the earliest of (i) a Bankruptcy Event, (ii) an
Acceleration Event (in each case as defined in Exhibit A)
and (iii) the maturity of the Note shall be evidenced
by a promissory note ("YMA NOTE") bearing the same interest
rate per annum as the Note (payment of all principal and
interest on such YMA Note being deferred until payment in
full of all Bank Obligations (as defined below)) with such
YMA Note being due and payable on the maturity date of the
Note. Each YMA Note shall be a secured obligation
subordinated to the Obligations (as defined below).
MANDATORY
PREPAYMENTS: The following amounts shall be applied as
prepayments in accordance with the following section
entitled "APPLICATION OF FUNDS":
(a) 100% of the net proceeds of any incurrence of
indebtedness (not otherwise permitted by the Note
Agreement Documentation) after the Closing Date
(as defined below) by the Company or any of its
subsidiaries;
(b) 100% (or 75% after mandatory prepayments
of principal (including amounts paid to the
Collateral Agent (as defined below) as cash
collateral in respect of outstanding letters of
credit) of the Credit Facilities and the Notes
have been paid to the Lenders (as defined
below) in an aggregate amount equal to
$50,000,000 less the Holdback Amount (as
defined below)) of the net proceeds from the
sale or issuance of equity (other than the
<PAGE> 3
3
issuance of equity to senior
employees in amounts to be agreed on
in connection with management
incentive programs) after the
Closing Date by the Company or any
of its subsidiaries shall be paid to
Chemical Bank, as collateral agent
(the "Collateral Agent") for the
Banks and each holder of a Note
(collectively, the "SENIOR NOTE
HOLDERS"; the Senior Note Holders
and the Banks collectively referred
to as the "LENDERS") for application
as provided below under "APPLICATION
OF FUNDS"; provided, that in the
case of the issuance or sale of
equity of Cerion Technologies, Inc.
("CERION") on terms and conditions
satisfactory to the Lenders, only
the net proceeds from the sale of
such equity by Nashua Precision
Technologies, Inc. ("NPT") (and not
the net proceeds from the issuance
of equity by Cerion) shall be paid
to the Collateral Agent as a
mandatory prepayment as provided
above;
(c) 100% (or 75% after mandatory prepayments
of principal (including amounts paid to the
Collateral Agent as cash collateral in respect of
outstanding letters of credit) of the Credit
Facilities and the Notes have been paid to the
Lenders in an aggregate amount equal to
$50,000,000 less the Holdback Amount of the
net proceeds in excess of $500,000 on an
individual basis and $1,000,000 on a
cumulative basis of any sale or other
disposition by the Company or any of its
subsidiaries of any assets (except for the sale
of inventory and obsolete assets in the ordinary
course of business and for the sale of assets in
amounts to be agreed when the net proceeds
are used for reinvestments in similar assets)
shall be paid to the Collateral Agent for
<PAGE> 4
4
application as provided below under
"APPLICATION OF FUNDS"; and
(d) On February 15, 1997, the Company shall pay
to the Collateral Agent 100% (or 75% after
mandatory prepayments of principal (including
amounts paid to the Collateral Agent as cash
collateral in respect of outstanding letters of
credit) of the Credit Facilities and the Notes
have been paid to the Lenders in an aggregate
amount equal to $50,000,000 less the
Holdback Amount) of Excess Cash Flow (as
defined in the Note Agreement
Documentation) as provided below under
"APPLICATION OF FUNDS".
At any time before the Revolving Credit
Facility (as defined below) has been
permanently reduced to an amount less than
or equal to $10,000,000, with respect to any
mandatory prepayment relating to either any
asset sale or equity issuance or sale
described under "MANDATORY PREPAYMENTS"
above with net cash proceeds in excess of
$15,000,000, the Company shall be entitled
to retain an amount (the "HOLDBACK AMOUNT")
equal to the excess, if any, of (i)
$3,000,000 over (ii) the amount of revolving
loans outstanding under the LIFO Revolver
and Old Money Revolver on the date of such
mandatory prepayment in excess of
$5,000,000.
APPLICATION OF
FUNDS: Application of prepayments described under
"MANDATORY PREPAYMENTS" above shall be
made in accordance with the Agreement in Principle,
dated March 27, 1996, between the Company and the
Banks, attached hereto as Exhibit A, as in effect
on the date thereof.
For purposes of this Summary of Terms and
Conditions, the following terms have the
following meanings:
<PAGE> 5
5
"ADJUSTED NOTE OBLIGATIONS" means principal
of the Notes plus accrued interest.
"BANK OBLIGATIONS" means (i) the
obligations under the new credit
facility among Chemical Bank, as
agent and certain banks (the
"BANKS") parties thereto and (ii)
Hedge Obligations.
"HEDGE OBLIGATIONS" has the meaning
assigned to such term in Exhibit A hereto.
"NOTE OBLIGATIONS" means the Adjusted Note
Obligations plus Yield Maintenance Amount.
"OBLIGATIONS" means, collectively, the Note
Obligations and the Bank Obligations.
All amounts required to be prepaid to the
Senior Note Holders in accordance with the
section "MANDATORY PREPAYMENTS" shall be
applied to installments of principal of the
Notes in inverse order of maturity.
If any change shall be made to the Bank's
current amortization that would have the
effect of accelerating principal
installments paid to the Lenders, the
Company shall prepay the Notes (with
Yield-Maintenance Amount, subject to the
subordination and deferral thereof as set
forth herein) in a proportional amount.
COLLATERAL: The Obligations and any YMA Notes shall be secured
by a perfected first priority security interest in all
receivables and inventory of the Company and all of
the assets of each of the Company's domestic
subsidiaries. All stock of the foreign subsidiaries
shall be pledged to the Collateral Agent, except in the
case where the Lenders determine that only 65% may be
pledged due to adverse tax consequences. All of the
foregoing, including any additional collateral which
<PAGE> 6
6
may be pledged by the Company as described under
"AFFIRMATIVE COVENANTS" below, collectively, the
"COLLATERAL".
The security agreements shall create two
separate and distinct liens. A prior lien
will secure principal of loans (including
unreimbursed draws under New Money L/Cs)
outstanding under the Credit Facilities in
excess of $56,018,000 (including interest
thereon) and a second lien shall secure all
remaining secured Obligations.
CREDIT FACILITIES: The aggregate amount of the Credit Facilities will be
$66,000,000, of which $48,000,000 will be designated
term loans and $18,000,000 will be revolving loans.
The revolving loans (the "REVOLVING CREDIT
FACILITY") will be structured as follows:
- $5,000,000 of existing indebtedness owed to
the Banks will be deemed outstanding under
the Revolving Credit Facility (the "OLD MONEY
REVOLVER").
- $5,000,000 will be a Letter of Credit sub-limit
that can be used exclusively for letters of
credit issued for insurance coverage purposes
only (except for a $250,000 sublimit for letters
of credit issued for purposes other than
insurance coverage). The Bank of Montreal
L/C's in the face amount of $3,018,000 will be
replaced by L/C's issued under the L/C
subfacility. Therefore, approximately
$1,982,000 will be available for new money
L/C's (the "NEW MONEY L/C'S").
- $8,000,000 will be available as new money
revolving credit (the "LIFO REVOLVER").
Other than the Hedge Obligations existing on
the date hereof, the Company shall not enter
into any other
<PAGE> 7
7
hedge agreements other than spot and forward foreign
exchange contracts (not to exceed 6 months in
duration) in the aggregate notional amount not to
exceed $4,000,000 in the following currencies:
Belgian Francs, Canadian Dollars, British Pounds and
Dutch Gilders.
The mandatory prepayments shall be on the
same basis as set forth in Exhibit A.
The contingent fees shall be on the same basis as set
forth herein.
INITIAL CONDITIONS: The closing shall be conditioned
upon satisfaction of, among other things,
the following conditions precedent (the date
upon which all such conditions precedent
shall be satisfied, the "CLOSING DATE"):
(a) The Company and its subsidiaries
shall have executed and delivered
definitive financing and security
documentation and intercreditor
agreement (the "NOTE AGREEMENT
DOCUMENTATION") in each case in form
and substance satisfactory to
Prudential.
(b) Prudential shall have received the
results of a recent lien search in
each of the jurisdictions and
offices where the collateral is
located or recorded, and such search
shall reveal no liens on any of the
Collateral except for liens
permitted by the Note Agreement
Documentation.
(c) No material adverse change shall have
occurred to the business, operations or
prospects of the Company or any of its
subsidiaries.
(d) The Company shall have received all necessary
approvals from its Board of Directors.
<PAGE> 8
8
(e) Prudential shall have received any necessary
consents from the Banks.
(f) The Banks shall have entered into a
credit agreement and related
documentation on terms and
conditions acceptable to Prudential
and in conformity with the terms
specified under the heading "Credit
Facilities".
(g) Prudential and the Banks shall have
executed an intercreditor agreement
satisfactory in form and substance
to Prudential and shall include,
without limitation, the following:
- Sharing of any proceeds received by
the Company in a manner contemplated by the
above section entitled "APPLICATION OF
FUNDS";
- Sharing of any funds received by setoff
as provided in the "APPLICATION
OF FUNDS" section above;
- Consent of a majority in principal
amount of Notes shall be required in
order for the Banks to make advances
under the Credit Facilities in excess of
$66,000,000; and once permanent
reductions to the Credit Facilities are
made, such amounts cannot be
readvanced without the consent of a
majority in principal amount of the
Notes. To the extent not already
provided for in the 2/29/96 draft of the
Collateral Agency and Intercreditor
Agreement, the Collateral Agency and
Intercreditor Agreement shall contain
provisions that ensure that the
Required Secured Parties (as defined
therein) may not (i) impair the rights of
<PAGE> 9
9
the Senior Noteholders under the Existing
Note Agreement, and (ii) materially impair
the rights of the Senior Noteholders in the
Collateral subject to the lien of the
Collateral Agent, in each case without
the prior consent of a majority in principal
amount of the Notes; provided however that
nothing contained in this sentence shall be
construed as requiring any provisions
in the Collateral Agency and Intercreditor
Agreement that could limit the rights
of the Required Secured Parties to direct the
exercise or non-exercise of rights under the
Collateral Agency and Intercreditor
Agreement (including foreclosure on
collateral and the filing of a petition in
bankruptcy against the Company or any
of its subsidiaries) or limit any rights of
the Required Secured Parties to direct
actions with respect to preserving or
protecting the Collateral.
- The Agent on behalf of the Banks will
give prior notice of any material
amendments in its documentation; and
h) Prudential shall have received such
legal opinions (including opinions
(i) from counsel to the Company and
its subsidiaries and (ii) from such
special and local counsel as may be
required by Prudential), documents
and other instruments as are
customary for transactions of this
type or as Prudential may reasonably
request.
AFFIRMATIVE
COVENANTS: The Company will provide the Senior Note Holders
with copies of the unaudited monthly management
<PAGE> 10
10
report within a number of days to be determined after
the end of each calendar month and such other
financial information as the Senior Note Holders may
reasonably request, including a revised business plan
for fiscal year 1996.
The Company and its Subsidiaries shall
maintain their lockboxes and accounts with
their current banks but shall enter into
such agreements with the Collateral Agent
and such banks (in form and substance
satisfactory to the Collateral Agent and the
Lenders) to ensure that the Collateral Agent
has a perfected security interest and the
receipts in cash in such lockboxes and
accounts.
At its next shareholders' meeting the
Company will use its best efforts to obtain
all necessary consents to pledge all of its
assets to the Collateral Agent and if it
obtains such consents will pledge such
remaining assets to the Collateral Agent
within 10 Business Days after being so
requested by the Senior Note Holders.
FINANCIAL
COVENANTS: (a) EBITDA (to be defined in the Note
Agreement Documentation), measured on a
cumulative basis, for any test period set forth
below, will not, as at the last day of such test
period, be less than the number set forth below
opposite such test period:
<PAGE> 11
11
<TABLE>
QUARTER AMOUNT
<S> <C>
January 1, 1996 - $ 1,640,000
March 31, 1996
January 1, 1996 - $ 7,800,000
June 30, 1996
January 1, 1996 - $19,150,000
September 30, 1996
January 1, 1996 - $27,300,000
December 31, 1996
</TABLE>
<TABLE>
(b) The ratio of EBITDA to Fixed Charges
(each to be defined in the Note
Agreement Documentation), measured
on a cumulative basis for any test
period set forth below, will not, as
at the last day of such test period,
be less than the ratio set forth
below opposite such test period:
QUARTER RATIO
<S> <C>
January 1, 1996 - .67:1
March 31, 1996
January 1, 1996 - 1.59:1
June 30, 1996
January 1, 1996 - 2.60:1
September 30, 1996
January 1, 1996 - 2.78:1
December 31, 1996
and thereafter on a
rolling four-quarter
basis
</TABLE>
(c) Consolidated Tangible Net Worth (to be
defined in the Note Agreement
Documentation) will not at any time during
<PAGE> 12
12
any quarter set forth below be less than the
number opposite such quarter:
<TABLE>
QUARTER AMOUNT
<S> <C>
Fourth Quarter 1995 $39,100,000
First Quarter 1996 $36,500,000
Second Quarter 1996 $37,100,000
Third Quarter 1996 $40,800,000
Fourth Quarter 1996 $42,700,000
and thereafter
</TABLE>
<TABLE>
(d) Capital Expenditures of the Company
and its Subsidiaries will not for
each fiscal year set forth below
exceed the amount set forth opposite
such fiscal year:
FISCAL YEAR
<S> <C>
1995 $17,200,000
1996 $17,000,000
1997 $17,500,000
</TABLE>
NEGATIVE
COVENANTS: Customary limitations including, without limitation,
limitations on: indebtedness (including preferred
stock); liens; guarantee obligations; mergers;
consolidations; sales of assets; leases; dividends and
other payments in respect of capital stock;
investments, loans and advances; modifications of debt
instruments; transactions with affiliates; sale and
leasebacks; negative pledge clauses; changes in lines of
business.
CONTINGENT FEES
AND COVENANTS: If the Obligations are not prepaid (including amounts
paid to the Collateral Agent as cash collateral in
respect of outstanding letters of credit) by an
aggregate amount equal to at least $20,000,000 less
<PAGE> 13
13
the Holdback Amount, on or prior to June 30,
1996, the Company shall pay to the Senior
Note Holders on July 1, 1996, a facility fee
equal to 1% of the average outstanding
principal amount of the Notes during the
period commencing on the Closing Date and
ending on June 30, 1996.
If the Obligations are not prepaid
(including amounts paid to the Collateral
Agent as cash collateral in respect of
outstanding letters of credit) by the
aggregate amount equal to at least
$50,000,000 less the Holdback Amount, on or
prior to September 30, 1996, then on October
1, 1996, the Company shall pay to the Senior
Note Holders a facility fee equal to 1% of
the average outstanding principal amount
under the Notes during the period commencing
on the Closing Date and ending on September
30, 1996.
AMENDMENT FEE: 3/8 of 1%, payable in immediately available funds on
the Closing Date. Once paid, such fee shall be fully
earned and nonrefundable.
EXPENSES AND
INDEMNIFICATION: The Company will pay the out-of-pocket expenses of
Prudential and the fees and disbursements of counsel
to the Senior Note Holders in connection with the
Note Agreement Documentation whether or not a
closing shall occur. The Note Agreement
Documentation will provide that the Company will pay
the costs and expenses (including counsel fees and
disbursements) of any modification or waiver of the
Note Agreement Documentation (whether or not
effective) and the costs of enforcing or defending
rights under the Note Agreement Documentation. The
Note Agreement Documentation will also provide that
the Company will pay the costs of any bankruptcy
proceeding or restructuring and the costs of
responding to any subpoena or investigation in
connection with the Note Agreement Documentation.
<PAGE> 14
14
If an event of default shall occur, the
Senior Note Holders shall have the right to
engage an independent financial consultant
acceptable to the Senior Note Holders, at
the Company's expense, to assist in the
analysis regarding the performance and
operations of the Company.
The Company shall indemnify, pay and hold
harmless each Senior Note Holder (and its
respective directors, officers, employees
and agents) against any loss, liability,
cost or expense incurred in respect of the
financing contemplated hereby or the use or
the proposed use of proceeds thereof (except
to the extent resulting from the gross
negligence or willful misconduct of the
indemnified party).
ASSIGNMENT: The consent of the Company shall not be required for
any assignments.
MISCELLANEOUS: If the Credit Facilities are hereafter amended such that
any material terms thereof (including, without
limitation, pricing, covenants, amortization, events of
default and mandatory prepayments) are more
favorable to the Banks than the terms hereof are to the
Senior Note Holders (as determined by the Senior
Note Holders in their sole discretion), the Company
shall enter into an amendment of the Note Agreement
Documentation in order to include such favorable
terms therein.
By January 1, 1997 (the "AMENDMENT DATE"),
the Company shall negotiate in good faith
with the Senior Note Holders in order to
enter into an amendment to the Note
Agreement Documentation for the purpose of
continuing the financial covenants described
above through the maturity date of the
Notes. If after thirty days after the
Amendment Date, the Company and the Note
Holders have not agreed on appropriate
levels for such financial covenants through
the maturity date of the Notes, the Senior
Note Holders in their reasonable judgment
shall set such levels and the
<PAGE> 15
15
Company and the Note Holders shall execute
an amendment to the Note Agreement
Documentation on the thirty-first day after
the Amendment Date for the purposes of
including the levels with respect to such
financial covenants set by the Senior Note
Holders as part of the Note Agreement
Documentation for the period through the
maturity date of the Notes. During the 10
Business Day period after any material asset
sale, the Company shall negotiate in good
faith with the Senior Note Holders in order
to enter into an amendment to the Note
Agreement Documentation for the purpose of
resetting the financial covenant levels
described above. If the Company and the
Senior Note Holders have not agreed on
appropriate levels for such financial
covenants by the end of such 10 Business Day
period, the Senior Note Holders in their
reasonable judgment shall set such levels
and the Company and the Senior Note Holders
shall execute an amendment to the Note
Agreement Documentation on the first
Business Day after such 10 Business Day
period for the purposes of including the new
levels set by the Senior Note Holders as
part of the Note Agreement Documentation.
The closing shall occur on April 3, 1996.
JURISDICTION AND
LAW: State of New York.
[Signatures on Next Page.]
<PAGE> 16
16
IN WITNESS WHEREOF, the parties hereto have caused this Summary of Terms
and Conditions to be duly executed by their proper and duly authorized officers
as of the day and year first written above.
NASHUA CORPORATION
By /s/ Daniel M. Junius
--------------------
Name: Daniel M. Junius
Title: Vice President
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ Joe Alouf
---------------------
Name: Joe Alouf
Title: Senior Vice President
<PAGE> 1
EXHIBIT 4.09
NASHUA CORPORATION $66,000,000 CREDIT FACILITIES
Agreement in Principle
March 27, 1996
----------------------------------
The following is a summary of the changes to the existing Credit Agreement,
dated as of January 5, 1995 (the "EXISTING CREDIT AGREEMENT") among Nashua
Corporation (the "BORROWER"), the lenders parties thereto (the "LENDERS") and
Chemical Bank as agent (the "AGENT") to be incorporated in the Amended and
Restated Credit Agreement. This summary sets forth the agreement in principle of
the Borrower, the Lenders and the Agent in respect of the Amended and Restated
Credit Agreement subject to the conditions precedent set forth herein.
I. Types and Amounts of Credit Facilities
--------------------------------------
Credit Facilities: The loans outstanding and commitments under the
Existing Credit Agreement will be restructured as a
term loan facility (the "TERM LOAN FACILITY") and a
revolving credit and letter of credit facility (the
"REVOLVING CREDIT FACILITY"; together with the Term
Loan Facility, the "CREDIT FACILITIES"). The aggregate
amount of the Credit Facilities will be $66,000,000.
Term Loan Facility
------------------
Amount of Facility: The portion of outstanding loans under the Existing
Credit Agreement to be designated as outstanding Term
Loans will be $48,000,000.
Amortization: Fifty percent of the Term Loans outstanding on October
1, 1996 shall be amortized in four equal quarterly
installments commencing on January 2, 1997.
All remaining Term Loans shall be due and payable
December 31, 1997.
<PAGE> 2
2
Revolving Credit Facility
-------------------------
Borrowing Base: The amount from time to time available under the
Revolving Credit Facility (which when added to a
portion to be determined of outstanding Term Loans)
shall not exceed a percentage, to be determined by the
Agent and the Lenders, of the eligible accounts
receivable and eligible inventory (each of which terms
shall be defined in the Credit Documentation (as
defined below)) of the Borrower and its subsidiaries.
Amount of Facility: The Revolving Credit Facility shall be in an amount
equal to $18,000,000 of which $5,000,000 (the "LETTER
OF CREDIT SUB-FACILITY") will be available
exclusively for letters of credit issued for insurance
coverage purposes only; PROVIDED that there shall be
a $250,000 sublimit for letters of credit issued
for purposes other than insurance coverage. The portion
of the outstanding loans under the Existing Credit
Agreement to be designated as outstanding Revolving
Credit Loans shall equal $5,000,000.
Letter of Credit
Sub-Facility: The letters of credit heretofore issued by the Bank of
Montreal in the face amount of $3,018,000 shall be
replaced by letters of credit issued under the
Letter of Credit Sub-facility. All letters of credit
shall expire on or before the Termination Date.
Maturity: December 31, 1997 (the "TERMINATION DATE").
Mandatory Prepayments
and Commitment
Reductions: The following amounts shall be applied to prepay the
Term Loans and reduce the Revolving Credit Facility:
(a) 100% of the net proceeds of any incurrence of
indebtedness after the Closing Date not permitted under
the Credit Documentation by the Borrower or any of its
subsidiaries;
(b) 100% (or, provided no Event of Default shall have
occurred and is continuing, 75% after mandatory
prepayments of principal (including amounts paid
to the Collateral Agent as cash collateral in respect
of outstanding Letters of Credit) of the Credit
Facilities and the Senior Notes have been paid to the
Lenders and the
<PAGE> 3
3
Senior Noteholders in an aggregate amount equal to
$50,000,000 less the Holdback Amount (as defined in
clause (h) below)) of the net proceeds of the sale or
issuance of equity (other than the issuance of equity
to senior employees in amounts to be agreed on in
connection with management incentive programs)
after the Closing Date by the Borrower or
any of its subsidiaries shall be paid to the
Collateral Agent for application as provided in
paragraphs (e) and (f) below; PROVIDED that in the
case of the issuance or sale of equity of Cerion
Technologies, Inc. ("Cerion") on terms and conditions
satisfactory to the Lenders, only the net proceeds
from the sale of such equity by Nashua Precision
Technologies, Inc. ("NPT") (and not the net proceeds
from the issuance of equity by Cerion) shall be paid
to the Agent as a mandatory prepayment as provided
above;
(c) 100% (or, provided no Event of Default shall have
occurred and is continuing, 75% after mandatory
prepayments of principal (including amounts paid
to the Collateral Agent as cash collateral in respect
of outstanding Letters of Credit) of the Credit
Facilities and the Senior Notes have been paid to the
Lenders and the Senior Noteholders in an aggregate
amount equal to $50,000,000 less the Holdback Amount)
of the net proceeds in excess of $500,000 on an
individual basis and $1,000,000 on a cumulative basis
of any sale or other disposition by the Borrower or
any of its subsidiaries of any assets (except for
the sale of inventory and obsolete assets in the
ordinary course of business and for the sale of assets
in amounts to be agreed when the net proceeds are used
for reinvestment in similar assets) shall be paid to
the Collateral Agent for application as provided in
paragraphs (e) and (f) below;
(d) On February 15, 1997, the Borrower shall pay to
the Collateral Agent 100% (or, provided no Event of
Default shall have occurred and is continuing, 75%
after mandatory prepayments of principal (including
amounts paid to the Collateral Agent as cash collateral
in respect of outstanding Letters of Credit)
of the Credit Facilities and the Senior Notes have
been paid to the Lenders and the Senior Noteholders
in an aggregate amount equal to $50,000,000 less the
Holdback Amount) of Excess Cash Flow (to be defined in
the Credit Documentation referred
<PAGE> 4
4
to below) for application as provided in the paragraphs
(e) and (f) below;
(e) Except in the case of a Triggering Event (as
defined below), all proceeds of mandatory prepayments
described in paragraphs (a), (b), (c) and (d) above
shall be paid by the Collateral Agent (as hereafter
defined)
FIRST to the Agent for the PRO RATA account of the
Lenders until all Revolving Credit Loans
outstanding in excess of $5,000,000 (including,
unreimbursed draws under any Letters of Credit
issued under the Letter of Credit Sub-facility in
excess of $3,018,000) are paid in full (including,
in each case, interest thereon) (and with any
such mandatory prepayment there shall be a
simultaneous permanent reduction of the Revolving
Credit Facility to an amount equal to $5,000,000
(not including the Letter of Credit Sub-facility)
irrespective of the amount outstanding under the
Revolving Credit Facility),
SECOND, to the Agent for the PRO RATA account of
the Lenders until all remaining outstanding
Revolving Credit Loans are paid in full WITHOUT a
permanent reduction of the Revolving Credit
Facility for such remaining loans,
THIRD 78.88% of such remaining proceeds to the
Agent for the pro rata account of the Lenders and
21.12% to Prudential Insurance Company of
America ("PRU") for the PRO RATA account of the
holders (the "NOTEHOLDERS") of the Borrower's
9.17% Senior Notes (the "SENIOR NOTES") until all
amounts outstanding under the Credit Facilities
and the Senior Notes (other than Yield Maintenance
Premium) are paid in full (and the Revolving
Credit Commitment is terminated) and all letters
of credit issued under the Letter of Credit
Sub-facility are fully cash collateralized, and
FOURTH, to the Agent for the PRO RATA account of
the Lenders until all Hedge Obligations (as
hereafter defined) are paid in full, and
<PAGE> 5
5
FIFTH, to Pru for the PRO RATA account of the
Noteholders until the Deferred Yield Maintenance
Obligations (as defined below) (including
interest thereon) are paid in full.
(f) All amounts paid to the Agent as per clause
"THIRD" in paragraph (e) above shall be applied,
FIRST, to the prepayment of the Term Loans,
SECOND, to the cash collateralization of
outstanding Letters of Credit and
THIRD, to the payment of Revolving Credit Loans
and the permanent reduction of the Revolving
Credit Facility in the amount of such payment.
Each such prepayment of the Term Loans shall be
applied to the scheduled installments
thereof in inverse order of maturity, and any
such prepayment of the Term Loans may not be
reborrowed.
(g) In addition, the Borrower shall from time to time
immediately prepay outstanding Revolving Credit Loans
to the extent they exceed the Borrowing Base then in
effect.
(h) At any time before the Revolving Credit Facility
has been permanently reduced to an amount less than or
equal to $10,000,000, with respect to any mandatory
prepayment relating to either any asset sale or equity
issuance described in clauses (b) or (c) above with
net cash proceeds in excess of $15,000,000, the
Borrower shall be entitled to retain an amount (the
"HOLDBACK AMOUNT") equal to the excess, if any, of (i)
$3,000,000 OVER (ii) the amount of Revolving Credit
Loans outstanding on the date of such mandatory
prepayment in excess of $5,000,000.
Optional Prepayments: Optional prepayments and commitment reductions
permitted on one Business Day's notice.
Collateral: The obligations of the Borrower in respect of the
Credit Facilities shall be secured initially by a
perfected first priority security interest in all
receivables and inventory
<PAGE> 6
6
of the Borrower and all of the assets of the Borrower's
domestic subsidiaries (all stock of the foreign
subsidiaries shall be pledged to the Agent, except in
the case where the Lenders determine that only 65% be
pledged due to adverse tax consequences). At its next
shareholders' meeting the Borrower will use its best
efforts to obtain all necessary consents to pledge all
of its assets to the Collateral Agent and if it obtains
such consents will pledge such remaining assets to the
Collateral Agent within 10 Business Days after being
so requested by the Majority Lenders. All collateral
will be shared with the Senior Noteholders and the
Lenders (subject to the priorities set forth herein)
(and in addition to securing the Credit Facilities
and the Senior Notes, will secure certain obligations
("HEDGE OBLIGATIONS") under existing and future foreign
exchange transactions entered into with certain of the
Lenders described in the section below entitled
"Foreign Exchange Agreements" and subject to the
limits therein described). Chemical Bank shall
act as collateral agent for the Lenders and the Senior
Noteholders (in such capacity, the "COLLATERAL AGENT").
The Security Agreements shall create two
separate and distinct liens. A prior lien will secure
principal of loans (including unreimbursed draws of
Letters of Credit in excess of $3,018,000)
outstanding under the Credit Facilities in excess of
$56,018,000 (including interest thereon) and a second
lien shall secure all remaining secured obligations.
II. Certain Conditions
------------------
Initial Conditions: The availability of the Credit Facilities shall be
conditioned upon satisfaction of, among other things,
the following conditions precedent (the date upon which
all such conditions precedent shall be satisfied, the
"CLOSING DATE"):
(a) The Borrower and its subsidiaries shall have
executed and delivered satisfactory definitive
financing and security documentation with respect to
the Credit Facilities (the "CREDIT DOCUMENTATION").
(b) The Lenders shall have received evidence that the
Borrower has obtained the results of a recent lien
search in each of the jurisdictions and offices where
the collateral is located or recorded, and such search
shall
<PAGE> 7
7
reveal no liens on any of the collateral except
for liens permitted by the Credit Documentation.
(c) The Lenders shall have received any necessary
consents from the Senior Noteholders.
(d) The Lenders and the Senior Noteholders shall have
executed an intercreditor agreement satisfactory to
the Lenders.
(e) The Lenders shall have received such legal opinions
(including opinions (i) from counsel to the Borrower
and its subsidiaries and (ii) from such special and
local counsel as may be required by the Agent),
documents and other instruments as are customary for
transactions of this type or as they may reasonably
request.
(f) Any amendment to the Note Purchase Agreement shall
be in form and substance satisfactory to the Agent and
the Lenders.
(g) No material adverse change to the business,
operations or prospects of the Borrower or any of its
subsidiaries shall have occurred.
(h) The Borrower shall have received all necessary
approvals from its Board of Directors.
Affirmative Covenants: The Borrower will provide the Lenders with (i) copies
of the unaudited monthly management report within a
number of days to be determined after the end of each
calendar month, (ii) such borrowing base certification
as may be required by the Lenders, and (iii) such other
financial information as the Lenders may reasonably
request, including a revised business plan for fiscal
year 1996.
The Borrower and its subsidiaries shall maintain their
lock-boxes and accounts with their current banks but
shall enter into such agreements on the Closing
Date with the Collateral Agent and such banks (in form
and substance satisfactory to the Collateral Agent) to
ensure that the Collateral Agent has a perfected
security interest in the receipts and cash in such
lock-boxes and accounts.
<PAGE> 8
8
The Lenders shall have the right to continue the
engagement of an independent financial consultant
acceptable to the Lenders, at the Borrower's expense,
to assist in the analysis regarding the performance
and operations of the Borrower.
Financial Covenants: (a) EBITDA (to be defined in the Credit
Documentation), measured on a cumulative basis, for
any test period set forth below, will not, as at
the last day of such test period, be less than the
number set forth below opposite such test period:
<TABLE>
<CAPTION>
Quarter Amount
------- ------
<S> <C>
January 1, 1996 - March 31, 1996 $ 1,640,000
January 1, 1996 - June 30, 1996 $ 7,800,000
January 1, 1996 - September 30, 1996 $19,150,000
January 1, 1996 - December 31, 1996 $27,300,000
</TABLE>
<TABLE>
(b) The ratio of EBITDA to Fixed Charges (each to be
defined in the Credit Documentation), measured on a
cumulative basis for any test period set forth
below, will not, as at the last day of such test
period, be less than the ratio
set forth below opposite such test period:
<CAPTION>
Quarter Ratio
------- -----
<S> <C>
January 1, 1996 - March 31, 1996 .67:1
January 1, 1996 - June 30, 1996 1.59:1
January 1, 1996 - September 30, 1996 2.60:1
January 1, 1996 - December 31, 1996 2.78:1
</TABLE>
<TABLE>
(c) Consolidated Tangible Net Worth (to be
defined in the Credit Documentation)
will not at any time during any quarter set forth
below be less than the number opposite such
quarter:
<CAPTION>
Quarter Amount
------- ------
<S> <C>
Fourth Quarter 1995 $39,100,000
First Quarter 1996 $36,500,000
Second Quarter 1996 $37,100,000
Third Quarter 1996 $40,800,000
Fourth Quarter 1996 and thereafter $42,700,000
</TABLE>
<PAGE> 9
9
<TABLE>
(d) Capital Expenditures of the Borrower and its
subsidiaries will not for each fiscal year set
forth below exceed the amount set forth opposite
such fiscal year:
Fiscal Year
<S> <C>
1995 $17,200,000
1996 $17,000,000
1997 $17,000,000
</TABLE>
Negative Covenants: Limitations customary to this kind of financing,
including, without limitation, on: indebtedness
(including preferred stock); liens; guarantee
obligations; mergers, consolidations; sales of assets;
leases; dividends and other payments in respect of
capital stock; investments, loans and advances;
modifications of debt instruments; transactions with
affiliates; sale and leasebacks; negative pledge
clauses; changes in lines of business.
Interest Rate: The Applicable Margin will be .50%. All Loans shall be
Reference Rate Loans (as defined in the Existing Credit
Agreement).
Amendment Fee: $247,500 payable to the Agent, for the ratable benefit
of the Lenders, on the Closing Date.
Commitment Fee: .50% per annum on the unused portion.
Letter of Credit Fees: 2% per annum on amount available to be drawn payable
quarterly in advance (.25% for the account of the
Issuing Bank and the remaining 1.75% for the PRO RATA
account of the Lenders).
Contingent Fees and
Covenants: If the Borrower has not paid to the Lenders and the
Senior Noteholders mandatory prepayments of principal
(including amounts paid to the Collateral Agent as cash
collateral in respect of outstanding Letters of Credit)
of the Credit Facilities and the Senior Notes in an
aggregate amount equal to $20,000,000 less the
Holdback Amount on or prior to June 30, 1996, (i) the
Borrower shall pay to the Agent on July 1, 1996, for
the pro rata account of the Lenders, a facility fee
equal to 1% of the average daily principal amount
outstanding under the Credit Facilities (including the
average daily amount available to
<PAGE> 10
10
be drawn under all outstanding Letters of Credit)
during the period commencing on the Closing Date
and ending on June 30, 1996.
If the Borrower has not paid to the Lenders and the
Senior Noteholders mandatory prepayments of principal
(including amounts paid to the Collateral Agent as cash
collateral in respect of outstanding Letters of Credit)
of the Credit Facilities and the Senior Notes in an
aggregate amount equal to $50,000,000 less the
Holdback Amount on or before September 30, 1996,
then on October 1, 1996 the Borrower shall pay to the
Agent, for the pro rata account of the Lenders, a
facility fee equal to 1% of the average daily principal
amount outstanding under the Credit Facilities
(including the average daily amount available to be
drawn under all outstanding Letters of Credit) during
the period commencing on the Closing Date and ending
on September 30, 1996.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable out-of-pocket
expenses of the Agent associated with the preparation,
execution, delivery and administration of the Credit
Documentation and any amendment or waiver with respect
thereto (including, without limitation, expenses
relating to collateral examination and monitoring,
environmental audits, real estate or other asset
appraisals, consulting fees, filing fees and the
reasonable fees and disbursements and other
charges of counsel) and (b) all out-of-pocket expenses
of the Agent and the Lenders in connection with the
enforcement of the Credit Documentation (including the
fees and disbursements and other charges of counsel).
The Borrower shall indemnify, pay and hold harmless the
Agent and the Lenders (and their respective directors,
officers, employees and agents) against any loss,
liability, cost or expense incurred in respect of the
financing contemplated hereby or the use or the
proposed use of proceeds thereof (except to the extent
resulting from the gross negligence or willful
misconduct of the indemnified party).
Intercreditor Agreement: The Intercreditor Agreement will provide that upon a
bankruptcy event relating to the Borrower (a
"BANKRUPTCY EVENT"), an acceleration of all amounts
outstanding under
<PAGE> 11
11
the Credit Facilities or the Senior Notes (an
"ACCELERATION EVENT") or a termination of the
Revolving Credit Commitment (or a refusal by the
Lenders to lend thereunder for a six-month period) (a
"COMMITMENT TERMINATION EVENT"); a Bankruptcy Event,
an Acceleration Event and a Commitment Termination
Event, each "TRIGGERING EVENT"), proceeds from
mandatory prepayments or from collateral realization
will be paid
FIRST to the Agent for the PRO RATA account of the
Lenders until all Revolving Credit Loans in excess
of $5,000,000 (including, unreimbursed draws under
any Letters of Credit issued under the Letter of
Credit Sub-facility in excess of $3,018,000
(including, in each case, interest thereon)) are
paid in full and all outstanding Letters of Credit
under the Letter of Credit Sub-facility in excess
of $3,018,000 are fully cash collateralized,
SECOND if the amount outstanding under the
Revolving Credit Facility is less than $5,000,000
on the date of such Triggering Event, to Pru for
the PRO RATA account of the Noteholders in an
amount equal to the product of (x) $1,056,000
times (y) an amount equal to the difference
between (i) one MINUS (ii) the percentage derived
by dividing the amount outstanding under such
Revolving Credit Facility on such date by
$5,000,000,
THIRD PRO RATA to the Lenders and the Senior
Noteholders based on the remaining secured
obligations outstanding on such date (including
Hedge Obligations, contingent obligations in
respect of outstanding Letters of Credit that are
not cash collateralized and Yield Maintenance
Obligations accruing on the date of such
Triggering Event but excluding the Deferred Yield
Maintenance Obligations (as defined below)) until
all such obligations are paid in full and
FOURTH to the Noteholders PRO RATA until all
Deferred Yield Maintenance Obligations are paid
in full.
The Intercreditor Agreement shall further provide that
all Yield Maintenance Obligations accruing under the
Note Purchase Agreement prior to a Bankruptcy Event
relating
<PAGE> 12
12
to the Borrower or an Acceleration Event relating to
the Senior Notes (the "DEFERRED YIELD MAINTENANCE
OBLIGATIONS") shall be deferred (including any interest
accruing on such Deferred Yield Maintenance
Obligations) and shall not be payable until all amounts
outstanding under the Credit Facilities are paid in
full. In addition, "Required Secured Parties" under the
Intercreditor Agreement shall be defined as defined in
the 2/29/96 draft of the Intercreditor Agreement. The
consent of a majority in principal amount of Senior
Notes shall be required in order for the Lenders to
make advances under the Credit Facilities in excess of
$66,000,000; and once permanent reductions to the
Credit Facilities are made, such amounts cannot be
readvanced without the consent of a majority in
principal amount of the Senior Notes. To the extent not
already provided for in the 2/29/96 draft of the
Intercreditor Agreement, the Intercreditor Agreement
shall contain provisions that ensure that the Required
Secured Parties may not (i) impair the rights of the
Senior Noteholders under the Note Purchase Agreement,
and (ii) materially impair the rights of the Senior
Noteholders in the collateral subject to the lien of
the Collateral Agent, in each case without the prior
consent of a majority in principal amount of the
Senior Notes; PROVIDED however that nothing contained
in this sentence shall be construed as requiring any
provisions in the Intercreditor Agreement that could
limit the rights of the Required Secured Parties to
direct the exercise or non-exercise of rights under
the Intercreditor Agreement (including foreclosure
on collateral and the filing of a petition in
bankruptcy against the Borrower or any of its
subsidiaries) or limit any rights of the Required
Secured Parties to direct actions with respect to
preserving or protecting the collateral.
Assignment: The consent of the Borrower shall not be required for
any assignments after the occurrence of an Event of
Default.
Foreign Exchange Other than the Hedge Agreements existing on the date
Agreements: hereof, the Borrower shall not enter into any other
Hedge Agreements other than spot and forward foreign
exchange contracts (not to exceed 6 months in duration)
with any Lender in the aggregate notional amount not to
exceed $4,000,000 in the following currencies: Belgian
Francs, Canadian Dollars, British Pounds and Dutch
Gilders.
<PAGE> 13
13
Miscellaneous: If the Note Purchase Agreement (as defined in the
Existing Credit Agreement) is hereafter amended such
that any material terms thereof (including, without
limitation, pricing, covenants, amortization, events of
default and mandatory prepayments) are more favorable
to the Noteholders than the terms hereof are to the
Lenders (as determined by the Agent and the Lenders in
their sole discretion), the Borrower shall enter into
an amendment of the Amended and Restated Credit
Agreement in order to include such favorable terms
therein if the Agent and the Majority Lenders so
desire.
By January 1, 1997 (the "AMENDMENT DATE"), the Borrower
shall negotiate in good faith with the Agent and the
Lenders in order to enter into an amendment to the
Amended and Restated Credit Agreement for the purpose
of continuing the financial covenants described above
through the Termination Date. If after 30 days after
the Amendment Date, the Borrower, the Lenders and the
Agent have not agreed on appropriate levels for such
financial covenants through the Termination Date, the
Agent in its reasonable judgment shall set such levels
and the Borrower, the Agent and the Lenders shall
execute an amendment to the Amended and Restated Credit
Agreement on the thirty-first day after the Amendment
Date for the purposes of including the levels with
respect to such financial covenants set by the Agent
as part of the Amended and Restated Credit Agreement
for the period through the Termination Date. During the
10 Business Day period after any material asset sale,
the Borrower shall negotiate in good faith with the
Agent and the Lenders in order to enter into an
amendment to the Amended and Restated Credit Agreement
for the purpose of resetting the financial covenant
levels described above. If the Borrower, the Agent and
the Lenders have not agreed on appropriate levels for
such financial covenants by the end of such 10 Business
Day period, the Agent in its reasonable judgment shall
set such levels and the Borrower, the Agent and the
Lenders shall execute an amendment to the Amended and
Restated Credit Agreement on the first Business Day
after such 10 Business Day period for the purposes of
including the new levels set by the Agent as part of
the Amended and Restated Credit Agreement.
<PAGE> 14
[COPY NOT SUBMITTED BY CLIENT]
The closing shall occur on April 3, 1996 at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York 10017.
This Term Sheet may be executed in any number of separate counterparts and shall
be effective upon receipt by the Agent of such counterparts executed by the
parties hereto (including facsimile signatures).
IN WITNESS WHEREOF, 9the parties hereto have caused this Term Sheet to
be duly executed by their proper and duly authorized officers as of the day and
year first above written.
NASHUA CORPORATION
/s/ Daniel M. Junius
By: ____________________________
Daniel M. Junius
Vice President -- Finance,
Chief Financial Officer
and Treasurer
CHEMICAL BANK, as Agent and as a Lender
/s/ John J. Huber III
By: ____________________________
John J. Huber III
Managing Director
THE FIRST NATIONAL BANK OF BOSTON
/s/ Linda A. Sternfelt
By: ____________________________
Linda A. Sternfelt
Vice President
BANK OF MONTREAL
/s/ Thomas E. McGraw
By: ____________________________
Thomas E. McGraw
Manager
<PAGE> 1
EXHIBIT 10.06
EMPLOYMENT AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and GERALD G. GARBACZ (the "Executive"), dated as of the 18th day of
December, 1995.
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
<PAGE> 2
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promulgated under the Exchange Act) (a "Person") of 20% or more of either (i)
the then 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 the case may be, immediately prior to such sale or disposition.
<PAGE> 3
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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 "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
<PAGE> 4
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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 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
<PAGE> 5
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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 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;
<PAGE> 6
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(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, 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
<PAGE> 7
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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 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
<PAGE> 8
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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, 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.
<PAGE> 9
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(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:
-------------------
Gerald G. Garbacz
301 Sturges
Wilton, CT 06879
<PAGE> 11
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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/Gerald G. Garbacz
----------------------------------
GERALD G. GARBACZ
NASHUA CORPORATION
By /s/Bruce T. Wright
-------------------------------
Bruce T. Wright
Vice President, Human Resources
<PAGE> 1
EXHIBIT 10.07
EMPLOYMENT AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and DANIEL M. JUNIUS (the "Executive"), dated as of the 28th day of
April, l989.
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
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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 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
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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 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.
<PAGE> 4
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(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 "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
<PAGE> 5
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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.
(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
<PAGE> 6
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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 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.
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(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, 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
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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 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
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(ii) for the remainder of the Employment Period, or such longer period as
any plan, 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
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4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such 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,
<PAGE> 11
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accepting legal representation with respect to such claim by an
attorney reasonably 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:
-------------------
Daniel M. Junius
12 Crestwood Court
Amherst, NH 03031
<PAGE> 13
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If to the Company:
-----------------
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03060
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/ Daniel M. Junius
-------------------------------------
Daniel M. Junius
NASHUA CORPORATION
By /s/Charles E. Clough
----------------------------------
Charles E. Clough
President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.08
EMPLOYMENT AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and ROBIN J. T. CLABBURN (the "Executive"), dated as of the 3rd day
of November, 1995.
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
<PAGE> 2
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promulgated under the Exchange Act) (a "Person") of 20% or more of either (i)
the then 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 the case may be, immediately prior to such sale or disposition.
<PAGE> 3
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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 or an affiliated company, for the period commencing on the Effective
Date and ending in accordance with the 12 month notice described in the letter
agreement with the Executive dated August 24, 1995 (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 "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
<PAGE> 4
- 4 -
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) 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.
(iv) 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.
(v) 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
<PAGE> 5
- 5 -
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 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 or the
letter agreement with the Executive dated August 24, 1995 to the contrary
notwithstanding, the Executive may terminate his employment for any reason
during the 30-day period immediately following the 30th day after the Effective
Date on notice and such termination by the Executive 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
<PAGE> 6
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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, that (i) if the Executive's employment is terminated by
the Company or an affiliated company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company or affiliated 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.
(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.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be
<PAGE> 7
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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 or an affiliated 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) the sum of (i) Annual Base Salary and (ii) the
Highest Annual Bonus (y) multiplied by either (i) a fraction
having the numerator being the number of months remaining in the
two year period referred to in the August 24, 1995 letter
agreement with Executive and the denominator being twelve, or
(ii) one, whichever results in the larger amount.
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
<PAGE> 8
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provided for in Section 7872(f)(2) of the Internal Revenue Code of l986, as
amended (the "Code").
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:
<PAGE> 9
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If to the Executive: Robin J. T. Clabburn
------------------- Buckthorn House
Sevenhampton
Wilts, U.K. SN6 7QA
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,
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.
<TABLE>
<S> <C>
NASHUA CORPORATION
/s/ Robin J. T. Clabburn By: /s/ Bruce T. Wright
- ------------------------------ -----------------------------------
Robin J. T. Clabburn Bruce T. Wright
Vice President, Human Resources
</TABLE>
<PAGE> 1
EXHIBIT 10.09
-------------
EMPLOYMENT AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and BRUCE T. WRIGHT (the "Executive"), dated as of the 24th day of
February, l995.
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
<PAGE> 2
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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 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
<PAGE> 3
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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 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.
<PAGE> 4
- 4 -
(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 "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
<PAGE> 5
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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.
(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
<PAGE> 6
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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 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.
<PAGE> 7
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(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, 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
<PAGE> 8
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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 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
<PAGE> 9
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(ii) for the remainder of the Employment Period, or such longer period as
any plan, 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
<PAGE> 10
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4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such 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,
<PAGE> 11
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accepting legal representation with respect to such claim by an
attorney reasonably 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:
-------------------
Bruce T. Wright
110 Pokonoket Avenue
Sudbury, MA 01776
<PAGE> 13
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If to the Company:
-----------------
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03060
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/Bruce T. Wright
------------------------------------
Bruce T. Wright
NASHUA CORPORATION
By /s/William E. Mitchell
--------------------------------
William E. Mitchell
President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.10
-------------
EMPLOYMENT AGREEMENT
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and CHARLES E. TURNBULL (the "Executive"), dated as of the 22nd day
of September, l995.
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
<PAGE> 2
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(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 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
<PAGE> 3
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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 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.
<PAGE> 4
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(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 "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
<PAGE> 5
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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.
(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
<PAGE> 6
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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 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.
<PAGE> 7
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(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, 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
<PAGE> 8
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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 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
<PAGE> 9
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(ii) for the remainder of the Employment Period, or such longer period as
any plan, 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
<PAGE> 10
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4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such 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,
<PAGE> 11
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accepting legal representation with respect to such claim by an
attorney reasonably 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:
-------------------
Charles E. Turnbull
44 Franklin Street
Nashua, NH 03060
<PAGE> 13
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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, 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/Charles E. Turnbull
----------------------------------
Charles E. Turnbull
NASHUA CORPORATION
By /s/Francis J. Lunger
--------------------------------
Francis J. Lunger
President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.11
-------------
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and John R. Mapley (the "Executive"), dated as of the 5th day of
July, 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
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
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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.
(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, 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
<PAGE> 7
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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 12 months;
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 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
<PAGE> 8
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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 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, 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
<PAGE> 9
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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, 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. 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
<PAGE> 10
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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:
-------------------
John R. Mapley
16 Jeremy Place
Nashua, NH 03060
If to the Company:
-----------------
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03060
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.
<PAGE> 11
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(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/John R. Mapley
---------------------------
John R. Mapley
NASHUA CORPORATION
By/s/Charles E. Clough
-------------------------
Charles E. Clough
President
<PAGE> 1
EXHIBIT 10.12
INCENTIVE AGREEMENT
This INCENTIVE AGREEMENT (this "AGREEMENT"), dated as of
March 21, 1996, is made by and between Nashua Corporation, a Delaware
corporation, with its principal place of business located in Nashua,
New Hampshire ("NASHUA") and David A. Peterson, an individual
residing at 45 Glenn Drive, Rt #1, White Heath, IL 61884 (the
"EXECUTIVE").
WHEREAS, the Executive is employed on the date hereof as Chief
Executive Officer and President of Cerion Technologies Inc., a
Delaware corporation with its principal place of business located in
Champaign, Illinois ("CERION");
WHEREAS, Cerion was established on December 31, 1995 as a
wholly-owned subsidiary of Nashua, to assume the operations of
Nashua's Precision Technologies division;
WHEREAS, Nashua and Cerion intend to sell shares of Common Stock
of Cerion in an underwritten public offering (the "OFFERING");
WHEREAS, in the event that Nashua and Cerion are unable or
unwilling to complete the Offering for any reason, Nashua may pursue
the private sale of Cerion as a going concern to a third party;
WHEREAS, Nashua believes that the Executive's participation in
the management of Cerion is important to the success of any such
proposed private sale, and is accordingly prepared to offer the
Executive certain incentives to encourage the Executive to retain his
current position with Cerion until the time of any such private sale;
and
WHEREAS, in consideration of the promises and covenants set forth
below Nashua and the Executive desire to enter into an Incentive
Agreement, on the terms and subject to the conditions set forth below;
NOW, THEREFORE, it is hereby agreed as follows:
Section 1. DEFINITIONS. For the purposes of this Agreement:
(a) the term "AFFILIATE" shall mean, with respect to a
specified Person, any Person that directly or indirectly controls, is
controlled by or is under common control with, the specified Person;
(b) the term "DISK BUSINESS" shall mean the manufacture,
processing or sale of substrates for disks used in the hard disk
drives of computers, network servers or storage devices and substrates
for organic photoconductor drums;
<PAGE> 2
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(c) the term "PERSON" shall mean any individual,
corporation, association, partnership (general or limited), joint
venture, trust, estate, limited liability company, or other legal
entity or organization, and any government or subdivision thereof
or any governmental or regulatory agency;
(d) the term "RESTRICTED PERIOD" shall mean the period from
the date hereof until the first to occur of (i) the date two years
after the termination or expiration of the Executive's employment with
Cerion, and (ii) the date of completion of an Offering; and
(e) the term "SALE" shall mean, with respect to Cerion, the
sale, disposal or other transfer of all or substantially all of the
assets or capital stock of Cerion to, or the merger of Cerion with,
any Person which at the time of such sale, disposal, other transfer or
merger is not an Affiliate of Nashua. In no event shall the term
"Sale" include the sale of Cerion Common Stock in any Offering.
Section 2. INCENTIVE PAYMENT. If the Executive shall
continue to be employed by Cerion in the capacity he has as of the
date of this Agreement, or in any capacity with similar duties,
responsibilities and compensation in the management of Cerion, and
such employment continues through and including the date of
completion of any Sale of Cerion, then Nashua agrees to pay to the
Executive an incentive payment in an aggregate amount calculated by
multiplying the Executive's base salary for 1996 ($160,000) by 3
(the "Incentive Payment"). The Incentive Payment shall be payable 50%
immediately following the date of completion of any Sale of Cerion,
with the balance due and payable twelve months after the date of
completion of such a Sale. In any case of a conditional Sale or a
Sale for which any portion of the consideration or purchase price is
deferred or is to be delivered at a later date than the "closing" of
such Sale, then the actual date of completion of such a Sale of
Cerion shall, for the purposes of this Agreement, be as reasonably
determined by Nashua under the circumstances, taking into
consideration the time at which substantially all of the
bargained-for consideration in such Sale shall have been received
by Nashua, and Nashua may, in such circumstances, elect to make the
foregoing Incentive Payment in such installments as Nashua may deem
appropriate.
Section 3. EXECUTIVE'S EMPLOYMENT PROTECTION. In the event
that, within twelve (12) months after any Sale of Cerion, the
employment of the Executive with Cerion (or its successor) is
involuntarily terminated by the employer (other than for cause),
and Nashua shall not, within a reasonable period of time thereafter,
have offered employment to the Executive in a position with Nashua or
any Affiliate of Nashua with similar duties, responsibilities and
compensation to that held by the Executive immediately prior to such
termination, then Nashua agrees promptly to pay to the Executive an
additional payment in an amount equal to the Executive's base salary
for 1996; PROVIDED, however, that Nashua shall make no payment,
which, when aggregated with other payments hereunder, would constitute
<PAGE> 3
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an "excess parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986 or any successor provision.
Section 4. TERMINATION OF OBLIGATIONS. Upon the first to
occur of (i) the completion of an Offering and (ii) December 31, 1996,
all obligations of Nashua to pay any amount to the Executive under
this Agreement shall immediately terminate and be of no further
effect. All obligations of the Executive pursuant to section 5 below
shall terminate upon the completion of an Offering, and this Agreement
shall thereupon be canceled in its entirety without any requirement
of notice to or consent of any party.
Section 5. NON-COMPETITION, NON-SOLICITATION, INVENTIONS AND
CONFIDENTIALITY.
Section 5.1. NON-COMPETITION. The parties hereto recognize
and agree that the services of the Executive are special and unique
and that he has special fiduciary duties to Cerion as its Chief
Executive Officer and President, and that for these reasons a
covenant on the part of the Executive not to compete during his
employment by Cerion, and for a reasonable period after the
termination or expiration of such employment, is essential to protect
the value of Cerion to Nashua. Accordingly, and in consideration for
$1.00 and Nashua's covenants and agreements set forth herein and other
good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Executive agrees that for the Restricted
Period, neither the Executive nor any person or entity controlled,
directly or indirectly, by the Executive, whether individually or as
an officer, director, employee, consultant, partner or owner of more
than one percent of the equity interest in any corporation or other
entity, shall, directly or indirectly (i) in the United States,
Canada, United Kingdom, Western Europe, Eastern Europe, or the Far
East, engage in, or render any services in connection with, any
business that is competitive, directly or indirectly, with the
businesses (including without limitation the Disk Business) carried on
by Cerion at or prior to the termination or expiration of the
Executive's employment by Cerion, or (ii) interfere with the business
relationships (whether formed heretofore or hereafter) between Cerion
and any of its customers and suppliers.
Section 5.2 NON-SOLICITATION. During the Restricted Period,
neither the Executive nor any person or entity controlled, directly or
indirectly, by the Executive shall, directly or indirectly, hire,
retain (including as a consultant), solicit or encourage to leave the
employment of Cerion, any employee of Cerion, or hire or retain any
former employee of Cerion (including, for the purposes of this section
5.2, any former employee of the Precision Technologies division of
Nashua) who has left such employment within one year prior to such
hiring or retention.
Section 5.3 INVENTIONS; ASSIGNMENT. All rights to
discoveries, inventions, improvements and innovations (including all
data and records pertaining thereto) which relate to the business of
Cerion whether or not patentable, copyrightable or reduced to writing
which
<PAGE> 4
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the Executive may discover, invent or originate during the Restricted
Period either alone or with others and whether or not during working
hours or by the use of the facilities of Cerion ("INVENTIONS"), shall
be the exclusive property of Cerion. The Executive shall promptly
disclose all Inventions to Cerion. Whether during the term of this
Agreement or thereafter, the Executive shall execute at the request of
Cerion any assignments or other documents Cerion may deem necessary to
protect or perfect its rights in any Inventions, and shall assist
Cerion, at Cerion's expense, in obtaining, defending and enforcing
Cerion's rights therein. The Executive hereby appoints Cerion as his
attorney-in-fact to execute on his behalf any assignments or other
documents deemed necessary by Cerion to protect or perfect its rights
to any Inventions.
Section 5.4 CONFIDENTIAL INFORMATION. (a) During and after
the period of his employment by Cerion, the Executive and any person
or entity controlled directly or indirectly by the Executive shall
maintain in confidence and shall not directly or indirectly,
disclose, sell, use, publish, make copies of, or communicate to any
person, firm, or corporation any confidential information, trade
secrets or proprietary data of Cerion of which he leams or learned
or to which he has or had access during the course of the Executive's
employment by Cerion (which, for the purpose of this section 5.4,
shall be deemed to include the Precision Technology division of
Nashua prior to the establishment of Cerion).
(b) For purposes of this section 5.4, "confidential
information, trade secrets or proprietary data" means any information
concerning any matters affecting or relating to the business of
Cerion, including but without limiting the generality of the
foregoing, any inventions, improvements, and enhancements (whether
patentable or not); patents or patent applications; any protectable
technology, know-how and copyrightable material; trade secrets,
including any formulas, patterns, devices, machines, processes,
compilations of information, or expenditures of time or money; product
designs and development; research reports, market studies and plans;
customer lists; the prices Cerion obtains or has obtained from the
sale of, or at which it sells or has sold, its products or services;
estimates, bids, and projections; or any other information concerning
the business of Cerion, its manner of operation, its plans, policies,
processes, strategies, or other data, and including any information as
to the existence or terms and provisions of this Agreement, without
regard to whether any or all of the foregoing are or would be deemed
confidential, material, or important, the parties hereto stipulating
that, as between them, the same are confidential, material and
important, and gravely affect the effective and successful conduct of
Cerion's business and Cerion's goodwill, and that any breach of the
terms of this section 5.4 shall be a material breach of this Agreement
and will result in immediate and irreparable harm to Cerion; provided
that nothing shall be considered "confidential information, trade
secrets or proprietary data" which is or becomes known to the public
by acts of others (other than other signatories to this type of
agreement with Cerion) or through the normal or other authorized
course of operation of Cerion.
(c) All memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by the Executive
or any person or entity controlled, directly or indirectly, by the
Executive or made available to the Executive or any person or entity
<PAGE> 5
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controlled, directly or indirectly, by the Executive concerning the
business of Cerion or any of its Affiliates shall be Cerion's property
and shall be delivered to Cerion promptly upon the termination of the
Executive's employment by Cerion.
Section 5.5. ASSIGNMENT. The benefits of the Executive's
agreements and covenants in this section 5 may be assigned without
notice to or consent of the Executive to any acquiror of Cerion or all
or substantially all of the assets in a Sale, and the Executive hereby
unconditionally and irrevocably consents to any such assignment and
furthermore agrees to be bound by the provisions of this section 5
notwithstanding any Sale of Cerion, or any assignment of the benefits
of this section 5 in connection with any such sale.
Section 6. GENERAL.
(a) NOTICES. All notices and other communications hereunder
shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if mailed by
certified or registered first-class mail, postage prepaid and return
receipt requested, sent by facsimile or delivered by established
overnight courier service to the relevant address set forth below, or
to such other address as the recipient of such notice or communication
shall have specified to the other party hereto in accordance with this
section 6(a):
If to Nashua, to:
Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03061-2002
Attention: President
Fax: 603-880-2747
If to the Executive, to:
David A. Peterson
45 Glenn Drive, Rt #1
White Heath, IL61884
Any such notice will be deemed to have been duly given or made
and to have become effective (i) if delivered by hand or facsimile to
the party to which it is directed, at the time of the receipt thereof
or the sending of such facsimile, (ii) if sent by overnight courier,
on the business day next following dispatch thereof, and (iii) if sent
by certified or registered mail, on the fifth business day following
the mailing thereof.
(b) EQUITABLE REMEDIES. it is recognized by the parties
hereto that damages for breaches of covenants of the nature contained
in this Agreement are difficult if not
<PAGE> 6
-6-
impossible to prove precisely; therefore, it is agreed that of this
Agreement shall be enforceable by injunction. If any of the
restrictions contained in this Agreement hereof shall be deemed to be
unenforceable by reason of the extent, duration or geographical scope
or other provisions hereof, then the parties hereto contemplate that
the court or other body having jurisdiction over the matter shall
reduce such extent, duration, geographical scope or other provision
hereof and enforce the affected provisions of this Agreement in
reduced form for all purposes in the manner contemplated hereby, and
the parties hereto agree that such provisions of this Agreement, as so
modified, shall be valid and binding as though any unenforceable
provision had not been included therein.
(c) SEVERABILITY. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired.
(d) WAIVERS. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such
right, power or privilege, nor shall any single or partial exercise of
any such right, power or privilege preclude any further exercise
thereof or the exercise of any other right, power or privilege.
(e) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(f) ASSIGNS. The rights and obligations of the parties
hereto shall inure to the benefit of, and shall be binding upon, the
successors and assigns of each of them; provided, however, that the
Executive acknowledges that the services to be rendered in connection
with this Agreement by him are unique and personal. Accordingly, the
Executive shall not, during the continuance of this Agreement, assign
this Agreement without the prior written consent of Nashua.
(g) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof, and shall not be
amended except by a written instrument hereafter signed by each of the
parties hereto.
(h) SURVIVAL. The termination of this Agreement shall not
affect the obligations of any party hereunder which by their terms are
to be continued for any period after the termination of this Agreement.
(i) GOVERNING LAW. This Agreement and the performance hereof
shall be construed and governed in accordance with the laws of the
State of New Hampshire.
<PAGE> 7
-7-
(j) JURISDICTION. The parties hereby agree that any action
for the enforcement or interpretation of any provision of this
Agreement will be brought in the courts of the State of New Hampshire
or any Federal court sitting therein, and each party hereby consents
to the exclusive jurisdiction of such court and waives any objections
that it may now or hereafter have to the venue of any such action or
any such court or that such action is brought in an inconvenient forum.
Each of the parties hereby consents to the service of process being
made upon such party at its address specified in section 6(a) above.
(k) WAIVER OF JURY. TRIAL, ETC. The Executive hereby waives
his right to a jury trial with respect to any action or claim arising
out of any dispute in connection with this Agreement, any rights or
obligations hereunder or thereunder or the performance of such rights
and obligations. Except as prohibited by law, the Executive hereby
waives any right he may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive
or consequential damages or any damages other than, or in addition to,
actual damages. The Executive (i) certifies that no representative,
agent or attorney of Nashua has represented, expressly or otherwise,
that Nashua would not, in the event of litigation, seek to enforce the
foregoing waivers, and (ii) acknowledges that the Nashua has been
induced to enter into this Agreement, and to provide the benefits to
the Executive provided for in this Agreement, by, among other things,
the waivers and certifications contained in this section 6(k).
IN WITNESS WHEREOF, and intending to be legally bound hereby,
the parties hereto have caused this Agreement to be duly executed as
an instrument under seal as of the date and year first above written.
NASHUA CORPORATION
By: /s/ Bruce Wright
-------------------
Bruce Wright
Vice President,
Human Resources
/s/ David A. Peterson
---------------------
David A. Peterson
<PAGE> 1
EXHIBIT 11.01
<TABLE>
NASHUA CORPORATION
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per share data)
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Income (loss) from continuing operations $(15,470) $ 2,210 $ 250
-------- ------- --------
Income (loss) from discontinued operations 739 (63) (19,419)
-------- ------- --------
Net income (loss) $(14,731) $ 2,147 $(19,169)
-------- ------- --------
Shares:
Weighted average common shares
outstanding during the period 6,374 6,343 6,312
Common equivalent shares -- 17 31
-------- ------- --------
6,374 6,360 6,343
======== ======= ========
Earnings (loss) per common share(1):
Income (loss) from continuing operations $ (2.43) $ .35 $ .04
-------- ------- --------
Income (loss) from discontinued operations .12 (.01) (3.06)
-------- ------- --------
Net income (loss) $ (2.31) $ .34 $ (3.02)
======== ======= ========
<FN>
(1) The computation of earnings (loss) per common share on a fully diluted
basis results in no change to the earnings per common share amounts
indicated above.
</TABLE>
<PAGE> 1
EXHIBIT 21.01
<TABLE>
SUBSIDIARIES OF THE REGISTRANT
Nashua Corporation, or one of its wholly-owned subsidiaries, owns beneficially,
directly or indirectly, all of the capital stock in the following subsidiaries:
<CAPTION>
Jurisdiction of
Domestic Incorporation
- -------- -------------
<S> <C>
Cerion Holdings Inc. (1) Delaware
Cerion Technologies Inc.(1)(4) Delaware
Nashua Belmont Limited (2) Delaware
Nashua Photo European Investments, Inc.(2) Delaware
Nashua Photo Inc.(1) Delaware
Nashua Photo International Investments, Inc.(2) Delaware
Nashua Photo Licensing Inc.(2) Delaware
Promolink Corporation(1) Delaware
Jurisdiction of
Foreign Incorporation
- ------- -------------
Nashua Europe B.V. (1) Netherlands
Nashua FSC Limited (1) Jamaica
Nashua Photo B.V. (2) Netherlands
Nashua Photo Limited (2) Canada
Nashua Photo Limited (2) England
Nashua Photo S.N.C.(3) France
<FN>
- ----------
(1) Stock held by Nashua Corporation
(2) Stock held by Nashua Photo Inc.
(3) Stock held 50% by Nashua Photo European Investments, Inc. and
50% by Nashua Photo International Investments, Inc.
(4) Stock held by Cerion Holdings Inc. The Company has filed a Form S-1
indicating its intention to sell a portion of its shares of Cerion
Technologies.
</TABLE>
All of the above listed subsidiaries are included in Nashua's consolidated
financial statements.
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-88669, No. 33-13995, No. 33-67940 and No.
33-72438) of Nashua Corporation of our report dated February 5, 1996, except as
to the Subsequent Events note, which is as of March 27, 1996, appearing on page
41 of this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page 56 of this Form 10-K.
Price Waterhouse LLP
Boston, Massachusetts
April 1, 1996
<PAGE> 1
EXHIBIT 24.01
Commission File No. 1-5492-1
POWER OF ATTORNEY
<TABLE>
Know All Men By These Presents, that each person whose signature appears below
constitutes and appoints Daniel M. Junius and Paul Buffum and each of them, as
true and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign Nashua Corporation's Annual Report on Form 10-K, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
James F. Orr III Director April 1, 1996
- ------------------------ ---------------
James F. Orr III
Sheldon A. Buckler Director April 1, 1996
- ------------------------ ---------------
Sheldon A. Buckler
Richard E. Carter Director April 1, 1996
- ------------------------ ---------------
Richard E. Carter
Thomas W. Eagar Director April 1, 1996
- ------------------------ ---------------
Thomas W. Eagar
John M. Kucharski Director April 1, 1996
- ------------------------ ---------------
John M. Kucharski
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 8,390
<SECURITIES> 0
<RECEIVABLES> 29,579
<ALLOWANCES> 0
<INVENTORY> 22,023
<CURRENT-ASSETS> 99,192
<PP&E> 127,658
<DEPRECIATION> 57,601
<TOTAL-ASSETS> 231,372
<CURRENT-LIABILITIES> 67,405
<BONDS> 0
0
0
<COMMON> 6,503
<OTHER-SE> 68,372
<TOTAL-LIABILITY-AND-EQUITY> 231,372
<SALES> 452,196
<TOTAL-REVENUES> 452,196
<CGS> 336,037
<TOTAL-COSTS> 136,308
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,532
<INCOME-PRETAX> (20,149)
<INCOME-TAX> (4,679)
<INCOME-CONTINUING> (20,149)
<DISCONTINUED> 739
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,731)
<EPS-PRIMARY> (2.31)
<EPS-DILUTED> 0
</TABLE>
